A Closer Look At Commodities

rate heights next year and into three. And that's obviously the market is trying to digest that. Markets ares in general, including the commodities market. H we talk commoties. We always like to chat with Will Rynd. He's founder and CEO of Granite Chairs at one point five billion dollars in assets under management, located in New York. So Will, thanks so much for joining us again again. A big change in tone, well, I would say hawk ish, a tone that was probably a little bit more hawkish than the

market had been discounting. What did you take away from FED Chairman Pal's comments this week? Well, I think that's um, you know much to what's kind of probably been already said in the market that you know, the expectations have been brought forward in terms of rate rises. So it seems like the the indication is that you know, inflation is rising faster than they expected. Um. And you know, to that end, trying to bring forward expectations of rate rises.

There No, there was no specific comments around the tapering. That's the asset purchase program. But I think expectations, obviously, that's the big story in terms of rising rates. For the first time, I did say they're starting to talk about tapering. Previously they weren't even talking about talking about tapering. Um. The thing I found interesting Will is, alright, so rates are gonna rise earlier than expected. What do you do sell gold that makes sense? Rates are gonna rise earlier

than expected. What do you do buy bonds? That doesn't make any sense at all? What's going on there? Well? I think, Um, to me, this is all a bit of a knee jerk reaction, because you know, in my mind, if you just look at that in a vacuum and you say interest rates are rising or interest rate expectations of rising cell gold, Okay, that might be fine, but what about inflation and right, now we have the lowest real interest rates by the nominal interest rate minus inflation,

that we've had since the nineteen seventies. So in this environment where real rates is so low, inflation is rising much quickly. Even the said saying, you know, Jerome Power, think the exact words that he used was inflation could turn out to be higher and more persistent than we anticipate in that environment. I'm not a seller of gold. I think gold and commodities. To me, inflation is still rising, and in this environment, I think you need to have

inflation hedges. All right, That's kind of where I wanted to go. Well, it just obviously you look across the commodities complex, uh, and you see, you know, big gains for most of the commodities of the soft of the herds and obviously oil, uh, you know, pushing higher above seventy on w T I crewed. I guess my question is is there room to grow? And if so, what's what's kind of the drivers there? I think short term,

absolutely yes, we're still in this reopening phase. I mean, obviously for those of us that you know, watch the commodities market, we are now just about to enter the notorious or infamous summer driving season, and you know what that means is that, you know, when kids get out of school and everybody takes off for some vacation, there's a lot more driving activity, which you know typically leads

to higher oil demand. Now this year, arguably that's going to be bigger than we've seen it a while, because people aren't traveling abroad maybe as much as they would have done in prior years, and so the Great American Vacation is going to be in full swing. And so from that perspective, I think on the short term, you know, I looked at what happened with oil yesterday and it barely moved. Okay, did go down a little bit, but I thought it was very stood up, very well given

everything else we were seeing in the market. So to me, that's an indication of the strength right now and short term strength and oil the energy complex more broadly. I think really the only things that got hit and got hit relatively severely were the metals, which you can also trade a little bit risk off when the US dollar rises. Oil special obviously, because you've got this cartel um that's watching the prices. How high do you think OPEC would

let it go. Um. Well, I think that they can let it or they would let it go significantly high. I don't think a hundred dollar oil is out of the question. Um. But of course they have their own pressures, as we've seen time and time again, economic pressures and financial pressures, and you know, they've they've tried to exercise restraints in terms of putting more supply into the market. So I think naturally, you know, if the price goes much higher than it is today, they're they're already talking

about putting more production on the market. It. But I think we'll see some supply response, a little demand response. I'm I'm there for the demand response. I'm willing to burn as much gas as i can this summer. I'm excited to be summer driving season well or yeah, in um in a number of different vehicles actually, although I promise that my offspring will make this shift to electric vehicles. Well, thanks so much for joining us, Will Rind. They're coming

in from Granite Shares. They have one and a half billion dollars of assets under management, uh and located right in New York City. We are going to continue to watch these commodities because after the moves that we saw yesterday, it became even more interesting than just a one way trip. Let's get over now to Lauren Sour, Associate Professor Emergency

Emergency Medicine at Johns Hopkins School of Medicine UM. Lauren, I was just telling our list nerves that the delta variant of COVID nineteen is spreading quickly throughout the UK. I think there's seventy seven thousand cases this week compared to thirty three thousand cases last week, and cent of the cases that they have tracked down and researched are the delta variants. So is that going to spread now

to the US and too continental Europe? Yeah, I think we are going to see delta variant overtaking a lot of the cases, sort of the stronghold, similar to what the alpha variant did UM late last year and early this year. You know, I think we're still all waiting to see UM whether or not we'll see an uptick in actual cases, but I think the cases we do see will start to be that delta variant for sure, Lauren. Here in the States, it's it's obviously a different story,

much more positive story in terms of vaccine metrics. UM is it too early to start talking Yeah, it's true. Is it too early to start talking about her community here in the US? Her immunities are really challenging things to talk about in a general sense, And so you know, I think we all want to see her community UM conceptually in the US, and I think we're getting really close. I think that's why we didn't see that sort of

spring UM uptick that everyone thought we would see. And the key focus in order to start having that conversation will be to understand what the the sort of overarching coverage of immunity is. So we want to make sure we get rid of those pockets of of communities that have been resistant to or enabled enabled to access vaccine UM, so that we have a really well spread immunity. The picture of community looks similar across the United States, rather

than high and low and high and low. And that's where you're going to start to see her community UM broadly across the country. Could we see something in the US happen the likes of which we're seeing in the UK. Could we see another wave of infection start to rapidly spread even though UM the majority of the adult population is vaccinated. I think we could. Um. I think everyone is hopeful that we'll get vaccine coverage that's high enough that we won't see that big uptick like the way

the UK has. UM. But the US is has really disparate levels of vaccination coverage, more so than the UK, I would say, and so, UM, you know, it's hard to compare. It's hard to make predictions on what will happen in the US based on what has happened in the UK. I think rather we start to look at the state level and say, Okay, if this state has pretty high vaccination coverage, we're less likely to see um,

that sort of picture in that state. Um. And over overall, I'll just remind listeners, overall the UK has more higher percentage of its population fully vaccinated than is that with astra zeneca? Though Um yeah does that, hey, doctor, does that make a difference? Is is it? Are you more likely to get the Delta variant even if you've been vaccinated if you were vaccinated with astra zeneca. Um, I'm

not actually sure. I will say that we're just starting to see data back on on the cases, the vaccinated cases from Delta. Most of those cases are people who have not had their second vaccine dose, which would be obviously the MODERNA advisor vaccines. And so the key is to get that full coverage of vaccination, right, don't stop

after that first dose. If you're having a two dose vaccine, make sure you're getting the booster if that's what's appropriate and recommended by your doctor UM, and make sure you get through that. You know, you sort of protect yourself and follow those other public health measures until you have you know, full vaccination coverage. And that's going to get the most protection at the individual and at the population level for UM for the delta variant. So I can't

speak specifically to astrogenica. I haven't looked close enough with the data, but I do think that we that the vaccines are protective. We just have to make sure that people get the full course of the vaccine that they're getting UM in order to build that protection. Lauren, the Barkley Center where the Brooklyn Nets play their basketball game last night was packed. Does that make you nervous? You know, it's weird right now. Any sort of visible crowd makes

me feel nervous. And you know, we're going to be in a place where we have to tease out what is sort of that emotional reaction. Um, And what is nervousness because um, we're still coming out of a pandemic, and we we still have pretty high numbers of cases in a lot of places, and and highly variable vaccination coverage. I'm not sure i'd be comfortable and events at the

Barkley Center yet. I think, you know, the CDC's recommendations are allowing for individual choice in a way that you have to sort of look at the data and feel, you know, decide your level of comfort. I think we're all going to have really variable returns to quote unquote normalcy, you know, and and and that's okay. And and I think, um, that sort of slow roll back into what, uh, you know,

what your interactions in the public look like is okay? Um. And especially if you're choosing to be more cautious um or more careful, or maybe you have someone in your life who is more vulnerable or susceptible and you want to be cautious and careful for them, that is absolutely okay right now. Lauren Sour, thank you so much for joining us. We always appreciate checking in with you here on a weekly basis, getting the latest on this pandemic.

And on vaccines. Laurence Sour, Associate Professor of Emergency Medicine at the Johns Hopkins University School of Medicine. They're not just lacrosse players. They are there's some world class uh you know, scientists and doctors, and we appreciate their time. Now, let's bring in Downtown's with Director of Equity Strategies at Conning. They have two hundred billion dollars of assets under management, and don let's talk. I guess high dividend equities are

what you're looking at? What do you see right now? And what are the what are the valuations? Tell you? Well, in terms of dividend paying stocks, we've really been at a relative discount now for quite a long time. Um. You know, one of the factors that we look at is is growth fears in the market. And growth fears actually tend to drive the growth stocks, the technology stocks that we've all seen rallies so far, it tests to drive them up because they can grow in a growth

scarcity environment. And that's left some of these dividend pairs and in broader in broader terms of value stocks behind and so they're their valuations still look relatively attractive even though they've had a recent strong rally. Don It's interesting when I think about dividend stocks, one of the names

that really jumps out of me is Apple. I mean, here's a company with a hundred billion dollars of net cash on the balance sheet, then a free cash flow in each the next two years of a hundred billion dollars, yet their dividend yield us less than one percent. That's gonna be frustrating for a dividend investor who would probably love to throw Apple on the portfolio. Absolutely, we would. We would love to have Apple in the portfolio if only they returned more value to the shareholder in terms

of dividends. And it's been a big frustration across the whole kind of fraternity of of dividend investors. And you know, we would, we would like them to take some of that free cash flow and distribute it to get their yield up closer to two or two and a half percent. So why, um, why don't they? Well, that's a great question.

I think that um, there are many technology stocks, particularly on the equipment UH and semiconductor side, that have for a very long time paid an attractive dividend, and they've done it while growing at a at a fairly good pay eight UM. I can only speculate based upon any company comments and and maybe our our biases here that that they see that cash hoard as an opportunity for acquisitions that they might see in the future, and they'd

rather keep it on their balance sheet. But as it grows and grows, one can only imagine that there's going to be a growing pressure along with that that can never make any big acquisition like well, who you know who knows? I wish I knew, and I I buy a lot of that acquisition target myself. Hey, don talk to us about UM tax policy and how that impacts your strategy, your dividends strategy, because the President Biden is talking about some changes to the capital gains taxes and

so on. Absolutely UM. Historically speaking, and this is really the thirty years I've been in the business, capital gains tax rates have been lower than their tax rates paid on dividends, which often are our tax at the level of your ordinary income as an investor. With the talk about raising capital gains rates, uh, it means that in relative terms, the go go growth stocks that don't pay a dividend, those stocks are going to become relatively less attractive as them as your tax rate goes up on

on on the proceeds when you sell. So we think that that's actually a positive in relative terms or dividend paying stocks. As perhaps the new tax laws equalize the tax treatment of capital games and dividends, that's going to give a boost to the dividend paying stocks because the other guys have to pay more taxes too. I've always found this interesting because um, as the owner of the company, you're paying taxes on the cash that you get paid out that you pay yourself out from profits, but those

profits are also getting taxed. Yes. Yes, the question of well I couldn't agree more, I couldn't agree more. Double taxation is a has been a problem for years, and I think that if if more people, if more people thought in those terms, I think that there would be more pressure on on reducing that double taxation load. For now, we're still gonna have a little with it. Yeah, So don how do you guys typically screen for dividends. Is it a certain yield and you do it by industry

or how do you do that? Well, we actually do take a look at a certain yield or higher, but Unlike many dividend managers, once a company has met a certain minimum, we actually tend to be agnostic after that, because what we're looking at is companies that have a very manageable debt load and companies that are generating the free cash flow that you referred to before um consistently year after year after year. Uh. Our hidden talent really

is that we're UH. We were primarily a fixed income shop, and so we have credit analysts that have decades of experience and they're looking at these same investments for the the safety and credit worthiness of their debt. We take that information and also look at the credit worthy units, if you will, of their dividend payment. Also, how sustainable

as the dividend can they grow it? Are they generating excess free cash flow after they've paid their dividend to be That's our secret weapon in terms of finding companies to pay a dividend and raise it. Hey, John, thanks so much for joining us. We really appreciate hearing about your strategy the dividend paying stocks. We don't talk enough

about that. I think equity strategy at a Conning they have a two or billion under management, A lot of it focused on dividend paying companies and the income the day and produced for shareholders. This is Bloomberg, you know, Matt. When I came onto the street in eighties six, insider trading was really a thing. You know. We had Ivan Bowski, you know, Drexel, Burnham, Lambert. I mean, some really juicy things. They wrote books and made movies about it. But I don't.

It feels like I don't see it, at least not on the scale that that we used to see it. So but actually looking at the Bloomberg terminal today, we have a good old fashioned insider trading report in there, and we have the reporter. And this reporter is a Duke Rad, so double good story here. We're overwhelmed by all these reporters. Being a duke rad is more important, I think than reporting on insider I think. So Bradhaim, she joins us here. She's reporter for Bloomberg News, and

so Burtte, thanks so much for joining us here. Talk to us about this case. Give us the background of this insider trading case, because it's got a little twist because it does include an NFL player who lost quite a bit of money. But give us the background on this case. Hey, yeah, thank you so much for having me. I'm really excited to be here. UM. So, like you said, this is a very interesting case. So I've spent the last three days down at a courthouse in downtown Manhattan

following this case. And there's kind of two parts that I'll break down for you here. So one is insider trading case. We have Donald Black's dad who's facing charges and prosecutors say that he committed insider trading talking with UM an accountant who worked at Alumina UM all of this well, black dad's based in San Diego UM and so he was talking with this accountant and they say that he used insider information to trade and along with some others, so they say he was the leader of

this insire trading ring. They used money to trade UM, including some options related to Alumina, and make millions of dollars doing that over the course of eighteen around the same time that this was going on. They're also saying that he well, he's charged with committing investment fraud as well. Yeah, there was some shady I mean it sounds even shadier.

Because I love your story by the way, bree Um, because you you you put some details in there that I think make it more interesting because I can imagine being there. So at the stake house, for example, Um, you know, he gives this football player a prospectus. The guy reads it. He's into it for an energy company that apparently has some kind of storage technology for renewables that is just about to go off the hook because California is going to change the law and this ball

er says, all right, I'm in for one fifty. The guy then takes his money. Uh, the investment manager, puts it into a bank account where he keeps also his personal money, and apparently uses that lump sum to make an offer to pick up another company unrelated to the energy company in which the baller wanted to invest in the first place. Yeah, so it gets very complicated, and we're still seeing the prosecution and defense lay out their

cases right now. The prosecution is um questioning witnesses, so we haven't actually gotten to um here all the defenses side yet. But um, so what happened here was we have this NFL player corelj who had been UM picked in the first round of the two thousand and eleven draft. He UM pretty high profile UM defensive lineman and he went out to UM dinner at this San Diego steakhouse.

UM and Donald Black's dad was there and they talked about this company, mid Continental Petroleum that Black dad UM was hyping up, and later on he sent UM Lug this prospectus that they ended up reading out a lot of parts of in court yesterday, some very technical language. They are going over some of these very specific clauses and talking through UM, you know just what Luge's experience

was with this process. And then he ended up wiring UM make Continental Petroleum's account one hundred fifty thousand dollars. And that's kind of where the NFL player becomes involved in this story. And prosecutors are saying that Um this money ended up being used for at least parts of it ended up being used for personal UM purposes. And the defense said in their opening statements, however, that Um

Black said was using one account for all purposes. So they're saying that, you know, this was an account that he used for business used for personal purposes, and that he put his own money UM involved in business purposes too. So how much money are we talking about here on this insider trading deal? Again? I just mentioned a man I just haven't seen too many high profile ones recently. How how much we're talking about here, Yeah, that's that's

obviously a great question. Um. So we originally saw when prosecutors were first talking about this that a black side his associate, so he had several people involved in this.

That's why they're calling it, you know, an inspire trading ring. Um. They initially tossed out the figure of about six million dollars um that was made, and actually what we were seeing in court where they left off at the end of the day yesterday was having an sec economist go over on the very specifics of this trade and talking about the timing around on trades around Alumini announcements. Coral got paid fifty million for a five year contract. I

just want to point out, Um, it's better. It's this is the lesson to take away from this. It's better to be a successful NFL star than an inside trader. Yes, absolutely, And it's it's weird. I mean, Brie, it's you always see like as It's another angle to this story is, you know, a professional athlete or celebrity oftentimes they're targeted by some of these scam artists and it's and you know that's why you have these financial representatives and managers.

And he was with, he was with, Yeah, I know, I mean, I think it's time to get another that I look at these guys are like, why don't they just buy stocks and bonds and mutual funds like the rest of us. Why do they need to go in on these crazy deals? But is this football player going to testify? Do you think? Yes? He actually spent yesterday on the day on the stand and so they had him come in UM and he It's actually interesting because you know, we're still in the air of covid UM

and so you go into the courtroom. People are spaced out UM where he masks, and the witness boxes actually UM like witness boxes and there's plexiglass around it. And so he came in and sat down and UM told the jury and UM answered questions from prosecutors in defense about this. And he has he's seen any of his

money back? Right? He said he has not gotten any of the money back, and there wasn't Another witnesses spoke yesterday UM Park City, um Utah based general contractor who talked about Heath given a hundred thousand dollars before um pre prior to the NFL player um into mccontinal Petroleum, and they asked for half of that back him and his business partner, and they got half back over the course of this. But yeah, I thought it was cool that,

you know, got the prospectus and read it. I mean, it's not like he didn't know what he was doing. He just got scammed. I would be like, uh, here's my financial advisor, give it to him and so and order another steak because they had Wagyu beef apparently twenty six dollars announced there. Well, this is something that they talked about quite a lot. They went over on the specific clauses and you know, um lug as they were reading through this, he said, UM, quite often. You know

I I looked at this document. I don't necessarily remember this clause. Um. I'm not quoting him on that, but that was kind of, um, the conversation that they were having. And he said that, UM, yes he had. There were emails and stuff going back and forth between black Stad and all these conversations going on, and a lot of doctor is there that they were showing real quick any ten seconds timing on this when when I think I

have a resolution the court. Yeah, Um, the tentative plan that they were talking about potentially um yesterday just kind of in conversations between the attorneys and the judge was trying to get it to the jury by on this coming Friday. But that still seemed a little bit up in there. All right. A great reporting, Bree, really appreciate bringing this story to us and joining us here on radio.

Bree Bradam there um a Duke graduate and a Bloomberg reporter talking about NFL star core Leja testifying an insider trading case, um where he talks also about the wag you beef that he got. This is Bloomberg. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seven d three. I'm Fall Sweeney. I'm on

Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.