Markets, ETFs, Travel, And Top Gun (Podcast)

the University of Louisville, the Cardinals. I don't know who he roots for during hoops season. Ross Mayfield Investment Strategy annals for Bared Wealth Management, Ross Louisville Place, Kentucky. Who do you root for? It's Kentucky, highest times out of Kentucky, high times out of that's strong. That's a strong. Yeah, they get some strong support there, dude. UK. I met Rick Pettino when I was a kid looking at UK. Really yeah, how'd that go? It was awesome? I Mean

I wasn't Ohio State fan obviously, but love Kentucky. Love going down to Lexington and uh yeah, hey, Ross, what do you make of this thirty year bond, it's two point seven nine percent. I thought we were just at like three point three three point four. What's going on in the bottom market. What's that telling us? Uh? Growth scare right, It's telling us that the market is finally convinced that the set is I'm going to do whatever

it takes. And increasingly that looks like, you know, some sort of recession, whether it's mild or not is up for debate, but I think there's you know that you talk talk about copper, talk about treasure, you olds, talk about other industrial medals, all of them are reflecting, um increased odds of a of a recession and of a big growth turned down. So I think that's that's what it is. And at the same time, you know, increasing odds that because of that, we can kind of you know,

defeat this inflation. Uh, you know, within the next twelve months or so. I was looking. We've been talking about the Michael Burry tweet. I don't know if you saw it UM yesterday, but he said basically, the first half was awful. SMP down, NASAC down thirty five, bit coming down six says that was at least in terms of stocks multiple compression. Next up is earnings compression, so he says,

maybe we're halfway there. Not to be fair, he calls himself Cassandra, he's a little bit dramatic about this kind of thing, But, um, how much do you think earnings will be hit? Well, you don't get movies made about you if you're not a little bit dramatic. I guess you know, I think earnings will take a hit, right, So currently I think I think the estimate for SMP earnings it's still something like two fifty, which is which

is ish growth. Um at a minimum, if you're looking at even a minor re session economics light down, that probably has to be flat or slightly down. You know, the average recession earnings contractions is like plus on the on the downside usually or on average. So you know, even if you saw something like five, you know, kind of earnings contracts in the the next year, um, that would be meaningful. Versus where estimates are now, you're starting

to see kind of one by one. Uh. You know, companies come out with guidance that's a little bit lower, a little bit more hesitant. But I think as we get into this this next earning season, you'll start to see it um kind of in mass, and the question would just be is it is downside or is downside? What are they seeing in real time as far as the consumer goes as far as investment goes um, because

I think that's the big question. Right. Consumers held up pretty well, but there's there's a lot of pressure, right. I mean, Lisa Shaalott from Morgan Stanley was saying, you know what, this kind of inflation driven recession isn't going to be as bad as the kind of credit driven recession that we had in two thousand and eight, and that was a profit decline of fifty seven percent, So she says, we're not likely to see anything that bad.

But I just wonder if stocks can get hit as hard we're down, can we really fall fifty percent by the end of this thing. I think a lot of the pain is priced in. I think there's I think earnings pain is already priced into stocks now. Estimates still have to come down, but you know, I think the market is sniffing that out ahead of time. Yeah, I think there could be a further leg down, but I would be surprised if they were that big of a sell off for the reason that you mentioned it's, you know,

there's nothing seemingly systemic that's wrong. Um. You know, big valuation compression obviously, and inflation is hitting you know, the consumer and companies in all sorts of ways. But um, we're still in a pretty decent position as far as profitability, as far as earnings. You know, profit margins are rolling over, but they're still elevated. The consumer is strained, but you still have that a couple of trillion, and aggregate savings UM, wage growth is still there. The job market is still

white hot. So one of the things we've been talking about is, you know, recessions don't always look like the last two. They don't always look like oh eight in the coronavirus crash where GDP falls off a cliff, things are catast d optick. There's a history of much more kind of mild recessions UM, and I think that's probably

what we're headed for. Given worth the starting point, Ross, what's the question you're getting most often from your bared wealth management clients you know at this point, And I think it's reflective of the past few selloffs and bear markets have really been v shaped in nature, and this one is much more grinding. Already a couple of headsake bear market alleyes. So the biggest question is when does this, When does this end? Where's the bottom? And you know,

obviously that's a borderline impossible question to answer. But given that there's still probably some some earnings pay to come, given that we haven't really seen the kind of capitulation that you'd want to see out of stocks, you know, at the top um mentioning that the VIX is still sub thirty. You know, when the markets in a bear market is pretty wild. Um, you just haven't seen that capitulations.

They want to know where the bottom is. But the reality is that bear markets outside of the kind of q E era are are much longer. You know, it's twelve eighteen month processes. And so that's what we're getting folks accustomed with is kind of setting that expectation that this could be a longer slog um, you know, much like maybe dot Com but the the past. All right, Ross,

good stuff, Appreciate you're taking the time here. On a Friday before July four, Ross Mayfield, investment strategy analyst for BARED Wealth Management, be A, University of Kentucky, NBA from Louisville. That's a good basketball rivalry down there. Have you ever been to Kentucky? I have great bowling Green. I'm a big fan of Bowling Green Kentucky. Now you bring in Katie and I have no idea what's going on with

her story here? Well, here's the d I mean, she's in her student Katie Greifeld Cross reporters in our studio. By the way, story Cross asset reporter. Uh. I don't even think it does her justice. She is an absolute expert at the world of E t F s. She also knows what she's talking about when comes to crypto. She's got like seventy five thousand followers on Twitter, and she's just generally a markets news hound. Okay, Now, I

told my boss is listening. Even dummies like me and Paul know that it has been a bad time for bonds. I mean, we've never seen anything like this. Investors that normally thought, oh, this is where I go for safety are now thinking where in the hell can I go? Right? And what you're saying is a lot of them have chosen E t F s. A lot of them have chosen E t F So this is something that always happens. You have sort of this moment in markets, and E

t F issuers rushed to capture it. So the current shiny object among E t F issuers right now is income E t F. So the strategies vary a little bit, but in all of them, at least the most recent filings, it seems to be that either of these funds invest in equities that offer dividends, or they write some sort of call writing strategy on the s. Give us some tickers. We like tickers here, okay, so, and also we love this.

To me, it's a great story because it brings together two of my favorite functions we love on this show. I n GO shows you all the indexes and it's a great search tool, and we love E t F GO. We do love I know, honestly, it's probably the best, my favorite function at Bloomberg. But in any case, in just the past few weeks, you've had three of these funds launched U d I T U g N N J p r E. But there's one that really taught U g N is a good one. Growth in income

E t F tickers are fun. But the fund that caught my it actually launched in the last two years. It's the JP Morgan Equity Premium Income e t F. The reason that I came across this fund, Matt, was because we talked to Brian Lake of JP Morgan on the E t F Show this week and we were talking about income funds super hot. So I decided to try and put some numbers to that. This JP Morgan Equity Premium jp J e p I. It is one

of the biggest income funds out there. It's seen inflows of over five billion dollars this year for relatively new fund that doesn't really happen all too often, and it's in the top ten of equity e t F and flows so far this year. Well, income funds seem like they should be sustainable. Like I think about the e t F world, your e t F world, Eric about tunis et F world. It's very niche. You know, whatever is the spright shiny object, Let's create an e t

F for that. But income funds are universal, it seems to me. Yeah, And so a lot of this is sort of repackaging the idea, trying to make you know, just following dividends seem exciting. Well, it's but here's the key and Jack Bogel might himself love this. In order to stay on top of um an income stocks portfolio, you occasionally have to trade in and out right. That costs money. A mutual fund would maybe give you a little bit less of a cost, but you're still paying

the manager. With an e t F, you get the cost down even further, so you're able to have this uh bonds like return without having to pay the equity trading fees is left the pitch. That's the pitch. So if you look at Jeff for example, it's an actively traded e t F charges just thirty five basis points.

That's pretty cheap. But to your point that these are offering bond like returns, that's sort of the angle that I drilled into into this piece because it sounds really good that you get income without sort of the drama that's going on in the bond market right now. But I was talking to um ben Levine. He's over at three D Asset Management Group. He was actually also on the et F show, but I had COVID for that episode. But in any case, he made the point that these

are sort of equity beta in income clothing. These are not the bonds sort of portfolio diversification, sort of layers of your portfolio. Basically, you shouldn't be using this as a substitute for fixed income. And the worry, at least for him and some of the other people I talked to, was that investors will basically, so this is the to be sure paragraph. This is the actually made the whole article, the to be sure because again this is the shiny object of the moment. You see a lot of issuers

chasing this. This is a typical be in construction. They'll have the first, you know, four paragraphs of the story investors are switching into urn rather than bonds. And then in the second, after the after the page, it'll say to be sure, and then they give you the which is really like secrets, that is that is it's important though to introduce a little bit of skepticism. Of course, these are the high flyers right now, which really speaks to the mood of the market, that just dividend funds

are the high flyers right now. But again, these aren't bonds, and if you're looking to diversify your portfolio, I mean, maybe you should still keep bonds in it. You want to be safe. And by the way, I know a crypto fund that will pay you like, oh, tell me about that? Kidding it crash okay, alright, so all right, so talk to us like e t F fund flows.

Given this first half of the year, where you know, the s andps down twenty plus percent, bonds are down double digits, how have the e t F flow has been? What have you seen in terms of trends? So it's brutal out there. We're actually just talking about it on the ten am show on BTV. Basically, if you look at where the money went in the first half, Spy that is the state street spider sputf in the world. We all know it, the O G B O G.

But it's relatively expensive. It costs ten basis points, whereas if you look at Vanguards answer to spy voo v o o uh, it costs three basis points. So Spy loss about twenty three basis points. It's a great question. Well, Vanguard is special. They have their mutual ownership model. They don't really need to make money. Okay, bo actually manages

it from heaven. That's how that's how they do it. Yeah, but in any case, you saw maybe twenty six billion dollars come out of Spy um and about that much going into do right exactly, So perhaps people exiting the market and then trying to come back in, we're going into the cheaper products. So the Vanguard products did pretty well this first half again because they cost absolutely nothing.

But I mean you saw outflows from broader SMP five hundred tracking funds that weren't Vanguard, from high yield funds, from financials, basically everything. This is actually I'm just using that e t F go function, Matt, and I just saw something that actually is pretty cool. You know, the year to date cash outflows of spy twenty five point five billion and then inflows into Voot four billions. That's there. You just, yeah, I could see it with you weren't

lying there. What I what I wanted to actually ask Brian Lake last week and what I want to actually this week? Oh it was this week. That's it. It was just Monday. Uh. And this is something that maybe we can talk about on our E t F show Wednesday at one pm. Um. Is it a good thing to have these two, this duopoly in E t F because it's like black Rock and Vanguard are pretty much it. Yeah, State Street used to be the solid number three, but they've been sort of straggling in recent years. I can't

answer that question. We should ask the next work on it with the big Wednesday. Yeah, next week, all right, Katie Grayfeld, crossset reporter Bloomberg. Well, I'm almos gonna say Bloomberg quick take. Maybe we have to rewrite that. Eric, let's switch gears. Talk about travel. It's gonna be a big travel weekend this weekend. I'm just driving down to the Jersey Shore. No other place I'd rather be, but a lot of people are hopping on planes and trains

and automobiles and stuff like that. It's check in with Alicia Kapoor, senior industry manager at similar Web. Alicia, how busy is it gonna be out there? What's this summer going to be like? Given some of the travel challenges that are out there? You know, this weekend is really really busy, and I'm seeing that in person. I'm actually talking to you from Poland, Um, where I'm here for a wedding and a lot of Yeah, Poland UM, I'm in I'm not going to pronounce it right, but it's

called um. So I'm here for a wedding and a lot of guests are delayed, and we are seeing just in terms of search volume, that consumers are seeing a lot of cancelations, especially for flights, and search volume for airline cancelations rose between thirty four and six over the past twenty eight days, with most searches going to American airlines.

And we're actually seeing that American Airlines has the highest share of traffic to its cancelation pages online UM and they've really had a high share of traffic to those cancelation pages since about May, and most airlines are seeing increased traffic. I think it's really just staffing issues are getting in the way. People weren't expecting this resurgence and demand and a lot of people are trying to travel now, um maybe before we get into an environment where prices

are even more UM volatile, right. I think there's a lot of price sensitivity that's coming into the picture right now. So they're worried about they're worried about coming inflation. Yeah, I think people are worried about coming inflation. I was actually talking to a client yesterday that said they're seeing really high bookings for next summer because people are trying to pay with payment plans or kind of put off the pricing because they can't afford this summer. So, you know,

you're in EUROPEO. We've heard some stories that just some strikes and it's you know, as bad as this travel is here, it's even worse than Europe. What are you seeing? Yeah, it's a great question. I was actually in London before this there was a tube strike. It was a little bit stressful. But we are seeing that bookings in Europe for top brands are declining into June UM with only booking dot Com actually seeing an increase in daily lodging

bookings month over months since May. And that picture is really different in the US. UM the U S we're seeing that all brands are seeing an increase in bookings. So I think you're right. Europe is seeing more struggles than the United States, and unfortunately it is impacting bookings across the board. All right, Alicia, thanks so much. We appreciate that, especially coming from Poland. Enjoy the wedding over the careful of the Russians. Yeah, be careful right there,

they're right there, But NATO is right there. I gotta tell you something. I moved to London about twenty years ago, and I lived there for a few years, some of the greatest years of my life. Sure, because it's a great town and because I was young. But um, there's literally always a tube strike. Yes, it's a constant thing. It's not now or last year, is not COVID or

pre pandemic. It's a constant, always a tube strike. And I feel the same thing with like air France or you know, are you know air it Tally or something like exactly all right, that's Alicia, senior industry manager for a similar web bringing. Uh. I think it's fair to say a friend of the show. You've interviewed Mark Douglas, president CEO of Mountain a number of times. Mountain is

a company that builds advertising software for brands. They have something to do with the guy from Deadpool and UM, Mark, I was reading your on your blog. There is a story about UM. I think Melissa Yapp wrote a story about UM. The fact that you can recession proof your streaming business by offering ads. We know that, UM, We've already seen that from Hulu and now we're expecting to see it from Netflix. Uh does it not drive away?

Do do consumers not care about ads. Um, I think consumers have demonstrated that they are willing to basically exchange viewing of ads for a lower price. And so if you look at Hulu, who you mentioned as an example, I mean it's only cluss I think two dollars to avoid advertising on Hulu and to take greater on that, meaning the number of people who elect that option is actually, you know, less than half of the consumers. I think

it is as low as like about. So I think consumers have said, you know that that's a really good trade off. But then you know, you want to add to the entertaining, which is what you know Ryan is all about as part of mountains. So that's that's that's an important part of it too. So Mark, I mean I'm looking at some of these media names and where the stocks are just getting crushed along with everything else. Here. One of the challenges, I guess Mark, is kind of

how is this whole streaming business gonna shake out? I mean even our friends and Netflix stocks down six on a trailing twelve month basis. What's the how how do you think investors are thinking about just the streaming business? Is it a good business? Um? I think it's an next on business, and you know, the thing that's interesting

right now is it's really started to stabilize. Obviously, Netflix and Hulu kind of pioneered streaming itself, and then you saw this kind of steady set of companies enter the business, and that created uncertainty in terms of market share. Who's gonna you know, what services are different consumers gonna sign up for. At this point, especially in the US, every service that you're going to have available to you is

essentially out there. Disney Plus, Decock, Netflix, They're all out there, and I think there's a bit of uncertainty to see where consumers wind up in terms of what are the services that they have in their core diet of viewing,

and so that uncertainty is affecting stocks. Netflix has kind of in some ways a good problem to have, but obviously when it comes to stock prices, no problem is great, which is they have so many consumers I think over seventy market share that it's just hard for them to grow that business in the US, and I think the stock has been penalized probably more than it should be for that, you know, for that kind of a problem, which is like everyone's already using our survey The interesting

thing to me, Mark is that you what your business. For example of you're you have a B two B piece, right, and and you're trying to help your companies generate more leads get more demand by placing their ads in the right places. So you are equally as interested in finding out which services are doing the best to connect with customers as an investor is um to find out which one is the best bet for the for the future, for sustainability. Right, So what are you seeing as the

big standout winners here for for your customers? Well, the in terms of in terms well really, let's back up just like that. The way to look at this is that the television advertising market is on to monetize. It has more users than social more people watch television that even than use social um by by small amount. It has three times the engagement people spend three hours a day or more watching TV. But somehow it has less revenue than a social media market. Then social advertising does.

So that's an opportunity, right, Well, this because television been dominated by you know, just like five thousand big advertisers, while someone like Meta has millions of advertisers. So what MOUND does is we're bringing television to every size company, and then by doing that, we're literally expanding the market for television advertising. And I think if you are an investor looking at streaming, looking at TV, that's what you

should be focused on. This market can expand we can bring more advertising market with more hours of engagement and literally expanding market for television advertising. And so Mound is contributing to that. And I think the future for these media companies and these media stocks are bright as they embrace that that streaming we can now bring all all these new companies into that market. All right, Mark, good good stuff. As always appreciate you taking the time here

on this Friday before your life fourth long weekend. Mark Douglas, President and CEO of Mountain, 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, p on Fall Sweeney, I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio