Markets, Crypto, Porsche, And The Queen (Podcast)

are we going here? Yeah, William, awesome. Great. So William portfolio. I grew up with that. That didn't work for me so well this year. What are you kind of doing their over at bay street in terms of allocating access between equities, fixed income, maybe some commodities, maybe some alternatives. I mean, what do you do in a market environment like this? MM HMM. It's not so much the allocation

right now as much as what the marketing anticipating. So, you know, as long as the Fed continues down this course of raising rates, we're going to see more of the same of what we're seeing in the market, you know, until they are able to reverse course once the inflation has slowed down. Regards what someone's allocation is, they're going to be looking at a difficult, a difficult path in the equities market. So, Um, it's not like a binary thing, that Um. I always think about it like that. Either

they're raising or they're cutting, but they could. I guess the market expectation is that they plateau at some point and just hold for a while. How do you see that going, and how important is your fed call to your investment strategy? Yes, that's the right process. You know, the the market is pricing in the pace that we're going to see these these rate hikes, as you said,

everyone's anticipating the seventy basis points. And yes, as soon as that trend reverse this course, you know, we stopped seeing this inversion in the yield curve where, you know, investors are being actually rewarded at a higher rate on these on these shorter term uh will say like like like like yields as opposed to longer term reels. As long as that's the case, yeah, equities are going to perform poorly, um, and and that's where that's what we're looking at for right now. So what do you do?

What do you tell your clients these days again, their their bonds haven't worked for them. Their stocks haven't worked for them. I mean, unless they've got a barrel of oil, you know, sitting in their apartment. What do they do? A lot of investors have also gone to cash in a very strong way. Yeah, what do you do? What are your cash balances and where do you put them

to work? If you do so, for a lot of folks that are rebalancing at the end of the year, at the beginning of the year, they would have already, you know, positioned themselves with some sort of cash allocation. We went into the year in January with cash. With that, you know, we've still seen similar performance in in the market. We're still down about or team per sent a year to date. You know, with that cast, it's there that

we've been able to be opportunistic with Uh. You know, I would say for the next six months the housing market is going to look uh soft. You know, housing also shot up over the last couple of years. With rates as high as they are, though, you know, there's less offers that are coming in. That means there's going to be lower inventories, which means that prices are going to start coming down. So I would say, for for people who are looking today, the smartest thing to do

is to just wait. You know, a lot of things have been announcing layoffs. So just in general, the market is going to see some softness in the next six months, nine months. But that doesn't mean, you know, don't be alert, don't be village and it just means let's look around, you know, prepared for, as these opportunities come up, as

we intestipate, these prices to come down. Welleam I want to ask you about Um, your life, your studies and you know what you do out there on the left coast, because I initially, you know, I saw your resume, restruck by how much you studied Um investment management at Wharton, Industrial Systems Engineering at Georgia Tech, mathematics Alabama, and classically trained pianist at Vanderbilt's Blair School of Music, which made me think about the fact that a lot of times

musicians are so innovative and Um so successful in the world of business and and on Wall Street. And I just wonder what you think about that and how it's how it's affected you. M Hm. So I think you know, no individual is able it's going to be able to outperform the market. You know, fortunately for me, I've been able to surround myself with other individuals from very diverse backgrounds and, you know, it's that diversity of thought in

this concept around idea flow. A friend of mine at the Stanford d school, he actually just released a book on, you know, how to come up with good ideas, you know, and the truth to that is, when you're looking at an investment opportunity, every one knows that it's art, you know, Part Art, part science, but the best ideas actually come

from actually the abundance of ideas, you know. So something that we do internally as a team is speak through the opportunities that we're looking at, speak through what's going on in the market, but also be comfortable to go through as many ideas as possible as a team so that we can so that we can field test these options that are coming up and actually, through trial and error, see well, what is the best option to to to to take in the in the in the in the

thing that we're experiencing at that at that moment. So will you what's you know? What do you think you really bring? What do you try to bring to your clients in terms of value, service insight. You know, what do you think is most important that you bring to your clients? Yeah, so something we've always stood behind is investing through the lens of history, right. So we want to be able to look at an opportunity. We want to help investors see around the corner. We want to

prevent any emotional decision making. So for us, you know, we want to be able to see what's going on and, when market sentiment is where it is today, be able to explain the position that we're in. Uh, and also, you know, again, even though we were only in cash, instead of going back hindsight and trying to make an impulsive decision, say, okay, this is where we position and over the long term, uh, you know, over time equity

markets will pull back up. We can speak investors through this next six to nine months that we see coming so that they're able to have a little rest in peace of mind as we as we step into it. All. Right, good stuff, Hey, William, thanks so much for joining us. Really appreciate you taking some time out of your day to chat with us. William Houston, C I O of Bay Street Capital Holdings and one of investipedia's top one hundred most influential advisors. That's a second year Ro. He's

been nominated for that prestigious award. Yeah, we've got a Federal Reserve. They're gonna be chatting with us on Wednesday, Bloomberg. Of course we'll have full coverage of our Federal Reserve and the press conferences and all that good stuff. But the question is, okay, you're raising interest rates. Are you can push this economy into a recession? Let's check in with somebody who thinks about this stuff for a living. Marcus schomer, chief economists at Pine Bridge Investments. Marcus, what's

your recession call with a Federal Reserve? That seems pretty you know, hell been on kind of getting its handle on inflation. Uh, it's really hard to to get to

get your head around the recession call forecast right now. Um, because it depends a little bit what it's all about, depending what what do you think the Fed will do, as opposed what the feds should do, if you really think that they're hell bend on a recession, if you really think they're so ignorant that they don't see how the inflation environment is turning, and it is changing rapidly

over the last couple of months. If they really, if you really believe they're so ignorant that they're not see that, then Um, if we do get a recession next year, it's all about them and it will be the second major policy era after last year getting the inflation story completely wrong. They may get the inflation story completely wrong

again and push the economy into recession next year. So, Um, I'm sticking I'm sticking out with the non recession forecast because I, maybe somewhat naively, believe they will get some some sort of economic sense over the next six months or so, realize where we are and stop this kind of ridiculous hawkishness that's coming out of every every remember right now and it's pushing up expectations for rate higher

and higher and higher. Marcus, I love your take because, um, of course the Fed is going to play it as hawkish as possible. They want to bring inflation expectations down and the only way to do that is to convince everybody in America or in the world, and that means market participants too, that they will do everything they have to do to crush inflation, that that doesn't mean they're

actually going to do it. It doesn't mean they're actually going to ignore a recession, high unemployment, you know, um unrest in the streets, just in order to bring this number that's already coming down down. But they have to put on that Hawk Ish Um uh show. Is that how you think it's gonna work, that they're that they're actually they actually are going to be smart enough or or Um sensitive enough too, if not turn around, at least pause when we start to get unemployment really ticking up.

You said, you obviously right in your description there Um, but inflation expectations, I'm not rising inflation next. True, you mission numbers were very were very good. Yet months ago you look at the New York site, has another one with the New York site. Is a three UH inflation outlook number, inflation expectations number there that's been turning. Tips, number, tips, inflation forecast has turned. I mean, I don't see any

indicator that suggests inflation expectations are rising. But that's the other problem. Um, I'm kind of very that they have to continue to to talk hawkish, right, otherwise that turns back around. No, it wouldn't. I don't think in face expectation not reven what the Fed says its lasin expectation of driven what people see on the street, and you know what they're seeing. They're seeing falling gas prices and they're seeing certainly a reduction in the upward pressure and

prices in other areas. And if you look at look at things like like import prices, import prices, I think, already point to the next deflationary impulse that's coming because the dollars super strong. The rest of the world is slowing much harder than the US. Everything we import right now is going down in prices and I think that that that deflationary impults will only intensify in the next six months Um. So I don't see but thefts still sees the problem. It looks at core CPI, which is

a terrible number to look at. We should start looking at CPI without housing, because housing is obscuring the turn right now and it is all about the turn and getting conference in the turn. Once operation turns, it has been my view for a while that then the debate would change from how high to how fast will we get to two percent? And that's a very different kind of discustion. Isn't it hard to leave out rents. That's such a sticky component. We hear of inflation, but and

it's been out of control on the upside. So it isn't a sticky component. It isn't. It's only sticky because the way it works right, because the way they do that they include rents and CPI, is by taking the very latest information on rent and only using of that for the rental component of CPI. Because you know what, nobody rents a new home every month, right, and nobody buys a house every month. So housing really shouldn't be

in there. But SP and CPI should be things that you basically buy every month or every every other month or so you can notice the price is going up or down. But things that you buy only every five years or every two years should really be in the CPI, or at least we should kind of adjust the CPI for the frequency of transaction of that product. And the only thing that's going still up right now, but it's not exactly two but the one thing that's going up

right now making everybody worried is housing. Is that what any going down now? He's collapsing right now. Is I'm not going up anymore and rensom are going up anymore. So I was gonna say that's not the case in New York City. But Housing is, uh, you know, rolling over. We get mortgage rates over six per cents. Marcus Scholmer, thanks so much for joining us there. Marcus Scholmer, chief

economers for pint bridge investments. I think he's kind of in that Vince Signarella camp, which is hey man, inflation is rolling over. If I'm the Federal Reserve, I can afford the Pauls, if not now, then maybe the next time, but we'll have to see how that plays out. Here in our Bloomberg interactive broker's Radio Studio we got a wall of video screens for all the networks kind of up in front of us and just seeing some video of the Queen's coffin now is arriving at Windsor Castle.

This huge, huge procession lined with just throngs of people. Just extraordinary, uh kind of day here. And I was looking at the schedule, man, it starts at six thirty a m this morning the you know, some of these uh rights and events, and doesn't end until seven thirty this evening. So a long day for all involved. And then we'll get a sense of what's going on there on the ground. We bring in Leanne Garan's she's a

radio anchor and producer for for Bloomberg News in London. Leanne, thanks so much for taking the time to join us. I'd love to you should get your your view of kind of how the day hasn't folded so far in London, of course. Um. So this morning I was down at Westminster Abbey and you know, the queue that we've seen

here in London has been somewhat of a phenomenon. Just hundreds of thousands of people have nine the streets to see the queen lying in states and I spoke to some of the last people to enter that Great Westminster Hall to say their Final Goodbyes today and they've been

waiting in the queue for thirteen hours. Shortly after that the queue was closed about six thirty am and then we also saw the queen loaded onto the gun carriage and she was pulled by members and sailors from the military here to Westminster Abbey, which is just eight minutes away, and I witnessed that and it was a moment of raw emotions. We've seen Um pageantry and pomp and ceremony and just a feeling of emotion in London. The gun carriage is so cool. So here's the deal of the

gun carriage. Basically, Um, it is an actual carriage for a twelve pound gun. Okay. That was built, I think, in the late eighteen hundreds and when Queen Victoria died um they went to pull it with horses, but the funeral was in February and it was too cold. The horses were freaking out, so they had UM. It was actually Dickie's father, Louis Mount Batten, the original Louis Mount Batton, who said, you know what, we're gonna pull this ourselves, and they had like a hundred guys get out there

kidding and pull it. And ever since then it's become an institution in royal funerals. Um So cool. Now they're marching into Windsor Castle. It's gigantic. I never noticed how big it is. I believe it is the biggest royal palace that's still inhabited by kings and Queens in the whole world. Have you been there, Liam? I have been there and I do actually spend a lot of time in one. It's one of my favorite places here in the UK and it was actually one of the Queen's

favorite places. She loved it and during the pandemic it was called the Windsor Bubble, where she spent a long time with her former husband and also with the staff of Windsor Castle, and that's because, as we know, the Queen always loved to be outdoors, she loved to walk her Corgis and also have access to the horses, and that's, like you said, Windsor Castle is the place where that happens.

And I could not believe just the volume of people that have lined the long walk to see the Queen and as a hearst made away, we saw all the roses that had been thrown onto the front of it. And this, for a lot of the British people, is the last time we will really see her. Majesty. She now will go into a service at four o'clock. That's a committal service, and then later on this evening she'll have a private burial with her family and the cameras

will not be watching any of that, you know. You know she mentions the Queen's late husband, the late Queen's late husband, Prince Philip. He was Dickie's nephew, dicky Mount Betton so and I watched a crown. I did a deep dive into this today. Apparently Dickie tried to get Prince Charles to marry his granddaughter. I mean they're all related anyway, but they wanted to get even more interrelated. I guess King Charles now the Third Leanne. What what's

the Um? What's the feeling, because I know there has have been times in the past when people wanted him to abdicate and pass the throne straight onto William. He's been very vocal about certain Um issues like climate change, which made him for for some time unpopular, and now I imagine that the left has to at least given points for that. How is he being seen now that he's sitting on the throne, so to speak? Well, I think first of all he has big shoes to follow.

