Markets, Twitter, And The Night Effect (Podcast)

at Bloomberg dot com slash podcast. We were talking about the two year you know, bonds, and this is your Bailey Wick Matt being a German resident for so many years, but again the two year German bond fort the buond, the boon forty two basis points down twenty five basis points today just brutal. So this is perfect timing for our next guest, Pooja kumera European rate strategist at t D. Pooja, do you look at the European you know, just the

German bond market. What's it telling us today? Good money? Yes, it doesn't really think that ECB high fifty basics points yesterday. I think what markets are seeing right now is that Europe cannot escape procession, and that has been seen in the last couple of weeks because we are reading more into weaker data than instation strips, and even next week when we are going to get the next euro area of dash PM MICE, I doubt see itsel up that much, just because the move is all towards the growth data

I've been instation data. I think I just want to point out that we saw this morning we had more ECB headlines. Kasimir came out and said the September rate hike could be UM fifty as well, obviously or fifty UM, so I think that's what moved markets there. But even here in the U s PUJA we've seen massive moves. I mean, UM Paul and I were just looking at the ten year We're down twenty seven basis points in two sessions. What's going on? It's it's it's been horrible.

I think one thing to note yesterday priced action that we saw across rates for mostly driven by a very poor liquidity because we could see a lot of block trades having that cause to move, and today's move us primarily with one of the other. We've got reeper data from Europe MS to us p M, so I think right now any reaction is anyway is getting much more exaggerated because we are heading towards the summer liquidity season and also markets somehow now we know that we are

sitting the end of the hiking cycles. They know that we could see maybe a couple of big moves from our central banks bankers, but they cannot continue. And that's the kind of message that we've got from Easy to be itself. They have to move forward rate guidance that we had before. They haven't said that they will be looking for bigger calibrations with respect to rate heights or September that we had before. So September could either be

twenty five, fifty or seventy five. And I think if if data continues to decree, rate market will start even thinking about twenty five, markets will think that the ECB is actually done with gritis. So I think you are we will be extremely data dependent and we could see moving much more exacuated just because there's thin liquidity. So put you know, so much news coming out of Europe this week with the ECB and what's going on in Italy.

Let's focus on just real quickly on Italy here as we have a little bit of the benefit of hindsight here with drug resignation, how's that viewed within the rates market, the European rates market. It can't be good. But how much of a concern is it? It is a concern. I think markets will get much more concerned when we

hit closer to the election in September. Train ships. ECB has announced to tp I tool, but first of all, this tool needs to be activated by the member states and comes with a lot of fistical conditions, so I think no member state would actually be ready to actually use it. It seems more of namesake pool right now.

So I think we did see I think today's move is more of a positioning let move, but it's talent politics will start actually getting more and more attention as we had closed it to this September day, so I would actually continue to stay with the moves with respect to wideners in btpsspots, I'm I'm a bit cautious about the rally that we have seen today. All right, Puja Kuma, thank you so much for joining us, Puja Kuma, Europeans Rates strategists for a t D. Looking at the markets here,

just kind of churning here. But we've got the SMP down, you know, kind of more or less. We've got the fixed income down double digits wanted to look at the corporates or treasuries. I mean, that's sixty or forty portfolio just got crushed in the first half of the year. I don't know how these people do it for a living. Brent Shooty, he does it for a living. He's a chief investment strategist at Northwestern Mutual. Brent, how do you and your team? But wait, hang on a second, Brent, Paul,

you did this for a living for three decades. Yes, I still don't get longer doing it. Probably, yes, exactly. That's why I'm on the radio now. Brent. How do you and your team's kind of reset after that brutal first half of two Yeah, I guess kind of commenting on the stocks and bonds both thing down and how that's kind of I think shell shocked many investors. They

shouldn't expect that to happen again. And so if I take you back to ninety six and I look at stocks and bonds, there have been twenty five periods, twenty five annual time horizons in which stocks have been negative since ninety six and bonds were positive, and all but four of those, and so you have this weird period

of time beginning of two. The other three time periods or four time periods, where nineteen thirty one, the Great Depression, ninety six, nineteen sixty nine, in nineteen seventy three, besides the Great Depression, the thing that occurred in each and every one of the other ones was high inflation. And this is where we recommend people own commodities because in those other three time periods that I mentioned, besides the Great Depression and now the beginning of two, um, you've

seen commodity prices rise. And so I guess two takeaways from that one you need to own some commodities as part of your long allocation. And to don't expect this to happen back to back years because it hasn't happened. It doesn't mean it can't, but it hasn't happened in the ninety other years. So are you saying, then, Brent, A portfolio is not dead. It is not dead. I think it's been declared dead about twenty seven times in my twenty seven year career. Apparently the beginning part of

this year was trying. But UM, I don't think that renders it dead for just because it hasn't worked for six or some months, and what about commodities? Retail investors should get that exposure. How do you think, um, actually, you know, um trading futures or buying ETFs or a fund. What do you think is the best way for a retail investor to get pork bellies exposure? Sure probably the easiest in the most efficient way for them to get it. I don't think you need to of it. You saw

what actually happened the first part of the year. How a little can go a long way. Uh, And certainly over longer periods of time, it's not going to return as much as the stock market. Um, they should get that through a diversified exposure to commodities. Perhaps something called the Bloomberg Commodities Index is kind of a decent place

to think about funds tied to that. Certainly it's not as tax efficient as money, but I think, as we've seen during recent time periods when inflation is rising, it certainly helps shelter you from some of the losses that are occurring in your other parts of the portfolio. You know, Brent, when pros like you say, boy in particularly the fixed income folks say we've never seen negative returns in the fixed income markets like we saw in the first half.

When I hear stuff like that, I'm like, well, I'm gonna go out and buy that stuff. But it's not the same for equities, and we're down and equities I don't feel like I have to run out and buy equities here. Um, how are you guys thinking about kind of you know, just maybe valuation or can't get any

worse than than the psychology of the markets. Yeah, I mean, you've seen horrible son, I'm and I know that this week we had the Bank of America survey that everybody's in referencing, but you've seen the American Association of Individual Investors. I believe we've had uh eight sub twenty readings, which doesn't occur very often going back to and most of those have given away to positive future year. By the way, Yeah, people's emotion kind of a contraining indicator. And so I'm

not suggesting it can't get any worse. It certainly could, But I do think the worst isn't on the inflation side, which I do think will help alleviate those fears, which are essentially that the economy slows but inflation doesn't. And I think the reason why the markets handled. Some of the bad news on the economic side over the past few weeks that we've seen, including today, is because inflation is starting to push lower. I think people are catching

on that inflation is being driven lower. You mentioned agriculture in the beginning. I mean I talked about commodities. The irony of commodities is now they're falling just a bit, which is actually good for your stock and bond portfolio. But I think it's also good for inflation pushing forward. And I think you're gonna see inflation fall, which will allow the market to guide. The Bloomberg Commodities Index UM

started the year just under a hundred. It peaked in June at UM one thirty six seven, and now we're back down to one seventeen. And it's also been a pretty good month for stocks. I mean, we started the month off at thirty and change I think on the SMP, and now we're pushing four thousand. Okay, it's a down day,

but it's been a good week. UM. When markets fall twenty some percent brent, for a retail investor who's got a longer time horizon, isn't it a decent idea to go ahead and at least dollar cost average in or am I dated in that thinking? No, you're not dated. All the all the old rules of investing still work. The first one that I've mentioned to people listening in is don't sell what others are um, even if you

don't want to buy, don't sell what you have. But certainly adding to your exposure during downturns, it's historically proven to be a good thing, and I don't think this time will be any different. You certainly may have to go through some uh periods of doubt about what you just did. Um, but certainly, you know, I don't think it's going to be a bad idea if you do, you know, two, three, or four five years from now, which hopefully, if you're buying stocks, you have that horizon

for those to actually kind of come to fruition. Alright, good stuff. Brent Shrudy joins his chief investment strategist for Northwestern Mutual. You know, he's in Milwaukee, so that it's summertime now, it's probably like a hundred degrees there and it'll be snow on the ground in two months. He's he's the Chicago guy though NBA from University Chicago. No, Yeah, NBA from those guys work hard, they're smart, they're all about the numbers. Um. I'm more of a big picture

