Welcome to the Bloomberg Penel podcast. I'm Paul swing you along with my co host Lisa Brahma Waits. Each day we bring you the most noteworthy and useful interviews for you and your money, whether at the grocery store or the trading floor. Find a Bloomberg Penl podcast on Apple podcast or wherever you listen to podcasts, as well as at Bloomberg dot com. We are awaiting the minutes from the last f O MC meeting. They are due out
today at two pm Eastern time. Although we have a good sense of what will probably be the headline here and will have to do with the expansion of the balance sheet that will not by any means be called quantitative easing by Fed officials. Joining us here in our
interactive broker studios is Phil Blancado. He is chief executive officer for Leidenburg Salmon Asset Management funds UH and I I want to start their Phil the idea that the Fed seems to be poised to expand the balance sheet in short order, according to what j. Pali said yesterday, but this is not necessarily part of any sort of easing. Do you buy that well? I think he said clearly this is not que profoundly more than once. Actually I agree with that for a minute. I would give the
FED credit on this front. That we took a three trillion dollar balance sheet and reduced it down to one point four and in that process there were going to be some hiccups along the way, and I think this is the one thing we can point to that they
got to where they wanted to be. They want to where they the right amount of cash on hand to be backing up the reserves, backing up the banking system, and now they've reached where Okay, we probably went a little too far to tune of a hundred and fifty two billion dollars, and then that would solve this problem. I don't think there's a systemic problem. Also had a little bit of the calendar involved. Also had a little bit to do with how much banks are going to
loan to each other. So the FEDS doing what it's supposed to do, which is fixed these disruptions in the market. I'm okay with what happened that. I don't think it's a big deal, so Phil, the expectation is that the FED will continue to ease maybe at the end of this month. I kind of argument, however, might be, you know, what do they really need to the economies? You know pretty doing pretty well. Yes, yes we know manufacturing this week,
but the consumers still hanging in there. Isn't it better to save our ammunition for later if and when the economy perhaps weekends. Further to the Chairman's comments just today that the US economy is actually pretty good, there's nothing hot in the economy, and I would agree on both fronts. When your consumer is gainfully employed at a historical level of loads of unemployment, you're seeing wages will be a
bit modestly but still going higher. It's hard for me to understand why we feel this dramatic need to cut to your points save it for later. Now, I would say, what the Fed funds rate is higher than the tenure. That concerns me. I'd rather see those flat. Why. I want to see more stimulus on both sides of the curve, not just a short end of the curve. So for that reason I could see another quarter point coming out That makes sense to me. But beyond that, why use
up that ammunition? Now use up that firepower when you might need it if something dressed it happens down the road. So what are you buying right now? That's a great question for me. I still want to rotate towards. For First of all, in your equity portfolios, we're up over near there on the SMP five D. Give or take a point or two. Take some profit. I think we've forgotten about rule one on one. You're in October, you've made a lot of money. Take someone at the table.
Then rotate towards two places. First, short term fixed income is yielding over two percent. That's a panacea. Right now. You're doing really well by hiding out in your shirt reserves. Nothing wrong with waiting for this to resolve yourself, whether it's the tariff battle or something along those lines. But add to that, where your opportunities are, you could still go into that staple sector, albeit carefully, and find those quality names they're going to earn your income. Whether it's
a cost co, whether it's a Walmart. You could even look at something like a tech company that's got a value bent to it, like a Microsoft, or even to a degree to a degree, Apple, who has had really spectacular that to come out recently. Where you're but you're getting paid a nice dividend, So that's where your rotate now. So you know the we have the trade delegation from China coming into Washington, the negotiations start tomorrow. What do
you think the market's kind of discounting right now? Is it released a trade because that's been one of the big issues that that's been whipping the market around, one of my favorite topics. I think there is this expectation that this is going to get solved in the blank of and I I think that's really a reach. There's just too many movies, too many people who are actually expecting an easy solution at this point. Well, here's why I think that. Look at the market's reaction just today.
I mean, grant the light volume day, but we watch these crazy minuscule headlines and we're up two hundred, down two hundred, and I'm saying to myself, there must be some enigma of people out there that think that this is going to get solved instantly. That's just not gonna
work that way. Whether it's the election cycle, whether it's China wanted to solve this on intellectual property issue, or it's just what the next president mayor man, all of these components, I think This is a multi year issue, not a multi month issue, and for that reason we're gonna be stuck with this for a while. I want to ask you a question that I've been thinking about all morning, which is at a time of an everything rally.
Yet again, it's not a comfortable everything rally with a lot of rotation under the surface, but if you look at the averages, it is a very strong performance nonetheless in bonds and equities. What's the argument as an active manager at that point when the Fed's basically back stopping markets, suppressing volatility and forcing people to do things that they're uncomfortable with and into assets that are going to keep rallying even if they shouldn't be. This is behavioral finance.
One oh one, my gosh. Rup now on the act nearly on the SMP. Take your money off the table. We thrilled you made this kind of money this year, and rotate to a neutral position because of the point you made. Whether you call this a potempan market, whether it's financed by the FEB artificial earnings, it's time to take some money off the table. Yeah, but the FED is still going to be back stopping the market over
the next couple of months and into next year. So my question is you could take out you know, your money, but then when you put it back it might actually be at an even higher point. Right, neutral not overweight. There's the answer to that is don't go underweight, go neutral, And by that you're right about the FED. But I don't think the FED could stimulate enough to really right as is higher. The reality is that the Canarian coal mine here is do we get a business procession that
impacts unemployment and causes consumer confidence to a road. So far it hasn't happened, and if it doesn't happen, we're gonna trade along in this bound for a while until we get a catalyst higher or lower. And for me, I don't want to take that political or that economic risk, So neutral is a lot safer than overweight. We are coming up on earnings starting next week. It's something we haven't talked about, probably for because there's been so much
more on the macro front to talk about. But earnings outlook isn't that great. I don't think the earnings necessarily are something that supports equities. How are you thinking about the echo markets going into earnings? The most important earning season in three years. Simply put, this is the one that matters. This is the guerrilla because the first two we got through, whether they ratcheted down expectations or we
somehow surpassed it. And I'm less worried about the e I'm more worried about the revenue side of the sales side. If we can get positive sales momentum plus two plus three percent, we're going to survive this because then we get into the fourth quarter of the year, we get in the last year the presidential cycle, which tendably stimulative. Fourth quote of tends to be a big buying season as we all know, Holidays, Santa clas Rally, blah blah blah. So if we can get through this earning seven, we're
gonna be okay. But the key is if we go negative on sales and earnings, it could be very problematic. From markets. I could see it's giving back a good percent would not surprise me at all. Phil Blancada, thank you so much for joining us. Well. You apppreciate you coming and sharing your thoughts. Fills the chief executive officer
for laden Berg tom and Asset Management Funds. Braving the rain here in New York City, joining us here in a Bloomberg Interactive broker studio giving us some thoughts on the markets. Yeah, I want to shift gears to the bankrupt utility in California, PG and E. It has come up with a new defense against wildfires, simply shutting down joining us now Kick Conneledge Senior Industrials and Utility is
analyst for Bloomberg Intelligence. Is this a viable solution to basically just say to everybody, Hey, guys, you know what, the risk of fire is high, So we're just gonna shut down your energy for a couple of days and uh just you know, we're not responsible for any fires
because we're not operating. Well. We're going to find out how viable it is, obviously, but I think it's to my mind, it's it's clearly in the context of uh we lost billions and billions of dollars and we went bankrupt by having the electricity on uh in in these conditions, right, so that you know, there's I don't think there's any way to tell from the outside. Are they being quote unquote too cautious or overly you know, aware of possibilities.
Is there a one percent chance that something could happen or a ten percent chance obviously that would that would make a big difference. But they're clearly airing on the side of caution and trying not to burn down the whole counties the way they've done before. Well, I've seen the map of the the outage area, um and it's just a huge part of the you know, the central northern part of the state and impact a lot of people.
Is there any precedent for this happening before? I think they're on on a smaller scale, There's definitely been these kinds of situations. I mean, utilities do it to some extent a lot of the time when there are floods and other you know, problematic situations where there are live wires in you know that could really hurt people. Is it just the up to PGEN or the utilities to decide when and how and they do it or do
they have to get approval from the regulators? It's almost like, hey, who's watching out for the homeowners and who are people who need electricity? Uh? My understanding is they can do it on their own. They're the experts. They have to, but they certainly have people potentially second guessing them. If they keep doing it consistently and enough people feel like it wasn't a problem and they're making it a problem.
U uh. And especially if bad things happen to people, like medical devices go you know, go off and can't be helped and so on, then they will have that uh, you know, that fallout from from other people. Yeah, and then there is this that the director of the Climate Energy Policy Program at Stanford University estimated that the economic impact could rise to as much as two point six billion dollars for PG and ease blackout for just two days. So there is a sort of economic bleed through in
addition to just the inconvenience. I have to wonder, though, why is it that they have to put the the the area at risk of a fire with their with their infrastructure. I mean, I don't understand exactly. Are there just live wires next to trees hanging out there? I mean, that's basically it is that northern California is an especially um problematic area to have big industrial operations. And there's a lot of mountains, that's a lot of trees, there's
a lot of you know, steep uh. There's a lot of of towns in remote areas, So there's a lot of wires going all over the place. If you want to have wires, you know that that go to where people are as opposed to having people run their own generator or their own rooftop solars. So arguably that would be kind of a a better solution someday. But obviously we're talking about hundreds of thousands of customers, millions of people being affected by this. It's not going to happen
overnight if they did fix it that way. So real quick, um kid, just give us a sense of how pg n E is doing right now. I know they're still in bankruptcy. How are they? You know, everybody um is has their eye on June next year, which is when uh they have to be out of bankruptcy if they're going to take advantage of the multibillion dollar um fun that the state is set up. So they're going back and forth with the victims of the fires, with the
bond holders over potentially reaching some settlement at some point here. Uh. You know, it's an intricate uh process in bankruptcy. But it looks for now like the current shareholders of PGNI have the their own exclusivity still in place. But you know, the judge ultimately makes that decision, and that's coming up judge any day. He's supposed to make a decision on whether they keep exclusivity. Uh, and that would you know, tend to lean in one direction or the other to
the you know, outside bondholders or the shareholders. Okay, kick kind of LEDs. Thanks so much for joining us kid as a senior industrials and utilities animals for Bloomberg Intelligence, joining us here in our Bloomberg Interactive Broker studio getting update on PGEN and potentially and shutting down power for you know, half million homes. And there are all these images of people going to grocery stores and wocking up
on flashlights. I was thinking to myself though, I mean, what if somebody lights a candle to get light during a high fire period because they don't have electricity. I mean, my mind was going a little a little while exactly We'll see how this goes. I suspect that maybe a little bit of an experiment here to see how it goes. But clearly the liability has been major for those utilities
out there. Blimberg reported earlier today that Turkey did begin their offensive into Syria after the US said that it was going to withdraw. Now there are reports that there are rockets being shot from Syria towards Turkey. Joining US now is Ali Cenar, president of the Turkish Heritage Organization, Ali, thank you so much for joining US. I want to just start with what has Turkey's role traditionally been with Syria and given some of the turmoil that we've seen
in that nation. It's government. Sure, as you know, there's a war going on over six seven years in Syria and Turkey is one of the country that's suffering from the Syria of war. Turkeys hosting over three point six million Syrian refugees and ISIS attack fourteen times to Turkey and lost three hundred four lives by ISIS attacks. So Turkey is fighting against terrorism for many years and Turkey
at the national security concern from the neighborhood. That's why this operation was needed by the Turkish government and with the Trump administration decisions, they gave the green light Turkey's operation in Syria. Ali, you know, one, if you could just give us a sense of what the goals are are of the Turkish government with this operation. Sure, So the operation will NERA line is terror threats against Turkey.
That me talk about terror threats. As you know, YPG is linked to p k K, which is a terrorist organization recognized by United States and European Union. So Turkey is saying that suing course label as as Sarian course, but it's a terrorist organization. So Turkey feels the threat from YPG, which is them two p k K. So the aim is to naturalize the terror threats in Syria.
The second objective is led to establishment of a safe song they play that can be a facilitation the return of serial refugees to their host As I said, there are over three point six million serial refugees and it's the cost of forty billion dollars to Turkey. So Turkey wants the Sudian refugees to go back to their homeland. Therefore this operation will also help them to go back
to their own country. How much involvement are you expecting from some Turkish allies I'm thinking about, for example of Russia. Any idea that there has been speculation that that that Vladimir Putin will want to get involved and help Turkey out in order to get sort of a foothold in a strategically beneficial area. I know today Present ar Don and Putting spoke on the phone and gave some information about operation, but overalls, I mean lookated Turkey and Russia
are not on the same page. In Syria. Russia is supporting ASSAT and because of the crisis, Russian and ran are behind of this IT disaster. So I think Turkyo and United States have more the same agenda in the region. I don't think Russia is happy with the Turkey's operation, but at the same time, Russian troops are not in that region. I'm we are talking about operation in northern Syria, which is domained by YPG, which is into p k K. So as I said this, I think Russia and Turkey partnership.
I don't think it's working in Syria and which shouldn't be. So I know Turkey informed Present Putting, but at the same time they're not also happy with the operation. If the U. S And Turkey are more aligned when it comes to Syria than many people think, why hasn't this happened earlier Because Turkey many times explained the concern about YPG, which is linked to p KK terrorious organizations, and Turkey as United States not support YPG or train them or
armed them. Turkey also offered to fight against ISIS in the region, but United States chose to work with YPG, and YPG is clearly working with p k K. They are linked to each other. That's why Turkey felt a threat and it didn't work out. But at the same time, United States and Turkey wants are said to be removed and both countries, both NATAL airlines are also we're working on it lit crisis, but unfortunately for the Northern Syria, two NATAL allies didn't agree on YPG. It just quickly
thirty seconds. What is the expected duration of this military operation. My expectation is at least two to three weeks. I know President are Domb you'll be meeting President Trump on November thirteen, So till then, I think we might see a clear outcome or some results out of this operation. But if it takes longer, it's it would be bad for Turkey because there's a best semear champion against Turkey for this operation. So I don't think it's gonna take
for many months to complete this operation. Alice, thank you so much for joining us. Ali is a president of the Turkish Heritage Organization, joining us on the phone, giving us his thoughts on the operation taking place just beginning today Turkey entering Syria to retake some territory there. As Mr Senor explained to us, we are very lucky to have with us here in our Bloomberg Gonna Active broker
studio studios. Noah Gottiner, Chairman and Chief executive Officer of Duff and Phelps, which advises the whole host of private equity firms and is also a recipient, has been a recipient of private equity funding itself and has grown as a result of it. So uh a great bird's eye view into the market at a time of growing emphasis on it, certainly by way of the Business Week cover
feature on private this week. No, I want to start with the idea that we're seeing so many companies that are going that are moving from private to public seeing a rocky road, and whether there's any significance to that. What do you think the main takeaway should be? Well? I think that, um, you have seen some difficult situations, Lisa, with public offerings that have not done well, and I think that what the public has woken up to is they want to see a path to profitability. It's no
longer great just to keep losing money. It's okay if there's a way to become profitable and to have a profitable model. I think there's also right now, as the exuberance has died down, a much greater focus on good governance and transparency. Those things kind of got lost in all the excitement of the heady public offerings, but now people are focused on that. So no, when I look at the private equity business, UM, it seems to me
I've been a Wall Street almost third earty years. It's kind of the one of the last bastions where you can make outsized returns UM. One of the concerns, however, is there's a lot of money slashing around in private equity. Word, every time we open the paper, look at the Bloomberg terminal, is another multibillion dollar fund being raised. My concern, I think some concerning a lot investors is too much money chasing too few deals, pushing valuations of how do you
view the market right now? Well, Paul, that's absolutely right. More money has come into the industry. Private equity in in in a way is almost a victim of its own success. It's done well, it's generated great returns and money has kept flowing into private equity. That's caused prices to go up, and that's put pressure on private equity firms to really find different ways to create value on
their investments and really focus on growth. So the old days of just cut cutting costs and getting the low hanging fruit isn't sufficient to generate the returns that private equity needs to generate today. So I want to dig in a little bit to some of the sect ers and where some of your clients are seeing opportunities right now. I was speaking with James Gellard, chairman and CEO of Rapid Ratings, and he was saying that there are a whole slew of companies that are probably overvalued in the
private space, particularly what within the energy sector. Are actually no, he didn't say energy, tech and biotech. He said energy. He actually sees an opportunity given how beating up it's gotten. Are you hearing something similar from your clients that they're trying to steer steer clear from tech and biotech names
at this point? Well, listen, Whenever valuations begin to rise dramatically in certain sectors, people become more cautious but the realities there are opportunities in every sector, in every slice of the economy, and private equity guys are really good at finding those areas where there there is the possibility of transformation and creating value. So I wouldn't rule out any sectors, uh where where there may be opportunities for
private equity. One of things I noticed in the private equity over over the years is only the big get bigger, whether it's you know, KKR, Blackstone or Carlisle Group. Is there is there still a market for kind of the smaller private equity firms doing smaller deals or is it just all the spoils are going to the big players. That's a great question, Paul. I think it comes back to that to that earlier question, is there going to
be a shake up in private equity? And obviously, um the higher performing firms are always going to do well. The lower performing firms are going to fall away or
may not be in business. But there's another um bifurcation I would say in private equity, which is firms will either get very big like you described and have multi strategies around capital deployment and become global, or if they're smaller they'll probably be very specialized around certain industries and create their competitive advantage through the intellectual capital they have, whether it's financial services or technology or software or whatever.
One thing I wonder about with the big companies, the big private equity firms is how difficult it is for them to find big enough companies to deploy cash too. Because they have so much money, they have to do bigger deals in order to make a dent. Has that been problematic it I you know, I would say maybe, Uh, they definitely have to write bigger checks. Uh, they have to find bigger companies to buy. But you know, it's
a big, brave world out there. There's a lot there, but there's a lot of There has been talk that some of the biggest private companies get the biggest amounts of money new money. Uh, they get flooded at them just because of this dynamic, because they're big enough to receive it. I mean, what's the fear that it sort of creates behemoths that aren't ready to be behemoths yet? I listen, I think that those those fears, I guess are legitimate. Um, but there are opportunities for private equity
with big companies, small companies. There are ways to navigate, So no, one of the trends I thought was interesting. I've seen a KKRS they've brought a lot of the capital markets operations in house. Um, I just trying to save fees on what they pay to the investment banks. Um. Do you think this is a trend across the industry because I haven't necessarily seen others do it to the extent KKR has, But I would think it would create some conflicts with their investment banking seal side, you know,
customers partners. However you want to terminate relationship. Yeah, listen, Uh, going back to the previous point, private equity firms have to find a way to distinguish themselves, to differentiate themselves. KKR has has, as you've described, used that strategy, which actually has worked very effectively for them, and I actually actually haven't seen uh that conflicts holding them up in
any way. And other firms like Blackstone have become sort of diversified asset managers and have done a fantastic job as well. So there are different ways of of skinning the baby. No, thank you so much for joining us. Really appreciate your thoughts. No, it got Deaner, Chairman and CEO of Duffin Phelps giving us the lay of the
land in the financial services business. Business focusing on the private equity UH portion of the financial services industry, and it continues to be an asset class that just really attracts a tremendous amount of capital from all parts, whether it's pension funds or endowments. It just seems to be one of those asset classes I think as people look for yield and return increasing and looking to private equity. Thanks for listening to the Bloomberg P and L podcast.
You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woyds. I'm on Twitter at Lisa abramoy It's one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio