Markets, Gender Equality, Equities, and Hostess (Podcast)

there's an airport in Vail. There is Eagle. It's not a half hour from Vail. So I see this guy next to me. He looks kind of familiar to say, hey, Matt Luzetti. He's's economist guy at Deutsche Bank. So I say, hey, how is your ski trip? He didn't ski. He was actually out there on a conference and he didn't ski. So I said, people do that. It's we're no. I mean, I said, we got to get you in studio here. We need to figure out what's going on. Matt Luzetti's

in our studio today. He's from Deutsche Bank, chief US economist and not an Avid skier obviously, but I appreciate the work. He did actually ski for the first time this past weekend. Oh you did, Okay, you are We appreciate. I could tell Matt to clients he was at a vail, working hard, and that's what you want for your chief US economists. So, Matt, we had some ECO data today that just seem kind to kind of put a you know, I guess solidify the call that this FED can go

higher for longer? Is that what you guys? A Deutsche banker thinking, yeah, absolutely, I think you got the data this morning. Obviously, the jobless claims data remain very low, consistent with a tight labor market with a lot of momentum. I'd also note the core PC inflation data were revised higher. We expected that a little bit because it's reflecting what we've already seen from the CPI data. I think tomorrow

would get core PC. We're above consensus we expected to be point five month on month, and I really think the trend of the recent data is with upward revisions, a lot of momentum in the economy, a lot of resilience in the economy and the labor market, and less disinflation than the FED thought at the February meeting, So inflation looked like it was slowing down pretty quickly from the June headline CPI peak of nine point one percent, And what's the idea now that we've slowed at around

six and we're not getting any lower. Yeah, I think I would focus on these three month changes because it strips out the very high prints that we saw early last year, and I think the revisions there have been really important. So course CPI looked like on a three month change it was decelerating down to three point one percent, getting closer to the level that's consistent with the FED subjective that was actually revised higher by more than a

percentage point. And then with this latest data you have a three month annualized change for course CPI that's four and a half four point six percent, you know, very far away from the FED subjectives. I do think, you know, as we see corepc tomorrow, it'd be closer to four point four four and a half percent. You've seen some disinflation, we're off the peak, but the latest data tell us that the path here isn't easy. It's not just continued disinflation.

We're likely to see somewhat higher in prints over the next few months. So, Matt, smart guys like you, are you taking the recession call off the table? I'm not sure if you had a recession call, but are the economists in general taking that recession call off the table? Do you think we've always had a recession call, but it's always been the back half of this year? Okay, it is in Q four for us right now. I think the latest flow the data fits well with that

type of timeline. And it fits well with that because, look, the economy has good momentum. Now, the idea that's going to fall into recession in Q one or probably even Q two doesn't seem very likely given the momentum. At the same time, the repricing that we're seeing with the FED, the idea that the terminal rate needs to be higher. We're at five point six for the terminal rates, so

we think they hike through through July. I think that will create tighter financial conditions consumers that that households are eating through their excess savings through the second half of this year. So we still have that timeline in place for our recession call. So how bad does it get? How bad to these long and variable lags hit us in Q four. We're already hearing news about huge price drops in housing, over a trillion dollars nationwide off five percent.

We're hearing news about a slowdown in I just stuck to the CEO of Ducati in North America and he said, you know, the high rates are putting a crimp on motorcycle sales for example. Yeah, I think that's been you know, assessing that long and variable acts is always difficult. I think that there's been some quick transmission from the Fed's

policies to financial conditions. We saw certainly what happened with the housing market mortgage rates spiking, but it's been I think a little bit slower to impact the consumer and a little bit slower to impact the labor market. I think in part that's because you've had this latent fiscal stimulus out there, with households still with one trillion of stimulus.

And it's also because you have a structurally undersupplied labor market, so you have firms that need labor have had difficulty in finding labor and has led to this very resilient labor market. Knowing exactly when when that financial condition tightening hits the economy, I think is always always very difficult.

