Bloomberg Audio Studios, podcasts, radio news.
This is the.
Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App, Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Please to start with Mike Green with a good view of the FED in economics and the system. Sort of a total all in look at what we're doing. But today we have to celebrate that is simplify asset management. High yield ETF has five stars from morning Star and that's That's what's unusual in the category that Mike plays in the pond, six hundred and thirty one investments, and I don't think I've ever seen this in umpteen years.
Your single percentile, what are you doing? I mean you're not offered death style, You're to date you're one percent tile a year ago twenty two percentile, which is phenomenal. What are you doing different than others in the highyeld sandbox?
Well, first of all, thank you for saying that. It's really kind of you. We are doing a couple of different things. We've designed the product to take advantage of many of the theories you've heard me talk about the impact passive investing, the strategies that are out there. The product is the way we access the high yield market. We're using a synthetic exposure all sorts of credit funds short the HyG in order to amplify their single security picks.
We relieve the balance sheet from the banks when they do that, so we get the securities lending fees, so we pick up out one hundred and fifty basis points of excess returns simply by doing that.
We then apply an.
Overlay that I've used for the past decade that is designed to smooth out credit hedges and just find designed to smooth out credit spread widening. The impact of that in this year has been fantastic. That's really what accounts for our.
Is it a one offer, is it something you can persist over three, five or ten years? We've been using it.
I've been using this strategy for about ten years. The Simplify strategy has been live now. It just hit his three year track record, which is what was required to get that five star rating, and it's managed to deliver in twelve separate tightening and widening cycles. Now for credit so we've actually been really fortunate.
You come out of Teal Macro as well, you know, the manage the assets of Peter Teal a few years ago. What did you learn there? What did you learn from him?
Well, you know, Peter is incredibly famous for asking the key question, what do you believe that nobody else believes? Or what you believe is true that nobody else believes is true? Or what do you believe is false that
everybody else believes is false? And when I met Peter several years ago, I introduced him to my ideas around the impact of passive investing, and honestly, that I think was one of the most important things that he encountered his influence, I think the dynamics of how he's taken his company's public and how he's behaved.
When you say passive, do you mean traditional the way that retail investors think about passive investing? Five hundred index funds two basis points to buy vo.
Absolutely, So that's really what we're hitting on. Unfortunately, there are incredible flaws in the construction and understanding of this. I've actually spoken on Bloomberg with Arry Ritholtz about this dynamic passive is not passive. The actual definition of passive is you never trade.
You always hold. That means it's impossible to get in. It means it's impossible to get out.
In around twenty sixteen, a very smart individual, Loss Peterson at AQR wrote a paper called Sharpening the Arithmetic of Active Management, which you noted on index reconstitution that they had to trade and therefore that created an opportunity. My contribution was to recognize that every time you, as an individual investor contributing to your four oh one K, you are creating a trading environment. So it turns out that
passive is not passive at all. It's a systematic, algorithmic strategy that simply says, if you give me cash, then buy.
So translate this into what our listeners and viewers are living when they buy a passive fund on a zero to one hundred scale, how active is it? Is it ten percent active?
Well, it really depends on what you defind. So the minute you're putting that money in, you are one hundred percent active. Once you've transitioned in short position, you become passive. That in and of itself, though, creates its own dynamics because you're not really passive in the classic sense. You are hoddling, right. It's the same phenomenon we saw on bitcoin. If you're not willing to sell, the next player has
to pay a higher price. And because what we have seen is just an extraordinary inflow into passive strategies, which now represent about forty five percent of the market cap of the United States, we've actually just seen a continual upward pressure in valuation and prices that a lot of us, unfortunately think is the up and to the right phenomenon in markets.
And your community across the nation. And this fad day, a lot of good voices coming up. Kati Kaminski will be with us the absolute best on trend investing of the shattering of trends. Right now, as Tim Stenovick mentioned that we've got a nice lift to the market off a bombshell Switzerland announcement, the United States and China will meet and they will speak. Futures up thirty seven points right now, we said good morning on YouTube, Tim.
Does that mean we're all handling our retirement incorrectly? If we're thinking about funds that are based on age, based on retirement, these target date funds that are mostly passive Unfortunately.
I think that's correct, and I think that the first of all, I want to be very clear, all and incorrectly are very broad and subjective terms. Right, it's a system that has worked extraordinarily well, but unfortunately has Ponzi characteristics. The new entrance into the system are inflating the wealth of the existing holders. What we don't know yet and unfortunately you mentioned when we're from Peter Teel, the trade that gave me notoriety was the Vollmageddon events the XIV.
What became very clear there was that was a systematic algorithmic strategy that had become too large for the market. We're seeing similar characteristics in the broader market with the S and P today. The way that that manifested itself is when a significant outflow occurred a crash.
Hey, where's the shadow right now? I mean those of us of a certain vintage understand we learned how to spell portfolio insurance in October of nineteen eighty seven. There was a leverage of LTCM in that where's the shadow in the system? Now? Is it just simply and I'm speaking folks on a physics basis, the mass of the passive market that has.
A huge component to it. So when I did the XIV trade the Volmageddon event, I had done the analysis that basically suggested that the passive or systematic algorithmic strategies had risen to about seventy percent of the daily trading volume. If we look at the impact of passive today and the broader market, it's very, very similar. Once you factor in the way money the way market making is done,
which is effectively index arbitrage. We're trying to make ETF's work, we're trying to keep prices tight.
All of that trading is tied.
Around many of the same phenomenon and so you know, unfortunately, my work suggests that we're getting closer and closer to a point at which it becomes an inevitability rather than a probability.
And would tell I would say, is you set yourself up for not a three standard deviation but a four or six standard deviation, surprise, some form of shock, and that's a trigger. Is it as simple as that there will be a trigger point outside our beliefs and certitudes that will allow for the magnitude move.
Will you hit on a really key phase a belief? And I would argue that a key component of what we're experiencing right now is that belief right. So the up unto the right phenomenon encourages people to put money in when it's down right now, they're putting it into the industries. We saw this very specifically in the events coming after April eighth, when the market made its recent low. A trigger was hit what's called a threshold trigger within many target date funds that forced them to rebalance.
When they rebalance, what do they do?
They have to sell bonds by equities, And unfortunately, when that coincides with Trump making a speech, President Trump making a speech saying it's a good time to buy, it's a force Listen.
Would you get the surveillance cork and it at my mouth? So Tim save me. Well, I can't say enough, folks, how I agree with mister Green. I'm rebail. It's like deaf to go. Mike.
You have just a fascinating post out from your newsletter earlier this week. It talks about President Trump in the historic context of other leaders in the past. Franklin Roosevelt. You even bring up Roman leaders in there, in the context of where we are as a country, where we are as perhaps an empire. Where do you see it? What do you see this moment? As well?
I've been talking about this for a long time, and as you know, I think all American men think about Rome at least five times a day, so.
We've heard that.
There's nothing particularly unique about my insights there. Look, we often talk about the fall of the Roman Empire. We're not an empire. We're a republic, and where we seem to sit, unfortunately, is towards the fall of the republic, And if anyone really wants to dig into it, I would strongly encourage them to read Mike Duncan's book The Storm Before the Storm, which is about that transition period
between the Roman Republic and the Roman Empire. I draw analogies to the idea that Trump could be viewed as a graucus, could be viewed as the Grocy Brothers, etc. As a reformer. Unfortunately, I just think he lacks the mental plasticity at the advanced stage that he's at that a Franklin Roosevelt had. Franklin Roosevelt was not a communist and was not a socialist, and was not a redistributionist
in his early stage. It was only after he saw the effects of the Great Depression in the late nineteen twenties early nineteen thirties that he saw a different path and he redefined the relationship. Now, I'm not suggesting that the answer to this is more government. The answer is more effective government, and that is a very hard challenge in this current environment.
