July 22, 2025 • 17 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) A cohort of the world’s largest asset managers is leaning harder into the rally in risk assets as US stocks push to fresh highs, defying persistent trade and geopolitical tensions.
(2) Junk bond funds based in Europe saw their biggest weekly inflow of the year last week, as investors continue to pile into an asset class that offers relatively generous yields, stability and diversification away from the US dollar.
(3) AstraZeneca plans to invest $50 billion in the US before 2030, becoming the latest European pharma company to ratchet up spending in the country ahead of potential tariffs on imported medicines.
(4) Treasury Secretary Scott Bessent said in a social media post Monday that there should be a review of the decision to renovate parts of the Federal Reserve headquarters in Washington.
(5) The ruling Labour party and upstart rival Reform UK separately opened the door to a potential increase in the retirement age, a move that would help cut the government’s costs but almost certainly draw a backlash from the public.
Podcast Conversation: How YouTube and Tiktok Are Shaping a New Generation of Chefs
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
This is the Bloomberg Day BAQ podcast. Good morning, It's Tuesday,
the twenty second of July. I'm Caroline Hepkeat in London.
Speaker 3 (00:16):
And I'm Stephen Carolin Brussels. Coming up today, stock market
investors shrug off trade uncertainty as the S and P
five hundred closes above six three hundred points for the
first time.
Speaker 2 (00:28):
Capital gains vanish into black holes in the latest etf
tax trick.
Speaker 4 (00:34):
We have an exclusive report.
Speaker 3 (00:36):
Plus not such a sterling idea. The Bank of England
goes cold on the concept of a digital pound.
Speaker 4 (00:42):
Let's start with a roundup of our top stories.
Speaker 3 (00:46):
Global equity markets are continuing to defy persistent trade and
geopolitical tensions as the S and P five hundred index
closes at yet another record high. Stocks have surged since
their slump in April as some of the world's largest
asset managers lean more heavily into the rally. Wells Fargo's
top us equity strategist, Christopher Harvey says he expects the
(01:06):
SMP five hundred to deliver another double digit increase in
the second half of the year.
Speaker 5 (01:11):
What we're seeing is the winners continue to win. The
ubercap companies have the higher margins are gaining more market share.
There is a real secular trade in AI that will continue.
I was here during the nineties. This is not a
fair comparison. It is much stronger and the fundamentals are
much better than today than they were back then.
Speaker 3 (01:30):
Harvey is the most buller strategies tracked by Bloomberg Forecasting
the SMP five hundred will climb above seven thousand points
by the end of the year. It closed yesterday at
just over six three hundred. The market wager is that
while President Donald Trump is threatening to disrupt the economic
order once again, he will ultimately step back from the brink.
While second quarter earning season is off to a strong start,
(01:51):
the rally faces a key test this week as major
companies such as Tesla and Alphabet have yet to report well.
Speaker 2 (01:58):
Corporate profit Full casting faster in Europe the Middle Eastern
Africa than they are in Asia or Latin America. According
to the latest data compiled by Bloomberg, stocks that in
the region have posted their biggest year to date rally
since two thousand and nine, and analysts are stepping up
the average twelve month earnings projections for companies in the
(02:19):
MSCI em EMEA index. Despite the ongoing threat of US tariffs,
investors have been drawn to the emir region by factors
including economic reforms in Nigeria and Morocco, peace hopes in Ukraine,
and gold's boost to South African miners.
Speaker 3 (02:39):
Astraseneca is to invest fifty billion dollars in the United
States before twenty thirty, becoming the latest European farmer company
to ratchet up spending ahead of potential tariffs on imported medicines.
Bloombergs Uwan Paths has more drug giants.
Speaker 6 (02:53):
Astraseneka frequently tops the list of the most valuable companies
on the London Stock Exchange. Now, the Cambridge based company
says it's to invest fifty billion dollars in manufacturing as
well as research and development in the United States. Kevin
has It, director of the US National Economic Council, says
that after the investment, substantially all of Astra's products sold
in the United States will be produced in the United States.
