July 9, 2024 • 38 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg News Economics Editor Molly Smith and Bloomberg Intelligence Chief US Interest Rate Strategist Ira Jersey recap Fed Chair Jay Powell’s Senate testimony on Tuesday. Powell said “more good data” would strengthen confidence that inflation is moving down toward the US central bank’s 2% target, and recent readings point to “modest further progress” on prices. Bloomberg News Personal Finance Reporter Suzanne Woolley shares the details of her Businessweek story Why High Rates Have Failed to Dent Record Stock and House Prices. Bloomberg News Hedge Fund Reporter Hema Parmar discusses investor Bobby Jain launching a complex hedge fund that has spawned fans as well as doubters. Serial Entrepreneur Laura Gassner Otting talks about women leaving the US workforce. And we Drive to the Close with Louis Navellier, Founder and CIO at Navellier & Associates.
Hosts: Jess Menton and David Gura. Producer: Paul Brennan.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business
Wait inside from the reporters and editors who bring you
America's most trusted business magazine, plus global business, finance and
tech news. The Bloomberg Business Week Podcast with Carol Messer
(00:23):
and Tim Stenebeck from Bloomberg Radio, Chess Manton and.
Speaker 2 (00:28):
David Gera Here in the Bloomberg Interactive Broker Studio. We
were just speaking about how fetcher Jerome pal did say
more good inflation data would still need to boost the
Fed's confidence. But of course we will get another update
on CPI David here on Thursday. So traders looking at that,
and I wrote a story earlier today looking at sort
of the options market what they were pricing in at
(00:48):
the JP Morgan Trading dest sing a potential move here
of about nine tenths of a percent. So that actually
would be the biggest in about a month, because just
a month ago we had CPI and the FED decision
on the same day. But that is in line with
the last three CPI prints. But we have two really
great guests coming up to speak with us on this,
so we'll also have Moly Smith, who's on our Economics Desk,
but also Ira Jersey, who's Bloomberg Intelligence Headquarters in New Jersey.
(01:13):
Get's going to speak with us, but first we're going
to get a clip here hearing a little bit more
of what Fed Chair Jerome pal had to say. So
listen more of what he had to say about inflation
as well as the path of interest rates.
Speaker 3 (01:23):
The most recent inflation readings, however, have shown some modest
further progress and more good data would strengthen our confidence
that inflation is moving sustainably toward two percent. We continue
to make decisions meeting by meeting. We know that reducing
policy restraint too soon or too much could stall or
even reverse the progress that we've seen on inflation.
Speaker 2 (01:45):
All right, So that was obviously FED Chair Jerome Pale
on Capitol Hill, who will be speaking tomorrow as well
in front of the House. So I want to bring
in Ira Jersey, who here works at Bloomberg News, who's
our US interest rates strategiest and he's based actually at
the Blue Intelligence headquarters in New Jersey, as well as
Wally Smith, who is one of our top editors here
(02:06):
for the economics desk. I'll start with you, Molly to
kind of get a recap here of what people were
expecting fed share pal to say versus what we ended
up getting here.
Speaker 4 (02:15):
Yeah, very two, very different things. I think people were
obviously hoping to get a bit more about the timing
of when we might be seeing some interest rate cuts,
and Powell on two occasions said he will not be
offering any signals on the timing of interest rate cuts,
which I said to the chat, I guess we can
all go home, because it seems like that's really what
we were all here for. And he then said again
when another lawmaker had pressed him on the topic, had
(02:38):
also said, yeah, I'm not really going to get into
that today. So a bit of a bummer. So we're
all still here sitting Okay, maybe one maybe two?
Speaker 5 (02:46):
Right TVD TVD Jersey. Let me turn to you. That's
the editor's perspective. Let me get the market market strategy
perspective on this is. But what were you listening for
and what did you hear from the fed share today?
Speaker 6 (02:57):
Well, first, let me say that Laurie does a great
job with the tea live chat. So if you're you know,
if you can't listen to radio or watch TV and
you have a.
Speaker 5 (03:04):
More live Yeah, for sure.
Speaker 6 (03:07):
I participate for example, and try to give my insights
onto the rates market on those blogs as well. So
the I think from j Powell, like like Laurie said,
he said even in his prepared remarks that they were
going meeting to meeting, he tried to say, where's data
dependent as we can possibly be, and he reiterated that.
So he didn't say anything broadly new in terms of
(03:28):
the monetary policy perspective, but the fact that he reiterated
basically what was said at in the June meeting minutes
which were released last Wednesday when the market, when the
bond market was closed, at least, I think was just
telling in and of itself, because you know, it's pretty
clear that they're trying to say, like, look, it might
be September, it might be November, it might be December,
but we're going to cut. The one thing that he
(03:50):
did say that I think was important was he did
reiterate that he didn't think that the next move as
a hike was likely. And that's something that remember, just
two months go, we were pricing for almost a twenty
percent probability of a hike. That's almost being completely priced
out of the market.
Speaker 2 (04:06):
Now, well, Molly, I want to bring you back into
the conversation because David and I had mentioned we will
get another update on CPI on Thursday. What are the
expectations here from economists?
Speaker 4 (04:16):
Yeah, so probably going to get something that's a bit
more of a maybe inflation still gradually coming down, if anything,
maybe moving still a little bit sideways in this range
that it's been in. You know we've seen which you know,
Power alluded to today, the big moves in inflation have
really are past us, which you know is to be
expected at this point, there's less progress to be made
(04:37):
and it's going to be coming in you know, smaller
chunks with each report that we get. So there was
definitely a lot of questions on housing inflation today and
that there's you know, the best thing that Howell said
that the Fed can do for the housing market is
to get inflation back to two percent, so that that
will hopefully then bring you know, treasury yields and interest
rates back down and then make you know, mortgage rates
(04:59):
also more affordable. So that's really yeah, to be expected
from him. You know that they can't really control of course,
that the US has a persistent structural shortage of housing,
and that's what when he was saying, well, this is
you on lawmakers to try to you know, that's more
your job and that's not something that.
Speaker 7 (05:14):
We can do.
Speaker 5 (05:15):
And we're going to get into that a little bit
later in the show. But Molly, let me ask you
about the crucible in which this is happening. So this
is before the Senate Banking Committee. You had a pretty
forceful statement from the chair of that committee from Shared Brown,
basically saying to the FED chair, stop raising rate stops
bring rates down, that this is having a really deleterious
effect on the American consumer, on those who want to
buy houses. And there's also this kind of moment of
(05:37):
emphasis on the chair's part about the independence of the
Federal Reserve. As we see this kind of swirl of
politics surrounding what might happen if Donald Trump were to
be elected again, How did he deal with that sort
of how did the setting of this kind of color
your sense of what the FED chair had to say.
Speaker 4 (05:50):
Well, it seems like at least Powell and pretty much
everyone on the Senate Banking Committee agrees that the FED
is and should remain an independent institution, and that there
was pretty unanimous support on that front, and you know,
without of course addressing the elephant in the room that
if Donald Trump were an elected president, that that's something
that he's kind of looking to attack, right that he
you know, wants to be a bit more involved somehow
(06:12):
in how the FED sets monetary policy, and perhaps ousting
Powell this was someone who he appointed. So yeah, clearly
that there's a bit of you know, there's certainly a
backdrop to all that, and I think he handled it
pretty delicately and just stressing you know, the Fed's credibility
really relies on its independence.
Speaker 2 (06:29):
Hey, I want to bring you back into the conversation.
What are you seeing when we're talking about, say, speculative
net positioning, when you're looking at the bond market, and
what that tells us about where traders are betting, where
rates could be headed in the second half of this year.
Speaker 6 (06:42):
Well, a lot of the spec positioning right now is
really basis trade. So it's people trading futures versus cash.
There's a little tiny bit of money to be made,
So in order to be to make that money, though,
you have to lever yourself a lot. So that's one
reason why you have such large shorts and some of
the some of the contracts. I want I go back
to something that Molly said just a second ago, and
(07:03):
you know that's about what J Powell and the FED
independence argument, because you know, from a market perspective, I
think that if the FED were will lose a significant
amount of its independence, then you'd wind up in a
situation where the bond market would probably sell off quite
a bit and certainly get a much much steeper yield
curve because it'd be worries that the FED would keep
(07:25):
interest rates too low for too long in a future
environment where you get more inflation. So I think that
there is a risk there that something like that happens.
And of course, you know, way back when when J.
Powell was first appointed, I was actually surprised that Donald
Trump appointed him because he appointed a mainstream kind of
thinker from the from from the FED border governors instead
(07:45):
of someone more duvish. So you know, Donald Trump will
still have the opportunity to appoint Aduvish FED chair. He'll
just have to wait, you know, eleven months to do that.
And because that person won't take office till the beginning
of twenty twenty six.
Speaker 5 (07:58):
Molly, we've talked a lot about inflation, is of course
what we're all supposed to be talking about this part
in the time, but we did get a little color
from the FED chair on the labor market as well,
And I wonder what stood out to you from from
his comments. Of course, we have the rate now at
four point one percent, but what did he say just
sort of about his perspective, I guess the Fed's perspective
on how healthy the jobs market is now?
