Markets, Electric Vehicles, and REITs (Podcast)

at Bloomberg dot com slash podcast. For now, let's talk about the bond story, because you are seeing a really massive historic moment here city coming out in this morning, adding to the to the talk about a hundred basis points in these next two weeks. Nomura coming out of course yesterday saying hundred is down there base case scenario.

What does that mean for investing? Well, let's bring in Aaron Brown, the managing director and portfolio manager over at Pimco, of course, to bring a talk about all things macro strategy and investing. Aaron, thank you as always for joining us. A hundred basis points, how effective is that really relative

to seventy five basis points? Is there an element perhaps of almost panics that comes with the facts of the Federal Reserve may have to be that aggressive, you know, I think that just given the inflation environment, that we're in right now. I don't think one hundred basis points should be considered a panicked you know raise. And in fact, if you look at what the fixed income pricing market is pricing in, there pricing in about nine two basis points.

So the fixed income markets are ready pretty much priced in a hundred basis point move at the July f on C meeting, which is a little bit of a gift to the FED because they're not going to surprise markets if they do, in fact, hike one hundred basis points. I also think that the market right now is really focused on getting inflation down so well, you know, certainly in a normal environment, a hundred basis points would be

a shock to markets. Given the inflation environment we are in right now, I think that's taking precedence over the size of the move. That said, you really have to think about whether or not it's going to be that effective, especially over the short for managing inflation lower. Absolutely, especially um, if the problem is on the supply side. Um, there's not much of the FED can do. However, you make

a good point. Everybody is freaking out about the possibility of a hundred basis points, and even some of our writers this morning, we're calling it an historic rise. But the bottom line is, if you look back in history, the FED has raised rates by one percent or more thirty eight times since nineteen seventies. So it's not as if it's a completely new move, right. I mean, we've seen Paul Volker do it at five percent in one clip, right, That's exactly right. So we have to put this in

a longer term context. Certainly, over the last a couple of decades we haven't seen moves in this size, but if you go back overall longer window, we have, and we've also been in an inflation environment that's also unprecedented. So I think that right now the main focus of the FED is getting inflation lower and and doing what it takes in order to manage that that number, you know, to something closer to where they're comfortable. Okay, but let

me let me put a counter point to Matt here. Yes, thirty eight times, a lot of them were throughout the eighties and the vulgar era. But isn't that that's the last time we had inflation this high? Right? But it isn't isn't the fear here, It's not just the fact that Vulgar hiked so aggressively they basically forced the entire economy into recession. It's also the idea that after this decade of the seventies of inflation, you have this mazed, massive deflationary spiral. So Aaron I have to ask, is

that what we're in store for next? I think that what we're likely in store for next is not a deflationary spiral, but going back to and probably where the comfort is is going back to a two to three

percent or even two to four percent band for inflation. Um. But I do think that there has been a fundamental shift over the last couple of years where we're likely not going back to the normal that we were in in the sort of pre pandemic period, but probably a higher normal than what we've been in over the last ten years with respect to inflation. And I think that that's okay for the FED. I mean, if anything, they they're managing to average inflation a little bit higher over

the secular horizon. But um, you know, going back to sort of a disinflationary or deflationary environment I think is for for at least over the medium term, is off the table. Yeah, I don't think we're getting set up for another if we are signed me up, because that wasn't really a bad economic situation in terms of what you're buying right now. Um, where do you like, where the most? Where's the most opportunity on the curve? Gary Shilling was in here the other day says he's going

along thirty years. That's no surprise, Yeah, And I actually don't disagree with that. I mean, I think that there is fundamental demand um for thirty years, you know, from pension funds and from insurance funds that look at the US relative to other markets globally and find an attractive yield.

And I think buying the long end at this point also just in a longer term context, makes a lot of sense with respect to the fact that you know, three percent if you're guaranteed yield and return is pretty attractive. In this environment, it's gonna be you're hard pressed to get that, you know, in risk assets right now. I also think that Muni's offer from a taxable basis offer really attractive returns as well. So that's another sort of

pocket of opportunity that investors should be looking at all. Right, Aaron, thanks so much for joining us. Pleasure having you on the program today. Aaron Brown there, managing director and portfolio manager at PIMCO. We'll stick with this market story here because stocks are just plummeting. It is not a pretty picture. Uh in the markets today down two percent. I wonder if we see a reversal even though there is this

really massive wall of worry. You've got pp I prices that were at an eleven handle following the CPI report at nine. Do you have recession odds a hundred basis point hikes that are now the base case for Nomurra and city. And on top of that, you now have

Jamie Diamond and James Gorman warning about recession remembers. These were two of the people who were so confident in consumer strength and now it kind of looks like they're saying, well, yeah, that whole recession scenario, there may be something to that. So how do you play the markets amid this wall of worry? We're gonna ask Brett Ewing, the chief market strategist at First Franklin Financial Services. Brett, thank you as always for joining. Let's start there a wall of worry.

