1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:05,280 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day, we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,600 Speaker 2: and Bloomberg experts, along with essential market moving news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 6 00:00:17,400 --> 00:00:20,480 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. 7 00:00:20,880 --> 00:00:23,360 Speaker 3: Our great friends of Goldman Sachs kind of a tough quarter. 8 00:00:23,480 --> 00:00:25,239 Speaker 1: You know, I don't feel sorry for them because they 9 00:00:25,280 --> 00:00:28,520 Speaker 1: win a lot more than they don't. I competed against 10 00:00:28,520 --> 00:00:31,640 Speaker 1: them for many, many years, with some success, but always 11 00:00:31,720 --> 00:00:36,199 Speaker 1: always tough competitors everywhere you go. Somebody's also followed this 12 00:00:36,240 --> 00:00:39,280 Speaker 1: company for a long long time. Allison Williams Bloomberg Intelligence. 13 00:00:39,520 --> 00:00:41,480 Speaker 1: She's her senior banks analyst, and you know she's also 14 00:00:41,520 --> 00:00:45,920 Speaker 1: a suit. She's now management. She runs the US Bloomberg Intelligence. 15 00:00:45,960 --> 00:00:48,440 Speaker 1: So it's like, you know, now she's a suit, she's 16 00:00:48,440 --> 00:00:48,920 Speaker 1: a boss. 17 00:00:49,040 --> 00:00:51,360 Speaker 4: You're a boss now exactly you were a boss before 18 00:00:52,240 --> 00:00:53,199 Speaker 4: because I have tough. 19 00:00:54,880 --> 00:00:56,920 Speaker 1: So, you know, Allison, I don't know talk to us 20 00:00:56,960 --> 00:00:59,600 Speaker 1: about Goldman Sachs here. It feels like they kind of 21 00:00:59,600 --> 00:01:01,840 Speaker 1: got a little off track with that retail push and 22 00:01:01,880 --> 00:01:05,200 Speaker 1: maybe that took some attention away from some of their businesses. Yes, 23 00:01:05,240 --> 00:01:08,039 Speaker 1: it is a tough environment, but Goldman Sacks is still 24 00:01:08,080 --> 00:01:08,960 Speaker 1: Goldman Sacks. 25 00:01:08,720 --> 00:01:12,000 Speaker 5: Right they are, and you know you're seeing the other 26 00:01:12,040 --> 00:01:15,240 Speaker 5: side of holatility to some extent, right, So, I mean 27 00:01:15,560 --> 00:01:18,440 Speaker 5: the ro is very tough. This quarter includes a lot 28 00:01:18,480 --> 00:01:21,720 Speaker 5: of one timers, there's some charges, there's you know, they're 29 00:01:21,920 --> 00:01:25,160 Speaker 5: working towards a longer term strategy and I think they're 30 00:01:25,160 --> 00:01:29,479 Speaker 5: doing the right things. The alternative strategy. You're really showing 31 00:01:29,520 --> 00:01:32,360 Speaker 5: this quarter why that they're implementing that in terms of 32 00:01:32,720 --> 00:01:35,039 Speaker 5: moving to a model that's more focused on fees and 33 00:01:35,080 --> 00:01:38,319 Speaker 5: managing assets for clients versus taking the risks directly on 34 00:01:38,360 --> 00:01:40,839 Speaker 5: their balance sheet, which is something that regulators have wanted 35 00:01:40,880 --> 00:01:43,720 Speaker 5: them to move away from for a long time. So 36 00:01:43,760 --> 00:01:47,360 Speaker 5: they had that charge. They also had the charge related 37 00:01:47,400 --> 00:01:52,360 Speaker 5: to Green Sky offset by a little small gain related 38 00:01:52,400 --> 00:01:55,680 Speaker 5: to some sale Marcus Loans. I think, you know, moving 39 00:01:55,680 --> 00:01:58,680 Speaker 5: away from those businesses also strategically the right thing for 40 00:01:58,760 --> 00:02:02,400 Speaker 5: Goldman focused on want what you're good at. Unfortunately, it's 41 00:02:02,440 --> 00:02:05,680 Speaker 5: a tough quarter for the business. But equities trading up 42 00:02:05,760 --> 00:02:09,800 Speaker 5: one percent, I mean that's oppressive in this quarter, and 43 00:02:09,840 --> 00:02:11,679 Speaker 5: that's you know, that's a prime brokerage business, and that 44 00:02:11,720 --> 00:02:13,720 Speaker 5: shows that they're executing on what they do well. 45 00:02:14,120 --> 00:02:16,960 Speaker 4: So when it comes to the consumer business in Green Sky, 46 00:02:17,120 --> 00:02:19,560 Speaker 4: like you mentioned, is part of what we're seeing right 47 00:02:19,600 --> 00:02:21,960 Speaker 4: now with Goldman, just some pain that they have to 48 00:02:22,000 --> 00:02:25,200 Speaker 4: go through to kind of have this transition out of 49 00:02:25,320 --> 00:02:26,760 Speaker 4: and away from those two things. 50 00:02:27,080 --> 00:02:29,640 Speaker 5: Yeah, I mean general, when you shift strategy and do 51 00:02:29,720 --> 00:02:32,040 Speaker 5: some kind of restructuring, you know, first of all, it's 52 00:02:32,080 --> 00:02:36,400 Speaker 5: never in a straight line, and there's always charges before 53 00:02:36,400 --> 00:02:38,400 Speaker 5: you sort of move on to the better stuff. Because 54 00:02:38,960 --> 00:02:41,880 Speaker 5: they were performing well, you probably are were not businesses 55 00:02:41,880 --> 00:02:45,920 Speaker 5: that you're getting rid of, and so it's tough for 56 00:02:45,919 --> 00:02:47,679 Speaker 5: them to take the impairment and shows that that was 57 00:02:48,200 --> 00:02:53,760 Speaker 5: not an asset purchase. Well, but I think that on 58 00:02:53,800 --> 00:02:59,200 Speaker 5: the cost side of things, if we strip out these costs, 59 00:02:59,000 --> 00:03:00,960 Speaker 5: there's stills a little bit more work to do. So 60 00:03:01,000 --> 00:03:02,959 Speaker 5: they do you know, they want to get to a 61 00:03:03,040 --> 00:03:05,640 Speaker 5: sixty percent cost ratio over the cycle. They're at about 62 00:03:05,720 --> 00:03:09,760 Speaker 5: seventy percent once you make all the adjustments. So part 63 00:03:09,760 --> 00:03:13,280 Speaker 5: of that is the tougher part of the cycle. So 64 00:03:13,520 --> 00:03:16,880 Speaker 5: I talked about equity trading which was a real positive fix. 65 00:03:16,960 --> 00:03:20,639 Speaker 5: Trading was weak as expected. You know, Goldman and Morgan 66 00:03:20,639 --> 00:03:24,200 Speaker 5: Stanley especially you're seeing big declines because they had such 67 00:03:24,240 --> 00:03:27,840 Speaker 5: good quarters a year ago due to commodities. And on 68 00:03:27,919 --> 00:03:31,639 Speaker 5: the banking side, Goldman is the m and a revenue leader, 69 00:03:32,040 --> 00:03:35,360 Speaker 5: as you know Paul from competing with them in the past. 70 00:03:35,440 --> 00:03:38,560 Speaker 5: That so they you know, the league tables move around, 71 00:03:38,600 --> 00:03:43,120 Speaker 5: but that's a big chunk for them, and that's just 72 00:03:43,160 --> 00:03:45,080 Speaker 5: going the wrong way right now for the industry. We're 73 00:03:45,120 --> 00:03:48,640 Speaker 5: hearing a lot of constructive comments about the pick up there, 74 00:03:50,120 --> 00:03:53,480 Speaker 5: and you know you've also mentioned from some folks, you know, 75 00:03:54,760 --> 00:03:56,920 Speaker 5: hearing some positive comments, but those are really not going 76 00:03:56,960 --> 00:03:58,760 Speaker 5: to play out in the second half. That's a twenty 77 00:03:58,800 --> 00:03:59,520 Speaker 5: twenty four story. 78 00:03:59,560 --> 00:03:59,760 Speaker 6: All right. 79 00:03:59,800 --> 00:04:02,040 Speaker 1: Let's step back and just talk regulation, not so much 80 00:04:02,080 --> 00:04:04,080 Speaker 1: for for Goldman per se, but just for the banks, 81 00:04:04,120 --> 00:04:07,080 Speaker 1: all right. Post financial crisis, a lot of new regulations 82 00:04:07,120 --> 00:04:07,880 Speaker 1: came on in the industry. 83 00:04:07,960 --> 00:04:08,720 Speaker 3: Fine, we get it. 84 00:04:09,120 --> 00:04:12,400 Speaker 1: There had to be some response and probably well deserved regulations, 85 00:04:13,120 --> 00:04:15,240 Speaker 1: I would have thought, and over time a lot of 86 00:04:15,240 --> 00:04:17,479 Speaker 1: those regulations would just kind of fall to the wayside, 87 00:04:17,520 --> 00:04:20,440 Speaker 1: peel back. But now the discussion is actually even for 88 00:04:20,520 --> 00:04:24,320 Speaker 1: more regulations. What is driving that that need for more 89 00:04:24,360 --> 00:04:26,200 Speaker 1: regulation of the banks? I know Jamie Diamond's been a 90 00:04:26,200 --> 00:04:29,039 Speaker 1: big spokesperson kind of against that with along with Brian 91 00:04:29,080 --> 00:04:29,480 Speaker 1: morning Hand. 92 00:04:30,680 --> 00:04:33,839 Speaker 5: So there's two things, you know, first, which is on 93 00:04:34,080 --> 00:04:36,720 Speaker 5: you know the quote smaller banks, but you know, not 94 00:04:36,760 --> 00:04:39,200 Speaker 5: the not the biggest banks that I cover. Right, So 95 00:04:39,240 --> 00:04:41,280 Speaker 5: we had the issues in March that did raise a 96 00:04:41,279 --> 00:04:43,680 Speaker 5: lot of questions of you know, some of the things 97 00:04:43,680 --> 00:04:46,720 Speaker 5: that were rolled back, Okay, should they have been? And 98 00:04:46,760 --> 00:04:49,320 Speaker 5: so I think that sort of, you know, to your point, 99 00:04:49,320 --> 00:04:51,359 Speaker 5: things started to roll back, but now the question was 100 00:04:51,400 --> 00:04:54,359 Speaker 5: like was that the right thing to do. The second 101 00:04:54,480 --> 00:04:57,320 Speaker 5: part that's more germane to the banks that I cover, 102 00:04:57,360 --> 00:04:59,840 Speaker 5: which is Basil three endgame, which we hope is finally 103 00:04:59,839 --> 00:05:03,920 Speaker 5: the end. So again we've had all these regulations over 104 00:05:03,960 --> 00:05:08,960 Speaker 5: the years. You know, there's some some still finalization that 105 00:05:08,960 --> 00:05:11,560 Speaker 5: we're expecting any day now for the last few weeks. 106 00:05:12,320 --> 00:05:16,040 Speaker 5: And I think that why you're hearing the bank management's 107 00:05:17,000 --> 00:05:19,560 Speaker 5: complain is that you know, first of all, the way 108 00:05:19,640 --> 00:05:22,400 Speaker 5: that the basil works, because you hear this term a lot, right, 109 00:05:22,440 --> 00:05:25,560 Speaker 5: So Basil is really an entity that sort of sets 110 00:05:25,600 --> 00:05:29,039 Speaker 5: the guidelines and then the jurisdictions go out and implement those. 111 00:05:29,360 --> 00:05:32,640 Speaker 5: So the US has a lot of other very strict 112 00:05:32,680 --> 00:05:35,479 Speaker 5: regulations that other countries don't have. Right, so we have 113 00:05:35,560 --> 00:05:38,600 Speaker 5: the stress test every year. That adds a lot of volatility, 114 00:05:39,600 --> 00:05:42,720 Speaker 5: and that really is very punitive to the trading books 115 00:05:42,720 --> 00:05:47,880 Speaker 5: of banks. This buzzle three endgame, again supposedly from what 116 00:05:47,880 --> 00:05:50,680 Speaker 5: we've heard from the proposal outlines, is also going to 117 00:05:50,720 --> 00:05:53,000 Speaker 5: be tough on the trading books of banks. So do 118 00:05:53,040 --> 00:05:55,320 Speaker 5: you really need to have this sort of double whammy 119 00:05:55,760 --> 00:05:59,719 Speaker 5: and these different types of conflicting regulations that you know, 120 00:05:59,760 --> 00:06:01,839 Speaker 5: really make it very difficult. And I think you know 121 00:06:01,880 --> 00:06:04,920 Speaker 5: what the bank managements will say is you might make 122 00:06:04,960 --> 00:06:07,480 Speaker 5: the banks safer, but the risks will still be there 123 00:06:07,520 --> 00:06:09,120 Speaker 5: and they'll be outside of the system. 124 00:06:09,320 --> 00:06:09,400 Speaker 7: Ye. 125 00:06:09,760 --> 00:06:11,039 Speaker 5: And is that really what you want? 126 00:06:11,080 --> 00:06:14,320 Speaker 1: Unintended consequence, because that goes too just to the business 127 00:06:14,320 --> 00:06:16,200 Speaker 1: at Maddie and I talked to talk about a lot, 128 00:06:16,240 --> 00:06:17,719 Speaker 1: which is the private credit business. 129 00:06:18,160 --> 00:06:22,000 Speaker 3: And these private creditors come in with almost these Cheshire smiles. 130 00:06:22,200 --> 00:06:24,640 Speaker 1: You know, they're like, I can't believe how good it 131 00:06:24,680 --> 00:06:26,360 Speaker 1: is for us now because the banks have so much 132 00:06:26,400 --> 00:06:28,880 Speaker 1: regulation that they're reluctant to put some of these loans 133 00:06:28,920 --> 00:06:32,560 Speaker 1: on their books, and so the barers, big private equity 134 00:06:32,560 --> 00:06:35,000 Speaker 1: shops are coming to us and we're making money handover 135 00:06:35,080 --> 00:06:35,599 Speaker 1: faced here. 136 00:06:36,040 --> 00:06:37,719 Speaker 5: And if you look at if you looked at a 137 00:06:37,839 --> 00:06:41,000 Speaker 5: very long term chart of banks, you know since the crisis, 138 00:06:41,480 --> 00:06:44,640 Speaker 5: you will see the huge growth of credit in the 139 00:06:44,680 --> 00:06:47,200 Speaker 5: non bank center, shadow bank, whatever you want to call it, 140 00:06:47,320 --> 00:06:51,320 Speaker 5: private credit is that is certainly a huge player there. 141 00:06:51,400 --> 00:06:55,080 Speaker 5: And then the decrease on banks balance sheets. But again 142 00:06:55,160 --> 00:06:57,320 Speaker 5: like these private credit firms are getting there. You know, 143 00:06:57,360 --> 00:07:01,520 Speaker 5: they're raising capital, you know, from someone, And if you 144 00:07:01,560 --> 00:07:04,800 Speaker 5: think about it, the private private credit is really sort 145 00:07:04,839 --> 00:07:08,280 Speaker 5: of the talk of the entire asset management industry, even 146 00:07:08,279 --> 00:07:12,480 Speaker 5: the traditional managers buying into private credit, the private equity 147 00:07:12,520 --> 00:07:15,400 Speaker 5: managers building up their private credit businesses. So you have 148 00:07:15,480 --> 00:07:16,720 Speaker 5: all this money going there. 149 00:07:16,840 --> 00:07:17,680 Speaker 3: There's more talk. 150 00:07:17,560 --> 00:07:20,480 Speaker 5: About getting this into pension portfolios and other portfolios. So 151 00:07:20,520 --> 00:07:22,760 Speaker 5: you can think about, you know, sort of wear the 152 00:07:22,840 --> 00:07:24,920 Speaker 5: risks and who's going to bear those risks and how 153 00:07:24,960 --> 00:07:25,920 Speaker 5: that's all shaping up. 154 00:07:25,840 --> 00:07:27,200 Speaker 3: Thinking about going into the private credit. 155 00:07:27,440 --> 00:07:30,680 Speaker 1: See I went through thesemen bank, the Chase Manhattan Bank 156 00:07:30,800 --> 00:07:34,040 Speaker 1: credit training, which is the best on Wall Street. Back 157 00:07:34,040 --> 00:07:35,760 Speaker 1: back in the day, I can take those skills and 158 00:07:35,800 --> 00:07:36,640 Speaker 1: go to private credit. 159 00:07:36,680 --> 00:07:37,120 Speaker 8: There you go. 160 00:07:37,360 --> 00:07:39,480 Speaker 4: I should have done it. I mean, there's still time 161 00:07:39,520 --> 00:07:42,720 Speaker 4: for me, you guys, I can get an MBA tomorrow. Allison. 162 00:07:42,720 --> 00:07:44,160 Speaker 4: I want to ask you a weird one in our 163 00:07:44,200 --> 00:07:46,440 Speaker 4: final minute and a half with you. A lot of 164 00:07:46,440 --> 00:07:49,640 Speaker 4: my friends got the Apple savings card with the Goldman. 165 00:07:50,400 --> 00:07:52,080 Speaker 4: What do I need to tell them? Are they gonna 166 00:07:52,240 --> 00:07:54,120 Speaker 4: get ditched by Goldman any day? 167 00:07:54,160 --> 00:07:54,360 Speaker 8: Now? 168 00:07:54,520 --> 00:07:56,600 Speaker 5: What's going on with I mean, they they probably don't 169 00:07:56,600 --> 00:07:59,360 Speaker 5: even know that Goldman's evolved, and except that you probably 170 00:07:59,360 --> 00:08:02,800 Speaker 5: told them that, and that's why those cards are those 171 00:08:02,800 --> 00:08:03,960 Speaker 5: cards are generally. 172 00:08:03,640 --> 00:08:04,680 Speaker 3: Called private label. 173 00:08:05,400 --> 00:08:08,600 Speaker 5: So what Goldman had said right was that they were 174 00:08:08,600 --> 00:08:11,480 Speaker 5: getting away from Marcus. They did keep the GM relationship, 175 00:08:11,520 --> 00:08:14,320 Speaker 5: the Apple relationship, where there's some kind of a relationship, 176 00:08:14,920 --> 00:08:18,680 Speaker 5: but in general, when those relationships fall apart, it's it 177 00:08:18,840 --> 00:08:22,160 Speaker 5: tends to be because the economics just aren't working for 178 00:08:22,240 --> 00:08:24,760 Speaker 5: one or someone else is coming in and willing to 179 00:08:25,040 --> 00:08:29,080 Speaker 5: accept lower economics. So, you know, and of course we 180 00:08:29,160 --> 00:08:31,920 Speaker 5: never know that, We never know that. Most of us 181 00:08:32,000 --> 00:08:34,719 Speaker 5: never know exactly what happens. But you know, that could 182 00:08:34,760 --> 00:08:37,080 Speaker 5: be the case that someone's coming in and just you know, 183 00:08:37,200 --> 00:08:40,160 Speaker 5: more interested in the credit card business, and now that 184 00:08:40,480 --> 00:08:43,720 Speaker 5: it's not so strategically important for Goldman, you know, will 185 00:08:43,760 --> 00:08:46,440 Speaker 5: they be willing to sort of give that away? And 186 00:08:46,480 --> 00:08:48,880 Speaker 5: it's it's also been interesting, right So the other side 187 00:08:48,880 --> 00:08:51,800 Speaker 5: of it is the deposit gathering business, and you see 188 00:08:51,960 --> 00:08:54,560 Speaker 5: Apples introducing this new product, but then you have the 189 00:08:54,600 --> 00:08:56,880 Speaker 5: Marcus product and you see the yields on both of 190 00:08:56,920 --> 00:08:59,880 Speaker 5: those and kind of competing, and you know where we're 191 00:09:00,280 --> 00:09:02,800 Speaker 5: you know, Goldman liked those. They obviously would like to 192 00:09:02,840 --> 00:09:04,720 Speaker 5: get one hundred percent of the economics where they. 193 00:09:04,640 --> 00:09:07,280 Speaker 1: Can, right, Okay, all right, Alison, thanks so much for 194 00:09:07,360 --> 00:09:09,480 Speaker 1: joining us. I know there's a busy, busy few days 195 00:09:09,559 --> 00:09:09,840 Speaker 1: for you. 196 00:09:09,920 --> 00:09:10,560 Speaker 3: Alison Williams. 197 00:09:10,559 --> 00:09:12,640 Speaker 1: She covers all the banks on a global basis for 198 00:09:12,679 --> 00:09:15,720 Speaker 1: Bloomberg Intelligence. She's also the director of research for the 199 00:09:15,840 --> 00:09:18,280 Speaker 1: US business for Bloomberg Intelligence, so we appreciate getting some 200 00:09:18,320 --> 00:09:21,440 Speaker 1: of her time here in the Bloomberg Interactive Brokers Studio. 201 00:09:22,880 --> 00:09:26,280 Speaker 9: You're listening to the Team Ken's are Live program Bloomberg 202 00:09:26,320 --> 00:09:29,720 Speaker 9: Markets weekdays at ten am Eastern on Bloomberg dot com, 203 00:09:29,760 --> 00:09:32,920 Speaker 9: the iHeartRadio app, and the Bloomberg Business app, or listen 204 00:09:33,000 --> 00:09:37,360 Speaker 9: on demand wherever you get your podcasts, Madison. 205 00:09:37,360 --> 00:09:40,400 Speaker 1: When I bought the Jersey Shore Compound earlier this year, 206 00:09:40,440 --> 00:09:43,240 Speaker 1: my mortgage had a six handle on it, and I 207 00:09:43,320 --> 00:09:44,360 Speaker 1: was not happy. 208 00:09:45,320 --> 00:09:47,000 Speaker 3: Just got rooked at because I know Matt. 209 00:09:46,760 --> 00:09:49,920 Speaker 1: Millers is I think sub three on his estate up 210 00:09:49,920 --> 00:09:53,480 Speaker 1: in Westchester. But I'm looking at the bankrate dot com 211 00:09:53,559 --> 00:09:57,360 Speaker 1: US home mortgage thirty year fixed national average today seven point, 212 00:09:58,240 --> 00:10:00,520 Speaker 1: So maybe I'm not that dumb of a buyer. But 213 00:10:00,840 --> 00:10:03,120 Speaker 1: any who, where are mortgage rates going? What's going on 214 00:10:03,160 --> 00:10:06,840 Speaker 1: in that market? I have no idea other than we'd 215 00:10:06,920 --> 00:10:10,040 Speaker 1: call Erica Adelberg. She's an MBS strategist that's mortgage backed 216 00:10:10,040 --> 00:10:13,840 Speaker 1: securities for you out there for Bloomberg Intelligence. She joins 217 00:10:13,920 --> 00:10:16,679 Speaker 1: us here in our Bloomberg Interactive Brokers studio. So, Erica, 218 00:10:16,880 --> 00:10:20,200 Speaker 1: how are mortgage backed securities? How's the market in twenty 219 00:10:20,640 --> 00:10:22,440 Speaker 1: twenty three so far you're to date? 220 00:10:23,200 --> 00:10:27,880 Speaker 8: Hi, thanks for having me on. The market is actually 221 00:10:28,920 --> 00:10:32,600 Speaker 8: just barely up, I think on an excess return basis, 222 00:10:33,000 --> 00:10:36,600 Speaker 8: and it's we actually have great rates are up one 223 00:10:36,640 --> 00:10:38,640 Speaker 8: hundred as you pointed out, they're up about one hundred 224 00:10:38,679 --> 00:10:42,920 Speaker 8: basis points in terms of primary mortgage rates year every year. 225 00:10:43,200 --> 00:10:45,880 Speaker 8: But they are off their recent peaks, so at least 226 00:10:45,960 --> 00:10:48,600 Speaker 8: you didn't take out a seven point three five percent 227 00:10:48,720 --> 00:10:53,320 Speaker 8: mortgage last week or so. As you know, they ratesed, 228 00:10:53,559 --> 00:10:57,280 Speaker 8: you know, fled higher once again when non fine pay 229 00:10:57,360 --> 00:10:59,559 Speaker 8: rolls came in a little stronger than some people had 230 00:10:59,559 --> 00:11:02,520 Speaker 8: hoped her expected. But there has been some retreat in 231 00:11:02,600 --> 00:11:05,160 Speaker 8: that again with CPI coming in a little bit lower. 232 00:11:05,320 --> 00:11:09,400 Speaker 8: So you know, we're still closer to the hives than 233 00:11:09,400 --> 00:11:12,120 Speaker 8: the lows, but you know, we are off the tippy top. 234 00:11:13,080 --> 00:11:16,480 Speaker 8: But anytime you have mortgage rates around or above seven percent, 235 00:11:17,440 --> 00:11:21,440 Speaker 8: it probably is restrictive on an affordability basis for quite 236 00:11:21,440 --> 00:11:22,080 Speaker 8: a few people. 237 00:11:22,480 --> 00:11:24,680 Speaker 4: Yeah, well, it's really interesting. I know that you know 238 00:11:24,840 --> 00:11:28,080 Speaker 4: all about this, but this Redfin report was fascinating to 239 00:11:28,160 --> 00:11:30,959 Speaker 4: me showing that just one percent of the nation's homes 240 00:11:30,960 --> 00:11:33,480 Speaker 4: have changed hands this year. And they also have data 241 00:11:33,520 --> 00:11:36,480 Speaker 4: showing the ninety percent of Americans do have a mortgage 242 00:11:36,559 --> 00:11:40,320 Speaker 4: under six percent. So why would anyone ever be incentivized 243 00:11:40,400 --> 00:11:43,480 Speaker 4: to let that go when, like you said, Paul, now 244 00:11:43,480 --> 00:11:47,559 Speaker 4: we're at the seven handle. What could be the catalyst 245 00:11:47,640 --> 00:11:51,720 Speaker 4: for people to start to say it's time to leave 246 00:11:51,800 --> 00:11:53,640 Speaker 4: behind my home and get a new mortgage. 247 00:11:53,720 --> 00:11:56,199 Speaker 8: I mean to state the obvious. Life happens. You know, 248 00:11:56,440 --> 00:12:00,600 Speaker 8: people have kids, you know, there's divorces, there's you know, 249 00:12:00,640 --> 00:12:02,880 Speaker 8: so over time and and I mean, if you look 250 00:12:02,920 --> 00:12:06,360 Speaker 8: at the very long range average, it's not like seven 251 00:12:06,400 --> 00:12:09,600 Speaker 8: percent is it's it's high, but you know, we've had 252 00:12:09,679 --> 00:12:11,760 Speaker 8: rates a lot higher. It seems like all of our 253 00:12:12,280 --> 00:12:15,559 Speaker 8: you know, older siblings or parents, depending on what generation 254 00:12:15,640 --> 00:12:18,800 Speaker 8: we're in, you know, at one point probably had rates 255 00:12:18,880 --> 00:12:21,920 Speaker 8: that were seven seven to ten percent or you know, 256 00:12:21,960 --> 00:12:24,600 Speaker 8: even higher. And of course all those people have now 257 00:12:24,640 --> 00:12:27,479 Speaker 8: refinanced two and a half percent if they still have mortgages. 258 00:12:28,000 --> 00:12:31,200 Speaker 4: But is that the move then for people listening? Just 259 00:12:31,400 --> 00:12:34,560 Speaker 4: if you are waiting to buy a home, don't wait, 260 00:12:34,720 --> 00:12:36,040 Speaker 4: just do it now in refinance. 261 00:12:36,320 --> 00:12:38,720 Speaker 8: That's that's certainly what a new homebuilder would tell you. 262 00:12:38,880 --> 00:12:39,880 Speaker 3: Yeah, and new. 263 00:12:39,720 --> 00:12:42,720 Speaker 8: Home builders are you know that That's that's really the 264 00:12:42,760 --> 00:12:45,240 Speaker 8: game in town right now, because as you just mentioned, 265 00:12:45,280 --> 00:12:46,839 Speaker 8: except for the people who do have to move for 266 00:12:46,920 --> 00:12:49,800 Speaker 8: one reason or another, very few people are listing their 267 00:12:49,840 --> 00:12:52,400 Speaker 8: their homes. You know, the numbers on listenings are extremely low. 268 00:12:52,720 --> 00:12:55,560 Speaker 8: So the resale market as they call it is, or 269 00:12:55,559 --> 00:12:58,880 Speaker 8: existing home market, is very slow. But new home builders, 270 00:12:59,360 --> 00:13:03,680 Speaker 8: as just alluded to, permits and starts, are up new 271 00:13:03,720 --> 00:13:06,080 Speaker 8: home sales. New home inventories are about a third of 272 00:13:06,120 --> 00:13:10,280 Speaker 8: existing homes of homes listed for sale these days, and 273 00:13:10,480 --> 00:13:16,000 Speaker 8: the new home builders are finding ways to incentivize first 274 00:13:16,000 --> 00:13:18,400 Speaker 8: time home buyers and you know, even some move up 275 00:13:18,400 --> 00:13:22,960 Speaker 8: buyers by offering them slightly lower rates. What's interesting, I 276 00:13:23,000 --> 00:13:25,640 Speaker 8: was reading just the other day that some of these buydowns, 277 00:13:25,640 --> 00:13:28,400 Speaker 8: as they call it, were relatively temporary. They offered like 278 00:13:28,440 --> 00:13:30,920 Speaker 8: a three two one buy down, where it's basically only 279 00:13:30,960 --> 00:13:33,040 Speaker 8: good for three years the first year they buy down 280 00:13:33,040 --> 00:13:35,760 Speaker 8: the rate for three years, then two, then one. They 281 00:13:35,800 --> 00:13:38,400 Speaker 8: have to qualify them at the higher mortgage rate, so 282 00:13:38,760 --> 00:13:42,440 Speaker 8: you know, unlikely to be another subprime teaser mortgage rate, 283 00:13:42,480 --> 00:13:44,320 Speaker 8: but it might become as a rate shock. Maybe some 284 00:13:44,360 --> 00:13:47,520 Speaker 8: people had expected, as you mentioned, rates to fall sooner 285 00:13:47,800 --> 00:13:50,280 Speaker 8: and to be able to refinance in that time, and 286 00:13:50,280 --> 00:13:52,840 Speaker 8: that's what the home builders are selling. They're like, you know, 287 00:13:52,920 --> 00:13:54,760 Speaker 8: for right now, we'll give you a lower rate because 288 00:13:54,800 --> 00:13:56,640 Speaker 8: surely you'll be able to refin in a year or two. 289 00:13:57,040 --> 00:13:58,880 Speaker 8: Some of those people certainly haven't been able to. 290 00:13:59,240 --> 00:14:02,520 Speaker 1: Yeah, I kind of thought I gave myself twelve months, 291 00:14:02,520 --> 00:14:04,439 Speaker 1: which I still plenty plan of time that i'd refinance 292 00:14:04,480 --> 00:14:07,120 Speaker 1: with a FOE handle, and I'm not sure that's going 293 00:14:07,160 --> 00:14:09,160 Speaker 1: to happen, but we'll see, but I will refinance a 294 00:14:09,200 --> 00:14:11,360 Speaker 1: low I'm not too concerned about that, all right, So 295 00:14:11,440 --> 00:14:15,440 Speaker 1: talk to us about Uh yeah, I think about office space, 296 00:14:15,720 --> 00:14:17,760 Speaker 1: and in some of the biggest cities there's so much 297 00:14:17,800 --> 00:14:19,400 Speaker 1: office space, and people are telling us that's going to 298 00:14:19,440 --> 00:14:22,440 Speaker 1: be a real problem for the lenders and so on 299 00:14:22,480 --> 00:14:22,960 Speaker 1: and so forth. 300 00:14:22,960 --> 00:14:27,000 Speaker 3: How does that impact your market, the mortgage backed securities market, I. 301 00:14:27,320 --> 00:14:30,680 Speaker 8: Think the actual office space. There's two ways that could 302 00:14:30,880 --> 00:14:33,480 Speaker 8: impact it. For one thing, as we've just mentioned, there 303 00:14:33,600 --> 00:14:36,880 Speaker 8: is a bit of a lack of availability of homes 304 00:14:36,880 --> 00:14:38,720 Speaker 8: for sale for those who do want to get into 305 00:14:38,720 --> 00:14:42,120 Speaker 8: the market. You know, the new home builders are picking up, 306 00:14:42,160 --> 00:14:44,840 Speaker 8: but actually if you look at the charts of permits 307 00:14:44,840 --> 00:14:47,200 Speaker 8: and starts, we're a lot higher than we were in 308 00:14:47,280 --> 00:14:50,240 Speaker 8: pre pandemic levels. But that's because there had been ten 309 00:14:50,400 --> 00:14:54,160 Speaker 8: years post financial crisis of underbuilding. So there's a big 310 00:14:54,240 --> 00:14:56,920 Speaker 8: troth after two thousand and nine two thousand and eight, 311 00:14:57,240 --> 00:15:00,840 Speaker 8: and it was just creeping slowly up and then shot 312 00:15:00,960 --> 00:15:05,040 Speaker 8: up during the pandemic. So we're about twenty percent below 313 00:15:05,080 --> 00:15:07,480 Speaker 8: pandemic levels. We're well above that we were in the 314 00:15:07,520 --> 00:15:10,200 Speaker 8: ten years beforehand. But what that means, that's the other 315 00:15:10,240 --> 00:15:12,560 Speaker 8: reason there are so few homes being listed. Not only 316 00:15:12,600 --> 00:15:16,320 Speaker 8: are people locked into their mortgages, but honestly, there was 317 00:15:16,360 --> 00:15:20,280 Speaker 8: probably a structural underbuilding of new homes to begin So 318 00:15:20,320 --> 00:15:22,400 Speaker 8: some of the people have talked about converting some of 319 00:15:22,400 --> 00:15:28,880 Speaker 8: this office space into residential loans, residential homes, which could 320 00:15:29,000 --> 00:15:32,960 Speaker 8: offer more opportunities. But you know, from a macro perspective, 321 00:15:35,360 --> 00:15:37,920 Speaker 8: loans that were made to office spaces that are now 322 00:15:38,160 --> 00:15:41,560 Speaker 8: falling a price, maybe even underwater, those have to be refinanced, 323 00:15:42,120 --> 00:15:47,160 Speaker 8: re constructed, you know, on a more regular basis, and 324 00:15:47,200 --> 00:15:50,800 Speaker 8: that could be a drag for lenders, which, whenever you 325 00:15:50,840 --> 00:15:54,000 Speaker 8: have a drag in the banking industry, can be a 326 00:15:54,080 --> 00:15:55,840 Speaker 8: drag generally for the economy. 327 00:15:56,800 --> 00:16:01,800 Speaker 4: Is the decreasing construction costs and kind of the alleviation 328 00:16:01,880 --> 00:16:03,920 Speaker 4: of some of the deeper supply chain issues of the 329 00:16:03,960 --> 00:16:07,280 Speaker 4: pandemic having an impact on home builders that will ever 330 00:16:07,320 --> 00:16:10,800 Speaker 4: gets passed on to home buyers. 331 00:16:11,280 --> 00:16:14,360 Speaker 8: Yeah, actually, in some ways it already is. If you 332 00:16:14,360 --> 00:16:17,680 Speaker 8: look at the difference between the median new home price 333 00:16:17,920 --> 00:16:21,680 Speaker 8: and the median existing home price, because existing home prices 334 00:16:21,720 --> 00:16:24,160 Speaker 8: haven't fallen maybe as quickly as some would have expected 335 00:16:24,200 --> 00:16:26,960 Speaker 8: given the lack of listing, the difference between those is 336 00:16:27,000 --> 00:16:29,840 Speaker 8: almost a record type, like new homes are normally more 337 00:16:29,880 --> 00:16:33,920 Speaker 8: expensive right but right now they're just very marginally more expensive. 338 00:16:34,240 --> 00:16:36,160 Speaker 8: So I think some of that, whether it's you know, 339 00:16:36,200 --> 00:16:39,680 Speaker 8: through price concessions which actually builders say they're not really 340 00:16:39,720 --> 00:16:43,520 Speaker 8: offering as much anymore, or just costs coming down relative 341 00:16:43,640 --> 00:16:47,080 Speaker 8: to what they had been, I think that already is 342 00:16:47,200 --> 00:16:50,520 Speaker 8: manifesting itself, and some people have I've read some people 343 00:16:50,600 --> 00:16:54,120 Speaker 8: even calling for new homes to be priced below existing homes. 344 00:16:54,440 --> 00:16:56,640 Speaker 8: And again this is all median prices, so this is 345 00:16:56,680 --> 00:16:59,800 Speaker 8: not adjusted for square footage or anything. But it's an 346 00:17:00,000 --> 00:17:02,800 Speaker 8: interesting you know, potential. 347 00:17:02,960 --> 00:17:07,720 Speaker 1: Eesg Environmental social governance is that kind of a part 348 00:17:07,760 --> 00:17:09,400 Speaker 1: of the mortgage lending market as well. 349 00:17:10,280 --> 00:17:13,159 Speaker 8: It is interestingly I put out a note yesterday that 350 00:17:13,200 --> 00:17:16,640 Speaker 8: you may have seen that you're referring to, And first 351 00:17:16,640 --> 00:17:19,480 Speaker 8: of all, in terms of Ginny made mortgages, those back 352 00:17:19,520 --> 00:17:22,880 Speaker 8: by FHA, for instance, in some ways those were already 353 00:17:23,119 --> 00:17:27,200 Speaker 8: fundamentally ESG loans because they're targeted towards trying to improved 354 00:17:27,240 --> 00:17:31,399 Speaker 8: affordability for lower income and higher LTV borrowers. Now Fanny 355 00:17:31,440 --> 00:17:35,360 Speaker 8: and Freddie have also started to highlight their efforts. They've 356 00:17:35,359 --> 00:17:37,800 Speaker 8: always they've always had a little bit of a mandate 357 00:17:37,800 --> 00:17:40,240 Speaker 8: there anyway, and their duty to serve. But they have 358 00:17:40,359 --> 00:17:44,960 Speaker 8: these new social criteria scores and social density scores that 359 00:17:44,960 --> 00:17:47,720 Speaker 8: they're publishing that are available here on the terminal that 360 00:17:47,880 --> 00:17:51,520 Speaker 8: tell you just how many of these socially responsible criteria 361 00:17:51,520 --> 00:17:55,040 Speaker 8: they're fitting. And in the research that we put out yesterday, 362 00:17:55,359 --> 00:17:58,760 Speaker 8: we pointed out that some of these highest social responsibility 363 00:17:58,760 --> 00:18:05,480 Speaker 8: loans and Somebody's offer the best risk award characteristics because 364 00:18:05,560 --> 00:18:07,560 Speaker 8: a lot of these homeowners are a little more restricted 365 00:18:07,600 --> 00:18:11,040 Speaker 8: from refinancing, but at the same time they may have 366 00:18:11,359 --> 00:18:17,120 Speaker 8: more more incentive to be move up borrowers, for instance, 367 00:18:17,800 --> 00:18:19,920 Speaker 8: so they tend to have less extension risk too. 368 00:18:20,200 --> 00:18:21,200 Speaker 3: All right, interesting stuff. 369 00:18:21,240 --> 00:18:24,639 Speaker 1: Always talking about the housing market, the mortgage market. Everybody 370 00:18:25,320 --> 00:18:28,600 Speaker 1: has their thoughts and opinions. Eric Adelberg, we get pay 371 00:18:28,640 --> 00:18:31,320 Speaker 1: her to have for those opinions in that analysis. Eric Aidelberg, 372 00:18:31,359 --> 00:18:34,120 Speaker 1: she's a mortgage backed security strategist for Bloomberg Intelligence. Joining 373 00:18:34,200 --> 00:18:37,199 Speaker 1: us here in our Bloomberg Interactive Broker Studio again that 374 00:18:37,520 --> 00:18:40,520 Speaker 1: you know, the bankrate dot com average mortgage rate for 375 00:18:40,600 --> 00:18:46,240 Speaker 1: thirty year mortgage seven point. It's off the highs, as 376 00:18:46,880 --> 00:18:49,479 Speaker 1: Erico was just mentioning, but certainly a lot higher than 377 00:18:49,480 --> 00:18:51,080 Speaker 1: a lot of people want to deal with. 378 00:18:51,119 --> 00:18:53,600 Speaker 3: That question is to what extent? When will that come down? 379 00:18:53,880 --> 00:18:57,000 Speaker 9: You're listening to the tape Cat's are Line program Bloomberg 380 00:18:57,040 --> 00:19:00,639 Speaker 9: Markets weekdays at ten am Eastern on Bloomberg Radio, the 381 00:19:00,720 --> 00:19:03,920 Speaker 9: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 382 00:19:03,960 --> 00:19:06,800 Speaker 9: You can also listen live on Amazon Alexa from our 383 00:19:06,800 --> 00:19:11,840 Speaker 9: flagship New York station. Just say Alexa, play Bloomberg eleven thirty. 384 00:19:12,960 --> 00:19:13,080 Speaker 6: You know. 385 00:19:13,080 --> 00:19:14,320 Speaker 1: Every once in a while, we'd like to get a 386 00:19:14,400 --> 00:19:17,520 Speaker 1: sense of kind of where high net worth investors are 387 00:19:17,560 --> 00:19:19,760 Speaker 1: putting their capital these days, and to do that we 388 00:19:19,920 --> 00:19:22,679 Speaker 1: check in with Michael Sonefeld. He's a chairman and founder 389 00:19:22,720 --> 00:19:25,360 Speaker 1: of Tiger twenty one. Tiger twenty one is a network 390 00:19:25,760 --> 00:19:29,600 Speaker 1: of learning groups for high net worth investors. We usually 391 00:19:29,600 --> 00:19:33,120 Speaker 1: get some really interesting perspective from Michael. So Michael, again, 392 00:19:33,160 --> 00:19:35,439 Speaker 1: the first half of the year was a lot better 393 00:19:35,880 --> 00:19:38,640 Speaker 1: for most investors in twenty twenty two, where you really 394 00:19:38,680 --> 00:19:40,840 Speaker 1: had nowhere to hide last year, whether it's equities or 395 00:19:40,880 --> 00:19:43,960 Speaker 1: fixed income. Maybe some of your alternative investments did better. 396 00:19:44,320 --> 00:19:47,520 Speaker 1: What are your members saying today? How did they feel 397 00:19:47,560 --> 00:19:49,840 Speaker 1: here in mid July after what was a pretty good 398 00:19:49,840 --> 00:19:50,600 Speaker 1: first half of the year. 399 00:19:52,920 --> 00:19:55,840 Speaker 7: Nice to see you guys, And you know, our members 400 00:19:55,880 --> 00:19:59,280 Speaker 7: are mixed, like the reports that you've been sharing all morning. 401 00:19:59,359 --> 00:20:03,119 Speaker 7: On the one hand, inflation is coming down, the business 402 00:20:03,400 --> 00:20:07,520 Speaker 7: climate is good, unemployment is low, but everybody thinks that 403 00:20:07,600 --> 00:20:10,600 Speaker 7: we're sort of at the crest, or many people think 404 00:20:10,600 --> 00:20:12,920 Speaker 7: we're at the crest, and at least half of our 405 00:20:12,960 --> 00:20:16,000 Speaker 7: members think we're going into recession. And when you have 406 00:20:16,119 --> 00:20:20,280 Speaker 7: this kind of diversity, our members try and create something 407 00:20:20,359 --> 00:20:23,960 Speaker 7: like an all weather portfolio where they have some bets 408 00:20:24,000 --> 00:20:28,240 Speaker 7: on the upside and protection on the downside. And that's 409 00:20:28,240 --> 00:20:32,280 Speaker 7: sort of been the magic quest that they're looking for 410 00:20:32,440 --> 00:20:33,800 Speaker 7: in preserving their wealth. 411 00:20:34,320 --> 00:20:38,240 Speaker 4: Part of the flows into the SMP, obviously related to 412 00:20:38,280 --> 00:20:42,320 Speaker 4: the Magnificent Seven, are related to the AI rally. I 413 00:20:42,320 --> 00:20:46,480 Speaker 4: wonder to what extent your clients experience FOMO when something 414 00:20:46,520 --> 00:20:48,720 Speaker 4: like an AI rally is happening, or are they kind 415 00:20:48,720 --> 00:20:49,520 Speaker 4: of immune to that? 416 00:20:50,960 --> 00:20:54,160 Speaker 7: So I just have to say we don't have clients, 417 00:20:54,160 --> 00:20:57,280 Speaker 7: We only have members. These are all entrepreneurs who have 418 00:20:57,440 --> 00:21:02,159 Speaker 7: no problem. These are alleople who built great businesses and 419 00:21:02,240 --> 00:21:04,240 Speaker 7: now we're preserving wealth. But I don't think it's so 420 00:21:04,320 --> 00:21:07,600 Speaker 7: much bomo because our members have been playing AI. Over 421 00:21:07,680 --> 00:21:11,840 Speaker 7: fifty six percent of our members either have or intend 422 00:21:11,880 --> 00:21:14,880 Speaker 7: to make AI investment plays. And one of the things 423 00:21:14,880 --> 00:21:18,000 Speaker 7: that's really different about AI if you think about recent fads, 424 00:21:18,040 --> 00:21:21,840 Speaker 7: either in crypto or the web, twenty years ago, when 425 00:21:21,840 --> 00:21:25,600 Speaker 7: you had these technology plays, you didn't have the equivalent 426 00:21:25,640 --> 00:21:28,720 Speaker 7: of a Microsoft, which is already a cash flowing company, 427 00:21:29,080 --> 00:21:32,639 Speaker 7: also be the technology play if you want to play AI. 428 00:21:32,720 --> 00:21:36,359 Speaker 7: Of course, there's lots of small venture capital opportunities, but 429 00:21:36,440 --> 00:21:39,640 Speaker 7: the best opportunities, many of our members think, are in 430 00:21:39,760 --> 00:21:43,080 Speaker 7: like the Microsoft and the Googles that have the largest 431 00:21:43,480 --> 00:21:47,919 Speaker 7: AI treasure troves, and yet they're really solid businesses. So 432 00:21:48,320 --> 00:21:51,960 Speaker 7: it's very it's a unique moment in AI that this 433 00:21:52,119 --> 00:21:54,800 Speaker 7: kind of fad. I don't mean that it's unimportant. I 434 00:21:54,840 --> 00:21:58,440 Speaker 7: mean this flavor of what everybody is focused on. You're 435 00:21:58,440 --> 00:22:01,359 Speaker 7: not taking the kind of extra ordinary risks that most 436 00:22:01,520 --> 00:22:06,159 Speaker 7: other technology rallies require, because here you have comp have 437 00:22:06,359 --> 00:22:10,600 Speaker 7: real profits and real businesses and real futures no matter 438 00:22:10,680 --> 00:22:14,040 Speaker 7: what happens on AI. But it'll be really enhanced as 439 00:22:14,119 --> 00:22:17,959 Speaker 7: they roll out and continue to build their AI functions. 440 00:22:18,160 --> 00:22:20,960 Speaker 1: Hey, Michael, how about alternative investments? I mean your members 441 00:22:21,000 --> 00:22:23,639 Speaker 1: they sell oftentimes their businesses for tens or hundreds of 442 00:22:23,680 --> 00:22:26,320 Speaker 1: millions of dollars and then they really have to allocate 443 00:22:26,359 --> 00:22:30,320 Speaker 1: capital cross a portfolio. How is investing in alternative investments, 444 00:22:30,359 --> 00:22:32,639 Speaker 1: whether it's head funds or private equity or private credit. 445 00:22:32,680 --> 00:22:34,719 Speaker 1: Has that changed over the last decade for your members? 446 00:22:35,880 --> 00:22:40,040 Speaker 7: So the two biggest changes, The single biggest is that 447 00:22:40,160 --> 00:22:44,240 Speaker 7: private equity fifteen years ago with about ten percent of 448 00:22:44,240 --> 00:22:48,479 Speaker 7: our members' portfolios. Today our members manage one hundred and 449 00:22:48,480 --> 00:22:53,600 Speaker 7: fifty billion dollars and private equity is just about thirty percent. Wow, 450 00:22:53,800 --> 00:22:57,159 Speaker 7: that's been the biggest change. And a big portion of 451 00:22:57,160 --> 00:23:02,760 Speaker 7: that private equity is venture capital because a period of 452 00:23:02,880 --> 00:23:05,680 Speaker 7: time ago you wouldn't have even seen venture capital fifteen 453 00:23:05,760 --> 00:23:09,840 Speaker 7: years and now we think that's the largest sub segment 454 00:23:10,240 --> 00:23:13,760 Speaker 7: of private equity. But on the other side, more recently, 455 00:23:13,800 --> 00:23:17,480 Speaker 7: the biggest down shift we've ever seen is in real estate. 456 00:23:17,520 --> 00:23:22,399 Speaker 7: Real estate was king for fifteen years bouncing between twenty 457 00:23:22,480 --> 00:23:25,719 Speaker 7: seven and thirty percent, and in the last year it 458 00:23:25,800 --> 00:23:30,520 Speaker 7: came down quite precipitously to around twenty two percent. And 459 00:23:31,480 --> 00:23:35,359 Speaker 7: you know, our members are exquisitely sensitive to interest rates, 460 00:23:35,760 --> 00:23:40,040 Speaker 7: and as interest rates are going up, that takes some 461 00:23:40,160 --> 00:23:43,359 Speaker 7: of the potential off the table for real estate. But 462 00:23:43,440 --> 00:23:48,200 Speaker 7: as your last speaker was mentioning, office, which was one 463 00:23:48,240 --> 00:23:52,119 Speaker 7: of the most solid areas in the real estate area, 464 00:23:52,320 --> 00:23:54,840 Speaker 7: is now up for grabs. A lot of problems, not 465 00:23:55,000 --> 00:23:59,560 Speaker 7: just with vacancies, but you know where offices were easy 466 00:23:59,600 --> 00:24:02,880 Speaker 7: to lev and so as buildings, they probably are more 467 00:24:02,960 --> 00:24:05,639 Speaker 7: highly levered and the equity is more at risk. And 468 00:24:06,040 --> 00:24:09,159 Speaker 7: behind that on the negative would be retail and on 469 00:24:09,240 --> 00:24:13,679 Speaker 7: the positive side would be industrial. But the office, you know, 470 00:24:13,720 --> 00:24:16,800 Speaker 7: where the office is going is one of the great 471 00:24:16,880 --> 00:24:20,440 Speaker 7: conundrums that will only figure out over the next decade. 472 00:24:20,640 --> 00:24:23,040 Speaker 4: Well, that's one of the things I find interesting about 473 00:24:23,080 --> 00:24:26,840 Speaker 4: these member feedback results you sent us is that you 474 00:24:27,520 --> 00:24:31,560 Speaker 4: asked about their most favorite public equity sectors and they're tied. 475 00:24:31,720 --> 00:24:34,199 Speaker 4: Twenty four percent said real estate and twenty four percent 476 00:24:34,520 --> 00:24:38,560 Speaker 4: said it. I'm fascinated that real estate is getting as 477 00:24:38,640 --> 00:24:41,240 Speaker 4: much love as the IT space given the big tech 478 00:24:41,359 --> 00:24:43,439 Speaker 4: rally that we've seen this year, can you help me 479 00:24:43,480 --> 00:24:44,160 Speaker 4: make sense of that? 480 00:24:45,240 --> 00:24:51,040 Speaker 7: Sure, our members are by accomplishment about one in ten thousand, 481 00:24:51,280 --> 00:24:55,160 Speaker 7: equivalent to being in the major League. And the largest 482 00:24:55,280 --> 00:24:58,919 Speaker 7: area our members created wealth in maybe a quarter of 483 00:24:58,960 --> 00:25:03,520 Speaker 7: our members, was in real estate. So you have extraordinary 484 00:25:03,640 --> 00:25:06,840 Speaker 7: knowledge that most investors don't have. That's the advantage of 485 00:25:07,040 --> 00:25:09,040 Speaker 7: being in one of our groups and being with somebody 486 00:25:09,040 --> 00:25:12,280 Speaker 7: who built their career in real estate. So my guess 487 00:25:12,400 --> 00:25:15,119 Speaker 7: is that real estate has been beaten up in certain 488 00:25:15,160 --> 00:25:18,879 Speaker 7: areas and our members are a little more attuned. The 489 00:25:18,920 --> 00:25:21,840 Speaker 7: big question we ask in a meeting is if you 490 00:25:21,920 --> 00:25:24,680 Speaker 7: buy something at twenty and it goes down to fifteen, 491 00:25:24,760 --> 00:25:27,639 Speaker 7: should you get out? And the answer is, if you 492 00:25:27,760 --> 00:25:30,119 Speaker 7: really knew what you were investing at twenty and it 493 00:25:30,160 --> 00:25:33,680 Speaker 7: goes down to fifteen, it's a better deal. But as 494 00:25:33,760 --> 00:25:37,000 Speaker 7: I think you guys well know, over the history of 495 00:25:37,040 --> 00:25:41,240 Speaker 7: the stock market, individual investors have never matched the returns 496 00:25:41,560 --> 00:25:43,600 Speaker 7: because they buy at the wrong time and sell at 497 00:25:43,640 --> 00:25:46,600 Speaker 7: the wrong time. And so I think the high interest 498 00:25:46,720 --> 00:25:50,840 Speaker 7: in real estate opportunities shows the sort of expertise that 499 00:25:50,880 --> 00:25:55,080 Speaker 7: our members has looking for deals and navigating in this 500 00:25:55,840 --> 00:25:56,960 Speaker 7: volatile climate. 501 00:25:57,480 --> 00:25:59,159 Speaker 1: Hey Michael, real quick, just give us the latest on 502 00:25:59,320 --> 00:26:02,199 Speaker 1: kind of estate planning. What are your members kind of 503 00:26:02,200 --> 00:26:03,560 Speaker 1: focused on these days. 504 00:26:04,760 --> 00:26:07,439 Speaker 7: Well, first of all, there's a big date coming up 505 00:26:07,480 --> 00:26:10,320 Speaker 7: at the end of twenty twenty five where some of 506 00:26:10,359 --> 00:26:15,879 Speaker 7: the major estate planning tools will sunset. But you know, 507 00:26:15,920 --> 00:26:21,440 Speaker 7: I think our members are focused on the tension between 508 00:26:21,600 --> 00:26:27,960 Speaker 7: giving kids too much and ruining. Essentially, what they saw 509 00:26:28,240 --> 00:26:32,200 Speaker 7: was their entrepreneurial ability to be successful. So this notion, 510 00:26:33,080 --> 00:26:37,240 Speaker 7: this notion of kying to figure out what to do 511 00:26:37,480 --> 00:26:40,119 Speaker 7: and how much to leave. So you know, there's something 512 00:26:40,200 --> 00:26:43,600 Speaker 7: called the giving pledge among billionaires where they are at 513 00:26:43,960 --> 00:26:47,960 Speaker 7: half of their money to foundation and philanthropy, and a 514 00:26:47,960 --> 00:26:50,520 Speaker 7: lot of our members are thinking about philanthropy in a 515 00:26:50,560 --> 00:26:53,159 Speaker 7: new way, particularly with all the problems that are in 516 00:26:53,200 --> 00:26:53,919 Speaker 7: the world today. 517 00:26:54,040 --> 00:26:55,720 Speaker 1: All right, Michael, thank you so much for joining us. 518 00:26:55,760 --> 00:26:59,200 Speaker 1: Always a unique perspective there, Michael Snefelt. He's a chairman 519 00:26:59,200 --> 00:27:01,520 Speaker 1: and founder of Tiger twenty one kind of collection of 520 00:27:01,560 --> 00:27:04,200 Speaker 1: high net worth individuals get a really interesting perspective how 521 00:27:04,200 --> 00:27:07,560 Speaker 1: they allocate capital across the sectors. 522 00:27:09,640 --> 00:27:13,040 Speaker 9: You're listening to the teenth Ken's Are Live program Bloomberg 523 00:27:13,080 --> 00:27:16,479 Speaker 9: Markets weekdays at ten am Eastern on Bloomberg dot Com, 524 00:27:16,520 --> 00:27:19,680 Speaker 9: the iHeartRadio app, and the Bloomberg Business App, or listen 525 00:27:19,760 --> 00:27:22,040 Speaker 9: on demand wherever you get your podcasts. 526 00:27:24,320 --> 00:27:25,960 Speaker 1: We've been hearing from a lot of the big banks 527 00:27:25,960 --> 00:27:28,520 Speaker 1: over the last four or five days talking about their 528 00:27:28,560 --> 00:27:32,960 Speaker 1: business net interesting income positive, but certainly offset by a 529 00:27:33,040 --> 00:27:35,520 Speaker 1: lack of deal making for a lot of these companies. 530 00:27:35,640 --> 00:27:37,760 Speaker 1: Comparisons are very tough. We want to get a sense 531 00:27:37,800 --> 00:27:39,800 Speaker 1: of what's happening in the mn A space. We talked 532 00:27:39,840 --> 00:27:42,639 Speaker 1: to Rob Brown, he's the CEO of Lincoln International. He 533 00:27:42,800 --> 00:27:45,719 Speaker 1: joins us here live in the Bloomberg Interactor Brokers studio. 534 00:27:45,760 --> 00:27:49,800 Speaker 1: They're based in Chicago, one of my favorite towns anywhere. Rob, 535 00:27:49,840 --> 00:27:52,880 Speaker 1: thanks for joining us here. Talk to us about kind 536 00:27:52,880 --> 00:27:55,720 Speaker 1: of the m and A environment we're seeing out there now. 537 00:27:56,080 --> 00:27:59,919 Speaker 1: A lot of uncertainty about the economy and not historically 538 00:28:00,000 --> 00:28:02,960 Speaker 1: it doesn't really bode well for boards and CEOs getting 539 00:28:03,000 --> 00:28:04,400 Speaker 1: out there and putting big capital to work. 540 00:28:04,400 --> 00:28:05,840 Speaker 3: What are you seeing in your practice? 541 00:28:05,920 --> 00:28:08,720 Speaker 6: Yeah, I think what you just allude to, Paul is 542 00:28:08,760 --> 00:28:11,720 Speaker 6: what we've seen really over the last eight months to 543 00:28:11,760 --> 00:28:16,320 Speaker 6: a year, right, the economic uncertainty really slowing down on 544 00:28:16,320 --> 00:28:17,920 Speaker 6: the m and a market, and you're seeing it in 545 00:28:18,200 --> 00:28:20,120 Speaker 6: the release of some of the big bakes and even 546 00:28:20,119 --> 00:28:24,480 Speaker 6: Goldman's release today, in the investment banking business being down. 547 00:28:25,320 --> 00:28:26,280 Speaker 10: So I think that's what we've seen. 548 00:28:26,359 --> 00:28:31,919 Speaker 6: Interestingly, there's some alchemy right now for improved activity, and 549 00:28:31,960 --> 00:28:34,119 Speaker 6: I think there's really four factors that are driving that. 550 00:28:34,200 --> 00:28:36,680 Speaker 6: I think one is, if you go back to how 551 00:28:36,680 --> 00:28:38,920 Speaker 6: we came into the year, there seems to be more 552 00:28:38,960 --> 00:28:42,280 Speaker 6: consensus of a soft landing, or at least not a 553 00:28:42,280 --> 00:28:43,120 Speaker 6: really hard landing. 554 00:28:43,320 --> 00:28:45,560 Speaker 10: And I think there was always that. 555 00:28:45,480 --> 00:28:47,719 Speaker 6: Fear of investors saying, well, joh, I don't want to put 556 00:28:47,760 --> 00:28:49,200 Speaker 6: something to work and have the bottom fall out of 557 00:28:49,200 --> 00:28:51,920 Speaker 6: the economy. So I think the backdrop is we may 558 00:28:51,920 --> 00:28:53,400 Speaker 6: have a recession, but it's probably not going to be 559 00:28:53,400 --> 00:28:56,120 Speaker 6: as severe as I thought. I think the other the 560 00:28:56,160 --> 00:28:59,480 Speaker 6: other key input here is that as each quarter has 561 00:28:59,520 --> 00:29:02,360 Speaker 6: gone by since probably midyear last year, when you saw 562 00:29:02,520 --> 00:29:06,320 Speaker 6: inflation spike and the FED respond aggressively, you're seeing sellers 563 00:29:06,360 --> 00:29:07,680 Speaker 6: expectations moderate. 564 00:29:07,360 --> 00:29:07,800 Speaker 10: Down a bit. 565 00:29:07,920 --> 00:29:10,000 Speaker 6: So you know, twenty twenty one and the first half 566 00:29:10,040 --> 00:29:12,480 Speaker 6: of twenty twenty two were really peak valuations. So I 567 00:29:12,480 --> 00:29:14,880 Speaker 6: think as time has gone on, sellers are starting to 568 00:29:14,920 --> 00:29:17,240 Speaker 6: realize I may not be able to sell it for 569 00:29:17,320 --> 00:29:19,240 Speaker 6: exactly what I could, but I can still get a 570 00:29:19,280 --> 00:29:21,840 Speaker 6: good return. So and I think the two last pieces 571 00:29:21,880 --> 00:29:24,520 Speaker 6: are we are seeing the aperture of the private credit 572 00:29:24,560 --> 00:29:28,040 Speaker 6: markets improve a bit, the credit markets are actually hardening 573 00:29:28,120 --> 00:29:30,240 Speaker 6: up in a good way, and that lenders are saying, 574 00:29:30,640 --> 00:29:32,840 Speaker 6: I will finance this deal. It's going to be expensive, right. 575 00:29:32,880 --> 00:29:35,480 Speaker 6: Rates are high, but they're going to be there. And 576 00:29:35,520 --> 00:29:38,920 Speaker 6: the last and maybe the biggest driver is the amount 577 00:29:39,000 --> 00:29:43,160 Speaker 6: of dry powder sitting in institutional equity holders, in private equity, 578 00:29:43,440 --> 00:29:46,479 Speaker 6: venture capital, and even the private debt funds. It's starting 579 00:29:46,520 --> 00:29:49,200 Speaker 6: to burn a hole in the pocket of investors, and 580 00:29:49,240 --> 00:29:51,840 Speaker 6: on top of that, they're under pressure to show some 581 00:29:51,880 --> 00:29:55,320 Speaker 6: returns and return some capital to raise the next fund. 582 00:29:55,360 --> 00:29:58,080 Speaker 6: So I think all of that kind of pointing maybe 583 00:29:58,160 --> 00:29:59,880 Speaker 6: not up hugely, but starting to trend in the right. 584 00:30:00,640 --> 00:30:02,840 Speaker 6: I think we're expecting much better activity for the back 585 00:30:02,840 --> 00:30:04,360 Speaker 6: half of the year than the first half. 586 00:30:04,720 --> 00:30:06,440 Speaker 4: Well, Paul and I talk about this all the time, 587 00:30:06,560 --> 00:30:09,320 Speaker 4: just that it's a challenging environment to get deals done 588 00:30:09,560 --> 00:30:14,120 Speaker 4: in I'm curious how your conversations and strategies have shifted, 589 00:30:14,160 --> 00:30:18,160 Speaker 4: if at all, Given some of the hawkishness that we've 590 00:30:18,200 --> 00:30:20,840 Speaker 4: seen from the FDC, from the Justice Department when it 591 00:30:20,840 --> 00:30:22,200 Speaker 4: comes to M and A deals. 592 00:30:22,200 --> 00:30:23,400 Speaker 10: Well, there's no doubt about that. 593 00:30:23,440 --> 00:30:25,080 Speaker 6: I mean, we're all trying to wait and see what 594 00:30:25,200 --> 00:30:28,920 Speaker 6: comes out of the new proposed FTC rules for Heart 595 00:30:28,920 --> 00:30:32,000 Speaker 6: Scott Ridino and clearance, and we're in a comment period 596 00:30:32,040 --> 00:30:34,840 Speaker 6: on that, and I know our industry is commenting aggressively 597 00:30:35,280 --> 00:30:36,520 Speaker 6: to we understand. 598 00:30:36,520 --> 00:30:38,680 Speaker 10: Listen, these rules haven't been changed in forty or fifty years. 599 00:30:38,720 --> 00:30:41,400 Speaker 6: It's okay to revisit them, but I think they need 600 00:30:41,440 --> 00:30:43,760 Speaker 6: to be done in a way that's going to achieve 601 00:30:43,800 --> 00:30:46,320 Speaker 6: the objective. So there is worry about that. But I 602 00:30:46,320 --> 00:30:48,320 Speaker 6: think your point is right. Deals are harder to get done. 603 00:30:48,440 --> 00:30:52,600 Speaker 6: I think what we're seeing is more targeted processes, making 604 00:30:52,600 --> 00:30:55,800 Speaker 6: sure you have financing lined up before you approach anybody, 605 00:30:56,600 --> 00:30:59,640 Speaker 6: and really going to investors with a pretty compelling investment 606 00:30:59,640 --> 00:31:03,360 Speaker 6: thesis that says, listen, you know, we know what you 607 00:31:03,480 --> 00:31:05,760 Speaker 6: like to acquire. Here's why you really need to look 608 00:31:05,760 --> 00:31:08,960 Speaker 6: at this. But it's more challenging to get things done right. 609 00:31:08,960 --> 00:31:10,560 Speaker 6: You got to get the financing in place. I think 610 00:31:10,640 --> 00:31:13,320 Speaker 6: the leverage has shifted a bit to the buyers in 611 00:31:13,400 --> 00:31:16,479 Speaker 6: terms of dictating the due diligence schedules and dictating what 612 00:31:16,520 --> 00:31:19,600 Speaker 6: they need to get done. But we are seeing things 613 00:31:19,600 --> 00:31:21,800 Speaker 6: get done. They're taking longer, they're a little more painful, 614 00:31:21,840 --> 00:31:22,960 Speaker 6: but they're getting done. 615 00:31:23,160 --> 00:31:25,920 Speaker 1: Talk to us about the role of private credit because 616 00:31:25,920 --> 00:31:27,360 Speaker 1: that's kind of a relatively new business. 617 00:31:27,360 --> 00:31:27,800 Speaker 3: In Madison. 618 00:31:27,880 --> 00:31:30,000 Speaker 1: I we spend a lot of time talking about We 619 00:31:30,040 --> 00:31:31,560 Speaker 1: try to speak to as many smart people as we 620 00:31:31,600 --> 00:31:34,640 Speaker 1: can about the private credit business because really it's really 621 00:31:34,720 --> 00:31:38,720 Speaker 1: just became a big source of capital after the financial crisis. 622 00:31:38,920 --> 00:31:41,479 Speaker 1: How does that factor into your deals? You typically do 623 00:31:41,520 --> 00:31:45,040 Speaker 1: more middle market transactions. How does that factor into your deal? 624 00:31:45,280 --> 00:31:46,520 Speaker 10: It factors in massively. 625 00:31:48,320 --> 00:31:51,160 Speaker 6: Most of our deals, particularly if we're selling to a 626 00:31:51,200 --> 00:31:54,520 Speaker 6: financial sponsor, a private equity group, or an institutional investor. 627 00:31:55,120 --> 00:31:56,600 Speaker 6: A good chunk of our deals are going to need 628 00:31:56,640 --> 00:31:59,840 Speaker 6: leverage to get done. And the entire market for that 629 00:31:59,880 --> 00:32:01,960 Speaker 6: is a private credit market. I mean, the banks have 630 00:32:02,400 --> 00:32:04,920 Speaker 6: you know, the compliance issues coming out of the global 631 00:32:04,960 --> 00:32:06,920 Speaker 6: financial crisis. The banks are out of this market, so 632 00:32:06,960 --> 00:32:12,320 Speaker 6: now you're dealing with private credit funds, hedge funds, unitronics investors, 633 00:32:12,800 --> 00:32:17,440 Speaker 6: and that market has attracted a tremendous amount of capital 634 00:32:17,480 --> 00:32:18,960 Speaker 6: over the last decade, and they have a lot of 635 00:32:19,000 --> 00:32:23,640 Speaker 6: dry powder too, But that market really closing up a 636 00:32:23,680 --> 00:32:26,040 Speaker 6: bit in the back half of the last year as 637 00:32:26,160 --> 00:32:29,040 Speaker 6: much as the fear of the economy downturning is what 638 00:32:29,240 --> 00:32:31,800 Speaker 6: really casts a little of appall over our market. So 639 00:32:31,840 --> 00:32:34,760 Speaker 6: what happens in that market is a really important driver 640 00:32:35,000 --> 00:32:39,320 Speaker 6: of the overall private the overall private capital markets and 641 00:32:39,360 --> 00:32:40,960 Speaker 6: the deals that get done on the private market. 642 00:32:41,240 --> 00:32:44,320 Speaker 4: Did some of the banking turmoil have any impact on 643 00:32:44,960 --> 00:32:47,640 Speaker 4: you guys via the impact on private. 644 00:32:47,360 --> 00:32:52,400 Speaker 10: Credit, You know, not really. 645 00:32:52,440 --> 00:32:54,280 Speaker 6: I think in particularly you look at SVB, there was 646 00:32:54,280 --> 00:32:55,600 Speaker 6: a little bit of a shock as to you know, 647 00:32:55,640 --> 00:32:57,120 Speaker 6: what does that mean? But they were really in the 648 00:32:57,240 --> 00:33:02,400 Speaker 6: venture debt market, and so the short answer is not really. 649 00:33:02,600 --> 00:33:05,440 Speaker 6: Although one thing I will say that's interesting is our 650 00:33:05,600 --> 00:33:10,080 Speaker 6: European M and A business, and we have offices in 651 00:33:10,240 --> 00:33:13,360 Speaker 6: sixteen countries, twenty offices. We've got a lot of offices 652 00:33:13,400 --> 00:33:15,200 Speaker 6: in Europe. It's a big part of our business. That 653 00:33:15,400 --> 00:33:17,720 Speaker 6: M and A market is actually holding up better than 654 00:33:17,720 --> 00:33:21,560 Speaker 6: the US M and A market this year, partly because 655 00:33:21,560 --> 00:33:23,640 Speaker 6: there still is a bank lending market in some of 656 00:33:23,640 --> 00:33:26,200 Speaker 6: the major economies to get deals done where we don't 657 00:33:26,200 --> 00:33:28,000 Speaker 6: have that here, so they've been able to look through 658 00:33:28,520 --> 00:33:31,160 Speaker 6: some of the private credit markets pulling their horns in. 659 00:33:31,920 --> 00:33:33,920 Speaker 6: I think they also have a situation where in the UK, 660 00:33:34,120 --> 00:33:37,880 Speaker 6: the largest capital market in Europe, they're worried about a 661 00:33:37,920 --> 00:33:40,560 Speaker 6: labor government next year and cap gains rates going up, 662 00:33:40,600 --> 00:33:42,080 Speaker 6: so there's a little bit of a push to get 663 00:33:42,080 --> 00:33:42,720 Speaker 6: things done now. 664 00:33:42,840 --> 00:33:44,680 Speaker 4: The more regulation in the UK. 665 00:33:44,680 --> 00:33:47,920 Speaker 6: Definitely, definitely. I think the regulation headwinds are going to 666 00:33:47,920 --> 00:33:48,360 Speaker 6: be everywhere. 667 00:33:48,520 --> 00:33:50,560 Speaker 1: Okay, you guys are a lot bigger than I thought 668 00:33:50,560 --> 00:33:53,800 Speaker 1: you were in I'm just reading some reporting that you 669 00:33:53,800 --> 00:33:54,160 Speaker 1: guys did. 670 00:33:54,200 --> 00:33:57,440 Speaker 3: It recently got into Australia, India. 671 00:33:57,840 --> 00:34:00,479 Speaker 1: You guys, you said you're in sixteen countries reporting here, 672 00:34:00,520 --> 00:34:02,320 Speaker 1: eight hundred and fifty investment bankers. 673 00:34:02,400 --> 00:34:03,200 Speaker 3: Why don't you guys. 674 00:34:03,040 --> 00:34:06,000 Speaker 10: Public You know we've followed. 675 00:34:06,040 --> 00:34:08,440 Speaker 6: We have followed our public investors or our public competitors. Right, 676 00:34:08,480 --> 00:34:12,399 Speaker 6: there's clearly an appetite for what we do. I think 677 00:34:12,440 --> 00:34:15,680 Speaker 6: for us, we have a pretty clearly stated goal to 678 00:34:15,760 --> 00:34:18,640 Speaker 6: be the leading advisor in the private capital markets, and 679 00:34:18,719 --> 00:34:21,359 Speaker 6: to date we felt that being a private. 680 00:34:21,040 --> 00:34:22,600 Speaker 10: Partnership is the right way to do that. 681 00:34:23,600 --> 00:34:26,200 Speaker 6: But we're constantly evaluating should we have a different ownership 682 00:34:26,200 --> 00:34:30,160 Speaker 6: structure and access to broader capital. So it's something we 683 00:34:30,200 --> 00:34:32,719 Speaker 6: haven't ruled out. And I think we've made some investments 684 00:34:32,760 --> 00:34:36,120 Speaker 6: to be public company ready. If and when we determine 685 00:34:36,120 --> 00:34:36,920 Speaker 6: that's the right thing to do. 686 00:34:37,360 --> 00:34:37,879 Speaker 10: What is the. 687 00:34:37,840 --> 00:34:40,080 Speaker 4: Biggest benefit for you staying private? 688 00:34:40,160 --> 00:34:43,480 Speaker 6: Then you know, for us, I think the thing we 689 00:34:43,520 --> 00:34:46,600 Speaker 6: need to balance that. What's made us unique and what's 690 00:34:46,600 --> 00:34:49,560 Speaker 6: allowed us to grow from seven of us to one 691 00:34:49,600 --> 00:34:52,600 Speaker 6: of the largest private markets M and A Advisors in 692 00:34:52,640 --> 00:34:55,080 Speaker 6: the world has been a real focus on culture that 693 00:34:55,280 --> 00:34:58,160 Speaker 6: attracts people and keeps people for the long time, long term. 694 00:34:58,239 --> 00:35:01,560 Speaker 6: And we've been able to define that measure against it 695 00:35:01,600 --> 00:35:04,640 Speaker 6: managed to it as a private company without having to 696 00:35:04,640 --> 00:35:07,440 Speaker 6: worry about what's going on in every single quarter. And 697 00:35:07,800 --> 00:35:09,239 Speaker 6: you know, if we were to go public, we'd want 698 00:35:09,280 --> 00:35:11,839 Speaker 6: to make sure that we can continue to really have 699 00:35:11,880 --> 00:35:16,000 Speaker 6: that as the oxygen of everything we do. So and 700 00:35:16,080 --> 00:35:18,080 Speaker 6: I think part of it's just different, right We kind 701 00:35:18,080 --> 00:35:20,240 Speaker 6: of know, we know the governance, we know how this works. 702 00:35:20,400 --> 00:35:21,879 Speaker 10: But I think organizations, if. 703 00:35:21,760 --> 00:35:24,000 Speaker 6: They're going to evolve, if they're going to continue to grow, 704 00:35:24,120 --> 00:35:27,480 Speaker 6: have to continually reevaluate, you know, what's the right capital 705 00:35:27,520 --> 00:35:29,720 Speaker 6: structure and ownership structure to achieve our goals. 706 00:35:30,040 --> 00:35:33,439 Speaker 1: So India, for example, a lot of folks are saying 707 00:35:33,520 --> 00:35:35,719 Speaker 1: India over the next twenty years is going to be 708 00:35:35,960 --> 00:35:37,200 Speaker 1: the It's gonna be China. 709 00:35:37,080 --> 00:35:39,920 Speaker 6: Was the last twenty years maybe for example, but better. 710 00:35:40,280 --> 00:35:42,799 Speaker 6: How do you guys view if you I agree with 711 00:35:42,840 --> 00:35:44,680 Speaker 6: that statement. We have been in India a long time. 712 00:35:44,760 --> 00:35:47,360 Speaker 6: We've been in India over a decade. We are about 713 00:35:47,440 --> 00:35:50,680 Speaker 6: to announce in the very near term here an acquisition 714 00:35:50,719 --> 00:35:54,040 Speaker 6: in India that's going to materially increase our presence there 715 00:35:55,560 --> 00:35:58,200 Speaker 6: as And we also have offices in China. As we're 716 00:35:58,200 --> 00:36:01,080 Speaker 6: seeing as we're seeing those off to slow down, as 717 00:36:01,120 --> 00:36:04,839 Speaker 6: we're seeing the economic ties really cool with China, we 718 00:36:04,920 --> 00:36:07,960 Speaker 6: think that the biggest benefactor of that is going to 719 00:36:08,000 --> 00:36:11,480 Speaker 6: be India. I mean India, it's the largest democracy on 720 00:36:11,560 --> 00:36:14,600 Speaker 6: the planet. Their laws based on English common law, it's 721 00:36:14,719 --> 00:36:18,600 Speaker 6: much easier to do business there, and it's a really 722 00:36:18,719 --> 00:36:23,839 Speaker 6: really innovative economy. So we're very bullish on what we're 723 00:36:23,840 --> 00:36:26,680 Speaker 6: seeing in India right now and really doubling down in 724 00:36:26,719 --> 00:36:27,080 Speaker 6: that market. 725 00:36:27,160 --> 00:36:29,720 Speaker 1: And conversely, twenty seconds left China. 726 00:36:30,840 --> 00:36:34,960 Speaker 6: Yeah, you know, I don't see in the near term 727 00:36:35,120 --> 00:36:38,200 Speaker 6: any sort of warming up of the economic ties with China. 728 00:36:38,320 --> 00:36:42,000 Speaker 6: I think that it's very difficult to get a Chinese 729 00:36:42,000 --> 00:36:45,160 Speaker 6: investor clear we were talking about compliance. Trying to sell 730 00:36:45,200 --> 00:36:48,120 Speaker 6: something to a Chinese buyer today in any Western country, 731 00:36:48,239 --> 00:36:48,959 Speaker 6: very very hard. 732 00:36:49,760 --> 00:36:51,560 Speaker 1: Interesting, all right, Rob, thanks so much for joining us. 733 00:36:51,840 --> 00:36:55,480 Speaker 1: Fascinating company which I need to learn more about. Rob Brown, 734 00:36:55,600 --> 00:36:58,640 Speaker 1: CEO of Lincoln International. They're based in the Great City 735 00:36:58,680 --> 00:37:01,239 Speaker 1: of Chicago, but as Rob is just saying, these guys 736 00:37:01,280 --> 00:37:03,960 Speaker 1: are all over and they focus on middle market M 737 00:37:03,960 --> 00:37:06,279 Speaker 1: and A, which, as we've learned from a lot of 738 00:37:06,280 --> 00:37:08,880 Speaker 1: people like Rob, a very lucrative business. Competitive business, but 739 00:37:09,000 --> 00:37:12,399 Speaker 1: very lucrative business, and so we'll pay attention to that 740 00:37:12,560 --> 00:37:13,080 Speaker 1: as well. 741 00:37:14,880 --> 00:37:18,520 Speaker 9: You're listening to the tape Can't Live program Bloomberg Markets 742 00:37:18,600 --> 00:37:22,000 Speaker 9: weekdays at ten am Eastern on Bloomberg Radio, the tune 743 00:37:22,000 --> 00:37:24,959 Speaker 9: in app, Bloomberg dot Com, and the Bloomberg Business App. 744 00:37:25,000 --> 00:37:27,839 Speaker 9: You can also listen live on Amazon Alexa from our 745 00:37:27,840 --> 00:37:32,240 Speaker 9: flagship New York station, Just say Alexa play Bloomberg eleven thirty. 746 00:37:33,960 --> 00:37:35,200 Speaker 3: Let's check out with Poocha Kumra. 747 00:37:35,440 --> 00:37:37,719 Speaker 1: She's a European rate strategist at TD. 748 00:37:38,160 --> 00:37:38,920 Speaker 3: Poocha, what did you. 749 00:37:38,920 --> 00:37:42,160 Speaker 1: Make of the UK economic data. The inflation data came 750 00:37:42,200 --> 00:37:42,680 Speaker 1: out today. 751 00:37:43,920 --> 00:37:47,160 Speaker 11: Good morning. Yes, never a dull moment in UK. I 752 00:37:47,160 --> 00:37:50,239 Speaker 11: think for the first time since February, the inflation did 753 00:37:50,280 --> 00:37:52,359 Speaker 11: surprise you downside, and I think this has come as 754 00:37:52,360 --> 00:37:55,880 Speaker 11: a big relief for the hawkish expectations that we're actually 755 00:37:56,200 --> 00:37:59,280 Speaker 11: playing out in UK and right our markets have actually 756 00:37:59,360 --> 00:38:03,040 Speaker 11: moved the tom expectations from close to six point five 757 00:38:03,120 --> 00:38:05,279 Speaker 11: that you saw a month ago to actually five point 758 00:38:05,320 --> 00:38:08,759 Speaker 11: seventy five, which seems much more reasonable. But as you say, 759 00:38:08,920 --> 00:38:12,719 Speaker 11: inflation in UK is still very elevated. Food intation is 760 00:38:12,760 --> 00:38:15,200 Speaker 11: almost thrice the levels that we see in US, so 761 00:38:15,320 --> 00:38:17,560 Speaker 11: I think we do have a long way to go. 762 00:38:17,880 --> 00:38:21,360 Speaker 11: But on the positive side, going forward, the base effects 763 00:38:21,640 --> 00:38:25,239 Speaker 11: both the energy and good prices should actually allow UK 764 00:38:25,320 --> 00:38:28,400 Speaker 11: inflation to actually be more correlated to what we are 765 00:38:28,400 --> 00:38:30,880 Speaker 11: seeing in UK and we have in sorry in Europe, 766 00:38:31,160 --> 00:38:33,400 Speaker 11: and we do see inflation to end the year around 767 00:38:33,480 --> 00:38:35,480 Speaker 11: the four to five percent level, which is a big 768 00:38:35,480 --> 00:38:37,160 Speaker 11: relief for BOE as well as riches. 769 00:38:37,280 --> 00:38:37,480 Speaker 12: Luck. 770 00:38:38,040 --> 00:38:40,400 Speaker 4: You mentioned the cost of food and I wonder to 771 00:38:40,440 --> 00:38:44,080 Speaker 4: what extent your average I'm going to steal this from 772 00:38:44,080 --> 00:38:48,240 Speaker 4: Paul the watering Hole attendees of the UK are able 773 00:38:48,280 --> 00:38:52,640 Speaker 4: to feel any sort of decrease in the inflation numbers 774 00:38:52,680 --> 00:38:55,040 Speaker 4: when they're still going out to get the same meal 775 00:38:55,040 --> 00:38:57,000 Speaker 4: they would have gotten a year ago and it's so 776 00:38:57,160 --> 00:39:01,480 Speaker 4: much more expensive. Do you have a take on when 777 00:39:01,719 --> 00:39:04,200 Speaker 4: the consumer in the UK might start to be able 778 00:39:04,239 --> 00:39:07,759 Speaker 4: to feel any sort of decline to the red hot 779 00:39:07,760 --> 00:39:09,440 Speaker 4: inflation they've been experiencing. 780 00:39:10,719 --> 00:39:12,640 Speaker 11: Yes, I mean the last six months have been pretty 781 00:39:12,719 --> 00:39:17,120 Speaker 11: much high prices everywhere, but we are actually seeing prices 782 00:39:17,160 --> 00:39:20,080 Speaker 11: going down when we go to all supermarket as well 783 00:39:20,080 --> 00:39:22,960 Speaker 11: as grocery stores there. We are actually getting emails from 784 00:39:22,960 --> 00:39:25,720 Speaker 11: all the grocery chains that they are actually reducing prices. 785 00:39:25,719 --> 00:39:28,760 Speaker 11: So I think there is some government pressure also involved. 786 00:39:29,080 --> 00:39:31,680 Speaker 11: And also one of the key things that the government 787 00:39:31,719 --> 00:39:34,279 Speaker 11: as well as the BOE is aware of is that 788 00:39:34,320 --> 00:39:37,120 Speaker 11: we are going to get very big mortgage payments as 789 00:39:37,120 --> 00:39:39,760 Speaker 11: we enter towards the end of the year and twenty 790 00:39:39,840 --> 00:39:43,319 Speaker 11: twenty four, so household buffer is actually going to be 791 00:39:43,360 --> 00:39:46,080 Speaker 11: more compressed and it's going to be a slow move, 792 00:39:46,280 --> 00:39:48,960 Speaker 11: but definitely we are moving in the right direction and 793 00:39:49,000 --> 00:39:50,560 Speaker 11: that should be a good news for you. 794 00:39:50,680 --> 00:39:50,879 Speaker 7: Ken. 795 00:39:50,880 --> 00:39:53,760 Speaker 11: That's why the crank basis points rally in today's session. 796 00:39:54,680 --> 00:39:58,960 Speaker 1: So putji, you talk to your institutional clients around the world, 797 00:39:59,440 --> 00:40:02,080 Speaker 1: and you're talk talking to about the European rates business, 798 00:40:02,600 --> 00:40:05,480 Speaker 1: what's kind of the most common trade that you're hearing people, 799 00:40:06,160 --> 00:40:08,279 Speaker 1: I guess are most interested in right right right now. 800 00:40:09,480 --> 00:40:12,279 Speaker 11: So right now, I think the US CPI as well 801 00:40:12,320 --> 00:40:14,879 Speaker 11: as the UK CPI have actually told us one thing 802 00:40:15,000 --> 00:40:17,759 Speaker 11: that we are done with this entire hiking story you 803 00:40:17,760 --> 00:40:20,400 Speaker 11: want or two hikes more central banks are done And 804 00:40:20,440 --> 00:40:22,839 Speaker 11: the key thing is how long we stay here. From 805 00:40:22,880 --> 00:40:25,759 Speaker 11: a trading perspective, we like long duration and I think 806 00:40:25,760 --> 00:40:28,719 Speaker 11: that is something even investors are looking at. But I 807 00:40:28,719 --> 00:40:31,680 Speaker 11: think after today's UK CPI report, one of the key 808 00:40:31,719 --> 00:40:34,640 Speaker 11: traits that I like is being long UK versus Bunce. 809 00:40:35,160 --> 00:40:37,359 Speaker 11: Just given the fact that that I think euro has 810 00:40:37,480 --> 00:40:41,120 Speaker 11: rallied quite a bit, when inflation will be equally sticky 811 00:40:41,200 --> 00:40:43,520 Speaker 11: in Europe as compared to in UK as. 812 00:40:43,440 --> 00:40:46,839 Speaker 4: Well, are you thinking about currency quite a bit then 813 00:40:46,880 --> 00:40:50,279 Speaker 4: in your calculations. 814 00:40:50,640 --> 00:40:55,960 Speaker 11: When it comes to the general strong pounds. 815 00:40:55,200 --> 00:40:57,960 Speaker 4: In Yeah, the strong pound, and I guess, particularly as 816 00:40:58,000 --> 00:41:00,360 Speaker 4: we're starting to see the decline of the U US 817 00:41:00,400 --> 00:41:05,000 Speaker 4: dollar hitting fourteen months low last week, is that something 818 00:41:05,000 --> 00:41:08,000 Speaker 4: that you think is going to be potentially a tail 819 00:41:08,120 --> 00:41:09,720 Speaker 4: or headwind for you this year. 820 00:41:11,160 --> 00:41:14,280 Speaker 11: I think generally now it's the FEDS show, just because 821 00:41:14,280 --> 00:41:16,919 Speaker 11: the fact that I mean so far, what we saw 822 00:41:16,960 --> 00:41:19,640 Speaker 11: that UK was just not correlated with the moves in 823 00:41:19,920 --> 00:41:23,200 Speaker 11: US as well as in Europe, just because we had 824 00:41:23,239 --> 00:41:26,239 Speaker 11: the strength of inflation, and BOE actually had to come 825 00:41:26,320 --> 00:41:29,360 Speaker 11: up more hawkish as well as hawk fifty basis points 826 00:41:29,360 --> 00:41:32,760 Speaker 11: when most of the central banks are actually at the terminal. 827 00:41:32,800 --> 00:41:36,480 Speaker 11: But I think that pound strength should actually be a 828 00:41:36,520 --> 00:41:38,600 Speaker 11: little new, more muted, and we should now be more 829 00:41:38,719 --> 00:41:41,680 Speaker 11: driven by where FED takes it from here, whether it's 830 00:41:41,760 --> 00:41:44,920 Speaker 11: one hike or two hikes going forward. And I think 831 00:41:45,000 --> 00:41:47,439 Speaker 11: that would be key when it comes to messaging going 832 00:41:47,480 --> 00:41:48,840 Speaker 11: into next week's FED meeting. 833 00:41:49,480 --> 00:41:51,640 Speaker 1: And to what extent just give us a kind of 834 00:41:51,640 --> 00:41:53,799 Speaker 1: a little bit of tutorial here, to what extent does 835 00:41:53,840 --> 00:41:56,000 Speaker 1: the Bank of England and the European Center Bank, to 836 00:41:56,000 --> 00:41:58,360 Speaker 1: what extent do they follow the US FED Reserve? 837 00:42:00,400 --> 00:42:03,080 Speaker 11: Well, to quote unquote, I mean actually's on the central 838 00:42:03,080 --> 00:42:05,319 Speaker 11: back meetings. We are told that we are different, we 839 00:42:05,400 --> 00:42:09,279 Speaker 11: have different economic background to handle it. But I think 840 00:42:09,560 --> 00:42:14,480 Speaker 11: FED is one central bank that basically determines interest rate 841 00:42:14,560 --> 00:42:17,239 Speaker 11: for the entire world, so I think one way or 842 00:42:17,280 --> 00:42:20,680 Speaker 11: the other one when FED actually decides to stop, it 843 00:42:20,680 --> 00:42:23,359 Speaker 11: would actually mean that the other central banks also need 844 00:42:23,360 --> 00:42:26,120 Speaker 11: to do less. So I think yes, FED still plays 845 00:42:26,120 --> 00:42:28,800 Speaker 11: a very key role when it comes to where terminal comes. 846 00:42:28,800 --> 00:42:30,040 Speaker 11: For most central. 847 00:42:29,640 --> 00:42:33,560 Speaker 4: Banks, we think that next week the FED is it 848 00:42:33,640 --> 00:42:35,960 Speaker 4: seems like a foregone conclusion. Here in the state, it's 849 00:42:35,960 --> 00:42:38,960 Speaker 4: a twenty five basis point hike. When you look ahead 850 00:42:39,000 --> 00:42:43,160 Speaker 4: to August for the ECB, is it going to be 851 00:42:43,200 --> 00:42:47,000 Speaker 4: maybe down to twenty five basis points after this inflation print. 852 00:42:48,400 --> 00:42:51,600 Speaker 11: So for when it comes to ECB, they've already told 853 00:42:51,680 --> 00:42:53,880 Speaker 11: us that they will be doing a twenty five basis 854 00:42:53,920 --> 00:42:57,080 Speaker 11: points in July. I think the key question is whether 855 00:42:57,080 --> 00:43:00,960 Speaker 11: they go twenty five again in September. I think at 856 00:43:00,960 --> 00:43:03,520 Speaker 11: this stage they will like to maintain the optionality. But 857 00:43:03,640 --> 00:43:07,520 Speaker 11: we have had hawks even coming in last this week's thing, 858 00:43:07,600 --> 00:43:10,160 Speaker 11: that there's no need to press that much on terminal. 859 00:43:10,239 --> 00:43:12,759 Speaker 11: So I think it is very much possible that we 860 00:43:12,800 --> 00:43:15,960 Speaker 11: are done with one high. But I think central banks 861 00:43:16,040 --> 00:43:19,200 Speaker 11: right now, including FED, wants to keep the optionality for 862 00:43:19,239 --> 00:43:21,719 Speaker 11: going in September as well. And I think the key 863 00:43:21,840 --> 00:43:28,080 Speaker 11: driver right now will be the August Jackson Hole meeting. 864 00:43:28,120 --> 00:43:30,240 Speaker 11: I think that would be the stage, the next stage 865 00:43:30,280 --> 00:43:33,319 Speaker 11: where central banks give us the key insight into what 866 00:43:33,400 --> 00:43:35,919 Speaker 11: they are thinking for the September meeting. I think right 867 00:43:35,960 --> 00:43:38,840 Speaker 11: now all central banks want a little more data to 868 00:43:39,040 --> 00:43:42,320 Speaker 11: convince themselves, whether it's one or two highs and they're done. 869 00:43:42,800 --> 00:43:45,240 Speaker 1: Hey, Pusha, thanks so much for joining us. Really appreciate 870 00:43:45,239 --> 00:43:48,000 Speaker 1: getting your perspective. The European call there the UK call 871 00:43:48,120 --> 00:43:52,200 Speaker 1: on rates Poosiakumra European rates Strategists at TD. 872 00:43:53,239 --> 00:43:56,840 Speaker 9: You're listening to the Tape Cancer Line program Bloomberg Markets 873 00:43:56,920 --> 00:44:00,400 Speaker 9: weekdays at ten am Eastern on Bloomberg Radio. Tune in 874 00:44:00,520 --> 00:44:03,400 Speaker 9: up Bloomberg dot Com and the Bloomberg Business App. You 875 00:44:03,440 --> 00:44:06,680 Speaker 9: can also listen live on Amazon Alexa from our flagship 876 00:44:06,719 --> 00:44:11,280 Speaker 9: New York station, Just say Alexa playing Bloomberg eleven thirty. 877 00:44:12,680 --> 00:44:14,880 Speaker 1: So Madison back in my cell said research days, you'd 878 00:44:14,920 --> 00:44:17,279 Speaker 1: have to slip out through San Francisco two or three 879 00:44:17,280 --> 00:44:19,400 Speaker 1: times a year to see institutional investor clients out there. 880 00:44:19,560 --> 00:44:21,160 Speaker 3: Love that town, still one of my faves. 881 00:44:22,560 --> 00:44:24,320 Speaker 1: But then you'd have to go not downtown, you have 882 00:44:24,400 --> 00:44:26,440 Speaker 1: to go slept all the way out to San Mateo 883 00:44:26,480 --> 00:44:28,040 Speaker 1: to see these Franklin Templeton people. 884 00:44:28,360 --> 00:44:29,680 Speaker 3: Now, it wasn't a. 885 00:44:29,680 --> 00:44:31,399 Speaker 1: Bad trip because they have a great Starbucks right there. 886 00:44:31,440 --> 00:44:35,160 Speaker 1: But nice people, smart people, and they manage a bunch 887 00:44:35,160 --> 00:44:37,040 Speaker 1: of money. So I've still got some bodies out there 888 00:44:37,040 --> 00:44:39,439 Speaker 1: from back in the day. Ed Perks, he's out there 889 00:44:39,440 --> 00:44:44,319 Speaker 1: in San Mateo. He's the CIO Franklin Templeton Income Investors. Ed, 890 00:44:44,480 --> 00:44:47,920 Speaker 1: I mean, you got fix income folks had a brutal 891 00:44:48,080 --> 00:44:51,440 Speaker 1: twenty twenty two. There was just nowhere to hide off 892 00:44:51,520 --> 00:44:53,120 Speaker 1: to a little bit better start this year. How are 893 00:44:53,120 --> 00:44:57,000 Speaker 1: you guys position out there with some of your fixingcome, 894 00:44:57,480 --> 00:44:59,760 Speaker 1: you know, kind of asset allocations in your performance? 895 00:45:01,280 --> 00:45:04,480 Speaker 12: Yeah, absolutely, you're right. Twenty twenty two was a tremendous 896 00:45:04,560 --> 00:45:06,719 Speaker 12: challenge for fixed income investors. You know, I think the 897 00:45:07,520 --> 00:45:11,120 Speaker 12: key element for us, for Franklin income investors is multi 898 00:45:11,120 --> 00:45:15,800 Speaker 12: asset flexibility. So really, at no other time in my career, 899 00:45:15,840 --> 00:45:18,480 Speaker 12: really have I theened this play out in a six 900 00:45:18,560 --> 00:45:22,279 Speaker 12: to eight quarter way where we entered twenty twenty two 901 00:45:22,360 --> 00:45:26,200 Speaker 12: with a very strong bias and tilting our multi asset 902 00:45:26,239 --> 00:45:30,520 Speaker 12: portfolios towards dividend paying common stock, and that was really 903 00:45:31,080 --> 00:45:35,600 Speaker 12: just reflecting the landscape and the opportunity set entering last year. 904 00:45:36,040 --> 00:45:38,080 Speaker 12: Ten year rates were I think we were down here 905 00:45:38,120 --> 00:45:40,399 Speaker 12: one and a quarter still one in a quarter, one 906 00:45:40,400 --> 00:45:44,200 Speaker 12: and a half percent, and you just didn't have enough spread. 907 00:45:44,239 --> 00:45:45,880 Speaker 12: And you know, the key things that we looked to 908 00:45:46,000 --> 00:45:51,120 Speaker 12: fixed income for in our portfolios attractive yield, potential for 909 00:45:51,200 --> 00:45:55,200 Speaker 12: some upside, or potential to help diversify our portfolio. And 910 00:45:55,680 --> 00:45:57,640 Speaker 12: I tell you, you know, most of twenty twenty two, 911 00:45:57,640 --> 00:45:59,600 Speaker 12: particularly the start of the year, we couldn't check any 912 00:45:59,640 --> 00:46:03,040 Speaker 12: of those. So we've come full circle though, and today 913 00:46:03,080 --> 00:46:06,720 Speaker 12: we sit from a tilt of nearly seventy five twenty 914 00:46:06,760 --> 00:46:11,759 Speaker 12: five in favor of equities eight to twelve quarters ago 915 00:46:11,920 --> 00:46:14,919 Speaker 12: to now better than sixty forty tilting to fixed income. 916 00:46:15,000 --> 00:46:18,000 Speaker 12: So that landscape has totally changed. And yes, you are 917 00:46:18,000 --> 00:46:23,080 Speaker 12: seeing it, whether you look at broader aggregate bomb market returns, investment, 918 00:46:23,080 --> 00:46:26,680 Speaker 12: great corporate returns. How ye, corporate returns all doing much better, 919 00:46:26,719 --> 00:46:29,520 Speaker 12: a little paling in comparison to something like the NASDAK move, 920 00:46:29,600 --> 00:46:32,360 Speaker 12: But I think fixed income investors have a lot to 921 00:46:32,360 --> 00:46:32,920 Speaker 12: look forward to. 922 00:46:33,760 --> 00:46:35,759 Speaker 4: Well, Okay, since you brought up the NASDAK move, I 923 00:46:35,800 --> 00:46:37,400 Speaker 4: just have to ask you about this. We saw the 924 00:46:37,480 --> 00:46:40,640 Speaker 4: NASDAK dip into the red a couple of minutes ago 925 00:46:40,760 --> 00:46:43,520 Speaker 4: because of some moves that we're seeing in the big 926 00:46:43,600 --> 00:46:47,680 Speaker 4: tech names, the Microsoft's, the Googles. It feels like the 927 00:46:47,680 --> 00:46:50,640 Speaker 4: perfect example of why it's a challenge when you have 928 00:46:50,760 --> 00:46:55,320 Speaker 4: this breadth of names leading the charge when it comes 929 00:46:55,360 --> 00:46:59,000 Speaker 4: to these indices. Is that a concern for you that 930 00:46:59,080 --> 00:47:04,719 Speaker 4: you think think about in terms of your allocation into equities, you. 931 00:47:04,680 --> 00:47:07,280 Speaker 12: Know it as it relates to the Nasdaq in particular, 932 00:47:07,719 --> 00:47:11,320 Speaker 12: given given worry income investors, we really aren't too concerned about, 933 00:47:12,360 --> 00:47:14,680 Speaker 12: you know, some of those moves or the narrowness of 934 00:47:14,760 --> 00:47:18,120 Speaker 12: the leadership. I know that's well been well discussed in 935 00:47:18,480 --> 00:47:21,200 Speaker 12: markets here the last couple of months. You know, we're 936 00:47:21,239 --> 00:47:23,480 Speaker 12: really focused on this kind of broader move. So we 937 00:47:23,640 --> 00:47:25,560 Speaker 12: clearly point more to you know, the S and P 938 00:47:25,719 --> 00:47:29,960 Speaker 12: five hundred, both the difference we've seen, the dispersion we've 939 00:47:30,000 --> 00:47:33,120 Speaker 12: seen year to date between something like the market cap 940 00:47:33,160 --> 00:47:36,200 Speaker 12: weighted index and the equal weighted index. You know that's 941 00:47:36,200 --> 00:47:40,040 Speaker 12: starting to perform a little bit better, But we wouldn't 942 00:47:40,080 --> 00:47:43,239 Speaker 12: be surprised if there's a pretty significant breather here in 943 00:47:43,320 --> 00:47:46,040 Speaker 12: in equity markets, and uh, you know we are going 944 00:47:46,120 --> 00:47:51,120 Speaker 12: to see you know, we'll see even even with companies 945 00:47:51,160 --> 00:47:55,640 Speaker 12: reporting slightly better earnings, we're still looking at at likely 946 00:47:55,680 --> 00:47:58,640 Speaker 12: flat to slightly negative year year earnings. And that's something 947 00:47:58,680 --> 00:48:01,040 Speaker 12: that you know, we think as you look forward into 948 00:48:01,080 --> 00:48:05,000 Speaker 12: the end of twenty three and particularly into twenty twenty four, 949 00:48:05,120 --> 00:48:09,080 Speaker 12: this bar, the hurdle really starts to rise, because consensus 950 00:48:10,280 --> 00:48:14,080 Speaker 12: really bakes in a resurgence in growth in Q four 951 00:48:14,120 --> 00:48:16,480 Speaker 12: and then into twenty twenty four, and we just think 952 00:48:16,520 --> 00:48:19,240 Speaker 12: that maybe a little premature. You know, we're still looking 953 00:48:19,280 --> 00:48:23,359 Speaker 12: at a pretty modest level of GDP growth, we're seeing disinflation. 954 00:48:23,880 --> 00:48:25,920 Speaker 12: We think a lot of companies have actually had a 955 00:48:25,920 --> 00:48:29,239 Speaker 12: bit more of a struggle with unit volumes, but have 956 00:48:29,280 --> 00:48:32,239 Speaker 12: had tremendous pricing that's going to start to wane and 957 00:48:32,280 --> 00:48:36,560 Speaker 12: certainly become much tougher with comps. So you know, we 958 00:48:36,600 --> 00:48:39,879 Speaker 12: wouldn't be surprised if the remainder of this year might 959 00:48:39,960 --> 00:48:41,600 Speaker 12: tilt a little bit more to some of the fixed 960 00:48:41,640 --> 00:48:45,839 Speaker 12: income markets, and equities have some digesting to do of 961 00:48:45,880 --> 00:48:47,120 Speaker 12: this very big move they've had. 962 00:48:48,160 --> 00:48:50,120 Speaker 1: Hey ed in the fixed income space, you know, as 963 00:48:50,120 --> 00:48:53,239 Speaker 1: income investors where are you guys kind of putting. 964 00:48:52,880 --> 00:48:55,360 Speaker 3: Your money to work? Where have you been putting your 965 00:48:55,360 --> 00:48:56,200 Speaker 3: money to work this year? 966 00:48:57,640 --> 00:49:00,640 Speaker 12: Yeah, we've really focused on some of the higher quality 967 00:49:00,680 --> 00:49:03,920 Speaker 12: segments within investment great corporates. And that's a big difference 968 00:49:03,960 --> 00:49:07,640 Speaker 12: from you know, last year, where we started with much 969 00:49:07,680 --> 00:49:11,880 Speaker 12: shorter duration. We're very selective, actually liked high yield bonds. 970 00:49:11,880 --> 00:49:14,839 Speaker 12: We didn't see the economy completely create airing and then 971 00:49:14,880 --> 00:49:18,040 Speaker 12: high yield you can find some really interesting opportunities with 972 00:49:18,200 --> 00:49:22,000 Speaker 12: very minimal interest rate risk as rates move first into 973 00:49:22,040 --> 00:49:25,160 Speaker 12: the fall last year, then this spring before the regional 974 00:49:25,160 --> 00:49:28,120 Speaker 12: banking crisis, and then more recently we've had you know, 975 00:49:28,200 --> 00:49:31,600 Speaker 12: opportunities with the ten year in and around four percent 976 00:49:32,040 --> 00:49:34,880 Speaker 12: through that level a couple of times, and UH and 977 00:49:34,960 --> 00:49:37,360 Speaker 12: spreads while not maybe as wide as a lot of 978 00:49:37,360 --> 00:49:42,440 Speaker 12: credit investors would would you know, would ideally like to see. 979 00:49:43,360 --> 00:49:45,840 Speaker 12: You had yields at levels that we haven't seen in 980 00:49:45,840 --> 00:49:49,280 Speaker 12: a while. You had bond prices because of last year's decimation, 981 00:49:49,840 --> 00:49:54,279 Speaker 12: at much more attractive discounts to face, and like I 982 00:49:54,320 --> 00:49:56,279 Speaker 12: said before, you know, you want to check some of 983 00:49:56,320 --> 00:49:59,600 Speaker 12: these boxes and fixed income today, particularly higher quality investment 984 00:49:59,600 --> 00:50:03,360 Speaker 12: Great corpor Brits you now have that opportunity incomes. Attractive 985 00:50:03,760 --> 00:50:06,480 Speaker 12: total return possibilities are there as we think rates do 986 00:50:06,640 --> 00:50:09,560 Speaker 12: decline over the next four to six quarters, and they're 987 00:50:09,640 --> 00:50:12,160 Speaker 12: nice diversification again in a multi ASID portfolio. 988 00:50:12,280 --> 00:50:14,720 Speaker 1: Right, hey, Ed, why don't you in your lunch break 989 00:50:14,960 --> 00:50:16,719 Speaker 1: hop down on the one on one go a little 990 00:50:16,719 --> 00:50:19,040 Speaker 1: bit south to Coopertino see our friends there that make 991 00:50:19,160 --> 00:50:21,879 Speaker 1: cell phones and tell them to step up and pay 992 00:50:21,920 --> 00:50:25,040 Speaker 1: a real dividend. Is that frustrate you as an income investor 993 00:50:25,080 --> 00:50:26,960 Speaker 1: that you got a company with a ga jillion dollars 994 00:50:27,000 --> 00:50:29,120 Speaker 1: of cash on a balance sheet, one hundred billion dollars 995 00:50:29,160 --> 00:50:31,000 Speaker 1: for free cash flow every year and they pay a 996 00:50:31,000 --> 00:50:32,400 Speaker 1: dividend yield less than one percent. 997 00:50:33,280 --> 00:50:36,760 Speaker 12: Yeah, you're preaching to the choir. We certainly are strong 998 00:50:36,800 --> 00:50:39,120 Speaker 12: advocates of that. We think it just makes sound sense. 999 00:50:39,719 --> 00:50:42,440 Speaker 12: It broadens your investor base, and you know, there's certainly 1000 00:50:42,480 --> 00:50:45,960 Speaker 12: other things that we can do with using convertible securities, 1001 00:50:45,960 --> 00:50:49,600 Speaker 12: for example in our portfolios or other structured equity like 1002 00:50:49,680 --> 00:50:52,399 Speaker 12: investments where you're kind of effectively doing some covered call 1003 00:50:52,440 --> 00:50:54,839 Speaker 12: writing and getting some premium. So you know, we do 1004 00:50:54,880 --> 00:50:58,360 Speaker 12: have some opportunity in lower dividend paying or non dividend 1005 00:50:58,400 --> 00:51:02,520 Speaker 12: paying stocks, but absolutely would firmly agree with you there. 1006 00:51:02,600 --> 00:51:04,680 Speaker 1: All right, if you see him, you know, Tim Cook, 1007 00:51:04,719 --> 00:51:07,439 Speaker 1: around the neighborhood, maybe can put that in his ear. 1008 00:51:07,760 --> 00:51:11,000 Speaker 1: Ed Perks Cio Franklin Income Investors out in San Mateo, 1009 00:51:11,520 --> 00:51:14,560 Speaker 1: giving us some good discussion on income investing. 1010 00:51:15,400 --> 00:51:18,520 Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can 1011 00:51:18,560 --> 00:51:22,320 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 1012 00:51:22,440 --> 00:51:26,120 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 1013 00:51:26,360 --> 00:51:28,400 Speaker 2: at Matt Miller nineteen seventy three. 1014 00:51:28,719 --> 00:51:31,160 Speaker 1: And I'm Faul Sweeney. I'm on Twitter at pt Sweeney. 1015 00:51:31,200 --> 00:51:33,880 Speaker 1: Before the podcast. You can always catch us worldwide at 1016 00:51:33,920 --> 00:51:35,640 Speaker 1: Bloomberg Radio