I just put it on Twitter, The Storm before the Storm, the book by Mike Green Robert T. Caplan with a book somewhat equivalent to that written last year off of Yale University Press. I'll try to get that out as well. My answers watched the what was it like fifteen twenty years ago? They had a whole It was like when they invented streamings serials and they add a TV show called Rome. You know, I don't have to read the book, do I can just watch just now.
You just open chat GPT and ask it whatever you want and then it'll do it for you.
Well, yeah, that's a whole separate story, you know, Mike, I think this is really really interesting. I want you to fold it over to how people should prosecute something as boring as a retirement plan. How do you bring this over to the mundane?
But Tom, we could have an hour long discussion before I get it.
Can we clear the deck here? Are you willing to give up newspapers for Mike Green?
That's the right answer.
That is the right answer. How do we bring this over to we mere mortals trying to decide what percentage to be in the market.
The quick answer is there is no right percentage, right, It's going to depend on everyone's individual component. The key thing that I would highlight is that when you think about investing for retirement, when you think about those, focus on what you need, not what your neighbor wants, right, And this is a really key component. We tend to
get ourselves caught up in the fomo type framework. We're in an environment in which you can if you're worried about inflation, you can buy real yielding tips with a positive yield for the first time in over a decade.
Right.
That is something that would argue people are ignoring. I would broadly suggest that fixed income in a lot of ways, because it has what I refer to as indogenous liquidity, significant coupon payments, and an ultimate payment of at maturity, has very different characteristics than the Ponzi like characteristics associated with equities, where you are always getting your value from what somebody else pays, and so those are ways that you can separate yourselves. They're not immune.
I have to be clear.
This is a systemic issue. But they are a better way to think about the opportunity.
So brilliant, Mike Green, thank you so much. She's chief strategy to Simplified asset Management.
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern. Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
We continue forward with some huge academics from the London Business School, her doctor at Crystal Rondo. The Linz stops by when she is in America. She's a Vauntabelle asset Management of Europe. You walked in the room and you said, I don't talk about it as fed stuff. I want to talk about allocation, which is great because I don't talk enough about allocation. What's the biggest mistake, given chaos, given day to day uncertainty, what's the biggest mistake people make an allocation?
Do you think that they know to be honest? Having been an active investment manager for all my Caurier before becoming the because just like.
That in the English, because it wasn't there having been an active manager in enjoying losing money.
And not at all, not at all, actually not at all, my friends should still be on your Bloombergh platform. No, but very seriously, there's a lot of uncertainty, and what it means is there's a lot that we don't know, and you need to recognize that and not go for extreme allocation. So neither extreme bullish, which nobody is tempted, nor extreme verish. That is the number one mistake is to actually go on the limb.
Are we passed a little bit of the chaos, a little bit of the uncertainty Given what we found out yesterday, a US China meeting will take place this weekend in Switzerland. It will center on de escalation.
No, I don't think we passed the uncertainty. Yeah, morehead, I think so. I think it will continue because you know, this is not a straight path to a deal, nor is it a straight path economically with the political environment, so uncertainty is here to stay.
Breathing a sigh of relief that the conversations are at least happening.
Yes, definitely, definitely for growth and for inflation. Right, the one thing that we do know, so let's start with what we do know now is everything else equal. If you put on tariff, however low they are, but on a large scale, you will get lower growth and higher inflation. So that is one part we know, and that again has implication for Ustelic nation.
Nine point two five percent of our audience, particularly here in America Good Morning, around the world and on YouTube, looks at Europe and has basically mentally discarded it for I'll say five years or ten years in investment. Is there a new Europe?
I hope I can answer yes, there's Certainly Europe has certainly gotten a wake up call. I think the proof is in the pudding. Europe has disappointed for quite a long time. So what's changing is the fiscal spending. I do believe it will happen, indeed in Germany. So that's a positive and relative term for growth. But look, some of the weakness of Europe has been the inability at times to act together and that.
But then on a micro basis at the company and level, are the CEOs thinking differently in whether it's two boards in Germany or one board wherever that they have supported the board to be. You know, the stereotype is to be more anglocentric. Are we are we seeing that now?
I'm not sure I understood your question.
I think because you don't want to hear it.
Yeah, no, no, no, no, no I do.
But I mean Europe has always been quite looking towards the west, right, so Anglo centric if you want to go with that.
But yeah, the stereotype of our global Wall Street audience, yes, is there's a there's a locking individual take on CEOs. Let's go at Disney at Uber this morning. Tim Uh, They're out there, they're going, let's go, let's fix this, let's fix our margins. Let's go, let's go, let's go, and everybody in years going at a slower speed. Is there a change there or is it business as usual? No?
I think there is a change. I think there is a change. Whether it delivers, I don't know. That's why I said proof is in the proof is in the pudding. Is that you now we now need to go get it in Europe in a sense a line?
You know the other day, fall off my chair, Royal Duchess once again looking at a British patrolum talk about dinosaurs.
What's all as new again?
You know?
I wonder to what extent this idea of Europe being pushed close together or becoming closer is the result of the US in this America First policy? Is that what's happening here? The US is saying essentially, okay, America First is not America alone. Investors don't necessarily agree with that, but it makes Europe say, okay, we have to rely on each other more for defense spending, we have to become closer together, and we have to unite more. Is that what happening?
I think that's part of it. That definitely part of it is just like I mean, that's with everything in life. You get adversity and that pulls you together. Right, So the adversity. The first thing that brought Europe together was COVID. That Ino sense really helped from that perspective in bringing the countries to pools it together. And I think, yes, there's a reaconing that that they better pull together.
It didn't happen from a fiscal perspective during COVID that was a huge issue. I mean, you saw Europe as a whole recover in a more slow way than the US did. The US sort of stood out over the last three years. Yes, in its quote unquote exceptionalism compared to the rest of the world. Is that era behind us?
No, I think there's I mean, there's a few things that are impacting right now. I don't think it's I mean, let's say I've been structurally bullish on the US economy. I continue to believe it's the strongest economy, but a few things are denting or impacting US assets right now. The pressure that we're seeing on the dollar, I think is a structural downward pressure. Europe has a chance to pick itself together by uniting. They see the need and that's why I come back to we need to see
the proof in the pudding. Is it happening and is it delivering?
With us from Vulntable this morning, thrilled with this crystal under the land all I've lived and I was in Switzerland I was fifteen years old. Magical is the appreciation of the Swiss franc. Tell us how Switzerland adapts to the new strength of Swiss franc. Will there be a different approach among the cantons and among the federal government.
Well, look, I mean as a Swiss, it's almost like you're born with it, with the chocolates and the mountains, you're born with a strong Swiss franc. So it's part of it. So the SNB, it's the I mean, it's a headache for the SNB, for the companies. They've learned to be competitive, to be honest. So this this is one aspect because it's part of it. Nominally it appreciates because inflation is low and for the foreseeable future that's
still going to be happening. On the real level, you see less of an appreciation trend, but you know, in the end, nominally is is a lot of what matters.
You're too, unimputed deflation in Switzerland because of the appreciation.
Yeah, we could drink, yes we could.
We could. Apple did a coupon a couple of years ago three quarters of a percent for like a zillion year.
We're all pretty much free.
Are you seeing travel to Switzerland changing with the trade wars, with the terror force?
Well, I mean I'm not. Let's say, I'm not on a line post to see people coming in and out, but we do read, including from from esteemed Bloomberg, that yes, we do see more, you know, more asks for for Switzerland, for people looking to come over, whether it's traveling, whether it's relocating. So that's wait for numbers.
Yeah, rto keeper of the MX. Yeah, it is very big on Switzerland. He wants me there on twenty four to seven.
One more question there, see I want to start and where we started. It has to do with asked allocation. Tom asked about the number one mistake people are making. If people are saying, okay, I should go look at my portfolio right now, think about its construction. Yes, where should people look closely? Is it in the equity side, is in the fixed income side? Is in the alternative side?
I think it's it's across everything. I think you do want to be diversified. If you don't know what you don't know and how things are going to pan out, again, don't lean out of the window. So you do want to make sure that you're diversified, that you're sticking to what you are trying to achieve. You obviously go for stuff that is less sicklical sectors that have all pricing power, because if you all things equal, lower grow bigre inflation.
