Defiance ETFs CIO: Great Day to Buy the Dip

biased market or is this something different? Let's check in with Sylvia Jablonsky, chief investment officer for Defiance et S. So, Sylvia, when you see action like this today, what do you make of it? We haven't seen it too often, these types of pullbacks in this recent bull market. What do you make of it? Good morning? UM. You know, I think today is partially a result of what we're hearing in China. You know, Hong Kong aquity saw a big

sell off during the Asia trading session. UM. Europe followed to you have the ever Grand group issue that I think bought some some fear and volatility to the market. But you know, there are a couple of other things going on. You still have COVID cases, You still have you know, the idea that September is the worst track record for for any month historically, and the second half of it tends to be, you know, worse than the first and certainly the worst training period of the year.

And then there's the concern about d C and and raising the depth ceiling and you know, sort of corporate tax fears and things like that. So, you know, long stories short, I think that there are a lot of reasons why there's solatility in the market. But you know, I remain very bullish on the market in the year.

The fundamentals are good. We're in economic recovery, and I think days like today, you know, if you can sort of grin and bear it, I think it's a great day to buy on the dips, particularly in the in the top quality name. So, um, you know, I don't think that this is the beginning of sort of the end. I mean, the biggest pullback we've seen in the last couple of years is is, you know, four percent. The average pullback of the SMP by hundred is about fourteen

fift over time, so it's really not that bad. It's a little bit of altility in the market for various reasons. Are you still bullish when you look at um the progress or lack thereof on the infrastructure bill? I mean, the idea that fiscal spending from this government has added three, four or five six percentage points per quarter for the last you know, four five quarters, and that now that fiscal um kind of punch bowl maybe empty. Isn't that

a worry for markets? You know? I think just a lot a lot of the corporations within the in the market that are essentially leading the market, UM, are are just just cash heavy. You know, they have incredibly strong balance sheets. Um I think that you know, they're they're

sort of well positioned. So even if that spending isn't coming into the market to the level was before, I do expect them to have you know, perhaps they won't have sixty year over year revenue growth, but I still expect them to be in the green for for the coming years. And you know, rates remain very low. I think that even if we get to a point where we start getting announcements about tapering, don't forget that rates

remain very low. So if you have this combination of strong balance sheets and low rates and you know, continue demand strong consumer I mean, the retail numbers were phenomenal there, their UM temper cent higher than than the pre COVID periods. We've got this consumer spending out there. I think it's still a fairly rosy picture. You know. What could set it back though, I think will be uh any kind of you know, corporate taxation that that is that is

really negative towards the bottom line. UM. I think, you know, depending on what long term and short term type of gain taxes look like for individuals, that might impact the market. But overall, I expect to see at the market end up and continue to move in a robust way. So so you were suggesting, you know, and sell offs like we're seeing this morning, to buy on that weakness. What sectors would you be buying here on this type of weakness? Yeah, so you know, so that this morning I looked at UM.

I looked at the five five G trade, which which I love. You know, I think five g's the future. You've got these you have these companies which are spanned from telecom um to radio technology to semiconductors. So UM, you have the five G E T s, you have everything from like the naivideo's UM, the A m d s, the stocks like Nokia, UM, you know, an American tower.

I think that five gs the future, augmented reality, AI, dated processing, all of all of this relies on five G. I also think that it's a good time to look at crypto. I think that you know, it's it's suspiciously um getting sort of a hammer today and in regards to what we saw coming out of China. And you know, I'm very bullish on the long term price of bitcoin and the ethereum. UM. You know, I think n f t s are going to propel all of this forward too.

So I think particularly for investors that have some risk tolerance and they're excited about the crypto space. You know, when you see these pullbacks, UM, they're they're certainly good up change to get in if you haven't had the opportunity to do so. UM. What do you think about the housing market right now? Does that worry you, Sylvia? Because UM, it's not just the case in the US

that prices have soared, I mean thirty percent. There's a story on the Bloomberg today talking about, UM, the housing prices in the US up thirty percent since the mid two thousands, when you know, Michael Bury was sitting in front of his computer listening to Metallica placing short bets on um the market. Should we be worried that this housing market has gone too far, too fast in New York, London, Paris, Berlin.

I think it's you know, I think it's something that we should sort of sit back and think on in terms of, like, if you're a buyer in the market now looking to buy a home, I mean, chances are that you're going to overpay for it. You've seen you know, people all over the world sort of sitting on our hands in terms of buying a home, you know. And I think it depends on where right, Like I mean

I live in New York City. I actually think you do have deals in the city, but you definitely don't have guilt in like Westchester when people are trying to flee, So it's sit on your hand and wait until it falls a little bit. I do think they're a little bit inflated. Hey, Sylvia, thanks so much for joining us. Really appreciate it. Sylvia Jablonski, chief investment officer for Defiance E t F. She's out with the call this morning.

By this dip Jose Herrera. He is one of the founders and the CEO of Horatio, which is a company that helps um improve the customer experience of startups and small businesses which maybe had been having problems. And it's interesting especially now, I think because of not the supply chain shortage so much as the labor shortage and the changes that we've seen during the pandemic. Jose, UM, talk to us first about your business and how it's developed

throughout throughout this this difficult period. Thank you for helping me today and it's a pleasure to talk to you both today. UM. Yeah. So, Horrisio is a company that works with fast growing e commerce brands to enhance their customer experience and provide a dedicated team of associates that are proud to represent their brand values and voice, and ultimately mitigate any customer frustrations that may arise as part

of the shopping process. And so, as you mentioned, we are having significant issues with global ports shutting down across the world, and now with the holiday season, we are also expecting a lot of issues when it comes to significant shipping delays from FedEx and other delivery partners, and so We are working with all these fast growing e commerce brands to prepare themselves for the busy holiday period that's coming in a couple of weeks. So Jose does

the customer experience. It's become more and more automated. It's almost impossible to reach a human these days, and I gotta think that results and if I'm just representative of the general consumer tremendous frustration. What are some of the solutions you guys are thinking about. Yeah, and I think that's exactly the reason why Horatio exists. We are the perfect balance between leveraging AI and also the human touch. So we provide dedicated teams and of humans that are

proud to represent these companies brand values and voice. So we provide first time personalized omni channel customer support so that the customers can reach out through whatever channel they want, whether it's chat, email, SMS, which nowadays more more than seventy percent of consumers want to ask questions through text, and so we allow these uh consumers to reach out through the preferred method of their choice, but leveraging both

AI and the human touch to provide an amazing customer experience. You know, I don't know if it's because I'm old, but I'm guessing Paul is going to agree with me. I want to call a place and talk to humans straight away. I don't want to be uh doing some chat bought action where the thing has no idea what I need or can't meet my demands. I don't want to be sending an email where I know I'm not going to get a response back. Um, but isn't it

difficult to get a call center up and running? I mean, how do you get some one who knows about the product and um, you know, can speak not just English but whatever language customers are calling in, and and can and can deal with the customer intelligently. Definitely, it's extremely important to two number one as a brand be very proactive with your customers so that you mitigate the risk

of of of needing a huge call center operation. And that's why we leverage the other channels that I mentioned which are easier to manage in scale, like SMS, social media emails. So you have to anticipate any challenges that your consumers may expect from you, and then also have,

like you mentioned, availability through phone if needed. UM. So with a lot of the brands that we work with we provide a concierge level approach to phone, so if we are not able to fix your issue over the other channels, we allow you to schedule a call for fifteen minutes so that you know that we are going to be calling you at a specific time so you

don't have to wait in line. Particularly now day when we are seeing unprecedented num revers of customer inquiries and now with the holiday period coming, what's the what's the size of your customer base? I mean, how quickly could you scale up? Would it be possible for you to help? For example, the airlines, your lens is A is A is a huge challenge nowadays. I think that you know, because of the way that they are structured, it will take months for them to to to really fix those issues.

And I think that um, you know, we are better set up for e commerce direct to consumer brands. I think that airlines are have to fix a lot of issues and incorporate more AI and analytics to fix their underlying historical issues that they faced in the past. All right, so Jose, just in thirty seconds, how has the pandemic kind of changed your business and customer service in general? It has definitely accelerated e commerce. UH five years right,

I think that, UM, the pandemic really shifted. I think that the number was some something along the lines of sales happen online. And I think that before COVID we were at a ten percent of silver happening online or even less. And so it has definitely accelerated, UH, the need for customer support across all organizations. And I think that we are not going to see these stopping anytime soon. And I think that you know now that the holidays are coming soon, we are expecting a few percent uptick

in customer service inquiries. More people are going to need to use your service. As Jose, thanks so much for joining us, Jose Herrera. They're one of the founders and the CEO of Horatio, a company that helps e commerce businesses tech businesses tailor their customer experience. And we're going into a difficult period. They're gonna need it. The talk has certainly escalated as it relates to taper, UH, the bond purchases funder Federal Reserve, maybe even raising some rates

some point in the foreseeable future. Yet I look at the ten year it stuck at one point three kind of words, been for a long time. Let's check in with one of the pros and the fixed income markets to get a sense of what's going on. R J. Gallo, Senior portfolio management head of the municipal bondup but federated Hermes. R J. The bond markets just like saying, ho hum, so what I mean, how concerned are you about that?

You know, tapering these FED purchases and then ultimately raising rates. Well, good morning, Um, the taper discussion has gone on for so long it's it's it's almost baked in, right, and I think the set has been bailed out. The set was very forward looking, and getting taper out there months in advance world is different than when it just sort of came up. Um, So that's you know, you got to congratulate the set on that part. Introducing the market

to it over and over and over helps. But I think the FA's also being helped by the simple fact that on the fiscal policy side, the amount of debt issuance in coming months is itself going to taper. So although the demand will go down from the FED, that will be partly offset by by lesser issuance from the U. S. Treasury but you've also got some of the fiscal follies going on in Washington. We don't have a budget for next year. The death ceiling thing looms over our heads.

Everyone always thinks the death ceiling shouldn't matter. But how often does the s a seated American president challenge the validity of an election they lost. You know, weird things can happen, And I think when weird things happen in Washington, and we are now facing another event risk in Washington, that might bring about some caution in the markets. Um, that might be another reason why bond yields really aren't

doing much. Not to mention the Chinese news that we're all talking about this morning, well, and we just also had a great conversation with Rich Miller about the fiscal cliff. Um, this is an economy that's been juiced by trillions and trillions of dollars of fiscal spending that looks like it may come to an end. How do you how do

you input that into your into your calculations? Um? I noticed that that your federator, excuse me, Bloomberg this morning ran an article about this very point and looked at the Hutchins Center, which is a group out of the Broken's Institution which tries to look at the cumulative impact of government spending in tax decisions, not just the GDP impact. You know, in GDP accounting, if the government cuts a check to you or me that doesn't directly add to GDP,

it only has the GDP when we spend it. Right, So the GDP accounting for government spending will often under state fiscal policies influence and to your point, at the amount of influence has been massive. Think of the p p P loans which were really grants. Think of all the checks cut to household trillions of dollars. Right, So, clearly the government can't keep that spending pace up. It has to diminish on a sequential basis, and it already

is expected to do so. The Hutchings Center does a great job of trying to quantify the the you know, the impact on GDP of those changes, and they're clearly below the line there in the red incoming quarters, including the one we're in. So you have to wonder, can the Biden program in Washington, namely the three and half trillion dollar reconciation Reconciliation Bill as well as the Infrastructure bill which is so far proceeding on a bipartisan basis.

How much will it offset that headwind. It's not going to give us another CARES Act. Those bills are are are both of them are over ten years. You know, the Cares Act and the American Rescue Plan were over a couple of quarters. So we are facing a fiscal policy headwind no matter how you cut it. The question is the degree in terms of how the Biden Plan gets enacted or trimmed further in the coming months. So r J your head of the Municial bond group at Federated,

how are you guys positioning your municipal bond portfolios? Um, we believe well, First of all, munities have had a very very strong year. We've talked about that in the past. Um, the simple fact that taxes were expected to rise, and now we have real proposals out of Washington, their soldier proposals that would raise marginal rates for for individuals, especially high income individuals. Also higher capital gains rates and higher corporate tax rates. Um. You know that's finally manifesting in

the discussions in Washington. Munis I think expected that, and that's why muni ratios are all very low, historically low the ratio of triple ammuni yield to a triple a UH to a treasury yield. These days, if you look at the Bloomberg series, you know, on the tenure part of the curves around, that's unusually low, but that's pricing in those tax increases. UM. We've been pretty positive on munies all year, to include within munies taking more credit risks,

so high yield munies have done extremely well. We've caught a good bit of that in all of our different strategies here at the company, at Federated hermes Um. At this point, spreads are tight, like they are everywhere. There's not a lot of cheap assets left in munis or anywhere else for that matter, reflecting the FEDS highly accommodated

monetary policy. So we're getting a little bit more cautious, not in the sense that we're heading for some sort of washout munities, but we think the prospects of incremental out performance from here aren't so great. Tight ratios, tight spreads, you know, at this point you're sort of clipping coupon and trying to make up some good idiots and cratic calls on security selection to eke out performance. Are J always great to talk to. You really appreciate you joining

us today as well. So, um, I mean it's interesting what we see in markets markets today, but you don't. I mean today is I think a little bit special and we'll see tomorrow if it if it continues on. So yeah, I mean you had to, you know, sell off, but kind of a little bit of studying here here in the mid day. Yes. And also I mean, as I talked about the top, we sometimes exaggerate, exaggerate the you know, the size of it's not even a two

percent drop. Ye. So at the worst point. R J. Gallo as senior portfolio manager and head of the Muni Bond Group at Federated Hermes, they've got six forty six billion dollars and assets under management, about a hundred and change in equities under Management's are great to get his take, this is Bloomberg. Okay, Well, we've certainly heard about income inequality,

wealth inequality. How about housing inequality? The big take story today entitled Storing Housing inequality is now a global political fault line. The dream of owning a home is increasingly out of reach. Democratic and are authoritarian governments alike are struggling with the consequences with the story. Here today is Alan Crawford, senior editor for International Government in Bloomberg News, running us on the phone from Burglin. That's where all

the smart, cool kids are. I guess Alan, thanks so much for joining us here talk to us about housing inequality. What's really driving it out there? Well, I think it's probably no surprise to to listeners to assure that house prices are are hitting fresh records worldwide and as a result of the pandemic. And that's that's due to issues like all to low interest rates, the fact that very few homes are actually being built and put on the market.

But what is what is new is that this is happening globally and it we're starting to see the political impact of this because it's not just about the pure numbers. It's also a generational issue because statistically we know that Baby boomers are far more likely to own their own home than Millennials and Generation Z, so these that latter cohort of society risks getting completely left behind. Here. What

kind of problems does this mean? We've all seen staring home prices and it's I have to say, Uh, sometimes the numbers are pretty shocking increased in the US since the mid two thousands, which you know, uh and and then you were telling me this morning about Boise, Idaho saw an increase of in the first quarter of this year alone. What does this mean in for politicians? Alan, What does this mean for elections around the world? What

does this mean for governments? Well, in the US, it means that some of the traditional policies that are that are you traditionally deployed to try and expand affordable homes, the risk backfiring, the risk just putting more more petrol gasoline on the fire of the housing market. And but so that that just exacerbates the existing gulf. But what we're seeing is that there's also a parallel crisis in terms of the rental market in many cities, not everywhere,

but in many cities. And we see that here in Berlin. The city government is under pressure and in fact, just last week it bought fifteen thousand departments to try and the swage this public anger over the rent price increases. A couple of months ago, we saw the collapse of the Swedies government for a variety of reasons, but at its heart were proposed changes to two rental caps which were completely out of favor with the coalition parties, and

the government collapse. So the point is there's no uniform political impact here, but it's it's really stoking uncertainty and in some cases instability. I'm kind of wondering what what's kind of the source of this housing issue on a global scale. It's it seems to me a supply and demand. I mean, you know what's changed here. Is there a sudden surgeon people looking for residences or is there just a supply has come out of the market. What's happened there?

There are different it depends on the market. But for what the single unifying factor is the pandemic And and and amid that, as I said, you've got these really low interest rates which are fueling purchases, and you've got this idea that the families are shifting their priorities or have been over the past eighteen months in terms of spending, with fewer holidays, they're putting more money into really state

and fewer homes being built. That these factors all seem to be coming together at once and and geographically spread around the developed world, and that that's really what's new Well, you've got a lot more investment as well, right in housing, as people see the prices go up and there's so

much um cash floating around the system. Um, they put that money into housing, and that exacerbates the problem, whereas we haven't been building enough new housing at least I know that's the case in the US, and I know that's the case here in Berlin as well. Um to keep up with with that demand. I wonder what the answer is alan um. And I know that this has historically been a real problem to deal with rising home prices,

rising apartment rents. You haven't had, um, you haven't had any sort of utopian um successes where a government stiggers out a way to keep prices at bay and doesn't you know, screw up the whole market, Not as far as I'm aware, But there are interesting examples playing out right now in Canada, where there's of course an election today that Justin Trudeau called his snap election, thinking that he would fight this on his handling of the pandemic,

which was broadly congrats. He was congratulated for that. Instead, he's fighting on issues of affordability and principally of housing, and he has proposed. His proposed solutions include a two year ban on foreign buyers, but in fact, interestingly his conservative opponent has the same policy and the the New Democratic Party, the third party polling they are proposing something

like a twenty percent tax on foreign buyers. UM. That really these kind of like issues that these Um what I'm trying to say is that these political parties are broadly sharing the the the idea that there is some kind of crisis in housing, but they really differ over the proposed solutions. And at the moment there are I am not yet aware of any sustainable things. You know. One of the issues has been, at least in the States, they're just not building entry level housing stock. They're building

the big, big Mick mansions and things like that. Is that a u an issue We're seeing in other countries as well? Alan it is. And there's an interesting little example which didn't make it into the final article from England, the South of England, which traditionally it's strongly conservative territory. This is the Conservative Party of Prime Minister Boris Johnson. Now, whatever you think of his government, the pro breaks it stands,

it's popular. I however, there was a special election by election in a district which had been hailed by his party since nine two. I'm being lost to the opposition Alan Crawford with our Big Take story. This is Bloomberg. 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 Vy three and on ball Sweeney I'm

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