story guy. But you know, Chicago people, you've got to be into this, like those freshwater economics come down. Yeah, exactly. All right, good stuff. Bruce Levine joins the CEO of night Shares, and we're gonna talk first, Bruce about what that is. I know that UM for a long time in crypto, it's been a good strategy to buy at the close and sell at the open, or buy on Friday and sell on Monday. Is that a similar idea behind night Shares? What's night Years? Yeah, I think there's

some similarity there night chairs. Is this really with the night effect? I should say? Is this really surprising phenomenon that a very large percentage of the returns of being buy and hol they're coming through the night session, and they're coming with substantially less volatility than the daytime session. So from the risk adjested basis, it makes a lot of sense to be playing in the night session as compared with the day session. All right, So what securities

in particular have a meaningful night session? If you will, Yeah, it's interesting in the night effect we found is very broad in acrey markets. It exists around the world. So if you were a Japanese investor who would buy the Japanese clothes and sell the Japanese open you'd have good risk agested returns. If you're a German investor, same thing, And um we find it at the single stock level.

But what we've decided to launch is to broad based indexes give you this night effect essentially in the large cap in the small cap space. So how many et s do you think you're inna launch and how long

is it this going to take? Yeah, So just to give a sense of you know, kind of what I'm talking about and why we launched these, Uh, we were getting returned in the large cap space, let's say over time, you were getting maybe the return coming in the night session, and the volatility of that being uh maybe fifty of buy and hold. So again nice risk of just returns.

We saw something really amazing and small caps where the daytime return on the Russell two South over a long period of times was either negative or just about flat. So all of the return was coming in the night session. So so the two that we launched so far are the end spy, So think of a night spy. Uh, and then that also playing on the ticker and the heavily traded russell to E T F I, w M D and w M. So those are the first two. We have four more in registration and we'll see what

happens over time. But we think it's a really interesting concept that's never been done in ets before. So have these two E T s have you launched them? And if so, kind of what's the interest been. Yeah, so we launched them on JU and I'd say we're getting a really good reception. People are very interested in the concept. They're trying to figure out how to blend them into their portfolios. And you know, we're just out there telling our story in the down days of summer that we're

getting a good responsible. But do you expect to focus on equities? I mean, I type E T F go right, and um, I can put in night shares if I leave it on equity. I see these, but then I'm reminded you could be doing bonds, you could be doing commodities, you could be Because of my experience in crypto, I see that it's worked across asset classes. Yeah, I know it is so now it's equities, and part of that

is just the operational complexities of actually doing this. So you know, cryptos obviously there's no cryptos being traded in et F format period other than the futures um you know with UH commodities is a good example where we have looked at it. That's something you might look at on the bond side that you get some interesting results on the on the high yield side, it tends to look a little bit like equities that kind of returns.

Yet and sometimes on treasuries you get the opposite of the night effect, which is when people are going out of the equities to get flat at the end of the day, um, they're going into treasuries. So so we're

looking at all that. It's really interesting. Are you looking also at crypto Bruce, mean, do you have you know, like SEC news alerts on your phone just in case they do approve of crypto e t f UM Not yet, but you know, we're we're we're just doubt there on the equity side started we're starting down the path here, so we will make sure to put that crypto alert

on our phone. It's it's interesting that in such a difficult year for I p O s, you know, no new issues and UM and for the market in general, E t F introductions have still been pretty strong this year, right ye have. But I think I heard a statum about two and the sifty new funds this year, you know. I think what you're seeing is two things. One is, most of the innovation and asset management in my opinion, comes through the et F structure these days. That seems

to be the preferred vehicle for most investors. The second thing you're you're seeing is you've seen the mutual fund industry really um embrace the E t F vehicle, and so you've seen conversion. Then you've seen some of the traditional folks get into the industry for the first time. So it's driving a lot of product launch. It took them long enough. So Bruce, you're at I Shares, Black Rocks.

Selection of e t F s give us a sense of just how the et F space it's kind of evolved over time, and is it a good attractive area to look at today. It's kind of a duopoly, right with I mean, I Shares and Vanguard are the two biggest shops on the street. They are and they take in you know, the lion's share of the money, and they do it in the more traditional et f that

were launched twenty five years ago. You know, I launched actually a number of them, and you know that if you take some of the flows away from them, it's still pretty large numbers. It's still a growth industry and there's always room for innovation. You have seen some good things happening from some of the smaller firms, and you know, I expected to just continue to be the center of innovation and asset management. All right, So you have an affinity here. I'm just looking at kind of your CV.