Speaker 4 (08:15):
Yeah, I think you know, this is now starting to
look a lot more like the jobs market that we
had before the pandemic, which was a very healthy jobs market.
And that Powell said something today that he hasn't really
said yet but has probably been true for a while,
that the labor market is no longer inflationary, and that
that's something that you know, one economist I noticed that
he had sent around to his distribution list that this
(08:35):
has been the case for a while. But it's nice
to see Powell finally acknowledging this because there has been
so much concern about, you know, all these job openings
and perhaps if that's propelling wages higher, or you know,
what kind of inflationary environment that might get us into
but he seemed to be, you know, a bit more
comfortable with where the labor market is in relation to inflation,
but certainly that you know, any like he's been saying,
(08:58):
any unexpected weakening in the labor market could force the
Fed to act a bit more aggressively.
Speaker 5 (09:03):
Molly, great to speak with you. Thank you very much.
That's Molly Smith from our ECON team. Our thanks to
Ira Jersey as well, chief US interest rate strategist to
Bloomberg Intelligence, joining us from Bloomberg Intelligence headquarters just a
bit south of here in New Jersey. And I know
we want to get into some of what you're talking about, right,
a knock on effect of this kind of very strange
economic environment.
Speaker 2 (09:20):
That's right, and especially because why high rates have failed
to dent record stock prices right now as well as
home price is too. So who better to bring in
than Bloomberg's own personal finance reporter, Suzanne Wooley, who's here
in the Bloomberg Interactive Brokers studio. Thanks so much for
joining us this afternoon. And it's interesting because you wrote
about how more people in the market right now, especially
(09:43):
when you're thinking about stocks and what's happening with housing
prices staying relatively high here, but it's still a confusing
world of finance. And this is also you wrote for
her latest Bloomberg Business Week story here, So walk us
through this sort of dynamic, especially coming out of the pandemic,
and how unique this is compared to history.
Speaker 8 (10:00):
Well, for most of us, we went through such a
long period of really reads near zero, you know, back
in twenty twenty it's early as twenty twenty two though,
they were at zero point zero eight percent. Now this
is the federal funds, right that I'm talking about. Now
it's around five point three percent, so very abrupt ramp up.
You know, they're like eleven fed hikes and something like
a sixteen month period, right.
Speaker 7 (10:20):
So came on big.
Speaker 8 (10:22):
And normally the script would be that we would expect
the stock market to take a hit, and you know,
housing with mortgage rates now at seven percent, in twenty
twenty one they were like around three percent, you expect
that to take a hit. Hasn't happened, obviously, you know.
And a big reason with the stock market is of course, AI,
right is just like powered over everything, and you know
(10:44):
when you look at the SMP and Vidia, it contributed
by thirty percent of the index is gained to date.
You know, Microsoft contributed another ten percent. So AI is
just sending it, you know, a market cap index flying.
Speaker 2 (11:01):
And even things beyond traditional tech and gross stocks. If
you look at utilities with people think it's more kind
of steady diven in low volatility. But if you have
the particular sub industry groups within it that are related
to data center businesses, those have taken off at certain
points this year two exactly.
Speaker 8 (11:17):
It's like an AI is, you know, an energy play.
It's such a huge energy guzzler, you know, so those
things have propped it up and underneath when you look
under the hood at the SMP. I was just listening
to Goldman Sachs's mid year investment outlook and one of
their experts was talking about, how, you know, the average
gain and the stock for the SMP for the year
is like three percent, you know, so beneath the breadth
(11:38):
as we know is just so narrow. In the mag
seven or mag whatever they are now six ' five.
Speaker 2 (11:44):
Right, we've gone from a lot of.
Speaker 5 (11:48):
I want to ask you about the kind of consumer
psychology aspect of this. There's such a great line in
your piece about how for most people into the age
of thirty five, they never had to live in a
world where rates are what they are. You talk about
what we've become a custom them to. How have you
found as you talk to people reporting out this piece,
what council have they given people who might long for
those lower rates not even not even know that they
(12:09):
used to be as high as they are in higher
see right.
Speaker 8 (12:11):
Well, I mean some people are saying, listen, you know
these rates are really not that unusual when you look
over the long scheme of things, so you know they
people are thinking that rates I mean a lot of
people think rates will go down now with people are
saying that the Fed maybe we'll get one cut in
September and such. But you really have to sort of
(12:32):
rethink some of your basics. There are a lot of
people who have gotten into buy now, pay later loans.
Speaker 5 (12:39):
Which we know so little about still exactly.
Speaker 7 (12:42):
It's sort of a black box in a way.
Speaker 8 (12:44):
And we had a poll on a Harris poll don
back in April that showed that forty three percent of
people in those loans were behind in their payments. And
you know, that's an area where they're going to feel
a lot of interest rate pressure, but also just in
buying a home you have to sort of think through
it a bit differently because if you want to get
(13:07):
a seven percent mortgage rate, you know, and rates don't
go down that much, you really can't. I mean, it's
not why is to take a flyer and.
Speaker 7 (13:19):
Just think, oh, yeah, you're down the road, I'll be
down to whatever.
Speaker 9 (13:22):
You know.
Speaker 5 (13:23):
Do we see people taking more flexible rates or are
trying different? Are they just wedded to the notion that
it's going to be high or where it is?
Speaker 8 (13:29):
For there are little pockets that are starting to pop up,
Like there's something called it's a little complicated, but it's
an assumable mortgage, and it's when you can actually assume
the seller's mortgage at their rate. Interesting, you know, at
their you know, it's it's complicated to do. But more
startups are popping up to create a sort of a
(13:51):
more organized market for these assumable mortgages because it's so appealing.
If you could just inherit someone's three percent mortgage, that
would be great. It's very expensive because you have to
sort of pay the premium on their home and you
have to pay off the equity that's in their mortgage, so.
Speaker 5 (14:05):
You need a lot of fun money for that.
Speaker 7 (14:07):
Yeah, it's not an appealing option for most people.
Speaker 2 (14:11):
Well, we only have about forty five seconds left. But
what do you think are the biggest takeaways for people
to take from your story? As well as how long
this dynamic can continue, which obviously a million dollar questions.
Speaker 8 (14:22):
I think a lot of people that I spoke with,
more of the financial planner types, were just giving some
good solid advice about diversification and if you're sitting on
some really big equity gains, and now, particularly in tech,
they've been telling some of their clients, you know, maybe
do a little profit taking, just make sure you're diversified
because there's just so much talk right now about it
(14:44):
expecting greater volatility, how long this lasts, which we've been
hearing forever, But they're just kind of telling people to
remember if they need to rebalance now, they can get
five percent on a bot.
Speaker 2 (14:55):
Right. Well, that was Sulisane really personal finance reporter at
Bloomberg News on why hireing have failed to dent record
stock prices and housing prices here, thanks so much for
joining us. Well more coming up, this is Bloomberg.
Speaker 1 (15:09):
You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2 (15:23):
And another really interesting story, David, that is in the
terminal that we've been reading here is about looking at
Bobby Jane's complex hedge fund debut and how it's spawning
fans as well as doubters to Who better to come
in than the author of the story, Ahemma Palmer, who's
here at one of our hedge fund reporters at Bloomberg
News in New York in studio with us. So walk
(15:46):
us through your story here about Bobby Jane's fund. What
makes it so complex such that it is unprecedented?
Speaker 10 (15:53):
Yes, So what he's trying to do here is launch
a fully formed multi strategy hedge fund. Means is going
to trade six strategies on day one when it launched
July first trade all of those strategies, have the teams
built out, have everyone hired in the right seats, all
the operational back and operational infrastructure and back office teams.
(16:14):
It's a pretty big undertaking. It's never been done before. Typically,
hedge funds start out small with one or two strategies,
and then they add on more over time. What he's
doing here is birthing a fully formed multi shrat heedge fund.
Speaker 5 (16:27):
Why is he going this route? So you describe the
complications of doing that. He has been ambitious about what
he hoped to raise, raised a little less than I
think what he wanted to the very beginning here. But
I think of a hedge fund starting in this environment
in particular, how complicated that must be, how difficult it
must be the line of the talent, of the technology
infrastructure to do all of this.
Speaker 10 (16:44):
Absolutely, it's very challenging in this fundraising environment too. His
thinking is that it's more efficient when you start a
firm of the size doing these many different types of things.
If you build the infrastructure from the ground up ready
for all the different parts, then you're less likely to
have duplicate costs, duplicate talent. It's going to be more efficient.
Every system will have everything it needs in order to
(17:07):
get going, and you don't need to add on things
later and then double over on expenses and everything. He
also was trying to build a system where even if
in the future, he adds more talent and has more
money to invest that the cost of operating the business
don't scale proportionally to that.
Speaker 11 (17:24):
Talk to us more.
Speaker 2 (17:24):
About the asset raising environment right now. In some of
the top challenges, it's really tough out there to be
raising money.
