Consumer Outlook, Muni Bonds, And Virtual Conferences

short equity hedge fund Strategy at Rockefeller Asset Management. Avery's great to have you back on the program again. I just want to hit you first with the PPI data. I'm sure you've seen, but a huge jump UM in final demand year of Europe nine point six percent. Does inflation concern you or do you think the Fed's gotta

handle on it? Yes? So I don't know. I mean everything I say suggests that there's and we're nowhere near the end of inflation UM, both from the PPI prices and from the ability of any companies to pass on inflation UM. It's really been significantly improved through UM through their own analytical tools UM and and and and buying discipline. So yes, that the pp. I think it's just one more indicator that inflation is likely to be around longer

than anticipated. And you know, I almost I feel like, no matter what the sent does, we're likely to see this as a as a new norm. So if maybe a little bit of a new norm here, UM, higher inflation, maybe not obviously where we are here at six seven, but certainly higher than where we were two for such a long period of time. How's the consumer faring with that? It seems like some of the retail numbers that we've seen out of the retailers in the earnings third quarter,

we're pretty darn solid. There's some pretty good guidance for the holidays. What's your take of the consumer and the consumer space? Yes, so, UM, retailers have really been succeeding for the most part in passing on this inflation UM. And so I mean that's one of the reasons that that I feel positive, uh, you know, constructive about UM. The fact inflation is going to continue. UM. You know, you're certainly seeing some pressure in the lower income consumer

and next year as they you know, last stimulus benefits. UM. You know, I think people are gonna be very selective about about where they're spending. But from a from a from a kind of a company, from a stock perspective, those companies that have been able to pass on higher pricing, I think are our places to look for investments next year UM, because those companies that have been able to

pass on higher pricing are those more likely to next year. UM. It means that consumers like their products, there's real demand for them. UM. They have underappreciated some underappreciated pricing power. How do you think about oh, Macron, Paul and I've been talking about the fact that what you see happen in Europe, UM, the US typically follows, and we're hitting a big wave or a big wave is hitting us here in Europe. Now does that happen to the US later?

I actually don't see it because as we see so much data coming in that that this variant is very mild, and so I think if that continues, UM, you know, Europe is going to be kind of a a place to see this play out first before the US has to act. I mean, certainly, if if if only com becomes you know, much more of an issue in terms of UM hospitalizations in death, you might see some actions here.

But if we continue to see it quite benign. I was just reading something this morning about about some places starting to reverse UM, even some of the travel band. I think, you know, the U S could get through this with with fewer freedoms like we're seeing. Definitely math mandates UM, but not necessarily much of an economic impact every what's the uh, the status of the supply chain issues as you take a look at some of the

consumer companies out there. I mean, I'm looking at a function here on a Bloomberg terminal, UH that lets me it's a mapping function. Lets me see a bunch of ships still docked off the ports of Los Angeles, still docked off the ports of Savannah and New York and so on. Is this something that we can expect to resolve over some period of time or is this again

a little bit of a new normal here. Yes. And the companies we're speaking with UM, they don't anticipate this resolving, most of them until at least the second half of next year UM. So they're planning for it. So they're they're ordering earlier, UM, They're they're they're being much more thoughtful about where they're sourcing from UM, and they're pricing for it, So I think that this is likely to continue.

UM at some point, right, it should fully resolve. I mean, just from a containership perspective, there are a lot of new orders on hand going out a couple of years from now, so at some point there should be a lot more simple highest containers UM. But of course it has to do the logistics at the ports and and COVID is related to that. UM. You'd expect COVID to you know, to to resolve UM at some point in in in the next you know, six to twelve months. So I think we should start to see the baby.

Some companies have actually just UM in the past couple of weeks commented that they're seeing things loosen up a little bit for them. But it's an overall dynamic. UM. Everyone's planning for it and uh, and it looks like it, you know, it might not result for another six or twelve months. How do you benchmark alongshore equity hedge fund strategy? I mean, can you underperform big gains and at least as long as you outperform years where their losses look.

I mean, I think as an as an investor in any entency is a fund of the stock UM, I wouldn't be investing in funds that UM that that aren't generating you know, real real returns. I know long short equity as a category is really underperformed. But in that category there are many funds UM that have actually done very well and have preserved capital um during times by the COVID crisis, and actually done quite well in markets like we've had, and really protect for the next downturn.

I mean, you know, from an individual, the market as a whole is gonna marched higher. You're seeing tremendous bifurcation underneath the surface, and a lot of companies UM stocks down meaningfully in this in this uh, you know, even in the past six months. And should you see something spell whether's you know, start to turn a bit um, the induscries themselves might might struggle. So look, I don't

know what's going to happen here. But the benefit of you know, of a long short strategy that considers all these things and has has proven to do well through the past um uh is that you know, even if it turned south, you can do well. But you know, I would look at every individual strategy m independently. All right, every thanks so much for joining us every Sheffield, there's an m D at Rockefeller Asset Management. Let's bring in Shaan Karney. Now he is the head of MUNI strategy

over at black Rock, and that means Paul is very excited. Sean, talk to me about how much does it matter if we get this build back better bill past two munis? Is it less important, um than than the infrastructure bill? Was It matters, um? But but I would say it's not as important, um. You know. Some of the keys that the MUNI market has looked at is investors are anticipating higher taxes as a result of the build back

that are plan. If we just look at a simple calculation of a market implied tax benefit, it shows, you know, the market pricing for a fifty top marginal tax rate, which as you know, is significantly higher than this administration

has been has been talking. But I think that the bigger impact comes from the supply side of the equation, where things like Advanced were Funding bonds and Build America bonds were omitted from the from the final draft, which ultimately would have been a catalyst for for greater supply in the market. So it does matter, h and markets are paying attention. So Sean in THEMMUNI market um again and I'm a big fan of the mini market, and the UNI bond returns have been very strong compared with

other fixed income markets this year. What's behind that and what's the outlook for That's a good question. So they have been and a lot of people concentrate on the gross returns. I think it's also important to look at

excess returns. So you're to date, the investment grade UNI market is up about one and a half percent, but in excess returns i e. When we duration match communities to treasuries, unis are up three basis points, and excess returns when you compare that to a U S AGG or corporate i G. That's down about one and a

half percent. I think there are several factors that have been driving this year's positive performance, and while I want to say it can continue into twenty two, there's a couple of things I think we need to pay attention to. Like I mentioned, higher taxes on the individual side would help. On the corporate side, it's still unclear the role that banks and insurance companies will play. From the demand side.

This year's outperformance has relative value measures I e. MUNI treasury ratios screening a bit rich so sub fifty in the first five years of the curve and probably ten ratio is rich out longer on the curve. So as long as supplied demand dynamics remains skewed, positive munies will hold in well. However, if that ratio goes a little sideways, we could see munities come under a bit of pressure.

I think about the net positive months of March and April and September and October, which have a little bit less uh, you know, technical strength than others. And I'd say the other thing to pay attention to is MUNI fundamentals support continued strong performance, as does the notion interest rates will rise in as munies tend to outperform in

a rising rate environment given their structure. Where are there places, um that are most advantageous to buy MUNI is still if you're looking for a tax avoidance, there are you know, our the way that we've kind of been positioning portfolios, and you know, positioning going into twenty two, I'd say we're going into the year slightly long duration stand but

importantly maintaining a barbell yield curve strategy. So we prefer lower rated investment grade bonds for instance, particularly in the front end of the yield curve, as well as select high yield credits. And we maintain a favorable view on

tax backed transportation, healthcare, and the education sectors. And the economic recovery is positioned to continue with strong growth in the tighter labor market in the coming year, you know, hence our our preference for for those you know, parts of the market on the yield curve and across the credit spectrum. Sean, give us a sense just kind of how fun flows have been into the MUNI space here.

I wouldn't guessing listen, talk about higher taxation out there, people are more inngest in the muni's flows have been phenomenal. Year to day, we've seen about eighty three billion come into the market. We have three prints left, but we're probably going to come in a shy of the record of the year of two thousand nineteen that printed about ninety four billion UM. It's been sensational. There's many different

ways that we can look at it. And we can use MUB the largest MUNI e t f UH ticker as as a way of looking at UM whether trades that a discount or premium do as n a V. That's ultimately kind of what fast Money will tell you about the future flows, and it's been very positive. It

remains very positive. We've been seeing you know, good inflows from from all different types of accounts, so you know, one would believe that as performance continues, you know, we'll see fund flows continue as well as we flip the calendar into into two. All Right, Seohn, thanks so much for your time. We really appreciate you sharing your thoughts here on the bond marker. Shaun Carney, head of Municipal Strategy at black Rock. I want to bring Shawn McCarthy.