(03:15):
It comes just six months after the company abandoned plans
to build a new vaccine plant in Liverpool. In London,
I'm you in pots of Boomberg Radio.
Speaker 2 (03:23):
Now, US Treasury Secretary Scott Besson says that there should
be a review of the decision to renovate parts of
the Federal Reserve's headquarters in Washington. In a social media post,
The Best Sense said the Central Banks should conduct quote
an exhaustive internal review of its non monetary policy operations. Meantime,
Florida Republican Congresswoman Anna Paulina Luhner has asked the Justice
(03:47):
Department to consider investigating Chaired your Own Powell for allegedly
lying under oath. She claims Powell made false statements about
the Fed's restoration project. Bloomberg's Michael McKee has and the holds.
Speaker 7 (04:02):
Almost no weight in any other administration. You dismissed it
as a publicity st But of course under this administration,
it's hard to know what the Justice Department will actually
do since they served more as the president's lawyers. But
there is little evidence of any kind of crime here.
Speaker 2 (04:20):
Bloomberg's Michael McKee speaking there As Powell continues to face
criticism from President Trump for the Fird's decision to hold
interest rates steady.
Speaker 3 (04:29):
The UK's Foreign secretary has described an Israeli aid scheme
in Gaza as grotesque as he repeated calls for an
immediate ceasefire. David Lammy yesterday joined twenty seven foreign ministers
and signing a joint statement calling for the release of
all hostages and the resumption of aid deliveries. The Hamas
run government claims that almost one thousand Palestinians have been
(04:50):
killed while waiting for aid under a US backed distribution,
which Lammy says is inhumane.
Speaker 8 (04:57):
It forces desperate civilians, children among them, to scramble unsafely
for the essentials of life. It's a grotesque spectacle reckon
a terrible human cost.
Speaker 3 (05:09):
David Lammie was speaking as Israel has disputed these circumstances
and figures for those killed while waiting for aid. Israel
also says a letter signed by the UK's Foreign Secretary
and others is disconnected from reality and sends the wrong
message to Hamas.
Speaker 2 (05:23):
Microsoft is rushing to stop hackers wreaking global havoc after
they exploited a floor in the firm's software over the weekend.
Microsoft release. They fixed for the vulnerability in servers of
the share Point document management software, but say that they're
still working to repair other parts of the system. The
(05:44):
floor was reportedly used to break into the file systems
of national government in Europe, the Middle East and the US,
according to cybersecurity researchers.
Speaker 3 (05:54):
When in the UK they're in Labor Party and Reform
UK are separately considering increasing the return hirement age. The
news comes as Working Pension Secretary Liz Candle announced yesterday
the next statutory review into the age when government pensions
kick in, currently set at sixty six. According to Candle,
the system is in need of immediate change.
Speaker 9 (06:14):
Unless we act, tomorrow's pensioners will be poorer than today's
because people who are saving aren't saving enough for their retirement,
and crucially because almost half of the working age population
isn't saving anything for their retirement at all.
Speaker 3 (06:31):
The government's lives. Candle delivering a speech there in London.
While the Government's required to review the state pension every
six years, the last one was in twenty twenty three,
making this announcement three years early. At a separate event
for former UK's Nigel Faraj said he thought the state
pension age would have to rise.
Speaker 2 (06:49):
And those are our top stories for you this morning.
So let's have a look at the markets This morning,
US stocks closed at a new high, although only inched
up by tenth of one percent yesterday's stop futures for
the US in the red Ustox fifty futures also dipping,
now four tenths of one percent. The dollar is a
bit firmer after Monday's sell off. Japanese stocks are down there,
(07:10):
back to trading after the holiday on Monday. At thirty
a jgbs now trading at three spots zero one percent,
up nearly three basis points. Are they vulnerable to more selling?
The yield curve has steepened, And of course we can't
forget that there are lots of earnings out this week,
including from big US megacap stocks. But we begin with
general motors earnings today well.
Speaker 3 (07:31):
In a moment, as those stock markets in the US
continue to rise to record highs, we have an exclusive
report on the ETF tax trick being used to help
rich investors minimize their tax bills in the US, plus
the Bank of England going cold on a digital pound.
But first, another story we've been reading this morning from
our food editor, Cake Crad about how it's not just
US amateurs and by us I mean me who are
(07:53):
getting cooking tips from YouTube. Top level chefs are doing
a two. So it's fine. It's fine to learn how
to cook on the internet.
Speaker 4 (07:59):
Yeah it's not.
Speaker 3 (08:00):
You're talking about James Lowe in particular, the chef who
was of very recently at Lyle's in shortage would close
down who learned how to prepare a bluefin tuna for
watching Japanese fish experts on YouTube? Is this the next
generation of cooking shows on TV?
Speaker 2 (08:15):
It certainly is, as long as you have got the skills.
I mean, I've got experience of this also, but mainly
of the kind of cautionary tale variety. Yet you remember this.
I mean it's only a couple of years ago and
one of my kids, very into baking, we tried to
replicate a five minute YouTube video of an extravagant.
Speaker 3 (08:35):
Cake seven hours or something like that. Yeah, this is
the problem. Two days of the weekend, I end up
watching the entire video about fifteen times over to try
and figure out all the parts in between that I've
missed essentially, So, I mean, the TikTok first of this
is like the hyperdriversion of it. But good to know
that even those at the very top of their profession
are also using these online platforms to ope their skills.
(08:57):
You can read Cake Creator's piece on Bloomberg. Calm will
put a link to it in our show notes.
Speaker 2 (09:02):
Now, after a decade where the S and p f
I found that index has tripled and more investors are
making bullish calls for this year too. Wealthy investors are
also looking for ways to lower their capital gains tax bills.
Speaker 4 (09:17):
In the United States.
Speaker 2 (09:18):
That has led to a rise in a creative tactic,
including one using ETFs that is the subject of today's
Bloomberg Big Take Report, and our cross Asset Markets reporter
Justina Lee joins us now for more on this. So,
just before we get into those details, let's start with
the kind of bullish sentiment that we're seeing in markets.
(09:39):
Investors do seem to be less worried about Donald Trump's
trade policies right now that that is going to dent
their stock market gains seems quite a positive backdrop.
Speaker 4 (09:51):
Yeah, that's right.
Speaker 1 (09:51):
I mean, I think it really goes back to you know,
the Trump always chickens out acronym Taco, and I think
so part of it is that people just don't think
that we're going to get the worst of his TERRORFF policies.
I think that's one factor. Another is there is still
quite a lot of optimism that we're going to get
(10:13):
those FED rate cuts. So I think those combined together,
and also the fact that the US economy still seems
to be doing pretty well, I think that's kind of
keeping the US economy of the US dock market kind
of near recordized.
Speaker 3 (10:26):
So a lot of people out there making a lot
of money. Justina, but you've been reporting on this particular
tax trick to do with ETFs. Talk to us how
does it work?
Speaker 1 (10:37):
So the thing to remember about ETFs in the US
is that even when they trade, and even when they
sell a position that's made a lot of money, they
don't usually have to pay any capital gains tax on it.
And the reason is that because of the way ETFs
are created and redeemed, they don't actually sell their positions
(10:59):
for cash, and so when they have a position that
has made a lot of money they want to offload,
usually they just kind of trade it in kind with
a market maker, and because of this, they don't incur
a capital gains tax bill. And it's really just this
loophole that was kind of created before ETFs even became
(11:19):
a thing, and then it's kind of become standard practice,
and it's a big reason why we've seen a lot
of mutual funds converted into ETFs. And in the case
of kind of my story today, I kind of talk
about these ETFs that are created from kind of seed,
it from appreciated securities, so that basically you see the
(11:40):
ETF with these positions that have already made money, and
once they become an ETFs, you can trade out of
them without paying.
Speaker 2 (11:47):
Text okay, and these are known as three five one conversions.
Speaker 4 (11:53):
How popular are they.
Speaker 1 (11:54):
Then, Yeah, so that's pretty hard to tell because they're
not laid in any way. Usually you kind of have
to do a bit of guest work, as I kind
of had to for this story, because obviously one telltale
sign is that they start trading with a lot of
assets because they're already seated with these securities. But there
are signs that they're becoming more popular.
Speaker 10 (12:17):
You know.
Speaker 1 (12:17):
For instance, I speak to this lawyer that says that
he has worked too close to one hundred of these
and this is only in the last few years, and
we kind of see from some more obvious examples that
you know, it feels like there are more and more.
Like I speak to one issuer kind of culled Cambria
and they've done two and they're doing two more this year.
Speaker 3 (12:39):
Okay, an interesting one to watch, Justina Lee, thank you
for very much for bringing us details of your reporter
our cross asset market supporter.
Speaker 8 (12:45):
There.
Speaker 2 (12:47):
Bank of England officials are considering whether to set aside
plans to create a digital pound for households amid growing
skepticism over the project's benefits. It's the latest sign of
dwindling support for tax back to digital currencies globally, and
our UK Economy reporter Tom Reese joins us now for
more on this.
Speaker 4 (13:08):
Tom good Morning.
Speaker 2 (13:09):
Remind us what is the digital pound and why was
the Bank of England actually working on it?
Speaker 10 (13:15):
So a digital pound would be like a digital form
of cash. It's one of these central bank digital currencies
or CDCs that a lot of jurisdictions have been looking at.
Speaker 7 (13:26):
You.
Speaker 10 (13:26):
You'd hold it in a digital wallet like you may
do with a cryptocurrency, and we come with a lot
of the benefits people see with cryptocurrencies. But crucially this
is issued by the center bank, so it's the safer,
more stabled digital currency, fully backed by the state. So
it comes with you know, those exciting potential benefits for
fast achieve of payments lots of course of like smart
(13:48):
contracts and micropayments, but without that that danger and that
instability that we see in the cryptocurrency market.
Speaker 3 (13:56):
So why are they now doubting the project?
Speaker 10 (14:01):
So there's there's a few problems. It seems particularly plasly
difficult in the UK. You know, this project has come
under attack from rulemakers here in both House Commons and
the Lords. They struggled to see a need for it.
There are major doubts among the public. Pollings showed that,
and then the banks will worry about it because it
(14:21):
causes a bit of a financial stability. So imagine we're
in a crisis. In to the financial crisis, it said,
rather than running down to the bank and with drawing
your deposits, you put it in a digital pound that
is fully backed by the state. So that there's that worry.
But probably the most crucial factor is that payments innovations
are advancing in the private sector and rather interested in
(14:44):
working paper out by the Bank late last year suggested
that the benefits from the CBC have diminished considerably in
recent years, but because of those advances, So it's a big, costly,
controversial stability risks and so maybe that there's not really
a need for anymore.
Speaker 2 (15:05):
That's interesting that the digital banking services have diminished that need.
I mean, does it actually mean that the digital pound
idea is dead?
Speaker 3 (15:15):
Not necessarily.
Speaker 10 (15:16):
I mean, first of all, it's a joint decision for
the BWI and UK Treasury to make, but it's pretty
crucial that Central Bank is worried about it. And you know,
we're seeing globally this sort of shift away from CBDCs,
especially since the Trump administration came back into power. The
most importantly is the rise of stable coins. You know,
(15:39):
if we see those really mergers as a proper payment
method for consumers, and let's say, you know, a US
dollar stable coin becomes like a major payment method for
UK consumers, then I think we will see the UK
probably do at CBC. You know, we've heard Andrew Bailey,
the governor, warn about this risk. You know, he says
it could undermine the public's trust in money. In that scenario,
(16:03):
I think they probably will have to push your head.
But for now, I think it's just going to put
it on the shelf ready just in case of that
risk and wait and see. Maybe hope it doesn't have
to use it, but there is always that risk that
it needs to to kind of pull it out the locker.
So it's wait and see. But they're definitely more skeptical
(16:24):
than they were a few years ago when they said
they thought it was likely that it was needed. You know,
we have seen this made shift in turn.
Speaker 3 (16:33):
This is Bloomberg Daybreak Europe. You're a morning brief on
the stories making news from London to Wall Street and beyond.
Speaker 2 (16:39):
Look for us on your podcast feed every morning on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 3 (16:45):
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Speaker 2 (16:51):
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Speaker 3 (16:58):
I'm Caroline Hepka and I'm Stephen Carol. Join us again
tomorrow morning for all the news you need to start
your day right here on Bloomberg Daybreak Europe.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
This is the Bloomberg Day BAQ podcast. Good morning, It's Tuesday,
the twenty second of July. I'm Caroline Hepkeat in London.
Speaker 3 (00:16):
And I'm Stephen Carolin Brussels. Coming up today, stock market
investors shrug off trade uncertainty as the S and P
five hundred closes above six three hundred points for the
first time.
Speaker 2 (00:28):
Capital gains vanish into black holes in the latest etf
tax trick.
Speaker 4 (00:34):
We have an exclusive report.
Speaker 3 (00:36):
Plus not such a sterling idea. The Bank of England
goes cold on the concept of a digital pound.
Speaker 4 (00:42):
Let's start with a roundup of our top stories.
Speaker 3 (00:46):
Global equity markets are continuing to defy persistent trade and
geopolitical tensions as the S and P five hundred index
closes at yet another record high. Stocks have surged since
their slump in April as some of the world's largest
asset managers lean more heavily into the rally. Wells Fargo's
top us equity strategist, Christopher Harvey says he expects the
(01:06):
SMP five hundred to deliver another double digit increase in
the second half of the year.
Speaker 5 (01:11):
What we're seeing is the winners continue to win. The
ubercap companies have the higher margins are gaining more market share.
There is a real secular trade in AI that will continue.
I was here during the nineties. This is not a
fair comparison. It is much stronger and the fundamentals are
much better than today than they were back then.
Speaker 3 (01:30):
Harvey is the most buller strategies tracked by Bloomberg Forecasting
the SMP five hundred will climb above seven thousand points
by the end of the year. It closed yesterday at
just over six three hundred. The market wager is that
while President Donald Trump is threatening to disrupt the economic
order once again, he will ultimately step back from the brink.
While second quarter earning season is off to a strong start,
(01:51):
the rally faces a key test this week as major
companies such as Tesla and Alphabet have yet to report well.
Speaker 2 (01:58):
Corporate profit Full casting faster in Europe the Middle Eastern
Africa than they are in Asia or Latin America. According
to the latest data compiled by Bloomberg, stocks that in
the region have posted their biggest year to date rally
since two thousand and nine, and analysts are stepping up
the average twelve month earnings projections for companies in the
(02:19):
MSCI em EMEA index. Despite the ongoing threat of US tariffs,
investors have been drawn to the emir region by factors
including economic reforms in Nigeria and Morocco, peace hopes in Ukraine,
and gold's boost to South African miners.
Speaker 3 (02:39):
Astraseneca is to invest fifty billion dollars in the United
States before twenty thirty, becoming the latest European farmer company
to ratchet up spending ahead of potential tariffs on imported medicines.
Bloombergs Uwan Paths has more drug giants.
Speaker 6 (02:53):
Astraseneka frequently tops the list of the most valuable companies
on the London Stock Exchange. Now, the Cambridge based company
says it's to invest fifty billion dollars in manufacturing as
well as research and development in the United States. Kevin
has It, director of the US National Economic Council, says
that after the investment, substantially all of Astra's products sold
in the United States will be produced in the United States.
(03:15):
It comes just six months after the company abandoned plans
to build a new vaccine plant in Liverpool. In London,
I'm you in pots of Boomberg Radio.
Speaker 2 (03:23):
Now, US Treasury Secretary Scott Besson says that there should
be a review of the decision to renovate parts of
the Federal Reserve's headquarters in Washington. In a social media post,
The Best Sense said the Central Banks should conduct quote
an exhaustive internal review of its non monetary policy operations. Meantime,
Florida Republican Congresswoman Anna Paulina Luhner has asked the Justice
(03:47):
Department to consider investigating Chaired your Own Powell for allegedly
lying under oath. She claims Powell made false statements about
the Fed's restoration project. Bloomberg's Michael McKee has and the holds.
Speaker 7 (04:02):
Almost no weight in any other administration. You dismissed it
as a publicity st But of course under this administration,
it's hard to know what the Justice Department will actually
do since they served more as the president's lawyers. But
there is little evidence of any kind of crime here.
Speaker 2 (04:20):
Bloomberg's Michael McKee speaking there As Powell continues to face
criticism from President Trump for the Fird's decision to hold
interest rates steady.
Speaker 3 (04:29):
The UK's Foreign secretary has described an Israeli aid scheme
in Gaza as grotesque as he repeated calls for an
immediate ceasefire. David Lammy yesterday joined twenty seven foreign ministers
and signing a joint statement calling for the release of
all hostages and the resumption of aid deliveries. The Hamas
run government claims that almost one thousand Palestinians have been
(04:50):
killed while waiting for aid under a US backed distribution,
which Lammy says is inhumane.
Speaker 8 (04:57):
It forces desperate civilians, children among them, to scramble unsafely
for the essentials of life. It's a grotesque spectacle reckon
a terrible human cost.
Speaker 3 (05:09):
David Lammie was speaking as Israel has disputed these circumstances
and figures for those killed while waiting for aid. Israel
also says a letter signed by the UK's Foreign Secretary
and others is disconnected from reality and sends the wrong
message to Hamas.
Speaker 2 (05:23):
Microsoft is rushing to stop hackers wreaking global havoc after
they exploited a floor in the firm's software over the weekend.
Microsoft release. They fixed for the vulnerability in servers of
the share Point document management software, but say that they're
still working to repair other parts of the system. The
(05:44):
floor was reportedly used to break into the file systems
of national government in Europe, the Middle East and the US,
according to cybersecurity researchers.
Speaker 3 (05:54):
When in the UK they're in Labor Party and Reform
UK are separately considering increasing the return hirement age. The
news comes as Working Pension Secretary Liz Candle announced yesterday
the next statutory review into the age when government pensions
kick in, currently set at sixty six. According to Candle,
the system is in need of immediate change.
Speaker 9 (06:14):
Unless we act, tomorrow's pensioners will be poorer than today's
because people who are saving aren't saving enough for their retirement,
and crucially because almost half of the working age population
isn't saving anything for their retirement at all.
Speaker 3 (06:31):
The government's lives. Candle delivering a speech there in London.
While the Government's required to review the state pension every
six years, the last one was in twenty twenty three,
making this announcement three years early. At a separate event
for former UK's Nigel Faraj said he thought the state
pension age would have to rise.
Speaker 2 (06:49):
And those are our top stories for you this morning.
So let's have a look at the markets This morning,
US stocks closed at a new high, although only inched
up by tenth of one percent yesterday's stop futures for
the US in the red Ustox fifty futures also dipping,
now four tenths of one percent. The dollar is a
bit firmer after Monday's sell off. Japanese stocks are down there,
(07:10):
back to trading after the holiday on Monday. At thirty
a jgbs now trading at three spots zero one percent,
up nearly three basis points. Are they vulnerable to more selling?
The yield curve has steepened, And of course we can't
forget that there are lots of earnings out this week,
including from big US megacap stocks. But we begin with
general motors earnings today well.
Speaker 3 (07:31):
In a moment, as those stock markets in the US
continue to rise to record highs, we have an exclusive
report on the ETF tax trick being used to help
rich investors minimize their tax bills in the US, plus
the Bank of England going cold on a digital pound.
But first, another story we've been reading this morning from
our food editor, Cake Crad about how it's not just
US amateurs and by us I mean me who are
(07:53):
getting cooking tips from YouTube. Top level chefs are doing
a two. So it's fine. It's fine to learn how
to cook on the internet.
Speaker 4 (07:59):
Yeah it's not.
Speaker 3 (08:00):
You're talking about James Lowe in particular, the chef who
was of very recently at Lyle's in shortage would close
down who learned how to prepare a bluefin tuna for
watching Japanese fish experts on YouTube? Is this the next
generation of cooking shows on TV?
Speaker 2 (08:15):
It certainly is, as long as you have got the skills.
I mean, I've got experience of this also, but mainly
of the kind of cautionary tale variety. Yet you remember this.
I mean it's only a couple of years ago and
one of my kids, very into baking, we tried to
replicate a five minute YouTube video of an extravagant.
Speaker 3 (08:35):
Cake seven hours or something like that. Yeah, this is
the problem. Two days of the weekend, I end up
watching the entire video about fifteen times over to try
and figure out all the parts in between that I've
missed essentially, So, I mean, the TikTok first of this
is like the hyperdriversion of it. But good to know
that even those at the very top of their profession
are also using these online platforms to ope their skills.
(08:57):
You can read Cake Creator's piece on Bloomberg. Calm will
put a link to it in our show notes.
Speaker 2 (09:02):
Now, after a decade where the S and p f
I found that index has tripled and more investors are
making bullish calls for this year too. Wealthy investors are
also looking for ways to lower their capital gains tax bills.
Speaker 4 (09:17):
In the United States.
Speaker 2 (09:18):
That has led to a rise in a creative tactic,
including one using ETFs that is the subject of today's
Bloomberg Big Take Report, and our cross Asset Markets reporter
Justina Lee joins us now for more on this. So,
just before we get into those details, let's start with
the kind of bullish sentiment that we're seeing in markets.
(09:39):
Investors do seem to be less worried about Donald Trump's
trade policies right now that that is going to dent
their stock market gains seems quite a positive backdrop.
Speaker 4 (09:51):
Yeah, that's right.
Speaker 1 (09:51):
I mean, I think it really goes back to you know,
the Trump always chickens out acronym Taco, and I think
so part of it is that people just don't think
that we're going to get the worst of his TERRORFF policies.
I think that's one factor. Another is there is still
quite a lot of optimism that we're going to get
(10:13):
those FED rate cuts. So I think those combined together,
and also the fact that the US economy still seems
to be doing pretty well, I think that's kind of
keeping the US economy of the US dock market kind
of near recordized.
Speaker 3 (10:26):
So a lot of people out there making a lot
of money. Justina, but you've been reporting on this particular
tax trick to do with ETFs. Talk to us how
does it work?
Speaker 1 (10:37):
So the thing to remember about ETFs in the US
is that even when they trade, and even when they
sell a position that's made a lot of money, they
don't usually have to pay any capital gains tax on it.
And the reason is that because of the way ETFs
are created and redeemed, they don't actually sell their positions
(10:59):
for cash, and so when they have a position that
has made a lot of money they want to offload,
usually they just kind of trade it in kind with
a market maker, and because of this, they don't incur
a capital gains tax bill. And it's really just this
loophole that was kind of created before ETFs even became
(11:19):
a thing, and then it's kind of become standard practice,
and it's a big reason why we've seen a lot
of mutual funds converted into ETFs. And in the case
of kind of my story today, I kind of talk
about these ETFs that are created from kind of seed,
it from appreciated securities, so that basically you see the
(11:40):
ETF with these positions that have already made money, and
once they become an ETFs, you can trade out of
them without paying.
Speaker 2 (11:47):
Text okay, and these are known as three five one conversions.
Speaker 4 (11:53):
How popular are they.
Speaker 1 (11:54):
Then, Yeah, so that's pretty hard to tell because they're
not laid in any way. Usually you kind of have
to do a bit of guest work, as I kind
of had to for this story, because obviously one telltale
sign is that they start trading with a lot of
assets because they're already seated with these securities. But there
are signs that they're becoming more popular.
Speaker 10 (12:17):
You know.
Speaker 1 (12:17):
For instance, I speak to this lawyer that says that
he has worked too close to one hundred of these
and this is only in the last few years, and
we kind of see from some more obvious examples that
you know, it feels like there are more and more.
Like I speak to one issuer kind of culled Cambria
and they've done two and they're doing two more this year.
Speaker 3 (12:39):
Okay, an interesting one to watch, Justina Lee, thank you
for very much for bringing us details of your reporter
our cross asset market supporter.
Speaker 8 (12:45):
There.
Speaker 2 (12:47):
Bank of England officials are considering whether to set aside
plans to create a digital pound for households amid growing
skepticism over the project's benefits. It's the latest sign of
dwindling support for tax back to digital currencies globally, and
our UK Economy reporter Tom Reese joins us now for
Speaker 4 (13:08):
Tom good Morning.
Speaker 2 (13:09):
Remind us what is the digital pound and why was
the Bank of England actually working on it?
Speaker 10 (13:15):
So a digital pound would be like a digital form
of cash. It's one of these central bank digital currencies
or CDCs that a lot of jurisdictions have been looking at.
Speaker 7 (13:26):
You.
Speaker 10 (13:26):
You'd hold it in a digital wallet like you may
do with a cryptocurrency, and we come with a lot
of the benefits people see with cryptocurrencies. But crucially this
is issued by the center bank, so it's the safer,
more stabled digital currency, fully backed by the state. So
it comes with you know, those exciting potential benefits for
fast achieve of payments lots of course of like smart
(13:48):
contracts and micropayments, but without that that danger and that
instability that we see in the cryptocurrency market.
Speaker 3 (13:56):
So why are they now doubting the project?
Speaker 10 (14:01):
So there's there's a few problems. It seems particularly plasly
difficult in the UK. You know, this project has come
under attack from rulemakers here in both House Commons and
the Lords. They struggled to see a need for it.
There are major doubts among the public. Pollings showed that,
and then the banks will worry about it because it
(14:21):
causes a bit of a financial stability. So imagine we're
in a crisis. In to the financial crisis, it said,
rather than running down to the bank and with drawing
your deposits, you put it in a digital pound that
is fully backed by the state. So that there's that worry.
But probably the most crucial factor is that payments innovations
are advancing in the private sector and rather interested in
(14:44):
working paper out by the Bank late last year suggested
that the benefits from the CBC have diminished considerably in
recent years, but because of those advances, So it's a big, costly,
controversial stability risks and so maybe that there's not really
a need for anymore.
Speaker 2 (15:05):
That's interesting that the digital banking services have diminished that need.
I mean, does it actually mean that the digital pound
idea is dead?
Speaker 3 (15:15):
Not necessarily.
Speaker 10 (15:16):
I mean, first of all, it's a joint decision for
the BWI and UK Treasury to make, but it's pretty
crucial that Central Bank is worried about it. And you know,
we're seeing globally this sort of shift away from CBDCs,
especially since the Trump administration came back into power. The
most importantly is the rise of stable coins. You know,
(15:39):
if we see those really mergers as a proper payment
method for consumers, and let's say, you know, a US
dollar stable coin becomes like a major payment method for
UK consumers, then I think we will see the UK
probably do at CBC. You know, we've heard Andrew Bailey,
the governor, warn about this risk. You know, he says
it could undermine the public's trust in money. In that scenario,
(16:03):
I think they probably will have to push your head.
But for now, I think it's just going to put
it on the shelf ready just in case of that
risk and wait and see. Maybe hope it doesn't have
to use it, but there is always that risk that
it needs to to kind of pull it out the locker.
So it's wait and see. But they're definitely more skeptical
(16:24):
than they were a few years ago when they said
they thought it was likely that it was needed. You know,
we have seen this made shift in turn.
Speaker 3 (16:33):
This is Bloomberg Daybreak Europe. You're a morning brief on
the stories making news from London to Wall Street and beyond.
Speaker 2 (16:39):
Look for us on your podcast feed every morning on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 3 (16:45):
You can also listen live each morning on London Dab Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 2 (16:51):
Our flagship New York station is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
Speaker 3 (16:58):
I'm Caroline Hepka and I'm Stephen Carol. Join us again
tomorrow morning for all the news you need to start
your day right here on Bloomberg Daybreak Europe.
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