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Dead Limit talks stolen. Greg Paters of pGEM Fixed Income saying investors a pang for default protection in the near term. We went out the curve somewhat as our sneaking suspicion is that it will continue year after year. The congressional disruption in DC is not going away anytime soon. Tks. This he the old normal, the new normal, what do you want to call it.
I'm so glad you picked this paragraph from his research. John, This is the fixed income note I've seen in ten days, maybe two weeks. Reg Peters at PGM right now on where we are and where we're moving forward. Joining us, Greg,
It's a really complex thing. I think we need to talk for an hour with you this morning, but I want you to set up what the market reaction is going to be if we get pgeum persistency and yield or dare I say we go to a higher five point six five point eight and then the dreaded six percent yield? What happens when we get there?
Well, I think we're a long way to six percent. But at the end of the day, we do think yields are too low. If you look at the move that we've seen, particularly in the front end around the banking crisis of March, there was a really deep move lower, and that doesn't make a lot of sense to us. And so, you know, when we're looking at the curve, we feel like it's miss priced. We feel like it's
already pricing in a recession. And then when you look at risk reward, even if you do get a recession, which is still you know, probable, of course, will you be rewarded for it? And the question on the table I think suggests, now.
Let's go pro here. There's a thing Greg called credit default swaps. Brando talks about this all the time. You say, there's a real efficacy to follow the CDs market for mere mortals listening and watching explain the linkage of their yield world with the CDs world.
Well, it just is a measure of credit risk of the US sovereign, right, and so you know what we've seen over the past couple months or so is that that risk is elevated of course, right, So this debt ceiling debate, let's call it, is creeping into the risk of the market. You're seeing that in the CDs curves. And so what you've seen is investors really pay up for short data protection in the event of a default
or some type disruption. What we decided to do, and to be clear, this is very much of a drop in the ocean type of trade, but what we've decided to do is actually not pay up for you know, the couple months or even one year, because we do think it's a persistent problem. So you know, we really worry about I really worry about a PGM that you know, this political debate around spending and using the depth ceiling
as a prop will be a common occurrence. And with that, you know, we think it's good to have a little protection on.
So Greg, can we go out further along the curve away from the front end, Let's go all the way to the back end. What's the thirty year doing up in there four percent.
Yeah, So the thirty year has different characteristics than the intermediate part of the curve and definitely the front end part of the curve. What you have in the back end is this still do this very much, you know, need for duration investors have to go out and hedge, or you know, pension funds and LDI accounts have to be out in the back of the curve. So there's
different characteristics there. So I think that the informational content that comes out of the thirty year is a lot less kind of worthy than the intermedia and the front end. So for me, you know, I look at more at the intermediate part of the curve and more in the front end of the curve than I do the thirty year. I mean, it's important, but it's not nearly as important from an informational content standpoint. Greg.
At a time when you do expect this turmoil to continue in Washington, do you consider corporate debt of very highly rated companies to essentially be more credit worthy right now than the US government itself.
Oh, I think that's a tenuous argument. I've heard that argument. That doesn't make a lot of sense to me that crops up, you know, every several years or so. You know, I really push back on that. So, you know, everything feeds off US Treasury US rates, So if the risk free gets repriced, everything gets repriced off of it. So, you know, hiding out in high quality credit seems like a fool's errand to me, and you're not going to protect yourself in a way that you think you will be protected.
Do you think that people who are going into credit in particular risk of your credit right now are also engaging in a fool's errand just simply because of the risk that you're seeing down the line of perhaps some of the defaults or there's at least the Washington turmoil continuing, and this idea of some sort of recession getting priced in to the curve.
Well, if you're definitely going down in quality and credit, you are basically an essentially betting that there will be no recession, there will be a soft landing. And so I think that is also a kind of a difficult case to make. So to me, there's much more value being up in quality and not going deep down and you know, deep recyclical type of company. So I don't know, you know, being down in quality doesn't make a lot of sense to me. I'm not sure you're getting paid
for it either. I think it's too early, very simple premise. I have yet to see credit spreads tightened into a recession, so if you have a high probability of a recession, you're you know, leaning against that narrative. So I don't know. To me, it's more of a high quality gain dispersion is super high.
Though.
There are lots of relative value opportunities, and we see a lot more value structure products as an example, than we do corporate credit.
Greg, can we try and make this really simple? Just to wrap things up, There were some headlines yesterday about a security that come to market with a yield to six percent and it has one of those at risk maturities early next month, Greg, can you explain to people what is the actual risk there? What is the risk there with that security? Because ultimately, surely doesn't it get paid.
Well, hopefully it gets baide. This is the debate on the table, Jonathan. But the question for an investor is like, why would you actually target yourself for that particular maturity? So you know, if you do the math around it, you know it's a much higher yield divided by three sixty five, you know, times ten days, is it really worth the risk? So so it's somewhat of an anomalist math equation. And so I wouldn't be so worried about the six percent because that's not really what you're going
to earn. So, you know, from most investors' perspective, it's just not worth targeting yourself and getting thrown into the potential default pool. And hopefully that doesn't happen.
We all have that doesn't happen Face page and fixed income. Thank you, Greg, appreciate it.
No one better in New York City to do this in Oliver Chen, senior equity research analyst at Cowen who's just totally plugged into our aspirations as well. Mister Arnold has done this forty five times at the MH. John has mentioned this. John's really followed this story. He brings his sons to an American icon, Tiffany, and is it right to say they blew it up.
Yeah, it's been tremendous in terms of the innovation there, and luxury is about magic and logic and bringing new, younger customers to the table as well. Tiffany is an iconic brand. The partnerships with Nike really elevating the assortment, and this flagship is one of the best stores in the world right now in terms of what they're doing experiential retail art, this unique experience. LVMH is definitely one
of our top ideas. China is about twenty five percent of revenue, so it's quite material and we're really watching these near term changes. The mRNA will be important.
You've coined a phrase that I love. It's South Wealth and if you know, you know, I could spot Brunello, I can spot the MS orange poking out at your pocket right now. And then there are brandings, the aspirational stuff, the people who line up outside the Gucci stores and they do the buy now, pay later, fifty dollars a month, get whatever you want, get a hoodie. It's got a big brand in front of it. Lisa and I were talking about this before we came on air. We're trying
to work out has the latter started to crack? Have you noticed that at all? Because we used to see all these lines around these luxury stores, and when we used to speak to people in the store, the consumer was changing. They were moving away from dropping five thousand dollars on a handbag and maybe that we're thinking about it through a monthly payment. Has that started to fade started to break in this country for sure?
John, You bring up a great point in terms of aspirational more entry point luxury logos as well as sunglasses and footweark be gateways to luxury, and that's been softer. We've seen inventory levels that are too high at nor Trum Sacks and Nemon Marcus for that reason. At the same time, when you think about stealth, well, it's about materials, it's about touch and feel, it's about looking great at work too. That's been a trend that's been working too.
As the consumers become more cautious and we've seen many shocks.
How much are we really parsing through the key shaped recovery that we used to talk about that we seem to have forgotten. We're basically people with the most power are spending it on luxury and able to do so in bulk, and you're seeing the others kind of fall off as the price increases really catch up. More broadly in the economy.
We're definitely seeing a consumer discretionary recession in terms of those products and that market as a whole facing negative trends. We're also still seeing shifts where dollars are spent on travel and services hotels. At the high high end, that customer is very strong and robust, so we're still seeing strength at the high end. It's more of that area right below the high end, the aspirational, where there's lots of pressure. At the high end, the wealthy consumer always
has money. It's more about sentiment and emotions too. Certainly, some of the financial shocks have been disturbing in terms of putting that customer on pause. Consumer confidence has been volatile as a whole, so it's definitely something we're watching.
The overlay here of China and what's going on there. Is there a sense based on the luxury players that are more exposed to the Chinese consumer and less exposed of where that trend is. Is it falling off? Are people really seeing a shift there?
Well?
Structurally, long term, China is the biggest deal in luxury. It's thirty percent plus of the market plus even more growth, so great luxury retailers and Louis Vuitton's the largest market cap company in Europe, so it spends about ten million dollars on advertising and promotion, and Tiffany Renovation is well over two hundred and fifty million dollars just here in New York. China will be important for the long term, but it'll be fairly volatile as we watch these issues unfold.
The name of the game in luxury is flagship stores and stores that really make you forget about price. So being there physically is important as well as a modern, upgraded, you know, rethinking the metaverse, a digital experience that's connected as well.
Our department stores then dead. If I'm at the corner of fifty seventh and fifth Avenue and I'm looking from Tiffany's waving over at Burg, Hi, what's the future of Bergdorf?
And you mentioned earlier, Oh, Burgdorf is very exciting. It's right there too, in these magic corners. Bergdorf is an iconic institution. Our recommendation is Macy's department stores are not dead, but they're transforming very rapidly and really needing to offer service, differentiated product. They really need to get the younger customer end, and that's been a constant, interesting epic struggle. We're following Coles this morning, the gross margins were better than expected.
Back to the basics for retail as well as inventory management and supply chain. But I teach at Columbia, don't forget it's about magic and logic and really bringing things you didn't know existed that you wanted in retail too.
He's the only want to know on the sell side that could conflate coals in Tiffany in one conversation.
In Macy's as well, quickly, what is it about Macy's that you like?
Inventory management? CFO really focused on an agile CEO, rethinking the loyalty program using data. Artificial intelligence will play a huge role in personalization the data sets as we think about the future of retail, and Macy's has a loyal customer too, needs a younger customer for sure.
We're not doing to giveaway a succession because Pharaoh's got to watch season three and four top to bottom it happened. What's a succession for our No at.
LVMH, Listen, the family is doing a really modern job rethinking brands and captivating a younger customer, elevating brands. It's a company that manages for the very long term.
Answer my question there's like three sons, two daughters, the whole thing. What happens in season three of the LVMH.
Well, I think it's going to be intensity competition and a real interesting battle for the best of the best, and that's what happens. You really need this competitive spirit to be culturally relevant. Retail is awesome, Luxury is awesome because it's always changing. You've got to be in touch with how music is moving, how TV is moving.
To be watching this.
I love this, Oliver. This is great. Thank you, Oliver. Such a startish dude. Double breasted suit, Pete, I'm going to.
Just postulate that if he had a beating at the White House, he would not be wearing shoes hybrids. I'm just guessing that I won't.
I've got a word on the hybrids.
Kind of in the churches.
This is Brooks Brothers. So it's back to the basics, rethinking and double breasted fashion is about all the new and bringing traditional mix and matching. But I'm also versatile. I'll do anything like you on the weekends.
The understated things.
About materials, craftsmanship, well, materials and heritage and how something is made and if it feels great, I mean Cashmere is here forever, Yes, and stitching and craftsmanship.
So you want again for shoe beautiful shoe half bro chat Chase, British, British.
It is not a great tradition of that, so little painful in the beginning, but it's worth it.
Break him in. Yeah, I great.
I just would kill to get at a larger desk. Oliver Chen, Michael Burke who ran burg Dose for years, and the great Vanessa Friedman of the New York all in together bring ink from from London about He takes it so seriously.
As he should.
It's a multi billion dollar.
What do you do if you put a sweatshirt in the dryer and shrink it?
I mean you asked about this before. It really depends on the material. But I've done it a few times, and sometimes you want to shrink it and sometimes you don't.
But most of the time it's shrink it.
He reinvented rethinking a real stature in the industry.
Yeah, okay, I.
Think we don't outwait, Yeah, okay, good, thank you.