How deep do you think the recession could be? Because two quarters of contraction, we've seen that already and it wasn't a recession apparently as far as we know, and we could see it again without feeling like we're in a deep recession. Is that what you expect? Shallow or do you think it could hit us hard and unemployment could eyes to five percent or more? Yeah? So I

think it's all about the labor market. You know, whether or not we have a technical recession that has two quarters of negative growth I think is somewhat irrelevant to the market and the FED at this point. It's really about does the labor market begin to crack and does it begin to weaken. From a historic perspective, our recession looks kind of moderate. It looks like the early nineteen nineties. You have the unemployment rate rising by about two percentage

points from from trough to peak. It's a big move from today's perspective, no doubt, But from a historic perspective, it's actually a relatively mild recession that we're expecting. What is your view on the labor market, it's just shocking to me that it is so strong, so vibrant, the jolts data, the unemployment day, everywhere you look. We don't see any cracks, do we No. I think you've seen it in some sectors. You know, obviously you have tech

layoffs that are ongoing. You've seen it in the sectors that have employment well above the pre COVID trend. You know, all those sectors have slowed materially. Many of them are actually reducing their jobs in those sectors that have employment that are well below pre COVID trends. Leisure and hospitality is one, healthcare is another, the government sector is another.

They've really been driving employment growth. They're really driving I think a lot of the tightness in the labor market, and really until that changes, it's unlikely that you're going to see negative payrolls prints. I don't think that that's happening over the next few months, just given the momentum. But the FED needs something to change here in the labor market, especially with what's happened with the inflation data recently.

I think that we should have a lot less confidence than inflation is on this very clear downtrend back to target. So what about if we do have a recession. If we do have a weakening labor market, and you know that affects growth, do we see cuts? Do you expect the FED to cut rates at the end of this year, at the beginning of twenty twenty four, So we've pushed out our expectation for cuts. We do expect that they

begin to cut rates in early twenty twenty four. But I think it's all about not only inflation, but what happens with the labor market. If we end this year and the labor market looks a lot like it does today and core inflation is three percent or above, the Fed's not going to be cutting rates. Yeah, and you know that that's close to what the FED has been forecasting.

They have this rise in the unemployment rate. So I think it's if you get this weekending in the labor market, if you see that uemployment rate rising four and a half five percent, that's an environment where if inflation is closer to three percent, I do think the FED would be cutting rates. That's our baseline, But there's this risk of the labor market remaining more resilient, inflation remaining a bit closer to three percent inflation. Do they they say

two percent, right, But do they really mean three? No? I think they're you know, they're adamant today, no doubt, and I think that they will stick to that. But the question is what does the labor market look like in that environment. If it's still very tight producing wage

growth that's very elevated, they can't cut rates. If the labor market is looking very loose and disinflationary pressures are clear looking forward, then they can back off of a plus five percent fed funds rate, bring it back down, and track inflation lower to a more normal level. Got a PhD in UCLA? How good was that? UCLA? So it'd be a lot more fun if you weren't getting a PhD undergrad? CLA sounds awesome, Not so much, not

as fun. You look out out of the library at the weather, and it's not as fun as you would expect. I guess, are you good? Matt Lozetti, proud graduate of Villanova undergrad got his PhD at UCLA. Pretty cool. They're great business school at UCLA, at the high school. Matt Louseettie, chief US economist Story Bank, joining us live in our Bloomberg Interactive Broker studio, And again I can attest to all Matt's institutional investor clients out there that he was

in veil, but he was working. He wasn't skiing bumming off like I was so good stuff there. I'm gonna talk aboutferred stock. Their analysts don't know if from livestock and preferred stock and named that movie Wall Street. Yeah, okay. Doug Baker, portfolio manager and head of preferred securities at New Ven. He's based in Chicago, but we got him live in our Bloomberg Interactive broker studio. We don't talk enough, nearly enough, Doug about preferred stock, preferred securities. What's the

pitch to own preferred securities? What's the advantage I think? I think for us it's an income solution that's that's high quality, okay. And you can generate this income without taking excessive credit risk. And if you choose your securities carefully, you can do it without taking significant duration risk or

interest rate risk. And I think in this environment today, with rates as volatile as they are, finding a solution where you can generate and it's also tax efficient income in a lot of instances, doing that without having to make a significant call on interest rates, I think is appealing for a lot of folks, and then again for those folks that think, hey, there's a recession around the corner, not driving that income through taking a lot of credit risk at this point in time too, is also kind

of compelling. So why are they called preferred? I mean, are you higher up on the credit list, creditors list if you if they go bankrupt, are you not broke as a preferred holder? Do you get better voting rights? That's yeah, so if you get special dividends, that's that's that's the So you're preferred, but not very preferred. If you're preferred to the common shareholder, and that's typically about it.