That's undoubted. His mother reigned over this country for seven decades and she's much loved. But one thing that King Charles has done, and it's one the people's hearts, is as soon as he realized that he was to come to the throne, he went to all four corners of the UK and he visited his whole kingdom. He started off in Scotland, he went in to Northern Ireland, he went to Wales and of course we've seen him here

in England. He's been out and about shaking people's hand, connecting with everybody who's come out to pay their respects to their mother. We've also seen an emotional speech given by him thanking his mother and saying I'm going to carry on the legacy, I'm going to carry on the service. So really we see Prince King Charles. I always want to say Prince Charles, King Charles the third. I know

it's always on the shoe front of my mind. So we see King Charles the third really coming out and giving people that reassurance that we need after seven decades. I can't remember another queen. Most of my friends you know. So he's really gone out and given the reassuring to the whole of the United Kingdom that he's here to carry on his mother's legacy and he has worked nonstop and so many people have recognized that and also felt a real sense for him because he's mourning the loss

of a mother. Well, first of all, um, that's terrible. I don't want to make light of that at all. It's a tragedy. Everyone loved her and, of course, her children for for their loss. I am sorry. Having said that, this has to be an incredible PR campaign for the United Kingdom because for ten days we've all followed along, we've all watched. You know, if you haven't been there, you probably want to go and check it out. If

you have, you may want to go back. I mean Um in a way, this has to kind of prove how important the world's are too, uh to tourism dollars right Ly, and there must be an influx of people who want to go to the UK to pay their respect and to check it out. I have never seen London so busy. I've almost not known what to do

with myself. People have come in from all over the world and I've actually gone and visited the queue a few times and reported from the queue, and many people I met were foreign who had flown into the country, who said the queen had always struck a chord with them, especially people from the US. They said we don't have this pomp and pageantry and it's something that we really wanted to be immersed in and involved in and we

loved the Queen From Afar. And you are right. It is something that has just bought the light here to the UK and today I have a feeling, and I'm sure many people would agree with me, everything almost went seamlessly. It has been so well rehearsed, it has been so well practiced. The queen made a lot of those approvals for the service that we saw today and I feel like London and the UK has done themselves justice. Absolutely agree. Lean.

We're gonna have you back later in the program that's how important this stuff is and how interesting compelling parents from Bloomberg radio. All right, it's Monday, it's eleven eighteen ish. That means we talk e t F, and when we do that we do with Katie Greifeld, cross asset reporter for a Bloomberg News N A N C K R U Z. What kind of e t F Vance and cruise? The world has been waiting for these filings. So, if

you haven't guessed so, these are filings. They haven't been launched at the filings for e t f s that would track the personal portfolios of members of Congress and their families and their dependent children, because, because members of Congress tend to beat the S and P by a mile, who knows where they get that kind of investing edge, but it's it's the acumen that you need to become a good politicians just being great at investing. We have

aric cultures. He actually crunched the numbers for Bloomberg Intelligence, which did prove that point that these portfolios do tend to outperform. Whether or not it's going to be like a great portfolio, something you would actually want to invest in, it's almost guaranteed to generate buzz because obviously there's been a lot of controversy when you're talking. Okay, so people of our age here, the things we want to invest in, our things that make the most money. Yeah, for sure,

it's different with people in your generations. Yeah, what over, General Generalization, Um, but let me tell you about the methodology. The financial world, and financial twitter especially, has been waiting for someone to try to do this. The fact that these filings finally landed uh, sort of went viral, but in any case. So they're going to look at disclosures. Members of Congress have to disclose any transactions they make valued more than a thou and dollars within forty five days.

So you do run the risk of missing those short term trades, but you can see what their long term holdings are and you can construct a portfolio around five hundred, six hundred names, and that's what this issue is trying to do. What's give me just a sense of how many e t f s come to market on a weekly basis. It seems like every time you come you've got more new crazy names. It's a cost of launching the TF like next to nothing. It would appear that way. The cost to file and E T F certainly doesn't

cost very much. We see so many interesting filings. The reality is that if you look at the e t f market at this point, you have three thousand e t f s in the US, just the US. Um there's not a lot of weights. Nine trillion dollar market exactly a TV show about it. You have a TV show about it. Issuers have to get creative to find any sort of white space, any area of that nine

trillion dollar industry that isn't saturated. And if these actually come to pass, they will be the only existing e t f s on the market that are trying to do this well. But these to me make the most sense of all of everything because, Um, if you a lot of people get angry about the fact that members of Congress are investing and very cynical people think, hey, they're using their position of power to make a profit. Um, you know, and now you can do it along with them.

That makes sense. So the only problem I have is with the disclosures. As a member of Congress you only have to disclose your investments within a, I think a forty five day period. Exactly are those laws gonna Change?

Is this gonna stay legal? Well, it's interesting. There was this big bipartisan push last year to basically change the laws require more disclosures or maybe make it so that lawmakers would only be able to invest in SMP five dred tracking funds, are indextracting funds which a lot of

corporate employees. Those are the restrictions were under. We're on our show going to hear from Emily Wilkins, she's a congressional and government reporter at Bloomberg News, about those efforts because again it was a big bipartisan sort of unity moment. But it seems like that pushes largely stalled. I don't think there's been any action on the legislatives front. Funds flow. People still putting the money in. Oh, here's the thing. I want to talk converting mutual funds. Like Matt and

I grew up with mutual funds. You put the fidelity, you know, Contra Fund, the fidelity. Think about how revolutionary they were at the time. Vogel is man a myth, a legend who changed the way we invest. But now mutual funds are converting to e t S. right. It is a growing trend. The first happened about two years ago. Honestly, I think it's slowed down a little bit. Uh. Some proponents in the et f industry would tell you that it's still growing, but we did have new Burger Berman.

They did convert earlier this month, uh, some of their mutual funds into an e t f. This trend, it's expected to grow to basically a one trillion dollar wave. We're not close to that point yet, but if you look at the flow of funds, new money or money coming into the ecosystem, it's all it's like a zero sum sort of flow picture. But in terms of issuers actually converting their mutual fund into E T F S,

people think there's a lot more runway. But you have to consider the fact that mutual funds are the preferred structure for retirement plans for four oh one case. So there's incentive to convert, but there's also plenty of reasons to stay in that specific structure. One PM Wall Street time. What are you and that gonna be up to? We're going to talk, I think, a lot about the congressional trading e t f s, again, just filings. They haven't

launched yet. That would probably take until November. So we're also going to talk to invest goes, head of thematic research theme the E T S. it's been a little bit of a struggle to attract the same magnitude of flows that we saw in some of the years past. I don't know if you've guys heard, but we've keep toggling in and out of the bear market. That tends to be PAT news for themes, but they do have some winners. They're including the P B J e t f.

it's a food and beverage GTF. I'm excited to dig in. Themes are different than factors. They are they are now. I don't know, momentum quality, those are factors inflation, robotics. Thank you's all right, she's smart. I'm ready that's why we have around the program Harford College. That's a really good college, by the way. On the mainline, yes, the mainline, Katie Graydfeld, cross asset reporter for Bloomberg News. I want

to bring in now Christopher Ralph. He is the Frankfurt Bureau chief and he is my go to source on anything V W related. And then, because he's my go to source on Folkswagon, that means he's automatically my go to source on Porsche, Bentley, Audi, Bugatti, Scoda is the one right. Ducatti is my own thing, but yeah, Bugatti is a great, cool company. Anyway, Christoph, thanks so much for joining us. Paul and I um both noticed the same thing when we saw the initial stories coming out

over the weekend. Porsche is going now for a much lower valuation than we thought. I mean ten billion dollars lopped off the valuation. Now Seventies, seventy five rather than eighty five. Why is that? Yeah, I'm Matt. I think. I think the IT basically bolts down to the fact that actually they have been looking at a very broad range of different valuations. When you like, like, uh, sort of like look a few weeks back, we've had like

the number of like eighty five billions floating around. Some some analytis actually speculating might be as worth as much as one dred billion. Uh. And then our last Thursday or Friday was we saw an HSS. No doubt it basically said, oh no, it's like gonna it's gonna be worth much. Basically they were looking at about forty five to fifty billion. So I think they sit pretty much right in the middle of the valuation which has been

basically discussed through a pretty broad range. So I do think they try really hard to not not push it too hard from a pricing perspective and, yeah, aim for something that sits pretty much right in the middle of them. To get this is my first thought is Um, you know, were I too, if I were allowed to invest in this, obviously I would back up the truck and buy as many shares as I could. I'd have to call every broker I know to try and get some syndicate. How

are they gonna deal with that kind of demand? Yeah, they basically have like a group of banks that is targeting specifically institutional investors. Four of the big anchor investors have been out there already, have been announced and we reported them before. But they also aligned up a number of banks, torture bank being one of them, who are specifically targeting, targeting retail customers, because they who have a pretty sort of affluent group of customers that are very

like loyal to the brand. I've been driving posts for a couple of years or decades maybe, are members of like the Porsche Club. So that's definitely a group of potentially invested as well. Alright, so the the anchor investors, by the way, are like the Saudi right, Um, Norwayway, nor just. They have the biggest. Who? Who? Who else are the big anchor investors? Remind us? UH, yeah, it was. It was in August, the the the sovereign wealthfront from uh,

from Norway, then Qatar was was was one. was another investor. T ro always on board, a D Q, I think. So. Yeah, a number of like pretty pretty established names out there. Now I understand there's some weird family dynamics going on here in this. I P O will dress some of it. I'm not sure if you can do this in a simplified version, but family. That in a book. Yeah, the Porsche family and the peach. Is it peach, Peach Peach. I can't even pronounce it correctly. Christoph, can you give

it a shot? Yeah, the name is is it pronounced Pah? And yes, I'll do my best at the night's challenge. You wrapped it up in a few seconds and I'll write that book and send it to you, Matt, right after this show wraps up. The thing is, basically they lost direct control over what used to be their family business just over a decade ago, back in the day's Porsche's previous management is tried to to take over the

much larger Folkswagen group. The whole thing basically like ran out of funding during the dead crisis and as part of like a pretty complex deal for Porsche a g, the Sports Cup business was folded into Folkswagen, and now this idea allows the family to regain some direct influence. They don't go at Porsche at the at the sports cooperation. They don't get like full control, but they will receive a blocking minority of twenty five percent of the voting

stock in that Sports Cup business. When is this still going to happen? Is this this week? This month? What's the timing? We've just heard that the German financial market regulator Baffin has signed off on the on the prospective, on the on the ibe of Prospectus, so that should land at some point later this this afternoon, at the coming hours. And Yeah, basically then it then the preparation.

The preparations are going to continue and the goal is that the first day of trading will be September twenty nine. It's pretty exciting. Um. The only thing that is kind of a bummer for me, and probably cool for Kristoff, is that they're doing it on the Frankfurt Bersia, which is, I mean, so lame. No offense, Christoff, but there's nobody that even works there. Like, why not doing on the New York Stock Exchange where there's real pomp and UH

and and and celebration? Yeah, I think I'm I'm I guess I'm totally biased that because like the Frankfort stock ex changes to stock a walk from our office. So I'm all for it, Matt Uh and, yeah, I guess we have to bring you back to Germany, guess, Christopher. Are they going to do like a road show, like go to New York, go to London, did that kind

of thing? Well, that they have been on a pretty sent the FROAD trow over the past few, uh, well months really, they've been to to Boston, to New York, to London, they've been touring Asia, so they've really like travel the globe, basically. But they decided, yeah, it's it's it's a Germany, it's a German company. They want to be what they wanted to be listed in Germany. So

that's basically why they picked Frankfurt. Alright, good stuff now, you know, maybe maybe we'll send Matt over there for that. That can be a good little uh police boot markets. Yeah, we'll send we'll send him your away, Christoph Rovald, bureau chief Frankfort Munich, pretty much all of Germany for Bloomberg News. He kind of keeps us on top of what's happening in Germany. And again this I P O of Porsche looking to raise as much as nine point four billion euros.

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 Boll Sweeney, I'm on twitter at PT Sweeney. Before the podcast you can always catch US worldwide at Bloomberg Radio M