June 3, 2025 • 44 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Wells Fargo & Co. finally escaped a Federal Reserve asset cap that has restricted its size for more than seven years, unleashing the firm from the unprecedented punishment in a major win for Chief Executive Officer Charlie Scharf. The bank’s shares surged.
The Fed said in a statement Tuesday that Wells Fargo met all conditions required by an enforcement action imposed on the bank in 2018 to remove the restriction. The central bank completed its review of Wells Fargo’s remediation efforts and third-party assessments, as well as its own assessment of the bank’s corporate governance and risk management programs, it said.
The hotly anticipated verdict closes the door on nearly a decade of scandals at the fourth-largest US lender and allows the bank to pursue growth again. Since the cap was imposed in February 2018, it became the most-feared punishment in banking and caused Wells Fargo to miss out on about $39 billion in profits by one measure.
The Fed said that other elements of the 2018 enforcement action will remain in place for now.
Today's show features:
- Bloomberg News US Finance Team Leader Sally Bakewell on Wells Fargo being released from a Federal Reserve asset cap that has restricted its size for over seven years
- Bloomberg Radio and Television Anchor Alix Steel on Meta's deal to buy nuclear power from Constellation Energy to help run its AI platforms
- Bloomberg News National Security Team Leader Nick Wadhams on President Donald Trump’s decision to attend the upcoming NATO summit and NATO’s push to boost European to air defenses
- Katy Kaminski, Chief Research Strategist of AlphaSimplex on key trends to watch in the equity and bond markets
- Eric Clark, Chief Investment Officer at Accuvest Global Advisors on consumer-focused ETFs and investing strategies
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business
Weekdaily reporting from the magazine that helps global leaders stay
ahead with insight on the people, companies, and trends shaping
today's complex economy. Plus global business, finance and tech news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Steneveek on Bloomberg Radio shere's.
Speaker 2 (00:32):
A Wells Fargo moving higher in the after hours up
right now by about two point six percent. They did
spike up as much as seven percent earlier, this after
investors learned that the bank finally escaped a federal reserve
asset cap that has restricted its size for more than
seven years. It unleashes the firm from the unprecedented punishment
and a major win for CEO Charlie Sharf. We've got
(00:54):
US Finance team leader Sally Bakewell here in our Bloomberg
Interactive Brokers studio. Obviously a little bit of a surprise
to investors, a surprise to you though, and to the
team that's covering that's been covering this bank for years.
Speaker 3 (01:07):
I think we were starting to pick up that it
was going to come quite soon for one thing, The
bank kept announcing that a lot of its consent orders
were being lifted. In fact, it managed to announced just
last week that its thirteenth consent order was lifted, with
about half of those since twenty nineteen actually lifted this year.
(01:30):
So it did feel a lot like momentum was gathering
toward this final hurdle, which really is the last major hurdle.
And really now I think you can say that it
puts the scandal pretty firmly behind Wells Fargo.
Speaker 4 (01:44):
Have they fixed all that ails them?
Speaker 5 (01:45):
I mean, it was what a decade, you know, of
scandals and then dealing with it and kind of finding
its way back.
Speaker 3 (01:52):
Yes, I think. I mean, there is still one formal
agreement left which it entered into in twenty twenty four
with the OCC regarding deficiencies in complying with anti money
laundering rules. But in terms of all of those scandals
that emerged in twenty sixteen and pertained to miss selling
of products and opening of fake accounts, it's shared most.
Speaker 2 (02:12):
So egregious on the list. Just it's like you'd pick
up one rock and you'd see something else under the
next rocket. And I remember Warren Buffett actually said is
something along the lines of there's never just one cockroach.
When he was talking about this, this was like years ago,
he said this. The question I have for you, Sally
is have customers forgotten about all these scandals?
Speaker 3 (02:35):
I mean, that's a great question. Memories are short on
Wall Street? Are they short with consumers? I mean, it's
almost a bit difficult to say, because the bank hasn't
really been able to grow beyond its twenty seventeen assets,
which were one point ninety five trillion, So it's been
harder for the bank anyway to really put itself out
there as this as a big sort of expander on
(02:56):
Wall Street for consumers. So I think now we'll be
moment where we see if consumers do sort of have
sort of forgotten or forgiven Wells Fargo for those past
egregious misdeeds.
Speaker 5 (03:09):
What's nine trillion in asset sounds like a lot, but
give us some perspective against some of the other big
players that are out.
Speaker 3 (03:13):
There well in terms of yeah, I mean, JP Morgan
has effectively added one Wells Fargo in the time that
Wells Fargo has been under the cap, so it really
hasn't been able to compete with a lot of its
Wall Street rivals, which I think now under Charlie schaff
who can very much be on its CEO, who can
very much be on the offensive. Now that is one
(03:33):
of the big focuses for the CEO, who really came
in to try to rectify all of these misdeeds from
the scandals.
Speaker 2 (03:42):
So now what is the bank going to be able
to do that it wasn't able to do over the
last few years.
Speaker 3 (03:47):
More trading, more investment banking. I think it can do,
more lending, It can probably acquire more deposits. A lot
of these things had been restrained and to that twenty
seventeen level. Charlie Schoff he also set about when he
came on board. He also said about selling some non
core businesses and reducing headcount, and so the bank now
(04:09):
is sort of a more simplified bank. Just last week
they announced the sale of their railcar financing and leasing business.
So it's a sort of simpler, more streamlined bank. And
they're still very eager to be a consumer facing bank
and have significant sort of retail presence, but they're also
very keen to bolster their Wall Street presence as well.
Speaker 4 (04:32):
I mean, I always think about them in terms of mortgages.
Speaker 5 (04:34):
Right, yes, yeah, I mean that's really has that been
really the core of their and kind of retail or
consumer accounts.
Speaker 3 (04:43):
So interestingly, the mortgage issue wasn't due to the mortgage
pullback because Wells Fargo has been pulling back in mortgages
like a number of banks since the Financial crisis, because
after the Financial crisis, regulation required that they allocate more
capital against risk weighted assets like mortgages. So that resulted
(05:03):
in wholesale pullback by banks from the sector. So Wells
Fargo was one of them, and that isn't actually really
related to the asset cap as it happens.
Speaker 5 (05:12):
But it was very separate.
Speaker 3 (05:13):
That was separate, but it was a huge and significant
presence in the mortgage world. But like all banks, it's
sort of withdrawn from that a little bit and it's
now the non banks just by.
Speaker 5 (05:23):
That, right, Like during thea it was was it Wells
Fargo and Wakovia Right, it's too just kind of interesting
bottom line netnet. I mean, the stock isn't up as
much as it was initially. But this is a huge
deal for Wellsburg, huge.
Speaker 3 (05:36):
Deal for Wells Fargo. It ends an era of scandals
It's a huge deal for Charlie chaff Yeah, it can't
be understated or underestimated. I think, and I think perhaps
the shares not being up so much is because it
was expected. We've seen a number of consent orders come
off this year, and the bank has the CEO in particularly,
it has telegraphed that things were going well, that they
did expect to have some sort of resolution soon.
Speaker 2 (05:59):
Sally big Well, thanks for joining us on this breaking news.
Sally bik Well, thank you. Is US Finance team leader.
She joined usus here in the Bloomberg Interactive Brokers studio.
Speaker 6 (06:07):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (06:22):
A story we've been talking about all day, Constellation Energy
agreeing to sell power from an Illinois nuclear plant to
meta platforms as AI sends power demands storing soaring. We
saw a story about energy, we knew we had to
bring her back. She joined us yesterday and by popular demand,
Alex Steele is back.
Speaker 3 (06:39):
Also.
Speaker 2 (06:39):
Carol missed her. I did a little jealous.
Speaker 7 (06:42):
I was.
Speaker 2 (06:42):
Alex is the Bloomberg radio and television anchor. She co
hosts Bloomberg Intelligence and The Close. She joins us from
our Washington, DC bureau. Alex, We had a really interesting
chat with Will Wade, who covers nuclear energy, at the
top of our two pm hour, and I asked him, Hey,
why does it matter where these where this energy comes from.
I mean, energy is energy. If you're getting power for
(07:03):
a server from fossil fuels or from a nuclear plant,
it still does the same thing. And Will said, these
companies want to buy clean energy, and I always said
clean energy. We're now calling nuclear energy clean energy. That's
such a far cry from what it was in the
nineteen eighties and nineteen nineties when everybody was so concerned
about well even fifteen years ago, in the wake of Fukushima,
(07:23):
the concerns there. Things have changed a lot when companies
are looking at their energy sources.
Speaker 8 (07:28):
No, yeah, and you know the fine line, like technically
nuclear is clean, like it has no emissions. In terms
of the risks, like you're talking about the Fukushima plan,
that's a little bit different. But in terms of actually
releasing emissions, nuclear doesn't really have that, but it has
changed a lot. And you know, I was on a panel.
I was leading a panel in Oklahoma City at the
(07:50):
Harold Ham Institute with the head of Sustainability and Energy
for Meta open AI Anthropic, I should say, as well
as Nvidia, and I kind of asked like what they
were most jazzed about in terms of energy, but they
put anything on or off the table. No one seemed
to want to touch coal with a ten foot pole,
But aside from that, it was like everything's on the table.
They were super pumped about geothermal and nuclear as well.
(08:13):
But the issues You can't just build a nuclear plant tomorrow,
Like it's really really expensive, and the Trump administration is
trying to make that part easier. But what makes this
so interesting is that it's just keeping the existing plant
going and not turning it off. And that's what's so
interesting about this particular deal.
Speaker 5 (08:28):
You know, Alex, you know you, yes, you are so
incredible in terms of the you know, energy markets and
just thinking about power overall. And I guess I keep
thinking about how you think thinking about kind of the
way forward, especially we have a different administration, different priorities.
He's certainly into you know, drilling more and kind of
(08:49):
embracing the fossil fuel economy. But I mean, when you
think about power generation and where it all comes from,
going forward alternatives, and I guess wherever nuclear fits into
all of this, is there a lot more enthusiasm.
Speaker 4 (09:02):
Is that enthusiasm still.
Speaker 5 (09:03):
There or is it waning? Like I'm just trying to
get the big picture here.
Speaker 7 (09:08):
I don't think you're alone.
Speaker 8 (09:09):
First of all, you guys are really good for my ego,
So I'm gonna come on like every.
Speaker 7 (09:12):
Day, but you're you're not here.
Speaker 8 (09:14):
You're welcome to, but you're not alone in being confused.
So what everyone can kind of seem to agree on
in the industry is that hydrogen isn't a really bad
spot because it doesn't have the support anymore from tax credits.
It's way too expensive and it hasn't been proven yet
to deliver the results. So let's put hydrogen aside for
a second. Solar and wind are economically very competitive. Without
(09:36):
the tax credits, it gets a lot harder. The problem is,
of course it's intermittent, right, Sun and wind don't shine
and blow every day, so you need it to you
need to offset it with something else like nuclear. Or
gas or coal. Now, the administration has talked a lot
about coal. I was talking to secretary right though, the
Energy Secretary, and he made it clear to me at least,
that it's not about new coal plants. It's about the
(09:57):
current ones just not going away, which is where we
kind of are nuclear. Also, administration is super into geothermal,
so that's like a heat pump like you might have
with a mini split, say in your house, So really
into geothermal. Again, there are issues need to be scalable
that go with it. I think that the prevailing feeling
is that you need all of this stuff and to
(10:18):
turn your back on anything is a really bad idea,
and you need it to all work together to help
to support the grid because nothing is full proof and
nothing runs forever. And that's where the ideological lines get
really tricky, when we're just trying to make sure we
all keep the lights on at the end of the day.
Speaker 2 (10:36):
Yeah, well, that's what I'm wondering about, because you know,
here we are in an environment where we're using more
and more electricity than we even thought what we would
demand is going up because of what we're doing as
consumers and what companies are doing to deliver the AI
solutions that they think customers and businesses want. So where
does that leave the traditional oil and gas players that
(10:59):
you have cut for years, alex in an environment where
oil prices are down roughly ten percent so far this year,
where do they lay right now?
Speaker 8 (11:09):
Yeah, this is the This is the really funny part
because they're not power producers, so they're not anywhere in
this game. Being a power producer is really different than
being an oil company a lot of tech.
Speaker 2 (11:22):
Companies, so they're not ever set they're not even forget
my ignorance here, but they're not even ever selling product
to power producers. Whether we're producing with fossil fuels, they're
never They're never in that pipeline.
Speaker 8 (11:33):
So like an AI company is never going to call
up Exon and be like, hey, I need power from
my plant. Right, there's a lot intermediaries and I mean
Exon might actually think about getting into power. But putting
that aside, like power is a whole different business than
producing oil and gas. Now, the gas part and using
gas to help to help em andate power is something
(11:55):
where the oil companies can play because they do make
gas and they do produce gas, so that is a
spot for them. But just because power demand is going
to grow and AI hyper scalers are going to invest
a lot of money, doesn't necessarily mean that all of
a sudden there's a huge demand.
Speaker 7 (12:10):
Pull for what the fossil fuel players are pulling out
of the ground.
Speaker 8 (12:14):
There's not a direct line from that. It's all energy, sure,
and maybe more of a direct line when it comes
to a gas player, but it's not a straight line
for them. They're still going to be at the mercy
of the strip price for crude and what the underlying
demand is for crude like what we put in our
car and that kind of stuff.
Speaker 5 (12:32):
All right, So you're I love, yeah, we love that
you went there. So when you think about kind of
moving forward, and you're right, like power generation versus what
we're getting from all the big energy giants like two
different things. I just wonder, I don't know for the
investment class that's out there, like how they should be
(12:53):
how do you take tho a story like once again,
meta constellation, we've seen Microsoft like we you know, we
keeping these hyperscalers right tap into how do we power
all this stuff going forward? How do we make sure
that we you know, are reaching out to the right
power producers. You know, what is the right investment story
to be thinking about because the buildout, whether it's nuclear nuclear,
(13:14):
takes time.
Speaker 4 (13:14):
So I'm just curious how we think about this.
Speaker 8 (13:16):
Yeah, and nuclear is still quite expensive. The Bloomberg Intelligence
had a great rundown on this and said that, you know,
consuming assuming a construction cost of like ten thousand dollars
per kilowatt, a one gigawatt unit would be still ten
billion dollars, right, And that's a lot of money to
sink in. And that's like there for the long time.
(13:39):
This is not a short term kind of thing. Okay,
So what do investors do?
Speaker 6 (13:43):
I don't know.
Speaker 8 (13:43):
If I knew, I'd probably go do that. But I
think it's the bull players.
Speaker 2 (13:48):
I thought about it for a second, Alex, you really
thought about it. Yeah we do.
Speaker 4 (13:52):
I also like you have aisation with yourself. It's really
kind of fun, okay.
Speaker 8 (13:56):
On radio it's two other people, super cool cool Okay.
But the investment thesis becomes more of who is talking
and what's the price at So the AI players can
say a lot that they want this kind of power
and the energy. These guys can say, look, we're talking
to all these people. Isn't that super awesome? But who's
actually signing the contracts? And at what price are they
(14:17):
doing that? We don't know the financials when it comes
to what Meta and Constellation Energy got together.
Speaker 7 (14:22):
I'm sure we will at some point.
Speaker 8 (14:24):
The rumor is that it's less than what Microsoft paid
to Constellation because of you had to restart a plan
versus just keep it going. But how hard is it
to sign those deals? Because if it's hard to sign
those deals, that means that a lot of the talk
is just talk, it's not actually being signed into action. Also,
sometimes we're double counting or triple counting certain power demand needs,
so it's not like a one for one basis. I've
(14:45):
heard a lot of stories that the tech guys are
kind of out there but casting super wide nets, but
that's not necessarily an actual deliverable that's going to be
signed on the find, that's going to be signed on
the fine print kind of thing. Power companies have also
told me like, look, we have the stuff, no one's
going to sign it with me, so I can't get
them to the table. So it's not as dry cut
I think as we want it to be.
Speaker 5 (15:06):
I love that you went there similar reaction doing a
panel on the nuclear energy, and.
Speaker 4 (15:12):
The same thing.
Speaker 5 (15:13):
They said, these hyperscollars are signing up with everyone because
they just want to make sure that they have kind
of redundancy and making sure that they have what they
need doesn't mean that they're going to fulfill all of
those commitments or contracts like going forward, right, So the
dust needs to settle a little bit here.
Speaker 8 (15:29):
Yeah, Also, what's a what's an MoU a memoir of
understanding versus a dotted line and a check Those are different,
very different things.
Speaker 4 (15:38):
All right, So come back tomorrow, come back.
Speaker 8 (15:40):
There's Yeah, the trains it too, trains it to you guys.
Speaker 7 (15:46):
With you guys all the time.
Speaker 2 (15:47):
Well, it is a special We usually we can only
talk to Alex Steal from two o'clock to three o'clock
Hard Wall Street time. And that's because from three o'clock
to five o'clock she does the clothes. She's on assignment
down in the Washington, DC area. So she was gracious
enough to go into the Washington dec Bureau and hang
out with us.
Speaker 4 (16:02):
We so appreciate.
Speaker 5 (16:03):
Yeah, always, always Alex Steel, Bloomberg Radio and TV anchor.
Check out all of our reporting on both sides across
our platforms.
Speaker 4 (16:10):
Really good stuff. Hey listen, folks. We did have the
market wrap up on this Tuesday.
Speaker 5 (16:15):
We do have some stocks moving in the after hours,
some because of earning, some because of Like with Wells Fargo,
it's a bank that's by basically having caps lifted. So
let's get on over to Charlie Pellett with an update
on the tree.
Speaker 1 (16:31):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Apple, Cocklay
and Android 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 (16:50):
Big meeting coming up later this week at gathering of
NATO defense ministers in Brussels. That's happening in just a
couple of days, and President Trump just a couple hours
ago saying he will be there. Just before, we heard
from White House Press Secretary Caroline Levitt that the President
was not aware of the Ukraine drun strike on Russia
before it happened. With more on all this and more,
(17:10):
we had two Washington DC and Bloomberg News National Security
team leader Nick Wadams, who joins us from our Bloomberg
News Washington d C bureau. Nick, I want to start
with just the news that the President is set to
go to the NATO Defense ministers meeting in at Brussels.
What's the signal that that's sending. Why was this such
a big deal? This was a red sticky to across
the Bloomberg terminal this afternoon.
Speaker 9 (17:31):
Well, he's going to the NATO leader's summit later later
in June. There's a NATO Defense minister summit later this week.
Thank you that he won't be going to. But regardless,
the point stands, it's a very big deal because the
tension between the Trump administration and NATO. Trump has put
so much pressure on the alliance in his first term.
There was a lot of talk about would he or
won't he leave the alliance, pull the United States out?
(17:54):
But you know they've patched things up since then. The
new NATO Secretary General is on pretty good terms with Trump,
and so it's a signal here that Trump is not
going to turn away from the alliance. He's not going
to turn away from these international gatherings where he's sort
of been at odds with some other leaders, and in
some ways may see this in two ways. One is
(18:15):
a way to push the alliance's members to spend more
on defense, but also to work with them. You know,
there's a lot of concern about European security and the
relationship with the United States. So a positive sign that
the president is willing to play ball with an alliance
he's been skeptical of in the past.
Speaker 4 (18:33):
Wait, so is this?
Speaker 6 (18:34):
Yeah?
Speaker 5 (18:35):
You know, President Trump talking tough, pushing back, and then
all of a sudden kind of backtrackingdre I say Taco,
Should I say it?
Speaker 4 (18:42):
Should I say it?
Speaker 9 (18:44):
Trade for NATO?
Speaker 2 (18:47):
This is this is I'm gonna be serious for a second.
I dropped my son off at school and walking to
the subway, guy crossing the street wearing a shirt already
says Taco Trump always chickens out. All right, do you
have shirts for this in Brooklyn?
Speaker 4 (19:01):
You know how that works? I mean, but is that.
Speaker 5 (19:03):
What's going on?
Speaker 10 (19:04):
Nick?
Speaker 9 (19:06):
Let's say it does fit with a broader pattern we've
seen from the administration. I mean, listen, the officials in
the administration have said that a lot of the hullabaloo,
a lot of the speculation that Trump would leave NATO
was always overblown, that he never intended to leave it,
and that he used that as essentially a forcing mechanism,
And you can make the argument, you know, they have
(19:26):
steadily increased defense spending. The administration is now saying they
want NATO countries to spend five percent of GDP on defense,
which is a target that many are not going to
reach or have not committed to reach for a very
long time. But you know, it wasn't that long ago
that we were talking about two percent, and you know,
there has been a real steady growth in the number
of countries doing that. You can ascribe that to various
(19:49):
different reasons, including the Ukraine War. But certainly Trump is
going to take credit for that, and the trend lines
are pointing in his direction.
Speaker 5 (19:58):
So why has it that Europe has struggled with sufficient
or insufficient air defense cover? Is it just because they
haven't spent or like, help me understand kind of where
they've been in terms of protecting the continent.
Speaker 9 (20:14):
Well, I mean, in a lot of ways for major defense,
they've relied on the United States. It's relatively new technology,
it's expensive, you have to deploy a lot of launchers
and systems far more than you might anticipate you would need.
And also the threat is relatively recent or has only
gotten urgent relatively recently with Russia's attack on Ukraine. You know,
(20:37):
there is fear if you play out the doomsday scenario
unlikely as it may seem right now, that Russia takes
over Ukraine, pushes to the border with Poland and then
potentially has aspirations as some people fear beyond that into
Poland or back into the Baltic States. That that's a
situation where you would need very very robust air defenses.
(20:57):
Problem there, of course, is production. It's very difficult to
produce these systems fast enough, and they're also extremely expensive,
you know, many many hundreds of millions of dollars to produce,
and European countries, you know, the real A plus air
defense systems are made in the United States, and again
(21:18):
the production lag there is years at best.
Speaker 5 (21:21):
Does it also, is it safe to say, Nick, it
kind of goes back to post World War two and
kind of the you know, agreement of the US kind
of helping Europe rebuild and being there and supportive. It
also gave the US incredible access to those markets. I
think we've talked about this with you before, but I
keep thinking about historically kind of this relationship and what
it's meant.
Speaker 9 (21:42):
Yes, I mean, you know, historically the trade off has
always been listened the United States will be sort of
your protector. That has applied much more for places like
Japan that it has for Europe. But there has been
this implicit agreement, you know, the United States will be
your security backstop in exchange for this very very robust alliance,
(22:03):
for the United States having great influence and sway and
also cementing those partnership, you know, with great with great
access and control over the security system you get. There
are a lot of benefits to the United States from that.
Now European leaders are saying, you know, with tensions getting higher,
with the strain with the Trump administration, it's time for
(22:24):
Europe to really double down on its own defense and
maybe separate itself from the United States. So you're sort
of seeing a little bit of that happening as well.
This is really a thing where they're saying, Okay, listen,
we have to be responsible for our own defense and
not rely so much on the United States.
Speaker 5 (22:39):
Hey, Nick, speaking of tensions, we did hear from after
we got the headline that we crossed on the Bloomberg
about President Trump going to the leaders the NATO Leader summit.
Then we heard from White House pres Secretary Caroline Levitt
who said the President was not aware of the Ukraine
drone attack.
Speaker 4 (22:57):
On Russia before it happened.
Speaker 5 (23:00):
All of this too apart for the President to go
across and say, hey, guys, I need to know, like
I'm trying to put the pictures together or the you know,
for him to say, why didn't we know? And our
Natal leader is going to be like, well, you've been
kind of backing off, Like I just wonder how this
kind of plays out.
Speaker 9 (23:16):
Right, I mean, there is an uncomfortable dynamic there for
the president. I mean, listen, I think you know, when
Ukraine has launched grown strikes on Russian soil in the past,
I don't think they would have necessarily tipped off the
United States. You know, it's the whole sort of esque
forgiveness rather than permission, and that applied certainly under the
Biden administration as well. But you know, there is that concern.
(23:38):
I mean, President Trump's strategy has been listened. We want
to get to talks and rather than using leverage, the
leverage of force, of sanctions, of punishing Russia, of stepping
up the fight. We want to avoid an escalatory spiral
and say, hey, we're going to create space for talks
and sort of use carrots rather than stick. So I think,
you know, though the President has not really commented in
(24:01):
any fulsome way on these drone strikes, it's something he
might oppose because he believes it's unhelpful at a time
when he's trying to get these two sides in a
room with each other. But in terms of some expectation
that the US would get a detailed readout from Ukraine,
I mean, especially with the US the President not being
willing to re up that supplemental to infuse more and
more weapons to Ukraine, they feel they strategically don't necessarily
(24:25):
need permission from the US to do.
Speaker 2 (24:26):
A strength What about a European ally, is getting a
readout ahead of that or having a tip that that
is going to happen, is that something well that would
likely happen.
Speaker 9 (24:35):
Not necessarily either. I mean, I think, for one thing,
they're really worried about leaks and the possibility that it
would get out. But again, I think it's that sort
of situation where you say you'd rather get forgiveness than permission.
They basically don't want anyone to tell them no. And
obviously the concern for NATO countries is Listen, if Ukraine
escalates this well beyond its eastern front and into Russian territory,
(25:00):
Russia may see that as an escalatory action that then
would require retaliatory action that might push the conflict into
Europe proper outside of Ukraine, and that's what they're really
worried about.
Speaker 2 (25:12):
Hey, Nick, just before we let you go, Carol and
I were talking about this. She was out yesterday, but
she was still paying a lot of attention to what
was happening.
Speaker 4 (25:19):
Well, it's kind of upset.
Speaker 2 (25:20):
On Sunday too, I had a lot of friends setting
me the videos the drone strikes that were released by
the government of Ukraine. Yeah, you're pretty obsessed with that.
I'm wondering what it tells us, Nick, about the technology
that's being used right now. A lot has been worn about, Yeah,
a lot has been written about what Ukraine has been
able to do with sort of rudimentary drones, But I
(25:40):
don't know if those were used in the case such
as this. We don't have all the details, but what
is starting to emerge.
Speaker 9 (25:46):
Well, I mean, one of the most fascinating things about
this is some of these drone strikes were deep, you know,
thousands of kilometers inside Russian territory, and it would not
have been a case where the drones would have been
able to fly from ukra And in many cases the
indications we have so far are that the report that
the drones were launched from within Russia, So you had
(26:07):
a network potentially of covert operatives of agents essentially setting
up and then launching these drones from within Russia, so
infiltrating Russian territory to be able to launch these drones.
So I think what you're seeing is a willingness to
raise the threshold and launch even bolder strikes. But in
(26:28):
terms of the technological advances, it's not necessarily that the
technology is so great, but that it's so cheap and
plentiful and has been able to have such a devastating
effect with the limited resources that Ukraine has. And that's
really what's so fascinating about this. You're not seeing some
multimillion dollar advanced stealth fighter jet launching around the world
(26:50):
strike from a base in Kansas or something like that.
You're seeing the infiltration into Russian territory of very rudimentary
drones that are being used to devastating effect.
Speaker 4 (27:00):
Yeah, it kind of reminded me.
Speaker 5 (27:01):
I know it's not apples to apples, but I think
about when Deep Sea came out earlier this year and
we're like, Okay, maybe we can do this AI thing
less expensively and very differently. And this, just to me, Nick,
seemed like warfare that, like you said, it doesn't have
to be super expensive for it to be impactful.
Speaker 9 (27:18):
Right, And that's a big tension point frankly in the
United States, because there are a lot of defense companies
that have made a lot of money developing and producing
the most advanced fighter systems. I mean, the F thirty
five all in all, is going to in the end
cost about two trillion dollars for that program, from development
through production to sustainment, huge cost overruns, I mean a
(27:39):
software update for the F thirty five costs many, many
hundreds of millions of dollars, and the defense primes in
a lot of ways really feast on these big contracts.
So then if you're a little country like Ukraine producing
these drones for hundreds of dollars a pop. I mean
that sends an earthquake through a lot of the big
defense primes.
Speaker 5 (27:58):
Yeah, talk about disruption perhaps in the defense industry. Nick
Waddam's the best. Thank you, always, always, National Security team.
Speaker 4 (28:05):
Leader at Bloomberg News.
Speaker 5 (28:06):
Joining us from the Bloomberg News Bureau in Washington, DC.
Speaker 6 (28:09):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (28:24):
Well, and now to trade and what we've seen on
the stocks versus bonds, and to bring in Katie Kaminski,
Chief Research Strategies in portfolio manager at Alpha Simplex Group.
She joins us from Boston. Katie, A big theme that
we had on yesterday's program. It was about a story
that ended up being pretty much the most read story
on the Bloomberg terminal. Was this buyer strike that was
happening at the long end of the curve, big investment
(28:46):
firms staying away from those thirty years over concerns about
the US economy. I'm wondering if you're starting to actually
see that happening as we get closer and closer to
five percent on the thirty year.
Speaker 7 (28:58):
We're definitely seeing that already in the data.
Speaker 11 (29:00):
You've seen momentum in signals on fixed income where short
signals are actually sort of building and have been building
for some time.
Speaker 7 (29:09):
So I think that's steepener view.
Speaker 11 (29:12):
That sort of negative view on long term bonds is
something that's catching a lot of people's attention.
Speaker 4 (29:17):
Hey, you know, I think I finally was brave enough
to look at my fro o one K.
Speaker 2 (29:21):
Wow, did you do such as well?
Speaker 5 (29:22):
Well, it's been over a month, six weeks, eight weeks
in the making, and it's like April and President Trump
so called liberation Dake Katie never even happened, at least
on the equity side of things. It did, But the
US bond market, I feel like, is still kind of wary.
Speaker 11 (29:41):
Yes, that's a really good point, And I think what's
been really hard for us on the systematic side is
that you know, you have this massive move and it's
as if you know that didn't happen, and the market
is starting to turn a little bit more positive. But
the one area that is seeing a little bit of
concern is definitely bonds. So I think there is some
(30:02):
truth to that that despite the fact that equities maybe
back where they are, bonds aren't really quite where we'd
like them to be for some investors.
Speaker 2 (30:11):
So does that then, and look, I know you're focus
on the fixed income side, but there is a relationship
between the bond market and the equity market. Does that
mean the bond market gets it in the equity market doesn't.
Speaker 7 (30:21):
Well, I think the question.
Speaker 11 (30:22):
I mean a lot of times people tend to look
at the bond market during these environments to try and
understand a longer term view, and that's because you know,
in general, the equity markets always like to be bullish,
and so I think looking at the bond markets could
give us an indication of potential interesting trends for the
rest of the year and places where things may be
(30:44):
a little different than they expect. I've even heard people
talking about even higher rates on the long end, which
would be a problem for many investors who are thinking
about financing and et cetera later this year.
Speaker 2 (30:56):
Well, it raises the question about the so called bond vigilantes.
You know, you knew we were going to go there.
They do They have the power that they've had in
the past to essentially tell the US government that hey,
this is not what we want to see right now.
Speaker 11 (31:09):
I mean, I think it's really been a long time
since we've really seen that force. But I think what
we did see even when April came about, and I
think I keep going back to this example, is that
when we actually had the equity markets falling, bonds weren't
there for us in that environment. And I think that's
an indication that either issues like inflation or other sort
(31:31):
of you know, the potential for fixed income to be
more challenging is something that is really an issue for
many investors, particularly in this environment. Whether it's inflation that
does this, or whether it's you know, bonds needing to
be higher because real rates are higher, it's not clear yet,
but it's definitely not the same bomb market we're used
to pre a few years ago.
Speaker 5 (31:52):
I don't know, Katie, Like, you know, how are you
thinking about this world? Like I keep thinking about it,
and I think about the US being uninvestible. I think
about the weaker dollar, like is the mar A Lago
accord like happening before us? I just wonder, right, that's
the administration's move to kind of correct some of the
trade deficit by weakening the dollar. So is it kind
(32:14):
of is this kind of happening? I don't know, how
do you guys talk about it with your team?
Speaker 11 (32:19):
Well, this is a really good question because the biggest
theme we've seen this year is a weaker dollar. I'm
a little concerned about that trade for several reasons. If
the market gets a little bit more positive, if growth
becomes positive, that tends to be pro dollar.
Speaker 7 (32:36):
But I think the thing that is the most interesting.
Speaker 11 (32:39):
From a quant perspective is we've actually really seen a
deterioration between the.
Speaker 7 (32:45):
Correlation between bonds and the dollar.
Speaker 11 (32:48):
So higher yields usually mean stronger dollar, and so you've
actually seen the opposite of that. So that does indicate
that something else is driving the dollar weakness, perhaps that
US vulnerability trade, this idea that people are repatriating capital
and the US assets are less desirable.
Speaker 7 (33:07):
The question is how long does that go? And is
that going to keep going?
Speaker 4 (33:10):
How credible is how credible is that? Katie?
Speaker 5 (33:13):
Like I you know, tips heard me say this a
million times, so feel free to roll your eyes.
Speaker 4 (33:17):
But at milk and it was just like, well, wait
a minute.
Speaker 5 (33:20):
A lot of folks said, it's all about rebalancing our portfolios.
We all became too exposed to the United States, and
so that's it, And that makes sense after you know,
a long time when there was nothing else but really
the United States, it felt like, certainly from an investment perspective,
Is that true or I don't.
Speaker 4 (33:36):
Know through your channels that you look.
Speaker 5 (33:38):
Is it a case that folks are saying, I don't
really want as much exposure to the US, it's not
as attractive. I don't want to be there.
Speaker 7 (33:45):
Well, I think there's some indications in the data.
Speaker 11 (33:48):
I mean, if you look at where markets have moved
this year and the way that they behaved in the
wake of the recent.
Speaker 7 (33:54):
Events and just this decoupling.
Speaker 11 (33:56):
Between the dollar and yields, it's ges that other forces
are affecting the dollars, so repast creation of capital and
you know, kind of rebalancing does have an impact on
those valuations. So I think there is some evidence to
that theme. Just how strong is that theme? Is it
as strong as some people would be concerned. We don't
(34:17):
know yet, but it's definitely there.
Speaker 4 (34:19):
TVD like so much in our world. Hey, listen, this
is a big week.
Speaker 5 (34:23):
We get the monthly jobs report and we're cruising towards
a FED meeting shortly soon ish. But the labor market
we got I feel like a sigh of relief a
little bit today based on adults data. But how are
you thinking about because I know, is it Torston Slot
that had.
Speaker 4 (34:38):
UPS research about sixty four thousand?
Speaker 2 (34:41):
Yeah, I got that note this morning and I was like, wait,
wait a second, we're talking talking double digits.
Speaker 4 (34:45):
Here, help me, help me.
Speaker 5 (34:48):
You know, Microsoft cutting more jobs, Disney talking about jobs.
Speaker 4 (34:51):
At some point, we're going to stuff has got to
show up in the data factor that in for us.
Speaker 11 (34:57):
Yeah, I think for us it's been it's been really
tricky because you.
Speaker 7 (35:00):
Know, you've seen current data not really showing.
Speaker 11 (35:04):
The expectations of concern that most investors have expressed in
terms of their sentiment. So I think, really it's too early,
and you know, for me it's I feel like most
investors are out scouring for sort of any now casting
or any sort of data that can give us a
little bit of a sense of the longer term picture.
But for now, actually, I've been very surprised. We haven't
(35:27):
seen a lot of evidence of things to tearing in
as much as we would have thought.
Speaker 7 (35:32):
So I think that's why the market is.
Speaker 11 (35:34):
Kind of calming down a little bit and has been
very positive, moving towards more positive sentiment, because it just
doesn't seem that the data has shown yet our concerns.
Speaker 5 (35:45):
Real quick fifteen seconds beed no moves this year? What
are you thinking real quick?
Speaker 11 (35:51):
We originally were thinking some, but I mean for now,
it's it's still looking very unclear, and especially if we
could see some growth and maybe even some inflation, that
is going to make things tricky.
Speaker 7 (36:01):
Unemployment data today didn't not help with that narrative either.
Speaker 5 (36:05):
Kati Kaminsky of Alpha Simplex Lover Lover, mcle I'll about you.
Speaker 9 (36:10):
Let me drive?
Speaker 2 (36:11):
Oh no, no, no no, this is not a toy.
Speaker 5 (36:14):
Who's going to judge?
Speaker 9 (36:16):
Honey?
Speaker 4 (36:16):
Please gravels. Let's wait, I want to drive.
Speaker 7 (36:22):
It's a good question.
Speaker 1 (36:23):
Good this is the drive to the clothes.
Speaker 7 (36:29):
Punk's commuting well, drun it down.
Speaker 1 (36:32):
On Bloomberg Radio.
Speaker 4 (36:34):
All right, TikTok, everybody.
Speaker 5 (36:36):
We've got about eighteen minutes to go until we wrap
up the trade on this Tuesday. Carol Master, Timstead of
a Clive in our Bloomberg Interactive Brokers Studio. You're Charlie
and Bill just uh breaking down the numbers, and we're
holding on to most of the day's games here.
Speaker 2 (36:49):
Do you know where we're going to be in a week, Cisco?
Do you know where it is?
Speaker 4 (36:55):
San Diego?
Speaker 2 (36:56):
Do you know where Clark is?
Speaker 5 (36:57):
San Diego?
Speaker 2 (36:58):
Okay, there's a method, my madness, Carol so Glad I like, yeah,
we got there again, we got there, we got there together.
This is a test. It's not a test. We're going
to test Eric Clark though. He's chief investment officer at
the RAA ac Vest Global Advisors. They've got approximate a
billion dollars in assets under management. We love checking in
with Eric because he covers all the companies that we
(37:19):
just talk about here on Bloomberg Business Week. In the
Rational Dynamic Brands Fund, YEP.
Speaker 5 (37:24):
That fund, by the way, is that more than fifteen
percent on average annually over the past three years, putting
it in the ninety first percentile according.
Speaker 4 (37:31):
To Bloomberg data against its peers.
Speaker 5 (37:33):
Here to date, the fund is down slightly and it's
lagging its peers. Good to have you back with us, Eric,
So talk to us about this environment and your fund,
Like we say, it's a bunch of household names.
Speaker 4 (37:47):
Are you disappointed by the performance.
Speaker 5 (37:50):
Or how do you explain it? Or is it just
kind of part of the course considering the year.
Speaker 10 (37:55):
Yeah, nice to talk to you guys again. You know, listen,
we had a really strong January up I don't know,
seven percent or so, and then we had all of
the tariff stuff, and the markets took the elevator down,
and so you know, there's you know, being back the
flat when you have a big draw down because of
the tariff situation feels pretty good. And now we can
(38:15):
maybe reset things. Hopefully we can get through the summer
without too much chop towards we get the end of
these tariffs. But you know, consumers are trying to figure
it out, just like businesses are trying to figure out
the rules of the road. But there's clearly a value
seekers mentality out there in consumer land, and with inflation
(38:35):
staying high for longer, I don't buy any of the
media tweet you know, the White House tweets about inflation
not being present. It's everywhere, go out to eat, go
on vacation, it's pretty much everywhere at the grocery store.
So value seekers are going to be everywhere, and some
companies deliver on that and some brands struggle with that.
(38:56):
And so, you know, we feel pretty good about the
portfolio that we have now. It has a lot of
you know, kind of predictable growers like Netflix and Spotify
and Amazon, but we have some good defense too for
some of the potential rocky stuff that might happen here
in the you know, the next couple of months with tariffs.
Speaker 9 (39:13):
You know, the.
Speaker 2 (39:16):
Stock market. If you look at the indexes they took
you said they took the elevator down, which they certainly did,
but they seem to have taken the escalator up. I mean,
we're up twenty percent since those lows on April eight. Yes,
we're still down close to three percent from those all
time highs back in February, but we've pretty much recovered
everything before April. Second.
Speaker 10 (39:39):
Yeah, I mean, so much money left the US. I
mean international is still you know, kicking the US is
but pretty handily. But when so much money moves out
of the US and out of tech and growth all
at once, and then you get this terraff for Prizal
from what was at April ninth or something, when the
Nasdaq was up twelve percent, and then you go lot
(40:00):
of money move back. So technology obviously has been the place,
higher beta names have been the place to be on
this on this rally. But I suspect people are gonna
look for some exit doors as we near these, you know,
the decision on tariffs, and and who knows, if we
get a decision and we or we kick the can
down the road again and those tariff things happen, the
(40:24):
tariffs get get cut for you know, the next couple
of months, then maybe maybe the market's rally again. But
in the July earnings is where we're going to really
start to see the effects of some of that uncertainty
and some of the tariffs. And let's see how inventory
levels are for different brands. You know, it was never
this this particular quarter that I was worried about. It
(40:46):
was all the July quarter. And and that's really going
to be the test on who's able to navigate this
better than others. And you know, candidly, the bigger brands
with with bigger cash flows and and and more levers
to pull and talking going back to their suppliers and
negotiating better rates, those are the people that those are
the companies that can navigate tariffs much better than maybe
(41:09):
smaller companies. So that's that's the real test of July
earnings in my opinion.
Speaker 2 (41:13):
Okay, so well, we'll hopefully speak to you before then. Eric,
We've spoken to you for years, and when we've spoken
to you, we've referenced as we did today that you
know you are a manager of the Rational Dynamic Brands Fund,
and it still shows you as the portfolio manager of
that mutual fund. Behind you, I see you have the
Alpha Brand's logo ETF. It's the Alpha Brands Consumption Leaders ETF.
(41:35):
It's an ETF here in the US that includes companies
such as Visa, Booking, Costco, Netflix, Eli, Lilly, kk Or, Walmart, Spotify,
Meta platforms and more in it. What just give us
your current focus right now? And are you managing this
fund as well as the Dynamic Brands Fund.
Speaker 10 (41:54):
We are the team. Thanks for mentioning that. I mean,
we just launched the ETF threaut three or four days ago,
so it's pretty new. We obviously have a track record
of managing global brands portfolios going back to twenty sixteen,
and the ETF is a little bit different than the
fund in that it's a much more broad in the
consumption categories that we want to have exposures to. And
(42:17):
so you know, we have exposure to travel through Booking
and Marriott, and we have exposure through streaming through Spotify
and Netflix, and even some international exposure like through media
with Sony and Tencent on the China technology. So this
is more about broad spending categories, which brands are the
(42:37):
dominant leaders in those categories, and we're still managing it
through a business cycle. There is obviously the business cycle
is still important, so you know, take more risk and
when it's prudent in the economies expanding and get more
defensive when you have a little more you know, yellow signs,
cautionary tales and data points that are starting. And we
(42:58):
still see some of those those cautionary data points which
keep us, you know, with about twenty five percent on
the defense. You know, Coke, right AutoZone, a Riley automotive,
those kind of things.
Speaker 2 (43:08):
Eric is it is the idea that new money comes
in and you wanted to go into the ETF rather
than into the mutual fund. It's sort of the pattern
that we're seeing with portfolio managers who are moving away
from mutual funds and more into ETFs.
Speaker 10 (43:19):
Yeah, you know, our view, there's still a lot of
advisors and people who like who like mutual funds and
the familiarity there. The goal for us was have a
consumption leader's global brand strategy in both of the popular packages,
the mutual fund and the ETF, and then we can
let advisors and individuals choose which, you know, I can
(43:41):
I can deliver it in a cone or a cup,
so to speak. You know, obviously the flows are going
to ETFs, and so having an ETF offering for people
to get access to the brands that they admire and
the brands that they spend their time and their money on,
that's just a wise decision. But there's still money coming
into the mutual fund as well.
Speaker 7 (44:00):
We're gonna leave it on that.
Speaker 4 (44:01):
We're gonna leave it on that note. Thank you so much, Eric,
Good to check in with you.
Speaker 5 (44:04):
Eric Clark, chief investment officer at the registered investment advisor
Acuvest Global Advisors roughly a billion in assets undermanaged.
Speaker 1 (44:12):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. 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
(44:33):
and always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business
Weekdaily reporting from the magazine that helps global leaders stay
ahead with insight on the people, companies, and trends shaping
today's complex economy. Plus global business, finance and tech news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Steneveek on Bloomberg Radio shere's.
Speaker 2 (00:32):
A Wells Fargo moving higher in the after hours up
right now by about two point six percent. They did
spike up as much as seven percent earlier, this after
investors learned that the bank finally escaped a federal reserve
asset cap that has restricted its size for more than
seven years. It unleashes the firm from the unprecedented punishment
and a major win for CEO Charlie Sharf. We've got
(00:54):
US Finance team leader Sally Bakewell here in our Bloomberg
Interactive Brokers studio. Obviously a little bit of a surprise
to investors, a surprise to you though, and to the
team that's covering that's been covering this bank for years.
Speaker 3 (01:07):
I think we were starting to pick up that it
was going to come quite soon for one thing, The
bank kept announcing that a lot of its consent orders
were being lifted. In fact, it managed to announced just
last week that its thirteenth consent order was lifted, with
about half of those since twenty nineteen actually lifted this year.
(01:30):
So it did feel a lot like momentum was gathering
toward this final hurdle, which really is the last major hurdle.
And really now I think you can say that it
puts the scandal pretty firmly behind Wells Fargo.
Speaker 4 (01:44):
Have they fixed all that ails them?
Speaker 5 (01:45):
I mean, it was what a decade, you know, of
scandals and then dealing with it and kind of finding
its way back.
Speaker 3 (01:52):
Yes, I think. I mean, there is still one formal
agreement left which it entered into in twenty twenty four
with the OCC regarding deficiencies in complying with anti money
laundering rules. But in terms of all of those scandals
that emerged in twenty sixteen and pertained to miss selling
of products and opening of fake accounts, it's shared most.
Speaker 2 (02:12):
So egregious on the list. Just it's like you'd pick
up one rock and you'd see something else under the
next rocket. And I remember Warren Buffett actually said is
something along the lines of there's never just one cockroach.
When he was talking about this, this was like years ago,
he said this. The question I have for you, Sally
is have customers forgotten about all these scandals?
Speaker 3 (02:35):
I mean, that's a great question. Memories are short on
Wall Street? Are they short with consumers? I mean, it's
almost a bit difficult to say, because the bank hasn't
really been able to grow beyond its twenty seventeen assets,
which were one point ninety five trillion, So it's been
harder for the bank anyway to really put itself out
there as this as a big sort of expander on
(02:56):
Wall Street for consumers. So I think now we'll be
moment where we see if consumers do sort of have
sort of forgotten or forgiven Wells Fargo for those past
egregious misdeeds.
Speaker 5 (03:09):
What's nine trillion in asset sounds like a lot, but
give us some perspective against some of the other big
players that are out.
Speaker 3 (03:13):
There well in terms of yeah, I mean, JP Morgan
has effectively added one Wells Fargo in the time that
Wells Fargo has been under the cap, so it really
hasn't been able to compete with a lot of its
Wall Street rivals, which I think now under Charlie schaff
who can very much be on its CEO, who can
very much be on the offensive. Now that is one
(03:33):
of the big focuses for the CEO, who really came
in to try to rectify all of these misdeeds from
the scandals.
Speaker 2 (03:42):
So now what is the bank going to be able
to do that it wasn't able to do over the
last few years.
Speaker 3 (03:47):
More trading, more investment banking. I think it can do,
more lending, It can probably acquire more deposits. A lot
of these things had been restrained and to that twenty
seventeen level. Charlie Schoff he also set about when he
came on board. He also said about selling some non
core businesses and reducing headcount, and so the bank now
(04:09):
is sort of a more simplified bank. Just last week
they announced the sale of their railcar financing and leasing business.
So it's a sort of simpler, more streamlined bank. And
they're still very eager to be a consumer facing bank
and have significant sort of retail presence, but they're also
very keen to bolster their Wall Street presence as well.
Speaker 4 (04:32):
I mean, I always think about them in terms of mortgages.
Speaker 5 (04:34):
Right, yes, yeah, I mean that's really has that been
really the core of their and kind of retail or
consumer accounts.
Speaker 3 (04:43):
So interestingly, the mortgage issue wasn't due to the mortgage
pullback because Wells Fargo has been pulling back in mortgages
like a number of banks since the Financial crisis, because
after the Financial crisis, regulation required that they allocate more
capital against risk weighted assets like mortgages. So that resulted
(05:03):
in wholesale pullback by banks from the sector. So Wells
Fargo was one of them, and that isn't actually really
related to the asset cap as it happens.
Speaker 5 (05:12):
But it was very separate.
Speaker 3 (05:13):
That was separate, but it was a huge and significant
presence in the mortgage world. But like all banks, it's
sort of withdrawn from that a little bit and it's
now the non banks just by.
Speaker 5 (05:23):
That, right, Like during thea it was was it Wells
Fargo and Wakovia Right, it's too just kind of interesting
bottom line netnet. I mean, the stock isn't up as
much as it was initially. But this is a huge
deal for Wellsburg, huge.
Speaker 3 (05:36):
Deal for Wells Fargo. It ends an era of scandals
It's a huge deal for Charlie chaff Yeah, it can't
be understated or underestimated. I think, and I think perhaps
the shares not being up so much is because it
was expected. We've seen a number of consent orders come
off this year, and the bank has the CEO in particularly,
it has telegraphed that things were going well, that they
did expect to have some sort of resolution soon.
Speaker 2 (05:59):
Sally big Well, thanks for joining us on this breaking news.
Sally bik Well, thank you. Is US Finance team leader.
She joined usus here in the Bloomberg Interactive Brokers studio.
Speaker 6 (06:07):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (06:22):
A story we've been talking about all day, Constellation Energy
agreeing to sell power from an Illinois nuclear plant to
meta platforms as AI sends power demands storing soaring. We
saw a story about energy, we knew we had to
bring her back. She joined us yesterday and by popular demand,
Alex Steele is back.
Speaker 3 (06:39):
Also.
Speaker 2 (06:39):
Carol missed her. I did a little jealous.
Speaker 7 (06:42):
I was.
Speaker 2 (06:42):
Alex is the Bloomberg radio and television anchor. She co
hosts Bloomberg Intelligence and The Close. She joins us from
our Washington, DC bureau. Alex, We had a really interesting
chat with Will Wade, who covers nuclear energy, at the
top of our two pm hour, and I asked him, Hey,
why does it matter where these where this energy comes from.
I mean, energy is energy. If you're getting power for
(07:03):
a server from fossil fuels or from a nuclear plant,
it still does the same thing. And Will said, these
companies want to buy clean energy, and I always said
clean energy. We're now calling nuclear energy clean energy. That's
such a far cry from what it was in the
nineteen eighties and nineteen nineties when everybody was so concerned
about well even fifteen years ago, in the wake of Fukushima,
(07:23):
the concerns there. Things have changed a lot when companies
are looking at their energy sources.
Speaker 8 (07:28):
No, yeah, and you know the fine line, like technically
nuclear is clean, like it has no emissions. In terms
of the risks, like you're talking about the Fukushima plan,
that's a little bit different. But in terms of actually
releasing emissions, nuclear doesn't really have that, but it has
changed a lot. And you know, I was on a panel.
I was leading a panel in Oklahoma City at the
(07:50):
Harold Ham Institute with the head of Sustainability and Energy
for Meta open AI Anthropic, I should say, as well
as Nvidia, and I kind of asked like what they
were most jazzed about in terms of energy, but they
put anything on or off the table. No one seemed
to want to touch coal with a ten foot pole,
But aside from that, it was like everything's on the table.
They were super pumped about geothermal and nuclear as well.
(08:13):
But the issues You can't just build a nuclear plant tomorrow,
Like it's really really expensive, and the Trump administration is
trying to make that part easier. But what makes this
so interesting is that it's just keeping the existing plant
going and not turning it off. And that's what's so
interesting about this particular deal.
Speaker 5 (08:28):
You know, Alex, you know you, yes, you are so
incredible in terms of the you know, energy markets and
just thinking about power overall. And I guess I keep
thinking about how you think thinking about kind of the
way forward, especially we have a different administration, different priorities.
He's certainly into you know, drilling more and kind of
(08:49):
embracing the fossil fuel economy. But I mean, when you
think about power generation and where it all comes from,
going forward alternatives, and I guess wherever nuclear fits into
all of this, is there a lot more enthusiasm.
Speaker 4 (09:02):
Is that enthusiasm still.
Speaker 5 (09:03):
There or is it waning? Like I'm just trying to
get the big picture here.
Speaker 7 (09:08):
I don't think you're alone.
Speaker 8 (09:09):
First of all, you guys are really good for my ego,
So I'm gonna come on like every.
Speaker 7 (09:12):
Day, but you're you're not here.
Speaker 8 (09:14):
You're welcome to, but you're not alone in being confused.
So what everyone can kind of seem to agree on
in the industry is that hydrogen isn't a really bad
spot because it doesn't have the support anymore from tax credits.
It's way too expensive and it hasn't been proven yet
to deliver the results. So let's put hydrogen aside for
a second. Solar and wind are economically very competitive. Without
(09:36):
the tax credits, it gets a lot harder. The problem is,
of course it's intermittent, right, Sun and wind don't shine
and blow every day, so you need it to you
need to offset it with something else like nuclear. Or
gas or coal. Now, the administration has talked a lot
about coal. I was talking to secretary right though, the
Energy Secretary, and he made it clear to me at least,
that it's not about new coal plants. It's about the
(09:57):
current ones just not going away, which is where we
kind of are nuclear. Also, administration is super into geothermal,
so that's like a heat pump like you might have
with a mini split, say in your house, So really
into geothermal. Again, there are issues need to be scalable
that go with it. I think that the prevailing feeling
is that you need all of this stuff and to
(10:18):
turn your back on anything is a really bad idea,
and you need it to all work together to help
to support the grid because nothing is full proof and
nothing runs forever. And that's where the ideological lines get
really tricky, when we're just trying to make sure we
all keep the lights on at the end of the day.
Speaker 2 (10:36):
Yeah, well, that's what I'm wondering about, because you know,
here we are in an environment where we're using more
and more electricity than we even thought what we would
demand is going up because of what we're doing as
consumers and what companies are doing to deliver the AI
solutions that they think customers and businesses want. So where
does that leave the traditional oil and gas players that
(10:59):
you have cut for years, alex in an environment where
oil prices are down roughly ten percent so far this year,
where do they lay right now?
Speaker 8 (11:09):
Yeah, this is the This is the really funny part
because they're not power producers, so they're not anywhere in
this game. Being a power producer is really different than
being an oil company a lot of tech.
Speaker 2 (11:22):
Companies, so they're not ever set they're not even forget
my ignorance here, but they're not even ever selling product
to power producers. Whether we're producing with fossil fuels, they're
never They're never in that pipeline.
Speaker 8 (11:33):
So like an AI company is never going to call
up Exon and be like, hey, I need power from
my plant. Right, there's a lot intermediaries and I mean
Exon might actually think about getting into power. But putting
that aside, like power is a whole different business than
producing oil and gas. Now, the gas part and using
gas to help to help em andate power is something
(11:55):
where the oil companies can play because they do make
gas and they do produce gas, so that is a
spot for them. But just because power demand is going
to grow and AI hyper scalers are going to invest
a lot of money, doesn't necessarily mean that all of
a sudden there's a huge demand.
Speaker 7 (12:10):
Pull for what the fossil fuel players are pulling out
of the ground.
Speaker 8 (12:14):
There's not a direct line from that. It's all energy, sure,
and maybe more of a direct line when it comes
to a gas player, but it's not a straight line
for them. They're still going to be at the mercy
of the strip price for crude and what the underlying
demand is for crude like what we put in our
car and that kind of stuff.
Speaker 5 (12:32):
All right, So you're I love, yeah, we love that
you went there. So when you think about kind of
moving forward, and you're right, like power generation versus what
we're getting from all the big energy giants like two
different things. I just wonder, I don't know for the
investment class that's out there, like how they should be
(12:53):
how do you take tho a story like once again,
meta constellation, we've seen Microsoft like we you know, we
keeping these hyperscalers right tap into how do we power
all this stuff going forward? How do we make sure
that we you know, are reaching out to the right
power producers. You know, what is the right investment story
to be thinking about because the buildout, whether it's nuclear nuclear,
(13:14):
takes time.
Speaker 4 (13:14):
So I'm just curious how we think about this.
Speaker 8 (13:16):
Yeah, and nuclear is still quite expensive. The Bloomberg Intelligence
had a great rundown on this and said that, you know,
consuming assuming a construction cost of like ten thousand dollars
per kilowatt, a one gigawatt unit would be still ten
billion dollars, right, And that's a lot of money to
sink in. And that's like there for the long time.
(13:39):
This is not a short term kind of thing. Okay,
So what do investors do?
Speaker 6 (13:43):
I don't know.
Speaker 8 (13:43):
If I knew, I'd probably go do that. But I
think it's the bull players.
Speaker 2 (13:48):
I thought about it for a second, Alex, you really
thought about it. Yeah we do.
Speaker 4 (13:52):
I also like you have aisation with yourself. It's really
kind of fun, okay.
Speaker 8 (13:56):
On radio it's two other people, super cool cool Okay.
But the investment thesis becomes more of who is talking
and what's the price at So the AI players can
say a lot that they want this kind of power
and the energy. These guys can say, look, we're talking
to all these people. Isn't that super awesome? But who's
actually signing the contracts? And at what price are they
(14:17):
doing that? We don't know the financials when it comes
to what Meta and Constellation Energy got together.
Speaker 7 (14:22):
I'm sure we will at some point.
Speaker 8 (14:24):
The rumor is that it's less than what Microsoft paid
to Constellation because of you had to restart a plan
versus just keep it going. But how hard is it
to sign those deals? Because if it's hard to sign
those deals, that means that a lot of the talk
is just talk, it's not actually being signed into action. Also,
sometimes we're double counting or triple counting certain power demand needs,
so it's not like a one for one basis. I've
(14:45):
heard a lot of stories that the tech guys are
kind of out there but casting super wide nets, but
that's not necessarily an actual deliverable that's going to be
signed on the find, that's going to be signed on
the fine print kind of thing. Power companies have also
told me like, look, we have the stuff, no one's
going to sign it with me, so I can't get
them to the table. So it's not as dry cut
I think as we want it to be.
Speaker 5 (15:06):
I love that you went there similar reaction doing a
panel on the nuclear energy, and.
Speaker 4 (15:12):
The same thing.
Speaker 5 (15:13):
They said, these hyperscollars are signing up with everyone because
they just want to make sure that they have kind
of redundancy and making sure that they have what they
need doesn't mean that they're going to fulfill all of
those commitments or contracts like going forward, right, So the
dust needs to settle a little bit here.
Speaker 8 (15:29):
Yeah, Also, what's a what's an MoU a memoir of
understanding versus a dotted line and a check Those are different,
very different things.
Speaker 4 (15:38):
All right, So come back tomorrow, come back.
Speaker 8 (15:40):
There's Yeah, the trains it too, trains it to you guys.
Speaker 7 (15:46):
With you guys all the time.
Speaker 2 (15:47):
Well, it is a special We usually we can only
talk to Alex Steal from two o'clock to three o'clock
Hard Wall Street time. And that's because from three o'clock
to five o'clock she does the clothes. She's on assignment
down in the Washington, DC area. So she was gracious
enough to go into the Washington dec Bureau and hang
out with us.
Speaker 4 (16:02):
We so appreciate.
Speaker 5 (16:03):
Yeah, always, always Alex Steel, Bloomberg Radio and TV anchor.
Check out all of our reporting on both sides across
our platforms.
Speaker 4 (16:10):
Really good stuff. Hey listen, folks. We did have the
market wrap up on this Tuesday.
Speaker 5 (16:15):
We do have some stocks moving in the after hours,
some because of earning, some because of Like with Wells Fargo,
it's a bank that's by basically having caps lifted. So
let's get on over to Charlie Pellett with an update
on the tree.
Speaker 1 (16:31):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Apple, Cocklay
and Android 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 (16:50):
Big meeting coming up later this week at gathering of
NATO defense ministers in Brussels. That's happening in just a
couple of days, and President Trump just a couple hours
ago saying he will be there. Just before, we heard
from White House Press Secretary Caroline Levitt that the President
was not aware of the Ukraine drun strike on Russia
before it happened. With more on all this and more,
(17:10):
we had two Washington DC and Bloomberg News National Security
team leader Nick Wadams, who joins us from our Bloomberg
News Washington d C bureau. Nick, I want to start
with just the news that the President is set to
go to the NATO Defense ministers meeting in at Brussels.
What's the signal that that's sending. Why was this such
a big deal? This was a red sticky to across
the Bloomberg terminal this afternoon.
Speaker 9 (17:31):
Well, he's going to the NATO leader's summit later later
in June. There's a NATO Defense minister summit later this week.
Thank you that he won't be going to. But regardless,
the point stands, it's a very big deal because the
tension between the Trump administration and NATO. Trump has put
so much pressure on the alliance in his first term.
There was a lot of talk about would he or
won't he leave the alliance, pull the United States out?
(17:54):
But you know they've patched things up since then. The
new NATO Secretary General is on pretty good terms with Trump,
and so it's a signal here that Trump is not
going to turn away from the alliance. He's not going
to turn away from these international gatherings where he's sort
of been at odds with some other leaders, and in
some ways may see this in two ways. One is
(18:15):
a way to push the alliance's members to spend more
on defense, but also to work with them. You know,
there's a lot of concern about European security and the
relationship with the United States. So a positive sign that
the president is willing to play ball with an alliance
he's been skeptical of in the past.
Speaker 4 (18:33):
Wait, so is this?
Speaker 6 (18:34):
Yeah?
Speaker 5 (18:35):
You know, President Trump talking tough, pushing back, and then
all of a sudden kind of backtrackingdre I say Taco,
Should I say it?
Speaker 4 (18:42):
Should I say it?
Speaker 9 (18:44):
Trade for NATO?
Speaker 2 (18:47):
This is this is I'm gonna be serious for a second.
I dropped my son off at school and walking to
the subway, guy crossing the street wearing a shirt already
says Taco Trump always chickens out. All right, do you
have shirts for this in Brooklyn?
Speaker 4 (19:01):
You know how that works? I mean, but is that.
Speaker 5 (19:03):
What's going on?
Speaker 10 (19:04):
Nick?
Speaker 9 (19:06):
Let's say it does fit with a broader pattern we've
seen from the administration. I mean, listen, the officials in
the administration have said that a lot of the hullabaloo,
a lot of the speculation that Trump would leave NATO
was always overblown, that he never intended to leave it,
and that he used that as essentially a forcing mechanism,
And you can make the argument, you know, they have
(19:26):
steadily increased defense spending. The administration is now saying they
want NATO countries to spend five percent of GDP on defense,
which is a target that many are not going to
reach or have not committed to reach for a very
long time. But you know, it wasn't that long ago
that we were talking about two percent, and you know,
there has been a real steady growth in the number
of countries doing that. You can ascribe that to various
(19:49):
different reasons, including the Ukraine War. But certainly Trump is
going to take credit for that, and the trend lines
are pointing in his direction.
Speaker 5 (19:58):
So why has it that Europe has struggled with sufficient
or insufficient air defense cover? Is it just because they
haven't spent or like, help me understand kind of where
they've been in terms of protecting the continent.
Speaker 9 (20:14):
Well, I mean, in a lot of ways for major defense,
they've relied on the United States. It's relatively new technology,
it's expensive, you have to deploy a lot of launchers
and systems far more than you might anticipate you would need.
And also the threat is relatively recent or has only
gotten urgent relatively recently with Russia's attack on Ukraine. You know,
(20:37):
there is fear if you play out the doomsday scenario
unlikely as it may seem right now, that Russia takes
over Ukraine, pushes to the border with Poland and then
potentially has aspirations as some people fear beyond that into
Poland or back into the Baltic States. That that's a
situation where you would need very very robust air defenses.
(20:57):
Problem there, of course, is production. It's very difficult to
produce these systems fast enough, and they're also extremely expensive,
you know, many many hundreds of millions of dollars to produce,
and European countries, you know, the real A plus air
defense systems are made in the United States, and again
(21:18):
the production lag there is years at best.
Speaker 5 (21:21):
Does it also, is it safe to say, Nick, it
kind of goes back to post World War two and
kind of the you know, agreement of the US kind
of helping Europe rebuild and being there and supportive. It
also gave the US incredible access to those markets. I
think we've talked about this with you before, but I
keep thinking about historically kind of this relationship and what
it's meant.
Speaker 9 (21:42):
Yes, I mean, you know, historically the trade off has
always been listened the United States will be sort of
your protector. That has applied much more for places like
Japan that it has for Europe. But there has been
this implicit agreement, you know, the United States will be
your security backstop in exchange for this very very robust alliance,
(22:03):
for the United States having great influence and sway and
also cementing those partnership, you know, with great with great
access and control over the security system you get. There
are a lot of benefits to the United States from that.
Now European leaders are saying, you know, with tensions getting higher,
with the strain with the Trump administration, it's time for
(22:24):
Europe to really double down on its own defense and
maybe separate itself from the United States. So you're sort
of seeing a little bit of that happening as well.
This is really a thing where they're saying, Okay, listen,
we have to be responsible for our own defense and
not rely so much on the United States.
Speaker 5 (22:39):
Hey, Nick, speaking of tensions, we did hear from after
we got the headline that we crossed on the Bloomberg
about President Trump going to the leaders the NATO Leader summit.
Then we heard from White House pres Secretary Caroline Levitt
who said the President was not aware of the Ukraine
drone attack.
Speaker 4 (22:57):
On Russia before it happened.
Speaker 5 (23:00):
All of this too apart for the President to go
across and say, hey, guys, I need to know, like
I'm trying to put the pictures together or the you know,
for him to say, why didn't we know? And our
Natal leader is going to be like, well, you've been
kind of backing off, Like I just wonder how this
kind of plays out.
Speaker 9 (23:16):
Right, I mean, there is an uncomfortable dynamic there for
the president. I mean, listen, I think you know, when
Ukraine has launched grown strikes on Russian soil in the past,
I don't think they would have necessarily tipped off the
United States. You know, it's the whole sort of esque
forgiveness rather than permission, and that applied certainly under the
Biden administration as well. But you know, there is that concern.
(23:38):
I mean, President Trump's strategy has been listened. We want
to get to talks and rather than using leverage, the
leverage of force, of sanctions, of punishing Russia, of stepping
up the fight. We want to avoid an escalatory spiral
and say, hey, we're going to create space for talks
and sort of use carrots rather than stick. So I think,
you know, though the President has not really commented in
(24:01):
any fulsome way on these drone strikes, it's something he
might oppose because he believes it's unhelpful at a time
when he's trying to get these two sides in a
room with each other. But in terms of some expectation
that the US would get a detailed readout from Ukraine,
I mean, especially with the US the President not being
willing to re up that supplemental to infuse more and
more weapons to Ukraine, they feel they strategically don't necessarily
(24:25):
need permission from the US to do.
Speaker 2 (24:26):
A strength What about a European ally, is getting a
readout ahead of that or having a tip that that
is going to happen, is that something well that would
likely happen.
Speaker 9 (24:35):
Not necessarily either. I mean, I think, for one thing,
they're really worried about leaks and the possibility that it
would get out. But again, I think it's that sort
of situation where you say you'd rather get forgiveness than permission.
They basically don't want anyone to tell them no. And
obviously the concern for NATO countries is Listen, if Ukraine
escalates this well beyond its eastern front and into Russian territory,
(25:00):
Russia may see that as an escalatory action that then
would require retaliatory action that might push the conflict into
Europe proper outside of Ukraine, and that's what they're really
worried about.
Speaker 2 (25:12):
Hey, Nick, just before we let you go, Carol and
I were talking about this. She was out yesterday, but
she was still paying a lot of attention to what
was happening.
Speaker 4 (25:19):
Well, it's kind of upset.
Speaker 2 (25:20):
On Sunday too, I had a lot of friends setting
me the videos the drone strikes that were released by
the government of Ukraine. Yeah, you're pretty obsessed with that.
I'm wondering what it tells us, Nick, about the technology
that's being used right now. A lot has been worn about, Yeah,
a lot has been written about what Ukraine has been
able to do with sort of rudimentary drones, But I
(25:40):
don't know if those were used in the case such
as this. We don't have all the details, but what
is starting to emerge.
Speaker 9 (25:46):
Well, I mean, one of the most fascinating things about
this is some of these drone strikes were deep, you know,
thousands of kilometers inside Russian territory, and it would not
have been a case where the drones would have been
able to fly from ukra And in many cases the
indications we have so far are that the report that
the drones were launched from within Russia, So you had
(26:07):
a network potentially of covert operatives of agents essentially setting
up and then launching these drones from within Russia, so
infiltrating Russian territory to be able to launch these drones.
So I think what you're seeing is a willingness to
raise the threshold and launch even bolder strikes. But in
(26:28):
terms of the technological advances, it's not necessarily that the
technology is so great, but that it's so cheap and
plentiful and has been able to have such a devastating
effect with the limited resources that Ukraine has. And that's
really what's so fascinating about this. You're not seeing some
multimillion dollar advanced stealth fighter jet launching around the world
(26:50):
strike from a base in Kansas or something like that.
You're seeing the infiltration into Russian territory of very rudimentary
drones that are being used to devastating effect.
Speaker 4 (27:00):
Yeah, it kind of reminded me.
Speaker 5 (27:01):
I know it's not apples to apples, but I think
about when Deep Sea came out earlier this year and
we're like, Okay, maybe we can do this AI thing
less expensively and very differently. And this, just to me, Nick,
seemed like warfare that, like you said, it doesn't have
to be super expensive for it to be impactful.
Speaker 9 (27:18):
Right, And that's a big tension point frankly in the
United States, because there are a lot of defense companies
that have made a lot of money developing and producing
the most advanced fighter systems. I mean, the F thirty
five all in all, is going to in the end
cost about two trillion dollars for that program, from development
through production to sustainment, huge cost overruns, I mean a
(27:39):
software update for the F thirty five costs many, many
hundreds of millions of dollars, and the defense primes in
a lot of ways really feast on these big contracts.
So then if you're a little country like Ukraine producing
these drones for hundreds of dollars a pop. I mean
that sends an earthquake through a lot of the big
defense primes.
Speaker 5 (27:58):
Yeah, talk about disruption perhaps in the defense industry. Nick
Waddam's the best. Thank you, always, always, National Security team.
Speaker 4 (28:05):
Leader at Bloomberg News.
Speaker 5 (28:06):
Joining us from the Bloomberg News Bureau in Washington, DC.
Speaker 6 (28:09):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (28:24):
Well, and now to trade and what we've seen on
the stocks versus bonds, and to bring in Katie Kaminski,
Chief Research Strategies in portfolio manager at Alpha Simplex Group.
She joins us from Boston. Katie, A big theme that
we had on yesterday's program. It was about a story
that ended up being pretty much the most read story
on the Bloomberg terminal. Was this buyer strike that was
happening at the long end of the curve, big investment
(28:46):
firms staying away from those thirty years over concerns about
the US economy. I'm wondering if you're starting to actually
see that happening as we get closer and closer to
five percent on the thirty year.
Speaker 7 (28:58):
We're definitely seeing that already in the data.
Speaker 11 (29:00):
You've seen momentum in signals on fixed income where short
signals are actually sort of building and have been building
for some time.
Speaker 7 (29:09):
So I think that's steepener view.
Speaker 11 (29:12):
That sort of negative view on long term bonds is
something that's catching a lot of people's attention.
Speaker 4 (29:17):
Hey, you know, I think I finally was brave enough
to look at my fro o one K.
Speaker 2 (29:21):
Wow, did you do such as well?
Speaker 5 (29:22):
Well, it's been over a month, six weeks, eight weeks
in the making, and it's like April and President Trump
so called liberation Dake Katie never even happened, at least
on the equity side of things. It did, But the
US bond market, I feel like, is still kind of wary.
Speaker 11 (29:41):
Yes, that's a really good point, And I think what's
been really hard for us on the systematic side is
that you know, you have this massive move and it's
as if you know that didn't happen, and the market
is starting to turn a little bit more positive. But
the one area that is seeing a little bit of
concern is definitely bonds. So I think there is some
(30:02):
truth to that that despite the fact that equities maybe
back where they are, bonds aren't really quite where we'd
like them to be for some investors.
Speaker 2 (30:11):
So does that then, and look, I know you're focus
on the fixed income side, but there is a relationship
between the bond market and the equity market. Does that
mean the bond market gets it in the equity market doesn't.
Speaker 7 (30:21):
Well, I think the question.
Speaker 11 (30:22):
I mean a lot of times people tend to look
at the bond market during these environments to try and
understand a longer term view, and that's because you know,
in general, the equity markets always like to be bullish,
and so I think looking at the bond markets could
give us an indication of potential interesting trends for the
rest of the year and places where things may be
(30:44):
a little different than they expect. I've even heard people
talking about even higher rates on the long end, which
would be a problem for many investors who are thinking
about financing and et cetera later this year.
Speaker 2 (30:56):
Well, it raises the question about the so called bond vigilantes.
You know, you knew we were going to go there.
They do They have the power that they've had in
the past to essentially tell the US government that hey,
this is not what we want to see right now.
Speaker 11 (31:09):
I mean, I think it's really been a long time
since we've really seen that force. But I think what
we did see even when April came about, and I
think I keep going back to this example, is that
when we actually had the equity markets falling, bonds weren't
there for us in that environment. And I think that's
an indication that either issues like inflation or other sort
(31:31):
of you know, the potential for fixed income to be
more challenging is something that is really an issue for
many investors, particularly in this environment. Whether it's inflation that
does this, or whether it's you know, bonds needing to
be higher because real rates are higher, it's not clear yet,
but it's definitely not the same bomb market we're used
to pre a few years ago.
Speaker 5 (31:52):
I don't know, Katie, Like, you know, how are you
thinking about this world? Like I keep thinking about it,
and I think about the US being uninvestible. I think
about the weaker dollar, like is the mar A Lago
accord like happening before us? I just wonder, right, that's
the administration's move to kind of correct some of the
trade deficit by weakening the dollar. So is it kind
(32:14):
of is this kind of happening? I don't know, how
do you guys talk about it with your team?
Speaker 11 (32:19):
Well, this is a really good question because the biggest
theme we've seen this year is a weaker dollar. I'm
a little concerned about that trade for several reasons. If
the market gets a little bit more positive, if growth
becomes positive, that tends to be pro dollar.
Speaker 7 (32:36):
But I think the thing that is the most interesting.
Speaker 11 (32:39):
From a quant perspective is we've actually really seen a
deterioration between the.
Speaker 7 (32:45):
Correlation between bonds and the dollar.
Speaker 11 (32:48):
So higher yields usually mean stronger dollar, and so you've
actually seen the opposite of that. So that does indicate
that something else is driving the dollar weakness, perhaps that
US vulnerability trade, this idea that people are repatriating capital
and the US assets are less desirable.
Speaker 7 (33:07):
The question is how long does that go? And is
that going to keep going?
Speaker 4 (33:10):
How credible is how credible is that? Katie?
Speaker 5 (33:13):
Like I you know, tips heard me say this a
million times, so feel free to roll your eyes.
Speaker 4 (33:17):
But at milk and it was just like, well, wait
a minute.
Speaker 5 (33:20):
A lot of folks said, it's all about rebalancing our portfolios.
We all became too exposed to the United States, and
so that's it, And that makes sense after you know,
a long time when there was nothing else but really
the United States, it felt like, certainly from an investment perspective,
Is that true or I don't.
Speaker 4 (33:36):
Know through your channels that you look.
Speaker 5 (33:38):
Is it a case that folks are saying, I don't
really want as much exposure to the US, it's not
as attractive. I don't want to be there.
Speaker 7 (33:45):
Well, I think there's some indications in the data.
Speaker 11 (33:48):
I mean, if you look at where markets have moved
this year and the way that they behaved in the
wake of the recent.
Speaker 7 (33:54):
Events and just this decoupling.
Speaker 11 (33:56):
Between the dollar and yields, it's ges that other forces
are affecting the dollars, so repast creation of capital and
you know, kind of rebalancing does have an impact on
those valuations. So I think there is some evidence to
that theme. Just how strong is that theme? Is it
as strong as some people would be concerned. We don't
(34:17):
know yet, but it's definitely there.
Speaker 4 (34:19):
TVD like so much in our world. Hey, listen, this
is a big week.
Speaker 5 (34:23):
We get the monthly jobs report and we're cruising towards
a FED meeting shortly soon ish. But the labor market
we got I feel like a sigh of relief a
little bit today based on adults data. But how are
you thinking about because I know, is it Torston Slot
that had.
Speaker 4 (34:38):
UPS research about sixty four thousand?
Speaker 2 (34:41):
Yeah, I got that note this morning and I was like, wait,
wait a second, we're talking talking double digits.
Speaker 4 (34:45):
Here, help me, help me.
Speaker 5 (34:48):
You know, Microsoft cutting more jobs, Disney talking about jobs.
Speaker 4 (34:51):
At some point, we're going to stuff has got to
show up in the data factor that in for us.
Speaker 11 (34:57):
Yeah, I think for us it's been it's been really
tricky because you.
Speaker 7 (35:00):
Know, you've seen current data not really showing.
Speaker 11 (35:04):
The expectations of concern that most investors have expressed in
terms of their sentiment. So I think, really it's too early,
and you know, for me it's I feel like most
investors are out scouring for sort of any now casting
or any sort of data that can give us a
little bit of a sense of the longer term picture.
But for now, actually, I've been very surprised. We haven't
(35:27):
seen a lot of evidence of things to tearing in
as much as we would have thought.
Speaker 7 (35:32):
So I think that's why the market is.
Speaker 11 (35:34):
Kind of calming down a little bit and has been
very positive, moving towards more positive sentiment, because it just
doesn't seem that the data has shown yet our concerns.
Speaker 5 (35:45):
Real quick fifteen seconds beed no moves this year? What
are you thinking real quick?
Speaker 11 (35:51):
We originally were thinking some, but I mean for now,
it's it's still looking very unclear, and especially if we
could see some growth and maybe even some inflation, that
is going to make things tricky.
Speaker 7 (36:01):
Unemployment data today didn't not help with that narrative either.
Speaker 5 (36:05):
Kati Kaminsky of Alpha Simplex Lover Lover, mcle I'll about you.
Speaker 9 (36:10):
Let me drive?
Speaker 2 (36:11):
Oh no, no, no no, this is not a toy.
Speaker 5 (36:14):
Who's going to judge?
Speaker 9 (36:16):
Honey?
Speaker 4 (36:16):
Please gravels. Let's wait, I want to drive.
Speaker 7 (36:22):
It's a good question.
Speaker 1 (36:23):
Good this is the drive to the clothes.
Speaker 7 (36:29):
Punk's commuting well, drun it down.
Speaker 1 (36:32):
On Bloomberg Radio.
Speaker 4 (36:34):
All right, TikTok, everybody.
Speaker 5 (36:36):
We've got about eighteen minutes to go until we wrap
up the trade on this Tuesday. Carol Master, Timstead of
a Clive in our Bloomberg Interactive Brokers Studio. You're Charlie
and Bill just uh breaking down the numbers, and we're
holding on to most of the day's games here.
Speaker 2 (36:49):
Do you know where we're going to be in a week, Cisco?
Do you know where it is?
Speaker 4 (36:55):
San Diego?
Speaker 2 (36:56):
Do you know where Clark is?
Speaker 5 (36:57):
San Diego?
Speaker 2 (36:58):
Okay, there's a method, my madness, Carol so Glad I like, yeah,
we got there again, we got there, we got there together.
This is a test. It's not a test. We're going
to test Eric Clark though. He's chief investment officer at
the RAA ac Vest Global Advisors. They've got approximate a
billion dollars in assets under management. We love checking in
with Eric because he covers all the companies that we
(37:19):
just talk about here on Bloomberg Business Week. In the
Rational Dynamic Brands Fund, YEP.
Speaker 5 (37:24):
That fund, by the way, is that more than fifteen
percent on average annually over the past three years, putting
it in the ninety first percentile according.
Speaker 4 (37:31):
To Bloomberg data against its peers.
Speaker 5 (37:33):
Here to date, the fund is down slightly and it's
lagging its peers. Good to have you back with us, Eric,
So talk to us about this environment and your fund,
Like we say, it's a bunch of household names.
Speaker 4 (37:47):
Are you disappointed by the performance.
Speaker 5 (37:50):
Or how do you explain it? Or is it just
kind of part of the course considering the year.
Speaker 10 (37:55):
Yeah, nice to talk to you guys again. You know, listen,
we had a really strong January up I don't know,
seven percent or so, and then we had all of
the tariff stuff, and the markets took the elevator down,
and so you know, there's you know, being back the
flat when you have a big draw down because of
the tariff situation feels pretty good. And now we can
(38:15):
maybe reset things. Hopefully we can get through the summer
without too much chop towards we get the end of
these tariffs. But you know, consumers are trying to figure
it out, just like businesses are trying to figure out
the rules of the road. But there's clearly a value
seekers mentality out there in consumer land, and with inflation
(38:35):
staying high for longer, I don't buy any of the
media tweet you know, the White House tweets about inflation
not being present. It's everywhere, go out to eat, go
on vacation, it's pretty much everywhere at the grocery store.
So value seekers are going to be everywhere, and some
companies deliver on that and some brands struggle with that.
(38:56):
And so, you know, we feel pretty good about the
portfolio that we have now. It has a lot of
you know, kind of predictable growers like Netflix and Spotify
and Amazon, but we have some good defense too for
some of the potential rocky stuff that might happen here
in the you know, the next couple of months with tariffs.
Speaker 9 (39:13):
You know, the.
Speaker 2 (39:16):
Stock market. If you look at the indexes they took
you said they took the elevator down, which they certainly did,
but they seem to have taken the escalator up. I mean,
we're up twenty percent since those lows on April eight. Yes,
we're still down close to three percent from those all
time highs back in February, but we've pretty much recovered
everything before April. Second.
Speaker 10 (39:39):
Yeah, I mean, so much money left the US. I
mean international is still you know, kicking the US is
but pretty handily. But when so much money moves out
of the US and out of tech and growth all
at once, and then you get this terraff for Prizal
from what was at April ninth or something, when the
Nasdaq was up twelve percent, and then you go lot
(40:00):
of money move back. So technology obviously has been the place,
higher beta names have been the place to be on
this on this rally. But I suspect people are gonna
look for some exit doors as we near these, you know,
the decision on tariffs, and and who knows, if we
get a decision and we or we kick the can
down the road again and those tariff things happen, the
(40:24):
tariffs get get cut for you know, the next couple
of months, then maybe maybe the market's rally again. But
in the July earnings is where we're going to really
start to see the effects of some of that uncertainty
and some of the tariffs. And let's see how inventory
levels are for different brands. You know, it was never
this this particular quarter that I was worried about. It
(40:46):
was all the July quarter. And and that's really going
to be the test on who's able to navigate this
better than others. And you know, candidly, the bigger brands
with with bigger cash flows and and and more levers
to pull and talking going back to their suppliers and
negotiating better rates, those are the people that those are
the companies that can navigate tariffs much better than maybe
(41:09):
smaller companies. So that's that's the real test of July
earnings in my opinion.
Speaker 2 (41:13):
Okay, so well, we'll hopefully speak to you before then. Eric,
We've spoken to you for years, and when we've spoken
to you, we've referenced as we did today that you
know you are a manager of the Rational Dynamic Brands Fund,
and it still shows you as the portfolio manager of
that mutual fund. Behind you, I see you have the
Alpha Brand's logo ETF. It's the Alpha Brands Consumption Leaders ETF.
(41:35):
It's an ETF here in the US that includes companies
such as Visa, Booking, Costco, Netflix, Eli, Lilly, kk Or, Walmart, Spotify,
Meta platforms and more in it. What just give us
your current focus right now? And are you managing this
fund as well as the Dynamic Brands Fund.
Speaker 10 (41:54):
We are the team. Thanks for mentioning that. I mean,
we just launched the ETF threaut three or four days ago,
so it's pretty new. We obviously have a track record
of managing global brands portfolios going back to twenty sixteen,
and the ETF is a little bit different than the
fund in that it's a much more broad in the
consumption categories that we want to have exposures to. And
(42:17):
so you know, we have exposure to travel through Booking
and Marriott, and we have exposure through streaming through Spotify
and Netflix, and even some international exposure like through media
with Sony and Tencent on the China technology. So this
is more about broad spending categories, which brands are the
(42:37):
dominant leaders in those categories, and we're still managing it
through a business cycle. There is obviously the business cycle
is still important, so you know, take more risk and
when it's prudent in the economies expanding and get more
defensive when you have a little more you know, yellow signs,
cautionary tales and data points that are starting. And we
(42:58):
still see some of those those cautionary data points which
keep us, you know, with about twenty five percent on
the defense. You know, Coke, right AutoZone, a Riley automotive,
those kind of things.
Speaker 2 (43:08):
Eric is it is the idea that new money comes
in and you wanted to go into the ETF rather
than into the mutual fund. It's sort of the pattern
that we're seeing with portfolio managers who are moving away
from mutual funds and more into ETFs.
Speaker 10 (43:19):
Yeah, you know, our view, there's still a lot of
advisors and people who like who like mutual funds and
the familiarity there. The goal for us was have a
consumption leader's global brand strategy in both of the popular packages,
the mutual fund and the ETF, and then we can
let advisors and individuals choose which, you know, I can
(43:41):
I can deliver it in a cone or a cup,
so to speak. You know, obviously the flows are going
to ETFs, and so having an ETF offering for people
to get access to the brands that they admire and
the brands that they spend their time and their money on,
that's just a wise decision. But there's still money coming
into the mutual fund as well.
Speaker 7 (44:00):
We're gonna leave it on that.
Speaker 4 (44:01):
We're gonna leave it on that note. Thank you so much, Eric,
Good to check in with you.
Speaker 5 (44:04):
Eric Clark, chief investment officer at the registered investment advisor
Acuvest Global Advisors roughly a billion in assets undermanaged.
Speaker 1 (44:12):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. 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
(44:33):
and always on the Bloomberg terminal
Hosts And Creators
Tim Stenovec
Carol Massar
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.
True Crime Tonight
If you eat, sleep, and breathe true crime, TRUE CRIME TONIGHT is serving up your nightly fix. Five nights a week, KT STUDIOS & iHEART RADIO invite listeners to pull up a seat for an unfiltered look at the biggest cases making headlines, celebrity scandals, and the trials everyone is watching. With a mix of expert analysis, hot takes, and listener call-ins, TRUE CRIME TONIGHT goes beyond the headlines to uncover the twists, turns, and unanswered questions that keep us all obsessed—because, at TRUE CRIME TONIGHT, there’s a seat for everyone. Whether breaking down crime scene forensics, scrutinizing serial killers, or debating the most binge-worthy true crime docs, True Crime Tonight is the fresh, fast-paced, and slightly addictive home for true crime lovers.