Do you hop into this market or not? Well, thanks for having me on UM, look the times to get out there and start put in some capital work, or when times where you have pete worry, and we're certainly in those times. Um, we're the economy is likely in a recession. UM. I think that the rate hikes are certainly getting baked in here for consecutive one percent, probably

another fifty to seventy five and September. But the way we're looking at markets, UM, the question is not when we go in recession, it's just how deep it's going to be. And we do believe that it will be a fairly light recession. But we think that we are currently in one, if not soon. We were talking with Gary Shilling, who is granted UM well known bear yesterday on the program. He says we're about halfway there in terms of the market draw down, to use a term

of our day. We've heard similar things from Michael Urry, who also is obviously known for his barish calls. But what do you think about that, the fact that we've seen valuation compression in the first half and now we're about to see the margin compressions. Yeah, I think the question is the real question is does inflation keep accelerating? UM? I think that's going to force the hand. I think the FED has already done their job. We're going to see a lot of demand destruction on the second half

of this year. Um, we're already seeing it across the board. The commodity markets are showing it. So, you know, I think, have we hit a bottom in the market. I don't think that that's our primary issue here. I don't think it's got a massive leg down from here. I would say that we could go another five to ten percent right here, depending on the inflation numbers and how much more aggressive the FED would need to get. But isn't there a bull ace here for the stock market in

that if there is a global recession? Isn't the recessionary playbook at least and I want to say, in the past twenty years or so, to hop right back into American markets, you buy American buy the dollar, buy US treasuries, by a defensive stocks, big tech. I feel like there has to be a bull case here for in the worst day scenario, fun flows from the rest of the world will rescue the stock market. Why aren't we seeing that? Well? I think I think the rest of the world is

also having quite a bit of trouble here. Um. You know, our dollars just skyrocketing on the dollar index, and I think that the dollar index will be a big discussion in the Jackson Hole conference coming up in late August. I'm sure that there's many central bankers from around the world that are going to probably been Chairman Powell's here on that issue. Um. But I am in the bullish camp. Just to be clear, I do believe um in equities, and I think equities are absolutely the best asset class

that you could be in right here. If you were putting capital work and you had a three to five year time horizon, there's no better place to go right now. I think trying to bottom tick is just meaningless right here. I do believe that we are going to have these inflation numbers start falling off as we move into the fall. That's our base case, and you can look at every market place. I mean look from getting of June. We've got gas down, oils down, coppers down, weeks down, I

mean everywhere across the board. I believe you're gonna see rents roll over a little bit as we get into the fall because the v R B o UH scene is gonna probably have a correction and rent prices there anywhere from ten to I think the consumer is about to tighten up, and I think demand destruction the feat has already accomplished it. Yeah, it does look like um as Dangerous says, it's been to call a peak and inflation.

It does look like these numbers should be it, because we do see eggs rolling over, we do see medals coming down, we do see oils coming down. We've seen that for the last couple of weeks. So and just to add to that, let's look at the labor market. I mean, there there's a lot of high level of layoffs within the technology sector that are rolling through. My sources are telling me it's it's rolling through the I mean, you just had the financial some of the financial companies

report this morning. Layoffs are coming throughout the financial services industry as well. And if you look at the jobless claims, the four week moving average since the very first rate hike, it's up thirty eight percent already. Um And this's gonna keep accelerating. And and that's what the Fed wanted to do, is cool it off. They've actually done their job, but there's no way they can actually stop right here with these high headline numbers. Got it all right, Brett, thanks

so much for joining us. Brett, you and their chief market strategists at First Franklin Financial Services. It's bringing Travis Hestor right now. He's chief Electric vehicle officer over at General Motors and uh, this company I think has made probably the most impressive electric vehicle of all time in the GMC Hummer. Pretty do you know what the Hummer can do? We're talking about a thousand horsepower, ten thousand pound feet of torque. It can crab walk. Travis, thanks

for joining us. UM Now, most of us probably can't afford a Hummer, or we'd have to stretch to get it. But are these things coming down to price points that the average American could get into? Yeah, Hi, Matte, nice to be Thanks for having us son. Yes, we you know, I said, General Motives. We're very much into EVS for everybody in our vehicles and in our charging network. And from a vehicle point of view, you're right. The Hummer

is a fantastic vehicle. It can do trab walking, it can do it has a what's to freedom mode, which is an acceleration mode, which is just fantastic. UM but it are more affordable, and you have sub thirty dollar cars like the Bolt from the Bolt of the UV, which are fantastic vehicles and very affordable and have some of our latest technology like take the Bolt EUV has the latest super cruse technology that's available UM and leads

in almost any segment. So yeah, we have we have price points and vehicles from low affordable vehicles through to some more expensive vehicles and everything in between. I'm looking at Hannah Elliott right now. She's walking right outside the Bloomberg Interactive Broker studio and she just did an excellent piece on the Hummer that I'm sure you saw the cover cover piece for Bloomberg Pursuit. She's standing on the hood of the truck. UM on the other in the

spectrum we talk about the Bolt, right. I was lucky enough to drive around Detroit UM with Mark Royce in his Bolt. I think it was the first generation and UM just the perfect vehicle for somebody on a budget who wants to get around without a big carbon footprint. Can you produce enough though, I mean, I know there's a huge chip shortage right now that stranded some vehicles.

My Silverado truck included on lots. So what's the chip situation Like, Yeah, there's no doubt with UM, you know, the global economy and COVID and lots of supply chain issues that there's been straying in the in the supply chain network. But we're optimistic that we are in doing everything we can every day to UM produce as many

vehicles that our customers desire. You know, we have a long, wide inglist because we have such great vehicles, but we do a lot to try and get them out and you know, the situation is continuing to improve by you know, it evolves every day. The area is UM increased clarity coming every day and we're getting better and faster every day. UM. But yeah, we're optimistic because we go forward. Matt Travis, I feel like everyone is getting into the e V game now. Naturally you have Tesla, you got GM, you

got Forward, you name it. Everyone is hopping into this market. But I'm curious does the infrastructure really support it here when you don't actually have this network of charging stations that kind of funding. I think a lot of people expected from the White House, from the government, from the states like California, for example, who are very go green that doesn't necessarily exist yet. So in your opinion, I guess my question is twofold. One, how is GM differentiated

at all? And two does it feel like the market is getting ahead of itself? Thank you, that's a great question creating. And uh, you know, we might have announcement yesterday of this coast to coast charging infrastructure network which is very significant. Uh you know, it's two thousand charging stalls, it's five hundred locations. Importantly, they're all three hundred and fifty DC fast charge stations, which allows you to put a lot of energy into the vehicle in a very

short amount of time. They'll be co branded Pilot Flying J and Ultium Charge three sixty Ultium Charge three sixty GMS network that aligns eleven different charge poard operators and gives you, in this particular announcement yesterday, some very beneficial things to the GM customers who buy our vehicles, things like exclusive reservations, discounts on charging, a really great technology called plug and charge, which means you don't need to

use credit cards anymore. You just plug them, the charge poort into the vehicle and the payment's taken care of. Integration into the vehicle what we call our my Brand apps, which are like the Chevrolet App or the Cadillac App, and that helps you to get real time charger availability, that does route planning, It allows you to make those coast to coast trips. And so it's a very significant um uh you know, north to south, east to west,

city to city announcement. But as part of the GM Multium Charge three S network, we've previously announced a seven hundred and fifty million dollar investment into that infrastructure. That includes forty level two charges around dealer communities where we all live and work. It includes three thousand, two hundred and fifty d C fast charges in the inner city environment, which we do with our great partner e v Go.

UM So, we know it's a pretty comprehensive network that's being built out here, and you know it's evolving at the same rate that evs are coming to market. And you know, we're in this latest announcement we just made, we will be getting that interstate free a charge are installed early here in two thousand and twenty three. We're moving pretty rapidly. Again, very cool, Hey Travis, tell us about you your job and you know how it's changed

over the years at General Motors. I know you were the chief engineer for the Cadillac CT six, and you've held engineering positions with other on other i CE projects. Now you're um, now you're running the growth or the electric operations. What's the difference. Uh, yeah, So I've been with GM for almost twenty six years now, lots of it, Matt. As you said, I was a chief engineer on vehicles for a long time, UM, which was great because we

do just such great vehicles. But as things have evolved here, you know, our technology development on electric vehicles and autonomous vehicles is just surging. It great. Rights I've been involved with both of them on the product development side, but now I'm lucky enough to get the opportunity to how developed this on the infrastructure side and some of the energy management side. And this is a highly fast evolving

area of our industry. And you know, the US has such a great infrastructure with its freeway and highway networks. It's time to get the electric vehicle infrastructure side of that up and running. And I have a fabulous team of people who helped do that, and we have fabulous partners, people like Pilot Flying J and even EGO, who help us UM get that up and running, and then we're going to be able to help us execute that. So

it's it's a fairly you know. It's our industry is evolving and our our roles are changing, and it's exciting. To be honest with you, it's I can't think of a more exciting time to be in our industry compared to the last hundred years. It's it's it's fantastic. I gotta say I would agree late sixties maybe late sixties, I'd be there right with the Camaro. But in any case, Travis, great to have you on. Thanks so much for joy

in US chief Electric Vehicle Officer for General Motors. As we've been focused on today, more high, well high is an understatement. More massive inflation prints. With the p p I coming out at eleven point three yesterday, with the c p I out at nine point one, let's talk with someone who can maybe offer you a solution in terms of the right hedge. David Auerbach joins us right now, managing director from Armada E. T F Advisors. And the cool thing is David with you and my co anchor

Kritty Gutta, I can say it's great to have y'all here. Yeah, it definitely is. David got his b A, his b A at Texas and his NBA at s m U. Well, the only reason he's telling me that is because for your information, David, and for our entire audience is my brother actually went to s m U. I grew up here. To me, I'm a Dallas I'm a Dallas gal. I spent a few years hitting the bars around s m US. My favorite places Highland Park one of my favorite places

to hang out. Let's get back to well, actually it's it's really a real real estate and partly residential story that you have for us, David, right, because you think this is a great way to hedge against inflation. Absolutely, and thanks so much for having me really appreciate it and love the Dallas ties. That's so cool. You know, we take a very uniquepproach at our MADA. When we launched the Home Appreciation US RE d E t F in March, we have this view that we're building our

fund on two fund principles. Number one, where people relocating across the country and then which the residential read segments are benefiting from that relocation. From where we sit, we know that real estate is personal. There's If there's one thing that the three of us all have in common, is that we're very fortunate enough to go to sleep

with the roof over our head. Whether we live in an apartment, we rent, the house where we live is home, and that home is the most important investment decision that you make every single day. And as you mentioned about inflation, well we know that interest rates are going up basis points lock it in for sure, most likely a hundred at this rate. But what that means is that cost

of that mortgage now gets more expensive. You have to come more to the table with the down payment, and so that's going to affect many first time home buyers and those that are probably in the market right now trying to buy that house. And for so many people it's just been impossible, right, I mean, not only were they priced out of the market when mortgage trades were cheap,

now they have no chance of getting in. I know a lot of people just anecdotally who can't buy a house, and I know people who can't sell a house because the buyers just can't afford it. Now is that going to change? You know? I would say in the back half of the year, we would see some moderation. But frankly, I also think part of plays into that old number

one rule of real estate location, location, location ship. If you go talk to folks that are in Nashville or Charlotte or in Austin, you know, they may have a different perspective. Right now, my neighbor across the streets sold his house within a week here in Dallas and almost got full offer on his property. And so, you know, I think there are pockets that you're still seeing massive, massive strength. But the bigger problem here is that we all know there is a massive supply demand and balance

in the housing markets. There's just not enough housing inventory to satisfy the amount of demand that's out there. David, is that going to change? I want to bring up another Texan that we're going to have on a little bit later on the show. Daniel DeMartino booth Um, whom you may know she advised the fed and wrote a book called fed Up. She advised the Dallas Fed. Um. She has said it's possible that we have a glut next year of housing and cars because so many people

are trying to fill this void. What do you think about that possibility? You know, I don't know about that glutt necessarily. Again, the part of the problem is that what I'm air quoting this that affordable housing product, that starter house doesn't exist anymore for those first time home buyers. But instead you're seeing this plethora of single family rental platforms from like invitation homes, American Homes for rent. You know, there's a tri con. There's a lot of single family

rental properties that are out there. One other point, you know, employment growth is driving household formation. We know that the employment market is still strong with a three handle on the unemployment rate. As a result, again with inflation going up, gas prices are up, and if you're an apartment landlord, you're still knocking on your tenant's door on the first

of the month saying where's my rent? Many of these apartment companies, as an example, reporting you know, double digit year over yr n o I growth, rental growth, strong quarterly sequential growth. We're going into the summer prime leasing season for these apartment guys that are you know occupied, and so again plays back into that thesis of where you live is that most important investment decision that you make for yourself, for your family and for your kids. David,

we got about a minute here. This is a trend that's not going away anytime soon. Do you foresee any sort of pop of the housing bubble any time in our near future? If there is going to be I think a lob, it's going to be dictated on future increases of the interest rates. We know obviously this next one is there going to be more down the road this year because that will play into the own price appreciation and the moderation of the housing market going forward.

But again with us focused on house R E t F here h A U S. You know, we're just trying to take it on a quarter by quarter basis, taking the news that's coming at us from the government, Fanning, may redfin Zelo, Bloomberg, all the sources that are kind of telling us where the housing market is headed. And right now I will tell you from where we sit, we really don't see that letting up until maybe, like I said, back half of this year, maybe into next year.

All right, David, thanks how much for joining us. Great having you all on this morning. David auerback, managing director at Armada E. T F Advisers, talking to us about possible inflation hedges. He would suggest one, which is their Home Appreciation U s REAT. The ticker is house spelled in German h a u S and you can check it out on the Bloomberg h a U S Equity d S. 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 pt on Fall Sweeney I'm on Twitter at pt Sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio