WEBVTT - Fed Officials Dial Back Rate Forecasts, Signal Just One '24 Cut 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.720 --> 0:00:13.960 Wait inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.880 tech news. The Bloomberg Business Week Podcast. With Carol Messer 0:00:23.040 --> 0:00:26.079 and Tim Stenebeck from Bloomberg Radio. 0:00:28.160 --> 0:00:30.360 Let's get some thoughts on both the equity market and 0:00:30.400 --> 0:00:32.559 the bond market. We're joined for our Drive to the 0:00:32.560 --> 0:00:36.120 Clothes with Sylvia Jablonski, CEO and chief Investment officer over 0:00:36.159 --> 0:00:38.600 at Defiance ETFs. She joins us from New York City. 0:00:38.640 --> 0:00:40.000 Also with us for the bond side. 0:00:40.080 --> 0:00:42.839 We love this Bloomberg Intelligence Chief US Interest rate Strategist 0:00:42.880 --> 0:00:45.960 Ira Jersey joining us from New Jersey. All right, Ira, 0:00:46.000 --> 0:00:47.800 I want to kick it off with you the decision, 0:00:48.040 --> 0:00:51.839 the rate market reaction, walk us through the day, what 0:00:51.960 --> 0:00:55.320 happened with CPI, and then what we got from the 0:00:55.360 --> 0:00:57.680 Fed and what really stands out for you in terms 0:00:57.760 --> 0:01:02.560 of the fundamentally kind of backdrop on inflation and FED think, 0:01:02.920 --> 0:01:05.520 and then how investors are perceiving it and traders are. 0:01:06.240 --> 0:01:11.400 You're asking me for a whole dissertation here, but defend. 0:01:13.319 --> 0:01:13.880 That's right. 0:01:14.400 --> 0:01:18.800 So for CPI. Obviously, the better than expected CPI number, 0:01:18.840 --> 0:01:21.240 I think gave a lot of people relief, particularly in 0:01:21.280 --> 0:01:23.440 the bond market, and you saw a big rally in 0:01:24.040 --> 0:01:26.440 uh all across the yield curve, so you had two 0:01:26.520 --> 0:01:29.839 year yields and ten year yields both lower by about 0:01:29.840 --> 0:01:32.679 fifteen basis points at one point. And we kind of 0:01:32.680 --> 0:01:35.319 hovered there until we got the Summary of Economic projections 0:01:35.360 --> 0:01:37.560 because the statement didn't really change, meaning you know, there 0:01:37.640 --> 0:01:40.720 was basically one word of any significance that changed there. 0:01:41.319 --> 0:01:44.000 But the summary of Economic projections I think surprised some 0:01:44.040 --> 0:01:48.000 people in the rate market, with only one cut now 0:01:48.440 --> 0:01:51.680 being the median dot this year, and four members who 0:01:51.720 --> 0:01:54.200 think that the Fed's not going to do anything this year, 0:01:54.240 --> 0:01:56.640 that they're going to remain on hold, so, you know, 0:01:56.680 --> 0:01:59.120 a little bit more hawkish there, sold off a little 0:01:59.120 --> 0:02:01.760 bit than Jay Powell starts to talk half an hour later, 0:02:02.200 --> 0:02:05.400 and we wound up with him being a little bit 0:02:05.400 --> 0:02:09.800 more hawkish. In fact, we have a natural language processing 0:02:09.840 --> 0:02:13.160 model that parses all the words, and we looked at 0:02:13.160 --> 0:02:17.000 his opening remarks this morning for this afternoon seems like 0:02:17.040 --> 0:02:21.040 this morning, the last two hours, this has been absolutely crazy. 0:02:20.639 --> 0:02:23.360 But he was a little bit more hawkish than he 0:02:23.440 --> 0:02:25.400 was in May, and then the markets sold off a 0:02:25.440 --> 0:02:27.480 little bit more. So now we've given back about half 0:02:27.520 --> 0:02:29.839 of the gains in the bond market that we made 0:02:30.080 --> 0:02:32.440 after the CPI report, And I think that, you know, 0:02:32.680 --> 0:02:35.200 traders are still trying to figure out, you know, is 0:02:35.240 --> 0:02:37.960 the Fed actually going to cut and if so, you 0:02:38.000 --> 0:02:40.560 know when and how much? Yeah, you know, that really 0:02:40.600 --> 0:02:43.200 affects the two year note. The longer end, what we 0:02:43.280 --> 0:02:47.160 saw was was basically the Fed pushing out their more 0:02:47.200 --> 0:02:49.840 rate cuts into twenty twenty six. Now, because you have 0:02:49.880 --> 0:02:52.000 two less cuts this year than was in the dots, 0:02:52.600 --> 0:02:54.960 the same number of cuts next year, but then the 0:02:55.080 --> 0:02:58.160 terminal rate for twenty twenty six is exactly the same. 0:02:58.240 --> 0:03:00.880 So so basically for the long end of the curve, 0:03:01.760 --> 0:03:03.240 you know, if people think that the dots are going 0:03:03.280 --> 0:03:05.080 to be realized, which they don't, right, No one actually 0:03:05.160 --> 0:03:06.880 thinks that that what the Fed says is actually going 0:03:06.919 --> 0:03:12.200 to happen. Yeah, exactly, they had to at least take 0:03:12.240 --> 0:03:14.880 some profits before before the end of the day. 0:03:14.800 --> 0:03:17.400 You passed the oral examination for your dissertation. You are 0:03:17.400 --> 0:03:20.000 now doctor Jersey. All right, let's get to Sylvia Doblonski 0:03:20.080 --> 0:03:22.640 and get her view on this break it down for 0:03:22.720 --> 0:03:24.480 us in terms of what we got from J. Powell 0:03:24.480 --> 0:03:27.520 and Company and what that means in terms of the 0:03:27.560 --> 0:03:28.400 investing environment. 0:03:28.480 --> 0:03:32.400 Sylvia Hiker, great to be here with you today. Yeah, 0:03:32.720 --> 0:03:35.840 tough to follow the lead on data dissertation there today. 0:03:35.880 --> 0:03:38.680 But you know, I think that in terms of what 0:03:38.880 --> 0:03:42.000 happened today, it's pretty much what the market expected, right, 0:03:42.000 --> 0:03:45.160 we didn't necessarily get a cut today. It's good news 0:03:45.200 --> 0:03:47.080 that CPI data is cooling off. 0:03:47.120 --> 0:03:49.360 It looks like inflation is trending downwards, and this is 0:03:49.400 --> 0:03:51.880 really what the market wants to hear. I actually think 0:03:51.880 --> 0:03:53.800 that we're in the sweet spot now where equities are 0:03:53.840 --> 0:03:56.120 going to kind of continue to rally because we do 0:03:56.200 --> 0:03:59.160 have great cuts coming. Maybe we don't get as many 0:03:59.200 --> 0:04:01.280 as we thought this year, maybe gets push off, but 0:04:01.320 --> 0:04:04.080 we're just talking a couple of months here, so ray 0:04:04.400 --> 0:04:06.840 cuts are coming eventually, and this is kind of you know, 0:04:07.280 --> 0:04:10.400 stocks really performing on this news, and so I think 0:04:10.480 --> 0:04:13.160 overall it's good for the markets. This feels a little 0:04:13.160 --> 0:04:15.560 bit like a soft landing. You have inflation coming down, 0:04:15.880 --> 0:04:18.200 jobs numbers for you know, maybe a little bit hotter 0:04:18.279 --> 0:04:20.800 than they should be but certainly you know, stable wages 0:04:20.839 --> 0:04:24.240 are stable, economic growth slowed but more or less in 0:04:24.279 --> 0:04:27.600 line with expectations. Corporate earnings are good. I think we're 0:04:27.640 --> 0:04:29.400 in a good spot in the market, and today doesn't 0:04:29.440 --> 0:04:30.240 change a whole lot. 0:04:30.279 --> 0:04:32.480 But it's a great data point. Quick question to both 0:04:32.520 --> 0:04:34.680 of you. First to you, Sylvia, just quickly. I don't 0:04:34.720 --> 0:04:36.400 think I was listening to all of it, taking lots 0:04:36.400 --> 0:04:37.920 of notes. But did I miss anything? Did I hear 0:04:38.000 --> 0:04:39.400 anything about a rate increase? 0:04:41.440 --> 0:04:44.159 No, no talks a break I resultso shaking his head. 0:04:44.560 --> 0:04:47.200 I can see them shaking his head, saying, no, well 0:04:47.800 --> 0:04:49.920 you passed the test too for doing a good job listening. 