Markets, Fintech, And ETFs (Podcast)

Oxbow Advisors. UM and I it's Ted. Is great to get a chance to talk with you after we've got some kind of confusing consumer confidence numbers and UM, you know, we're worried about inflation, we're worried about growth. It's just a difficult time right now to make a call on the markets. What do you think, Well, I would have

to say none. It's hard for us. I mean what we're seeing is that this latest round of sort of a snap back, and in terms of what's going on in the consumer, I think they're borrowing all the money number one, but number two to all the snapback, people can't wait to find the bottom and it just looks like we have more to go. And you have to think about that relative to the numbers that have come out, and uh in May, obviously with oil and that sort

of thing, the Fed's going to keep on fighting. So we can't see the upside here, I'd have to say we're looking for more downside? How much more downside? Ted? And kind of I think what a lot of folks are saying is, you know, where do we find a bottom? What is the market pricing in now? Is the market pricing and stagflation? Is the pricing in a recession? Or are we not even there yet? How do you think about kind of identifying you know, not the bottom, but

maybe you know kind of the beginnings of a bottom. Well, the biggest thing is I think it's pricing in profits. I mean, if you look at the market, it's always pricing in how profitable things are going to be for

companies that are in the market. And if you look at all those companies Brian Large, they haven't made any any more money in the last six months, and it looks like in order to stay up with things are going to have to raise prices where it hurts the sales and the margin is going to break down again. And so if you can't see the earnings picture, for the next six months. To me, that's what the market does, discounting or we'll discount more. So, um, what do you

do if um? Well, first off, if you're not someone living on a fixed income, if you're still trying to build your nuts so to speak, Uh, what's an investor to do right now? You know, we always break that down between younger people that are building and someone else who has already achieved the wealth level and and they're going towards you know, the end of life. But on the younger side, we you know, you think normally they could just keep on uh dollar cost averaging because they

put a small end every month and they're young. I mean it's going to build up over time, You're Okay, for someone that sold a company or they have significant wealth at say fifty five or sixty, they need to start thinking about preservation as opposed to trying to beat the SMP right here, because probably preservation will beat the SMP this year. And I think that's where people probably there's there's two categories of what we recommend right in there,

and they are well listening for the young people. Okay, if I'm a young person, I don't how much money maybe putting in I think we just decided we don't care about young people. That's right. What what if what if you sold your company? What if you just sold a house. What if you're you know, you've made your money on Wall Street with an amazing three decade career, and now you just want to keep the money. Well, most of our workers with people that have sold a company,

that's the majority of our assets. And so the new money we've had coming in the last two or three months went something like this about it or seventy five similar between that number is really i right now, it's in it's in short treasuries, things along that line. We're not trying to you know, we're not trying to bet the farm and where rates go right here. We're keeping

that fairly short, a little bit long. But then on the stock side, where we might normally have for somebody like that, uh, maybe a third of stock, that's only about ten percent for us right now. And then we have another strategic called high income, and that one normally that would be again about thirty five percent. It's probably only about fifteen to twenty right now. So you can see we're skewed towards safety. We can make a change

really quickly. But that's where we are right now, he said, I know, you know as a proud texting um people in Texas, I'm guessing just have a natural call on oil one way or another. I'm looking at w T I coude oil here, just one dollars a barrel. What are your good friends around the state of Texas saying about oil? Well, I have to tell you that I've been obviously Texas most of my all my life actually.

But the thing about it, most people in the one guest business are very good when it's very poor, I should say. When it comes to sentiment, they are all they're always bullish at the high and you can't give it. You know, you can't get them to even take giveaway oil when it's like eight or nine bucks. But you know, so they're all in that mode right now because their checks are higher every month, checks a little higher, you know when from production, and so you can't get them there.

The big point is what we're watching is the end the march. You know, you're up around one and this this miss will be a test here. If you can't get much higher, it means that you're I don't know, if you sell the gas line numbers, but the sales of gasolene, you know, the last two weeks have really, even in the hot season like this, are starting to really show weakness relative to where they were. So I think that's the key. Does that you make? Do you

do you push that one high? I sort of doubt day. Actually, I think you're you know, somewhere in here, you slow the whole thing down because of the consumer. I'm actually surprised ted that, you know, some of our friends in Texas and Oklahoma I haven't started drilling more. But I guess they're disciplined. Well, there's two things go into that. One they the leases are really expensive right now to go buy a brand new lease to drill. And first

of all, and everybody's out buying minerals, everybody. I'm in a couple of mineral deals myself private. But what happens is everybody's out by a mineral. So the mental that they're paying a lot of money for these leases, and so that starts out high, and then you really have all the expenses have gone up a lot. Now, all right, Ted, we always the politicians are gonna pull the rug out from under you soon enough, anyway, throw a little politics.

We're talking economics here, but boy, we always learned something from Ted, Ted ocally founder and managing partner ox Boat great on Ted. Yep, absolutely, we'll talk later with Ted. So you know, I like to walk around with a little bill fold, a little bit of cash, and I actually done at mom with park Raceway this past weekend, so I got some little winnings in my betting on the horse on the ponies had a decent day, not

a great day. But the kids don't have cash. They just everything's on an app, on a card, on this and on that. I mean back in the day, I don't use my credit card. When was something meaningful? I just use my watch every I know, now the watch and now the phone. Video. Peter's chief operating officer of Markhetta joined this. Margaret is a NASDAC traded company trading on the symbol m QUE. Came public last year. Video talk to us about what you guys at Marcatta are

doing in the fintech space. Thanks so much for having me here. It's such an exciting time to talk to you about Marcatta and what is going on in the fintech space. As a bit of background and contact. Marcatta is the first modern card issuing platform. So we enable any business to be able to build a card of their choice to serve their customer, their vendor, their end user using very developer friendly tools. And so we're sitting at the intersection of watching some of the most modern

payment flows happening in the industry. But is it a card um in collaboration with Visa or MasterCard or Goldman Sachs, Like, how does the how does it work? Correct? So, Visa, MasterCard, Discover are all our partners, and so we run our cards on their payment rails and they've been early partners

of us. On the journey. We have many customers from most of the on demand delivery companies by now paid later providers, some of the largest financial institutions like JP, Morgan Chase and Market by Goldman Sachs is as you mentioned, so we really allow anyone from the most modern innovators to the largest financial institutions to the latest fintech to be able to build a innovative card of their choice. They're very different from the cards you and I have

in our wallets that do very little. Right if you think about the old cards, they check a balance, maybe verify the zip code, and imagine a card that allows you to pay installments over time, or to be truly digitally native, or to ensure that the gig worker picks up exactly your order from that restaurant or that grocery store. That's the level of control that's possible on a Marquetta

issued card. So videos, it just feels like with the pandemic, people took more and more of their personal financial I guess responsibilities themselves and using more and more digital technology. I know I use my bank apps much more than I did pre pandemic. So what are you seeing from from from businesses? Is that what they want? I mean, do they need? They? Are they looking to reduce the reliance on banks or banks being intermediated a little bit?

So a couple of things here. The pandemic, as you mentioned, has been probably the largest and biggest digital transformation accelerant for payments. Um, it's so funny hearing you speak about cash, but now people think of cash as being dirty. No one wants to touch it because it's no longer a question of inconvenience now it's a and uh and banks are okay with that because now they have more data. Right,

any time money is moving electronically, it's safer. You have better tracking, you have better analytics, you have better intelligence on on where that money is going. And so you're not seeing banks getting intermediated. You're actually seeing them enjoy this and and explore this further. And it's also been

a bit of a forcing function for them. You know, now we're seeing sixty percent of the consumers are using their bank mobile app regularly versus visiting a bank's physical branch, which is only nine How do banks feel about that? I think they feel pretty good because the cost of operating a physical branch is pretty high, and if they can close more of those physical branches and not hurt

their business, I think that's good news all around. By the way, our visa and MasterCard still kind of my only choices because I can't remember which card I had or which card they accept But I had the wrong combination at Costco the other day, um, and had to and had to pull out a water cash. Um, Paul Sweeney style. Is there something else? Is there room for

something else? Oh? There absolutely is. I mean, we have used a master card, you have Amax, you have discovered you have paulse and you have a series of local networks, especially when you go international. Of course, THESA and MasterCard tent I still have the lion's share of the market, but but you're definitely seeing you know, smaller networks operate in UH in international markets for sure. Video thank you so much for joining us. Really fascinating stuff there was

up talking fintech is boyneaging and money. It is changing very quickly as technology continues to be deployed across financial services. Video p chief operating Officer for Marquetta Nastac traded Company. M Q is the symbol on NASTACK. All right, let's bring in Katie Greifeld. She's here in our Bloomberg Interactive Broker studio. She's a cross asset reporter. One of the cross assets I want to talk about is E t F s we've had. And she's not just a cross

asset reporter. What else? She anchors the Bloomberg E t F Show. When is the t F i Q on Bloomberg Television. I would say it's every Monday at one pm, but this week it's Wednesday at one pm. It is, which is tomorrow? Yeah? Yeah, Well, we have quite a crew, Matt Miller one of them. Eric Falcunis, I've never seen you guys in the same room though we have like a rotating cast show. Eric has hair. That's the easy way to say on that part. All right, Katie, what

do you got for us on the E t F biz? Okay? Well, I want to start with em funds because they really saw huge inflows last week. If you look overall, a two point a billion dollar streak. Uh, that's interesting in and of itself. But what's more interesting if you dig under the surface, a lot of that is actually just black Rock, And the sort of the thinking in the market is that's black Rock tweaking one of its model portfolios.

It's this huge, booming business model portfolios. They have trillions of dollars in them and basically they're ready made strategies that advisors can pick off the shelf and give to their clients. Black Rock huge in that business. And if you look at the I Shares m s C I Emerging Markets mint Vall Factor E t F, it's taken into ticker. The E E m V is the ticker taking in billions and billions of dollars over the past

few weeks. Uh. And the thinking there is that, Okay, nothing was really going on with the E t F until a couple of weeks ago. This is probably just black rock shifting around some money and the ripple effects. As you can see if you look at the category of overall, it's just black rock. So I'm I love the show mainly because I love the funk chin E t F go. So I was able to find the information you were just telling us by typing E t F go. And I'm looking at all funds um, asset

class equity. I guess I could take that out right, and then I and then I started by flow. I look at the one week flow and I see E m V is the sixth sixth biggest. Now if I take out the equities, Um, you're starting to add other things in there. Um. But such a cool function. Did such about tunists actually make this himself? I don't know if we can credit him with that, but he certainly has popularized. One of the things that Paul was talking about is that investors love E t s on the

markets on it's way up. Um, But what about when it's on its way down? Now we do know you can supercharge bets short bets with the t F s right, you, certainly has been dangerous. Only sophisticated investors should try this. But that being said, if you look at the pro shares Bitcoin strategy e t F this remember this is the first derivatives bitcoin backed sort of e t F that launched in the US. Two big fanfare back in October has uh you guys probably know. Bitcoin hasn't done

too hot since October since this fun launch. It's actually one of the worst performing e t F so far this year. What's interesting if you look at the short interest, the ticker is bit O b I t O and the short interest on this e t F is close to an all time high. It's hovering around ten percent.

And this caught my eye because there's not yet a short bitcoin futures e t F in the U S. There's been filings, nothing has been approved yet though, so it seems like in the meantime traders are turning to this fund and shorting it sort of as a proxy for that short bitcoin exposure. If you also look at the put call ratio on this e t F, which you can also do on the terminal, super high, close to a record, so just shows you that a lot of people are bracing for more bitcoin downside here positioning

for it. How do you see the put call ratio? Oh my gosh, this is sort of a long involved process on G chart. I can show you, tell me after, show you after all right, So, how about fund flows were as the market turned down in two What have we seen for fund flows for ETFs? You've seen so much money going to bond ETFs, to bond out of bond utual funds, like a hundred and fifty What are you talking about year to date right now? Year to date?

We're talking year to date. You've seen I don't know, some fifty billion dollars going to bond e t f s, mostly to the short end, those cash like e t f s. Also, just in the last week or so, you've started to see some money come back into broad index tracking equity funds such as SPY and VOOS. So there is some by the dip impulse there, but a lot and value right and if you look here to date is the biggest inflows year to date. But v TV is the second biggest, and that is the Vanguard

Value et F. So' strong stomach for that one. But people are doing it. I don't think so I feel like why you know, I don't know. I feel you know what. I love cows. We talk about cows on this show a lot cash cows and the brilliant that you can make plays like this in a very violatile market where people are worried about girls, feel like value continues to break hearts. It has its moments in the sun, and it always goes alive, certainly in your lifetime. It's true.

All right, Katie, good stuff as always, Katie Greifeldt here in Bloomberg and her actor broker studio. She's across asset reporter. Let's bring in Alfonso Pettiello right now, m Alfonso, what's going to happen at the e c B. Are they going to get realness fight against inflation? Are they still going to give us like little bip increases? Well, guys, the incentive scheme of the European Central Bank has clearly changed here um and they have to tighten. They have

to tie them because they need to preserve credibility. Very little that left on the inflation fighting front. The guys, you were saying inflition is printing pretty high in you know, it's not only headlines, but core inflation is three point eight percent on a U new basis, and if you look at the composition, it's broading towards the services side of the inflation from the stickiest parts of the inflationary basket. And this scares policymakers in the first place, so they

will hike. And starting to hear the first discussion about the fifty basis morning right in September. So fun So, I mean it feels too probably a lot of our listeners. They hear commentators say the US Federal Reserve is behind the curve, but it seems to me that the e c B is even further behind the curve. How effective can they be to the extent they do turn more hawkers, they can be pretty effective, to ask me. So um monetary policy should always be judged in comparison to what

the neutral interest rate is for the economy. And we hear the Federal Reserve and estimates called the neutral rate at round about two to two and a half percent, right, and now European points in nakers have to come up with an estimate too, because they're gonna hike interest rates. But up until what point if you want to rein an inflation. What you do is you interest rates above

neutral levels. Well, European policymakers and now begating whether whether you know, neutral levels in Europe are between one and two percent, but the deposit rate in Europe is negative to fifty basis point. So before we get at least to neutral levels the European Central Bank, that's too hyped by at least a hundred and fifty basis point, which would be the fastest hiking cycle the European Central Bank they's ever embarked, I think over the last fifty into

twenty years at least. All right, in terms of what we're seeing here in the US, is there a big difference between um, you know, our central Bank here with its two mandates and others who which only have one. Yeah, I mean effectively, the c B offers two mondays if you're asking, one is postibility, the other one is to preserve Europe and the euro as a good jobs which which limits as well the ability that they have to

really hike and to push on the title. And possibly that you need to look at the Italian government, bomb spreads against the German government bones they're already above two hundred basis point because investors as missing that monetary policy is about to get either and quick, but each is going to be wins by the three hundreds or four hundred basis point. Then obviously preserving the Euro, which is the second Hidden Monday of ec PEO, will come back

to play again. All right, Alfonso, good stuff. We appreciate getting your global perspective. Alfonso Petillo is the author of the macro Accompass, and he's also formerly a fun manager. To I n G. 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 V three. Pet On

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