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All right, now, let's get to those minutes from that last FED meeting, which was, of course March twentieth. We want to head over to Bloomberg News International Economics and Policy correspondent Michael McKee. Mike is live in Washington, DC at the Federal Reserve.
Mike Well, recent data, including today's CPI reports, have eclipsed the value of the Minutes in terms of monetary policy. They show, as expected, great concern and uncertainty among officials about the path of inflation, the outlook for the labor market and growth. Participants generally noted their uncertainty about the persistence of high inflation the Minute say, and expressed the view that recent data did not increase their confidence that
inflation was moving sustainably down to two percent. Of course, today's CPI reading will contribute to that. There was even some disagreement about rate cuts this year. Almost all participants judged that it would be appropriate to move policy to a less restrictive stance at some point this year. Almost all is fed speak for all but one or two, so at least a couple of people disagreed. The news in the minutes actually comes from the committee's discussion of
the balance sheet. The staff presented a number of scenarios for reducing the six point nine trillion dollar level of holdings. The participants generally favored reducing the monthly pace of treasury holdings runoff by a roughly half of the sixty billion a month current cap. Because mortgage bound runoff runs well below the thirty five billion dollar monthly cap, the participants
saw no need to trim that. The participants judged it would be prudent to begin slowing the pace of runoff fairly soon, because there was great concern about repeating the experience of twenty nineteen when runoff went too far disrupting money markets. A few participants indicated they preferred to continue with the current pace of balance sheet runoff until market indicators begin to show signs that reserves are approaching an
ample level. Now no decisions were made, but it does sound a little bit like we might see the FED start to trim its reserve holdings and slow QT before we even get rate cuts.
So Mike, we're going to give you a moment just to think about all those headlines. But just real quickly, let's update everybody on the market. You've got the S and P five hundred still down about fifty one points, so just shy of one percent. Here the Nasdaq one hundred a decline of one hundred and seventy six points, so it too is shy of a one percent decline, but definitely off some of the earlier levels that we
saw today. And you still have what a ten year tim that's at four point fifty two, and looking at the shorter end of the yeld curve, most sensitive often to what the FED might do, and you're looking at a two year net with the yield of four at ninety three.
Ye that's right, that two year yield up nineteen point seven basis points and the ten year yield up sixteen point eight basis points as we speak, Hey, Mike McKey, I want to talk a little bit about the data that we've gotten since the latest FED meeting. The hotter than expected jobs report, the hotter than expected CPI report, in your mind, does that change at all what these members of the Federal Reserve see as the path to cut rates moving forward.
Well, it's a good question. We can look back three weeks and see what they saw then, and there was great uncertainty then, but they were leaning in the direction of still being able to cut rates this year and still thinking that disinflation would continue. Those lines are in the minutes, but now that may not be the case.
They were looking then at January and February numbers that suggested to them that there might have been some seasonality problems, there might have been some problems with the way the data were put together. But today you have a third CPI reading that suggests that no, there is a stickiness to inflation that they hadn't counted on. We won't get a complete read at the May first meeting because they don't put out a new summary of economic projections and
they don't do a new dot plot. But I'm fairly certain that between now and then, and of course between now and the June meeting, we will hear a lot from them about the possibility of holding back.
All right, Mike, as you stated, and as we went through those headlines, those FOMC meeting minutes from that March nineteenth, twentieth meeting, I'm just looking to you at our right throw right through, if you will, showed almost all official judging it would be appropriate to begin lowering boring costs at some point this year. Again, that caveat inflation data since then has upended expectations for three interest rate cuts
this year. Could those expectations in terms of rate cuts continue to be upended if the data continues to come in strong, particularly the inflation data.
Oh certainly, I mean we've seen that in the markets today now. We at least when we went into the minutes lock up, the betting was that there would be no rate cuts until November. So we're starting to see this pushed out. And of course, before the FED began its meetings, we'd heard a number of people say that, or since they began, we've heard a number of members say that they might think we would do fewer rate cuts.
Of course, off Albostic saying that he was in favorab only one Neil Cashkari saying there is a possibility they wouldn't do any So the markets are now going to be perhaps positioned for the idea of few or no rate cuts this year going forward.
They were certainly seeing something that play out in the rates market. The front end of the yield curve two year higher by twenty basis points right now, the ten year higher by seventeen basis points. I want to bring in Ira Jersey, who's standing by in our Bloomberg Intelligence headquarters in Princeton, New Jersey. He's chief interest rates strategist
here at Bloomberg Intelligence. Ira, when you see yields shoot up like this across the curve, what's the signal that it's sending you about the path of interest rate policy for the remainder of the year.
Well, it's up because of the path of industry policy. Right, So when you look at the when you look at the short term interest rate markets, you know, we've been pricing out more and more of those six six or seven twenty five base point interest rate cuts that were priced in a couple of months ago. And when you keep on getting this relatively strong data, it's hard to
kind of get in front of that. And you know think that the Federal Reserve is going to be able to cut rates, you know, you know, there's a whole group of investors who are concerned that the Federal Reserve may actually have to increase interest rates. That from some former policy officials as well. I personally am not in the camp that thinks that they necessarily have to increase
interest rates in order to slow the economy. But but the idea because and one of the reasons is is that first you have to get rid of all these cuts that are being priced into the market, and doing that, you are effectively tightening monetary policy. Because the you know, longer term interest rates are now higher than they were just a couple of weeks ago. So you know, there's a lot of data and information that came out today and that including a pretty bad actually the worst tenure
auction that we've had in about two years. So you know that that was a the astounding, you know, revelation that demand just isn't very strong.
Could is that because investors assume that it's going to go even higher in terms of the rate the rate outlook?
You think that's part of it.
I think it was also Yet you know, you know, obviously you had Carol, you had the really you know, good inflation number. This more high inflation number this morning, which was bad for the market and keyed off the sell off. I think also, you know, it was an hour before we got the minutes that you I still am only about a quarter of the way he finished reading, so we have, you know, so it's hard to get in front of some of that news cycle. There was
also a lot more market risk today. So yesterday's three year auction was okay, but today's tenure was absolutely bysmal.
Tomorrow we have thirty year bonds. It'll be really interesting to see if people say, oh, look at these higher yields at four point six percent, four point seven percent wherever we end up at auction time tomorrow, is that going to draw in some buyers just thinking, hey, I want to get these yields while I can, Or are they going to stay away because they are worried that, hey, inflation is going to remain kind of at these reasonably high levels and the Fed's going to be on hold,
so I can get even better returns later if I just wait a little bit.
Well.
One of the former officials Treasury, former Treasury Secretory Larry Summer, saying that hot US consumer price inflation report for March means that the risk case of the next FED move is to move to be an increase must be taken seriously. He also talked about the idea of a rate cut. Here's what he said earlier on Bloomberg.
A rate cut in June. It seems to me would be a dangerous and egregious error, comparable to the errors the FED was making in the summer of twenty twenty one when it just didn't get the thread on inflation.
Mike, I want to bring you in one last question from you. Would it be a dangerous and egregious era if the FED did any kind of rate cut in gum Based on what you're seeing.
Well, dangerous and egregious might be a little strong words for it, but I don't think the FED is going to be rushing into anything like that. Remember, what we're seeing is the markets move, and commentators talking about what the markets are doing. They're not talking about what the Fed's doing, because the FED hasn't done anything. July twenty twenty three was the last time they moved interest rates, and while we've had speeches about what they may or
may not do, they haven't done anything. I did want to point out one thing that might be important if you still have IRA there, and that is that they did have this discussion about the balance sheet and the idea of trimming starting to run off their balance sheet run down to about half thirty billion a month instead of sixty billion a month caps and leaving mortgages at thirty five because nobody is really prepaying at this point.
Are you want to come in.
On that, Yeah, that's that's almost one hundred percent of my concentration right now looking at the minutes, because it hasn't hasn't aged very well. Right, We've got a lot of information and data since that March meeting, so it's really how are they going to adjust a balance sheet? Basically, they've said that they're going to slow down the amount of treasuries that they're going to allow to run off. That's in line with what we were expecting, and I
think that was more or less the consensus. There was some nuance around that, but that was broadly the consensus. You know, when they're going to start, it's still a little bit unclear, but it's probably going to be sooner
rather than later. And the reason for this is that if you know bank reserves are starting to run off more quickly now that that we've seen to have found a floor for the reverse repo facility, and as reserves run off, at some point, they're going to be scarce and demand for bank reserve is going to be much higher that are out there, and that's what causes a lot of volatility like we had in September of twenty nineteen.
The Fed ones to avoid that or at least be able to like, you know, turn off the you know, turn off the spickett very quickly and stop the runoff more quickly. And they don't want to go cold Turkey from sixty billion treasuries a month to zero, so they'll go from thirty to zero probably.
IIRA, we have one more question for you, Mike. We know you've got a run, but we always appreciate all that you do for us in breaking this all down. Are Mike McKee there at the Federal Reserve in Washington, IRA, one more for you. I'm thinking, you know, we've got
a really smart, sophisticated audience here at Bloomberg. There are those folks who are like, well, wait a minute, you know, are we getting into kind of the weeds when we talk about the balance sheet what's the significance when the FED comes out and says or that we got revealed in these minutes that the runoff they're going to start to slow it down. What's the significance of that.
Yeah, I think there's an acknowledgment that the financial plumbing matters. And it's not something that prior to two thousand and seven anybody really cared about, but it's really what makes a world go round. So when you think about the repurchase agreement market, which is the market that helps fund treasury dealer desks and hedge funds and other traders in treasury securities, if that breaks, then the entire financial sector
can just break down. And what underlies that kind of the grease that allows the wheels to continue turning within the short term funding markets ends up being bank reserves. So when bank reserves get down to a level that is less than what's demanded by banks, then banks suddenly have to find reserves from elsewhere, and that's what causes interest rates to spike and for the financial plumbing to start to seize up a little bit. Again, you saw
that to some degree in twenty nineteen. Now the Fed's done some things to try to mitigate that, like creating the standing repurpurchase agreement facility that allows banks whenever they need it to inject reserves into the system, as opposed to the FED deciding when to do that. But this financial plumbing stuff, you cannot completely discount it. It's actually way more important than I think most people who get their MBA or you know, just study business in school
or finance, they don't teach this stuff. And this is actually the stuff that really really matters to the overall market structure and functioning of markets.
It's why we love having you here, all right, Ari Jersey, thank you for our Bloomberg Intelligence team and our think. Once again, to Mike McKee out there in Washington, guys, thank you.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple card Play and then brought auto with a Bloomberg Business Act or watch us live on YouTube.
The private markets, we know, private equity, private credit, They're one of the hot topics of investing, especially among the institutional set. Bloomberg News reporting just last week how each trio of academics says a bold take on the boom. I think one point seven trillion dollar private credit market, and that is after accounting for additional risks and fees, the asset class delivers virtually no extra return to investors. So really curious, Carol, what our next guest has to say about that.
All right, we welcome in Hartley Rogers. He's executive co chairman at Hamilton Lane, a private markets investment management firm with nine hundred and three billion dollars in assets under management and supervision. Hartley is joining us from our Bloomberg News bureau in Toronto. Hartley, great to have you here on Bloomberg Business Week. Like most folks in your world, we'd like to start macro.
When you look at.
The global environment, where do you see the strengths? Where do you see the risks? You know?
Carol and Tim, first of all, thanks for having me on. You know, I think we're pretty bullish in a way about private markets right now. I think the data and stats show continued out performance in all of the private markets segments, including private credit, Tim and and we feel pretty good about how things look. We feel like the risks of significant interest rate rises are low, and therefore there's more predictability as you look out at the world.
It may be, especially given today's inflation print, that rates will be a little higher for longer. It may be that we'll see some softening in the US economy towards the end of the year. But we're pretty constructive about the opportunity set, especially in the buy out space. The buyout part of the private markets has been the kind of stalwarts, strong part of the markets for decades and it continues to be that today.
Why aren't you concerned about rates going up significantly given the data that we got today.
Especially as everybody seems to be pairing bets that the FED is going to do cuts. Traders also pairing ECB rate cuts after today's CPI print, So it just seem feels like the narrative has changed.
I think that higher for longer certainly is part of the narrative today. But remember, if you look back at the private markets, private markets have been around for a long time, and if you go back twenty twenty five years, we were operating in rate environment very similar to the rates that we're in today, and private markets did just fine. And so I'm not a macroeconomist, but I think the As I said, our house view is that the chance
of rates going up is very low. They may just stay where they are for a little bit longer, but we don't see that as a significant ahead wind in private markets.
Interesting, I mean, what indication to you out there. I know, again you're not macro, but you have to think about this macro stuff when you're making investments, when you're raising money, is your what is your outlook for then for the remainder of the year, what is your outlook when it comes to not just the US economy but the global economy.
Well, I think we feel like there's a chance of a soft landing. I think the US consumer has been very strong, US corporate profitability has been very strong. US productivity is very strong, and so our view is that the US remains a robust econom me but potentially with a bit of a downdraft towards the soft landing. I think globally speaking, there's plenty of opportunity out there. Remember I come at this from a private market standpoint. I'm
not really a public market broad based person. Private markets are a growing and important part, but they are far from the largest part of the global capital markets, and we specialize. Our industry specializes in finding opportunities to invest in attractive, growing companies and in places where you can make operating improvements, as the industry has always done for years through our unique ability to control and influence and align the portfolio companies that we own.
Well and we get it and hardly you know that what goes out in the public markets that can impact to the upside or to the downside what goes out in the private market. So, having said that, based on your outlook, where are the opportunities when it comes to the who's reaching out to you in terms of the private credit and who needs to tap the private credit markets?
Increasingly well, the private credit market have become a replacement over time for the bank markets as you come in after the GFC, and they've done very, very well. They allow for a different style of investing, both from the investors standpoint and from the investee company standpoint. Many of our buyout funds that we invest in, and we're you know this, but we're one of the very largest investors
in private equity funds in the world. Many of the buyout funds that we invest in tap the private credit markets and are happy to do it because they feel that they're dealing with people that they can have a relationship with, that they can negotiate with. It's more concentrated group of owners of private credit than when you have a more broadly based financing, and I think they feel that that can be very constructive as you're moving a
company through its private equity ownership phase. On the investing side, there's a premium for private credit. There has been for a very long time and there continues to be in our data. And to remind you, we have a very large data set in this area, so we do not agree with what insited those professors are saying in terms of returns not being there in private credit.
Well, that's what I wanted to do, And I understand there's just so much information maybe you can share or want to share, But what kinds of returns are you seeing on average when it comes to private credit and what is the right metric to compare private credit investments against? Right you buy a stock, you're either going to measure it against the S and P. You're going to measure
it against a MidCap or small cap. Like there's so many different ways that are more apples to apples, but in as you know, in private credit or in private equity, right, there's a lot of investments that certainly fill those buckets. So what is the kind of returns that you are seeing and how do you measure it? What's the right metric or benchmark?
So that's a great question, Carol, and very broad brush, we measure private credit against two things. One is the leverage loan index and the second is the high yield market index, because most of what we do is in situations involving some leverage, right, leverage buyouts or buildings that are leveraged, or infrastructure investments that are leveraged, things like that, and so we try to look depending on what we're
looking at. Specifically, we'll find a finer tuned index if we need it, but broadly speaking, we look at private credit against those two things that I mentioned, and I would say in today's environment, obviously you've got interest rates that have gone up considerably and so you've got to have a premium to those. So depending on what you're looking at, seeing you're secured or not secured, you're looking at anything from high single digits to low double digits kind of all in yield.
Hey Hartley, how do you grow private markets at least for you beyond institutional investors right now? I mean, do you think that these type of products should be available in four to one case, for example, in retirement products?
We absolutely do. These are investments that have benefited sophisticated institutional investors for decades and there are reasons why some of the best known institutional investors have earned wonderful returns is because they have had significant allocations to illiquid investment private market type investments. We see no reason why those should not be made available to the broader public and
particularly through the private wealth type channels. The critical thing to do is make sure you are educating the consumer and educating their advisors to understand how these investment works, how these investments work, and how you think about portfolio construction and exposures to them. But there is no reason why they shouldn't be broadly avaed.
Hey, Harley, we're running up against the clock ten seconds left. You're in Canada because Hamilton lays in expanding its presence in Canada. Why are you so bullish on Canada right now?
Well, Canada is a great market, It's very sophisticated financially. They have some of the strongest financial institutions in the world in terms of their investment reach and scope. So that's very important for us to be in dialogue with these people and to work with them. Plus, Canada represents a tremendous opportunity for investment things like infrastructure. So appreciate it.
Thank you so much. Hartley Roger, Executive co chair Over at Hamilton Lane in our Toronto bureau. This is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play 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.
Well Delta shares bouncing around today. They were upsize more than four percent, now down three point two percent after the company says it expects earnings to exceed Wall Street's projections for the second quarter. This is Delta benefits from a step up in corporate travel and steady leisure demand heading into summer. We got Mary Schlangenstein, Bloomberg News US Airlines reporter joining us right now from our Dallas Bureau and Mary, I got to tell you, Carolyn and I
were talking. We're looking at the chart throughout the day. We're wondering why White A Swing shares were up four percent and then now they're down three percent. What's going on here?
Right?
So initially investors really favored their earnings report, and not only did Delta shares go up, but they pulled up some of the other airlines as well. But then when the federal the FED comments came out about you know, the rest of the year, and there was some federal data that showed that March airfares fell seven percent, and so we think that's what's driving down the shares this afternoon.
Yeah, it's interesting here. Just inflation data released did show airfares dropping about seven percent in March for the prior year.
Biggest I will say that was Carol's guest. I will I will give Carol full credit.
That was your guest, just reading through, reading through on all of you guys are reporting, but it is interesting, Mary, you follow this sector so more broadly though, strong report from Delta.
Yeah, and what Delta talked about primarily was one that their operations, their flight operations really improved this year, and they're not alone in doing that. There hasn't been a lot of bad weather, and a lot of the airlines are performing better operationally. But they're also talking about a big factor being the return of some of the corporate
travel accounts that were lagging. The areas that were lagging like tech and financial services, they're finally seeing those companies come back, so that managed corporate travel revenue is back to twenty nineteen levels. Volumes are still lagging, but the revenue is returned to twenty nineteen.
Remind us Mary about where Delta gets its revenue mix in terms of domestic versus international.
Here, Yeah, they're still more heavily domestic, but the differentiator for Delta is so much of their revenue comes from premium products. So in the first quarter, their premium product revenue rows ten percent, main cabin only rows four percent, And that's been a pretty consistent thing for them. They really focus on that premium customer and their cells, you know, have been leaning more toward that area for some time.
But since they're more heavily domestic, how much were they affected by a slowdown into potential slow down in domestic travel and an increase of late in international travel.
So international travel has been really strong since last year, and Delta saying it continues to be really strong, even across the Atlantic, where there were concerns early on that there was too much capacity in that market this year, but Delta says there's plenty of demand. They see demand strong to the Pacific and Latin America. Domestically, they're saying
demands picked up too. They're picking up some travel they think from the domestic focus carriers that are having toggle rejuggle their schedules and and redo their operating schedule because of some conditions specific to the domestic market.
You're talking about Boeing or Spirit.
We're talking about Spirit, Frontier, Allegiance. They're shifting some of their capacity. No, no, not United or Boeing, No no, We're talking about the domestic focus carriers like Spirit, Allegiant, even Jet Blue to some expensis.
Okay, Hey, Mary, One thing I wanted to ask you, the CEO at Baston saying in your story that you noted is that while revenue acceleration has brought the carrier back fully to twenty nineteen levels, you just said that earlier volume remains eighty five to ninety percent of pre pandemic levels. Does that mean so yay, Delta has more of a runway to kind of grow that and grow the revenue line or is it? How are I don't know. How is the industry rethinking about the levels that were
pre pandemic and where we are? Do we go back to those levels at some point?
Yeah? Well, on business travel in particular, I think that they believe that there's some segment of that volume that's just not going to come back because they're still seeing, you know, a permanency to some of the changed travel patterns where people are taking you know, to blend leisure travel and business travel, so they're business strip may be longer, they maybe aren't traveling as frequently as they did before. So I think part of the volume is always going
to be gone. I think the revenue even on non business travel has exceeded twenty nineteen levels already, and so as the volume for leisure travel.
Mary my head is on the equipment providers Airbus, Bowing and Breier Bombardier, all of which provide aircraft to Delta. I'm wondering, since it does have a mixed fleet, was was there any commentary about Boeing on the.
Call not a lot. You know, Delta does primarily fly Boeing aircraft. They don't currently fly the Max. They have the Max ten on order, but they don't expect to receive that for about three years yet. But what the CEO ed Bastian did say was that you know, safety is a top priority across the industry and that every day,
you know, that's the top priority for every airline. So he didn't comment specifically on Boeing, and he didn't comment specifically on the safety incidents that have been occurring across the industry recently, but just said that's a top priority. He did say in an interview I had with him yesterday that he knows the new chairman at Boeing is familiar with him, and he expects that at some point he will talk to him about any concerns about Boeing itself.
Has there been any chatter about them changing their order of those new Max planes that have not yet been delivered to Airbus if that isn't even a possibility given the Airbus supply constraints.
They just placed that order recently, they haven't had it for very long, and I don't think there's any consideration at this point, the deliveries are due farther out. That gives plenty of time for the Max ten to be certified before their deliveries come up, and even for Delta for Boeing to catch up on some production. So I don't think that's being considered right now.
Yeah, I'm looking at I just got to say the overall industry, as you said, S and P five hundred Supercomposite Airlines Index, which was up one point seven percent of its highs earlier today, it's not down about three and a half percent, so we're seeing pressure as you
said from some of that commentary about airfares. Having said this, Mary, what does Delta maybe tell us, not every airline we know it's not apples to apples, but what does it say about some of the other ones that will report throughout the earning season if anything?
You know, Delta is the only major US carrier that is expected to report a profit this quarter, So there are other factors affecting American you know, United Southwest has its own issues, but the Delta is the only one that's expected to report a profit. The others will have losses this quarter, and we'll see what their outlooks are going into the second quarter and maybe even the you know, later in the year.
Really fascinating. All right, Mary, always appreciated and your insight. Uh, thank you so much for joining us. Mary Schlangenstein once again, she's our Bloomberg News US Airlines reporter joining us from Dallas. A brother, Marc, a journal How about you let me drive?
No, no, no, honey, please, I'll do the gravel ECUs, mate, I want to dry it.
It's a good question.
This is the drive to the globe.
Doing well.
BYELDN on Bluebird Radio.
All right, everybody, just about eighteen minutes left in today's trading session, getting ready to wrap up the Wednesday trade. This what's been another busy day, no doubt about it. But we did get a higher than expected forecast, if you will, hot inflation print. That was this morning that we got fed minutes Again the rethink tim in terms of what happens when it comes to the Fed cutting rates probably why don't these analysts just not much this year?
Why don't these analysts just raise their expectations about what about what's going to happen when it comes to inflation? Like why don't they increase? Like Okay, looking at me expected, Yeah, well you gotta expect it that it's going to be hot.
Let's ask our next guest about what it means when it comes to forecasting. Penning Pennington is in the house. She's CEO over at Edward Jones, joining us here in our interactive broker studio. It is interesting forecasting not a perfect sign. So you guys have to deal with it too in terms of what you think is going to happen with the markets. What do you feel like you can kind of securely hang your hats on when it comes to the investment environment this year.
Well, what you can securely hang your head on is that we don't have a crystal ball. And so, as one financial advisor I talked to you this morning said, a good plan is better than a poor prediction. And so our financial advisors work with eight million clients. We engage with a half a million North Americans every week. So you're right to ask, what is the pulse of North America around what our clients are thinking?
What a love that?
Soective inflation is not exactly how they come at it. They come at it with questions like how am I going to be able to afford healthcare? In a long life when healthcare inflation has been going up for a long long time, And and and Matt the financial advisor I was talking to today, Matt, what I bought the grocery store three years ago that cost a hundre dollars now cost one hundred and thirty dollars. Is that in our plan?
Well?
Well, absolutely, it's in the plan. So what we talk with our clients about before we talk to them about what's going on in the stock market or what's going on inflation, we say what's important to you? What are you trying to accomplish and over what period of time and how much risk do you want to take doing that? And our clients are multi dimensional people and families. They've
got lots of goals, short, medium, and long term. And so when we have a day like today, or a year like we've had, or the last five years like we've had, we work with our clients on their financial plan and we flex it. We say, what would happen if we saw a longer term downturn in the equity markets? What would that do to your investment plan? And more importantly, what would that do to your life and financial plan?
You know, I'm hearing you say this, and it's interesting because you said that they're not coming at it with inflation being high. They're coming at it through the lens of Okay, well, we know the cost of medical care is going off, we know the cost of food is going up.
That is inflation exactly. That's right. They talk about it in terms of what it costs to live the life that I want to live.
And that's I think the way that it manifests for a lot of people, apart from gas prices, which are certainly volatile. I'm interested, Penny, in terms of the commonalities that run across your clients. I mean, eight million people around the United States who you work with. It's really runs the gam that I know. But what's the commonality there.
The commonality is that our clients care about their health, their family, their purpose, like their reason for being on the planet, and how that manifests in their financial plan. So, strangely enough, what our clients want to talk with our financial advisors before we get to which stock or bond is I'm concerned about how long I'm going to live
and planning for that. I'm also concerned about the next two generations of my family and by the way, there's an eighty four trillion dollar wealth transfer that's in motion right now. And so family and how you pass on your legacy and your assets to your family and then your purpose, like you know, what what do I want to do in retirement? Is retirement going to be different for me than it was for my parents? It certainly is going to be different for my thirty year olds than it will.
Be for me.
And so this is the common thread, the very real, multi dimensional ways that our clients express themselves. And the other thing that's common is that we want to get to know them, and every single one of them is different.
I think if it's someone like you who you know are in it's a very important seat in terms of a financial firm. And when you talk about generational wealth and that transfer, okay, that's great in terms of CEO who runs a business that's based on people having money to invest or wanting to invest that you know, do you get more nervous about I don't know. Is it two generations from now that doesn't have We talk about this all the time. I think about my dad or
maybe you know your dad. You know, pension investments, social security, several things you know bought a house in cash outright fifty years ago. I think it was a very different dynamic. And I have younger individuals in my life, nieces and nephews, and they're like, I'm never going to buy house. I just can't do it. These are well educated people who are making a decent living. But I mean, how do you guys think about what is the lifeblood of your
business going forward? And I don't know, is it two or three generations that maybe it's a little bit different business.
Well, we've worked with seven generations of clients in one hundred and two years, and that's backwards. That's backwards. But I have no doubt that each generation looked to the future generations and said, how are they going to do it? It's getting more complicated. That's why it's so important to get good financial advice. We start with financial literacy. We're teaching a million learners in North America over these five years about the basics of saving and investing and budgeting
and credit card debt. And then we invite those investors. We invite the younger absolutely, they're younger, they're in high school, and then we work with investors across the generations we work with those who have money now and who are beginning the process of establishing wealth. It's not going to be easy, but it has always been the case. You know, the time value of money and compounding of interest is
a magical thing. People who understand that earlier in their lives and get on that train, that's what we help our.
T I mean, unfortunately they don't teach that in junior.
High Well, interestingly, there are two parents. There are now twenty five states that mandate financial literacy education in the high schools. Really, and that we've been in five thousand high schools. We've taught three hundred thousand students just in the past three.
Or four years.
It's working.
What we have learned from those students is that their confidence is fifty three percent higher, and they're over sixty percent more likely to start the process of investing. It's not magical to them at that point. It's become far less abstract and it's become something that they could imagine would be part of their lives.
Do you think we'll need to get to a point and forgive me? I know we're kind of getting existential a little bit. Our bigger macro We've got about thirty forty seconds left here. But we get to a point where you're born in the government or something, or something is put aside for people just because we don't have the retirement plans like that companies used to do in terms of pensions and so and so forth. I understand four oh one K, but that's a little bit more
active on an individual's part. Do we get to a point where there's government involvement just quickly?
I thank you. There's to solve this problem. There's a really important partnership that needs to happen between employers, between financial advisor and wealth management firms like ours, and public policy.
So appreciate it. I know we wanted to we were going to talk a lot more fed and stuff, but this was I think really smart because I just think about kind of what the future is in terms of the investment world. Thank you, really appreciate it. Petting Pettington, she's the chief executive officer of Edward Jones. She sees a lot, so does her team. Joining us here in our Bloomberg Interactive Broker Studio.
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