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Paulciana joins us.
Had his fit technical strategy at Bank of America. Paul, you don't mince any words about it. This is a two year going well above five percent? How does it get there?
Yes?
Indeed, so base case technical process says there's something called a rising wedge pattered forming and the riding wet term chart of two year yield right, which says this cycle needs to make another marginal new high this year.
What is the bet now in the bond market?
Can it be like an in video where everybody's on board an inequity stock in luisja Buscham because there's an is there an oomph to the bid?
Excuse me? Is there an oomp to a lower price higher yield on two your.
I think it's driven by the commodity space. Really, the higher commodities.
You're speaking terms of Francisco Blanche. It's unbelievable, that's breaking news. Commodities are driving the two year yield.
Yes, it's the inflation scare, right. The higher commodity prices go, the more markets think about sticky inflation, the risk of the Fed staying on hold for longer, potentially pricing outcuts the narrative talking about whether or not we get a hike, which is unlikely.
But yeah, I mean the interns today, Paul, and it came in. They didn't break brief me on Brent. Brent was eighty three, it's now rounded up eighty five dollars a barrel. There's that inflation exactly right.
And Tom, I'm looking at Paul, She's got this is research note.
There's just way too many charts.
And I mean, he wrote a book.
He couldn't he had to. He couldn't even get into Le cirque Across was right. He had to show his idea at le Circa and they didn't even believe his id and he had a book out on technical annalysmis.
He's like seventeen years exactly.
So, Paul, what do we do here with this ten year treasure? It feels like, I don't know, four point fifty fourth were kind of feel like we're in a kind of a training ranger.
How do you think about the ten year we do?
You know, our our medium term view here in the ten year yield is you know, we're in this first half of twenty twenty four, which we define as counter trend to fourth quarter twenty three. Fourth quarter twenty three yields fell, first half of this year yields up. I think we're nearing the end of that period where we should be looking for tops in the ten year yield chart or signals that say we peak out by five percent and roll over in the second half of the year.
You take your trend analyis respected John fitzger Old Kennedy. What do we learned by taking the ten year trend backed in nineteen sixty two sixty three.
That it went up for fifteen years and about down for thirty So that doesn't mean it can't go up for fifteen years, right, anything is possible in markets. And what I think changed in twenty twenty was the downtrending yields. That secular decline clearly ended, right, the downtrend channel that everybody loves for so long from the peak in nineteen eighty five down to the twenty twenty low, it broke.
And I think what's even more fantastic from a technical lens is that there was a head and shoulders bottom in the monthly charts of ten year yields when it did in fact change the secular tide. And you know, to see that happen, it complements the head and shoulders top back in the early nineteen eighties. So these are the same technical patterns tom that are formed by different investors over different generations, repeating themselves.
So is this kind of a are we Is this kind of the new normal here? You know, we got a ten year you know four five percent?
Is that kind of the new normal here?
I define it as we're now in a secular bear market in treasuries, secular overall. Biggest picture, right, people would say the equity markets are in a secular bulb, right, and treasuries we're in a secular bear, which is rising yields for the biggest picture. So this year they come back down again, but maybe next year or two they go to higher highs.
If a stock is a moonshot, and we're gonna go a little technical here now because Ciana can keep up with this if you run a semi logue or slope matters percent change, and even if you take Wells Wader in nineteen seventy eight and you look at some trend.
Analysis as well. Can you chart in Vidia? I mean, I'm not it's outside your remit to give me buy, hold sell on in Vidia? Right?
True?
Okay? Can you technically chart a moonshot, whether it's copper or in video? Absolutely? Well, what do you see now in a moonshot like in video? Well? Is it contained?
Is in control? Arithmetic scale? Let's Lisa, it's like.
A whoa whoa, whoa, whoa whoah to any syllables, Lisa, can we go arithmetic today? A logarithmic there we got to arithmetic, He's a guest.
Look logarhythmic scale. It's up into the right.
Right.
If you look at the dollar since two thousand and eight, the dollars up into the right.
What's your dollar call?
We're bullish?
Your bullish?
Do you think the dollar stays supported this quarter? There's potential for a breakout in the Bloomberg Dollar Index, for example, to another high for the year before there's any risk of it rolling over. Ultimately, the dollar isn't the trade here. It's swings three percent either way. It's the currency on the other half. Right, So if you want to carry because actually portfolios.
Sess hour hour.
Only Damien can talk carry here, Paul I, I really I got time for one more question. We have James kke Lastman coming in later iconic for Dow thirty six thousand.
It took a while to get there. Can you frame out a roaring twenties like Edyard Denny where we're in an extended bull market?
You know what we can frame out in our equity technical research is that every cycle that we've pretty much looked at for this year is positive and it does indicate stronger statistics for the summer rally and stronger statistics to your end. So big picture, we do think that equity markets are in the secular bull cycle, not as secular bear. So yes, it is supportive of that narrative.
Okay, okay, he knows what he's talking about. He knows who the food court is ex.
Bloomberg now holding court at Bank of America, doing a great job there. And I really can't say enough about his book.
It is not dated.
It is a brilliant book, a little dense. They're a pro book on technicals as well. Thank god for Amanda Linum of Villanova who hit the pause button in the control room and said there that should do it. I mean I had that once happened where you know, it's like one little button in a studio and boom it's on.
Thank you Amanda for getting our audio back.
Joining us some blackrock, Amandelignum right now, we just had Pausiana from Bank of America and it's in the zeitgeist as non consensus, but with nominal.
GDP where it is with the spirit of Atlanta GDP. Now, what if rates go higher, how does Blackrock and how do you, Amanda line them frame out a two year or at five point zero five five point one?
Oh sure, good morning, and thank you first of all for having me. I think, Tom, what you're raising is is the reason why we think that there's not really a sense of urgency for the FED to normalize policy, and even when they do, it's likely to be a shallow cutting cycle. So for corporate credit, that means we shouldn't be banking on significant near term interest rate relief.
I think the tail risk that we're watching, and the longer that rate cuts get delayed, I think lends more credence to this possibility is that of a rate hike. And rate hike would not be negative for credit because of the incremental twenty five or fifty basis points mathematically, it would be more negative for credit because of the uncertainty that it would interject related to the forward path of monetary policy. That's not a great backdrop for credit.
That's not a great backdrop for deal making, specifically kind of sponsor related m and A. And so that's what we're watching for. It's not our base case, but it's a concern. And that's that's really the risk.
Sponsor Sponsor related and A is when the twerp the kid asks you if they can go to the third lacrosse camp this summer. That's what sponsor really did means.
So Amanda, he I mean I could sit here to your treasury like a lot of investors here and get close to five percent.
That's not a bad trade.
Or should I take some credit risky things?
So we like taking credit risk and floating rate exposures, So leverage loans, for example, up around three and a half percent year to date, outperforming high yield up around one point five percent. Total return IG is lagging because of the duration exposure. I think importantly, if you're deploying money in corporate credit, you need to be deploying for income and yield, not for total return. We shouldn't be banking on a significant rally in rates to really kind
of juice those total returns. Nor should we be banking on material spread compression, because spreads are already quite tight. So really the conversations that we're having in capital deployment and corporate credit is really about locking in those yields.
I'm going to get you in trouble. It's confusing, folks. There's black rock, there's blackstone. There's black Rock.
Which is the building CBS is in over I think it's on sixth Avenue.
A man, I'm going to get you in trouble here.
If we get a rate regime higher, what does that do to private equity and private credit valuations.
My math doesn't work.
Yeah, So, somewhat counterintuitively, Tom, against this backdrop of high for long, we've seen covenant defaults in one of the private credit industries that we track decline for four consecutive quarters, which is a bit of a counterintuitive result. It speaks to the flexibility that is inherent in this long term
lender bar relationship. I think the point you're raising is also applicable in the public markets, and for a given company with a given business model and a given macro backdrop of say higher for even longer, they're probably afforded more flexibility in the private markets relative to the liquid However, I do think that when you're thinking about sponsor related m and A, so again not strategic companies buying other companies, but more lbo activity, financing is a major component of
that equation, and so it would likely keep that sort of activity well on.
In Twitter, Yes to this guy, I'm sorry, don't have his name in front of it. He's absolutely fabulous. I read everything he does. He breaks down all these property deals that go bust. And there's a deal that went bust. I can't remember the geography it doesn't matter where they so the mezzanine financing and equitized it. That's what I see coming here with a higher rate regime is somebody puts a shotgun too somebody's head and says, all of a sudden.
Its equity.
And I think with respect to commercial real estate the trend that we've seen over the past eighteen months has been extending. I think we've underestimated the ability and the willingness yeah of lenders to work with their borrowers. And so, for example, Real Capital Analytics estimates there was more than two hundred billion of CRO debt that was supposed to mature in twenty twenty three that did not, so it
was pushed to twenty twenty four. So now that twenty twenty four maturity wall is not six hundred billion, it's around eight hundred billion. If we have the environment where you interject uncertainty related to monetary policy, I think, but
there may be a limit to that. I think tom is the kind of the tail risk in a higher for longer rate environment where importantly there's uncertainty so that expectations in that price discovery process can't get met between the buyer and the cellar Mandy your.
Head of macro credit research at Blackrock, How do you think about private credit because that's been a business that's just exploded in the last ten to fifteen years on Wall Street.
Yeah, we actually have a pretty constructive view on private credit. We're expecting it to grow at around a fifteen percent compound annual growth rate over the next five years. That's actually below the twenty percent compound annual growth rate of the past five but we think it's actually a positive from the perspective of several years ago, if we were having this conversation, a company may have decided between issuing a hild bond and a leverage loan in the syndicated market.
Now there's this third and viable option. Importantly, we also see scope for this to grow beyond corporate lending to asset based lending. So as banks become more selective with their lending, we see actually an opportunity for private credit to step in there. So we have a pretty constructiveview on it.
Are you worried at all about the maybe lack of regulatory oversight of that market because it doesn't seem like it's not an sec type of thing thing.
There is actually a fair amount of oversight in terms of how these companies operate business. I think the one stat actually, if I had to pick one that gives me comfort, it's that new and this is using data from pre quinn New entrance in private credit have raised two percent two and a half percent of capital on average since twenty twenty two. So it's showing that actually the market's being discerning and where it's allocating capital, it's valuing expertise, experience, governance.
Running out of time.
But a big question, and particularly into the Apple meeting, is big tech big tech finally going to grow up an issue debt?
Well, we've seen the capital markets in IG wide open books four times over subscribe. I mean, I think if I'm a corporate treasurer CFO, especially if I'm in a cash rich position, I think I would be I would be prudently issuing in the first half of this year. There's a fair amount of event risk cutting into the second half, where I think whose treasure is to take
some chips off the table. Specifically, even though the risk free rate is elevated, spreads are tight, the tone is good, and I think they should probably think about taking that window.
We got through this without asking her about bitcoin. Yep, exactly good. That's good a man, Alinea, This is brilliant. Thank you so much. She's with black Rock. Yes, prett to digress here right now.
And it is into the election season and all that we have and it is into a taut of two hundred and thirty nine page book. It is cheaper, faster, better, How will win the Climate War? By a guy who's never mailed it in time on the Upper ef.
You went to Yale and you could have been a flunky, and you were absolutely nailed it in economics. Where did you know?
Everybody knows you had to drive in investment capital goldmen Sex Morgan stantly blah blah blah. Where did you get the drive the first day at Yale University to not be another spoiled brat exit?
Where did that come from? Well?
I guess you never met my mom.
You know, it's so funny slave it on maham right.
Well, I give her an enormous amount of credit because she's one of the most down to earth people I've met in my whole life.
Okay, she was you.
She ran school of volunteer programs all over New York.
She worked at the House of Detention. Is that right.
She worked at the Brooklyn House, she rode her bike all over the city. She was she accepted herself, and that meant she could accept everybody else in society, from the fanciest to the least fancy, and look at him in the eyes an equal. And that's how I was brought up. And that's what I believe.
The last chapter of Cheaper, Faster, Better is the heart of the matter.
You're widely perceived as a Democrat with Mondel and all of your work over the years, but you have to speak to a doubting America on climate change. When the conservatives read this book, what do you want them to get out of it?
What I want him to think is that this is an American a potential American success story, one that we are going to win. But we're going to win it together. I mean, the book is called Cheaper, Faster, Better, How We'll win the climate War, which means we're going to win it in the marketplace.
We're going to win it with.
The cheapest, best products in the world, and that's actually how we're going to solve this crisis. But also how we're going to have another American century, how we're going to come together as a people. We shouldn't be divided on this, we should be together.
Paul and I are in London.
Climate change green is you're steeped in it, particularly in the continent of Europe as well. Is the reason America's behind is some Lockean individualistic ethos from eighteen twenty or for the Better seventeen twenty.
Well, let me say this, Tom, there is a lot of talk in the US, but let's look at what's actually happening in the US. I mean in one of the states where the talk is strongest against the sort of clean tech revolution, which would be Texas. They've tripled their solar in the last three years and it's going to go up another thirty five percent years.
I saw this week paw An article. Texas is the most green state right now, exactly my point.
So they can talk and talk and talk, but my point is we win in the marketplace. Texas produces by far the most wind energy of any state by far. Why are they doing it to be nice to be woke. I think they're doing it because it's cheap and it's a good deal. And that's my point is for whatever reason, people do it. We need to come together on this and win. It's important for us economically, it's important for
us as a people. And by the way, we look at what's happening in Texas, look at what's happening in the southern United States right now in terms of storms, in terms of a heat dome, in terms of people dying. That's what's actually going on, and the people in Texas know it. And the question is why don't we accept each other, accept each other's motives. We're good people across this country. We share an awful lot, we're all patriotic.
Why don't we go and win together in the way that the United States is built to do.
You take a look at I think if you talk to the average personal industry, one of the.
Things they think about, and I think.
By clean energy, would be electric vehicles. And we had a nice initial surge and we have this great Tesla's success story, which is phenomenal. But what we've seen over the last year, year and a half, two years is pulling back a little bit from the auto industry. It seems like maybe the first adopters for evs they're already satiated. Where's a demand going to be. That's been a concern.
Now I read an article in the Journal about maybe this whole evy thing's becoming politicized, the people that believe in climate change versus the people that don't believe in climate change.
How do you bring those so lot together? Paul, let me just tell you a story. So, probably seven years ago, one of my very best friends in the world, who I would describe as a business Republican, somebody who believes that the economy drives success, that business drives the economy. That you know, a traditional concert you know, moderate conservative, but a really smart guy. He bought a Tesla and
he's a car guy. He's from California. When I met him at eighteen, he took me out in his car and took it up to one hundred miles an hour to show me how fast it could go. He bought a Tesla seven years ago. I said, Matthew, you know, you know, are you out to change save the world here? He's like, absolutely not. This car goes zero to sixty so fast you can't believe it. It handles better than the European sports car. I love this car. So in fact, cheaper, faster, better.
Americans are going to buy the cars that they enjoy, the ride they believe in, and you know whether that's going to be Yeah, they had a bad first quarter. I think a lot of it has to do with the product offering, whether there are new products. You know, where everybody's talking about the thirteen thousand dollars by D car that goes twelve hundred miles. Now it's a plug in hybrid. But my point is this is going to be product driven. It's gonna be people rievs.
If they're so far ahead of us and delivering that twelve thousand dollars vehicle. Should President Biden's second term, you'll probably be in the cabinet.
Should he should he should? He? Should he let the Chinese evs into the country.
Look, I'm gonna give you the argument that I'm gonna give my answer if that's okay, Tom, Look, China is trying is the country that emits by far the most, but they're doing everything they can to win industrially in terms of you know, the clean energy. They're trying to do, all the solar panels, all the evs, and they're basically you know, dumping into the United States.
And the question is when.
People offer you really good product, really cheap. Should you allow them in hurts jobs helps. By the way, you guys keep talking about inflation, Oh my god, the bond market. What do you think was keeping inflation down all these years? It was cheap products from overseas forcing you know, prices there affair. So when I look at that, I go, okay, environmentally good, consumer based good, inflation based good. But it goes after American jobs. We have to win in the market fairly on our own.
Guy, one time for one more question. Pharaoh on Capital twenty twenty five. There's a forty page memo in front of Styre and it says, why don't we have EV charging stations on the upper east side? What a scandal that we can't build zillions of charging stations?
Whose fault is it?
Look, as far as I'm concerned, if people will pay for charging stations, charging stations will get built. The US has gotten Look, we have not been great about infrastructure period time. If you look about how are we doing in terms of build things? Physical things in this world were kind of caught up in our underpants. And I think that in this case, this is a question where we have to respond as a society, and I think from a central place, we have to say the perfect
is the enemy of the good. Here, we need to win here, we need to solve this crisis, and we need top down saying we got to cut through the red tape. And that's true, you know in virtually every part of this country.
Cheaper, faster better.
Tom Steyer here with a primal scream about the view forward on climate change. Paul from the Mail, I get hugely controversial.
Your dad, look at the front pages, Lisa.
What do you got?
How did I miss the Danaife story?
And you can't miss it once you.
See it is all right.
Well, we're gonna start with the Wall Street Journal. This is about companies four O one K match. They're saying that it doesn't provide a secure retirement for all Americans, so not everyone is the same. It's the study by Vanguard. It says that that perk mainly benefits high earners. So it shows nearly half of two hundred billion dollar companies contribute to workers for one k. It goes to that top twenty percent, and the lowest earning workers get six
percent of the money. So researchers are saying that new formulas for company matches. They really need to be curiated to kind of ensure that better benefit for everybody.
I skim the article. I take immense issue with it. And Peter Orzag is expert on this. Or Zeg when he was at Brookings invented this. The reason it's so skewed is the fancy people put more money into their four O one K so they get more of a match. And yes, there should be if we agree that the retirement program is a disaster, which I feel strongly, we have to come up with legislation to allow people that don't have disposable income to get a bigger four one
K and to get some form of match. But I just thought the article piled on the halves who have the cash flow to put aside and take advantage of the match and social security.
You can't depend upon social security.
Yeah.
I had the privilege once to talking to Alan Greenspan about this, and I believe it was nineteen eighty six was the last time they really walked through it.
And all this is going to come to an ed. Lisa, it's really really, really serious. It's it's it's really front and center. It's something Paul and I are devoted to folks. We're going to try to do more in retirement planning here going forward, because it's a train wreck. It's tough out there, we el and.
That article really really gets into the potatoes of it. Okay, orange juice prices, we know they're soaring, right, so the Financial Times they didn't know then, Yes, yes, because you have problem. You had bad weather diseases in Brazil and that's like the world's largest exporter, and then you had the crop problems in Florida to on top of it. So that's why the orange juice prices are soaring. But the Financial Times is saying that it's pushing manufacturers to
think of alternative fruits. So what do you think about mandarin juice?
Sure, I like.
There's like a mixture thing. It's I'm fascinated by this. Where you grew up, what kind of orange juice? Did you hit?
Tropicana?
Yes, you had this tropicano in a paper thing, right, I grew up where it was un American. If orange juice wasn't a lump like a hockey puck rosy in the freezer, and your mother would go say, go make the orange juice, and then you stirred around hoping it would defrost over six hours. And then there's other people. If it's not in a bottle, they won't drink it. What is this about? But I don't buy much orange juice. It's gotten expensive.
I don't either, but because there's just so much sugar contented. But it's happening, right.
So what do you water?
Water time? We're not going to her house?
Like, no, but fresh fruit is what you eat, except it's expensive.
Yes, but the fresh fruit you have to make sure to keep the pulp in it so you get the fiber too.
No, no, you don't like a minimum pulp person.
You have to get the pulpe in.
There are the orange skin.
You gotta do the pulpe that's where the fiber is. Come on, ball, No, all right, let's turn. Let's turn to the olympase.
Yes, oh, let's turn to something health.
Yes, we'll go to French fries. Okay, So the New York Times is saying French fries will not be on the menu for the athletes of the games in France. Now, it has nothing to do with the health reasons because they're fried or anything. It has to do with the environment. So This is at the Olympic Village, which is the dining hall. They serve about forty five thousand meals. They're going to twenty four to seven. The chefs fay say that the French fries are too risky because of fire
hazard concerns over those deep fat friars. Okay, they're also they're also not serving foie gras because of concerns of animal will be and avocados. On top of it, you cannot get those things. Avocados because they're imported from a great distance and also they consume a lot of water, so that's why you can't get what you can have. You can have French cheeses, you can have veal and
like a light sauce, not a heavy buttery, you know. Okay, and baguettes, yes, but there's gonna be over five hundred meals.
But no freez okay, but yes, no.
No French fries. You cannot have them at the Olympics.
We saw a TV twenty four I actually watched the whole YouTube video will they swim in the river sind And the guy, mister environmentalist, he said right now he wouldn't swim in the scent.
But the opening Games.
I believe I read the Opening Games are not going to be a huge arena.
It's gonna be along the river like a boat for the opening of opening, which is very cassome. I mean, this is gonna be.
This has the potential to be just an extraordinary Olympics with.
You and me Hotel sure by the shore, bring Francine along to help us. You gad.
Yes, it's like it's like.
A no brand. I mean, it was destined to happen. You know, what else do you happen?
Lastly, Chipotle, I always thought that they piled on exactly, but actually there's a lot of people who are posting to social media. They're filming the workers who are dishing out the food, and they're saying that they're skimping out on the protein portions. They're giving smaller amounts of the steak and the chicken, and so now they're posting these videos to kind of give pressure to Chipotle to.
Say, hey, people on Third Avenue, they just do a good job.
Yeah, there's one in my town. They pile it on.
Can I give you the best chicken in Paris? Yes?
The cocoa fee up by Ma Mantra, little tiny restaurant. You sit at the table with other people that you don't know, and it's like real rotisserie. And the secret is they use big birds.
The secret and not big bird, not bid use. They use a bigger chicken than most people, a bigger chat. You got to get a reservation, like through that really red and they serve French fries. They when when.
So I see going through the menu.
Thank you for the newspapers today.
This is the Bloomberg Surveillance Podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten a m. Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.