So you're typically your payments, and for a lot of our securities, there will be a clause that will say, hey, if you're making a distribution to your common shareholder that common equity dividends going out, you have to pay your preferred security. So you do get some preference from that point.

And then also if and we'll talk about why this is a low probability event, but if you did have one of our issuers say default or go bankrupt in our space, you would have a claim on assets above the common shareholder, So you do get a preferential treatment in that from that perspective, From the issuer's perspective, are there certain sectors that whether their financials or whatever, that typically our issuers or preferreds And if so, why so?

It's heavily dominated by financial services and in particular banks. So banks are a big issue or preferreds roughly about sixty five percent of our issuer base. Banks, another ten or fifteen percent insurance companies. That's a plus and no minus.

So we're going to have se concentration. But we think that that's a good thing in this environment because look, let's face it, banks today are incredibly strong and it's really a result of the financial crisis we had close to ten twelve years ago that they're in a great position today. But the outlook is also really constructive for banks.

They're benefiting tremendously from this rise and interest rate environment, and so it's a it's a way, I think for us to also benefit from rise and interest rates from a fundamental perspective when you invest in prefers, so the story that gets lost a lot of times and preferred. So when people look at the securities, they're often rated triple B, sometimes double B, and people will say, oh, this is kind of a high yield type of investment.

The reality is that the senior rating on average for the issuers is closer to single A. Our securities are rated lower because they're subordinate. And we use JP Morgan as an example all the time. JPMorgan at the senior level rated single A, single A, double A by the big three radiing agencies across the board, preferred A triple B. But if you own a JP Morgan preferred, you don't have exposure to a triple B company, right you're subordinate to JP Morgan, you really have that single A slash

double A type of credit exposure. So so there's a lot of I think benefits to preferreds, But at the end of the day, when you have this much sector concentration, you need to be cognizant at in your overall portfolio. That's JP Morgan's your go to example. In the US, I just got back last year from living in Berlin for five years. I think of Volkswagen. I don't know if it's a different structure, but VAW three GI on the terminal is preferred and that's almost traded like they're common.

Like if you buy Volkswagen shares, you're buying those. I don't get why. So there are sector there is sector exposure outside of financial services, and for US, we really still like to kind of even though it's it's concentrated in that space, that's where we like to hit the ball down the fairway, kind of like staying within the banks, the insurance utilities because the US in the US. But you know, do you stay in the US though, or

do you also look overseas? When we go overseas, the market is still dominated by non I would say, non US financial institutions. The corporate hybrid corporate preferred universe is larger outside the US, but still the majority of the exposure is financial services. And so you know, just remember we're benefiting not just here in the US, but also globally from this higher regulatory environment that these banks are operating under today, and we benefit as investors from that

added layer of security from that oversight. These banks are incredibly well capitalized, and the insurance space is incredibly strong too, I mean, sitting on record levels of statutory capital. The

pricing environment for insurance has been incredibly strong. So so the one big takeaway that we want people to know and understand is that, look, the underlying fundamentals of the large sectors in the preferred space are incredibly compelling, and that this income which we you know, I only touched on briefly, which is why a lot of people will

access our asset class oftentimes as tax advantage. For individual investors, a lot of times the distributions are treated as dividends, and so for folks that are in a high tax bracket that needs some income but they don't have any more room in a qualified account, the tax advantage of the distributions from a lot of preferred strategies puts the taxable equivalent yield much higher than even the stated yield. Now, when I buy a preferred am I getting a fixed

rate a floating rate, How does that'll work? It just depends what you want you can find at all. And so this is where we think also active management comes into play, because an active manager can go out there and find those securities that have either a fixed rate coupon or something that's a floating rate, or something that's

a hybrid affixed to a floating rate structure. And so when we look at the overall preferred universe, You're going to some securities that do have durations of seven, eight, nine plus years, others floating rate pretty much zero durations. So you can, depending on your appetite for interest rate risk, you know, really customize a portfolio preferreds to meet your needs. I would need an active manager like a seeing eye dog. And I'm blind here, but I mean, for example, I

look at JP Morgan's preferred LA see seven. I don't know where I would go. I guess this dividends six percent dividend is a strong one. But are you worried your job gets replaced by AI soon? Or do you use AI? Can you use AI at your job? You? I think it's really really tough because there's such very little standardization across the preferred market, and a lot of the things that create value and help alleviate risk is

how the prospectus is written. So could we get to a point where AI could go through a prospectus and really pull out those important data points, those minute details that make one security meaningfully different from another. Absolutely, are we there yet? You know, I think we're still a ways off. But you feel comfortable, you're secure in your job. I'm probably more likely to get replaced at home by aim in the workplace. Yeah, all right, City a thousand

dollars par floating rate preferred. It's got a current coupon of nine point zero nine three five seven. I mean that's pretty good, right, And it's qdi qdi meaning it's tax advantage. It's tax advantaged, right. So so this was one of those structures that started off paying a fixed rate coupon. It was just shy of six percent, got up to its call date, and then for these types of structures, if if the issuer doesn't redeem the security, then the coupon starts to reset. This is one of

those examples. Now, City right now, could they refinance this security at a lower coupon, absolutely, but if they do, they're going to be locked into a new preferred for probably at minimum five years. So what they're doing right now, in our opinion, is they're paying up now to maintain optionality to take this preferred exposure out if they don't

need it down the road. And what we feel is and is some of the feedback we're getting from the banks is that they're expecting their balance sheets to shrink over time as the economy shrinks, and if that's the case, they won't need as much capital, and that's why they

issue prefers. Preferreds count as capital, so as their balance sheet shrinks, this security now is really cullable quarterly, so it gives them a lot of optionality just to take it out at some point, whereas if they refinance it today, they'd lock themselves into a new preferred for a long period of time. All right, just real quick, thirty seconds.

Aircraft lesser sector, Yeah, what's that all about it? Yeah, so this is important, right, We're just talking about sector concentration, so we try and come with some ideas, some thoughtful

ideas outside of outside of that area. So the aircraft lesser space is a weight I think to really leverage the very strong story that's that's underlining and underpinning the airlines air travel today, this post COVID environment and the air lesser business model oversimplifying it as to provide financing to the airlines when they buy fifty sixty seventy aircraft. These guys today, I think offer us exposure to a

unique opportunity. It's timely and you can still find securities here that our interest rate, you know, kind of moderate exposure interesting stuff, really interesting stuff. Glad we got some some of your time. Doug Baker, portfolio Management, head of Preferred Securities at Nouvene, talking about preferred securities. Really interesting discussion there. We'll get Doug back and we appreciate them coming into our Bloomberg Interactive Broker studio the Northern Line.

I've been commuting to the City of London on this train for decades. Raised in the era of Margaret Thatcher and the city's big bang women thought that we'd be making the decisions by now and getting the rewards. But how wrong we were. The reality is that only twelve percent of UK fund managers are women. The person who's been at the vanguard of advancing women in the city is Helena Morrissey, Dame Helena, former CEO of Newton Investment Management,

ex chair of aj Bell. She's advised the government and has a seat in the House of Lords. She's now putting her considerable contacts, book and profile to work to get more women managing money. I do think there's an image problem that people look and they think, oh, fund management, it's not for me. It would be very isolated to be a woman. It's kind of macho environment, and I think there is still though a bit of a sort

of cultural impediment as well. I think many men now, especially in our industry, really are just as frustrated as the women that we're not seeing more progress. So is this Morrissey's more muscular approach to diversity. I love your expression, Karim muscular, because you know it should feel very robust. It should be like a you've got a business objective here, Let's improve diversity of talent. Let's make sure that people are included when they join if they're diverse, and let's

achieve better results for our clients. Mentoring some sixty women over a year sounds modest, smaller than the intake at a big investment or law firm. There are around one thousand, six hundred UK fund managers but only about two hundred women in all. You could fit all of those women on a single London Underground tube train seated. So as Morrissey's legacy achievable. You know they used to go to be a veteran. Now, Lexie, I'm not beyond the grave

next tithing my hope. This is not sort of you know, my parting shop. But I've always said you know, I really don't want to leave this industry until it looks and feels very different. And for me, that means that we have, you know, as many women in it as men, and so people expect if they have a fun manager to come visit them and their thorough client. They have just as much expectation that's going to be a woman as a man, and that's not the case. Now meet

the mentors and what they hope to pass on. My name is Rosie McMillan. I work at Fidelity International, where I'm the director of portfolio Management. To say it's been an easy ride would be a lie. It's a case of changing mindset, changing habits, changing deeply in rooted beliefs, and opening people's eyes to possibility. If gender diversity has stalled, ethnic diversity is even worse. My name is I'm Jim day Lawal and I work at Bearings. I'm the head

of Ian Corporate Debt at Bearings. I think there are certain circumstances in certain situations you find yourself in as a female portfolio manager, a female fund manager, and you feel you'ressuming against the tide. I've got the intersectionality of being an ethnic minority as well as a female, and I see that come through in my own journey. Ellen Man is a mentee. She's studying to become a chartered financial analyst at Cambridge Graduate in Japanese. She's working at

Jupiter Asset Management. I'd started my career during lockdown, so I spent almost two years working pretty much by myself. So I just was really excited to honestly meet other people getting started and here from them. I've joined a team where my my line manager is someone very committed to the mentor role already. So you've got a mail mentor. Yes, the idea of having a mentor and the kind of check ins with them and providing some guidance on how

do you support someone in those career goals. I think that's very valuable, especially from the kind of gender perspective. So cautious optimism then, because the numbers truly are embarrassing. Citywar totted up five hundred and sixty two new funds launched in the UK in twenty twenty two, but only ten percent are being managed by women. It's hard, though, not to be swept up by Helena Morrissey's determination. But in the twenty years that I've been covering finance, the

sector has seen little change. Helena and others have a battle to move fund management forwards. I'll leave the final word though, to Ellen, I'm hopeful, but I think my hopefulness is very much in the context of being lucky enough to be around a team who are very supportive, and to have a kind of first boss who has been extremely supportive and wants me to flourish. Caroline joins us right now on the phone from Lunn. Caroline, what is your level of optimism about change here in the

UK fund business? Well, great to be speaking to you. Look, I think it's it's very difficult. On the one hand, this is hugely ambitious, right Helena Morrissey. If she continues this program with the Diversity Project, in three years time, she could double the number of female fund managers. That is massively ambitious, even though it's only sixty women. So you could have sort of Morrissey's view and this whole

program really amazingly influential in the space. On the other hand, we've had so many initiatives and the numbers have been so difficult to move. The UK's got gender pay reporting for the big financial institutions, big, big employers in the UK that hasn't moved the needle that much. You look at the Alison Rose review just this week. She's the CEO of nat West Bank here in the UK, and that review of entrepreneurship record numbers of women starting new businesses,

but they still struggle to get funding. So that's the context, and I think it's reflected in some of the comments by the women that I spoke to. For me, it's great having on the program. I'll listen to your show every single morning as I drive to work and I can't think of any better way to prepare for my trading day, well, my reporting day. I wonder if this is specifically a UK problem or if you see it, you know any better or worse in New York? Is

it any better or worse in Frankfurt? Look, the numbers speak for themselves, right Globally eighteen percent of fun managers are female, so it's not particularly better anywhere else in the world. But also I think that it's important not to think about this pathway program, which is accompanied by doing your CFA, your exams as well to be a

fun manager in Britain. It is global isn't it, Because as one of the women told me, Rosie, these companies that are taking part thirty three firms, they're global investors, and so perhaps the optimism also is that there's a cascade effect and financial cities and centers around the world. We'll be looking at London maybe maybe take that example.

All right, great stuff. I really appreciate you taking the time, Caroline, and a fascinating piece of reporting there Bloomberg Daybreak Europost Caroline Hepcker with the story about the I guess what is a stubborn problem on a global basis. It is the lack of diversity, gender and otherwise in the fund management business. Yeah. Absolutely, and again I'll encourage people four Am. Caroline Hepker and team act Tom Mackenzie on the radio deliver everything you need to get started. And uh, it's

really don't miss programming. And they're assuming you're awake it for you, Assuming you're awake it for you. Let's talk stocks with an old friend, Callie Cox. She's in our Bloomberg in Actor Broker studio. She's US equity analyst with e Turo. And I think memory serves you went to that trade school in Chapel Hill is right if I remember, Yeah, that trade school that's not doing so hot with basketball. Yeah. Anyway, Callie,

do you make of this market? I think the last time we talked to you a month or so ago, the narrative is very different. People were talking about the FED, this inflation things. It's it's in the past. The FED actually made pause and pivot sooner than we think. That was driving the markets in January. But the narts a little bit differently. Now, how are you thinking about it? Yeah, well, now people think the FED could go even higher, and

FED officials are saying the same thing. We have FED speakers stepping out and saying, you know, maybe a fifty basis point hike is warranted. You know, maybe we should re accelerate, and markets are pricing that back in. From our side, you know, we didn't expect a rate cut anytime soon. We expected maybe a little bit of excitement around the fact that inflation is coming under control. But maybe it's not coming under control as quickly as people think.

So I think that's just shifted the mindset of it. So what does that mean? I just saw Cliff Assess actually from AQR on Bloomberg TV and he was saying, this market has priced in inflation coming down pretty rapidly. So that to me says Cliff thinks we got a ways to go on the down side. What do you think? I agree with him. I think it's going to be a lot harder to take inflation from six percent to two percent than it was from nine percent to six percent.

I'm talking about CPI when I say that, right headline, CPI, right right. And the reason why I say that is because services inflation is still fiery hot, and that's the strong part of the economy too. This is not a bad story if you step back and look at it, but it does make the Fed's job a lot harder because services inflation is more demand driven and more tied to the job market. And let's be honest, investors did

get over their skis. It makes sense because bon yields fell, but now that bonn yields are rising again, there is a bit of a mismatch. So what do we do here? I mean, do we just wait for the Fed to signal that rates of peaked endor they would put a rate cut on the table, or is there some way to be active here and trying to get positioned for the remainder of this year. Well, I think it's important to sit down and figure out what your view is if you're looking for a short term opportunity, and I

put it in three camps. I think of doomsday bears, I think of cautious bears, and I think of straight up bulls. We fall into the cautious bearers camp, where we think that prices are a little bit too high, sentiment has gone a little bit too far, but at the same time, we're still hopeful that the economy can avoid a recession, and that means markets may not take out the lows. So in that camp, you know, we really like looking for value. We like looking for quality,

low valuations. Uh, you know, maybe looking at some cheap cyclical sectors. But I think depending on what camp you fall in, that could determine how you approach this market. I don't know if you have a view on crypto. I think of e toro and crypto together, just because so much of the great analysis I read, you know,

I first started covering bitcoin was from e Toro. Um, I've been amazed by the fact that it's holding at let's check where bitcoin is right now see rypico on the twenty three thousand, So it's holding at twenty four thousand dollars, basically just about fifteen bucks under and at a time when the market has decided, oh darn it, we believe the FED narrative. Now they really are going to keep raising and holding. And so stocks, you know, tanked a couple days ago. Bitcoin did nothing. Why is

it so resilient? So this is a really interesting story that I'm watching, and there are a bunch of different theories. But within crypto bitcoin is seen as the quality. It's seen like seen as the gold of the crypto space, and from a portfolio management perspective you look at it differently, but let's be honest, that's the brand that it has.

So we're seeing the flight to quality within the crypto space out of alt coins, out of stable coins, into bitcoin and ethereum, just because they're so well known and because there is that institutional underpinning. It's a little weird to me, I'll be honest, because again, as from a portfolio management perspective, it's a risk asset, and risk assets tend to do worse in high rate environments, especially if they don't have underlying cash flows and profits. But it's

it's a perspective thing. From what I've seen, there are just more flows going into bitcoin within the space, and that's kept the price afloat. How about fixed income? It was so so brutal performance in twenty twenty two. What are the you guys at eteral thinking about just broadly fixed income? So fixed income, You're right, it was a really weird year last year. I mean, stocks were down ten percent, bonds in general were down more than ten percent.

It seems like they're rebounding at the same time. You know, we look at the ten year yield, we say, you know, it probably can't go much higher than four percent here. There seems to be a lot of technical push and pull around that point. Look at short term yields too. You know, the FETE is talking about re accelerating rate hikes, but again, let's be honest here, how much more are

they going to re accelerate it? Because the FETE is trying to keep this balance and check of controlling inflation and you know, basically steering the economy and the job market through a slowdown. So, you know, we talk to more speculative short term traders, we remind them that. Of course, the recession is still a risk out there, and it may be smart to head your positions. Bonds are the

obvious hedge there. But at the same time, you know, as a retail investor, you have to realize your time frame. So we're also saying if you're longer term, you know, maybe you have those short term goals that you want to meet, but longer term, let's look at more risk at these levels. Because stocks are ten to fifteen percent away from their highs. This is a buying opportunity if you have the time on your side. So tell me

about ETRO. I don't know that much about it. Who's kind of your customer base talk to us about Yeah, so I love E Toro bias so I Toro is a retail brickrage. We have a lot of millennial and Gen X clients are kind of claim to fame is that we have a social investing feed and we offer a lot a lot globally in the US we offer stocial investing is not going to be enough for Paul. You got to tell them what that is, Paul. There's a social feed and you can post your trades and

so you can then follow other people's trades. Right. So the idea is you can, if you you know, love Callie's portfolio management, you can follow her trades online. You can just copy her portfolio, okay, which is kind of a cool idea. I had never heard of it before that. Yeah, it's really cool, especially in this era of community when everybody's looking to everybody else on how to trade, how

to invest, and more and more, how to speak. Yes for good and bad reasons, yes, but you know, being in that space and having that power to help investors find each other and find community is just such a cool offering. And I feel really honored that, you know, I'm I'm kind of the face of that in the US and helping helping, you know, connect this community along with the markets that we're all trying to understand alone. Gen Z. Millennials do they invest? Are the active investors? Yes?

They invest? You're talking to a millennial Rod, Yeah, you are talking and she invests. Yeah. From data that we run and we keep a close pulse check on the retail investors through a bunch of different surveys we do. But retail investors, millennials and gens excuse me, gen X, We'll talk about all of them, gen X, gen Z. Millennials are investing at a more and more rapid clip. We're seeing a millennial coming of age basically in the economy, and when people have more money, they tend to invest it.

So yeah, we're seeing a lot of those demographic shifts where these younger investors are feeling more empowered to invest. Great stuff. I love learning about the new ways to invest. Kelly Cox, she's a US investment analyst for e Turo. I think you guys are based in Hoboken, right, that's pretty cool. We are. We are, but we just got our New York bit license so we can move across the river. Now, Okay, I'm a big Hoboken fan, So

that's good. There. Good stuff kind of Cox join us here in our Bloomberg Interactor Broker studio today in our c suite conversation, we'll talk about the snack food business. We'll be there with our good friends and Hostess Brands stock symbol. This is one of my faves. T w n K think Twinkie, Hostess Brands. It's a three point three billion market cap company. Stocks up nine percent. They report it's some better and expected results Tuesday, after the

clothes stock traded up yesterday. We're joined by the CEO of Hostess Brands, Andy Callahan, joins us via the phone. Andy, thanks so much for joining us here. You had some pretty good numbers Tuesday after the close. What are some of the highlights from your quarterly results? Yeah, thanks for having me. We're coming off a great week in total earnings. As part of that, I mean, we're coming off our

third consecutive year of double digit top line growth. We have double digit earnings growth and double digit EPs growth, so we're really we're really feel like we're in a good spot on our sustainable growth plan, and we reaffirmed our long term algorithm, gave guidance that was once again

another profit guidance above our long term algorithm. And what's really driving our growth is our ability to be able to connect with consumers reimagine the snacking category for a new set of consumers, and a lot of that has

driven by our innovation. We launched Bouncers back at the end of last year, and yesterday we just announced the launch of KS Bars, which is really bringing baking, which we do better than anybody else, into a new confectionery form and both our customers and consumers are really excited about it. So a big week overall. All right, I'll bite there you go. What are casbars? So? I love it? I love the so well consumers, So I love it. What are cas bars? Are? We? I mean as I

know obviously, and everyone knows the twinkie. I'm a big fan of the Choco dial and the ding Dongs. I like the cupcakes, prefer the orange ones. But you don't drink soda. Uh well, I don't drink soda any right, we're not going out. I don't drink soda anymore. But anyway, I still do eat this stuff when I can. Um, it's because it's not an everyday thing, right, I'm not like living on twinkies. It's just occasionally in the gas station, I'll be like, damn, I need some cupcakes. Um. So,

what is a casbar? Yeah? So a cas bar in a basic And then I'll give you the background because although your behaviors are terrific to you, what we find at a macro level is that snacking continues to grow. Snacking is growing greater than food and indulgence. Snacking is growing greater than a non indulgence, snacking by about twenty percent. And with all that being said, almost fifty percent of Americans snack more than three times a day, and so

they take a balance sheet of prowth. Our Teeth chief growth officer talked about that and baking specifically. Consumers care about quality. We've invested in quality, and there's a lot of confections company the indulgence of confections that are trying to get into baking. Well, guess why we bring in baked goods to the confection category with a hostless strength of a baked good in a convenient package form. But you can discover a kazillion layers of delicious in our

kaz bars. And that's gooey gooey cream, fluffy fluffy chocolate cake, pieces of sweet crunch, delightful drizzle. It is really an affection form with all the great goodness and quality that consumers wanted a bake goods, and we think it is really a big idea. Hey, Andy, When I think about the food business, whether it's a snack business or just overall food, I think of a GDP or GDP plus

type type of top line growth story. But as you mentioned, the last three years, you guys put up low double digits. That also coincides with the pandemic. How did the pandemic impact your business? And will let have any residual effect going forward? Yeah, So the residual effects means will we continue to grow in the answer is a resounding yes.

What the pandemic did for us. As consumers are in their home, around their home and traveling around their home, they snack more and snacking before COVID, during COVID, and after COVID had trends, especially indulgent snacking that were greater than total food. Consumers are changing the way they eat. They eat more with now with a balance sheet approach.

My chief growth officer talked about that yesterday. So as they increase the total occasions or interactions food there, each of those occasions are more choiceful and they have a role in their life. And if they have an indulgence snack one time, they may then later in the day or earlier in the day have a more non indulgence snack to balance that all out. So that macro trend

is unmistakable and we're living in that. So that what happened with COVID is we were able to given our investment in quality, the new innovation forms, we're able to reintroduce a new consumer to host this in a way that they hadn't seen before. And those investments during COVID, both innovation, reaching out to consumers, talking to them, our investment in quality, our ability to do that has been able to propel this business and that momentum has continued

after COVID. You know, just a finer point on that, when we attract new consumers into our franchise, a lot of those are millennial parents. They then repeat at In other words, our addition of two times buyers is growing at more than twice the rate of anybody else that does bake goods. So we're really attracting consumers. But when we attract them, we really keep them. So those trends

are really unmistakable the same consumer. It's not a it's not a binary choice of eating healthy or eating indulgence. It's really a balance sheet of how does it all fit within my life? And we're really capitalizing those trends with our innovation, our marketing outreaching, our investment in quality. I got to ask, but this is going to sound maybe flippant or but I'm wondering, really in states where marijuana is legal. Do you see a bump in sales?

You know what? I don't know that specifically, but you know, consumers have choices, and that's what we provide. We want to provide them the best choice at the really accessible value. That's what we do and that's why we invest in our productivity. We want our operation to be really focused on what consumers care about, really focused on what customers

care about. Growing the category by doing that and then running an operation and a team that unlocks the greatest potential of our terrific team and our culture to be able to provide that to our customers. And we're doing that in a real, real good way. So consumers have a breath of choices and uh, and I support all of those we want to give Andy, do you? I mean, but you seem very focused and I'm not sure if I know all of your brands, but they all seem

like something that could add to my waistline. Do you also go after food categories, you know, in the fitness or our health food sector. Yeah, so I'm glad you brought that up because I was going to bring that up to you. Not only do we have an indulgent snacks We are the number one cookie brand with our Avoortment brand in the reduced sugar and sugar free segment and our Avoortment business that which we purchased three years ago, Integrate It and Grew, is one of the fastest brands

in an eight billion dollar cookie segment. It's been growing at a rate last year of nearly twenty eight percent a point of sale, slightly above twenty eight percent point of sale, and we think we're well positioned to capitalize on consumers focus on reduced sugar as well. We have a leading position that subsegment of cookies is growing a greater than twice the rate of total cookies. So we have a portfolio of bait goods that provide for what

consumers choices are. That's an important consumer segment, so we provide both of them. All right, Andy, great stuff. I really appreciate you taking the time to speak with us. Andy Callahan, he's the CEO of Hostess Brands, NASAC, Symbolt w n K think Twinkie again. The stock is up about nine percent year to date. Had a nice quarterly earnings reported after the closed Tuesday. Stock popped yesterday, so good to check in with the CEO. Thanks for listening

to the Bloomberg Markets podcast. You can subscribe and listen to an interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three. And I'm Fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio