Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside my co host Matt Miller.

Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside my co host Matt Miller.

Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven News.

Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven News.

I'm the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com Slash podcast. The retailers coming in with some numbers here today, Target, TJ Max, we got Walmart tomorrow. Let's let's round table this thing with some smart folks. Jen Bartash is senior industry an also with Bloomberg Intelligence and Bloomberg News. Jen joins us via the cam from the Princeton office of Bloomberg Intelligence. And then we got Simone Foxman. She is a Bloomberg reporter for Bloomberg Television, joining us here in studio, Jen Bartashes, Let's start with you. TGT Target stocks up over five percent the market. What is it like here out of the Target results.

I'm the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com Slash podcast. The retailers coming in with some numbers here today, Target, TJ Max, we got Walmart tomorrow. Let's let's round table this thing with some smart folks. Jen Bartash is senior industry an also with Bloomberg Intelligence and Bloomberg News. Jen joins us via the cam from the Princeton office of Bloomberg Intelligence. And then we got Simone Foxman. She is a Bloomberg reporter for Bloomberg Television, joining us here in studio, Jen Bartashes, Let's start with you. TGT Target stocks up over five percent the market. What is it like here out of the Target results.

Well, when we look at Target, you know with the market it likes is that margin is up and it's up significantly over last year. At the same time, I think everyone recognizes that it's a difficult operating environment, and so even though target reduced, it's full of your guidance for sales and for profit. I think that people are encouraged by the the way that margins are responding even in that environment.

Well, when we look at Target, you know with the market it likes is that margin is up and it's up significantly over last year. At the same time, I think everyone recognizes that it's a difficult operating environment, and so even though target reduced, it's full of your guidance for sales and for profit. I think that people are encouraged by the the way that margins are responding even in that environment.

All right, So genders for our viewers on YouTube, I want to point out that you have what is probably the best quote unquote office in Bloomberg. It is a kind of a corner office. Now, no one, I mean no one at Bloomberg has offices. We all sit at our desks in kind of the bullpen style. But Jenna's got bad as close as you can get to a corner office. I just want to point that out now because she's been running the Princeton office for decades. I mean, she's basically the leader down there. So we were able to bring her to BI. So that's pretty cool.

All right, So genders for our viewers on YouTube, I want to point out that you have what is probably the best quote unquote office in Bloomberg. It is a kind of a corner office. Now, no one, I mean no one at Bloomberg has offices. We all sit at our desks in kind of the bullpen style. But Jenna's got bad as close as you can get to a corner office. I just want to point that out now because she's been running the Princeton office for decades. I mean, she's basically the leader down there. So we were able to bring her to BI. So that's pretty cool.

All right, Simone teach Simone Foughtsman sits near a window.

All right, Simone teach Simone Foughtsman sits near a window.

She does sit near a window.

She does sit near a window.

I also sit near the great Michael McKee, who's a frequent Bloomberg radio. Yes, but I once had my own office because I was the only correspondent in the country. So anyway, but yes, but you want to hear about retail in the United States.

I also sit near the great Michael McKee, who's a frequent Bloomberg radio. Yes, but I once had my own office because I was the only correspondent in the country. So anyway, but yes, but you want to hear about retail in the United States.

Yes, So what do you got here on our good friends at TJMAX.

Yes, So what do you got here on our good friends at TJMAX.

Yeah, I mean beaten a raise really right across the board, raising their outlook for the year, seeing compar bill sales three to four percent. I mean, the idea value is attracting customers. They're seeing increased traffic across all their major brands. According to the CEO, there even home Goods that was not expected to do quite so well. Comp sales there were expected to be slightly in the negative, but we saw four percent year on year rise. So even though consumers are looking away from their homes, they spent so much time there, they've invested there during the pandemic, and they are moving on, home goods is still able to attract people. So a broadly very positive earnings report for TJX, though I will say shares three points six percent higher, not the five plus that we see.

Yeah, I mean beaten a raise really right across the board, raising their outlook for the year, seeing compar bill sales three to four percent. I mean, the idea value is attracting customers. They're seeing increased traffic across all their major brands. According to the CEO, there even home Goods that was not expected to do quite so well. Comp sales there were expected to be slightly in the negative, but we saw four percent year on year rise. So even though consumers are looking away from their homes, they spent so much time there, they've invested there during the pandemic, and they are moving on, home goods is still able to attract people. So a broadly very positive earnings report for TJX, though I will say shares three points six percent higher, not the five plus that we see.

Into time high for TJX. I wild point that out all time high for the stock.

Into time high for TJX. I wild point that out all time high for the stock.

Well, I mean, are people stepping down? Are you starting to see that?

Well, I mean, are people stepping down? Are you starting to see that?

Jen?

Jen?

You know, for a long time we've been hearing guests come in the studio and tell Paul and me that people step down from target to Walmart. Are they stepping down from Target to TJX.

You know, for a long time we've been hearing guests come in the studio and tell Paul and me that people step down from target to Walmart. Are they stepping down from Target to TJX.

Well, I think across the board, you're talking about what we consider to be a flight to value, and so regardless of where your household income level lies, people are increasingly seeing value. And that's one of the things that makes TJX such a great opportunity for people, and that it's there's something always new they go in there. It's treasure hunt. And if you're talking about the Walmart's and the Targets of the world, you're seeing consumers shift into areas where they think there is value. So there are some shoppers who have moved from Target to Walmart, especially when you're talking about essentials, where Walmart's prices are just generally very, very sharp. But we're all also seeing people move from Walmart down to dollar stores. So it's really that progression of the flight to value that is really describing the current economic environment and the consumer environment that we're seeing.

Well, I think across the board, you're talking about what we consider to be a flight to value, and so regardless of where your household income level lies, people are increasingly seeing value. And that's one of the things that makes TJX such a great opportunity for people, and that it's there's something always new they go in there. It's treasure hunt. And if you're talking about the Walmart's and the Targets of the world, you're seeing consumers shift into areas where they think there is value. So there are some shoppers who have moved from Target to Walmart, especially when you're talking about essentials, where Walmart's prices are just generally very, very sharp. But we're all also seeing people move from Walmart down to dollar stores. So it's really that progression of the flight to value that is really describing the current economic environment and the consumer environment that we're seeing.

And I think when you think about it too, you know, the area we've heard folks across the consumer space be really negative is those middle income consumers who want to cut their discretionary spending, and TJX offers a bit more of that discretionary spend. So instead of going to the top line retailer, you have people going out and saying, I want to do that treasure hunting. I think that that is a better use of my wallet than just simply going to a store where the kind of where I don't have to do that, but I'm also going to pay it.

And I think when you think about it too, you know, the area we've heard folks across the consumer space be really negative is those middle income consumers who want to cut their discretionary spending, and TJX offers a bit more of that discretionary spend. So instead of going to the top line retailer, you have people going out and saying, I want to do that treasure hunting. I think that that is a better use of my wallet than just simply going to a store where the kind of where I don't have to do that, but I'm also going to pay it.

And simone I noticed, you know, kind of what was unusual for TJ Max here is okay, they beat the quarter, and but unlike the Target who was cautious in their outlook, they boosted. TJ Max boosted their outlook here. So what's kind of the the.

And simone I noticed, you know, kind of what was unusual for TJ Max here is okay, they beat the quarter, and but unlike the Target who was cautious in their outlook, they boosted. TJ Max boosted their outlook here. So what's kind of the the.

Extremely strong commentary saying that they're off to an incredible, a very strong start, I believe is word for word in the third quarter. So I think everyone very optimistic there that this flight to value, as Jennifer was talking about, will continue even if even if a recovery to some degree materializes in the way that Target has been I guess hoping and praying for on their call, Jen, what do.