Two big stories here to talk to. Jim Lucier about senior political analystic capital HEFA Partners barely describes the decades of experience. We've got the theater in Florida, We've got the theater in Washington. Jim, in your research to Know, which I thought was a really calming note, you talk about three subsets, the people that will bless this, the blessed, the people that will say the deal is acceptable, and
I would suggest i'd add the furious as well. Who's going to win out here in the next ten days among the blessed, the acceptable, and the furious to move on from his crisis?
I think the blessed and the acceptable are going to outnumber the furious. If you look at the way these negotiations proceeded, they've gone from hell, no, we're not budgeting to what kind of freeze do you want to? Okay, who's going to deliver the votes for this? So I think that despite what you see on television about a standoff, they're actually fairly close.
James, I've got to turn to what's going to take place a little bit later on this afternoon, this talk on Twitter for Gabnor Tsantis. What do you make of this as a first step potentially towards a run for the big role in the White House.
Well, I think it's an unlikely match of personalities. The thing about Ron DeSantis is he's not exactly the most warm and fuzzy guy out there, even though he is a terrific administrator and terrific governor, terrific giver of press conferences. To have an unscripted moment with Elon Musk suggests that either he's prepared to roll the dice and try something very different, or else he just doesn't know what he's in for.
Do you think the first steps are important or do you think in a couple of months time will forget this.
I think that in a couple of months time, we'll forget this. We have forgotten Elon Musk throwing the iron ball through the the truck. We've already forgotten the stealth video in which President Biden announced his re election campaign
early in the morning two or three weeks ago. I don't think the announcement makes that big a deal, but it is important as we go into Memorial Day that we start that one year countdown to the presidential campaign beginning in Earnest, which is really going to be next Memorial Day.
How interesting is it to you, James, that Twitter, a social media platform, is not so much tiptoeing, as in screaming, running into the whole media kind of sphere in Elon Musk hosting this conversation. I mean, what is the distinction at this point between social media and media? And from a regulator standpoint, does this muddy the waters?
Well, Elon Musk likes to say that Twitter is the app for everything, and how do you better prove that you're the app for everything than by entertaining Tucker Carlson. So he's demonstrating you can do a lot of things on Twitter. I think Elong has a great commercial incentive to show that Twitter's a very vast, lot, very effective platform, right up there with Amazon or Netflix. I'm not sure
the regulators know how to do this yet. The regulators are fighting a retroactive war, I think, battling Bigness, trying to fight Bigness by breaking up and turing large mergers. But I think Elana is far ahead of them at this point.
Well, and to that point, James, I mean to John's point earlier, he was saying, some are speculating that Twitter and Elon Musk is becoming the main competitor to Fox and sort of this alternative conservative universe, especially if you have Tucker Curlson launching his own Twitter space or Twitter platform, and you also have a sort of initiation of Ronda Santiss campaign, all on the same site.
Well, you've got no shortage of people who tried to launch alternative platforms. For instance, there is Glenn Beck, Megan Kelly has your podcast. I guess O'Riley is still out there. What's happening though, is that as you see conservative media moving into this new video platform with Twitter, the old forum, the AM media, the AM radio that was the home
turf of Rush Limbaugh that is slowly dying off. So in other words, the old forest is dying and the forest animals are looking for a new environment.
Jim, you got such a study of history on this. I'm going to go back to the legit World War two. Here Robert Dole of Kansas, he'd be one hundred by here in July. Senator Dole ran for president, came out of Kansas in the Midwest, and really never related with the American public. Translate that over to the governor of Florida. How does he come out of Florida where he won big and translate over to a Republican and independent America.
Well, Bob Dole was a marvelously funny, warm and empathetic guy. Everybody who knew him in person loved him. He was famous for cracking jokes NonStop in the Senate cloak room. He was famous after he retired for sending donuts to the cloak room every day. You know, the memory of Bob Dole is just incredible in that way. But he did have I think a bit of awkwardness with large bodies. DeSantis, though nobody's ever really said that DeSantis is warm and
fuzzy in that way. They're impressed with his smarts, they're impressed with his ability to lead as a former military officer. They're impressed with lots of things about him. But you don't hear people talking about DeSantis inspiring the deep personal loyalty among his constituents, among his base, among friends that Bob Dole certainly did. I knew Bob Dole. My father knew Bob Dole very well.
James wonderful to get a perspective on things, particularly that in mind. James Lucy then of Capital Alpha Partners.
It's great about Liz Young. She writes his brutally direct notes. This head of investment strategy it so far she loses the ratio mumble jump and talks about the mood and emotion that's out there. You're speaking of housing, Lis, but I think just talking to Oliver Chen of Cowen about the persistence of luxury, I'm going to steal a phrase from you. We're in a milieu of bullet proof demand. We just keep seeming to continue to prosper here amid all the gloom. How do you see that?
Well, I think there's a difference between the demand that we're still seeing from certain sets of consumers, and especially in the housing market, in the face of rising mortgage rates again, mortgage rates that are higher than they've been in forty years, and there just continues to be this appetite to spend. I think when you look at what's happening signal wise, both in the economy and in many parts of the market, this is pretty classic late cycle behavior.
The challenging part for many investors, myself included, is that late cycle can last a very very long time. It can last up to eighteen months, maybe even longer. So we could continue to say it's clear that we're in late cycle. At some point there's probably a contraction to bring us back into early cycle that would soften that demand. But could it be another six months perhaps? And I think that's the frustrating part in the meantime to try to make money in the market.
John brain Freeze surveillance correction. Liz Young is with us, And I was thinking of the day I first heard Liz Story the piano player, when she fell on the scene of singers Songs, that this story Liz story, was this storyline caacular? She's got spectacular voicings.
Was she as good on the piano?
Was Liz Young as Liz Young? Liz Young on piano as a site to hold I'm so sorry.
Well, Liz, you said something I want to pick up on this idea that late cycle can last a very long time. How do you know when you're getting to the end of a late cycle that can last for eighteen months?
Well, it's o cult to know exactly what those signals are. I think if we all knew exactly what it was supposed to look like right before a recession came, we'd not have all of this consternation about what's happening. One of the things that I watch and I continue to watch this every single day is the yield curve inversion. Now we know that the inversion itself, especially at the twos tens, is more of a signal pre recession or a warning sign of, hey, there could be some bumps ahead.
We don't know when, we don't know how big. And then you hear that old adage of the yield curve has predicted nine of the last five recessions or something, So it's not a fool proof indicator. But when that inversion starts to re steepen, meaning the inversion becomes more shallow, that tends to be the time when your ears should perk up and you start to listen for indicators that the FED may pause, the FED may have to cut, And that's what we're looking at in the market right now.
The market still believes that the FED is going to have to cut before the end of the year. The FED holding steady and saying that absolutely not, we are not talking about that yet. Also, their own projections of inflation are still above target, both at a core and a headline level by the end of this year, So if things go the way that they expect, no cuts on the horizon in twenty twenty three. The market is sending a different signal saying, hey, we think that things
could weaken. It's possible that we see cuts. So when you start to see those yield curbn versions get more shallow, you start to see the expectation that the FED may have to pivot, may have to change policy at some point in the next twelve to eighteen months. That's usually the time when you feel like the clock is really ticking on, when we're going to find out whether or not this recession actually occurs.
Given that the music is still playing, do you play? Do you invest in stocks? I mean, are you basically in the Sevita Supermanian camp and not on the Darryl Kronk camp of saying cautious amid an n cycle that could last for another year.
I'm cautious on the market, and I admit I did not see this rally in tech stocks coming this year. I mean, up twenty to twenty six percent, depending on what part of the NASDAC you're looking at, is pretty astonishing. But if you're a long term investor, and this constantly is a theme that I think everybody should think about. If you're a long term investor, you should be invested in stocks on some level at all times, because there's
really no other place to generate capital growth in that way. However, if you're a long term investor that doesn't have a stomach for volatility in the short term, you do have to position defensively in this environment, especially at a time when we've got yields back up again. I know that
you talked about that earlier in the program. As yields rise again in this environment, valuations really do matter, and you're paying a lot for some of those names that have done really well so far in twenty twenty three. So if you're not somebody that has a ton of stomach for short term volatility, and when I say short term, I mean six months or less, then you have to
have defensive positions in the portfolio. But if you're a long term investor, let's say beyond three to five years, you do still have to have equities.
Hey, Liz, thank you, Lis Young there are so fine.
You know we're going to dive right into this right away because it's like a three hour conversation with Douglas Cast. He's at Seabear's Partners moving money around in Florida, and he's been very vocal. But Doug, I want to start with what I saw at Oakhill where I used to caddy with just stunning memories of my ute. I went to dancing school there, Doug, with girls with white gloves on, and you know, the whole thing from another time and place.
And there's a guy from California. You hit a seventy five last week, Doug cast in my dreams, I could hit a seventy five. You're not too far from Michael Block. I mean, you're really working at it. What do you think of the miracle the PGA rot last weekend.
I think that for those that have no idea what we're talking about, Michael Block was the PGA club pro who had hold in one and finished tied for fifteenth in the PGA Championship last week. And I think he's the reason why we love sports. It's the unexpected which excites us, like my seventy five year reference on Saturday, or like Judges home run to tie the game last night and Volpi's walk off and the recovery of the
Yankees in the last three weeks. It's why we root for eight FC Richmond over West Ham Tom.
Yeah, Well, Richmond's doing well this.
Year, Tedence.
You know, Doug, they're in the bunkers, And when I was at ol Kill, the bunkers didn't look like that. It was like the Berlin wall in front of you on the way to the green. And where does Michael Block's hands fall apart because he's never faced a pressure. Is it in the bunker, is it hitting the ball the first time with the driver, or is it on the putting green?
I don't know. It was the classic caddy Shack Cinderella's story. Yeah, that's why we love the game.
Just woke up because you mention Caddyshack and she's like, Okay, would you like to ask you a question that dodcasts about the equity Barker, I would love.
To I finally recognize something.
Crey, Good morning, Hi.
Good morning, lovely to have you on. Let's talk about this debt ceiling. What happens if we get say we have vert a default. Do we get a relief rally or is it just more glum and doom?
What happens next?
I think it's just a sideshow to the core problems facing the markets. Creedy. Look, we all make mistakes in this business, but one of the benefits of having experience and managing money over the last year and a half in particular, and having been around the block. Is the quote Crosby, Stills, Nash, and Young. We have all been here before. We were in nineteen ninety nine during the dot com mania, we were in late two thousand and seven in the home price mania, and again in twenty
twenty one in the arc disruptive stock mania. We are there again in May twenty twenty three. Today it's a speculation in AI and in as Mike Darda discussed really well in the last segment, the negative market ramifications of a top heavy market in which leadership is historically narrow, which reminds us of nineteen seventy four when the nifty to fifty blew up, leading to seven years of lean returns for stocks.
So it sounds like the AI rally that you're seeing not sustainable in your view, correct?
I think that the two circles we have the square crety, are the soft landing and speculation in AI the markets at nearly twenty times, it seems to be betting on a soft landing, though in reality the market goes up and down and oftentimes traders and investors simply chase an eye the direction for no real reason other than they are evaluated against the benchmark and care more about that than they do in making money or preserving capital. I think soft landings only tend to happen when the FED
has been proactive with monetary tightening. In this case, they've been badly behind the curve and badly reactive, so forcing a somewhat aggressive tightening cyclone the last fourteen months, especially relative to the zero base we came from. So we have sticky inflation mostly a functional labor costs. Soft landings don't tend to take labor out of the system in
lower pressure on wages. Only hard landings do that. So how do we get sticky inflation out of the system without a hard landing that the market implicitly is betting against. And then, secondly, of course, we have the hot sub topic d Jore in which Tina has taken a new form. It's in AI this time, but AI has been around for years, and as I discussed in an article I just wrote for Real Money pro the pathway to AI adoption and profits is likely to be rockier than many expects.
And Critty this is so important mister cass is saying, and I go to the railroad bottle. The railroads went down in flames in the eighteen nineties for all sorts of reasons, and then they finally got together the second act around, Yeah saying you know we've seen this with AI for years.
Yeah.
Well, Doug, I was just reading your column, actually, And the case you make here is simply that the adoption is going to take much longer than what the market is pricing in. But what is the actual value to a lot of these big tech companies sitting on piles and piles of cash, record amounts of cash that are all going into AI, Alphabet and Microsoft.
Et cetera.
So is it really fair to say that some of these games are unjustified?
I think it is and creedy. I'm not a luddite, you know. I was on with Tom and pol in late twenty twenty twenty two when I was buying all these stocks, I was buying them under four time sales. And now with the stocks up dramatically, there's no longer a value in my Yeah, Doug, with.
Time left here and I there's just so much to talk about today. You have a Florida perspective like nobody. I know the governor of your state tonight, I guess, is going to launch a presidential campaign with Elon Musk. Now, you know, mister Musk, you've been very supportive. I believe the space stuff and all that, and you know you're hugely visible on Twitter. But this is your governor. What are you going to listen for from governor to Santa this afternoon today?
Well, let's begin by framing it. You're talking to a former Native raider and a progressive liberal who believes in pro choice and has a political view, and my political view is antithetical.
To this same He won big in year Florida. Can he extend that across the comfortable Republic.
I don't think he has a chance against Trump. I don't think he's a likable character. I actually think he's on the spectrum based upon my conversations with him, and I don't think he's going to be competitive against Trump. So I think it's an academic question. You know, I'm much more concerned about the market.
Yeah, well, you know, let me bring this back to Kidder. Peabody being pritty doesn't know this, but long ago, you're meeting potatoes. I think a Mario Gabelli and auto parts and industrial stuff cass on the high ground in banking, I looked at Peck West today and they got a thirteen month five point five zero percent cd dug out of our ute. I mean, are you going to load the boat on regional bankers in crisis?
No, you can't right now because of the aforementioned conversation you had in a prior segment. It simply stated the the cost of capital, the cost of funds are going up dramatically. This combined with FDICS, extra assessments and other factors, are going to a really way on the secular earnings growth rate of the industry over the next two three years. And unfortunately Sellside has not yet reduced their estimates.
Doug.
A final quick question or last minute here when it comes to the biggest concern after this debt saga, where does China rate on your list the growth concerns that we're seeing there.
China is, as as we all know, is the driver of global economic growth, but that really is not my primary concern visa visa speculation, I see, I'm not certain of much, but one thing I'm certain about is that the S and P is highly valued, especially against interest rates, and our reasonable and much lower than consensus for Castler profits.
And I'll just briefly say that yesterday's closed, the Fed funds rate was five to eight percent, the six month Treasury yield was five point four percent, and that's roughly three and a half times the SMP dividend yield of
one point sixty five percent. It costs seven point one percent for a fixed rate mortgage, and the SMP basically closed where it did fifteen months ago, when the Fed funds rate was only eight basis points, the yield on the sixth month note was one percent, or roughly two thirds the SMP dividend yield, and the fixed rate mortgage rate was around three percent, And the SMP is basically
the same price. And also fifteen months ago, the consensus s and P estimate was two hundred and fifty two dollars a share, and now it's most to two hundred and fifteen dollars to share.
So I don't see any amount of time I wanted to get to Garret Cole in the New York Out of time, Dougcast, thank you so much. As Sea Breeze. Subscribe to the Bloomberg Surveillance Podcast on Apple, Spotify, and anywhere else you get your podcasts. Listen live every weekday, starting at seven am Eastern. I'm Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always on
the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and this is Bloomberg