Speaker 10 (17:32):
So five point three is a good amount of change
to be starting a hedge fund with it. It's the
second biggest launch that we've seen in years, is the
biggest launch we've seen this year. But the environment is
tricky for a few reasons. Firstly, investors are not getting
as much money back from private equity from distributions as
they have been in the past, and so that limits
(17:53):
how much money they have to put to work, though
also a lot more cautious about every dollar they want
to put to work. You have an option, You have
optionality between the hot private credit markets or a multishat fund,
and they've been so somewhat underperforming recently. You're seeing a
lot of questions over should we even invest in hedge
(18:14):
funds or do we put it someplace else? With each dollar?
Do we want to take the day one risk in
investing in a brand new manager and a new fund
versus a tried and true option. So LP's a weighing
all of these things, and every dollar is harder to
get these days than it has been in some time.
Speaker 5 (18:29):
The piece opens with a meal a pitch at the
seafood restaurant at the Breakers in South Florida. Bobby Jaen
making this overture to a Middle East sovereign wealth fund
I believe ultimately ponies up. I think about close to
a billion dollars to the fund. How has he made
that pitch? How is he trying to convince investors, yes,
that this model that you've described as being kind of
(18:50):
un orthodox is likely to work, and be that this
is the moment to do it. That you know, don't
bide your time, don't watch all of this unfold, get
in now, and this is likely to reapers here in
the next I guess twelve months to eighteen months exactly.
Speaker 10 (19:03):
So he has gotten Adia, which is the Abi Dhabi
Investment Authority, with a billion dollar ticket, other big name investors,
to a number of bank platforms. So you know, his
pitch is, yes, you get the ground. You know, day
one opportunity to invest in this fund. He's offered a
lot of concessions and.
Speaker 7 (19:19):
He's fees are cheaper. He's lowered fees.
Speaker 10 (19:21):
The bigger the tickets, the more the better fees you
get for investing. He offered promise them future capacity. So
if you want an investor any future optionality, if you
like what you see, you can get in later on
and that will be guaranteed. Some investors got co invest opportunities.
The liquidity of this fund means that you can get
your cash back in three years versus other other competitive
(19:45):
firms the more like five and there's a number of
other investor family terms. So you do see in this
environment needing to have more concessions make it worthwhile. And
I think even Bobby Jane understands that there's a day
one risk to doing this kind of thing and made
those these these perks advantageous for them.
Speaker 2 (20:03):
And you talked about obviously the concerns and the caution
that investors have. Clearly there's different issues when it comes
to lofty targets, But what are some of the underlying
problems in the root of where those concerns.
Speaker 10 (20:15):
Lie with investing in hedge funds? Right, Yes, so you
know people use hedge funds in their portfolios in a
few different ways. It could be to hedge against you know,
if the markets take a downturn, then maybe invest in
some of the multi strategy funds. Multi shrat funds aren't
typically aiming to always beat the market. They want to
be a steady return roughly a percent a month, tried
(20:37):
and reliable and true, and so that's sort of how
they would think about it. But if you want, you know,
really huge returns, so hedge funds are incredibly volatile where
you can see double digit gains one year and then
double digit losses the following year. So it really is
like strategy strategy dependent, fund dependent, liquidity dependent. As this
strategy has shifted to become a lot more illiquid. The
(21:02):
assets themselves are pretty liquid, but the structure of these
vehicles means it's harder to get your money back, and
it's become a lot more expensive to run these multi
strategy funds. There's been more caution when it comes to
this specific strategy fum investors because they're thinking, well, do
I want to be locked up for this long? And
what am I paying for? Because they're paying for the
talents and the compensation of these traders.
Speaker 5 (21:25):
Your world is one in which I think personality matters,
and you know, the head of these funds, you know,
can really shape the way that the business works. I
think Bobby Janis is close to a household name as
you can get. But what can you tell us about him?
And is he in the mold of his England or
is he somebody who has taken a lot of inspiration
from the time that he's spent at millennium Sor how
does he operate? How is he as a manager's or
(21:45):
what's his personality like as somebody who's ever seeing these
billions of dollars?
Speaker 10 (21:48):
Yes, so if you look at his tenure, he spent
more than twenty years at Credit Sweez. He spent about
six at Millennium, so really you know, experience that big
name repids. At Millennium, he was co cio, worked very
closely with Izzy Englander at Credit Sweets. He helped to
build out various businesses, So he's sort of known for
(22:09):
building businesses, working with teams, being sort of on that
higher up level versus being in the weeds unnecessarily a trade.
But he is has been described to us as being
more cerebral, more like a philosopher, thinks in matrices and
can jump between sort of the big picture idea and
(22:29):
in the weeds details. But we have also heard from
investors that he struggles to communicate some of his ideas
clearly and sucstence disinctly. What that's meant is some investors
have walked away from meetings feeling either frustrated that they
didn't really understand things, or walked away with ideas of
the firm that were not really what the firm is,
or unclear as to what Bobby's trying to build here.
Speaker 5 (22:52):
And Bobby trying to use that sort of seeing things
as a matrix to oversee what I think he describes
a smories board of options here at this fun just
a fascinating piece by Emma Parmer on the Bloomberg terminal,
Bobby Jane's complex hedge fund debut, sponds, fans and daughters.
I was just fascinated by, I guess the ambitions prisonly
of doing this and trying to do it on such
short short order.
Speaker 2 (23:11):
No, it's true, and then obviously the challenges that come
with it and the money they've been able to pull off,
but still the other issues they have to deal with.
Speaker 1 (23:19):
You're listening to the Bloomberg Business Week Podcast. Listen live
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Speaker 2 (23:38):
David, let's switch gears here and talk more about the
latest jobs report data as well as women leaving the
US workforce. We're going to bring in Laura Gasner, adding
a serial entrepreneur, a HR veteran who's joining us on
Zoom in New York City. Thanks so much, Laura for
making time for us now. We wanted to dig deeper
(23:58):
here when it comes to this libor market report. Obviously
we get them monthly, but dig deeper to us and
when it comes to the issues when it comes to
women leaving the workforce, especially coming out of the pandemic,
and how that's been exacerbated by that issue.
Speaker 11 (24:12):
I mean, I think that we saw during the pandemic
women were leaving the workforce in droves because obviously during
the pandemic, our kids were all home from school. Suddenly
we were dealing with our parents who were getting older,
some of them getting sick and women were the ones
who had to pick up all of the slack. We
saw women just absolutely leading the workforce in historic numbers,
but we're saying that that's still happening, and that's due
(24:33):
in large part because the gender pakeapp of course continues
as a lack of flexibility and control for women, especially
as they've become more senior, there's inadequate opportunities for advancement.
It's hard to integrate work in life, and of course
we're all looking for more purpose in our life right
now as well. So it's across so many different variables
that we're seeing it. And because women are getting paid
less than men at the same job, that gender pay
(24:55):
gapp does still exist. It just means that when it
comes time to choose who's going to lead the workforce,
it often ends up being the woman.
Speaker 5 (25:02):
I look just kind of the nature of the pandemic,
which was without precedent, and how little time relatively has
passed since then, and we do have this atmosphere now
and a lot of workplaces where there is more flexibility
baked in, able to work from home more. Do we
know sort of how that's affecting workplace dynamics or again,
given how little time has passed, are we still trying
to figure out what the sort of longer term effects
(25:24):
of that new, more novel flexibility is going to be
on workers in the workforce.
Speaker 11 (25:29):
Yeah, I think we're still trying to figure it out,
and I think a lot of it comes down to
the fact that, you know, the workers are using the
same tools that they used in the office. They're using ZOM,
they're using Sleck, they're using all of the same tools
that they're using when they're actually an office to work
from home. But the bosses, which tend to be predominantly morales,
still the maganity of people and meta physicians are still
Then those bosses have to be different tools, but they
(25:51):
can't just manage by walking around anymore. Becomes very different
for them to figure out how they're going to see
how people work now. I ran an executive search from
for fifteen year seventy two thousand and two to twenty seventeen,
fifteen years, and we were always virtual, like before it
was COVID cool. We were all virtual, and people used
to say to me like, Laura, do you how do
(26:12):
you judge the quality of being team's work? And I'll
just like are you waiting, are you sitting, or are
you listening? By the quality of my team's work. But
the problem is a lot of bosses, if you can't
see are people working, we wonder whether or not they're
actually working. And so you know, if you've got kids
at home again, you know how old is the story
of the man takes time off for work to go
(26:32):
to the kid's soccer game. Everyone goes, Oh, what a
good daddy is, And the woman takes time off to
go to the soccer game, and everyone's like, well, she
prioritizes her kids over the work. So if there's a
woman and she's in a flexible work arrangement and she's
got kids at home, of course we always fall to
that age old trope that it must be that she's
being a mom and not working. So I think that
bosses have to really change the way that they're thinking
(26:52):
about how they manage their people and really think about
what the metrics are but which they're managing the people.
So it's not just do I see them working, Okay,
they must be working.
Speaker 2 (27:02):
There was an interesting story in Forbes where they were
citing a survey about how sixty percent of you as
business executives said that their company will likely have to
have layoffs over the next few months in the second
half of this year, and that was based on resume
template survey. So if you are unexpectedly laid off, what
high income skills do you think people really need and
(27:23):
that will be crucial to move forward?
Speaker 11 (27:26):
Oh, I think that we all have to. I think relationships.
I think it all comes down to human caspital all
the time, all ways. So I could say AI, I
could talk about, you know, all the different types of
technology skills that we need. But at the end of
the day, I think, especially now that we're all working
remote and being able to figure out how to create relationships,
how'd be steward relationship to you decide what to ask for,
(27:47):
when to ask for how do you move that relationship forward?
Business moves at the speed of relationships all the time.
So making sure in this period of time where we're
working in this remote in this hybrid fashion, especially if
you're a young person, making sure that you are making
time to go into the office, getting to see people,
going out to talk through with people, making sure that
you are investing in that one on one relationship building
(28:09):
time because those are the skills that we're losing right now.
They're sort of leaching out of our civil discourse or
reaching out of the way that we work with each other.
And so to think somebody who's able to create those
high level, deep sticky relationships will be skills that will
help people absolutely forever and ever.
Speaker 2 (28:26):
All Right, Laura, thanks for sticking with us. That's Laura
Gasner adding so your entrepreneur and each R veteran who
is joining us on Zoom here in New York City.
And it's really fascinating, especially when you think of this
dynamic of the labor market still. You know, just at
the end of last year's unemployment was still there a
half century load, David, and not far off from that
still even though it's around four percent.
Speaker 5 (28:48):
And an interesting study I saw recently in the Harvard
Business Review just indicating that this really kind of plays
out differently among how senior you are within the workforce.
So as I was kind of getting too there, I
think there's a lot we still don't know yet just
about how this is all going to shake out. This
is Blimber Business Week on BLOEM Radio David Gerra with
Jess Manton and for Carol Mass and Tim Stanbek.
Speaker 2 (29:05):
M brother mack.
Speaker 9 (29:08):
A journal.
Speaker 10 (29:10):
How about you let me drive?
Speaker 4 (29:11):
Oh no, no, no, no's honey, please, I'll do the driving.
Speaker 1 (29:16):
Gravels eleas mate, I want to try it.
Speaker 3 (29:21):
It's good question time.
Speaker 1 (29:26):
This please the drive to the Globe dot Com thing
well round.
Speaker 2 (29:30):
On Bloomberg Radio Jessman and David Gera here in the
Bloomberg Interactive Brokers studio in of course for Carol and Tim,
who both have the day off. If you look at
where the S and P five hundred is trading right now,
David that we have a little under twenty minutes left
to go on track four, it's thirty thirty six records
of the year.
Speaker 5 (29:51):
Pretty astonishing, it is.
Speaker 2 (29:52):
I must say I did a charticle after the first
half and at that point it had been thirty one records.
That was the best pace of records in the first
half of your year, second best this century behind twenty
twenty one. Obviously that was when you saw a big
rebound in the stock market from the depths of COVID.
But we have so many different things coming up. Obviously
we have a fed Shared's Room palas we've mentioned back
(30:13):
on Capitol Hill tomorrow in front of the house. We
also have that CPI report of course coming on Thursday,
and then earning season getting into full swing at the
end of the week. Of course the big banks like
JP Morgan reporting. But who better to talk to us
about his outlook on the stock market, the economy, all
things in Louis Navalier, founder in CIO at Navalier Associates,
(30:34):
who's joining us once again. So it's always great having
you back here with us talk to us about kind
of your outlook moving forward, especially when we've continued to
see a big rise here and you looking at the
S and P F five hundred, the spread between the
SNP it's two hundred day movie average hovering around thirteen percent.
But as you know, that can kind of go on
for a while here. As we have seen the S
(30:54):
and P five hundred rise, Louis.
Speaker 9 (30:58):
Well means are supposed to be up eight point eight
percent for the second quarter. That's the best estimate from
the Allison over two years. We have very easy year
of year comparisons, but it should be you know, it's
every stock for itself come earning season. Now. The other
thing is we're expecting a very good CPI and PPI
(31:20):
later in the week, and so we might get a
little turbo boost on the anticipation that the FED will
be cutting on September eighteenth.
Speaker 5 (31:29):
Louis, as Jess mentioned a moment ago, the FED chair
was up on Capitol Hill, largely sticking to script as
I saw it, as I heard it today. Anything stand
out to you and sort of how are you processing
or thinking about what the Fed's next steps are here
and how that's affecting your your investment strategy at this point.
Speaker 9 (31:46):
Well, the Fed's clearly worried about the labor market because
we've gone from three point four percent unemployment to four
point one percent in a little over a year, and
so it's there's a problem. And you know, if we
throw out government jobs and healthcare jobs, there's not a
(32:07):
lot of job creation. And we you know, we have
those negative sm numbers. You know, manufacturing has been down
for the last twenty months. There was one month but
one up, and now the service sector has been down
to the last three months. So anytime you get those
ISM surveys under fifty, it's a bad sign. So he
(32:29):
clearly sees that they've engineered a soft landing, but they
don't want to be too cute.
Speaker 2 (32:34):
I've been taking a close look at systematic positioning as
well as discretionary positioning, so obviously people listening if usually
fund managers have more of the discretion to make their changes,
whereas with systematic positioning it's more kind of tied to algos.
But louis what I've been looking at that, especially from
Deutsche Bank. It's interesting because they've seen a bit of
when you're thinking about sort of stretched positioning here for
(32:56):
tech is what they're seeing, but they've been seeing that
for a while. But they're also seeing more rotation into
areas like financials and other areas that obviously have at
times benefited from rate cut cycles. There, how are you
putting money to work right now in the stock market
and where are you putting that?
Speaker 9 (33:14):
Well, I'm super concentrated. You know, most of our clients
are taxable and they don't like to pay a lot
of taxes. So we are grossly overweighted in the video
super Micro on another stock called a Lar, which is
a cybersecurity stock. Also we have CrowdStrike, another cybersecurity firm,
(33:37):
but we're loaded with Lily, you know, menor Disk and
those stocks right now are probably thirty five percent of
our portfolios. We have invested a lot in the utility
grid and beefing up the demands for cloud computing. Essentially,
I'm here in Reno and we have the Apple Google
(33:59):
servers here in Reno, but I live high in the
hills and suburbia, and they have these netch They have
diesel generators every mile to make sure you can meet
our air conditioning demand. So the server farms have priority
around here. They can't they can't go down, and so
expanding the grid has become very problematic and it's not easy.
(34:21):
I mean, you know, the power is just coming on
now in Houston. I mean people that have been kind
of miserable for the last couple of days.
Speaker 5 (34:28):
This is so fascinating to me. We had a big
piece at Bloomberg last week kind of looking at this
and the heightened demand that that AI and cloud computing
is having for energy and the consequences of building all
of these data centers. Can you walk us through to
more granular levels, what companies or what stocks for appealing
to you as you look at Yes and Video, which
you said is in your portfolio with these others that
are kind of secondary plays when it comes to AI.
Speaker 9 (34:51):
I would be Eten which is etn mcre Eme, Quanta
Services PWR, and then Vistra which is v our Tea.
Those all help make the grid more efficient expand. The
one thing holding the grid back is the Biden administration
did pass a law that if you add a new
(35:13):
not a law, but an executive order that if you
do a new natural gas power plant, they would like
you to sequester the carbon and that's an eight year permit.
So normally you would just hook up a natural gas
power plant and that's how you expand the grid. Okay,
but when you put all these new rules on it, it
(35:33):
really messes things up. Now Here in Nevada, you know,
we're next to California. We're extra green. Everything here is
solar and batteries. We do have a lot of geothermal,
but that can only.
Speaker 11 (35:47):
Do so much.
Speaker 2 (35:48):
Since you are in Reno, talk to us about what
it's like for the economy. What you're seeing consumers spending
their money on, whether you're going to the grocery store
or other things. Telltale signs about the economy right now.
Speaker 9 (36:00):
Yeah, Well, you know, Reno is a is a boomtown
because we're next to California and people move here, and
you know that we got a lot of The Schwab
office in Reno is the largest in the world, so
there's a lot of money hiding here. Plus we have
a lot of corporate money. Microsoft is one of the
(36:20):
largest employers in Reno because there's a two percent tax
on gross revenue in Washington State. Amazon is here too,
big time, so they're avoiding the state corporate taxes. But
we have Apple, Google, Intel, the into It founders, my neighbor,
you know, Cisco's here that they're all a lot. We
have a lot of Treasury departments here. But yeah, we
(36:43):
got a lot of wealthy retirees. You know, the Californians
come in and buy our real estate and what used
to be you know, you know, two hundred foot for
a home is now in the hills pushing four to
five hundred a foot. It's funny the last twelve hundred.
But then we have to remind them where they built.
But you know, it's it's a boomtown. But you know,
(37:07):
we do have extreme weather here and they should have
a four wheel drive and they better put snow tires
on the right.
Speaker 2 (37:13):
You know, we only have about fifteen seconds left. But
what's the top question you're getting from your clients right now?
Speaker 1 (37:19):
Oh?
Speaker 9 (37:20):
Just it's all about the I stocks. And fortunately we're loaded,
so we're fine.
Speaker 2 (37:25):
You're good, all right, Luis Davia, thanks so much for
joining us again. Founder in CEO Navalier and associates joining
us from Reno, Nevada. We'll have more coming up. This
is Bloomberg.
Speaker 1 (37:37):
This is the Bloomberg Business Week Podcast, a little Apple, Spotify,
and anywhere else you get your podcast. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot com,
the iHeartRadio app tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
and always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business
Wait inside from the reporters and editors who bring you
America's most trusted business magazine, plus global business, finance and
tech news. The Bloomberg Business Week Podcast with Carol Messer
(00:23):
and Tim Stenebeck from Bloomberg Radio, Chess Manton and.
Speaker 2 (00:28):
David Gera Here in the Bloomberg Interactive Broker Studio. We
were just speaking about how fetcher Jerome pal did say
more good inflation data would still need to boost the
Fed's confidence. But of course we will get another update
on CPI David here on Thursday. So traders looking at that,
and I wrote a story earlier today looking at sort
of the options market what they were pricing in at
(00:48):
the JP Morgan Trading dest sing a potential move here
of about nine tenths of a percent. So that actually
would be the biggest in about a month, because just
a month ago we had CPI and the FED decision
on the same day. But that is in line with
the last three CPI prints. But we have two really
great guests coming up to speak with us on this,
so we'll also have Moly Smith, who's on our Economics Desk,
but also Ira Jersey, who's Bloomberg Intelligence Headquarters in New Jersey.
(01:13):
Get's going to speak with us, but first we're going
to get a clip here hearing a little bit more
of what Fed Chair Jerome pal had to say. So
listen more of what he had to say about inflation
as well as the path of interest rates.
Speaker 3 (01:23):
The most recent inflation readings, however, have shown some modest
further progress and more good data would strengthen our confidence
that inflation is moving sustainably toward two percent. We continue
to make decisions meeting by meeting. We know that reducing
policy restraint too soon or too much could stall or
even reverse the progress that we've seen on inflation.
Speaker 2 (01:45):
All right, So that was obviously FED Chair Jerome Pale
on Capitol Hill, who will be speaking tomorrow as well
in front of the House. So I want to bring
in Ira Jersey, who here works at Bloomberg News, who's
our US interest rates strategiest and he's based actually at
the Blue Intelligence headquarters in New Jersey, as well as
Wally Smith, who is one of our top editors here
(02:06):
for the economics desk. I'll start with you, Molly to
kind of get a recap here of what people were
expecting fed share pal to say versus what we ended
up getting here.
Speaker 4 (02:15):
Yeah, very two, very different things. I think people were
obviously hoping to get a bit more about the timing
of when we might be seeing some interest rate cuts,
and Powell on two occasions said he will not be
offering any signals on the timing of interest rate cuts,
which I said to the chat, I guess we can
all go home, because it seems like that's really what
we were all here for. And he then said again
when another lawmaker had pressed him on the topic, had
(02:38):
also said, yeah, I'm not really going to get into
that today. So a bit of a bummer. So we're
all still here sitting Okay, maybe one maybe two?
Speaker 5 (02:46):
Right TVD TVD Jersey. Let me turn to you. That's
the editor's perspective. Let me get the market market strategy
perspective on this is. But what were you listening for
and what did you hear from the fed share today?
Speaker 6 (02:57):
Well, first, let me say that Laurie does a great
job with the tea live chat. So if you're you know,
if you can't listen to radio or watch TV and
you have a.
Speaker 5 (03:04):
More live Yeah, for sure.
Speaker 6 (03:07):
I participate for example, and try to give my insights
onto the rates market on those blogs as well. So
the I think from j Powell, like like Laurie said,
he said even in his prepared remarks that they were
going meeting to meeting, he tried to say, where's data
dependent as we can possibly be, and he reiterated that.
So he didn't say anything broadly new in terms of
(03:28):
the monetary policy perspective, but the fact that he reiterated
basically what was said at in the June meeting minutes
which were released last Wednesday when the market, when the
bond market was closed, at least, I think was just
telling in and of itself, because you know, it's pretty
clear that they're trying to say, like, look, it might
be September, it might be November, it might be December,
but we're going to cut. The one thing that he
(03:50):
did say that I think was important was he did
reiterate that he didn't think that the next move as
a hike was likely. And that's something that remember, just
two months go, we were pricing for almost a twenty
percent probability of a hike. That's almost being completely priced
out of the market.
Speaker 2 (04:06):
Now, well, Molly, I want to bring you back into
the conversation because David and I had mentioned we will
get another update on CPI on Thursday. What are the
expectations here from economists?
Speaker 4 (04:16):
Yeah, so probably going to get something that's a bit
more of a maybe inflation still gradually coming down, if anything,
maybe moving still a little bit sideways in this range
that it's been in. You know we've seen which you know,
Power alluded to today, the big moves in inflation have
really are past us, which you know is to be
expected at this point, there's less progress to be made
(04:37):
and it's going to be coming in you know, smaller
chunks with each report that we get. So there was
definitely a lot of questions on housing inflation today and
that there's you know, the best thing that Howell said
that the Fed can do for the housing market is
to get inflation back to two percent, so that that
will hopefully then bring you know, treasury yields and interest
rates back down and then make you know, mortgage rates
(04:59):
also more affordable. So that's really yeah, to be expected
from him. You know that they can't really control of course,
that the US has a persistent structural shortage of housing,
and that's what when he was saying, well, this is
you on lawmakers to try to you know, that's more
your job and that's not something that.
Speaker 7 (05:14):
We can do.
Speaker 5 (05:15):
And we're going to get into that a little bit
later in the show. But Molly, let me ask you
about the crucible in which this is happening. So this
is before the Senate Banking Committee. You had a pretty
forceful statement from the chair of that committee from Shared Brown,
basically saying to the FED chair, stop raising rate stops
bring rates down, that this is having a really deleterious
effect on the American consumer, on those who want to
buy houses. And there's also this kind of moment of
(05:37):
emphasis on the chair's part about the independence of the
Federal Reserve. As we see this kind of swirl of
politics surrounding what might happen if Donald Trump were to
be elected again, How did he deal with that sort
of how did the setting of this kind of color
your sense of what the FED chair had to say.
Speaker 4 (05:50):
Well, it seems like at least Powell and pretty much
everyone on the Senate Banking Committee agrees that the FED
is and should remain an independent institution, and that there
was pretty unanimous support on that front, and you know,
without of course addressing the elephant in the room that
if Donald Trump were an elected president, that that's something
that he's kind of looking to attack, right that he
you know, wants to be a bit more involved somehow
(06:12):
in how the FED sets monetary policy, and perhaps ousting
Powell this was someone who he appointed. So yeah, clearly
that there's a bit of you know, there's certainly a
backdrop to all that, and I think he handled it
pretty delicately and just stressing you know, the Fed's credibility
really relies on its independence.
Speaker 2 (06:29):
Hey, I want to bring you back into the conversation.
What are you seeing when we're talking about, say, speculative
net positioning, when you're looking at the bond market, and
what that tells us about where traders are betting, where
rates could be headed in the second half of this year.
Speaker 6 (06:42):
Well, a lot of the spec positioning right now is
really basis trade. So it's people trading futures versus cash.
There's a little tiny bit of money to be made,
So in order to be to make that money, though,
you have to lever yourself a lot. So that's one
reason why you have such large shorts and some of
the some of the contracts. I want I go back
to something that Molly said just a second ago, and
(07:03):
you know that's about what J Powell and the FED
independence argument, because you know, from a market perspective, I
think that if the FED were will lose a significant
amount of its independence, then you'd wind up in a
situation where the bond market would probably sell off quite
a bit and certainly get a much much steeper yield
curve because it'd be worries that the FED would keep
(07:25):
interest rates too low for too long in a future
environment where you get more inflation. So I think that
there is a risk there that something like that happens.
And of course, you know, way back when when J.
Powell was first appointed, I was actually surprised that Donald
Trump appointed him because he appointed a mainstream kind of
thinker from the from from the FED border governors instead
(07:45):
of someone more duvish. So you know, Donald Trump will
still have the opportunity to appoint Aduvish FED chair. He'll
just have to wait, you know, eleven months to do that.
And because that person won't take office till the beginning
of twenty twenty six.
Speaker 5 (07:58):
Molly, we've talked a lot about inflation, is of course
what we're all supposed to be talking about this part
in the time, but we did get a little color
from the FED chair on the labor market as well,
And I wonder what stood out to you from from
his comments. Of course, we have the rate now at
four point one percent, but what did he say just
sort of about his perspective, I guess the Fed's perspective
on how healthy the jobs market is now?
Speaker 4 (08:15):
Yeah, I think you know, this is now starting to
look a lot more like the jobs market that we
had before the pandemic, which was a very healthy jobs market.
And that Powell said something today that he hasn't really
said yet but has probably been true for a while,
that the labor market is no longer inflationary, and that
that's something that you know, one economist I noticed that
he had sent around to his distribution list that this
(08:35):
has been the case for a while. But it's nice
to see Powell finally acknowledging this because there has been
so much concern about, you know, all these job openings
and perhaps if that's propelling wages higher, or you know,
what kind of inflationary environment that might get us into
but he seemed to be, you know, a bit more
comfortable with where the labor market is in relation to inflation,
but certainly that you know, any like he's been saying,
(08:58):
any unexpected weakening in the labor market could force the
Fed to act a bit more aggressively.
Speaker 5 (09:03):
Molly, great to speak with you. Thank you very much.
That's Molly Smith from our ECON team. Our thanks to
Ira Jersey as well, chief US interest rate strategist to
Bloomberg Intelligence, joining us from Bloomberg Intelligence headquarters just a
bit south of here in New Jersey. And I know
we want to get into some of what you're talking about, right,
a knock on effect of this kind of very strange
economic environment.
Speaker 2 (09:20):
That's right, and especially because why high rates have failed
to dent record stock prices right now as well as
home price is too. So who better to bring in
than Bloomberg's own personal finance reporter, Suzanne Wooley, who's here
in the Bloomberg Interactive Brokers studio. Thanks so much for
joining us this afternoon. And it's interesting because you wrote
about how more people in the market right now, especially
(09:43):
when you're thinking about stocks and what's happening with housing
prices staying relatively high here, but it's still a confusing
world of finance. And this is also you wrote for
her latest Bloomberg Business Week story here, So walk us
through this sort of dynamic, especially coming out of the pandemic,
and how unique this is compared to history.
Speaker 8 (10:00):
Well, for most of us, we went through such a
long period of really reads near zero, you know, back
in twenty twenty it's early as twenty twenty two though,
they were at zero point zero eight percent. Now this
is the federal funds, right that I'm talking about. Now
it's around five point three percent, so very abrupt ramp up.
You know, they're like eleven fed hikes and something like
a sixteen month period, right.
Speaker 7 (10:20):
So came on big.
Speaker 8 (10:22):
And normally the script would be that we would expect
the stock market to take a hit, and you know,
housing with mortgage rates now at seven percent, in twenty
twenty one they were like around three percent, you expect
that to take a hit. Hasn't happened, obviously, you know.
And a big reason with the stock market is of course, AI,
right is just like powered over everything, and you know
(10:44):
when you look at the SMP and Vidia, it contributed
by thirty percent of the index is gained to date.
You know, Microsoft contributed another ten percent. So AI is
just sending it, you know, a market cap index flying.
Speaker 2 (11:01):
And even things beyond traditional tech and gross stocks. If
you look at utilities with people think it's more kind
of steady diven in low volatility. But if you have
the particular sub industry groups within it that are related
to data center businesses, those have taken off at certain
points this year two exactly.
Speaker 8 (11:17):
It's like an AI is, you know, an energy play.
It's such a huge energy guzzler, you know, so those
things have propped it up and underneath when you look
under the hood at the SMP. I was just listening
to Goldman Sachs's mid year investment outlook and one of
their experts was talking about, how, you know, the average
gain and the stock for the SMP for the year
is like three percent, you know, so beneath the breadth
(11:38):
as we know is just so narrow. In the mag
seven or mag whatever they are now six ' five.
Speaker 2 (11:44):
Right, we've gone from a lot of.
Speaker 5 (11:48):
I want to ask you about the kind of consumer
psychology aspect of this. There's such a great line in
your piece about how for most people into the age
of thirty five, they never had to live in a
world where rates are what they are. You talk about
what we've become a custom them to. How have you
found as you talk to people reporting out this piece,
what council have they given people who might long for
those lower rates not even not even know that they
(12:09):
used to be as high as they are in higher
see right.
Speaker 8 (12:11):
Well, I mean some people are saying, listen, you know
these rates are really not that unusual when you look
over the long scheme of things, so you know they
people are thinking that rates I mean a lot of
people think rates will go down now with people are
saying that the Fed maybe we'll get one cut in
September and such. But you really have to sort of
(12:32):
rethink some of your basics. There are a lot of
people who have gotten into buy now, pay later loans.
Speaker 5 (12:39):
Which we know so little about still exactly.
Speaker 7 (12:42):
It's sort of a black box in a way.
Speaker 8 (12:44):
And we had a poll on a Harris poll don
back in April that showed that forty three percent of
people in those loans were behind in their payments. And
you know, that's an area where they're going to feel
a lot of interest rate pressure, but also just in
buying a home you have to sort of think through
it a bit differently because if you want to get
(13:07):
a seven percent mortgage rate, you know, and rates don't
go down that much, you really can't. I mean, it's
not why is to take a flyer and.
Speaker 7 (13:19):
Just think, oh, yeah, you're down the road, I'll be
down to whatever.
Speaker 9 (13:22):
You know.
Speaker 5 (13:23):
Do we see people taking more flexible rates or are
trying different? Are they just wedded to the notion that
it's going to be high or where it is?
Speaker 8 (13:29):
For there are little pockets that are starting to pop up,
Like there's something called it's a little complicated, but it's
an assumable mortgage, and it's when you can actually assume
the seller's mortgage at their rate. Interesting, you know, at
their you know, it's it's complicated to do. But more
startups are popping up to create a sort of a
(13:51):
more organized market for these assumable mortgages because it's so appealing.
If you could just inherit someone's three percent mortgage, that
would be great. It's very expensive because you have to
sort of pay the premium on their home and you
have to pay off the equity that's in their mortgage, so.
Speaker 5 (14:05):
You need a lot of fun money for that.
Speaker 7 (14:07):
Yeah, it's not an appealing option for most people.
Speaker 2 (14:11):
Well, we only have about forty five seconds left. But
what do you think are the biggest takeaways for people
to take from your story? As well as how long
this dynamic can continue, which obviously a million dollar questions.
Speaker 8 (14:22):
I think a lot of people that I spoke with,
more of the financial planner types, were just giving some
good solid advice about diversification and if you're sitting on
some really big equity gains, and now, particularly in tech,
they've been telling some of their clients, you know, maybe
do a little profit taking, just make sure you're diversified
because there's just so much talk right now about it
(14:44):
expecting greater volatility, how long this lasts, which we've been
hearing forever, But they're just kind of telling people to
remember if they need to rebalance now, they can get
five percent on a bot.
Speaker 2 (14:55):
Right. Well, that was Sulisane really personal finance reporter at
Bloomberg News on why hireing have failed to dent record
stock prices and housing prices here, thanks so much for
joining us. Well more coming up, this is Bloomberg.
Speaker 1 (15:09):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five pm. Easter listen
on Apple car Play and then brought auto with a
Bloomberg Business app or watch us live on YouTube.
Speaker 2 (15:23):
And another really interesting story, David, that is in the
terminal that we've been reading here is about looking at
Bobby Jane's complex hedge fund debut and how it's spawning
fans as well as doubters to Who better to come
in than the author of the story, Ahemma Palmer, who's
here at one of our hedge fund reporters at Bloomberg
News in New York in studio with us. So walk
(15:46):
us through your story here about Bobby Jane's fund. What
makes it so complex such that it is unprecedented?
Speaker 10 (15:53):
Yes, So what he's trying to do here is launch
a fully formed multi strategy hedge fund. Means is going
to trade six strategies on day one when it launched
July first trade all of those strategies, have the teams
built out, have everyone hired in the right seats, all
the operational back and operational infrastructure and back office teams.
(16:14):
It's a pretty big undertaking. It's never been done before. Typically,
hedge funds start out small with one or two strategies,
and then they add on more over time. What he's
doing here is birthing a fully formed multi shrat heedge fund.
Speaker 5 (16:27):
Why is he going this route? So you describe the
complications of doing that. He has been ambitious about what
he hoped to raise, raised a little less than I
think what he wanted to the very beginning here. But
I think of a hedge fund starting in this environment
in particular, how complicated that must be, how difficult it
must be the line of the talent, of the technology
infrastructure to do all of this.
Speaker 10 (16:44):
Absolutely, it's very challenging in this fundraising environment too. His
thinking is that it's more efficient when you start a
firm of the size doing these many different types of things.
If you build the infrastructure from the ground up ready
for all the different parts, then you're less likely to
have duplicate costs, duplicate talent. It's going to be more efficient.
Every system will have everything it needs in order to
(17:07):
get going, and you don't need to add on things
later and then double over on expenses and everything. He
also was trying to build a system where even if
in the future, he adds more talent and has more
money to invest that the cost of operating the business
don't scale proportionally to that.
Speaker 11 (17:24):
Talk to us more.
Speaker 2 (17:24):
About the asset raising environment right now. In some of
the top challenges, it's really tough out there to be
raising money.
Speaker 10 (17:32):
So five point three is a good amount of change
to be starting a hedge fund with it. It's the
second biggest launch that we've seen in years, is the
biggest launch we've seen this year. But the environment is
tricky for a few reasons. Firstly, investors are not getting
as much money back from private equity from distributions as
they have been in the past, and so that limits
(17:53):
how much money they have to put to work, though
also a lot more cautious about every dollar they want
to put to work. You have an option, You have
optionality between the hot private credit markets or a multishat fund,
and they've been so somewhat underperforming recently. You're seeing a
lot of questions over should we even invest in hedge
(18:14):
funds or do we put it someplace else? With each dollar?
Do we want to take the day one risk in
investing in a brand new manager and a new fund
versus a tried and true option. So LP's a weighing
all of these things, and every dollar is harder to
get these days than it has been in some time.
Speaker 5 (18:29):
The piece opens with a meal a pitch at the
seafood restaurant at the Breakers in South Florida. Bobby Jaen
making this overture to a Middle East sovereign wealth fund
I believe ultimately ponies up. I think about close to
a billion dollars to the fund. How has he made
that pitch? How is he trying to convince investors, yes,
that this model that you've described as being kind of
(18:50):
un orthodox is likely to work, and be that this
is the moment to do it. That you know, don't
bide your time, don't watch all of this unfold, get
in now, and this is likely to reapers here in
the next I guess twelve months to eighteen months exactly.
Speaker 10 (19:03):
So he has gotten Adia, which is the Abi Dhabi
Investment Authority, with a billion dollar ticket, other big name investors,
to a number of bank platforms. So you know, his
pitch is, yes, you get the ground. You know, day
one opportunity to invest in this fund. He's offered a
lot of concessions and.
Speaker 7 (19:19):
He's fees are cheaper. He's lowered fees.
Speaker 10 (19:21):
The bigger the tickets, the more the better fees you
get for investing. He offered promise them future capacity. So
if you want an investor any future optionality, if you
like what you see, you can get in later on
and that will be guaranteed. Some investors got co invest opportunities.
The liquidity of this fund means that you can get
your cash back in three years versus other other competitive
(19:45):
firms the more like five and there's a number of
other investor family terms. So you do see in this
environment needing to have more concessions make it worthwhile. And
I think even Bobby Jane understands that there's a day
one risk to doing this kind of thing and made
those these these perks advantageous for them.
Speaker 2 (20:03):
And you talked about obviously the concerns and the caution
that investors have. Clearly there's different issues when it comes
to lofty targets, But what are some of the underlying
problems in the root of where those concerns.
Speaker 10 (20:15):
Lie with investing in hedge funds? Right, Yes, so you
know people use hedge funds in their portfolios in a
few different ways. It could be to hedge against you know,
if the markets take a downturn, then maybe invest in
some of the multi strategy funds. Multi shrat funds aren't
typically aiming to always beat the market. They want to
be a steady return roughly a percent a month, tried
(20:37):
and reliable and true, and so that's sort of how
they would think about it. But if you want, you know,
really huge returns, so hedge funds are incredibly volatile where
you can see double digit gains one year and then
double digit losses the following year. So it really is
like strategy strategy dependent, fund dependent, liquidity dependent. As this
strategy has shifted to become a lot more illiquid. The
(21:02):
assets themselves are pretty liquid, but the structure of these
vehicles means it's harder to get your money back, and
it's become a lot more expensive to run these multi
strategy funds. There's been more caution when it comes to
this specific strategy fum investors because they're thinking, well, do
I want to be locked up for this long? And
what am I paying for? Because they're paying for the
talents and the compensation of these traders.
Speaker 5 (21:25):
Your world is one in which I think personality matters,
and you know, the head of these funds, you know,
can really shape the way that the business works. I
think Bobby Janis is close to a household name as
you can get. But what can you tell us about him?
And is he in the mold of his England or
is he somebody who has taken a lot of inspiration
from the time that he's spent at millennium Sor how
does he operate? How is he as a manager's or
(21:45):
what's his personality like as somebody who's ever seeing these
billions of dollars?
Speaker 10 (21:48):
Yes, so if you look at his tenure, he spent
more than twenty years at Credit Sweez. He spent about
six at Millennium, so really you know, experience that big
name repids. At Millennium, he was co cio, worked very
closely with Izzy Englander at Credit Sweets. He helped to
build out various businesses, So he's sort of known for
(22:09):
building businesses, working with teams, being sort of on that
higher up level versus being in the weeds unnecessarily a trade.
But he is has been described to us as being
more cerebral, more like a philosopher, thinks in matrices and
can jump between sort of the big picture idea and
(22:29):
in the weeds details. But we have also heard from
investors that he struggles to communicate some of his ideas
clearly and sucstence disinctly. What that's meant is some investors
have walked away from meetings feeling either frustrated that they
didn't really understand things, or walked away with ideas of
the firm that were not really what the firm is,
or unclear as to what Bobby's trying to build here.
Speaker 5 (22:52):
And Bobby trying to use that sort of seeing things
as a matrix to oversee what I think he describes
a smories board of options here at this fun just
a fascinating piece by Emma Parmer on the Bloomberg terminal,
Bobby Jane's complex hedge fund debut, sponds, fans and daughters.
I was just fascinated by, I guess the ambitions prisonly
of doing this and trying to do it on such
short short order.
Speaker 2 (23:11):
No, it's true, and then obviously the challenges that come
with it and the money they've been able to pull off,
but still the other issues they have to deal with.
Speaker 1 (23:19):
You're listening to the Bloomberg Business Week Podcast. Listen live
each weekday starting a two pm Eastern on applecar Play
and ANDROYD Auto with the Bloomberg Business App. You can
also listen live on Amazon Alexa from our flagship New
York station, Just Say Alexa, Play Bloomberg eleven thirty.
Speaker 2 (23:38):
David, let's switch gears here and talk more about the
latest jobs report data as well as women leaving the
US workforce. We're going to bring in Laura Gasner, adding
a serial entrepreneur, a HR veteran who's joining us on
Zoom in New York City. Thanks so much, Laura for
making time for us now. We wanted to dig deeper
(23:58):
here when it comes to this libor market report. Obviously
we get them monthly, but dig deeper to us and
when it comes to the issues when it comes to
women leaving the workforce, especially coming out of the pandemic,
and how that's been exacerbated by that issue.
Speaker 11 (24:12):
I mean, I think that we saw during the pandemic
women were leaving the workforce in droves because obviously during
the pandemic, our kids were all home from school. Suddenly
we were dealing with our parents who were getting older,
some of them getting sick and women were the ones
who had to pick up all of the slack. We
saw women just absolutely leading the workforce in historic numbers,
but we're saying that that's still happening, and that's due
(24:33):
in large part because the gender pakeapp of course continues
as a lack of flexibility and control for women, especially
as they've become more senior, there's inadequate opportunities for advancement.
It's hard to integrate work in life, and of course
we're all looking for more purpose in our life right
now as well. So it's across so many different variables
that we're seeing it. And because women are getting paid
less than men at the same job, that gender pay
(24:55):
gapp does still exist. It just means that when it
comes time to choose who's going to lead the workforce,
it often ends up being the woman.
Speaker 5 (25:02):
I look just kind of the nature of the pandemic,
which was without precedent, and how little time relatively has
passed since then, and we do have this atmosphere now
and a lot of workplaces where there is more flexibility
baked in, able to work from home more. Do we
know sort of how that's affecting workplace dynamics or again,
given how little time has passed, are we still trying
to figure out what the sort of longer term effects
(25:24):
of that new, more novel flexibility is going to be
on workers in the workforce.
Speaker 11 (25:29):
Yeah, I think we're still trying to figure it out,
and I think a lot of it comes down to
the fact that, you know, the workers are using the
same tools that they used in the office. They're using ZOM,
they're using Sleck, they're using all of the same tools
that they're using when they're actually an office to work
from home. But the bosses, which tend to be predominantly morales,
still the maganity of people and meta physicians are still
Then those bosses have to be different tools, but they
(25:51):
can't just manage by walking around anymore. Becomes very different
for them to figure out how they're going to see
how people work now. I ran an executive search from
for fifteen year seventy two thousand and two to twenty seventeen,
fifteen years, and we were always virtual, like before it
was COVID cool. We were all virtual, and people used
to say to me like, Laura, do you how do
(26:12):
you judge the quality of being team's work? And I'll
just like are you waiting, are you sitting, or are
you listening? By the quality of my team's work. But
the problem is a lot of bosses, if you can't
see are people working, we wonder whether or not they're
actually working. And so you know, if you've got kids
at home again, you know how old is the story
of the man takes time off for work to go
(26:32):
to the kid's soccer game. Everyone goes, Oh, what a
good daddy is, And the woman takes time off to
go to the soccer game, and everyone's like, well, she
prioritizes her kids over the work. So if there's a
woman and she's in a flexible work arrangement and she's
got kids at home, of course we always fall to
that age old trope that it must be that she's
being a mom and not working. So I think that
bosses have to really change the way that they're thinking
(26:52):
about how they manage their people and really think about
what the metrics are but which they're managing the people.
So it's not just do I see them working, Okay,
they must be working.
Speaker 2 (27:02):
There was an interesting story in Forbes where they were
citing a survey about how sixty percent of you as
business executives said that their company will likely have to
have layoffs over the next few months in the second
half of this year, and that was based on resume
template survey. So if you are unexpectedly laid off, what
high income skills do you think people really need and
(27:23):
that will be crucial to move forward?
Speaker 11 (27:26):
Oh, I think that we all have to. I think relationships.
I think it all comes down to human caspital all
the time, all ways. So I could say AI, I
could talk about, you know, all the different types of
technology skills that we need. But at the end of
the day, I think, especially now that we're all working
remote and being able to figure out how to create relationships,
how'd be steward relationship to you decide what to ask for,
(27:47):
when to ask for how do you move that relationship forward?