Extremely strong commentary saying that they're off to an incredible, a very strong start, I believe is word for word in the third quarter. So I think everyone very optimistic there that this flight to value, as Jennifer was talking about, will continue even if even if a recovery to some degree materializes in the way that Target has been I guess hoping and praying for on their call, Jen, what do.

You hear about the excess savings? I heard someone this morning, I think carl Rickodonna on Bloomberg Surveillance say that carl Rickodonna over at BNP, Perry of BA saying that at least, like you know, there's been a debate about whether or not Americans still have excess savings left, but he says, one thing is for sure that the lower let's say three quinn tiles have already blown through it and have nothing left.

You hear about the excess savings? I heard someone this morning, I think carl Rickodonna on Bloomberg Surveillance say that carl Rickodonna over at BNP, Perry of BA saying that at least, like you know, there's been a debate about whether or not Americans still have excess savings left, but he says, one thing is for sure that the lower let's say three quinn tiles have already blown through it and have nothing left.

Yeah, that's that's what we're seeing too. And there's you know, growing use of credit card that credit cards and is a little bit on the rise, especially for those quintiles that he was talking about, and so those consumers are really looking for where to spend that money. And I think one of the other things to think about is that the retailers in general haven't they still haven't gone back to pre pandemic days of promotions and the same types of levels of sales and discounts, and so although they're offering value, that type of sales environment or promotional environment hasn't yet come back. Now that maybe on the horizon if things don't change soon. But I think it also supports why we're seeing the popularity of things like TJX, because people aren't getting those sales at the big box retailers or some of the other retailers at the moment, and so they're looking for where they can find some of those key brands but at a much lower cost.

Yeah, that's that's what we're seeing too. And there's you know, growing use of credit card that credit cards and is a little bit on the rise, especially for those quintiles that he was talking about, and so those consumers are really looking for where to spend that money. And I think one of the other things to think about is that the retailers in general haven't they still haven't gone back to pre pandemic days of promotions and the same types of levels of sales and discounts, and so although they're offering value, that type of sales environment or promotional environment hasn't yet come back. Now that maybe on the horizon if things don't change soon. But I think it also supports why we're seeing the popularity of things like TJX, because people aren't getting those sales at the big box retailers or some of the other retailers at the moment, and so they're looking for where they can find some of those key brands but at a much lower cost.

Simon, what else are you looking at here in the retail space as we get somebody's come to reporting earnings.

Simon, what else are you looking at here in the retail space as we get somebody's come to reporting earnings.

Yeah, I mean tomorrow we have Walmart. That's the big dog there. I think shares hit an all time high earlier this week, and so I think expectations are very high that they can do they can benefit from this environment in a similar way to perhaps TJ Max. Is that consumers are trading down, They're doing more of their spending at Walmart. Walmart plus growing and increasing number of subscribers that are using its food businesses and that sort of thing. So that'll be an interesting data point to watch. I'm also interested. You know, we heard from Target this morning about the impact of student loan repayments kicking back up. Do we hear that from TJ Max? They have yet to have their call, do we hear that from Walmart. We're just trying to get a sense of how much this is actually going to weigh on consumers as we head towards the fall, and then of course head towards the holiday season.

Yeah, I mean tomorrow we have Walmart. That's the big dog there. I think shares hit an all time high earlier this week, and so I think expectations are very high that they can do they can benefit from this environment in a similar way to perhaps TJ Max. Is that consumers are trading down, They're doing more of their spending at Walmart. Walmart plus growing and increasing number of subscribers that are using its food businesses and that sort of thing. So that'll be an interesting data point to watch. I'm also interested. You know, we heard from Target this morning about the impact of student loan repayments kicking back up. Do we hear that from TJ Max? They have yet to have their call, do we hear that from Walmart. We're just trying to get a sense of how much this is actually going to weigh on consumers as we head towards the fall, and then of course head towards the holiday season.

You ever been a TJ Max Paul. Probably yes, I have to say, I haven't been there in a while, but when I when I would go, and still if I would go today, Jenna is right or I don't know who said that about hunting for like, it is an adventure to go in there because there's so much stuff and you know you're gonna find like like three cool polo shirts for twenty nine to ninety nine that you would normally pay, like I don't know, one hundred bucks for.

You ever been a TJ Max Paul. Probably yes, I have to say, I haven't been there in a while, but when I when I would go, and still if I would go today, Jenna is right or I don't know who said that about hunting for like, it is an adventure to go in there because there's so much stuff and you know you're gonna find like like three cool polo shirts for twenty nine to ninety nine that you would normally pay, like I don't know, one hundred bucks for.

So I think that's how you can make sense of it, right. You know, when I was younger, I loved doing that so much more.

So I think that's how you can make sense of it, right. You know, when I was younger, I loved doing that so much more.

Uh.

Uh.

And I think if my thanks Bloomberg for paying me. But I think if my pennies were tighter, I would I would worry a little bit more about where each dollar was going. Uh, And therefore I would feel like, Okay, I've done. I've put in the hard work to go and buy this handbag, even though you know, my dimes are tight. Whereas Walmart, whereas whereas I guess you go to Target, it's much everything's much more laid out for you.

And I think if my thanks Bloomberg for paying me. But I think if my pennies were tighter, I would I would worry a little bit more about where each dollar was going. Uh, And therefore I would feel like, Okay, I've done. I've put in the hard work to go and buy this handbag, even though you know, my dimes are tight. Whereas Walmart, whereas whereas I guess you go to Target, it's much everything's much more laid out for you.

I mean, my point is it's actually a great way to spend an hour or two in the city, like like going to a Barnes and Noble and.

I mean, my point is it's actually a great way to spend an hour or two in the city, like like going to a Barnes and Noble and.

Just hanging out.

Just hanging out.

But this is why you come.

But this is why you come.

This is the great Matt Miller.

This is the great Matt Miller.

When I was a kid, I used to do that.

When I was a kid, I used to do that.

Far you fall and Jen Bartash is senior Industrial so Bloomberg can tell and simoon Foxman from Bloomberg. She's reported there joining us talking to us about all things retail.

Far you fall and Jen Bartash is senior Industrial so Bloomberg can tell and simoon Foxman from Bloomberg. She's reported there joining us talking to us about all things retail.

You're listening to the team Ken's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.

You're listening to the team Ken's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.

Next week, Jackson Hole, I am still searching my inbox for the invite Matt, and I'm just I know it's there, I just can't find it. But I don't know if that's gonna be a big deal. Anyway.

Next week, Jackson Hole, I am still searching my inbox for the invite Matt, and I'm just I know it's there, I just can't find it. But I don't know if that's gonna be a big deal. Anyway.

I heard they disinvited a lot of people, Like remember when the Soho House canceled all the bankers memberships. Yes, I think that's Jackson All did the same thing a couple of years ago.

I heard they disinvited a lot of people, Like remember when the Soho House canceled all the bankers memberships. Yes, I think that's Jackson All did the same thing a couple of years ago.

All right, let's bring in Danielle di Martino Booth. She's the CEO and chief strategist at QI research. She joins us live here in our Bloomberg Interactive Brokers studio and on YouTube. So that's even better, Danielle. I guess the narrative now with our feter reserve and with rates is, you know, not how higher they go, but it could be how long are we going to stay here? How are you viewing that part of the narrative.

All right, let's bring in Danielle di Martino Booth. She's the CEO and chief strategist at QI research. She joins us live here in our Bloomberg Interactive Brokers studio and on YouTube. So that's even better, Danielle. I guess the narrative now with our feter reserve and with rates is, you know, not how higher they go, but it could be how long are we going to stay here? How are you viewing that part of the narrative.

