Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Joining us now to talk about all that's going on
Speaker 2: in the markets right now is black Global, Chief Investment
Speaker 2: Officer of Global Fixed Income, Rick Reader. And Rick, we
Speaker 2: book you on every Job's Day, but this is yet
Speaker 2: another Friday when we don't get the jobs report because
Speaker 2: of a short government shutdown. It looks like we could
Speaker 2: have another one partial shutdown at the end of next week.
Speaker 2: What do you make of this sort of muddy data
Speaker 2: picture when we don't get the things we need in time.
Speaker 3: Well, so, first of all, it hasn't been jobs Day
Speaker 3: in a number of months anyway, because we're not getting
Speaker 3: any of those. So I think the last three months
Speaker 3: we've had negative people. We had a government shutdown, but
Speaker 3: you've still have negative negative jobs.
Speaker 1: Listen.
Speaker 3: I mean it's a little trickier when you don't get
Speaker 3: the actual published reports and markets pivot off and by
Speaker 3: the way, the volatility markets, you strike a lot of
Speaker 3: options in and around those dates. So I tells you
Speaker 3: this creates a little bit of trickiness that being sad.
Speaker 3: I mean, particularly for jobs, and we've talked about a
Speaker 3: number of months on your show. You look at what
Speaker 3: we got yesterday. Look at the Jolt support, look at
Speaker 3: the Challenger job counts, you look at the claims data,
Speaker 3: you look at the ISM services. In terms of jobs, like,
Speaker 3: there's no ambiguity around where we are in the job market.
Speaker 3: We're having a really tough time. We're watching productivity explode
Speaker 3: higher in terms of growth being really.
Speaker 1: Good, but at job market, that's that's really tricky.
Speaker 4: That dichotomy, Rick is the most fascinating. Well, there's a
Speaker 4: lot of interesting stuff going on, but as one of
Speaker 4: the most fascinating things about this economy because it's difficult
Speaker 4: for anyone to say, even with jobs looking very challenging,
Speaker 4: that we're heading anywhere near a recession. As long as
Speaker 4: the mag seven is spending what like two point one
Speaker 4: percent of GDP on capex, as long as a government's
Speaker 4: running a six percent plus deficit deficit, is this economy
Speaker 4: going to be okay even if the jobs market starts
Speaker 4: to have some cracks in it.
Speaker 1: Yeah, the answer is yes.
Speaker 3: And the you know, I think I think people don't
Speaker 3: you know, look at jobs and look at this economy
Speaker 3: like it was twenty thirty years ago. You have an
Speaker 3: extraordinarily different economy service oriented versus goods oriented. But you've
Speaker 3: got an economy that's operating incredibly well, but only on
Speaker 3: a couple or three cylinders.
Speaker 1: Today.
Speaker 3: You've got, like you pointed out, you've got cap X
Speaker 3: that is robust and will continue. You've got consumption that
Speaker 3: is robust, but it's driven by wealthier, older savers. And
Speaker 3: it's part of why the you know, the interest rate
Speaker 3: tool is is not nearly as effective as it used
Speaker 3: to be because that cohort is doing extremely well. Where
Speaker 3: the burden today is is in terms of low income,
Speaker 3: small business, younger people and so.
Speaker 1: But if when you.
Speaker 3: Aggregate the data, and I hear a lot of people
Speaker 3: talking about when my god, the jobs market is softening,
Speaker 3: the economy.
Speaker 1: Is going to come under pressure.
Speaker 3: It's actually this is an economy that's more acid oriented
Speaker 3: than labor oriented, and that cohort I don't want to
Speaker 3: understate this.
Speaker 1: We have a problem too, is we need to employ
Speaker 1: more people.
Speaker 3: But that cohort isn't that much in terms of aggregate spend,
Speaker 3: so the economy can continue to motor along. And productivity,
Speaker 3: I mean you watch it play out every day. I
Speaker 3: mean the equity market has taken it on. About where
Speaker 3: is productivity manifesting itself effectively some spaces.
Speaker 1: Not other Who are the winners? Who's building a moat?
Speaker 1: Who's not going to be a winner in this?
Speaker 3: But I mean, at the core, you're watching something play
Speaker 3: out that's pretty historic.
Speaker 2: Anthropic putting out another AI tool, this time for financial analysis.
Speaker 2: They did earlier this week for legal services. Both of
Speaker 2: them kind of rocking the market. That will affect sales
Speaker 2: at big companies I imagine, big and small, as well
Speaker 2: as the jobs picture. Right, we're talking to a lot
Speaker 2: of people. Yesterday we're talking Mike Arraghetti from Aries, who
Speaker 2: pointed out that, you know, the younger talent, the new
Speaker 2: hires aren't going to be doing the same work and
Speaker 2: may not be as plentiful as they once were in
Speaker 2: that industry. What do you make of AI changing the
Speaker 2: way we work or the fact that we work at all.
Speaker 3: Well, Mike's a very smart guy. I would say, I
Speaker 3: would say a couple of things. You know, I chair
Speaker 3: the board of we have fourteen charter schools in Newark,
Speaker 3: New Jersey, and we just had a discussion this week
Speaker 3: at our board meeting about what is our curriculum going forward?
Speaker 3: How does AI evolve how we teach kids. How do
Speaker 3: we what are the disciplines we're teaching our kids for
Speaker 3: going forward? How do we use AI to augment a
Speaker 3: traditional teaching process? This is all new territory, and this
Speaker 3: is all new land in terms of where we're going. Listen,
Speaker 3: I think there's a bunch of things that are you know,
Speaker 3: that have been standard operating procedure that you know that
Speaker 3: we used to teach people for and quite frankly, AI
Speaker 3: is going to fulfill that function going forward. I still
Speaker 3: think learning and interacting with people and the core of
Speaker 3: education will will be sincere to what it was.
Speaker 1: But gosh, there's so many things we got to.
Speaker 3: Think about about what can AI do that can make
Speaker 3: the economy more efficient, make people more efficient, and then
Speaker 3: move people into the zones that are going to be
Speaker 3: fulfilling going forward. But that is I'll tell you'm out there.
Speaker 3: There is no roadmap for this.
Speaker 2: Well what do you make of I mean, I look
Speaker 2: at Bink, the ETF that you manage very well, and
Speaker 2: we'll show in a second how you've beaten returns of
Speaker 2: the benchmarks by a lot. But there's some corporate assets
Speaker 2: there right forty five percent, And I wonder how you
Speaker 2: judge whether or not a company has a moat, what
Speaker 2: that moat would look like so that it can defend
Speaker 2: itself against AI disruption.
Speaker 3: So mat there is how do I describe this by
Speaker 3: the way, you know, we'll take it in a couple
Speaker 3: of different rections.
Speaker 1: One that's interesting. You know, you hear the.
Speaker 3: Discussion about capex and the cap X was too high,
Speaker 3: and you know, I would argue, there's some other things
Speaker 3: that play there.
Speaker 1: Cap X is your moat.
Speaker 3: Cap X and R and D spend are the way
Speaker 3: companies can build their moat. And it's actually data utilization
Speaker 3: and the companies that are exploiting data effectively that are
Speaker 3: building bigger moats.
Speaker 1: That is at the core of what is happening.
Speaker 3: You know, there's something also that's different today some companies,
Speaker 3: the free cash flow generation that's been so robust the last.
Speaker 1: Couple of years.
Speaker 3: You see some of these big companies buying back a
Speaker 3: huge amount of stock. Now they're spending more on capex
Speaker 3: that has real ratifications for the technicals in the equity
Speaker 3: market that we got to think through.
Speaker 1: It's a lot of hard work, YEA.
Speaker 4: Well, I just want to jump in about the other
Speaker 4: hard work you do at BINK and how you're thinking
Speaker 4: about positioning the fund and where on the curve. Yield
Speaker 4: curve just shy of its twenty twenty two highs, somewhat
Speaker 4: reverse a little bit yesterday, but some of that steepening continues.
Speaker 4: We have an incoming FED chief who's been talking about
Speaker 4: trying to shrink the balance sheet over at the FED.
Speaker 4: When you think about the rest of this year, are
Speaker 4: you thinking about changes to bank it all? Where do
Speaker 4: you want to be positioned for the road ahead? And
Speaker 4: fixed income?
Speaker 3: Bunch of changes your point about credit. We've reduced some credit,
Speaker 3: We've reduced some ig because quite frankly, it's not that fulfilling.
Speaker 3: We're gonna get a lot of supply. The spread's not
Speaker 3: that interesting, you know. We've cut a little bit of
Speaker 3: the low quality high yield, and by the way, we're
Speaker 3: running a bit less high yield than we're running overall.
Speaker 3: We've added to mortgages, although recent the last couple of
Speaker 3: months or there's no last couple months, last few days,
Speaker 3: maybe we've cut a little bit of mortgages because the
Speaker 3: balance sheet discussion becomes a little less enthusiastic than than
Speaker 3: it was before.
Speaker 1: But we still like mortgages.
Speaker 3: We like EM a lot, and the dollar will stay
Speaker 3: contained and so EM. The yield differential between EM and
Speaker 3: high yield is as good as it's ever been. And
Speaker 3: then the key one for us is and is securitization
Speaker 3: markets that I'll allow you to structure the collateral, the covenants,
Speaker 3: the you know, what's your attachment point is. So we
Speaker 3: love the securitization market, but you're right, it's a different expression,
Speaker 3: a little less credit, a little more EM, a little
Speaker 3: more sicking the securitization zone. By the way, Europe killed
Speaker 3: it last year, and now the benefit you're getting from
Speaker 3: Europe is not nearly as robust as it was. So
Speaker 3: we've dulled down a little bit of that and more
Speaker 3: actually more Asia in the portfolio. So yeah, we've been
Speaker 3: moving around a fair amount to keep a dynamic and
Speaker 3: where the best we think the best opportunity is