Infrastructure to me is a segment that stands out right less cyclical, has cash flows that are normally indexed to inflation. And you want to think about the dollar, and particular in the asset classes that have lower volatility. If you're unhedged, I'd look at a hedge, to be honest. So these other things that are on my mind.
Thank you, Thank you so much for visiting Crystal Ronde. Where this is Vanderbilt Zurich in today with this whole new view of Europe.
This is the Bloomberg Surveillance Podcast.
Listen live each weekday starting at seven am Eastern on Apple Corplay.
And Android Auto with the Bloomberg Business app.
You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
More than any other guest when she is on, I will get emails. Who was that? Who was that? Who's she with? With RBC Capital Markets. Francis Donald on the economics of the moment of America. Francis into this FED meeting. Do we have looking at the dual mandate looking at growth? Do you have vectors in place? Is there a Francis Donald inflation vector, an unemployment rate vector, a real GDP vector. Do they exist?
I mean, sure, they just look very different than they have historically.
But I got to tell you Tom listening to come into this segment, he said, it's FED day, and I had to say, oh, yes, it's FED day. Which is not because I'm sleeping at the wheel. It's because I spent the morning doing things I've never done on FED days before, which is scan geographic photos for ships on the West coast to see if we're still getting supply to come in. I'm looking at some old school pandemic charts, open table restaurant reservations. Are we seeing any week to
week change in the data there? And of course reading every headline we can see for insights into are we going to see some trade de escalation from China? And my sense is that probably the Federal Reserve is doing very similar things this morning, and that is because they are trying to determine their own vectors for inflation and employment and they just don't have enough data or insights, just like most economists don't right now to determine.
The path ahead.
So extraordinary and certainty heading into this meaning it is going to be a fold of course, We're always looking for any type of insight from FED share Powell as to how they would react to certain situations and what they think will happen next. But the data is going to leave the Fed, as it always does, and we have very limited visibility from traditional data points.
Right now, I hear you talking about the alternative data such as open table reservations, looking at satellite images of ships that are coming into port. It sounds like we're talking in twenty twenty one one. Save for the China comment that you made about potential progress on a trade deal. The Federal Reserve has a very limited toolbox when it comes to what it can do to achieve its dual mandate. How does it navigate a situation of uncertainty such as this, Well.
It doesn't, or it waits for the data to turn, and for that reason, they will by necessity be late. I think their issue is going to be a sequencing issue, which is that the inflation data is likely.
To pop much earlier than the labor data.
And I've been on the show many times to talk about how even though we see a very weak economic environment, we only have the unemployment rate rising to.
About four to eight or high fours. Traditionally, that would be a very strong labor market.
That would be something we associate with a boom time, not a recessionary type period. And that's because this labor market, well, America does not need jobs. America needs workers. It's going to keep this labor market very tight. That's very different than what we saw in twenty eighteen, the first time
that we saw tariffs coming through. It's going to make the FEDCE job a lot harder because I don't think they're going to see a material weakness in traditional indicators of unemployment over the course of twenty twenty five, even as the economy software.
So here's the core question. Francis, back at Queen's University, I mean, you were fourteen or whatever taking your undergraduate there. But Francis, back at Queen's University then, was a six percent unemployment rate the same as a six percent unemployment rate now? I don't think that the same? Am I wrong?
One hundred percent?
And just a little plug here, Queen's University in Canada, we call it the Harvard of the North, just so you know, just caliber.
I thought Harvard was a Queen's of the South.
We'll go with that one too, so that's exactly right. The nature of this job market is changing. We have the most amount of those over the age of sixty five the US has ever seen. Over one in five Americans is over the age of sixty five, most amount of retirees ever, and so economists.
Are scratching their head.
Why are higher rates but also fire rates down and quick rates down. This is a job market that is acclimating to a demographic bus that's occurring in real time. Demographics are traditionally something that you look at when you're five or ten year forecast, when you're forced to do something that difficult.
They're not something we take to hear now.
And this is why when I talk about uncertainty, a lot of folks are saying we're going to get more certainty on trade in the coming week. But a lot of the customers, a lot of the folks that we talk to in the United States are also paying very close attention to immigration policies that come through and how this government is going to support or not support what is a very shifting labor dynamic.
Now.
Ftter Reserve is going to have to talk about this at some point, probably not today, when they're looking at something like a high fours unemployment rate, and that's going to be enough for them to start cutting.
Well, you just heard their folks bottle it, because that's the discussion of the next eighteen months. I'm sorry when I look at the kids having trouble getting jobs, on and on and on, this is a new unemployment rate where it's not equivalent to our memory of what that number is.
Yeah, I think Tom brings up a good point, which is who is having trouble getting jobs right now? And given in the context of the president's immigration policy, this administration's immigration policy, how are you looking at the job market given that we've heard anecdotally challenges from new graduates in those folks looking for jobs, versus some emptiness in the pipeline when it comes to folks in the trade, for example, you.
Got to go sector bisector more than we have in the past. So think about three sectors that have driven a lot of job growth. Healthcare, well, there's a skills matching issue happening there. Government, we know that's going to be declined. That's the one area where you will see shedding of activity. And then retail and accommodation that's where traditionally you would see what economists called new entrance or
immigrants being more impactful there. So sector bisector stories are going to become incredibly important.
But underlying the.
Surface here, a lot of folks will say, well, the labor force participation rate is quite low. It's been falling since two thousand and one. Could prime age workers in the United States twenty five to fifty four. They have one of the highest labor forced participation rates we've ever seen. So the labor market is very tight. This is very different than twenty eighteen. It's even different than twenty twenty two. It's going to change a dynamic of this recessionary conversation.
We don't have a formal recession in our outlook, although I really begrudged that recession or no recession call. It's still a very problematic outlook for the US. And part of that is we think the labor market is actually going to in old school terms, stay strong, but it's not strong in the traditional ways.
Tom. That's the problem.
This is a labor market that we're going to have to reassess and measure with different types of instruments than we have historically.
We got to get you out again. So soon soon, Francis Donald, thank you so much. I got like eight more questions as well with RBC Capital Markets. Francis Donald.
This is the Bloomberg Surveillance Podcast.
Listen live each weekday starting at seven am Eastern on Apple Corplay.
And Android Auto with the Bloomberg Business.
You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.
Which starts Strong, Strong Strong. Vishal Kanjuja joins us now from Morgan Stanley had a broad market's fixed in Kim. I love the first sentence of your note. Jobs Day stole the thunder from the Fed completely. What did we learn in the buoyant Jobs Day that adjusts this meeting this afternoon.
Morning, Tom, thanks for having me on completely stole the thunder. Hot data is not at all anywhere close to the soft data which we've been talking about, you guys have been talking about very clearly. As while the FED knows this very clearly, I think today the market is going to be very clearly looking for a repeat from the Fed for their reaction function that they are still focused on growth.
Down sites and they are willing to take.
Less of a deeper look into the inflation upsides that we are talking about.
Synthesizes with Seth Carpenter's team, Allen Zentner over at Wealth Management, and the others. I guess we got a nominal GDP, it's actually pretty good because of stagflation, But then do you see nominal and real GDP coming out.
Through the year exactly?
So I think that is where we think that the demand destruction on the back half, and we are talking about quite a bit of uncertainty. We've seen it in the base report, We've seen it from all the earnings that we've seen through the corporations as well. But the persistence of uncertainty the time period that we are going to sustain here is going to definitely show up with that demand destruction on the back half of the year.
So then what does the FED do if it knows demand destruction is coming given its dual mandate.
I think it has two precedents that it has laid out in the past of but it intervenes or comes in. One very clearly their dual mandate is at.
Risk and data shows it they step in.
Or the second is that the financial market functionality is breaking down that they have to intervene none of that has happened right now, so they need to be patient, look through the data, and they have quite a bit in the toolkit to act.
What do you what's in the toolkit to act?
Four hundred and fifty basis points? Vase still about if.
We're in a stackflationary environment, then what do we do? What do they do?
I think, in principle, tariffs are going to be one time price increases. Consumers and corporations are going to adjust. I know we've already seen that supply and demandshock play out in twenty twenty two. This is the opposite of that that is happening here.
He almost said transitory, Tom, but he didn't say transitory. You said one time price increases. What makes you confident that that will be the case? And I should I should look, Actually, I'm going to change my question. I don't think we don't do that in the morning. I don't think consumers. I don't think consumers understand how inflation is measured. I think they understand inflation in the context of gas prices going up and then coming back down.
They'd understand that it's change in price over a period of time. They think high prices come down they don't come down.
I think that's what it is this time.
I think the balance sheets, yes, are very very strong in terms of consumer and corporates, but I think the moment you start to see margin compression in corporates meaning consumers pushing back on services or small business pushing back on prices, that's where I think you start to see the hit on labor.
That's when you start to see the demand destruction show up. And that's why we have quite high degree of confidence. But we've covered our.
Underweights and credit. We've covered some of our underweights and duration during this time, but we are not long. We still think that spreads could be widening out as that's tax platary freear could go through in the next two months.
I'm sorry, well, I mean I go back to Mary Poppins and the famous bank scene with Dick Van Dyke and the tuxedos. We are always to India, but you know, I go back to librar or ois. I don't know why we got rid of library. I thought it was great. Now I got something fancy called so for sof R. When you look at sofur swaps, which is what Arid Jersey tells me to look at a little bit of
deterioration the last five days. Is the short term market getting out front of the joy and saying at some point this becomes difficult.
It does, absolutely it does. I think we are less focused.
I think our conviction level with the amount of information that we are getting at the moment is much lower to call the exact date that these guys can.
Cut the FEN. But our conviction level increases as we go out the next eighteen months.
And that's why I think our focal point of duration is still that three to five year mark.
So what is full faith and credit ten year ye'd do out eighteen months?
I think it's lower. I think we breached that.
For me, three point sixty five percent is my recollection for the ten year yield? Can you get a nicely under four percent?
Nicely under four percent?
I think we were four to five percent when we wrote our outlooks in November, and we thought that it will travel that range, and it did almost travel that entirely.
The dynamic ASCO forobose one on one on a dynamic basis, if I get price up yield down, does that signal a good or bad event for our listeners or viewers.
That means the fixed income has served its dual mandate price, total return and negative correlation to risky assets, and it will be poised to deliver.
How much of what you're saying depends on the US successfully negotiating trade deals in the next eighteen months.
Quite a bit of the long end depends on that.
The twenty and the thirty year we need a sustainable, credible, bought into deficit reduction plan, and then that will decide the demand and supply of the twenty and thirty year part of the market as well. I think that is one part of the market that we are nauseous about, to be very honest and staying away from on that part. Coming back to your question on demand destruction, quite a bit depends on the next probably ninety two hundred days, maybe this weekend as well.
Does things get funded. We're going to move on now to the airport, the airline catastrophe in America, But does infrastructure get funded? Does Morgan Stanley see businesses u usual for the issues of megapaper.
Businesses are getting funded very comfortably throughout this entire April volatility that we had seen. The markers that we see for liquidity for funding for corporations and healthy balance sheets. We're still in the green. Treasuries were getting issued very clearly. Concessions we're building up but then getting bought into. Yesterday also we had one of them, and then IG Corporate. We exceeded the supply marker over subscribe books and deals went really well.
When Tim Cook issues bonds, does he call you? But do you get a phone call from Tim Cook?
Definitely? Our traders are getting the phone call from the healers.
Thank you so much. Rasha Ken jud with us with Morgan Stanley driving all of their fixed gun Learn a lot there that was very, very informative.
This is the Bloomberg Surveillance Podcast.
Listen live each weekday starting at seven am Eastern on Apple Corplay.
And Android Auto with the Bloomberg Business app.
You can also listen live on Amazon Alexa from our flagship New York station and just say Alexa play Bloomberg eleven thirty.
We're gonna do the newspaper, so I had to shot up missus Keane all over it last night, she said. Lisa Matteoe nailed it by getting Zandaia front and center and then met Gala. Missus Kean agree with you.
Zandia just was the That's why I wore my full white yesterday. But we do hat and everything.
I mean, who topped it off?
It was very good.
Congratulations again to all to Anna Wintour and all at the Metropolitan Museum of Art Spectacular event in New York City. What do you got this morning?
Okay, we've heard a lot of stories about the tough job market out there, right, but the Wall Street Journal has this article saying that high school juniors they're getting close to seventy thousand dollars a year job offers. And you asked, okay, and what, Well, it's the skilled trades. It's companies looking to shop class to find new hires because the baby boomers are retiring, so that's the issue.
So they're looking to this kids. And this kids say they.
Feel like top athletes like being recruited by you know, pro teams, like they feel.
Like Rockstar's a huge deal.
It's a huge deal.
And the high schooler noticing because they're investing more money into their shop classes, they're teaming up with companies to offer you know, to come in the classroom and talk with the kids too, offer them part time work credits.
I grew up in a house hugely supportive. It was called vocational or something I can't remember back a million years ago. But Ian Why yesterday with Huntington National Bank Shers was brilliant about how the younger cohort there's no skilled workers, and they're going to really incentivize it quickly. Right, they don't have a choice.
Right, they're going to either how much seventy seventy thousand starting, but you have consolation energy, which we all know they offer high school graduates without four year degrees as much as six figures started.
I love this. I mean, I think this is also something that's lost in the conversation about immigration, when you think about the skilled trades and who's coming in and doing these jobs. We haven't had a pipeline here in the US to these careers because so much emphasis has been placed over the past couple of generations on college. I think we're starting to have that conversation now.
I love it.
That's an amazing point I think about that one. Okay, So men is Mark Zuckerberg. He's been making the Rounds podcast, interviews, conferences, and there seems to be a theme when he looks into the future.
So he says that most of your friends will be AI.
Hey, come on, okay, speak for yourself, Mark, most of your friends will be AI.
But you also have AI therapists and AI business agents. So we're gonna be talking to real people less.
I know.
Okay, I'm gonna be the contrarian here. I've been using dual Lingo a lot, which is the language learning. There's an AI agent in there, Lily, and you can practice conversation with her, and it makes what I'm doing Spanish with my son, he thinks it's he and and because he's only six, he thinks that Lily is a real person, which is weird to me.
That's what the next generation is gonna think.
I think, so, I mean music AI. But the idea that AI is going to replace a business agent, yes, nuts.
Next, it can source all this information and it knows you so well.
Yeah, okay.
So, after seventeen years underground, the annual Cicada Cousins says Brood fourteen, they are ready to emerge. Yes, these are the cicadas. The Boston Globe says. They started making their way out of the ground in April from down South. They've started coming out in Massachusetts, Cape Cod, Plymouth County. A few fun facts if you didn't know about this specific.
Group of cicadas.
They come out in the thousands, right, They come out in the evening after dark. They don't sting or bite, so you don't have to be scared of them.
Even though they look a little bit scary.
They do uh.
They're not dangerous to plants and trees. And they die about three to four weeks after they come out of the ground.
Every so I thought this, I feel like we hear this story every three or four year.
Yes, well those are the annual ones.
These are the cousins, the brude ex that comes after like about seventeen fifteen to seventeen years.
So they emerge.
So they've been underground like.
And they're gonna be like in Central Park.
Well eventually, yes, but they're in mass Chusetts right now. They've been down south. Now they're mass Chusetts. So yeah, they'll start to make and that at nighttime they'll start to like come out this.
Summer in New York. It sounds like, okay, you've been watched Wild Kingdom.
With you look at the videos.
Oh no, there's a katas they're they're not, Oh the Curtus looking things.
Listen Mateo. Thank you so much for the newspapers as well.
This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Eastern on Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal