Speaker 1: Welcome to the Bloomberg markets podcast. I'm Paul Sweeney. Alongside
Speaker 1: my co host Matt Miller, every business day we bring
Speaker 1: you interviews from CEOS, market pros and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg markets podcast
Speaker 1: on Apple podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg Dot com slash podcast. Let's get right to
Speaker 1: our next guest, William Houston, see io of Bay Street
Speaker 1: Capital Holdings. So William, you prefer William or bill? How
Speaker 1: are we going here? Yeah, William, awesome. Great. So William portfolio.
Speaker 1: I grew up with that. That didn't work for me
Speaker 1: so well this year. What are you kind of doing
Speaker 1: their over at bay street in terms of allocating access
Speaker 1: between equities, fixed income, maybe some commodities, maybe some alternatives.
Speaker 1: I mean, what do you do in a market environment
Speaker 1: like this? MM HMM. It's not so much the allocation
Speaker 1: right now as much as what the marketing anticipating. So,
Speaker 1: you know, as long as the Fed continues down this
Speaker 1: course of raising rates, we're going to see more of
Speaker 1: the same of what we're seeing in the market, you know,
Speaker 1: until they are able to reverse course once the inflation
Speaker 1: has slowed down. Regards what someone's allocation is, they're going
Speaker 1: to be looking at a difficult, a difficult path in
Speaker 1: the equities market. So, Um, it's not like a binary thing,
Speaker 1: that Um. I always think about it like that. Either
Speaker 1: they're raising or they're cutting, but they could. I guess
Speaker 1: the market expectation is that they plateau at some point
Speaker 1: and just hold for a while. How do you see
Speaker 1: that going, and how important is your fed call to
Speaker 1: your investment strategy? Yes, that's the right process. You know,
Speaker 1: the the market is pricing in the pace that we're
Speaker 1: going to see these these rate hikes, as you said,
Speaker 1: everyone's anticipating the seventy basis points. And yes, as soon
Speaker 1: as that trend reverse this course, you know, we stopped
Speaker 1: seeing this inversion in the yield curve where, you know,
Speaker 1: investors are being actually rewarded at a higher rate on
Speaker 1: these on these shorter term uh will say like like
Speaker 1: like like yields as opposed to longer term reels. As
Speaker 1: long as that's the case, yeah, equities are going to
Speaker 1: perform poorly, um, and and that's where that's what we're
Speaker 1: looking at for right now. So what do you do?
Speaker 1: What do you tell your clients these days again, their
Speaker 1: their bonds haven't worked for them. Their stocks haven't worked
Speaker 1: for them. I mean, unless they've got a barrel of oil,
Speaker 1: you know, sitting in their apartment. What do they do?
Speaker 1: A lot of investors have also gone to cash in
Speaker 1: a very strong way. Yeah, what do you do? What
Speaker 1: are your cash balances and where do you put them
Speaker 1: to work? If you do so, for a lot of
Speaker 1: folks that are rebalancing at the end of the year,
Speaker 1: at the beginning of the year, they would have already,
Speaker 1: you know, positioned themselves with some sort of cash allocation.
Speaker 1: We went into the year in January with cash. With that,
Speaker 1: you know, we've still seen similar performance in in the market.
Speaker 1: We're still down about or team per sent a year
Speaker 1: to date. You know, with that cast, it's there that
Speaker 1: we've been able to be opportunistic with Uh. You know,
Speaker 1: I would say for the next six months the housing
Speaker 1: market is going to look uh soft. You know, housing
Speaker 1: also shot up over the last couple of years. With
Speaker 1: rates as high as they are, though, you know, there's
Speaker 1: less offers that are coming in. That means there's going
Speaker 1: to be lower inventories, which means that prices are going
Speaker 1: to start coming down. So I would say, for for
Speaker 1: people who are looking today, the smartest thing to do
Speaker 1: is to just wait. You know, a lot of things
Speaker 1: have been announcing layoffs. So just in general, the market
Speaker 1: is going to see some softness in the next six months,
Speaker 1: nine months. But that doesn't mean, you know, don't be alert,
Speaker 1: don't be village and it just means let's look around,
Speaker 1: you know, prepared for, as these opportunities come up, as
Speaker 1: we intestipate, these prices to come down. Welleam I want
Speaker 1: to ask you about Um, your life, your studies and
Speaker 1: you know what you do out there on the left coast,
Speaker 1: because I initially, you know, I saw your resume, restruck
Speaker 1: by how much you studied Um investment management at Wharton,
Speaker 1: Industrial Systems Engineering at Georgia Tech, mathematics Alabama, and classically
Speaker 1: trained pianist at Vanderbilt's Blair School of Music, which made
Speaker 1: me think about the fact that a lot of times
Speaker 1: musicians are so innovative and Um so successful in the
Speaker 1: world of business and and on Wall Street. And I
Speaker 1: just wonder what you think about that and how it's
Speaker 1: how it's affected you. M Hm. So I think you know,
Speaker 1: no individual is able it's going to be able to
Speaker 1: outperform the market. You know, fortunately for me, I've been
Speaker 1: able to surround myself with other individuals from very diverse
Speaker 1: backgrounds and, you know, it's that diversity of thought in
Speaker 1: this concept around idea flow. A friend of mine at
Speaker 1: the Stanford d school, he actually just released a book on,
Speaker 1: you know, how to come up with good ideas, you know,
Speaker 1: and the truth to that is, when you're looking at
Speaker 1: an investment opportunity, every one knows that it's art, you know,
Speaker 1: Part Art, part science, but the best ideas actually come
Speaker 1: from actually the abundance of ideas, you know. So something
Speaker 1: that we do internally as a team is speak through
Speaker 1: the opportunities that we're looking at, speak through what's going
Speaker 1: on in the market, but also be comfortable to go
Speaker 1: through as many ideas as possible as a team so
Speaker 1: that we can so that we can field test these
Speaker 1: options that are coming up and actually, through trial and error,
Speaker 1: see well, what is the best option to to to
Speaker 1: to take in the in the in the in the
Speaker 1: thing that we're experiencing at that at that moment. So
Speaker 1: will you what's you know? What do you think you
Speaker 1: really bring? What do you try to bring to your
Speaker 1: clients in terms of value, service insight. You know, what
Speaker 1: do you think is most important that you bring to
Speaker 1: your clients? Yeah, so something we've always stood behind is
Speaker 1: investing through the lens of history, right. So we want
Speaker 1: to be able to look at an opportunity. We want
Speaker 1: to help investors see around the corner. We want to
Speaker 1: prevent any emotional decision making. So for us, you know,
Speaker 1: we want to be able to see what's going on and,
Speaker 1: when market sentiment is where it is today, be able
Speaker 1: to explain the position that we're in. Uh, and also,
Speaker 1: you know, again, even though we were only in cash,
Speaker 1: instead of going back hindsight and trying to make an
Speaker 1: impulsive decision, say, okay, this is where we position and
Speaker 1: over the long term, uh, you know, over time equity
Speaker 1: markets will pull back up. We can speak investors through
Speaker 1: this next six to nine months that we see coming
Speaker 1: so that they're able to have a little rest in
Speaker 1: peace of mind as we as we step into it. All. Right,
Speaker 1: good stuff, Hey, William, thanks so much for joining us.
Speaker 1: Really appreciate you taking some time out of your day
Speaker 1: to chat with us. William Houston, C I O of
Speaker 1: Bay Street Capital Holdings and one of investipedia's top one
Speaker 1: hundred most influential advisors. That's a second year Ro. He's
Speaker 1: been nominated for that prestigious award. Yeah, we've got a
Speaker 1: Federal Reserve. They're gonna be chatting with us on Wednesday, Bloomberg.
Speaker 1: Of course we'll have full coverage of our Federal Reserve
Speaker 1: and the press conferences and all that good stuff. But
Speaker 1: the question is, okay, you're raising interest rates. Are you
Speaker 1: can push this economy into a recession? Let's check in
Speaker 1: with somebody who thinks about this stuff for a living.
Speaker 1: Marcus schomer, chief economists at Pine Bridge Investments. Marcus, what's
Speaker 1: your recession call with a Federal Reserve? That seems pretty
Speaker 1: you know, hell been on kind of getting its handle
Speaker 1: on inflation. Uh, it's really hard to to get to
Speaker 1: get your head around the recession call forecast right now. Um,
Speaker 1: because it depends a little bit what it's all about,
Speaker 1: depending what what do you think the Fed will do,
Speaker 1: as opposed what the feds should do, if you really
Speaker 1: think that they're hell bend on a recession, if you
Speaker 1: really think they're so ignorant that they don't see how
Speaker 1: the inflation environment is turning, and it is changing rapidly
Speaker 1: over the last couple of months. If they really, if
Speaker 1: you really believe they're so ignorant that they're not see that,
Speaker 1: then Um, if we do get a recession next year,
Speaker 1: it's all about them and it will be the second
Speaker 1: major policy era after last year getting the inflation story
Speaker 1: completely wrong. They may get the inflation story completely wrong
Speaker 1: again and push the economy into recession next year. So, Um,
Speaker 1: I'm sticking I'm sticking out with the non recession forecast
Speaker 1: because I, maybe somewhat naively, believe they will get some
Speaker 1: some sort of economic sense over the next six months
Speaker 1: or so, realize where we are and stop this kind
Speaker 1: of ridiculous hawkishness that's coming out of every every remember
Speaker 1: right now and it's pushing up expectations for rate higher
Speaker 1: and higher and higher. Marcus, I love your take because, um,
Speaker 1: of course the Fed is going to play it as
Speaker 1: hawkish as possible. They want to bring inflation expectations down
Speaker 1: and the only way to do that is to convince
Speaker 1: everybody in America or in the world, and that means
Speaker 1: market participants too, that they will do everything they have
Speaker 1: to do to crush inflation, that that doesn't mean they're
Speaker 1: actually going to do it. It doesn't mean they're actually
Speaker 1: going to ignore a recession, high unemployment, you know, um
Speaker 1: unrest in the streets, just in order to bring this
Speaker 1: number that's already coming down down. But they have to
Speaker 1: put on that Hawk Ish Um uh show. Is that
Speaker 1: how you think it's gonna work, that they're that they're
Speaker 1: actually they actually are going to be smart enough or
Speaker 1: or Um sensitive enough too, if not turn around, at
Speaker 1: least pause when we start to get unemployment really ticking up.
Speaker 1: You said, you obviously right in your description there Um,
Speaker 1: but inflation expectations, I'm not rising inflation next. True, you
Speaker 1: mission numbers were very were very good. Yet months ago
Speaker 1: you look at the New York site, has another one
Speaker 1: with the New York site. Is a three UH inflation
Speaker 1: outlook number, inflation expectations number there that's been turning. Tips, number, tips,
Speaker 1: inflation forecast has turned. I mean, I don't see any
Speaker 1: indicator that suggests inflation expectations are rising. But that's the
Speaker 1: other problem. Um, I'm kind of very that they have
Speaker 1: to continue to to talk hawkish, right, otherwise that turns
Speaker 1: back around. No, it wouldn't. I don't think in face
Speaker 1: expectation not reven what the Fed says its lasin expectation
Speaker 1: of driven what people see on the street, and you
Speaker 1: know what they're seeing. They're seeing falling gas prices and
Speaker 1: they're seeing certainly a reduction in the upward pressure and
Speaker 1: prices in other areas. And if you look at look
Speaker 1: at things like like import prices, import prices, I think,
Speaker 1: already point to the next deflationary impulse that's coming because
Speaker 1: the dollars super strong. The rest of the world is
Speaker 1: slowing much harder than the US. Everything we import right
Speaker 1: now is going down in prices and I think that
Speaker 1: that that deflationary impults will only intensify in the next
Speaker 1: six months Um. So I don't see but thefts still
Speaker 1: sees the problem. It looks at core CPI, which is
Speaker 1: a terrible number to look at. We should start looking
Speaker 1: at CPI without housing, because housing is obscuring the turn
Speaker 1: right now and it is all about the turn and
Speaker 1: getting conference in the turn. Once operation turns, it has
Speaker 1: been my view for a while that then the debate
Speaker 1: would change from how high to how fast will we
Speaker 1: get to two percent? And that's a very different kind
Speaker 1: of discustion. Isn't it hard to leave out rents. That's
Speaker 1: such a sticky component. We hear of inflation, but and
Speaker 1: it's been out of control on the upside. So it
Speaker 1: isn't a sticky component. It isn't. It's only sticky because
Speaker 1: the way it works right, because the way they do
Speaker 1: that they include rents and CPI, is by taking the
Speaker 1: very latest information on rent and only using of that
Speaker 1: for the rental component of CPI. Because you know what,
Speaker 1: nobody rents a new home every month, right, and nobody
Speaker 1: buys a house every month. So housing really shouldn't be
Speaker 1: in there. But SP and CPI should be things that
Speaker 1: you basically buy every month or every every other month
Speaker 1: or so you can notice the price is going up
Speaker 1: or down. But things that you buy only every five
Speaker 1: years or every two years should really be in the CPI,
Speaker 1: or at least we should kind of adjust the CPI
Speaker 1: for the frequency of transaction of that product. And the
Speaker 1: only thing that's going still up right now, but it's
Speaker 1: not exactly two but the one thing that's going up
Speaker 1: right now making everybody worried is housing. Is that what
Speaker 1: any going down now? He's collapsing right now. Is I'm
Speaker 1: not going up anymore and rensom are going up anymore.
Speaker 1: So I was gonna say that's not the case in
Speaker 1: New York City. But Housing is, uh, you know, rolling over.
Speaker 1: We get mortgage rates over six per cents. Marcus Scholmer,
Speaker 1: thanks so much for joining us there. Marcus Scholmer, chief
Speaker 1: economers for pint bridge investments. I think he's kind of
Speaker 1: in that Vince Signarella camp, which is hey man, inflation
Speaker 1: is rolling over. If I'm the Federal Reserve, I can
Speaker 1: afford the Pauls, if not now, then maybe the next time,
Speaker 1: but we'll have to see how that plays out. Here
Speaker 1: in our Bloomberg interactive broker's Radio Studio we got a
Speaker 1: wall of video screens for all the networks kind of
Speaker 1: up in front of us and just seeing some video
Speaker 1: of the Queen's coffin now is arriving at Windsor Castle.
Speaker 1: This huge, huge procession lined with just throngs of people.
Speaker 1: Just extraordinary, uh kind of day here. And I was
Speaker 1: looking at the schedule, man, it starts at six thirty
Speaker 1: a m this morning the you know, some of these
Speaker 1: uh rights and events, and doesn't end until seven thirty
Speaker 1: this evening. So a long day for all involved. And
Speaker 1: then we'll get a sense of what's going on there
Speaker 1: on the ground. We bring in Leanne Garan's she's a
Speaker 1: radio anchor and producer for for Bloomberg News in London. Leanne,
Speaker 1: thanks so much for taking the time to join us.
Speaker 1: I'd love to you should get your your view of
Speaker 1: kind of how the day hasn't folded so far in London,
Speaker 1: of course. Um. So this morning I was down at
Speaker 1: Westminster Abbey and you know, the queue that we've seen
Speaker 1: here in London has been somewhat of a phenomenon. Just
Speaker 1: hundreds of thousands of people have nine the streets to
Speaker 1: see the queen lying in states and I spoke to
Speaker 1: some of the last people to enter that Great Westminster
Speaker 1: Hall to say their Final Goodbyes today and they've been
Speaker 1: waiting in the queue for thirteen hours. Shortly after that
Speaker 1: the queue was closed about six thirty am and then
Speaker 1: we also saw the queen loaded onto the gun carriage
Speaker 1: and she was pulled by members and sailors from the
Speaker 1: military here to Westminster Abbey, which is just eight minutes away,
Speaker 1: and I witnessed that and it was a moment of
Speaker 1: raw emotions. We've seen Um pageantry and pomp and ceremony
Speaker 1: and just a feeling of emotion in London. The gun
Speaker 1: carriage is so cool. So here's the deal of the
Speaker 1: gun carriage. Basically, Um, it is an actual carriage for
Speaker 1: a twelve pound gun. Okay. That was built, I think,
Speaker 1: in the late eighteen hundreds and when Queen Victoria died
Speaker 1: um they went to pull it with horses, but the
Speaker 1: funeral was in February and it was too cold. The
Speaker 1: horses were freaking out, so they had UM. It was
Speaker 1: actually Dickie's father, Louis Mount Batten, the original Louis Mount Batton,
Speaker 1: who said, you know what, we're gonna pull this ourselves,
Speaker 1: and they had like a hundred guys get out there
Speaker 1: kidding and pull it. And ever since then it's become
Speaker 1: an institution in royal funerals. Um So cool. Now they're
Speaker 1: marching into Windsor Castle. It's gigantic. I never noticed how
Speaker 1: big it is. I believe it is the biggest royal
Speaker 1: palace that's still inhabited by kings and Queens in the
Speaker 1: whole world. Have you been there, Liam? I have been
Speaker 1: there and I do actually spend a lot of time
Speaker 1: in one. It's one of my favorite places here in
Speaker 1: the UK and it was actually one of the Queen's
Speaker 1: favorite places. She loved it and during the pandemic it
Speaker 1: was called the Windsor Bubble, where she spent a long
Speaker 1: time with her former husband and also with the staff
Speaker 1: of Windsor Castle, and that's because, as we know, the
Speaker 1: Queen always loved to be outdoors, she loved to walk
Speaker 1: her Corgis and also have access to the horses, and that's,
Speaker 1: like you said, Windsor Castle is the place where that happens.
Speaker 1: And I could not believe just the volume of people
Speaker 1: that have lined the long walk to see the Queen
Speaker 1: and as a hearst made away, we saw all the
Speaker 1: roses that had been thrown onto the front of it.
Speaker 1: And this, for a lot of the British people, is
Speaker 1: the last time we will really see her. Majesty. She
Speaker 1: now will go into a service at four o'clock. That's
Speaker 1: a committal service, and then later on this evening she'll
Speaker 1: have a private burial with her family and the cameras
Speaker 1: will not be watching any of that, you know. You
Speaker 1: know she mentions the Queen's late husband, the late Queen's
Speaker 1: late husband, Prince Philip. He was Dickie's nephew, dicky Mount
Speaker 1: Betton so and I watched a crown. I did a
Speaker 1: deep dive into this today. Apparently Dickie tried to get
Speaker 1: Prince Charles to marry his granddaughter. I mean they're all
Speaker 1: related anyway, but they wanted to get even more interrelated.
Speaker 1: I guess King Charles now the Third Leanne. What what's
Speaker 1: the Um? What's the feeling, because I know there has
Speaker 1: have been times in the past when people wanted him
Speaker 1: to abdicate and pass the throne straight onto William. He's
Speaker 1: been very vocal about certain Um issues like climate change,
Speaker 1: which made him for for some time unpopular, and now
Speaker 1: I imagine that the left has to at least given
Speaker 1: points for that. How is he being seen now that
Speaker 1: he's sitting on the throne, so to speak? Well, I
Speaker 1: think first of all he has big shoes to follow.
Speaker 1: That's undoubted. His mother reigned over this country for seven
Speaker 1: decades and she's much loved. But one thing that King
Speaker 1: Charles has done, and it's one the people's hearts, is
Speaker 1: as soon as he realized that he was to come
Speaker 1: to the throne, he went to all four corners of
Speaker 1: the UK and he visited his whole kingdom. He started
Speaker 1: off in Scotland, he went in to Northern Ireland, he
Speaker 1: went to Wales and of course we've seen him here
Speaker 1: in England. He's been out and about shaking people's hand,
Speaker 1: connecting with everybody who's come out to pay their respects
Speaker 1: to their mother. We've also seen an emotional speech given
Speaker 1: by him thanking his mother and saying I'm going to
Speaker 1: carry on the legacy, I'm going to carry on the service.
Speaker 1: So really we see Prince King Charles. I always want
Speaker 1: to say Prince Charles, King Charles the third. I know
Speaker 1: it's always on the shoe front of my mind. So
Speaker 1: we see King Charles the third really coming out and
Speaker 1: giving people that reassurance that we need after seven decades.
Speaker 1: I can't remember another queen. Most of my friends you know.
Speaker 1: So he's really gone out and given the reassuring to
Speaker 1: the whole of the United Kingdom that he's here to
Speaker 1: carry on his mother's legacy and he has worked nonstop
Speaker 1: and so many people have recognized that and also felt
Speaker 1: a real sense for him because he's mourning the loss
Speaker 1: of a mother. Well, first of all, um, that's terrible.
Speaker 1: I don't want to make light of that at all.
Speaker 1: It's a tragedy. Everyone loved her and, of course, her
Speaker 1: children for for their loss. I am sorry. Having said that,
Speaker 1: this has to be an incredible PR campaign for the
Speaker 1: United Kingdom because for ten days we've all followed along,
Speaker 1: we've all watched. You know, if you haven't been there,
Speaker 1: you probably want to go and check it out. If
Speaker 1: you have, you may want to go back. I mean
Speaker 1: Um in a way, this has to kind of prove
Speaker 1: how important the world's are too, uh to tourism dollars
Speaker 1: right Ly, and there must be an influx of people
Speaker 1: who want to go to the UK to pay their
Speaker 1: respect and to check it out. I have never seen
Speaker 1: London so busy. I've almost not known what to do
Speaker 1: with myself. People have come in from all over the
Speaker 1: world and I've actually gone and visited the queue a
Speaker 1: few times and reported from the queue, and many people
Speaker 1: I met were foreign who had flown into the country,
Speaker 1: who said the queen had always struck a chord with them,
Speaker 1: especially people from the US. They said we don't have
Speaker 1: this pomp and pageantry and it's something that we really
Speaker 1: wanted to be immersed in and involved in and we
Speaker 1: loved the Queen From Afar. And you are right. It
Speaker 1: is something that has just bought the light here to
Speaker 1: the UK and today I have a feeling, and I'm
Speaker 1: sure many people would agree with me, everything almost went seamlessly.
Speaker 1: It has been so well rehearsed, it has been so
Speaker 1: well practiced. The queen made a lot of those approvals
Speaker 1: for the service that we saw today and I feel
Speaker 1: like London and the UK has done themselves justice. Absolutely agree. Lean.
Speaker 1: We're gonna have you back later in the program that's
Speaker 1: how important this stuff is and how interesting compelling parents
Speaker 1: from Bloomberg radio. All right, it's Monday, it's eleven eighteen ish.
Speaker 1: That means we talk e t F, and when we
Speaker 1: do that we do with Katie Greifeld, cross asset reporter
Speaker 1: for a Bloomberg News N A N C K R
Speaker 1: U Z. What kind of e t F Vance and cruise?
Speaker 1: The world has been waiting for these filings. So, if
Speaker 1: you haven't guessed so, these are filings. They haven't been
Speaker 1: launched at the filings for e t f s that
Speaker 1: would track the personal portfolios of members of Congress and
Speaker 1: their families and their dependent children, because, because members of
Speaker 1: Congress tend to beat the S and P by a mile,
Speaker 1: who knows where they get that kind of investing edge,
Speaker 1: but it's it's the acumen that you need to become
Speaker 1: a good politicians just being great at investing. We have
Speaker 1: aric cultures. He actually crunched the numbers for Bloomberg Intelligence,
Speaker 1: which did prove that point that these portfolios do tend
Speaker 1: to outperform. Whether or not it's going to be like
Speaker 1: a great portfolio, something you would actually want to invest in,
Speaker 1: it's almost guaranteed to generate buzz because obviously there's been
Speaker 1: a lot of controversy when you're talking. Okay, so people
Speaker 1: of our age here, the things we want to invest in,
Speaker 1: our things that make the most money. Yeah, for sure,
Speaker 1: it's different with people in your generations. Yeah, what over,
Speaker 1: General Generalization, Um, but let me tell you about the methodology.
Speaker 1: The financial world, and financial twitter especially, has been waiting
Speaker 1: for someone to try to do this. The fact that
Speaker 1: these filings finally landed uh, sort of went viral, but
Speaker 1: in any case. So they're going to look at disclosures.
Speaker 1: Members of Congress have to disclose any transactions they make
Speaker 1: valued more than a thou and dollars within forty five days.
Speaker 1: So you do run the risk of missing those short
Speaker 1: term trades, but you can see what their long term
Speaker 1: holdings are and you can construct a portfolio around five hundred,
Speaker 1: six hundred names, and that's what this issue is trying
Speaker 1: to do. What's give me just a sense of how
Speaker 1: many e t f s come to market on a
Speaker 1: weekly basis. It seems like every time you come you've
Speaker 1: got more new crazy names. It's a cost of launching
Speaker 1: the TF like next to nothing. It would appear that way.
Speaker 1: The cost to file and E T F certainly doesn't
Speaker 1: cost very much. We see so many interesting filings. The
Speaker 1: reality is that if you look at the e t
Speaker 1: f market at this point, you have three thousand e
Speaker 1: t f s in the US, just the US. Um
Speaker 1: there's not a lot of weights. Nine trillion dollar market
Speaker 1: exactly a TV show about it. You have a TV
Speaker 1: show about it. Issuers have to get creative to find
Speaker 1: any sort of white space, any area of that nine
Speaker 1: trillion dollar industry that isn't saturated. And if these actually
Speaker 1: come to pass, they will be the only existing e
Speaker 1: t f s on the market that are trying to
Speaker 1: do this well. But these to me make the most
Speaker 1: sense of all of everything because, Um, if you a
Speaker 1: lot of people get angry about the fact that members
Speaker 1: of Congress are investing and very cynical people think, hey,
Speaker 1: they're using their position of power to make a profit. Um,
Speaker 1: you know, and now you can do it along with them.
Speaker 1: That makes sense. So the only problem I have is
Speaker 1: with the disclosures. As a member of Congress you only
Speaker 1: have to disclose your investments within a, I think a
Speaker 1: forty five day period. Exactly are those laws gonna Change?
Speaker 1: Is this gonna stay legal? Well, it's interesting. There was
Speaker 1: this big bipartisan push last year to basically change the
Speaker 1: laws require more disclosures or maybe make it so that
Speaker 1: lawmakers would only be able to invest in SMP five
Speaker 1: dred tracking funds, are indextracting funds which a lot of
Speaker 1: corporate employees. Those are the restrictions were under. We're on
Speaker 1: our show going to hear from Emily Wilkins, she's a
Speaker 1: congressional and government reporter at Bloomberg News, about those efforts
Speaker 1: because again it was a big bipartisan sort of unity moment.
Speaker 1: But it seems like that pushes largely stalled. I don't
Speaker 1: think there's been any action on the legislatives front. Funds flow.
Speaker 1: People still putting the money in. Oh, here's the thing.
Speaker 1: I want to talk converting mutual funds. Like Matt and
Speaker 1: I grew up with mutual funds. You put the fidelity,
Speaker 1: you know, Contra Fund, the fidelity. Think about how revolutionary
Speaker 1: they were at the time. Vogel is man a myth,
Speaker 1: a legend who changed the way we invest. But now
Speaker 1: mutual funds are converting to e t S. right. It
Speaker 1: is a growing trend. The first happened about two years ago. Honestly,
Speaker 1: I think it's slowed down a little bit. Uh. Some
Speaker 1: proponents in the et f industry would tell you that
Speaker 1: it's still growing, but we did have new Burger Berman.
Speaker 1: They did convert earlier this month, uh, some of their
Speaker 1: mutual funds into an e t f. This trend, it's
Speaker 1: expected to grow to basically a one trillion dollar wave.
Speaker 1: We're not close to that point yet, but if you
Speaker 1: look at the flow of funds, new money or money
Speaker 1: coming into the ecosystem, it's all it's like a zero
Speaker 1: sum sort of flow picture. But in terms of issuers
Speaker 1: actually converting their mutual fund into E T F S,
Speaker 1: people think there's a lot more runway. But you have
Speaker 1: to consider the fact that mutual funds are the preferred
Speaker 1: structure for retirement plans for four oh one case. So
Speaker 1: there's incentive to convert, but there's also plenty of reasons
Speaker 1: to stay in that specific structure. One PM Wall Street time.
Speaker 1: What are you and that gonna be up to? We're
Speaker 1: going to talk, I think, a lot about the congressional
Speaker 1: trading e t f s, again, just filings. They haven't
Speaker 1: launched yet. That would probably take until November. So we're
Speaker 1: also going to talk to invest goes, head of thematic
Speaker 1: research theme the E T S. it's been a little
Speaker 1: bit of a struggle to attract the same magnitude of
Speaker 1: flows that we saw in some of the years past.
Speaker 1: I don't know if you've guys heard, but we've keep
Speaker 1: toggling in and out of the bear market. That tends
Speaker 1: to be PAT news for themes, but they do have
Speaker 1: some winners. They're including the P B J e t f.
Speaker 1: it's a food and beverage GTF. I'm excited to dig in.
Speaker 1: Themes are different than factors. They are they are now.
Speaker 1: I don't know, momentum quality, those are factors inflation, robotics.
Speaker 1: Thank you's all right, she's smart. I'm ready that's why
Speaker 1: we have around the program Harford College. That's a really
Speaker 1: good college, by the way. On the mainline, yes, the mainline,
Speaker 1: Katie Graydfeld, cross asset reporter for Bloomberg News. I want
Speaker 1: to bring in now Christopher Ralph. He is the Frankfurt
Speaker 1: Bureau chief and he is my go to source on
Speaker 1: anything V W related. And then, because he's my go
Speaker 1: to source on Folkswagon, that means he's automatically my go
Speaker 1: to source on Porsche, Bentley, Audi, Bugatti, Scoda is the
Speaker 1: one right. Ducatti is my own thing, but yeah, Bugatti
Speaker 1: is a great, cool company. Anyway, Christoph, thanks so much
Speaker 1: for joining us. Paul and I um both noticed the
Speaker 1: same thing when we saw the initial stories coming out
Speaker 1: over the weekend. Porsche is going now for a much
Speaker 1: lower valuation than we thought. I mean ten billion dollars
Speaker 1: lopped off the valuation. Now Seventies, seventy five rather than
Speaker 1: eighty five. Why is that? Yeah, I'm Matt. I think.
Speaker 1: I think the IT basically bolts down to the fact
Speaker 1: that actually they have been looking at a very broad
Speaker 1: range of different valuations. When you like, like, uh, sort
Speaker 1: of like look a few weeks back, we've had like
Speaker 1: the number of like eighty five billions floating around. Some
Speaker 1: some analytis actually speculating might be as worth as much
Speaker 1: as one dred billion. Uh. And then our last Thursday
Speaker 1: or Friday was we saw an HSS. No doubt it
Speaker 1: basically said, oh no, it's like gonna it's gonna be
Speaker 1: worth much. Basically they were looking at about forty five
Speaker 1: to fifty billion. So I think they sit pretty much
Speaker 1: right in the middle of the valuation which has been
Speaker 1: basically discussed through a pretty broad range. So I do
Speaker 1: think they try really hard to not not push it
Speaker 1: too hard from a pricing perspective and, yeah, aim for
Speaker 1: something that sits pretty much right in the middle of them.
Speaker 1: To get this is my first thought is Um, you know,
Speaker 1: were I too, if I were allowed to invest in this,
Speaker 1: obviously I would back up the truck and buy as
Speaker 1: many shares as I could. I'd have to call every
Speaker 1: broker I know to try and get some syndicate. How
Speaker 1: are they gonna deal with that kind of demand? Yeah,
Speaker 1: they basically have like a group of banks that is
Speaker 1: targeting specifically institutional investors. Four of the big anchor investors
Speaker 1: have been out there already, have been announced and we
Speaker 1: reported them before. But they also aligned up a number
Speaker 1: of banks, torture bank being one of them, who are
Speaker 1: specifically targeting, targeting retail customers, because they who have a
Speaker 1: pretty sort of affluent group of customers that are very
Speaker 1: like loyal to the brand. I've been driving posts for
Speaker 1: a couple of years or decades maybe, are members of
Speaker 1: like the Porsche Club. So that's definitely a group of
Speaker 1: potentially invested as well. Alright, so the the anchor investors,
Speaker 1: by the way, are like the Saudi right, Um, Norwayway,
Speaker 1: nor just. They have the biggest. Who? Who? Who else
Speaker 1: are the big anchor investors? Remind us? UH, yeah, it was.
Speaker 1: It was in August, the the the sovereign wealthfront from uh,
Speaker 1: from Norway, then Qatar was was was one. was another investor.
Speaker 1: T ro always on board, a D Q, I think. So. Yeah,
Speaker 1: a number of like pretty pretty established names out there.
Speaker 1: Now I understand there's some weird family dynamics going on
Speaker 1: here in this. I P O will dress some of it.
Speaker 1: I'm not sure if you can do this in a
Speaker 1: simplified version, but family. That in a book. Yeah, the
Speaker 1: Porsche family and the peach. Is it peach, Peach Peach.
Speaker 1: I can't even pronounce it correctly. Christoph, can you give
Speaker 1: it a shot? Yeah, the name is is it pronounced Pah?
Speaker 1: And yes, I'll do my best at the night's challenge.
Speaker 1: You wrapped it up in a few seconds and I'll
Speaker 1: write that book and send it to you, Matt, right
Speaker 1: after this show wraps up. The thing is, basically they
Speaker 1: lost direct control over what used to be their family
Speaker 1: business just over a decade ago, back in the day's
Speaker 1: Porsche's previous management is tried to to take over the
Speaker 1: much larger Folkswagen group. The whole thing basically like ran
Speaker 1: out of funding during the dead crisis and as part
Speaker 1: of like a pretty complex deal for Porsche a g,
Speaker 1: the Sports Cup business was folded into Folkswagen, and now
Speaker 1: this idea allows the family to regain some direct influence.
Speaker 1: They don't go at Porsche at the at the sports cooperation.
Speaker 1: They don't get like full control, but they will receive
Speaker 1: a blocking minority of twenty five percent of the voting
Speaker 1: stock in that Sports Cup business. When is this still
Speaker 1: going to happen? Is this this week? This month? What's
Speaker 1: the timing? We've just heard that the German financial market
Speaker 1: regulator Baffin has signed off on the on the prospective,
Speaker 1: on the on the ibe of Prospectus, so that should
Speaker 1: land at some point later this this afternoon, at the
Speaker 1: coming hours. And Yeah, basically then it then the preparation.
Speaker 1: The preparations are going to continue and the goal is
Speaker 1: that the first day of trading will be September twenty nine.
Speaker 1: It's pretty exciting. Um. The only thing that is kind
Speaker 1: of a bummer for me, and probably cool for Kristoff,
Speaker 1: is that they're doing it on the Frankfurt Bersia, which is,
Speaker 1: I mean, so lame. No offense, Christoff, but there's nobody
Speaker 1: that even works there. Like, why not doing on the
Speaker 1: New York Stock Exchange where there's real pomp and UH
Speaker 1: and and and celebration? Yeah, I think I'm I'm I
Speaker 1: guess I'm totally biased that because like the Frankfort stock
Speaker 1: ex changes to stock a walk from our office. So
Speaker 1: I'm all for it, Matt Uh and, yeah, I guess
Speaker 1: we have to bring you back to Germany, guess, Christopher.
Speaker 1: Are they going to do like a road show, like
Speaker 1: go to New York, go to London, did that kind
Speaker 1: of thing? Well, that they have been on a pretty
Speaker 1: sent the FROAD trow over the past few, uh, well
Speaker 1: months really, they've been to to Boston, to New York,
Speaker 1: to London, they've been touring Asia, so they've really like
Speaker 1: travel the globe, basically. But they decided, yeah, it's it's
Speaker 1: it's a Germany, it's a German company. They want to
Speaker 1: be what they wanted to be listed in Germany. So
Speaker 1: that's basically why they picked Frankfurt. Alright, good stuff now,
Speaker 1: you know, maybe maybe we'll send Matt over there for that.
Speaker 1: That can be a good little uh police boot markets. Yeah,
Speaker 1: we'll send we'll send him your away, Christoph Rovald, bureau
Speaker 1: chief Frankfort Munich, pretty much all of Germany for Bloomberg News.
Speaker 1: He kind of keeps us on top of what's happening
Speaker 1: in Germany. And again this I P O of Porsche
Speaker 1: looking to raise as much as nine point four billion euros.
Speaker 1: Thanks for listening to the Bloomberg markets podcast. You can
Speaker 1: subscribe and listen to interviews with apple podcasts or whatever
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on twitter
Speaker 1: at Matt Miller. Three pet on Boll Sweeney, I'm on
Speaker 1: twitter at PT Sweeney. Before the podcast you can always
Speaker 1: catch US worldwide at Bloomberg Radio M