He's a CEO and co founder of Build America Mutual talk about the municipal bond marketing we heard earlier today. We're chatting Shawn and how the good performance coming out of the municipal bond market. I want to start with who's buying these things? Give us a sense of who are the buyers in municipal bond market, retail versus institutional. What's a typical buyer like out there? Well, thanks Upo

met for having me join you today. UM, and so the typical UH investor in the municipal bonds would be somebody who plays that has in the high income tax bracket. Do you think about the fact that the vast majority of municipal bonds are tax exempt, that benefit really runs to the individual who is purchasing those bonds, And so you really think about municipal bonds generally as retail or um investments in proxies of retail meaning funds institutional funds that you can buy. So, um, do you have an

eye on the best places to invest right now? I mean where if I want to avoid taxes and also generate some returns, where do I go in this kind of market? Well, so in the municipal bond market, I'd say there's a couple of things that are happening. This year will end up being about a four hundred and sixty billion dollar market, perhaps a little bit more than that, which is which is a record. We would anticipate that

next year would be the same. Now, when you look at what those opportunities are going to be, UM, I think they're going to center around, uh, some of the things that have happened in Washington. So when the infrastructure bill was passed, that's good and that it sort of provides a resource for state and local governments to um uh you know, finance and repair infrastructure that that they

have going forward. UM. One of the things that's interesting about that that's Federal Infrastructure Bill is that really still at the at the fundamental funding level for infrastructure. It's done at the state and local government level. So that's about of bonds that are issued for infrastructure are done

at state and local governments. So what we see happening next year, it's going to be a fact that there'll be funds that will be matched by the federal government UH for statan local governments as they build out um their infrastructure and repair the infrastructure that you know, this is long overdue. So this we think is a pretty exciting area. And I think that if investors are looking to participate in that market, and that's going to be there's gonna be a lot of opportunity next year to

do that. UM. Sean, I want to ask you about just the whole E s G Green bond phenomena. We see corporations looking for the designation of a of their one of their issuance being a green bond or E s G friendly bond. Is that a is that a thing in the municipal bondmark as well. You know, it's it's actually a growing thing. So we've at the Build American Mutual UM, we've been designating green star bonds or green bonds UM as part of our underwriting process UM,

you know, for four or five years now. And so if you think about that market, this past year through the third quarter, over twelve billion dollars of municipal green bonds were issued in the United States UM. UH. Part of what we do is as a service is to make that designation. So we've actually designated one and a half billion dollars with the transactions through the third quarter

UM as green. And that's UH an important factor because I think there is an investor demand for not only making smart investments, but doing well doing good for the community at the same time. So green bonds really sort of if you think about it, they're there. The nature of them is sort of to finance clean water, renewable energy, energy efficiency. And in Europe it's it's something that has been really a part of their market for quite a while, but it's it's definitely a growing area in terms of

UM the US municipal market. Talk to the about what you do at BAM. I mean you have a long history on Wall Street at uh EF Hutton and Paining Weber. Um you were chief operating officer to shared Guarantee until you started BAM. In what what's the main crux of your business? So um, UH build a back and mutual. BAM is a double A rated UH financial guarantee company. Basically, what we do is we put our guarantee arm initial bonds.

That makes them double A in their own right. It's a little like you co signing a student loan for your children. UH. You hope they get a job and you hope they tell, but UM, if they don't, where they are standing by to make timely payment of principle and interest when due. So why do people use us? Issuers use us because we are UH going to lower their cost of funding and that that's pure and simple. So we're double A. We put our guarantee on that.

It creates creator liquidity in the paper we provide on our website for free credit profiles, which is a summer every transaction that we underwrite, we looked at that every year, UH, and that creates value protection for the investor. It also creates you know, sort of unparalleled transparency and sort of unique to BAM um UH in the industry is that we are a mutual insurance company, which means that our stakeholders are the state local governments that take our insurance.

And that's important because what they want, what we want is to be bigger and stronger and provide that guarantee to the market in order to create greater liquidity, greater security um UM investment portfolios that retail and institutional investors owned. All right, Seohan, We're also doing an informal poll on your favorite college bar in the Washington, D C. Area.

You're Georgetown grad. Where did you go? Well, you know, when when I was at Georgetown, UM the third Edition was a very popular place, um uh and uh and I went to actually bartended a place called the Foundary UM. So I'm not objective. I thought the founder was pretty terrific as well, very cool. All right, Hey, Sean, great having on the program. Thanks so much for joining us. Sean McCarthy, co founder and the CEO of Build America Mutual.

Speaking just from myself, I tend to get a lot of value out of attending conferences, and my career spent mostly to investor conferences. I found it a good way to you know, meet with clients, talk to other folks, get some new ideas, see new companies, that kind of thing. I even enjoyed the Consumer Electronics Show in Vegas, which is a couple hundred thousand tech geeks kind of getting

together every January. But of course the pandemics put the kai bosh on the whole conference biz and we're doing everything virtually. So let's see how this might develop going forward. Ben Choulder, president of Notified, joins us UH. Notified provide software for virtual events. Uh so Ben talked to us about what your business has experienced during this pandemic. I gotta think there's a lot of demand for what you guys do at Notified. Oh my, so, first, thank you

for having me on the show. I'm a big fan. Um. But it is totally change or largest vertical and streaming organizations actually moved right. So now it went from something that was a great way to reach a global audience or an extended audience to something that you had to do in twenty so. You know, everyone used to say that virtual events would eventually cannibalize physical events. It's not virtual it's not virtual events that cannibalize physical events. The

world cannibalize physical events. So everyone in twenty had a hop on board, and everyone in continued and now the trend is heading towards you know, hybrid, right, it's time to do both. Have bases in places and that's that seems pretty clear. Ben. What you do it notified to

healthy industry. So we as an organization provide the platform where the event tech platform, whether you're doing a physical event and you wanted to manage the event, whether you're doing a virtual event and wanted to have you know, tens of thousands of people attend sessions and breakouts and exhibits, or even if you're doing a hybrid, right, we were

doing hybrid pre COVID. It allows you to actually have that physical audience and the virtual And you brought up cs like c S last year when virtual and had eighty thousand people attend. This year, they've decided or going into twenty two, they decided to do it as a hybrid. And if you read the news, you know they've had a fifteen thousand people register in the last two weeks.

People are dying to attend, but they also know that there will be such a demand for the virtual element as well, So they're actually doing a true hybrid for the first time. Alright, so cee s hybrid. We know that as of this moment, Davos is going to be live in Switzerland. That's another big one for global business folks.

How about some of the other conferences, whether it's just you know, a company wants to get their salesforce together, you know in some warm locale in Florida or the desert, or you know, an investment bank wants to have its a conference with its investors. What are you hearing on that front for We're hearing that it's going to be

a hybrid if they're gonna do both. They want to have the interaction of being at the event, but they also understand that organizations aren't going to be feel very comfortable, and not all organizations can feel comfortable in the beginning of twenty two sending everyone to a location plus individuals aren't gonna feel comfortable. So they want to give them a choice. So you got to allow the audience to participate in multiple ways. I mean, there's great advantages of

it too. Rite It's it's cost effective, it's better for the environment. It's great E s G. What they what we all learned in twenty and twenty one is it also allows you to expand your audience. So more and more organizations are planning their s k oh. If you can't attend in person, pretend in person, If you need to attend remotely, pretend remotely. So I think it just opens up the world for you to attend a conference,

whether you're physical or virtual. So and frankly, the main thing that Paul loves about going to the office is it's basically a conference every day. Are I don't know if you've been to our headquarters one Luxington Avenue, but it's an incredible space and of course being there with your co workers is really beneficial. The same as true at Big Banks. We've heard all the CEOs tell us, is it possible to have a hybrid experience like that that works as well. It's possible to have a hybrid

experience to get people engage and delivering the content. But nothing's going to take the place of when I'm in your office or at a Bloomberg conference and being able to walk up to someone and have a conversation. It's a different kind of engagement. They both very valuable, but it's a different engagement. And I don't think there's any technologies. You know, the metaverse is not going to replace you and I having a cup of coffee or a conversation together.

So how would you characterize two in terms of physical conferences? Would it be levels or are we still well below kind of where we were pre pandemic? Would you guess? I think the quantity of events will be back to pre COVID. I think the attendance level would be about less. But by making it virtual, you have a potential even growing your audience. And if you do a really good virtual event, it's gonna make people want to attend. I also think the biggest trend going into twenty two is

the seven three sixty five always on environment. The three days of a conference is where you're gonna be there meeting with everyone, But what about the fifty weeks the rest of the year, you know, the other days, the three hundred and sixty other days of the year. How are you going to interact and keep that content going and engage yep, And it sounds uh. The word hybrid seems to be working forward, not just work environment, but also potentially for other parts of the economy as well,

including live events. Ben Chowder, president of Notified, he's into that virtual side of the business, giving us some good color here talking to us about the whole conference biz. Likely to be more of a hybrid offering in that long term could be a good thing. And again consume Electronics show in January, a couple hundred thousand people in Vegas, Davos in Switzerland. They're back on. Thanks for listening to

the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three. Pet On Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide Bloomberg Radio