0:04:50.680 --> 0:04:51.920 You are kind of. 0:04:51.880 --> 0:04:54.000 Glued, like we like run the makeup, we run to 0:04:54.040 --> 0:04:56.200 the bathroom, like we've got to earbuds, it like everything 0:04:56.240 --> 0:04:58.640 because we want to hear all of it and the tone. 0:04:58.680 --> 0:05:01.799 But I reset significant that we didn't hear anything. Sorry, Tim, 0:05:01.880 --> 0:05:04.520 I you know she rate there a great reveal of 0:05:04.560 --> 0:05:05.920 what happens behind them. 0:05:06.160 --> 0:05:08.840 Just so you guys know, they actually play Bloomberg Radio 0:05:08.960 --> 0:05:12.039 in the bathrooms here at Bloomberg News, so in the 0:05:12.080 --> 0:05:12.640 whole building. 0:05:12.760 --> 0:05:14.640 So it's amazing that people come out like that was 0:05:14.640 --> 0:05:18.719 a great interview. Iira having said that significant that we 0:05:18.760 --> 0:05:21.960 didn't hear anything about a rate increase, and again their 0:05:22.040 --> 0:05:24.200 data dependence, so it could change. 0:05:24.960 --> 0:05:27.599 Yeah, well, you know, the chances of a changing I 0:05:27.600 --> 0:05:30.120 think is pretty low because you know, Ja Powell has 0:05:30.160 --> 0:05:33.080 been very reluctant. Even when directly asked at the main 0:05:33.160 --> 0:05:36.240 meeting whether or not a rate hike was possible, he 0:05:36.320 --> 0:05:38.880 basically said no. He said, at this point, based on 0:05:38.920 --> 0:05:40.920 all of their forecasts and everything else, they're much more 0:05:41.000 --> 0:05:43.440 likely to remain on hold than they would be to 0:05:43.960 --> 0:05:46.840 cut rates. So it is a bit asymmetric, right to. 0:05:46.839 --> 0:05:49.039 Raise rates, more likely to be on hold and raise rates. 0:05:50.160 --> 0:05:53.640 Yeah, correct, to be on hold and raise rates. So 0:05:53.640 --> 0:05:55.520 so basically they're going to be on hold if inflation 0:05:55.680 --> 0:05:59.760 increases significantly, and then cut rates if the economy starts 0:05:59.800 --> 0:06:03.400 to deteriorate further, or if infliction keeps coming down, and 0:06:03.520 --> 0:06:06.480 it's at asymmetry that's keeping the yield curve inverted and 0:06:06.480 --> 0:06:08.839 and will likely continue to keep the yield curve inverted 0:06:09.160 --> 0:06:11.440 until they actually start to cut interest rates. And I 0:06:11.440 --> 0:06:14.640 think that that's you know, someone pointed out to me 0:06:14.680 --> 0:06:17.400 today one of our customers was like two years to 0:06:17.480 --> 0:06:21.119 today is when the two tens curve first inverted, and 0:06:21.160 --> 0:06:24.240 so we're at basically, uh the the longest period of 0:06:24.520 --> 0:06:27.279 the yield curven version ever and that's likely to persist 0:06:27.360 --> 0:06:29.440 I think until close to the end of the year. 0:06:30.400 --> 0:06:32.159 The other the other thing that's come out of this 0:06:32.240 --> 0:06:36.280 when in my quick discussions with customers after after Jay 0:06:36.320 --> 0:06:38.640 Powell spoke, is there's a lot of people who think 0:06:38.640 --> 0:06:41.680 that a September cut is very possible. I don't think 0:06:41.720 --> 0:06:44.800 that's true at all. Maybe if they cut twice, but 0:06:45.080 --> 0:06:47.480 why cut in September. You know you're only going to 0:06:47.520 --> 0:06:50.599 get two more months of data points basically between July 0:06:50.760 --> 0:06:53.919 and September, So why you know, why bother, why not 0:06:54.000 --> 0:06:57.440 wait until after the election. They move the meeting of November. 0:06:57.440 --> 0:06:59.800 It's now going to be on a Thursday, so they 0:06:59.800 --> 0:07:02.880 have way to having a meeting on election day and 0:07:02.440 --> 0:07:05.080 they can cut rates then and six weeks in the 0:07:05.080 --> 0:07:08.520 grand scheme of things from the longer term, thinking that 0:07:08.600 --> 0:07:10.440 you know, we're markets people, right, we think about what 0:07:10.480 --> 0:07:13.680 the market's doing every second. The FED is thinking more 0:07:13.680 --> 0:07:16.680 longer term, so six weeks in the grand scheme doesn't 0:07:16.720 --> 0:07:18.960 really matter. So I think that they would hold off 0:07:19.040 --> 0:07:21.720 until then. They could still cut twice this year. That's 0:07:21.800 --> 0:07:24.600 completely possible if the economy's falling out of bed. But 0:07:25.120 --> 0:07:28.480 you know, we were unlikely to see that prior to 0:07:28.920 --> 0:07:30.280 election day, at least in my view. 0:07:30.520 --> 0:07:32.600 Okay, Sylvia, I want to go to you and just 0:07:32.640 --> 0:07:34.960 get you know, you have this thesis where things look 0:07:35.000 --> 0:07:37.320 pretty good. We're in the sweet spot for equities right now. 0:07:38.440 --> 0:07:41.360 I'm wondering what derails that thesis, Like what data could 0:07:41.360 --> 0:07:43.080 you see over the next few months that says, wait 0:07:43.080 --> 0:07:45.000 a second, things are not going the way that we 0:07:45.040 --> 0:07:45.880 think they should be going. 0:07:47.240 --> 0:07:50.520 Yeah, and look that certainly happened, right. We get these 0:07:50.600 --> 0:07:52.679 events out out of left field that we don't expect 0:07:52.680 --> 0:07:54.880 and they move markets. And so I think that those 0:07:54.880 --> 0:07:57.800 events remain the same. If inflation, for example, where to 0:07:57.840 --> 0:08:01.080 suddenly start increasing or just you know, does a budge 0:08:01.080 --> 0:08:03.440 for long periods of time, I think that, you know, 0:08:03.560 --> 0:08:06.880 kind of challenges my narrative. The other thing is, of course, geopolitics. 0:08:06.920 --> 0:08:09.160 This is you know, over the last few years, it's 0:08:09.200 --> 0:08:11.400 it's the first time where we have two very active, 0:08:12.160 --> 0:08:16.320 you know, global wars going on that are you know, 0:08:17.600 --> 0:08:20.000 taking time bomb, could be taking time bombs at any moment, 0:08:20.000 --> 0:08:21.640 and I think that that's something that we always have 0:08:21.680 --> 0:08:25.440 to think about China and Taiwan, what happens during the election, tariffs, 0:08:25.440 --> 0:08:27.400 things like this. So I think it's any of these 0:08:27.520 --> 0:08:30.320 kind of you know, unexpected events that have to do 0:08:30.320 --> 0:08:32.960 with geopolitics and politics. I'll say, I don't think inflation 0:08:33.040 --> 0:08:35.319 is going to be the thing, to be honest, it's 0:08:35.360 --> 0:08:36.360 something like that. 0:08:36.559 --> 0:08:38.800 We are data dependent too, We kind of move from 0:08:38.880 --> 0:08:41.199 data point to data point to FED speak to FED speak. 0:08:41.840 --> 0:08:45.000 Just got about forty seconds really quickly, Sylvia, twenty seconds 0:08:45.040 --> 0:08:47.000 for you. Your next focal point, just quickly. 0:08:48.320 --> 0:08:50.880 Yeah, I mean I'm still looking to build out the 0:08:51.720 --> 0:08:54.080 AI trade and look for those opportunities, so starting to 0:08:54.080 --> 0:08:57.120 expand it to things that AI will benefit, like health care, 0:08:57.320 --> 0:09:00.240 like the materials uranium, copper, things like that. So for 0:09:00.280 --> 0:09:01.960 some new investment ideas around that theme. 0:09:02.400 --> 0:09:04.280 Ten seconds for you are at next focal point. 0:09:05.080 --> 0:09:07.600 Yeah, it's all about the data, so it's retail sales 0:09:07.640 --> 0:09:10.080 and then the PC data at the end of the month. 0:09:10.120 --> 0:09:12.840 All right, so appreciate dynamic duo. Both of you passed 0:09:12.880 --> 0:09:16.080 the oral examination, so really good stuff. I'm great set 0:09:16.120 --> 0:09:20.080 up for us papers do tonight. I don't know. Now 0:09:20.120 --> 0:09:23.080 you go celebrate right our jersey chief you has interest 0:09:23.160 --> 0:09:26.400 rate strategies at Bloomberg Intelligence, and Sylvia Deablonski, she's CEO 0:09:26.440 --> 0:09:28.600 and chief investment Officer, defines ETFs. 0:09:29.600 --> 0:09:33.120 You're listening to the Bloomberg Business Week podcast. Catch us 0:09:33.160 --> 0:09:36.400 live weekday afternoons from two to five pm Eastern. Listen 0:09:36.440 --> 0:09:38.599 on Apple car Play and then Broute Auto with a 0:09:38.600 --> 0:09:41.600 Bloomberg Business app, or want us live on YouTube. 0:09:42.520 --> 0:09:45.079 Beneficials, as you know, pencil laying in just one interest 0:09:45.160 --> 0:09:48.400 rate cut this year, forecast more cuts for twenty twenty five, 0:09:48.440 --> 0:09:51.920 reinforcing policymakers calls to keep borring costs, hire for longer 0:09:51.960 --> 0:09:54.760 to suppress inflation. Fetch your j Powell at today's press 0:09:54.760 --> 0:09:56.120 conference after the decision. 0:09:56.800 --> 0:10:01.800 We do see today's We see today's report as progress 0:10:01.880 --> 0:10:04.439 and as you know, building confidence. But we don't see 0:10:04.480 --> 0:10:08.560 ourselves as having the confidence that would warrant you know, 0:10:08.559 --> 0:10:12.880 that would warrant beginning to loosen policy at this time. 0:10:13.360 --> 0:10:14.920 Hi for longer, that is, Jacob, I've. 0:10:14.800 --> 0:10:15.400 Heard that before. 0:10:15.480 --> 0:10:18.200 Yep, it's a narrative. 0:10:18.440 --> 0:10:20.960 He's not I would say he's not full of surprises. 0:10:21.400 --> 0:10:25.160 No studies which is probably what a FED market a 0:10:25.240 --> 0:10:25.840 chair should do. 0:10:26.160 --> 0:10:28.920 Yet right, Yeah, exactly, So I'm curious about like how 0:10:28.920 --> 0:10:31.440 it impacts the investing environment. So let's get to that. 0:10:31.720 --> 0:10:34.360 Alexander Brown is with us. She's senior managing Director, chief 0:10:34.400 --> 0:10:38.119 Development officer at the family office wealth manager Leedo Advisors. 0:10:38.120 --> 0:10:40.880 They have some nineteen billion in assets under management. She 0:10:40.920 --> 0:10:45.080 does us here in our Bloomberg Interactive Broker studio. Ali, Welcome, welcome, Welcome, 0:10:46.000 --> 0:10:49.319 What if anything? And I am curious about We obsess 0:10:49.559 --> 0:10:52.000 as you would expect and as you just heard about 0:10:52.040 --> 0:10:53.880 the FED and which Jay Powell has to say, but 0:10:53.920 --> 0:10:56.920 it does move markets. So what about what we got 0:10:56.960 --> 0:10:58.680 in terms of the FED decision? What he had to 0:10:58.679 --> 0:11:00.880 say about kind of color on the economy and the 0:11:00.880 --> 0:11:02.720 outlook impacts kind of your world? 0:11:02.920 --> 0:11:07.160 Oh absolutely, it's everything that we do. But understanding and 0:11:07.280 --> 0:11:10.559 educating yourself is one piece. Where were we six months ago? 0:11:10.760 --> 0:11:14.480 Like we projected six maybe seven rate cuts. We haven't 0:11:14.480 --> 0:11:18.400 had one, and yet the market's hitting new ultra ultra highs. Right, 0:11:18.440 --> 0:11:21.400 So the question is how do we I think everyone's 0:11:21.440 --> 0:11:22.680 waiting for that first cut. 0:11:22.760 --> 0:11:24.120 When is that first cut going to be? 0:11:24.200 --> 0:11:26.559 I do think if we would have seen signs from 0:11:26.559 --> 0:11:28.959 the press conference of having a second cut this year, 0:11:28.960 --> 0:11:29.360 we might. 0:11:29.280 --> 0:11:34.319 Have seen stronger futures be producing now. But it absolutely 0:11:34.320 --> 0:11:34.920 plays a role. 0:11:34.920 --> 0:11:36.880 But I think where we are now, it's proceed with caution, 0:11:37.320 --> 0:11:38.600 And how do we proceed with caution? 0:11:38.679 --> 0:11:40.760 How do we build the portfolios to look like that? 0:11:41.240 --> 0:11:43.840 It's interesting because I one would argue in the wealth 0:11:43.880 --> 0:11:48.040 management space, pre inflation, it was a hard world to 0:11:48.080 --> 0:11:50.800 retire in. Right when you when you exit your the 0:11:50.840 --> 0:11:53.880 workforce and you move from the accumulation phase of your 0:11:53.880 --> 0:11:56.840 life to the withdrawal out of the fixed income side 0:11:56.840 --> 0:11:58.600 of things, it was either you or your out. 0:11:58.960 --> 0:12:00.600 Either you're making money or your making nothing. 0:12:00.840 --> 0:12:03.880 But at the same time, you know, stocks were up 0:12:04.040 --> 0:12:07.360 double digits year on year with the exception of just 0:12:07.400 --> 0:12:09.520 a couple of years because of that low rate environment. 0:12:09.640 --> 0:12:13.640 Exactly yet but yet we raised rates substantially in twenty 0:12:13.679 --> 0:12:17.080 twenty two. The stock market soared in twenty three, is 0:12:17.080 --> 0:12:18.400 still soaring in twenty four. 0:12:18.520 --> 0:12:21.280 So how do we how do we look at that. 0:12:21.760 --> 0:12:25.520 I'm curious about your clients. They're high net worth individuals, 0:12:25.880 --> 0:12:30.240 family offices, you know, family money maybe passing on to generation. 0:12:30.679 --> 0:12:33.080 Where is it that they typically like to invest in 0:12:33.080 --> 0:12:34.679 your world. Because we Tim and I spent a lot 0:12:34.679 --> 0:12:37.840 of time talking about increasingly family offices wanting to be 0:12:37.880 --> 0:12:40.480 in the private markets. But I'm curious about where a 0:12:40.480 --> 0:12:44.120 lot of your investors ultimately, you know, invest and they 0:12:44.160 --> 0:12:45.680 tend to park it then for a long time. 0:12:45.960 --> 0:12:49.760 Sure, but it's also understanding there's so much similarities between 0:12:49.760 --> 0:12:51.640 the family office space and the retail space. 0:12:52.040 --> 0:12:54.240 Let's put it into perspective. You've got to you sell 0:12:54.280 --> 0:12:56.440 a business and now you have five hundred million dollars 0:12:56.600 --> 0:12:57.240 a lot of wealth. 0:12:57.320 --> 0:12:57.520 Right. 0:12:58.480 --> 0:13:00.199 I have yet in my career to see a five 0:13:00.240 --> 0:13:03.200 hundred million dollar family have sixty percent in stocks, forty 0:13:03.240 --> 0:13:05.320 percent in bonds and rebalancing once a quarter. 0:13:05.960 --> 0:13:07.280 So what where are they? 0:13:07.360 --> 0:13:07.560 Yeah? 0:13:07.600 --> 0:13:08.280 So what is their goal? 0:13:08.320 --> 0:13:09.640 Their goal is to build in control? 0:13:09.720 --> 0:13:12.599 How do I build in more control around outcomes like 0:13:12.640 --> 0:13:16.040 we're seeing today that we have zero control around whether 0:13:16.080 --> 0:13:20.040 it's building in alternatives within the portfolio with real estate. Right, 0:13:20.240 --> 0:13:22.480 It's amazing you look at a real estate investor, they're 0:13:22.520 --> 0:13:24.440 typically very heavy into real estate and cash. 0:13:24.520 --> 0:13:24.679 Right. 0:13:25.040 --> 0:13:27.280 Why because there's a lot more control in that aspect. 0:13:27.320 --> 0:13:30.719 So building in control, whether it be using alternatives and 0:13:30.760 --> 0:13:32.040 there's ways to building control in the. 0:13:32.120 --> 0:13:35.120 Chiwn like where are alternatives? Do you find like your 0:13:35.200 --> 0:13:37.559 folks wanting to put their money in this environment? 0:13:37.559 --> 0:13:38.600 We like the alternatives. 0:13:38.640 --> 0:13:40.600 We work in all aspects, so whether it's we we 0:13:40.640 --> 0:13:43.080 buy real estate, we lend on real estate, private equity, 0:13:43.080 --> 0:13:46.360 and middle market lendings being the topic of every conversation lately, 0:13:46.600 --> 0:13:48.520 all the way up to hedge funds right, which is 0:13:48.559 --> 0:13:50.640 an interesting factor if you see the amount of money 0:13:50.640 --> 0:13:53.720 pouring into hedge funds now, because one is arguing, is 0:13:53.760 --> 0:13:57.040 that tactical, active, single stock management beneficial? 0:13:57.080 --> 0:13:58.040 Are you getting value there? 0:13:58.240 --> 0:14:01.800 What's a typical allocation to alternatives in a portfolio? 0:14:02.040 --> 0:14:04.080 So it very much depends upon the client. 0:14:04.160 --> 0:14:06.400 With the clients seeking I think the big thing that 0:14:06.440 --> 0:14:08.920 we look at on our end is the need for liquidity. 0:14:09.280 --> 0:14:11.560 What people don't realize is that you know, you don't 0:14:11.559 --> 0:14:13.520 need one hundred percent of your money liquid on a 0:14:13.600 --> 0:14:16.959 daily basis, especially when you look at building alternatives into 0:14:17.160 --> 0:14:20.400 tax deferred accounts that have longer timeframes. So it's all 0:14:20.440 --> 0:14:23.520 about the client, the need, the desire where it's fitting 0:14:23.560 --> 0:14:24.720 from a tax perspective. 0:14:24.920 --> 0:14:26.000 I'll give you a quick example. 0:14:26.040 --> 0:14:28.920 A client that you know maybe has a one of 0:14:28.920 --> 0:14:32.480 the long aged pensions, right that's completely covering their income needs. 0:14:33.320 --> 0:14:35.280 Their portfolio can be a lot more aggressive and a 0:14:35.280 --> 0:14:38.360 lot less liquid than maybe someone who's needing to pull 0:14:38.400 --> 0:14:39.880 out of their portfolio on a consistence. 0:14:39.960 --> 0:14:42.760 So they might have a higher concentration of alternatives because 0:14:42.800 --> 0:14:45.320 alternatives are less liquid, right, and they. 0:14:45.200 --> 0:14:47.240 Can play because they've already got something kind of as 0:14:47.280 --> 0:14:49.440 their safety net, if you will. Having said that, I 0:14:49.480 --> 0:14:53.040 am curious among the wealth clients that you guys work with, 0:14:53.600 --> 0:14:55.680 what is it that they ask you about the most? 0:14:56.040 --> 0:14:58.400 Is it something like Nvidia? Is it Ai? Is it 0:14:58.800 --> 0:15:01.640 fed policy? Is it the fixed income air? 0:15:01.720 --> 0:15:01.800 Like? 0:15:01.840 --> 0:15:05.200 I'm just curious where they are, Like, wait a minute, 0:15:05.240 --> 0:15:06.560 is that an opportunity for listen? 0:15:06.640 --> 0:15:06.880 AI? 0:15:07.000 --> 0:15:09.960 We can't ignore without question. It is just a it's 0:15:10.880 --> 0:15:12.760 the way we're seeing it promote itself. I mean, look 0:15:12.760 --> 0:15:14.840 at this week, for example, with what happened with Apple. 0:15:15.120 --> 0:15:16.520 Do you say get into Apple now? 0:15:18.120 --> 0:15:20.880 I would say proceed with caution. It's all about everything 0:15:20.920 --> 0:15:23.280 has a place within a portfolio. It's a matter of 0:15:23.360 --> 0:15:26.280 how much and where and understanding. So clients that come 0:15:26.280 --> 0:15:28.440 to me and say I want private equity exposure because 0:15:28.440 --> 0:15:30.760 they heard about it at the golf course, right, you know, 0:15:30.840 --> 0:15:33.400 it's it educ covers a lot, which covers a lot, 0:15:33.440 --> 0:15:36.640 and what sector and how liquid is and so's there's 0:15:36.680 --> 0:15:40.080 a big, big education around the alternative space and what 0:15:40.120 --> 0:15:41.120 goes into that bucket. 0:15:41.160 --> 0:15:43.840 How do you give clients exposure to private equity? 0:15:44.240 --> 0:15:46.240 Yes, first of all, we need to educate them, right, 0:15:46.240 --> 0:15:47.560 they hear the word yeah. 0:15:47.520 --> 0:15:49.640 Right, But I mean you can get exposure to private 0:15:49.640 --> 0:15:52.720 equity by buying the stock of a publicly traded firm 0:15:52.760 --> 0:15:55.000 that is in private equity. But you can also go 0:15:55.080 --> 0:15:57.120 to an alternative asset manager, which a lot of wealth 0:15:57.160 --> 0:16:00.080 managers work with, and then buy into their funds as well. 0:16:00.080 --> 0:16:01.160 What do you guys do we. 0:16:01.520 --> 0:16:03.760 Do a combination of both, I would say more the latter. 0:16:04.040 --> 0:16:05.720 The private equity space that we do is in the 0:16:05.760 --> 0:16:08.200 private space. They're very opportunistic though. 0:16:08.120 --> 0:16:11.880 And so I think you're buying KKR, you're buying no, yeah, no. 0:16:11.440 --> 0:16:13.600 No, And it's opportunistic. We have a deal, the deal 0:16:13.640 --> 0:16:15.880 closes quickly, right, you know. So it's a client that 0:16:15.880 --> 0:16:17.720 we're build. Hey, listen, we're going to build an allocation 0:16:17.800 --> 0:16:20.080 for private equity, and this deal that may come around 0:16:20.160 --> 0:16:22.400 this week may work and it may not, and we'll 0:16:22.400 --> 0:16:24.080 reevaluate when the next one comes around. 0:16:24.120 --> 0:16:26.160 What do you say in terms of how you think 0:16:26.160 --> 0:16:28.560 it's smart for your clients to get exposure to AI? 0:16:28.640 --> 0:16:30.600 And these are folks that will park money for a while, 0:16:30.680 --> 0:16:31.880 So is it? What is it? 0:16:31.960 --> 0:16:34.040 I don't think we can ignore it. It's going to touch. 0:16:34.120 --> 0:16:36.280 AI is not just tech. But how do you play 0:16:36.320 --> 0:16:38.000 it then? Or how do you suggest. 0:16:37.840 --> 0:16:42.600 There's ways to get exposure to AI with controlled outcomes right, 0:16:42.600 --> 0:16:45.480 whether it's using a combination of options saying listen, I 0:16:45.520 --> 0:16:48.400 want to participate in this space. I want to grow 0:16:48.440 --> 0:16:50.280 in this space, but I don't know if I necessarily 0:16:50.320 --> 0:16:53.120 want to take very directive risks. So I like to 0:16:53.120 --> 0:16:55.080 get exposure, but how do I build in protection? We 0:16:55.120 --> 0:16:59.000 do a lot of options in house, like against specific 0:16:59.040 --> 0:17:00.760 equity name I against but very. 0:17:01.280 --> 0:17:02.240 Or with right. 0:17:02.280 --> 0:17:05.280 So options I think get a huge negative connotation in 0:17:05.320 --> 0:17:07.120 the market as the meeting, And I didn't. 0:17:06.880 --> 0:17:08.480 Mean it like that because theo's two sides. 0:17:08.560 --> 0:17:10.640 Yeah, yeah, yeah, no absolutely, So is there a way 0:17:10.680 --> 0:17:13.080 that we can get exposure to a certain number of 0:17:13.440 --> 0:17:16.560 AI stocks right where we can participate if things go up, 0:17:16.560 --> 0:17:19.159 but have some protection if we're wrong to avoid that 0:17:19.200 --> 0:17:20.000 timing component. 0:17:20.600 --> 0:17:23.640 Speaking of AI, we are getting Broadcom earnings right now, 0:17:23.800 --> 0:17:27.520 second quarter adjusted earnings per share beat estimates. We're seeing 0:17:27.560 --> 0:17:31.240 stock move higher in the after hours right now after 0:17:31.440 --> 0:17:33.480 that eight percent Wow, yeh, stock moving higher in the 0:17:33.480 --> 0:17:36.240 after hours. He's fiscally your revenue approximately fifty one billion 0:17:36.280 --> 0:17:39.000 dollars beating estimates of fifty point six billion dollars. 0:17:39.119 --> 0:17:41.080 Yeah, we'll be looking for some more color when it 0:17:41.119 --> 0:17:42.360 comes to certainly AI and chip. 0:17:42.359 --> 0:17:44.600 But twenty seconds, do you use AI at your firm yet? 0:17:45.560 --> 0:17:47.600 Yes, in different types of ways. 0:17:48.440 --> 0:17:50.240 But were you using AI for years? 0:17:51.400 --> 0:17:52.600 We are doing more and more. 0:17:52.960 --> 0:17:55.960 It's all educating ourselves and how to incorporate it effectively. 0:17:55.960 --> 0:17:56.119 You know. 0:17:56.160 --> 0:17:59.960 Being in the finance world, we're so regulated, so as finance, 0:18:00.080 --> 0:18:02.480 because AI gets more regulated, I'm interesting to see how 0:18:02.480 --> 0:18:03.359