WEBVTT - US Retail Sales Rise by Most in Three Months 0:00:00.600 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.520 --> 0:00:12.880 This is Bloomberg Business Wait inside from the reporters and 0:00:13.080 --> 0:00:16.640 editors who bring you America's most trusted business magazine, plus 0:00:16.720 --> 0:00:20.840 global business, finance and tech news. The Bloomberg Business Week 0:00:20.880 --> 0:00:25.800 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:27.000 --> 0:00:29.800 Let's fuck retail stocks because they certainly got a boost 0:00:29.800 --> 0:00:32.760 today as the latest read on US retail sales, excluding 0:00:32.760 --> 0:00:35.600 the impact of that cyber attack on auto dealerships that 0:00:35.640 --> 0:00:37.839 we talk so much about, rose in June by the 0:00:37.880 --> 0:00:41.000 most in three months. Carol assigned consumers regain their footing 0:00:41.040 --> 0:00:42.200 at the end of Q two. 0:00:42.360 --> 0:00:44.120 Yeah, and just a little bit more detail. Of the 0:00:44.159 --> 0:00:47.640 thirteen categories that are tracked by the Commerce Commerce Department, 0:00:47.680 --> 0:00:51.720 only three registered declines. Those included sales of gasoline reflecting 0:00:51.720 --> 0:00:54.400 lower prices in the month. Sales at sporting goods stores 0:00:54.480 --> 0:00:57.080 also edging lower. So a little bit of context there 0:00:57.280 --> 0:00:58.760 what you need to know. We want to get to 0:00:58.800 --> 0:01:00.760 that now that we've had a few hours to digest 0:01:01.160 --> 0:01:03.840 that retail sales report, Washington DC Bureau, that's where we 0:01:03.960 --> 0:01:06.880 go and to Bloomberg News. US Treasury and Economic Policy 0:01:06.880 --> 0:01:10.119 reporter Chris Condon. Hey Chris, good to be checking in 0:01:10.160 --> 0:01:12.679 with you. What do we need to take note of 0:01:12.959 --> 0:01:15.560 from this morning's retail sales report other than it was 0:01:15.600 --> 0:01:17.080 a surprise to the upside. 0:01:17.680 --> 0:01:18.399 Hi there, Caroly. 0:01:18.480 --> 0:01:18.800 Yeah. 0:01:18.920 --> 0:01:21.560 The first thing in which you've already noted is to 0:01:21.600 --> 0:01:24.679 throw out the headline number. It was distorted by the 0:01:24.720 --> 0:01:29.560 auto issue that affected auto dealers. The underlying numbers were 0:01:29.560 --> 0:01:33.680 really good X autos up zero point four percent and 0:01:35.040 --> 0:01:39.120 going further, autos and gasoline. Gasoline fell mostly because of 0:01:39.120 --> 0:01:43.240 a fallen prices, not less demand. Take those out. There's 0:01:43.280 --> 0:01:46.959 your number zero point eight that's quite strong, much better 0:01:47.000 --> 0:01:50.559 than expected, and it finishes off the quarter on pretty 0:01:50.680 --> 0:01:56.520 sound note. Now, more broadly, I would hesitate to make 0:01:56.640 --> 0:02:01.600 any big conclusion about a full recovery of the consumer. 0:02:01.800 --> 0:02:07.200 The broader trend is for cooling consumption, cooling demand. Obviously, 0:02:07.240 --> 0:02:11.240 the consumer and businesses are under pressure from high interest rates. 0:02:11.680 --> 0:02:16.120 We're seeing that across the labor markets, so that's going 0:02:16.160 --> 0:02:19.919 to further a road purchasing power. We're seeing more consumers 0:02:19.960 --> 0:02:23.360 in some level of debt distress. In a way, I 0:02:23.360 --> 0:02:26.480 would say the FED is getting exactly what they want, 0:02:26.520 --> 0:02:31.880 an incremental gradual slowing of demand. It's helping to reduce inflation, 0:02:32.480 --> 0:02:35.600 but not so much that we're hitting some kind of 0:02:35.680 --> 0:02:40.520 dramatic tipping point. In the June strong retail numbers kind 0:02:40.520 --> 0:02:43.720 of reinforced that idea that we're not tipping over into 0:02:43.760 --> 0:02:45.760 a more dangerous period quite yet. 0:02:45.919 --> 0:02:48.760 So if your fed Shair J. Powell, we've heard from 0:02:48.800 --> 0:02:52.840 him yesterday at the Economic Club of Washington. Chris, you 0:02:52.880 --> 0:02:56.160 talk about repeatedly every day, how data dependent you are. 0:02:56.480 --> 0:02:58.320 How do you take this bit of data? 0:02:59.160 --> 0:03:02.200 Well, rule of number one is it's just one piece 0:03:02.240 --> 0:03:04.840 of data. They're going to incorporate it into a bigger 0:03:04.880 --> 0:03:09.560 sphere of numbers that they're looking at. And even within consumption, 0:03:09.800 --> 0:03:12.800 the retail sales is largely focused on goods. It's not 0:03:12.840 --> 0:03:18.400 really a comprehensive take on demand from consumers. So he'll 0:03:18.560 --> 0:03:22.320 they'll take that on board, but I don't think it's 0:03:22.639 --> 0:03:25.959 likely to deter them from that feeling that they are 0:03:26.040 --> 0:03:29.600 getting closer to a raid cut. Now, it doesn't sound 0:03:29.680 --> 0:03:33.760 like they're on the cusp of say a July raid cut. 0:03:33.919 --> 0:03:37.600 There's no real firm signal of that. It does sound 0:03:37.600 --> 0:03:41.280 increasingly like a September cut is likely today's number is 0:03:41.600 --> 0:03:46.160 you know, gonna reinforce the idea that certainly July is 0:03:46.200 --> 0:03:49.840 not yet appropriate. But the overall trend, as I said, 0:03:50.040 --> 0:03:53.960 is moving them closer and closer to a September cut. 0:03:54.320 --> 0:03:57.240 You know, it's an interesting, uh environment, no doubt about it. 0:03:57.400 --> 0:03:58.440 You know, we're gonna talk to him and I a 0:03:58.440 --> 0:04:01.200 little bit later on Claire Valentine Bloomberg News has a 0:04:01.240 --> 0:04:05.040 story about carve repossession surging twenty three percent, so rocketing 0:04:05.320 --> 0:04:07.000 higher in the first half of the year, and it's 0:04:07.080 --> 0:04:10.640 just another sign of consumer distress as we've seen, you know, 0:04:10.800 --> 0:04:14.280 either higher interest rates making payments more difficult, so you 0:04:14.280 --> 0:04:17.840 would say glass more half empty when it comes to 0:04:18.400 --> 0:04:19.559 consumers at this point. 0:04:20.400 --> 0:04:22.800 Yeah, as you say, that's another sign of distress. We're 0:04:22.839 --> 0:04:27.640 seeing credit card balances ramp up. But you know, again 0:04:27.680 --> 0:04:31.240 I would come back to the point, Carol, that these 0:04:31.279 --> 0:04:34.360 are the things that you do expect when the FED 0:04:34.760 --> 0:04:38.919 has a restrictive policy in place, and it's not so 0:04:39.080 --> 0:04:43.000 bad that we're seeing a spike in unemployment or any 0:04:43.040 --> 0:04:48.000 creating in overall demand that would indicate a policy mistake 0:04:48.080 --> 0:04:51.120 has already been committed and that the FED is going 0:04:51.200 --> 0:04:54.440 to really have to start cutting dramatically. No, they are 0:04:54.480 --> 0:04:58.240 closing in. They're not quite there yet, but they are 0:04:58.240 --> 0:05:01.039 closing in on that soft land. There will be pain 0:05:01.640 --> 0:05:06.000 along the way on the margins increasingly, but so far, 0:05:06.120 --> 0:05:09.360 so good, I think from the Fed, and pretty soon 0:05:09.400 --> 0:05:11.640 I think some consumers are going to start to see 0:05:11.640 --> 0:05:15.960 some relief not only in lower inflation but lower interest rates. 0:05:16.320 --> 0:05:19.680 How long that takes to feed its way through the 0:05:19.760 --> 0:05:23.640 lower credit card rates is another question, but some relief 0:05:23.800 --> 0:05:24.640 perhaps on the way. 0:05:24.800 --> 0:05:25.000 Chris. 0:05:25.040 --> 0:05:27.600 Inflation is still not at the levels the FED wants 0:05:27.600 --> 0:05:32.280 to see that elusive two percent at this point. What 0:05:32.400 --> 0:05:37.000 economic metrics, though, are seeing a normalization? You know, take 0:05:37.040 --> 0:05:39.920 into account like pre COVID levels. Where are we seeing 0:05:40.320 --> 0:05:43.080 things normalize and where are things not normalizing? 0:05:44.360 --> 0:05:48.760 Well, you know, if I'm thinking of the bigger picture here, 0:05:48.880 --> 0:05:52.760 it's very difficult even to draw some conclusions yet. From 0:05:52.760 --> 0:05:56.200 the Fed's perspective, they're going to be wondering where to 0:05:56.400 --> 0:05:59.640 long run rates normalize, and that is still very much 0:05:59.760 --> 0:06:02.479 on unanswered question, a question they're going to have to 0:06:02.520 --> 0:06:05.800 confront in the coming once. You know, they're starting a 0:06:05.880 --> 0:06:09.080 new what they call a framework review, and they're going 0:06:09.120 --> 0:06:12.560 to have to very publicly confront this question, and so 0:06:12.680 --> 0:06:17.040 far it does seem like long run neutral interest rates 0:06:17.080 --> 0:06:20.880 are much higher than they were before the pandemic. Will 0:06:20.920 --> 0:06:25.159 they return still? Like I said, an unanswered question that 0:06:25.200 --> 0:06:26.960 economists are grappling with, well. 0:06:26.839 --> 0:06:29.039 And it's certainly something to those who invest in the 0:06:29.040 --> 0:06:30.960 banking sector are grappling with. Which is where we want 0:06:30.960 --> 0:06:33.279 to go right now. Chris, thank you so much, Always 0:06:33.279 --> 0:06:36.159 appreciate it. Chris Condon, his US Treasury and Economic policy 0:06:36.200 --> 0:06:38.680 reporter at Bloomberg News there in our DC bureau. So 0:06:38.800 --> 0:06:42.560 let's talk about the continuation of big bank earnings that 0:06:42.720 --> 0:06:45.400 came out earlier today. Morgan Stanley and Make of America 0:06:45.440 --> 0:06:49.039 reporting quarterly results this morning. Both stocks did rally for 0:06:49.160 --> 0:06:52.040 much of the day. Morgan, though losing most of its 0:06:52.080 --> 0:06:54.760 earlier gains, still up just shy of one percent. BAA 0:06:54.880 --> 0:06:57.200 still up tim about five percent today's session. 0:06:57.000 --> 0:06:58.560 And again, we're going to be hearing from Brian moynihan 0:06:58.640 --> 0:07:01.520 over at BIA just few minutes before we get there, though, 0:07:01.600 --> 0:07:04.520 let's check in on what these stocks did and what 0:07:04.560 --> 0:07:07.880 these banks reported. Morgan Stanley, like its rival Goldman Sachs 0:07:07.920 --> 0:07:11.679 and JP, Morgan beat expectations. It solidified the market's business 0:07:11.800 --> 0:07:15.400 as a hotspot across the industry. Investment banking fees Carol 0:07:15.480 --> 0:07:18.600 also increased. They sored fifty one percent from a year earlier, 0:07:18.680 --> 0:07:19.200 and then Bava. 0:07:19.440 --> 0:07:21.680 We saw their stock hitting I think it was a 0:07:21.720 --> 0:07:24.800 two year high during the day after it reported trading 0:07:24.800 --> 0:07:27.720 and investment banking results at top. Analyst Estimates also gave 0:07:27.760 --> 0:07:31.880 a forecast for net interest income, very key and BAA's 0:07:31.880 --> 0:07:35.160 biggest source of revenue that also exceeded expectations. So let's 0:07:35.200 --> 0:07:37.800 get to it. Anton Schwitz is back with US, president 0:07:37.840 --> 0:07:40.560 and chief investment Officer at Menden Capital Advisors. He joins 0:07:40.640 --> 0:07:42.840 US from Florida. His R and B mend and Financial 0:07:42.920 --> 0:07:45.360 Services Fund, by the way, up nearly sixteen percent in 0:07:45.400 --> 0:07:48.360 the past month, putting it in the ninetieth percentile among 0:07:48.440 --> 0:07:51.160 its peers. According to Bloomberg Data. The fund up twenty 0:07:51.160 --> 0:07:53.480 six percent in the past one year, putting it in 0:07:53.520 --> 0:07:56.120 the thirty six percentile in this category again according to 0:07:56.160 --> 0:07:58.760 our data. Ant, I'm good to have you back with us. 0:07:58.800 --> 0:07:59.360 How are you. 0:08:00.960 --> 0:08:05.400 Well. It's been busy, crazy, always a crazy time, and 0:08:05.480 --> 0:08:06.920 then we've added craziness. 0:08:07.320 --> 0:08:09.920 Yeah, it's crazy on top of crazy on top of crazy. 0:08:09.960 --> 0:08:12.640 But let's talk bank earnings, if we may, Morgan Stanley, 0:08:12.680 --> 0:08:15.040 b of A, let's start there. Investors seem to, for 0:08:15.120 --> 0:08:16.920 the most part, like what they heard, especially from b 0:08:17.000 --> 0:08:21.560 of A. Are these results investable? Should investors be acting 0:08:21.600 --> 0:08:23.040 on these results? In your view? 0:08:24.520 --> 0:08:27.000 Well, I mean, I think people have been negative on 0:08:27.080 --> 0:08:29.160 b of A for quite some time. It's got a 0:08:29.240 --> 0:08:32.520 very large bond portfolio. It kept talking about the bottom 0:08:32.520 --> 0:08:35.360 and that interest margin, and here we are, we're at 0:08:35.360 --> 0:08:37.720 the bottom of the interest margin. They're actually guiding higher. 0:08:39.160 --> 0:08:42.520 And obviously, as the bond portfolio you know, starts getting 0:08:42.559 --> 0:08:44.880 longer in the tooth, you know, the losses on it, 0:08:44.960 --> 0:08:47.240 you know, get smaller, interest rates drop, which people are 0:08:47.240 --> 0:08:50.120 thinking about again, the losses could you know, get smaller, 0:08:50.160 --> 0:08:52.520 may potentially even turn into gains over some period of time. 0:08:52.640 --> 0:08:55.320 So I think, you know, people may have been short 0:08:55.320 --> 0:08:58.360 Bank of America and clearly at this point there's a 0:08:58.400 --> 0:09:01.600 lot more comfort in the banks general. And then you know, 0:09:01.760 --> 0:09:04.679 also since the debate, the financials have had a very 0:09:04.720 --> 0:09:08.640 strong performance because the Trump administration is seen as friendly 0:09:08.720 --> 0:09:09.640 er towards banks. 0:09:10.040 --> 0:09:11.240 Are you buying that trade? 0:09:12.800 --> 0:09:13.160 Well? 0:09:13.440 --> 0:09:15.640 Uh, you know, I would you suggest. 0:09:15.400 --> 0:09:17.760 Others by that trade. I guess I. 0:09:17.679 --> 0:09:20.280 Know, well, I guess I guess I've said for some 0:09:20.360 --> 0:09:22.760 period of time to people are willing to listen to me, 0:09:22.800 --> 0:09:24.840 which you know, again, when you're out of favor, people 0:09:24.840 --> 0:09:27.000 aren't willing to listen. But I've said that, you know, 0:09:27.040 --> 0:09:30.120 buying my fund is like buying a call option really, 0:09:30.160 --> 0:09:31.640 you know, without a cost to it at the time, 0:09:31.679 --> 0:09:34.560 because evaluations were so cheap on if Trump wins. And 0:09:34.600 --> 0:09:37.520 it's just just going back to November sixteen, that that 0:09:37.720 --> 0:09:39.720 month banks were up sixteen percent. Now, there was a 0:09:39.760 --> 0:09:43.199 tax cut in the offing, but from a regulatory perspective, 0:09:43.280 --> 0:09:45.880 I think, you know, deals getting approved again. You know, 0:09:45.920 --> 0:09:49.880 people expect that that administration be friendlier towards M and A, 0:09:50.000 --> 0:09:52.160 and clearly m and A has been way down in 0:09:52.200 --> 0:09:52.640 the space. 0:09:54.040 --> 0:09:57.040 Anton. You know, I love asking about the consumer. Carol 0:09:57.160 --> 0:09:58.920 knows that I sound like a broken record, But one 0:09:58.920 --> 0:10:00.840 of the reasons I love hearing from Bank of America 0:10:00.880 --> 0:10:03.080 is because they have such a good eye on what 0:10:03.120 --> 0:10:05.120 the consumer's doing, how the consumer is feeling. We just 0:10:05.120 --> 0:10:07.280 talked retail sales. We're going to talk a little later 0:10:07.280 --> 0:10:11.640 about auto defaults. What what idea or what picture of 0:10:11.640 --> 0:10:14.400 the consumer. Did we get from Bank of America earnings today. 0:10:15.440 --> 0:10:17.320 Well, I mean we got we got a pretty good picture. 0:10:18.120 --> 0:10:20.680 I think they're not going down the food chain into 0:10:20.720 --> 0:10:23.719 the subprime space because I think that consumer particular is 0:10:23.800 --> 0:10:26.600 hurting a great deal. I think the stimulus money's gone. 0:10:27.559 --> 0:10:30.280 I think the employment picture is getting tougher for them. 0:10:31.000 --> 0:10:35.400 Inflation is biting hard. So I'm negative on the subprime consumer. 0:10:35.440 --> 0:10:37.440 And I think if you look at the you know, 0:10:37.520 --> 0:10:40.360 sort of the middle income part of the population. I 0:10:40.360 --> 0:10:42.599 mean you can see it in restaurant statistics that you 0:10:42.720 --> 0:10:45.679 sort of the full service restaurants are sort of struggling 0:10:46.080 --> 0:10:48.080 to you know, gain that consumer. You've seen even some 0:10:48.120 --> 0:10:49.880 of the lower end stuff like red Lobster, you know, 0:10:50.000 --> 0:10:50.880 get in a lot of trouble. 0:10:52.440 --> 0:10:55.920 Yeah, exactly, all right, So you know, b of a 0:10:56.920 --> 0:10:59.880 with Morgan Stanley today, but wrap it up for us 0:11:00.120 --> 0:11:02.440 Goldman Sachs yesterday. And I know you do focus on 0:11:02.520 --> 0:11:05.840 kind of the smaller MidCap names Anton, but I do 0:11:06.880 --> 0:11:08.520 appreciate your insight when it comes to some of the 0:11:08.559 --> 0:11:11.079 big cap names, you know, JP Morgan of course, last week, 0:11:11.160 --> 0:11:15.480 City Group and Wells Fargo. Are there any trends takeaways 0:11:15.720 --> 0:11:19.079 in terms of the overall banking sector, what we're seeing 0:11:19.080 --> 0:11:22.320 in lending, some of the commentary, what it kind of 0:11:22.360 --> 0:11:24.439 says about this environment right now. 0:11:25.160 --> 0:11:26.680 All right, I'll take up the rest of the show. 0:11:26.679 --> 0:11:28.320 Now, all yours? 0:11:29.480 --> 0:11:32.000 Yeah, really, I mean, first of all, the one thing 0:11:32.000 --> 0:11:36.200 we didn't see was credit problems. You know, and everybody 0:11:36.240 --> 0:11:38.120 keeps harping, boy, we're gonna have all this trouble in 0:11:38.160 --> 0:11:41.360 the banking system from real estate and you know, they've 0:11:41.400 --> 0:11:44.280 reserved a lot and you know we're not. You know, 0:11:44.320 --> 0:11:47.319 we're seeing losses. Banking America actually said commercial real estate 0:11:47.400 --> 0:11:51.079 losses will be lower in the second half of the year. Fascinating, right. 0:11:52.200 --> 0:11:55.599 You know. Secondly, long growth is slow. All right, we 0:11:55.720 --> 0:11:58.240 got slowing economy. We just talked about an economist on 0:11:58.600 --> 0:12:00.960 economy slowing. In fact, I think the FED is behind 0:12:01.360 --> 0:12:04.480 I wish they would get started, but you know, September 0:12:04.480 --> 0:12:05.880 appears to be in the cards, but they need to 0:12:05.880 --> 0:12:08.600 get go. Economy is slow and there's no loan growth. 0:12:09.120 --> 0:12:11.400 So what do banks have if there's no loan growth? 0:12:11.720 --> 0:12:16.080 Earnings are fine, capital grows, They buy backstock, maybe they 0:12:16.080 --> 0:12:18.800 start buying each other. That's what happens when you don't 0:12:18.840 --> 0:12:21.720 have any loan growth and credit quality is fine. I mean, 0:12:21.720 --> 0:12:24.280 they've done a nice job. They've been very conservative really 0:12:24.320 --> 0:12:27.280 since COVID, And this is not two thousand and seven 0:12:27.360 --> 0:12:29.920 or eight. Keep saying that, but it's not. It's not 0:12:29.960 --> 0:12:30.480 showing up. 0:12:31.679 --> 0:12:33.599 Well, why do you think the Fed is behind? 0:12:35.640 --> 0:12:39.200 Because there's such a lag to them moving rates right, 0:12:39.280 --> 0:12:41.000 when they raise rates, it takes a long time for 0:12:41.040 --> 0:12:43.040 a take effect. When they lower rates the same thing. 0:12:43.040 --> 0:12:44.960 It's not like twenty five basis points is going to 0:12:45.000 --> 0:12:49.520 change anybody's economic behavior or viability. So you know, my 0:12:49.559 --> 0:12:51.920 guess is they tiptoe and give us twenty fives for 0:12:51.960 --> 0:12:54.360 a while. But that's pushing on a string early on. 0:12:54.840 --> 0:12:57.560 So it takes time for all those effects to take hold, 0:12:57.920 --> 0:13:01.280 for financing to become more attract different people, for people 0:13:01.320 --> 0:13:05.040 to be able to refinance or invest in new projects. So, yeah, 0:13:05.080 --> 0:13:06.559 they've got it. They've got to get going. If the 0:13:06.559 --> 0:13:07.800 economy is slowing. 0:13:07.559 --> 0:13:10.199 When does it start to concern you that they haven't 0:13:10.200 --> 0:13:11.040 gotten going yet. 0:13:12.360 --> 0:13:14.920 Well, I mean I'm already I'm already concerned. I think 0:13:14.920 --> 0:13:17.760 they're already. They're already late. You know, if you think 0:13:17.760 --> 0:13:20.440 about unemployment, I mean where do we bottom three point four? 0:13:21.080 --> 0:13:23.280 You know word four to one. And if you look 0:13:23.280 --> 0:13:26.160 at different statistics, things like the household survey, the numbers 0:13:26.200 --> 0:13:28.959 are not as rosy on the employment side. So I 0:13:29.559 --> 0:13:30.480 think they've got work to do. 0:13:30.960 --> 0:13:33.080 I do wonder too, Anon, when you look at the space, 0:13:33.280 --> 0:13:36.880 you know, what is your favorite first of all, big bank? 0:13:36.920 --> 0:13:39.720 What's your favorite other bank? If you will in the 0:13:39.720 --> 0:13:41.320 space and why? Yeah? 0:13:41.360 --> 0:13:44.360 All right, Well, you know I've always loved geography, so 0:13:44.520 --> 0:13:46.880 again I'm going to talk about the southeastern Tennessee. So 0:13:46.960 --> 0:13:49.680 first Arizon. It's a pretty good size bank, right, just 0:13:49.720 --> 0:13:52.840 under one hundred billion in size. You know, they had 0:13:52.880 --> 0:13:55.480 agreed to sell the TV years ago. The deal got 0:13:55.480 --> 0:13:59.640 scuttle TD got in some trouble. I think that company 0:13:59.760 --> 0:14:03.240 is doing well fundamentally. I think they're in great markets 0:14:03.800 --> 0:14:05.960 and potentially someone else could go. You know what, I'd 0:14:05.960 --> 0:14:07.960 love to be in those markets as well. So I 0:14:08.000 --> 0:14:11.280 think operationally they're great, and I think fundamentally and you know, 0:14:11.320 --> 0:14:13.480 they're attractive, so you know, if you go down the 0:14:13.480 --> 0:14:15.920 food chain. And I think I may have talked about 0:14:15.920 --> 0:14:18.559 it before, but First Bank in Mississippi. They're in Georgia 0:14:18.600 --> 0:14:22.160 and Mississippi and Florida, So you know two states that 0:14:22.200 --> 0:14:24.200 are really growing well. In Mississippi, by the way, is 0:14:24.200 --> 0:14:25.200 a lower unemployment rate. 0:14:25.280 --> 0:14:28.720 In Texas, first Rising, by the way, is one of 0:14:28.760 --> 0:14:31.040 the top holdings. It's number nine in your fund. It's 0:14:31.040 --> 0:14:35.640 about four percent of your fund. Anton, what about banks 0:14:35.640 --> 0:14:38.280 that you want to stay away from? You said, well, 0:14:38.280 --> 0:14:40.120 correct me if I'm wrong, But I believe you said 0:14:40.280 --> 0:14:42.560 that we might still see some shake up in some 0:14:42.600 --> 0:14:44.640 of the regional banks when it comes to real estate. 0:14:46.400 --> 0:14:48.640 So sure, yeah, So which ones I want to avoid 0:14:48.680 --> 0:14:49.440 as a result of that? 0:14:50.520 --> 0:14:52.880 Yeah, I'm not seeing a lot of failure. So first 0:14:52.920 --> 0:14:54.920 of all, let me not say that you should go 0:14:54.960 --> 0:14:56.520 out and short a bunch of banks that have a 0:14:56.560 --> 0:15:00.640 lot of real estate exposure. But you know there will 0:15:00.680 --> 0:15:04.480 be some losses. Things like life sciences, right That's that 0:15:04.600 --> 0:15:06.200 was a hot area to lend into. It's not a 0:15:06.200 --> 0:15:09.120 good area right now. So people have exposure to things 0:15:09.200 --> 0:15:12.320 like that, you know, ar at risk. If you saw 0:15:12.320 --> 0:15:14.680 some downgrades on things like Bank of the Ozarks a 0:15:14.680 --> 0:15:16.920 month ago, that's an interesting, interesting a race to look at. 0:15:16.960 --> 0:15:19.280 I really respect the CEO, but he's got a lot 0:15:19.320 --> 0:15:20.920 of real exposure to things like that. 0:15:22.200 --> 0:15:25.760 You know, I do wonder too, you know, in terms 0:15:25.840 --> 0:15:29.000 of what the FED does or doesn't do. Do you 0:15:29.040 --> 0:15:31.640 think you know, we've been talking a lot about politics, 0:15:31.680 --> 0:15:33.760 and are you concerned that the FED gets caught up 0:15:34.280 --> 0:15:38.320 in some of the political environment and maybe doesn't do 0:15:38.520 --> 0:15:40.400 as you said? I think you that they're already behind 0:15:40.400 --> 0:15:42.480 the curve. Are you concerned that they get caught up 0:15:42.520 --> 0:15:45.760 in that and maybe you know, don't move as fast 0:15:45.760 --> 0:15:47.560 as they I mean, they're already behind the curve according 0:15:47.560 --> 0:15:49.440 to you. So do you think they kind of get 0:15:49.480 --> 0:15:50.200 caught up in that? 0:15:51.720 --> 0:15:53.960 Well, I think they had gotten caught up. I mean, 0:15:53.960 --> 0:15:57.000 I think they acted a little late in racing rates. 0:15:57.240 --> 0:15:59.720 You know, I think Sherman Powell was waiting to get reappointed. 0:16:00.840 --> 0:16:03.960 So that transitory thing on inflation was was was bad. 0:16:05.680 --> 0:16:09.000 You know, President Biden has promised a rate cut, you 0:16:09.040 --> 0:16:10.520 know some months ago that the FED is going to 0:16:10.560 --> 0:16:12.760 cut rates. Well, there's a little bit of pressure. We 0:16:12.800 --> 0:16:16.040 haven't said anything lately, but yeah, you know, at this 0:16:16.080 --> 0:16:17.800 point he's behind in the polls. A lot of the 0:16:18.120 --> 0:16:21.040 people at the FED have been appointed by him, so 0:16:21.080 --> 0:16:23.200 we can say that that's not a political organization, but 0:16:23.600 --> 0:16:25.480 you know, certainly people are going to have some loyalty 0:16:25.480 --> 0:16:27.240 to him, and he's behind in the polls, so I 0:16:27.280 --> 0:16:29.040 suspect there will be pressure on the FED to cut 0:16:29.120 --> 0:16:31.400 rates by the administration if we get any more bad 0:16:31.440 --> 0:16:32.440 economic statistics. 0:16:32.560 --> 0:16:35.000 Anton one last question we're getting ready to hear from 0:16:35.040 --> 0:16:37.600 the CEO Bank of America or David Western sitting down 0:16:37.640 --> 0:16:40.120 with him in just a moment, what would be your 0:16:40.160 --> 0:16:42.800 top question to him? What's top of mind for you? 0:16:44.280 --> 0:16:46.920 Well, you know, look, I'm a big fan of Brian Mooynhand, 0:16:46.960 --> 0:16:48.800 so I mean it was just amazing watching him take 0:16:48.840 --> 0:16:51.520 the rain after the financial crisis. So you know, the 0:16:51.520 --> 0:16:54.120 big question is what's next? Right, he can't he can't 0:16:54.120 --> 0:16:57.200 grow the company anymore from a depository perspective. One of 0:16:57.240 --> 0:16:59.000 the line of lines of business would he liked to 0:16:59.000 --> 0:17:00.640 be in, you know, is you want to continue to 0:17:00.640 --> 0:17:03.200 build out you know, the wealth management product? Does he 0:17:03.240 --> 0:17:05.960 want to continue to build out you know, other lines 0:17:06.000 --> 0:17:08.480 of business? And by the way, how is he using technology? 0:17:08.920 --> 0:17:11.560 Because technology is going to be the biggest driver efficiency 0:17:11.640 --> 0:17:15.520 ratios in this industry. AI is enormous for anybody that 0:17:15.600 --> 0:17:18.480 has all those back office jobs like the big banks do. 0:17:19.359 --> 0:17:21.520 All right, got to leave it on that note around 0:17:21.520 --> 0:17:23.800 the world of banking, we went as we always do. Anton, 0:17:23.840 --> 0:17:25.560 thank you so much, Be well, have a good summer. 0:17:25.600 --> 0:17:28.320 Anton Schutz, his president and chief investment officer at Mendon 0:17:28.359 --> 0:17:29.360 Capital Advisors. 0:17:30.359 --> 0:17:33.920 You're listening to the Bloomberg Business Week podcast. Catch us 0:17:33.920 --> 0:17:37.160 live weekday afternoons from two to five pm Eastern Listen 0:17:37.200 --> 0:17:39.359 on Apple card Play and then Bright Auto with a 0:17:39.400 --> 0:17:41.119 Bloomberg Business app or want. 0:17:41.119 --> 0:17:43.520 Us live on YouTube. 0:17:44.840 --> 0:17:47.200 All right, let's talk a little bit more about politics, 0:17:47.240 --> 0:17:49.240 certainly fronton center. Donald Trump, of course, as you know, 0:17:49.320 --> 0:17:52.399 made his first public appearance since an assassination attempt. That 0:17:52.480 --> 0:17:55.520 was last night, white bandage covering his right ear as 0:17:55.560 --> 0:17:59.359 Republicans gathered to nominate him as their presidential candidate for 0:17:59.400 --> 0:18:00.200 a third time. 0:18:00.320 --> 0:18:02.640 We didn't hear from the former president, but the through 0:18:02.680 --> 0:18:05.520 line of his populist doctrine was evident from tapping. Ohio 0:18:05.640 --> 0:18:08.160 Senator jd. Vance is his running mate to the spate 0:18:08.200 --> 0:18:11.080 of speakers, which range from business executives to the head 0:18:11.080 --> 0:18:14.600 of the influential Teamsters union. We've been heard from David Sachs, 0:18:14.640 --> 0:18:16.800 the venture capitalist who we were talking about a little earlier. 0:18:16.880 --> 0:18:19.680 A broad spectrum of speakers, so what will the race 0:18:19.800 --> 0:18:22.040 and run up to the November elections mean for investors 0:18:22.080 --> 0:18:24.639 short and longer term? To tackle that with us as 0:18:24.680 --> 0:18:27.679 Karen Murphy, she's chief investment officer at the registered investment 0:18:27.720 --> 0:18:31.640 advisor Kestra Investment Management, joining us right here in our studio, Kara, Welcome, 0:18:31.880 --> 0:18:34.159 Thank you, Nice to have you here. Nothing going on, 0:18:35.000 --> 0:18:36.760 very quiet, it's very quiet. 0:18:37.040 --> 0:18:37.280 Hey. 0:18:37.320 --> 0:18:39.520 Remind us we often, you know, we'll talk about this 0:18:39.600 --> 0:18:42.560 some of our Bloomberg market write up stories or write 0:18:42.600 --> 0:18:45.199 ups on the markets. We'll talk, you know, remind everybody 0:18:45.200 --> 0:18:47.600 about kind of historically what happens in a presidential year. 0:18:47.720 --> 0:18:49.200 Remind us a little bit about that. 0:18:49.520 --> 0:18:51.840 Well, Number one, there's always a lot of fretting, a 0:18:51.840 --> 0:18:54.400 lot of hand ringing, a lot of worrying. But what's 0:18:54.400 --> 0:18:57.000 interesting is that when we actually look at market performance 0:18:57.119 --> 0:19:00.320 in years when there's a presidential election, the annual turn 0:19:00.400 --> 0:19:03.480 is remarkably similar to non election years, but the way 0:19:03.480 --> 0:19:05.520 that we get there is a little bit different. And 0:19:05.560 --> 0:19:08.280 typically what we see as a kickup in volatility late 0:19:08.359 --> 0:19:10.959 in the summer prior to the election and then markets 0:19:10.960 --> 0:19:14.159 sort of take off before the election actually happens. So 0:19:14.160 --> 0:19:16.399 we've been counseling people to be aware of this. It 0:19:16.400 --> 0:19:18.520 can still be a really good market environment, but it 0:19:18.560 --> 0:19:20.120 can be a bumpy road along the way. 0:19:20.960 --> 0:19:23.160 It hasn't been that bumpy over the last year rect 0:19:23.240 --> 0:19:24.959 eighteen months. 0:19:24.600 --> 0:19:27.199 And so this is where it's all. We also have 0:19:27.280 --> 0:19:30.439 to be caution because this year is so different in 0:19:30.520 --> 0:19:32.720 so many different ways. And I think part of the 0:19:32.760 --> 0:19:35.159 reason why marcuts have been able to rally in the 0:19:35.160 --> 0:19:37.080