Business moves at the speed of relationships all the time.
So making sure in this period of time where we're
working in this remote in this hybrid fashion, especially if
you're a young person, making sure that you are making
time to go into the office, getting to see people,
going out to talk through with people, making sure that
you are investing in that one on one relationship building
(28:09):
time because those are the skills that we're losing right now.
They're sort of leaching out of our civil discourse or
reaching out of the way that we work with each other.
And so to think somebody who's able to create those
high level, deep sticky relationships will be skills that will
help people absolutely forever and ever.
Speaker 2 (28:26):
All Right, Laura, thanks for sticking with us. That's Laura
Gasner adding so your entrepreneur and each R veteran who
is joining us on Zoom here in New York City.
And it's really fascinating, especially when you think of this
dynamic of the labor market still. You know, just at
the end of last year's unemployment was still there a
half century load, David, and not far off from that
still even though it's around four percent.
Speaker 5 (28:48):
And an interesting study I saw recently in the Harvard
Business Review just indicating that this really kind of plays
out differently among how senior you are within the workforce.
So as I was kind of getting too there, I
think there's a lot we still don't know yet just
about how this is all going to shake out. This
is Blimber Business Week on BLOEM Radio David Gerra with
Jess Manton and for Carol Mass and Tim Stanbek.
Speaker 2 (29:05):
M brother mack.
Speaker 9 (29:08):
A journal.
Speaker 10 (29:10):
How about you let me drive?
Speaker 4 (29:11):
Oh no, no, no, no's honey, please, I'll do the driving.
Speaker 1 (29:16):
Gravels eleas mate, I want to try it.
Speaker 3 (29:21):
It's good question time.
Speaker 1 (29:26):
This please the drive to the Globe dot Com thing
well round.
Speaker 2 (29:30):
On Bloomberg Radio Jessman and David Gera here in the
Bloomberg Interactive Brokers studio in of course for Carol and Tim,
who both have the day off. If you look at
where the S and P five hundred is trading right now,
David that we have a little under twenty minutes left
to go on track four, it's thirty thirty six records
of the year.
Speaker 5 (29:51):
Pretty astonishing, it is.
Speaker 2 (29:52):
I must say I did a charticle after the first
half and at that point it had been thirty one records.
That was the best pace of records in the first
half of your year, second best this century behind twenty
twenty one. Obviously that was when you saw a big
rebound in the stock market from the depths of COVID.
But we have so many different things coming up. Obviously
we have a fed Shared's Room palas we've mentioned back
(30:13):
on Capitol Hill tomorrow in front of the house. We
also have that CPI report of course coming on Thursday,
and then earning season getting into full swing at the
end of the week. Of course the big banks like
JP Morgan reporting. But who better to talk to us
about his outlook on the stock market, the economy, all
things in Louis Navalier, founder in CIO at Navalier Associates,
(30:34):
who's joining us once again. So it's always great having
you back here with us talk to us about kind
of your outlook moving forward, especially when we've continued to
see a big rise here and you looking at the
S and P F five hundred, the spread between the
SNP it's two hundred day movie average hovering around thirteen percent.
But as you know, that can kind of go on
for a while here. As we have seen the S
(30:54):
and P five hundred rise, Louis.
Speaker 9 (30:58):
Well means are supposed to be up eight point eight
percent for the second quarter. That's the best estimate from
the Allison over two years. We have very easy year
of year comparisons, but it should be you know, it's
every stock for itself come earning season. Now. The other
thing is we're expecting a very good CPI and PPI
(31:20):
later in the week, and so we might get a
little turbo boost on the anticipation that the FED will
be cutting on September eighteenth.
Speaker 5 (31:29):
Louis, as Jess mentioned a moment ago, the FED chair
was up on Capitol Hill, largely sticking to script as
I saw it, as I heard it today. Anything stand
out to you and sort of how are you processing
or thinking about what the Fed's next steps are here
and how that's affecting your your investment strategy at this point.
Speaker 9 (31:46):
Well, the Fed's clearly worried about the labor market because
we've gone from three point four percent unemployment to four
point one percent in a little over a year, and
so it's there's a problem. And you know, if we
throw out government jobs and healthcare jobs, there's not a
(32:07):
lot of job creation. And we you know, we have
those negative sm numbers. You know, manufacturing has been down
for the last twenty months. There was one month but
one up, and now the service sector has been down
to the last three months. So anytime you get those
ISM surveys under fifty, it's a bad sign. So he
(32:29):
clearly sees that they've engineered a soft landing, but they
don't want to be too cute.
Speaker 2 (32:34):
I've been taking a close look at systematic positioning as
well as discretionary positioning, so obviously people listening if usually
fund managers have more of the discretion to make their changes,
whereas with systematic positioning it's more kind of tied to algos.
But louis what I've been looking at that, especially from
Deutsche Bank. It's interesting because they've seen a bit of
when you're thinking about sort of stretched positioning here for
(32:56):
tech is what they're seeing, but they've been seeing that
for a while. But they're also seeing more rotation into
areas like financials and other areas that obviously have at
times benefited from rate cut cycles. There, how are you
putting money to work right now in the stock market
and where are you putting that?
Speaker 9 (33:14):
Well, I'm super concentrated. You know, most of our clients
are taxable and they don't like to pay a lot
of taxes. So we are grossly overweighted in the video
super Micro on another stock called a Lar, which is
a cybersecurity stock. Also we have CrowdStrike, another cybersecurity firm,
(33:37):
but we're loaded with Lily, you know, menor Disk and
those stocks right now are probably thirty five percent of
our portfolios. We have invested a lot in the utility
grid and beefing up the demands for cloud computing. Essentially,
I'm here in Reno and we have the Apple Google
(33:59):
servers here in Reno, but I live high in the
hills and suburbia, and they have these netch They have
diesel generators every mile to make sure you can meet
our air conditioning demand. So the server farms have priority
around here. They can't they can't go down, and so
expanding the grid has become very problematic and it's not easy.
(34:21):
I mean, you know, the power is just coming on
now in Houston. I mean people that have been kind
of miserable for the last couple of days.
Speaker 5 (34:28):
This is so fascinating to me. We had a big
piece at Bloomberg last week kind of looking at this
and the heightened demand that that AI and cloud computing
is having for energy and the consequences of building all
of these data centers. Can you walk us through to
more granular levels, what companies or what stocks for appealing
to you as you look at Yes and Video, which
you said is in your portfolio with these others that
are kind of secondary plays when it comes to AI.
Speaker 9 (34:51):
I would be Eten which is etn mcre Eme, Quanta
Services PWR, and then Vistra which is v our Tea.
Those all help make the grid more efficient expand. The
one thing holding the grid back is the Biden administration
did pass a law that if you add a new
(35:13):
not a law, but an executive order that if you
do a new natural gas power plant, they would like
you to sequester the carbon and that's an eight year permit.
So normally you would just hook up a natural gas
power plant and that's how you expand the grid. Okay,
but when you put all these new rules on it, it
(35:33):
really messes things up. Now Here in Nevada, you know,
we're next to California. We're extra green. Everything here is
solar and batteries. We do have a lot of geothermal,
but that can only.
Speaker 11 (35:47):
Do so much.
Speaker 2 (35:48):
Since you are in Reno, talk to us about what
it's like for the economy. What you're seeing consumers spending
their money on, whether you're going to the grocery store
or other things. Telltale signs about the economy right now.
Speaker 9 (36:00):
Yeah, Well, you know, Reno is a is a boomtown
because we're next to California and people move here, and
you know that we got a lot of The Schwab
office in Reno is the largest in the world, so
there's a lot of money hiding here. Plus we have
a lot of corporate money. Microsoft is one of the
(36:20):
largest employers in Reno because there's a two percent tax
on gross revenue in Washington State. Amazon is here too,
big time, so they're avoiding the state corporate taxes. But
we have Apple, Google, Intel, the into It founders, my neighbor,
you know, Cisco's here that they're all a lot. We
have a lot of Treasury departments here. But yeah, we
(36:43):
got a lot of wealthy retirees. You know, the Californians
come in and buy our real estate and what used
to be you know, you know, two hundred foot for
a home is now in the hills pushing four to
five hundred a foot. It's funny the last twelve hundred.
But then we have to remind them where they built.
But you know, it's it's a boomtown. But you know,
(37:07):
we do have extreme weather here and they should have
a four wheel drive and they better put snow tires
on the right.
Speaker 2 (37:13):
You know, we only have about fifteen seconds left. But
what's the top question you're getting from your clients right now?
Speaker 1 (37:19):
Oh?
Speaker 9 (37:20):
Just it's all about the I stocks. And fortunately we're loaded,
so we're fine.
Speaker 2 (37:25):
You're good, all right, Luis Davia, thanks so much for
joining us again. Founder in CEO Navalier and associates joining
us from Reno, Nevada. We'll have more coming up. This
is Bloomberg.
Speaker 1 (37:37):
This is the Bloomberg Business Week Podcast, a little Apple, Spotify,
and anywhere else you get your podcast. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot com,
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You can also watch us live every weekday on YouTube
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