You have affinity for Charlottesville, Virginia, University of Virginia undergrad and then you get the NBA at the Darden School of Business, and I was considering going there. That was my choice between Duke and Virginia. But you know what, the people Bruce at Darden, they just worked too hard. You guys really worked hard at doing that case stuff, right, Yeah, we the series Lament. The type of the law school which was right across from us is really playing softball

while we're working on our cases. But um, now I have a greater finishing Charlotte, Like you said, it's a great place. You know. I was down there Matt for my tour and they were just telling me how hard they worked. And I was literally getting off a stretch of like twenty seven days straight work, you know, as an investment banking analyst, scrub analyst. And the last thing I wanted to hear was we worked the hardest. Yeah. So I went to Duke and had a phenomenal two years.

And so all right, Bruce, thanks so much for joining us. Bruce Levine, CEO of Night Shairs, I didn't know this night trading thing was a thing. Yeah, it's huge, and um it's amazing if you look at the charts, because you don't expect it to be as successful as it is, and then I guess it would be laborious. Um well, from my perspective, maybe the kids could write code for it, but obviously in E t F just makes it easier

and keeps the cost down. Where you go to Man Deep, because we need to get smart here on the social media named snap down thirty, uh pinterest down twelve, Twitter also a down, So Man Deep seeing he covers technology for Bloomberg Intelligence. Man Deep, is this some of this week just we're seeing some of these smaller social media names. Is it just because they're not players and we need to really wait for the facebooks and the Google's next week? Yes, and uh, I think what it shows is that not

everything in ad spending is going to be cut. So if companies are looking at their discretionary versus you know, essential ad spend, So in the discretionary bucket, probably snap Pinterest, the smaller social media platform sofall as opposed to the non stationary where you Google search spend is probably the last thing to be cut. So I think that's what the market is hinting at. But who knows, maybe Google

disappoints as well. It's very unlikely. And you know, the valuation multiples have compressed a lot in anticipation, so I think even if the report an inline quarter, you are going to see the stock will be up. So uh yeah, I I think a lot has already priced in in terms of weakness. Man, deep, why does um Snapchat have the power to move the market. I mean, it's wiped out. I think eighty billion dollars in social media market cap, but it's not even worth eight billion dollars itself. And

I didn't even really know people still used it. I remember back in the day the idea was college kids could text each other and it would disappear or something. But is it still like a big deal. Well, so they still have around three forty and daily active users. So when you start looking at you know a number of platforms that have got over two hundred million daily active users, you can it's probably you know, less intent at this point of time. So clearly they have that

user base. Now their engagement seems to be falling, and part of that has to do with competition from TikTok. But at the same time, the advertisers are pulling back because they just don't seem to get the r Y they were getting before. And that is the big change. Because Apple's privacy changes has really heard the r o I on ad spending for some of these platforms, and uh, I think that is the big change. I mean, doesn't warrant eighty billion dollar route in terms of the market

cap of all these companies, I don't think so. But clearly there's a lot of uncertainty around how much those changes would affect the large companies like Alphabet and Matter. All right, well, Snap has a market cap at of sixteen point eight billions, a little bit bigger than that, but nothing relative to the Facebook's and Google. So thirty seconds, Man Deep, what's the key thing we should look for

from those big companies next week? Facebook and Google? Yeah, direct response adds because those are the ones directly hit by Apple's privacy changes. If Meta can show you know, even an inline quarter, the estimates have been devised the lower by ten percent if they report an inline quarter, I think I thinks those stabilized. All right, Man Deep, good stuff. As always appreciate your phone in it in from home. But I see him here. He's here all the time too, So he's one of those guys A feeling.

He also works very hard from home. This is you know the debate, right, do people are they pretending to work from home? As Elon Musk says, or as we see from Man Deep, are they excelling They're? Deep is a smart dude and he's a hard work He puts out some great research. You can get it in b I go. I'll just get right to next guy, Dan Mary, CEO and founder of Vertex Software UM and I also want to talk to about what's going on in great state of Iowa. We'll get to that in a minute. Hey, Dan,

thanks so much for joining us. Tell us what Vertex software is, what are you guys doing, and and kind of what's your outlook? Well, hey, thanks for having me. So we have cloud based software that helps manufacturers use three D and sales service, factory and supply chain that helps them increase efficiencies, lower costs, and drive revenue. That's kind of the nutshell. It's kind of like if you think about video games, to do games make today, you

make heavy use of three D content. Well, manufacturers have a lot of three D content that they provide. It's just much more complex, a lot bigger, and it has to be more precise. So we help happen leverage that content to get more bang for the buck out of that investment. So is it like CAD your own version of AutoCAD, Well, it's kind of like that, except we're

more like Netflix for CAD. So we take their CAD data and we make it easier for them to use it downstream of product of alopment and engineering where they make it so they can use it and put in the hands of a salesperson or someone on the factory for or in the hands of their customers. That historically has been really really hard to do, and we make that easy and orders the magnitude more cost efficient. Dan talks about your partnership with John Deer one of my

favorite companies out there, Mine too, Mine too. Yeah, I mean, we're just so grateful to work with. You know, iconic company like John dere is such innovators. So we help them leverage three D cads like you just said, uh, to see the state of the factory for forecasting and planning, for visualizes and equipment of function and for service. Again, that concept of putting three D in the palm of people's hands on devices that they use today. Again, it's

been a horse historical challenging. So what is the state of US manufacturing like right now, especially with the supply chain issues? Are they getting any better? Chip short ages really bumming me out? Um, is there an improvement that you see with the partners you work with? Well, I think just generally what I'm seeing is certainly right now. I think everybody knows demand for goods as weakening. You know, consumers are starting to spend more on service, labor, energy

costs are rising, and their supply chain bombs. As you mentioned, so I think what I'm seeing, and I was just actually on site of one of our customers earlier this week. I'm just seeing this accelerating need, almost an urgency for automation, automation and distributed collaboration across time zones. They want to shorten a side of supply chain and be more nimble and flexible. That's really what what I see in the

microchip shortage. The nail on the head with that is we have customers that have equipment parked in parking lots that they're leasing right because they don't have the parts to complete the production to deliver the orders. So you know, man, Dan, do I understand that? You know, I ordered a Chevy Silverado at the beginning of the year, and it is apparently as far as I can track, built in Mexico, sitting in a lot waiting for I think a window

switch chip. I don't ever need to roll the windows down. I'll take the truck now, thank you very much. Hey Dan, you know, Matt and I are stuck here in midtown Manhattan. We have no idea what's going on in the real world. So we left talking the folks that are out and about doing stuff you have a bachelor's mechanical engineering from Iowa State University. That's an eyewa. These days, well, you know, I think, you know, generally speaking, I think things are

pretty good in Iowa. We have a you know, state government here that has been really uh you know, supportive of from my world, support of the innovation. I I am excited about what's going on in Congress right now and support for you know, kind of diversifying uh you know, diversity of the investments for National Science Foundation and Department Energy. I think that's something I've heard a lot of excitement

about with his latest bill. Um just making it possible for people in more rural states like us to tap into you know, grant money. How's it you the farm economy out there. We've seen big swings and commodity prices that Mett and I like to talk about, but you guys are actually putting the stuff in the ground and taking it out. Yeah, you know, I gotta tell you, I'm in Iowa, and that's not not really my area. Got a lot of friends, and I got a lot

of friends in the act. But I grew up in kind of science technology and was a child at the early video game generation, Like, what what are your favorite games? Oh gosh, geez, well, I go all the way back to dude, I was there at the Commodore sixty four. You know. Oh yeah, yeah, oh you that that impossibation? Yeah yeah, all right, dad, good, good, good stuff. We always appreciate checking in with some of these entrepreneurs out

there all over the country. Dan Murray's doing it CEO and founder Vertex Software bringing some technology solutions to some industrial companies. And I'm sure that's a big, big plus for a lot of these companies when they can get kind of really step up their tech game, and Dan Murray does that. Appreciate it. 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. Put on Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.