WEBVTT - ETFs, Markets, And Broadcom (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.680 at Bloomberg dot com slash podcast. This market hanging in there. 0:00:22.680 --> 0:00:24.400 It's doing a little bit better than maybe I had 0:00:24.400 --> 0:00:26.000 given a credit for. Just a few minutes ago, the 0:00:26.120 --> 0:00:28.720 SMP up about eight tenths of one percent. A lot 0:00:28.760 --> 0:00:32.960 of questions for war investors out there as we flirt 0:00:33.000 --> 0:00:37.000 with bear market territory and SMP maybe chief among them, 0:00:37.000 --> 0:00:40.680 as a recession, Sylvia Jablonski, chief investment officer and co founder, 0:00:40.720 --> 0:00:43.519 have to find a t F S joins us. Sylvia, 0:00:43.840 --> 0:00:46.040 how are you thinking about that? Again? I think maybe 0:00:46.080 --> 0:00:48.400 over the last week or two, one of the more 0:00:48.440 --> 0:00:51.400 frequent questions we had is, Okay, the Fed is raising 0:00:51.440 --> 0:00:55.080 interest rates. We get that, but put in context the 0:00:55.160 --> 0:00:59.160 risk of a recession that might result from this rising 0:00:59.200 --> 0:01:01.680 indestrate environment? Do you guys think about that? At Defiance? 0:01:02.960 --> 0:01:05.440 Good morning to Paul Well. I think that a lot 0:01:05.480 --> 0:01:08.000 of what is going on in the market is very 0:01:08.080 --> 0:01:12.520 much you know, near term panic, fear, um some capitulation, 0:01:12.800 --> 0:01:16.880 and that naturally spurs these these thoughts and again just 0:01:16.959 --> 0:01:19.880 fear that there will be an inflation sooner or inflation 0:01:19.920 --> 0:01:23.679 recessions sooner than rather than later. Um. You know, my 0:01:23.680 --> 0:01:25.760 my thought on that is that we're certainly in a 0:01:25.760 --> 0:01:28.360 deep correction, if not a short term bear market, we're 0:01:28.360 --> 0:01:31.080 pretty close. You know, no dec is there a spire 0:01:31.280 --> 0:01:35.200 is swarting with that twenty percent level intra day Um, 0:01:35.920 --> 0:01:38.160 it's it's it's got about half of the components below 0:01:39.000 --> 0:01:42.400 or so foot call ratios are high, you know, consumer sentiments, 0:01:42.400 --> 0:01:44.000 so there are all these things that are just sort 0:01:44.000 --> 0:01:46.280 of scary and it feel terrible in the near term. 0:01:46.760 --> 0:01:48.840 But you know, I don't think we're at that point 0:01:48.880 --> 0:01:52.160 where a recession is necessarily right around the corner. And 0:01:52.160 --> 0:01:56.000 the reason why is because the economic backdrop still remains 0:01:56.240 --> 0:01:58.400 pretty healthy. You know, you have a hot labor market. 0:01:58.720 --> 0:02:01.440 If loosening a little bit, um, you have you know, 0:02:01.480 --> 0:02:04.240 trillions of dollars and savings from from a strong consumer, 0:02:04.280 --> 0:02:06.280 a strong curve of balance sheets, and we don't have 0:02:06.320 --> 0:02:08.359 a credit crisis. You know this isn't two thousand eight. 0:02:08.480 --> 0:02:11.240 Banks are sort of stable and strong and there are 0:02:11.400 --> 0:02:14.160 good things that will help us sort of weather the storm, 0:02:14.200 --> 0:02:18.239 if you will. So, yeah, how much does this bear 0:02:18.360 --> 0:02:20.640 market talk really matter? We gonna have guilty little our 0:02:20.680 --> 0:02:23.440 markets reporter on just a few minutes ago, and she said, well, 0:02:23.480 --> 0:02:26.360 you know, it's really just psychological. It doesn't matter that much. 0:02:26.440 --> 0:02:30.520 Do you agree? Well, I think it matters for for 0:02:30.600 --> 0:02:33.840 people who are who are selling. I think that you 0:02:33.880 --> 0:02:37.240 know that that crowd is is essentially um, you know, 0:02:37.600 --> 0:02:40.840 taking losses and they really shouldn't, you know, So I 0:02:40.880 --> 0:02:44.240 think um Abigail makes a great point. I expect, I 0:02:44.280 --> 0:02:47.320 expect that a lot of this is sort of psychological 0:02:47.400 --> 0:02:49.760 and that you know, we're just watching the sort of 0:02:49.800 --> 0:02:51.920 market fall and and it feels terrible, and so you 0:02:51.960 --> 0:02:54.040 have traders sitting on the sidelines. But where it does 0:02:54.120 --> 0:02:56.960 matter is that you know there are opportunities that can 0:02:57.000 --> 0:02:59.560 be had now. Right, So if you are an investor 0:02:59.600 --> 0:03:01.400 that has on the sidelines and you have a long 0:03:01.480 --> 0:03:03.760 term investment, her eyes and you could be missing out 0:03:03.760 --> 0:03:06.720 on an opportunity of fear and panics. Keeping on the sidelines. 0:03:06.960 --> 0:03:11.120 You know that also keeps things sort of repressed for 0:03:11.120 --> 0:03:12.760 a longer period of time as well, if we don't 0:03:12.760 --> 0:03:15.800 see investors coming back in. But what's interesting about you know, 0:03:15.840 --> 0:03:18.200 sort of this their market or non bare market, whatever 0:03:18.200 --> 0:03:19.799 it is is. You know, there are sort of two 0:03:19.800 --> 0:03:22.120 types of people out there there, traders who can benefit 0:03:22.160 --> 0:03:23.840 the short term, and what I would say is that 0:03:24.240 --> 0:03:27.600 those traders tend to be high frequency experts. I'll go, guys, 0:03:27.680 --> 0:03:29.840 you know the hedge funds so invested in the corporation. 0:03:29.880 --> 0:03:32.079 Don't try to do it yourself. It's too tricky now. 0:03:32.520 --> 0:03:34.400 But if you're a long term investor and you have 0:03:34.440 --> 0:03:36.320 a long term outlook, you know, buying stocks on the 0:03:36.360 --> 0:03:39.680 discount again, with the odds of a recession still being 0:03:39.720 --> 0:03:41.960 fairly low, with this unique set up in the economy, 0:03:42.400 --> 0:03:44.800 it is probably not the worst idea if you're looking for, 0:03:44.960 --> 0:03:46.840 you know, sort of quality and strung down sheet. A 0:03:46.840 --> 0:03:49.240 lot of names around down now, you know. I had 0:03:49.240 --> 0:03:53.160 a phone call from my financial advisor on Friday advising 0:03:53.160 --> 0:03:57.120 me that we're taking some tax loss tax losses on Friday, 0:03:57.200 --> 0:03:58.960 just letting me know. I was like, oh great, But 0:03:59.000 --> 0:04:01.440 that was the first time in fourteen years we had 0:04:01.520 --> 0:04:04.800 had that conversation. About taking tax losses on and there's 0:04:04.840 --> 0:04:07.480 all my e T s as well. So are there 0:04:07.480 --> 0:04:10.560 e T s out there that are actually doing well 0:04:10.760 --> 0:04:15.680 that unfortunately I was not in? You know, it well 0:04:15.720 --> 0:04:17.800 depends on the time frame. It depends on when you 0:04:17.920 --> 0:04:20.160 when you sort of got it in them, and when 0:04:20.160 --> 0:04:22.520 you're getting out, you know. I definitely think that there 0:04:22.560 --> 0:04:25.400 are some ets that investors can look at now that 0:04:25.440 --> 0:04:27.760 are poised to do well, you know, in terms of well. 0:04:27.839 --> 0:04:30.560 I think that the pullback of the market is pretty 0:04:30.560 --> 0:04:33.839 widespread right now. I mean, oil, gas and energy ets 0:04:33.880 --> 0:04:37.240 have have sort of done well, um with you know, 0:04:37.279 --> 0:04:39.960 with sort of the inflation, the energeo politics. But I 0:04:40.000 --> 0:04:42.440 also think that ETFs that are poised to do well 0:04:42.680 --> 0:04:44.400 do exist, and I think a lot of those will 0:04:44.440 --> 0:04:48.280 be in the travel reopen um type of spaces. You know. 0:04:48.320 --> 0:04:50.520 I think that that's a good trade of consumer spending 0:04:50.600 --> 0:04:53.560 going from good services. I think that you know, the 0:04:53.640 --> 0:04:58.520 longer term outlook on things like you know, alternative energy resources, 0:04:58.600 --> 0:05:02.160 things like hydrogen things solar um could be interesting to 0:05:02.279 --> 0:05:04.640 investors now, So you know, they're definitely places to look 0:05:04.640 --> 0:05:07.120 and look. I would even just argue that that you 0:05:07.160 --> 0:05:10.080 know them both cues and sim age and just just 0:05:10.160 --> 0:05:13.000 you know, sort of plain old technology and and um, 0:05:13.200 --> 0:05:16.320 you know, um sort of larger market cup somebody. Conductor 0:05:16.360 --> 0:05:19.200 ETFs are interesting just because they've been absolutely hammered from 0:05:19.240 --> 0:05:21.960 their all time highs um, so their places to do 0:05:22.000 --> 0:05:24.080 well in the future. But to answer your question now, 0:05:24.120 --> 0:05:26.839 it's probably more around the commodity space, and it's around 0:05:26.839 --> 0:05:30.440 those names. Sylvia, what about Levered e t s And 0:05:30.680 --> 0:05:32.839 there was some chat on the street a couple of 0:05:32.839 --> 0:05:35.680 weeks ago that Leverty t f s and their liquidation 0:05:35.839 --> 0:05:39.479 was hurting the market and kind of snowballing some of 0:05:39.520 --> 0:05:42.400 the selling. Where does that fall in the grand scheme 0:05:42.440 --> 0:05:45.919 of things. Yeah, so having you know, having a background 0:05:45.960 --> 0:05:48.159 of some more than a decade at the level of 0:05:48.160 --> 0:05:51.640 a niversity ETF provider direction, Um, you know, what I 0:05:51.640 --> 0:05:53.120 can say is that a lot of people sort of 0:05:53.160 --> 0:05:55.960 misunderstand how how the trade works. Right. If if you 0:05:55.960 --> 0:05:58.600 have a both fund um that is buying, you often 0:05:58.600 --> 0:06:01.760 have a bare fund that is selling or vice versa. Um. 0:06:01.800 --> 0:06:05.240 You know, there's a lot left and there's been numerous 0:06:05.279 --> 0:06:07.880 studies done and the impact on the close of leven 0:06:07.960 --> 0:06:11.320 niversity TF funds, whether it's you know, direction posures are 0:06:11.400 --> 0:06:15.160 kind of the lion's share of it. It tends to 0:06:15.200 --> 0:06:18.880 be well under one percent or so. UM. So you know, 0:06:19.360 --> 0:06:22.320 I think it's it's it's. It sounds good, but in sanery, 0:06:22.360 --> 0:06:25.400 the math doesn't usually play out for it to be true. 0:06:26.480 --> 0:06:28.480 All right, Sylvia, thank you so much for joining to 0:06:28.560 --> 0:06:31.599 really appreciate getting your thoughts here on these markets and 0:06:31.760 --> 0:06:35.559 on the E t F space. Sylvia Jablonsky, chief investment officer, 0:06:35.640 --> 0:06:42.039 co founder Defiance E t F s here we have 0:06:42.080 --> 0:06:44.560 a good green day on the screen for equities, but 0:06:44.839 --> 0:06:47.000 you know, you take a look at the total return 0:06:47.120 --> 0:06:51.040 aggregate for US corporates minus thirteen percent year to date. 0:06:51.400 --> 0:06:54.040 Just brutal out there in the world of fixed income 0:06:54.080 --> 0:06:56.320 and credit. Um, let's talk to somebod who does this 0:06:56.400 --> 0:06:59.080 stuff for a living. Randy Schwimmer, co head of Senior 0:06:59.160 --> 0:07:03.640 Lending and Seeing Senior Managing Director Churchill Asset Management. Randy, 0:07:03.839 --> 0:07:07.400 anywhere for you and your team to hide year to date? 0:07:08.760 --> 0:07:11.520 And what are your thoughts for the remainder of the year. Well, 0:07:11.520 --> 0:07:13.080 it's great to be with you, and actually we're not 0:07:13.160 --> 0:07:17.400 hiding at all. We're out We're out there investing and uh, 0:07:17.440 --> 0:07:20.440 you know this is a time when private markets are 0:07:20.480 --> 0:07:24.080 actually shining. So we're seeing a reset as you mentioned, 0:07:24.200 --> 0:07:26.640 you know, it's been now happening for a while, kind 0:07:26.680 --> 0:07:29.880 of a repeat of March of when we were really 0:07:29.880 --> 0:07:33.200 sure where the public markets were going. UM. We have 0:07:33.280 --> 0:07:35.960 more recession worries to deal with now, I think as 0:07:36.000 --> 0:07:39.960 the FED is increasing interest rates and trying to battle 0:07:40.120 --> 0:07:43.400 inflation um and so that's now causing concerns in the 0:07:43.520 --> 0:07:46.160 public markets about you know, what's going to happen with 0:07:46.200 --> 0:07:49.280 earnings and so forth, and if if rates start to 0:07:49.280 --> 0:07:51.600 get too high, what's the impact on the consumer. We're 0:07:51.600 --> 0:07:54.480 starting to see some slowing in some areas, but but 0:07:54.600 --> 0:07:58.800 private capital in general has been very constructive, particularly during 0:07:58.800 --> 0:08:01.920 this time. We've actually seen a number of deals that 0:08:02.000 --> 0:08:05.560 were stalled in the high yield bond market being taken 0:08:05.560 --> 0:08:08.920 out by private capital managers who are stepping in with 0:08:08.960 --> 0:08:13.680 deals like Nielsen and CDK Global and even peloton Um 0:08:13.920 --> 0:08:17.640 and and stepping in actually refinancing some deals that that 0:08:17.720 --> 0:08:20.840 were stuck because of what's going on in the public market. 0:08:20.880 --> 0:08:23.560 So I think, you know, the private capital, because of 0:08:23.560 --> 0:08:27.400 the long term nature of both the assets and liabilities 0:08:28.080 --> 0:08:30.760 UM that that are locked in in our markets, as 0:08:30.800 --> 0:08:34.160 well as the significant hole levels that we've that we've 0:08:34.200 --> 0:08:38.560 achieved because of great fundraising activity. In general the last 0:08:38.559 --> 0:08:41.360 couple of years, private credit sects have been very constructive 0:08:41.440 --> 0:08:46.800 during this otherwise volable market, this otherwise volatble market. I 0:08:47.120 --> 0:08:48.679 want to dive into what you said about the high 0:08:48.760 --> 0:08:52.080 yield space specifically because to me, I feel like with 0:08:52.120 --> 0:08:54.680 all this recession talk, if there was indeed a recession 0:08:54.720 --> 0:08:57.240 coming or even on the horizon, you would see it 0:08:57.320 --> 0:09:00.400 show up in the credit market first. But the crests 0:09:00.480 --> 0:09:03.599 crest prosts haven't widened to what we've seen in previous recessions. 0:09:03.679 --> 0:09:07.000 Is that disconnect that you're keeping an eye on. Yeah, 0:09:07.080 --> 0:09:09.680 and in fact, we haven't really seen that in the 0:09:09.720 --> 0:09:13.040 private market's well known fairness. You know, the middle market, 0:09:13.040 --> 0:09:16.640 the smaller companies tend to be a lagging indicator, so 0:09:16.800 --> 0:09:20.280 the large cap, more highly traded businesses are probably gonna 0:09:20.360 --> 0:09:23.280 see the impact first. Um. You know, we're not seeing 0:09:23.280 --> 0:09:26.760 really a slowdown, certainly not in our portfolio. Revenues for 0:09:26.800 --> 0:09:30.480 our portfolio companies continue to be strong. Um. Now again, 0:09:30.600 --> 0:09:32.280 you know, we'll see what happens during the rest of 0:09:32.280 --> 0:09:37.240 the year. Some of the impact particularly with inflation UH 0:09:37.360 --> 0:09:41.360 sensitive areas such as food and energy and commodities. Those 0:09:41.440 --> 0:09:44.320 kinds of things are are still top of mind for 0:09:44.400 --> 0:09:47.439 us from a portfolio perspective, and we're very focused on 0:09:47.920 --> 0:09:51.760 the potential of higher costs down the road. Supply chain 0:09:51.800 --> 0:09:56.600 issues continue to be UM at the forefront, potentially compressed 0:09:56.640 --> 0:09:58.960 margins as a result of some of these higher costs 0:09:59.000 --> 0:10:02.840 in certain areas, But in areas where we're UM you know, 0:10:02.920 --> 0:10:07.320 being very constructive, for example, health care and technology and 0:10:07.440 --> 0:10:11.280 business services, these companies are continue to do pretty pretty well. 0:10:11.640 --> 0:10:13.400 And I think you're starting to see even the public 0:10:13.400 --> 0:10:16.520 markets today a little bit of kind of reassessment UM 0:10:16.559 --> 0:10:19.120 in what we mean by a slowdown and what really 0:10:19.480 --> 0:10:21.720 the markets are worried about. But I do think that 0:10:22.240 --> 0:10:26.160 UM private capital will continue to be very very positive 0:10:26.200 --> 0:10:29.160 as we move forward, you know, and even in an 0:10:29.280 --> 0:10:33.440 environment where some of the concerns with whether where, whether 0:10:33.480 --> 0:10:36.240 it's inflation or interest rates, that's something that we've been 0:10:36.240 --> 0:10:39.000 really dealing with all along, particularly going through over it. 0:10:39.120 --> 0:10:42.439 So I don't really see any change in our own posture. Randy, 0:10:42.440 --> 0:10:45.280 how about as interest rates UH continue to rise and 0:10:45.320 --> 0:10:48.160 there's talk of a slowing economy, maybe even a recession. 0:10:49.000 --> 0:10:50.840 What are the leverage have you changed the kind of 0:10:50.840 --> 0:10:54.480 the leverage levels or that you're willing to go to 0:10:54.520 --> 0:10:57.480 the market with. Well, we we always are sensitive to 0:10:57.559 --> 0:11:00.000 those kinds of things. We we tend to turn down 0:11:00.000 --> 0:11:03.240 and probably the transactions that come in the door because 0:11:03.280 --> 0:11:05.920 of that reason. Um. I think the focal point, Paul, 0:11:06.000 --> 0:11:09.520 that is, as I mentioned, something that's of concern is 0:11:09.559 --> 0:11:12.600 really the cost structures of these businesses because you're as 0:11:12.600 --> 0:11:15.000 you're looking forward to your point, you know, if you 0:11:15.040 --> 0:11:18.080 start to see food and energy in certain commodities where 0:11:18.120 --> 0:11:20.079 costs are going to be higher, you're not going to 0:11:20.160 --> 0:11:22.760 be leveraging those businesses the same you would have, you 0:11:22.800 --> 0:11:26.520 know nine months ago, twelve months ago, and so yes, um, 0:11:26.559 --> 0:11:30.000 you know, more leveraging in companies or things that we're 0:11:30.080 --> 0:11:33.280 always focused on. We're going to be very um cautious 0:11:33.320 --> 0:11:37.199 about that going forward. But in many cases where companies 0:11:37.240 --> 0:11:40.160 are doing well, where the private equity sponsors that we're 0:11:40.240 --> 0:11:44.240 partnering with are putting in significant capital below our structures 0:11:44.840 --> 0:11:47.560 because they believe in these businesses, those are companies that 0:11:47.600 --> 0:11:49.760 were we continue to lean into and we believe in. 0:11:49.800 --> 0:11:51.640 And I think that you know, the outlook for the 0:11:51.720 --> 0:11:54.120 rest of the year continues to be good investors that 0:11:54.200 --> 0:11:57.160 we are serving, uh, seemed to indicate that they have 0:11:57.240 --> 0:12:00.400 the same or even higher interest in private credit again 0:12:00.480 --> 0:12:03.520 because it tends to be you know, the oil on 0:12:03.600 --> 0:12:06.640 troubled waters which we're seeing right now, and people believe 0:12:06.720 --> 0:12:09.720 that that that's going to be positive going forward. All right, Randy, 0:12:09.720 --> 0:12:12.320 good stuff. Really appreciate getting an update on the private 0:12:12.320 --> 0:12:15.360 equity and a senior lending business into the private equity space. 0:12:15.440 --> 0:12:18.640 Randy Schremmer, cohead of senior Lending and senior managing director 0:12:18.800 --> 0:12:24.920 at Churchill Asset Management. You know, one of the bricks 0:12:24.960 --> 0:12:27.360 in the wall of worry, and there are many, is 0:12:27.559 --> 0:12:30.080 this scene called stag inflation. I started hearing about over 0:12:30.080 --> 0:12:31.400 the last couple of months. I had to go back 0:12:31.400 --> 0:12:34.360 into my economics book from Business Malfair, What the heck 0:12:34.400 --> 0:12:37.000 is stagflation again? And I guess it's kind of like 0:12:37.120 --> 0:12:40.079 inflation but slowing to no growth. And that just doesn't 0:12:40.080 --> 0:12:42.400 sound very good. But that's certainly one thing that's been 0:12:42.480 --> 0:12:44.600 royal in these markets. Let's get the latest Lis McCormick 0:12:44.600 --> 0:12:47.480 Global Fixed Income and Foreign Exchange Reporter for Bloomberg News joints. 0:12:47.520 --> 0:12:49.840 Us I like to say, live in our Bloomberg Interactive 0:12:49.840 --> 0:12:54.559 Broker studio. That's good stuff, Liz, all right, stagflation is 0:12:54.600 --> 0:12:56.839 it a thing for this market? Our investors really worried 0:12:56.840 --> 0:12:59.000 about it? And you know, what are you hearing about it? 0:12:59.360 --> 0:13:02.000 It's definitely, uh, something that people are worried about. And 0:13:02.040 --> 0:13:04.400 I've heard even the senior investors say, we had to 0:13:04.400 --> 0:13:07.080 crack out our textbooks and remember what this is. And 0:13:07.120 --> 0:13:12.000 I think it's become I'm amalgam of different explanations now 0:13:12.000 --> 0:13:13.880 with a lot of people saying, hey, look, if you're 0:13:13.880 --> 0:13:17.400 telling me stagflation in this world is slowing growth and 0:13:17.480 --> 0:13:20.280 high inflation, well that's what we have. I mean, I 0:13:20.320 --> 0:13:23.280 don't think that's the textbook explanation, but so people are 0:13:23.280 --> 0:13:25.640 worried about that. You know, obviously the feed is worried. 0:13:25.640 --> 0:13:28.080 So there, you know, kind of stepped up this tightening path. 0:13:28.200 --> 0:13:31.200 But yeah, people are thinking about that. So let's how 0:13:31.240 --> 0:13:34.160 do you get out of a stagflationary environment. Well, I 0:13:34.200 --> 0:13:36.480 think that's what the FED is doing. Like you've heard 0:13:36.679 --> 0:13:39.520 Chairman Pal talk about he thinks he can pull off 0:13:39.559 --> 0:13:43.679 tightening bringing down inflation without causing recession, although he's changed 0:13:43.679 --> 0:13:47.000 his tone a little from slow growth to slowish growth too. 0:13:47.080 --> 0:13:49.640 It'll take a little bit of pain, right, But then 0:13:49.679 --> 0:13:52.520 that's their ideal goal is to say, hey, the labor 0:13:52.559 --> 0:13:55.079 market is really strong. It can take these higher rates. 0:13:55.120 --> 0:13:57.640 We can bring inflation under control, but we don't have 0:13:57.679 --> 0:14:00.800 to completely implode the economy. I'll though, as you guys know, 0:14:00.920 --> 0:14:04.400 history doesn't always go with that. Usually Fed tightening, there's 0:14:04.440 --> 0:14:07.280 a recession, but we'll see what happens. You know, the 0:14:07.360 --> 0:14:12.760 FED calls rightfully into the discussion the strong labor marketplace, 0:14:12.800 --> 0:14:14.960 which it certainly is if you look at unemployment just 0:14:15.000 --> 0:14:16.960 for example. But one of the risks when you do 0:14:17.000 --> 0:14:20.040 talk about the labor market is wage inflation kind of 0:14:20.080 --> 0:14:22.240 spiraling a little bit. And I guess we're running it 0:14:22.760 --> 0:14:25.960 wage inflation five percent, but there's a concern out there 0:14:25.960 --> 0:14:29.160 that could get a little bit hotter um is a 0:14:29.200 --> 0:14:31.280 market concerned about that? Do you think, Well, that's something 0:14:31.320 --> 0:14:34.120 people talk about because also talking to a colleague today 0:14:34.160 --> 0:14:37.240 that you know, when people get these raises, say they 0:14:37.320 --> 0:14:39.600 got a five percent raise, they're not so much the 0:14:39.680 --> 0:14:42.280 next year are going to say, oh, I'll give that back, right, 0:14:42.360 --> 0:14:44.320 So that's what the FED is worried that this gets 0:14:44.320 --> 0:14:47.240 in trench. So I think that's on the radar, though 0:14:47.520 --> 0:14:51.080 I've heard some FED officials say, or we don't see 0:14:51.080 --> 0:14:53.840 the wage price spiral as if yet. You know, we 0:14:53.920 --> 0:14:57.280 want to contain inflation expectations, which have come off a 0:14:57.320 --> 0:15:00.520 lot from the kind of peak we had. But yeah, 0:15:00.680 --> 0:15:03.360 you know, if those wages get entrench, that's the problem. 0:15:03.560 --> 0:15:06.240 You know, there's two jobs basically for every opening, and 0:15:06.240 --> 0:15:09.600 that's what Chairman Palell's talked about, concerned too hot labor market. 0:15:09.720 --> 0:15:11.400 And I saw just a new story today. I guess 0:15:11.440 --> 0:15:15.000 the Bank of America. They're hourly employees now going up 0:15:15.000 --> 0:15:17.840 to twenty five dollars an hour. So yeah, I think 0:15:17.840 --> 0:15:21.680 the official minimum wage is still seven dollars, but it 0:15:21.680 --> 0:15:26.240 seems like Walmart and you know, you know Amazon have 0:15:26.560 --> 0:15:29.720 set the real minimum wage at fifteen dollars for all 0:15:29.720 --> 0:15:32.040 intensive purposes. But now you've got you mean like you 0:15:32.080 --> 0:15:34.480 mean like the like the bank teller's and I guess, 0:15:35.440 --> 0:15:38.600 so very interesting. So we're seeing it out there. Um, 0:15:38.720 --> 0:15:40.520 just don't know if it's problematic yet. I was gonna say, 0:15:40.520 --> 0:15:42.200 they used to be like if you did like a 0:15:42.320 --> 0:15:45.000 junior banker salary divided by hours they work. It came 0:15:45.000 --> 0:15:48.600 down like twenty five, which is interesting. Um, Liz, let's 0:15:48.600 --> 0:15:51.000 talk about the dollar if we can. We are seeing 0:15:51.040 --> 0:15:53.760 this new dynamic where you see a weaker dollar yield 0:15:54.000 --> 0:15:57.720 kind of resumed their march higher. Why the separation, Well 0:15:57.760 --> 0:15:59.880 today it's interesting and I heard you guys talking girl 0:16:00.120 --> 0:16:02.640 or but we had Christine Lagarde kind of pre announced, 0:16:02.640 --> 0:16:04.840 which was a surprise that you know, they're going to 0:16:04.880 --> 0:16:07.680 be stopping their bond buying. They want to get rates 0:16:07.720 --> 0:16:10.320 off the negative level. But I think the third quarter, 0:16:10.440 --> 0:16:13.000 she said, so, you know, the dollar for a while, 0:16:13.000 --> 0:16:15.200 the FED was the most aggressive in town, you know, 0:16:15.280 --> 0:16:17.800 even though other central banks were tightening, and definitely the 0:16:17.840 --> 0:16:20.880 e c B was the lagger. Now you have le 0:16:21.000 --> 0:16:23.960 guards stepping up. So I think there's the feeling that 0:16:24.040 --> 0:16:26.880 you know, hey, the other central banks and there's others 0:16:26.920 --> 0:16:29.840 that are kind of increasing their hawks rhetoric that it's 0:16:30.040 --> 0:16:33.400 you know, that divergence isn't as extreme. Plus, the dollar 0:16:33.560 --> 0:16:36.240 had such a torrid rise, right, you know, I mean, 0:16:36.360 --> 0:16:38.800 let's let's just talk about dollar long saying like in 0:16:38.840 --> 0:16:41.480 any market, hey, let's take some profits. It's come a 0:16:41.520 --> 0:16:43.560 long way. How far can it go. So I think 0:16:43.600 --> 0:16:47.040 there's the two things flows and you know the divergence narrowing. 0:16:47.960 --> 0:16:50.960 You mentioned ECB starting to move here. Is it still 0:16:51.040 --> 0:16:55.000 a valid concern to claim that the US feder Reserve 0:16:55.120 --> 0:16:58.760 is quote unquote behind the curve. Well, the FED would 0:16:58.840 --> 0:17:01.200 argue not so much, right. I think Buller just said, 0:17:01.240 --> 0:17:04.280 we're not so much behind the curve. Um. I think 0:17:05.240 --> 0:17:07.600 with where the market has priced in what the FED 0:17:07.640 --> 0:17:10.320 will do, which Chairman Palace kind of pointing to a lot. Hey, listen, 0:17:10.359 --> 0:17:13.240 the markets doing what you know we want, and they've 0:17:13.240 --> 0:17:15.640 priced in all these hikes to come. So I think 0:17:15.680 --> 0:17:18.199 if you go by that and the q T is 0:17:18.240 --> 0:17:21.080 starting next month where they unwind you know, some of 0:17:21.119 --> 0:17:23.640 the dead on their balance sheet, they would argue, we're 0:17:23.680 --> 0:17:26.320 not as behind the curve as we were. Um, that's 0:17:26.320 --> 0:17:28.919 where the question is. Like I was listening to one 0:17:29.000 --> 0:17:31.840 of the guests earlier talk about do they have the 0:17:31.920 --> 0:17:34.479 room to hike maybe fifty basis points the next two 0:17:34.520 --> 0:17:37.879 meetings and then stop and look around. Maybe but not 0:17:37.960 --> 0:17:40.080 if inflation is too hot, they might have to just 0:17:40.160 --> 0:17:43.560 keep going. But is it enough for the ECB to 0:17:43.680 --> 0:17:45.959 finally catch up to the Fed or at least that's 0:17:45.960 --> 0:17:47.440 the way it's being framed. When you have the b 0:17:47.560 --> 0:17:49.720 o E that's kind of doing their own thing, you 0:17:49.760 --> 0:17:52.200 have a PBOC that's actually looking to stimulate, um, and 0:17:52.240 --> 0:17:54.119 a b o J that's kind of stuck between a 0:17:54.200 --> 0:17:56.119 rock and heart place. Right. Well, the b o J 0:17:56.320 --> 0:18:00.000 has kind of been stuck for a long time, exactly. Um. 0:18:00.119 --> 0:18:02.440 But yeah, no, I mean clearly, I think the FED 0:18:02.600 --> 0:18:04.840 in the in the last months has been the most 0:18:04.920 --> 0:18:08.080 kind of laser focused. We're on a mission. We're getting 0:18:08.080 --> 0:18:12.240 to neutral. You know, we're going to get inflation down that. Yeah, 0:18:12.240 --> 0:18:14.800 they stand out, but yeah, these other central banks are 0:18:14.800 --> 0:18:17.680 a little more hodgepodge, you know. But I think the guards, 0:18:18.040 --> 0:18:19.919 especially because you did it in that blog, you know, 0:18:20.000 --> 0:18:22.800 kind of getting ahead of it was pretty telling. And 0:18:22.840 --> 0:18:24.720 you know you look at the work function. I mean 0:18:25.000 --> 0:18:27.920 w i r P World interest rate probability still looking 0:18:27.960 --> 0:18:32.320 for eight basis point cuts by the end of the year. 0:18:33.440 --> 0:18:38.960 I'm sorry, thank you markets. Yeah, exactly, that's what I mean. 0:18:39.000 --> 0:18:40.760 That if if the FED, and that's what they're kind 0:18:40.760 --> 0:18:42.439 of looking at, says, look at how much the markets 0:18:42.480 --> 0:18:45.880 priced in. You know, we're getting there. It's it's filtering 0:18:45.920 --> 0:18:49.480 through to expectations, which is what we want. Um. Yeah, 0:18:49.480 --> 0:18:51.760 but it's like that nebulous neutral. They said, we want 0:18:51.760 --> 0:18:54.000 to get to neutral. Some people say it's bound two 0:18:54.040 --> 0:18:56.560 and a half. They're gonna feel their way as they 0:18:56.560 --> 0:18:58.040 get there, and that I think you're going to see 0:18:58.080 --> 0:19:01.360 some more volatility at that point. All right, Liz, thanks 0:19:01.359 --> 0:19:03.920 so much. We appreciate it. Liz McCormick, global fixed income 0:19:04.000 --> 0:19:06.960 and foreign exchange reporter for Bloomberg News, joining us live, 0:19:07.320 --> 0:19:10.320 which we really appreciate. In the Bloomberg Interactive Broker studio, 0:19:15.320 --> 0:19:17.919 Dianna Baker and Ed Hammond had a story out on 0:19:17.960 --> 0:19:19.600 the Bloomberg term on this morning. There are M and 0:19:19.640 --> 0:19:22.000 A reporters. They broaked a lot of news right there 0:19:22.000 --> 0:19:25.240 saying broad Comms and talks to buy vm Ware. I mean, 0:19:25.720 --> 0:19:27.920 vm Where's a big Company's got a forty billion dollar 0:19:27.960 --> 0:19:30.080 market cap, so this would be a major deal in 0:19:30.640 --> 0:19:32.520 in that business. Let's bring it somebody who does this 0:19:32.600 --> 0:19:37.640 stuff for living Ujinho. He's a technology analyst for Bloomberg Intelligence, 0:19:38.119 --> 0:19:40.520 which thanks so much for joining us here. What do 0:19:40.520 --> 0:19:43.440 you make of this deal? Vm War's a big company. 0:19:44.680 --> 0:19:48.399 The deal actually makes sense from from a broadcom perspective. UM, 0:19:48.440 --> 0:19:54.040 they've been embarking on a revenue diversity the percification strategy 0:19:54.080 --> 0:19:56.720 for the past couple of years, dating back to with 0:19:56.800 --> 0:20:00.720 the acquisition of c A and UM. If you listen 0:20:00.760 --> 0:20:04.120 to Broadcom's last serning is called, they said that they 0:20:04.160 --> 0:20:07.800 had the capacity to do a deal that's fairly sizeable 0:20:07.880 --> 0:20:11.040 and vm where somewhat. That's a deal, So that's from 0:20:11.040 --> 0:20:15.080 a deal synergies perspective. There's another player here that might 0:20:15.119 --> 0:20:18.280 get in the way. Michael Dell at stake in vm ware. 0:20:18.320 --> 0:20:20.240 Can you walk us through why he might be a 0:20:20.320 --> 0:20:26.000