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Boeing hitting the market. I'm raising some money up to nineteen large, maybe fourteen billion in common, maybe five billion in preferred. I think they can get this done pretty quickly. Everybody knows the Boeing name. It's been trading in these levels for a long time, so we know where the value is. George Ferguson, he's the analysts responsible for all this stuff. He's a senior airspace, defense and airlines analysts
for Bloomberg Intelligence. George, if they are able to get this deal done again, roughly nineteen billion of incremental new equity, what's that going to do for him? How much time is I going to buy him?
So we think it probably buys them a couple of quarters, right. So on the call the other day, on the evening's call for three Q, they indicated that they thought they'd burn four four and a half billion dollars in four Q similar to what they burned in two Q at that burn rate, what it gets maybe even you know, three quarters or the burn I wouldn't I would hope
they wouldn't need all that, but we did here. Again their outlook that the first half of next year they expect to be largely a cash use scenario and for the full year they'd be cash used'd go sounded like they would go cash positive sometime in the second half, they hoped, so two three quarters.
So, George, just in terms of how large this can be, we know that they launched the shelf to raise up to twenty five billion. Do you think that gets close to maxing it out just because it's going and they simply probably can.
Well, I guess you know they have to, you know, sort of really, I mean, there's a lot of dilution here, right, so really be concerned about dilution. But you know, last I look, the shares were down a couple percent, so it seemed like the market's not that concerned about whatever delution is going to occur here. I think the bigger amount they have, right, the more staying power, obviously, the more they can look at the union across the negotiating table. And say we can hang out for a long time.
We really need you to rethink your idea on let's say something like a pension, right.
And so I think, you know, more money helps them there.
And look, the aerospace supply chain still isn't stable, right, so Airbus should be sort of moving towards fifty rate on a three twenty as they close out the year.
Here, we're not seeing it.
We're seeing them in the forties still, so they're sort of proof positive to us.
You know, we're.
Seeing more noise out of the engine makers. They're still sort of working to get their supply chains fully functioning coming out of the pandemic. So it's not a given that just once they get this strike past them that Bowe's going to have, you know, clear skies ramp up quickly,
generate cash and not have any additional problems. So I think raising more, raising above twenty billion, which yeah, I think could certainly happen here, just buys them more time in a world that is just has a lot more variables in it than you know, than most other industries.
The airspace industry is more more variables right.
Now, George, what are you hearing about this strike here? Has there been any movement here? Have they been able to narrow in on a or a topic or two or three? What are what are you hearing?
I'm hearing it has a lot to do about pensions, right I'm still this weekend, I'm hearing noise out of the unions on the on the West coast, and that that noise, you know, not trying to demean it. It's it's the commentary is probably better way of putting it. Out of the union is really around a pension now, you know, I have heard the machinists presidents say that, you know, if they can't give a pension, they should
Boeing should be prepared to give somewhere else. So it sounds like there is flexibility, but it sounds like a lot of it has to do with retirement plans and what the union thought they lost a decade ago. They did lose the pension a decade ago, and they think they lost a very valuable benefit. And it sounds like there's a lot of focus on that right now.
And we saw the report at the end of last week that the company could sell their Starliner space program. What's your thinking on that? Is a more streamlined Boeing more attractive to equity investors.
Look, I think Boeing could potentially do some streamlining. I frankly think the space business isn't necessarily the place.
For them to do the streamlining.
But I do think they're looking for pieces of the company that aren't core to sort of aircraft, you know, defense aircraft, commercial aircraft, and so space I think stands out for that. The problem I have though with the space business is they've got a launch business called the United Launch a line.
It's with Lockheed.
It's not as competitive as SpaceX, right, I know from people I talked to in the industry, SpaceX can deliver things into orbit much cheaper. You know, I think the Boeing Lockheed joint venture suffers from I think some of those sort of structural challenges inside any big defense contract that they're not nimble and they're not cheap. And I think you know, star Liner, they took four point six
billion to develop a capsule. It's supposed to be the second capsule to the SpaceX capsule, which one as well. You know, NASA wantce redundancy to deliver to the International Space Station.
There's a commitment in there. I think they have to.
Deliver or at least have to go to the space station at least twice a year for a number of years. I don't see NASA, you know, letting them off that that requirement. So they're gonna have to find someone else to step in to a program they've already developed, to take it over and commit to making you know, deliveries to the space station or shots to the space station
twice a year. I think that they're going to be hard pressed to really get much money from that, because again, they don't they don't deliver cheap.
They're overruns on Starliner two. So I just think it's.
Going to be a real challenge to really generate much cash from that. That's been on the market too for a while, and nobody's bitten so far. I understand Blue Origin looked at it, and now they're going to the equity markets for twenty billion in equity. So I think that's a sign of what they think they can generate for that business just isn't there, I don't think all.
Right, George, thanks so much for the update. Appreciate it as always.
George Ferguson, Senior Aerospace, Defense and Airlines sentists for Bloomberg Intelligence, Boeing in the market for you know, up to nineteen billion dollars in some equity common stock, preferred stock. We'll see stock's only off one percent years. So, as George was suggesting, it seems like the market's okay with the delution. I mean, it is what it is. You kind of knew this was coming. It's been well telegraphed.
We reported it back in early October, so almost four weeks ago. At this point that they were in talks with advisors, that stock was about one point fifty three. Right now it's one fifty three to five. So when you think about it, we're continuing to see the stock
move sideways. As you mentioned, the big question is what kind of a discount, How quickly does this deal get done, and what are the terms that actually get agreed upon for that convertible debt, Just because when as George mentioned, when you talk dilution, if you're an equity investor, I'm sure you want to clean balance sheet, but you also don't want to get squeezed out of your position.
Yep, it's actually and then presumably that'll strengthen their position with the union. Just in terms of talking about this upcoming contract.
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Let's switch hears to the global auto industry. A little bit different story there is. The best I could tell the two may your headwinds for the auto industry is one China, which is obviously a huge growth market for the global auto industry. It's slowing and the local brands there are improving dramatically, so they're getting much more competitive there. And then the second thing is, oh, yeah, they got this whole transition to evs and how do you do that?
We heard some some really cautious news out of Volkswagen today. Volkswagen eyes closing three German factories in a cost cutting push. Let's check them with Steve Man, he covers the global auto industry for Bloomberg Intelligence. Steve talked to us first about this Volkswagen news here, I mean shutting German factories. They don't typically do that, So how much, how much hurt are they feeling over their VW.
Oh, they're in the world of pain at the moment. You kind of mentioned it, Paul. They are hurting around the world in all three major regions of the auto market. You know, US, they're not They're not that big of a they don't have that big of a presence in the US. You're up, you know, it's sales are down. You're not only hearing it from Volkswagen, but also Silentis as well. You know, their stock is down quite a
bit over the past few months. And in China, you know, China, the Chinese OEMs are taking a lot of market share in China, They're they're entering the EU market. Like you said earlier, you know, Chinese automaker are just much quicker in transitioning to EVS in that region than any of the foreign OEMs operating in China at the moment. So, you know, Volkswagen is feeling it.
And how does that kind of position a company And you're up one of the biggest automakers trying to compete with US automakers who are having their own issues and as well as kind of the potential pent up demand at least in terms of capacity production capacity in China.
Yeah, there, I mean de pent up the capacity in China. It is really not EV capacity. It's actually really ICE capacity, internal combuntion engine vehicle capacity.
Uh.
There's been a lot of closing of those plants in China. Volkswagen has closed one of its plants in China with his partner Shanghai Auto sai C. You know, Ford has closed a number of plants. Hyundai has closed a number of plants. And these are all companies that have not transitioned to EV as fast as the OEM's companies like GM and BUYD taking huge market share from the foreign automakers. By D is actually the biggest now biggest automaker in terms of volume in China.
All right, So what is Global Auto to do about China? What is the strategy?
Do you think?
Because I think if I've got these Chinese companies that are, you know, getting better and better every day, what do.
I do there?
Do I walk away from this market? I can't do that.
It's too big.
Yeah, that's I know.
You know, if you look at the four OEMs operating in China five years ago, they were they had market share over fifty percent in the last couple of years, they basically have changed position.
Uh.
You know, the Chinese OEM has more and more capacity, more and more market share, uh, and it's growing. There's a number of ways they can attack this. They need, you know, they either invest a lot of money uh and and really grow evs and not just evs, but these user interface. Chinese consumers are buying cars because they like the user interface that the Chinese OEMs are offering them.
So they need to build more evs. They need to look at revamping their software to cater the local customers in China.
Well.
The other the other option is really to close shop and you know, focus, refocus their their investments and their costs. They know how to you know, they know how to operate in Europe, they know how to operate in the US. They know how to do, you know, sell more cars in their local markets. That that may be one option is to just retrench. But you know, that's that's not an unfortunate approach if they had to do that in the biggest auto market in the world.
When I look at Europe, are there any automakers well positioned? I mean, Stilantis is hitting getting hit by four performance in the US BMW has an expensive recall. Mercedes Bins has been struggling in China, Like is anyone winning well?
Relatively speaking, I think the German luxury automakers, the BMW, Mercedes are faring better than the mass market, but they're also feeling the pain, right They're all the luxury brands are also feeling the pain.
You know.
BMW and Mercedes just reported, you know, lower sales in China. And you know, I also am concerned. And it's a matter of time because there are companies like Neil, there are companies that are xpunk, you know, they're also moving up market competing with the Mercedes and BMW. So I think, relatively speaking, just to answer your question, the luxuries are doing better, but you know, time will tell if they can you know, maintain you know, some of the sales that they have in China.
All right, Steve, thanks so much for joining us there. Steve Man, he covers the global global autos and industrials for Bloomberg Intelligency spased down in our Princeton, New Jersey office, So getting the latest on VW closing some plants, cutting some staff, trying to cut some costs here as they face the some headwinds coming out of China, as well as the continued costs of going over to electric vehicles.
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All right, our next guest, let me see if I got this conjugated right. She's in Chicago, though, but she's a Boston native and fan of the Red Sox, which means she's rooting for the Dodgers. I think I've got that rate. Shane Sissel, president and CEO of a ban Rionn Capital Management, joins us here in our Bloomberg Interactive Broker.
Studio that I get that right.
We totally got that right. I think, guys we were saying before, Dave Roberts has to continue to do everything he can to help the Red Sox, whether it be win a World Series as a player, as give the Red Sox World Series as a manager, and now he needs to make sure.
That the Yankees prevent the Yankees. I get the whole concept there, all right, Before we get to your market call which we want to talk about pink ETF. Talk to me about that.
Yes, so pink ETF is near and dear to my heart. I am a breast cancer survivor and October is breast cancer Awareness month. The pink ETF is issued by Simplify Asset Management. It is a healthcare ETF. It invests in healthcare, is not specific to cancer or breast cancer in general. It's the only pro bono ETF on the market, meaning the manager does it pro bono and they donate all of the net profits of the fund through its expense ratio to the Susan G. Comen Foundation for Breast Cancer Research.
So you know it's October, yeap breast cancer on this month. You can do your part and this is an interesting way to do that. Fund has a great track record.
Yeah, absolutely, nice Caaren from Springlake. That's for you. Talk to us about the markets. What do we do here? Do we just sit on the sidelines until the election's over and then become investors again? What are you telling your clients about these markets these days?
Well?
I mean yeah, I mean the election is the number one most important piece of news that the markets is waiting for we have a virtual tie and almost all the polls and I have opinions on where I think that kind of leans. But in that kind of environment, companies are reluctant to make any big Capex decision, are kind of putting a pause on policy, waiting to see, you know, who wins, because the rules could be substantially different depending on who becomes the victor.
Well, what do you make, Shana of the betting market? We talk kind of ad nauseum. It feels like at poly market and predicted and how that impacts it. What the Trump trade is or isn't. If we're still in agreement that it's a coin flip, how are people positioning if we are kind of at least reading about in Bloomberg's reporting about kind of the so called Trump trade, if it still feels kind of like a deadlock.
Well, I think there's this one little caveat nuance to this, which is that I think in polls that are showing a deadlocked electorate that is actually pro Trump in my opinion, right, I think we've seen this in every election he's been
involved in. The Polls tend to underestimate his voting, his voters because being associated as a Trump voter has some negative connotation in the broad public right, so people are less likely to be honest about it until they get into the the voting booth, and then it doesn't matter because it's truly anonymous or we hope. So in that case, I think that when you see something where it's a virtual tie, it's probably leaning more in Trump's direction.
Than it is in Harris's direction.
That's just my opinion, all right, So elections aside, it seems like we've got a FED that's accommodative, seems like earnings generally remain fairly strong, the economy remains fairly strong, in inflation coming down.
Is that?
How constructive is that for you guys in terms of taking risk in this market in place?
Well, I think this is a market where you can take risk. So for me, the way I position portfolios is I want to make sure I can get the most upside.
I can from the equity markets because I.
Think that the probability of upside in the equity markets is quite high, and I think it's also high probability of risk assets outperforming, so I want to be able to take that risk. I'm not as certain about fixed income markets. So I'm taking some of my fixed income allocation and putting it into more alternative strategies, which I think do better than fixed income but allow me to take more risk and equities because they are diversifiers that
tend to reduce overall portfolio risk. So that's kind of how I'm positioning myself.
Right now within taking on risk. When you say that, do you mean within large caps? Are you skewing out more towards like a small cap? I just am looking at in terms of earnings we're going to hear from this week alone Alphabet, AMD, Microsoft, Meta, Apple, Amazon, and that's really cap X comments have been making up so much of the Nvidia trade. So when you're looking at allocating risks to equities, what does that look like?
So I do think it involved some of the high flyer growth stocks. We haven't had an environment that's conducive to small caps or value in a while. Jason Trendert from STRTIGAZ did a great piece last week called ten Things I Think, I Think, and one of the things he talked about is in since two thousand and nine, we've been in this perpetual QE cycle where companies haven't been permitted to fail, and we've been in this perpetual
late cycle business cycle. The business cycles kind of disappeared, and in doing that, it's been a complete headwind to anything that would benefit from things winning and losing and not allowing companies to fail has kind of also increased the haves and have nots. So I'm willing to take more risk in those larger cap names. That's where I actually think there is more risk, but also things like bitcoin, which is not a stock obviously, but is a risk asset.
In my opinion, I would argue small caps could be considered a risk asset, but value wouldn't be right. So you're probably staying away from some of your cyclicals and you're going with your more risk growth beta names.
Is where I would be paying attention right.
Now, Shane. I know you have a lot of experience in alternatives, and I've been surprised when I talk to retail advisors how willing they are to embrace alternatives and to a much higher percentage of their portfolio than I would have thought. Where do you see opportunities in alternatives these days? Private equity, private credit has becomes so big. Hedge funds where do you see alternatives? How do you talk your clients about that?
So private credit is credit, it's correlated to credit markets. Private equity is equity, it's correlated to equity markets. So they belong in equity and fixed income. And while they are alternatives in the sense that their liquidity terms and not available to everyone, they're not necessarily diverse fying alternatives. I think the opportunities lie in those diverse fying alternatives, things like hedge equity, and there's a million different ways to slice that pie. That's a pro and a con
of that asset class. It's you know, they all kind of get thrown in together, but you can do hedge equity a million different ways, market neutral, managed future is global macro, more those hedge fund type strategies, but also looking at you know, things like sports rights. I've talked about this a million times because I'm a huge sports fan and it resonates with me. But there's real opportunity here for you to be able to bring diversification into
your portfolio using things like that. And while advisors are definitely more open to alternatives than they've been before, it's mostly because their clients are demanding it.
Right.
It's because if they don't, then they could lose those relationships. And ALTS, I would argue, is a relationship builder because you can really I mean, it's such a huge universe, you can really find things that will resonate with your client on a million different levels. So they're seeing that, but seventy five percent advisors still don't use alts and the vast majority are allocating something like five percent, where institutions is more like twenty five to thirty. So there's
a huge gap there. Still, it's going to take a long time to get there, and we as an industry have not done advisors any favor by making investing in any sort of alternative incredibly difficult, operationally cumbersome, and in some.
Cases just annoying.
Like just a trade BTL, which is an alternative ETF. If you tried to do that in your Fidelity or Schwab account, you'd get a pop up saying that you need to change your risk tolerance to aggressive. And I would argue, if I am an aggressive investor, i am definitely not doing hedge, dequity or market neutral like that's
like completely counterintuitive. But because of that, it sort of makes people shy away because you've got to change your client's risk tolerance and it's not reflective of reality just to be able to make a trade.
And when you talk sports diversification sports rights, like, I immediately think of the fact that the Atlanta Braids are publicly traded. Is that what you mean or how do you think about allocation to sports is an alternative investment?
No, I think the private equity aspect of it.
So my favorite fund in that space is the one managed by Avenue Capital because I think that what they're doing is really interesting. They weren't one of the high flyers that was approved by the NFL, but they invest in MLB and NBA and things of that.
Mark Lazari is the kind of founder of that firm. He used to own the.
Box, but he talks about it also in the credit sense. Most people don't realize that banks won't lend to sports teams because the goal to have a franchise that's worth anything is based on whether or not you win, and you don't win if you don't spend, and banks don't like that so much. So, you know, teams, when they need access to the credit markets, they don't really have any place to go, so that fund does that. They
also do what they call emerging sports. So I've done a bunch of interviews talking about cricket, Like, cricket is an incredibly interesting area of private equity is looking at buying cricket teams.
Women's sports is huge.
You know, you have the yacht league that's out there and some of this as we have the proliferation of streaming services and everybody trying to get live events because that's really the only way you can get ad dollars.
You're seeing this more and more.
Which gives you more and more opportunity to make money in sports that maybe we wouldn't have paid attention for.
A while back.
Yeah, lots of different opportunities out there. Shana Sisil, thank you so much for joining us. Shane Sisil, She's a president and CEO of ban reON Capital Management based in Chicago, but originally from Boston. We've got that all cleared up.
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Let's switch gears and touch base on the ever changing situation in the Middle East. Kirsten Fulton Rose joins as president of Red six Solutions. Kirsten, I guess the most recent data point that everyone's trying to digest here is the Israeli response in its attack on Iran. How would you characterize Israel's response sending approximate one hundred fighter jets to attack some key logistical targets. What do you make of that move?
It's interesting. One hundred fighter jets sounds like a lot.
They were sent in three waves, but this response was actually designed to allow Iran to declare it requires no response. Israel only hit military sites. They hit outside densely populated areas. They had it most one civilian casualty. The Israeli defense forces say that they targeted border radar systems with very light warheads direct quote to remove Aroan's early warning capability, and then they followed with the jets that struck carefully selected sites.
If we look at those sites.
According to some experience US analysts who were looking at unclassified imagery, Israel struck buildings in a couple of places, including in Parchen and in Klojure, and there are two reasons why these locations matter. One, Israel hit Clgier, which is a large missile production site that's near Tehran but
not in it. The reports back in July that Hadro was being expanded, So according to these analysts looking at the imagery, Israel's pinpointed strikes could have significantly reduced Iran's capacity to produce missiles, which then make it less apt to want to continue this fight with Israel right now. Second Partschen is a large military complex near Tehran as well, so capital pays attention, but it's not actually feeling the hit.
The satellite imagery analysts tell us that Israel hit a building there that was used for testing in an old nuclear weapon weapons program that was called the Ahmad Plan. This program was shut down about twenty years ago according to international watchdogs, but Iran denied it ever worked on a nuclear weapon there. So this target, we think was
a message to Tehran. We hit an old facility without personnel, without nuclear material present this time, but we can reach your nuclear facilities without you being able to prevent it in the future.
If we think it's necessary.
And Kirsten, you have more than two decades of experience working in our security with a focus in the Middle East and Africa. One of the things that stood out to me was that Israel distributed videos of Prime Minister Benjamin n Yahoo and military chiefs coordinating the defense from a ministry bunker, which was a rare acknowledgment of an attack on Islamic Republican expansion what had been mostly a
shadow war. What do you make of the video being distributed and how does that potentially impact kind of the path forward.
I think the reason for distributing the video was to make it clear to the international community that Israel is in a real war, that it is truly the existential threat it feels it wants the international community to have a sense of as well. While we're planning our response on Israel on Iran, we are still taking hits from
Hazbala and from Hemas and perhaps from the Huthis. So they're trying to let the international community know that this is not something they're taking lately, that they're being arrogant, that they really see the threat as serious. So that means US support needs to stay high, that means Europe
needs to stay behind them. They're trying to make sure that they continue to maintain this level of support and this level of attention on the threat from their international partners while they stage these responses, sometimes without listening closely to their international partners.
Kirsen, what do you think the end game is now for Israel and maybe the timing associated with that.
For Israel? The endgame is not with the international community you would like to hear.
The arguments for a ceasefire are ongoing from almost every corner except from inside Israel, and often except from inside parts of Hamas and parts of Habeala.
For instance.
You see that Hasbala right now is saying it will not negotiate less it's not under attack, and their own speaker of the parliament in Lebanon is negotiating for them.
So Israel saying, look, we don't.
Have space to talk about a ceasefire unless it's short we get some of our hostages back so that we can reduce the domestic pressure on us to bring hostages home. But this conflict is not over as long as there is still a threat, As long as all of these groups continue to say one of their primary objectives is to eliminate our state from the map. This threat will continue to face us. We will continue to fight this kind of onslaught every few years like we have for
decades now, unless we do something decisive. So they're looking to uproot Hamas, uproot Hu's Baalah, shut down the Khuthi's ability or will to fight this war on behalf of Hamas, and to put Yourn on the back foot where it is no longer has the capacity to strike and perhaps no longer the will. It certainly does not have the domestic support, but the hardliners in Iran's leadership are going to push that fight going forward as well.
This is not over.
Yep, all right, That's kind of what what we're hearing across the board. Kirsten, thank you so much for joining us. Kirsten fontin Rose, she is the president of Red six Solutions, joining us in Washington, DC via zoom kind of getting the latest there. But again, it seems like this is Israel saying, you know, we're going to settle everything here. That's kind of our goal as opposed to maybe when we started out a year ago, which is, you know,
neutralize Hamas and get her hostages back. This obviously is much broader, much wider.
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Thirty Billy Lipschild sitting in for Alex steel On Paul Sweeney. We're live here on O Bloomberg in Arrector Brokers Studio, streaming live on YouTube as well. Boy, if you we're paying attention, the ten year treasury just in the last five weeks has gone from a yield of three point six percent to four point two six percent. Kind of where we are today, that's a big time move here. I don't know what's going on out there in the bond market, but our next guest does. R J Gallow.
He's a senior portfolio manager of fixed income and Federated at Hermes, coming to us from Pittsburgh, PA. No, they do not have a team in the World Series, but they have a good football team. So r J, thanks so much for joining us here. My giants are coming out to Pittsburgh tonight. It'd be nice to them. What's going on in fixed income market?
Again?
That ten year treasury kind of got me by surprise that the moves we've seen in rates, what's going on out there?
Yeah, well, good morning, Yeah, steals giants side always excited in terms of the rates market. There's been quite a turn of events basically since the Fed's ease. The fedies fifty basis points, and you might recall leading into that meeting, the expectation was twenty five. The Fed seemed to use media outlets to lay the groundwork for a fifty basis point ease, a bold move when the economy isn't back
doing well. Since the data, excuse me, since the FED meeting and the fifty basis point ees, the data has in fact affirmed that the economy is doing pretty well. So you have the Fed layering in a large first move in what will be a path of easing, and an economy that has been quite resilient on the on the labor and growth front, terms of things like retail sales and CPI came in a little firmer than expected.
So you have an economy that's not showing signs of recession, a FED that's committed to landing the economy outside of recession, a soft landing as we've all come to call it. And then you have the election coming up. All those factors have leaned towards a significant repricing hire and yield. You mentioned the ten year treasury I think if you take a look at the implied rate on SOFA futures out in June of twenty twenty six, the implied rate
has risen almost eighty basis points since September tenth. It is now three point fifty five. It was one below to eighty.
Wow.
So all those factors have really hit the bond market pretty hard. It's now priced i think for perhaps an inflationary election outcome, and that's the next big focus the election itself.
Well within that, we're eight days from the election. How should investors be positioning just given the polls that we've been seeing and how kind of markets have seemingly been moving ahead of it.
Yeah, well, the markets certainly have been moving, and by markets, I'm sort of speaking broadly, the betting markets, starting probably in the first week of October, just started shifting in the direction of a Trump win and a red sweep as the most probable of outcomes according to some of them, you know, forty five to fifty percent probability of a red sweep. That's a big change from where they were
in September. The financial markets, including the impact on rates, I think the economy's resilience that I just described, and the unwind of expectations to some degree of a deep fed easing path, those were the primary drivers. But the election risk and the prospect of an inflationary setup policies from a Trump two point zero, we're secondary factors there. I think it's safe to say that the market now is leaning heavily in the direction that we just described,
but I would still think some caution is warranted. We're leaning a little bit short, not aggressively. So there's a lot of other complex factors out there. Kamala Harris could surprise us on election day. We could actually have an indeterminate election outcome. You go back to two thousand, a highly indeterminate outcome between Gore and George W. Bush led to yields falling, in flight to quality demand and risk
assets struggling. If we have prolonged and decision this time, you might see a rerun of that script.
So when you guys get together for your Monday morning meeting plot out the week, where do you guys see value these days?
A great question, you know. So we started off the year thinking the bond market was going to produce us pretty good total returns, and then that was sort of tempered earlier in twenty twenty four by the fact that Inflame had a bit of a resurgence and started getting a little sticky. We had a great run there from say April all the way up through the expectations of the FED easing, but now the total returns are getting
diminished yet again. So for example, if you look at the aggregate index, your today's total return is just up two percent over the last three months, it's just one point two And it's been a brutal October. Over the last thirty days we've lost two and a half percent. A month to day, we've lost two point three percent. So just betting on rates has not been compelling. But
that's not all that we do. We obviously look at and actively managed duration, but we realize calling rates is a dicey prospect, so we focus very heavily on other variables. So the yield curve has steepened sharply in relation to the FEDS easing and the prospect of inflationary policies to come. We've played that rather well in our number of our portfolios, positioning for YELD curve steepening, and that's been a way to generate alpha within a fixed income portfolio. When it
comes to credit, we've been overweight mortgages. We remain cautious on how you in corpus where we think spreads are just not enticing enough. But the good news about a fixed income portfolio, a highly diversified one is you can move across sectors to look for opportunities. You can move up and down the YOK curve for changes and it's slope and shape in addition to taking some positions on duration.
So all in all, we've been deploying all those different tools to varying degrees throughout what's been a moderate return but a positive return year.
All right, Urjie, thanks so much for joining us as always.
R J.
Gallow, Senior Portfolio Manager Fixed and come over there at Federated Hermes.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Applecar Play and Android Auto with a Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa Play Bloomberg eleven thirty.
All right, you're listening to Bloomberg Intelligence Belly Lipschultz sitting in for alexel On Paul Sweeney live here in our Bloomberg Interactive Brooker Studio, streaming live on YouTube as well. We're eight days away from the election, and one aspect the election we haven't really had to think about up until the most cycled, most recent cycle or two is
just ensuring that we have safe and secure elections. That is now a big deal, particularly with early voting and mail and voting and all those things that came out of the pandemic. Somebody who does think about that is Rhet Buddle. He's the CEO of the Public Private Strategies joining us here via zoom sod. How are you thinking these elections are going to go next Tuesday and then Wednesday and then Thursday? Are you what is your concern level that we will in fact have safe and secure elections?
Well, great to be with you. So, first of all, I mean you know, America, as we know, you know, over the last you know, set of election cycles has primarily had very safe and secure elections, and I think we're feeling confident about all the elections to date, and many of the you know, state local officius have worked
very hard to prepare. I think, you know, one of the bigger questions is, you know, we probably will not have the exact results of the election on election night, and so you know, it might be until Saturday or Sunday until we know an official winner. And so one of the pieces that we've been thinking a lot about is really making sure that folks are preparing for that, that they know that every vote is still being counted
and that the process might just take a while. But that is the important role of democracy, making sure every vote gets counted, and particularly for business owners, understanding that this sort of period of uncertainty is a really important moment for businesses to be able to you know, bring some calm to the market, to be able to say this is how democracy plays out, not just in the role that they play in the markets, but also in
the role that they play as community leaders. You know, for a lot of CEOs who have employees this can be a fraught time, for example, and so it's really important to know that, you know, every vote will be counted. The elections are on part of be very safe and secure, but we may have a period of uncertainty and that's okay, and we just need to understand that that might be the case. But it's an important part of letting democracy play out.
Well, I think back to twenty twenty when it took a few days, but we were still in the midst of the pandemic. Now in twenty twenty four, people will be back into the office, back at work, back on subways here in the New York and commuting around the country. How does that actually kind of impact a delayed ruling or delayed decision on who in fact will win the election, especially as we see a number of contested seats across the House and Senate.
Yeah.
Look, we're so used to having everything, you know, be so instant instantaneous. We're used to obviously having a result,
you know, called on election night. The reality is, at least for the national presidential election, we expect it to be very close, and there's a number of states that probably will take a few days to make sure that every ballot is counted, and so you know, unlike where we were all sort of huddled in our homes around zoom screens or around TV screens, before you know, we are going to have people going back into the office and we know want the things we learned in twenty
sixty was that elections can invoke a lot of emotions with employees and start a lot of conversation. And the reality is is the workplace has become a really important
square for civic engagement. Right It's one of the places where people interact, they talk to each other, and so it's become increasingly important that business leaders and CEOs think about the role they can play and sort of setting the tone of the role that they can play in sort of depoliticizing things and making sure that there's a safe space. We've see in a lot of companies with employee research groups that there's the opportunity to provide space
for dialogue. And so part of the work that we've been doing under an initiative we created it's called the Business and Democracy Initiative, is we've been working with business leaders to help them prepare for this election to not only sort of raise their voice in their communities to talk about how this is the normal part of democracy, but also to play an important role in sort of depolarizing, de escalating and making sure that everyone's voices are heard
in this process over the next few weeks.
And the business leaders that you do speak to, what is a concern level, if at all, that we have a recreation of something like January sixth to that level.
Look, I think overall people feel that the election is going to be safe and secure and that every vote is counted. So that's that is a good point, you know.
I think generally what I hear from business leaders is, you know, increasingly, you know, risk has become an issue with just instability, and so even beyond the elections, you know, there's a broader issue with the government, for example, not being able to pass you know, funding bills that go on for years, or the debate over the debt selling for example, and not being able to reach resolution. So
there's that broader sort of risk level. You know, America, as we all know, is the most important economy in the world, and so having that certainty is really important
for business leaders. And I think over the last few years, businesses have become increasingly frustrated that the government hasn't been able to provide more stability and that partisanship is continued to sort of really you know, make it difficult for business leaders to make decisions, especially businesses who rely upon the government for you know, a wide variety of factors. So it's a broader sort of risk appetite rather than
just in this moment. But it's definitely something that boardrooms and businesses are starting to look at.
All right, fascinating times. And we'll have election day eight days and then we'll have to see how many days are for that it takes to get a declared winner and loser. Redbuttle, he's the CEO of the Public PRIVCT Strategies, that's the name of the firm there, and again eight days away, so we'll have to see.
Here.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple car 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.
We got an election coming up, so I'm told next week one of the major issues from a policy perspective that might see us a big difference depending upon who's in the White House. Is kind of renewable energy, electric vehicles, all that kind of stuff. So let's check out Corey Kantra joins us, the lead US electric vehicle analysts. Yes, we have one of those. He's at bn EF. Those are the new energy finance people. He's in our Bloomberg
Interactive Broker's studio. Corey, how does your market, the electric vehicle market looking at this election as to a Trump presidency versus the potential Harris presidency is it?
Are there material differences?
Yeah, they're pretty big differences and great to be here with you again. Paul and Bailey, still still doing the EV thing. We basically are one week out of a pretty pivotal moment of implementation of some pretty major US federal policies. So everything from federal fuel economy standards that's the kind of miles per gallon of new vehicles which electric vehicles help automakers achieve, to the implementation of the
Inflation Reduction Act. So even though the law has passed now over two years ago, you're going to see those loans and grants from the federal government impacted all the way up to the seventy five hundred dollars Clean Car ev tax credit that people know and love in some
cases depending on who wins. Obviously, with the IRA, you're going to need Congresses input on that, but there are things that the Trump administration could do very early on on the implementation side to make those credits a bit more restrictive. So it's going to be big, but also a split decision could have an impact too if you have, say a Republican Congress with Kamala Harris's president or vice versa.
And how does that actually impact the ability for these car makers to sell cars? When I look at targets of Biden administration having a certain number of evs. I'm from California, where they lay out these overly ambitious goals five, six, seven years down the road and then seemingly chop them down when they get closer.
Yeah, Bailey, I mean even beyond that, there's been a kind of back and forth between California and the rest of the country for a long time, known as you know, the California Advanced Clean Cars to policy, which aims to have one hundred percent of all new sales by twenty thirty five is electric eighty percent fully electric, twenty percent plug in hybrid. And so last time Trump was elected, there is a lot of lawsuits, a lot of uncertainty in the market. Makes it very difficult from an automaker
perspective actually planned. And so these automakers for a long time have wanted both the carrots, which are these IRA kind of subsidies and incentives on grants and loans, and then they'd be willing to take the stick, which is the fuel economy standards.
So we have to see how it shapes out.
But from the automakers that we speak to, it's a pretty confusing policy environment. But given that the globe is moving towards electric vehicles and cleaner cars in general, they have to kind of prepare to move that way regardless. And it's just how quickly in the US are they going to move in that direction?
The Chinese are moving very aggressively. How do you expect them to do outside of China? Will there be market for Chinese evs in Europe?
In the US? Yeah, it's a really good question, Paul.
And you know, looking at the data which we do at BNEF, you can see Chinese automakers like BYD making upground in places like Brazil, in places like Latin America, in places like Israel, you know where you might not expect to see Chinese automakers. They've been moving into Europe and there's been a pushback with all the tariffs and back and forth there. I think that's also why the US election does have a big impact, because if there's no kind of counter bailing force coming out of the US.
You see what's going on with Volkswagen on the European side today, it's going to maybe make the road easier for those Chinese automakers on electric to kind of shift into those export markets, because if Tesla isn't focused on making more affordable evs, then there's really only going to
be one major player in town. It doesn't mean, you know that Chinese automakers are going to be the only ones who are making mass evs, but it's a pretty big transformation at the global auto market level, just like when the Japanese automakers came onto the scene.
So I think that's the way I like to think about it.
It doesn't mean that you know evs are going to be sold everywhere overnight, but without a kind of other major automaker, that's where I.
Think a lot of these countries are going to turn.
And if we do see tariffs on some magnitude, yeah, what does that actually mean for the market for Elon Musk's Tesla who he's had a very prominent role campaign for Donald Trump as well as other companies.
I think when it comes to US tariffs, you know that could buy you. I think some time you look at the one hundred percent tariff that the Buying Administration put on Chinese EV makers. While there weren't that many Chinese EV makers selling electric vehicles here currently, Jili Group, which owns Volvo and Pollstar, was pretty much the major automaker impacted.
So that's why you saw those prices.
Or the Volvo Ex thirty, which is a really popular model globally not sold here yet. It's keeping BYD out for a little bit longer. But if the automakers like GM or Stillantis or Ford aren't helped or don't move towards electric vehicles, you know, maybe it buys you two, three,
four years. But all the while BYD and other Chinese automakers are making more investments in battery technology, and I think regardless of who wins, you need to see more of those investments here on batteries because those are going to be important not only for electric vehicles but for the grid as well, and you're letting China get a major competitive advantage.
What are the US manufacturers doing? Have they pulled back on their EV investments.
We've definitely seen at the global level those EV targets moving back. I think Ford in particular, you saw them move their new EV models.
Out a couple of years.
So it's let's so on the dollar amount and more pushing it back. GM has seen better EV sales. In fact, the third quarter this year was the best in the US that they had seen to date, with the Equinox
and Blazer and Lyric really taking off. To make one bright point, Bailey, your home state of California actually saw in that third quarter the best EV share of sales they've ever had at twenty seven percent, So that's twenty three percent, about almost twenty four percent fully electric, the rest plug in hybrid.
So it's pretty good calif Like, what's the US average?
US average has been at about ten percent now nine and a half ten percent. Yeah, far California twice twice the average. But what's significant about that is California had been stuck at about twenty five percent. Tesla actually for four quarters in a row in California has seen decline in deliveries because of I think some of the kind of Tesla or musk fatigue, and so to see California begin to grow again from the other automakers, even as Tesla's pullback is pretty significant.
All right, Corey, good stuff. As always Corey Canter. He's a lead US electric Vehicle analyst at b n e F.
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