So I think the higher for longer narrative is something that markets do not want to accept. But we have to bear in mind that Jay Powell started in January of twenty twenty two kind of like Obi wan Kenobi, this will happen, This will happen, this will happen. These are not the droids you're looking for. And so he's managed to really extend this narrative. And I think that, you know, if you look at what a lot of people are starting to believe compared to twelve months ago. Now they're saying we might not see quantitative tightening stop until the fourth quarter of twenty twenty four. That is a form of higher for longer, even if we see rate cuts in twenty twenty four.

So I think the higher for longer narrative is something that markets do not want to accept. But we have to bear in mind that Jay Powell started in January of twenty twenty two kind of like Obi wan Kenobi, this will happen, This will happen, this will happen. These are not the droids you're looking for. And so he's managed to really extend this narrative. And I think that, you know, if you look at what a lot of people are starting to believe compared to twelve months ago. Now they're saying we might not see quantitative tightening stop until the fourth quarter of twenty twenty four. That is a form of higher for longer, even if we see rate cuts in twenty twenty four.

All Right, A very smart listener of ours kind of wrote in and asked about that the relationship between running off the balance sheet and interest rates. You made a comment the last time you were here about that. What did you mean by that relationship?

All Right, A very smart listener of ours kind of wrote in and asked about that the relationship between running off the balance sheet and interest rates. You made a comment the last time you were here about that. What did you mean by that relationship?

So, I mean we are a nation that exists. Liquidity is the lifeblood of the US economy. It's seventy percent consumption, but so much of business investment, so much of consumption is derived from credit. And when you're pulling liquidity from the system, you end up seeing things like the New York FEDS work that shows that that companies anticipate rejections being at the highest level on record in the next twelve months when it comes to a credit card, home loan, auto loans, and what have you. So that is a reflection of a credit crunch, which I've learned to some is a term that showed up in nineteen sixty six. Oh two guys from Salomon Brothers created the term. They said, they said, a squeeze and a pinch. They might be kind of friendly. A crunch is not. A crunch can break a bone. And that's what we're in the midst of, quietly, and that's what we're seeing with Moodi's and Fitch and the warnings that we've got on banks.

So, I mean we are a nation that exists. Liquidity is the lifeblood of the US economy. It's seventy percent consumption, but so much of business investment, so much of consumption is derived from credit. And when you're pulling liquidity from the system, you end up seeing things like the New York FEDS work that shows that that companies anticipate rejections being at the highest level on record in the next twelve months when it comes to a credit card, home loan, auto loans, and what have you. So that is a reflection of a credit crunch, which I've learned to some is a term that showed up in nineteen sixty six. Oh two guys from Salomon Brothers created the term. They said, they said, a squeeze and a pinch. They might be kind of friendly. A crunch is not. A crunch can break a bone. And that's what we're in the midst of, quietly, and that's what we're seeing with Moodi's and Fitch and the warnings that we've got on banks.

I love that. So what they these two guys of Solomon said, you used to be people would say credit squeeze or credit pinch, but that was like too fun.

I love that. So what they these two guys of Solomon said, you used to be people would say credit squeeze or credit pinch, but that was like too fun.

It was too fun. And so that's what happened in nineteen sixty six. You had banks pull back on lending while the US government had been spending a lot of money. I don't see any parallels here.

It was too fun. And so that's what happened in nineteen sixty six. You had banks pull back on lending while the US government had been spending a lot of money. I don't see any parallels here.

That's sarcasm for those of you who aren't watching.

That's sarcasm for those of you who aren't watching.

And what did we see?

And what did we see?

We saw a massive pullback. So there's something to be said for quantitative tightening directly influencing that flow of liquidity or not into the system. It's something we see every Friday afternoon aft the close. In the fed's h eight document, you're seeing commercial and industrial lending negative.

We saw a massive pullback. So there's something to be said for quantitative tightening directly influencing that flow of liquidity or not into the system. It's something we see every Friday afternoon aft the close. In the fed's h eight document, you're seeing commercial and industrial lending negative.

How much does the treasury issuance sort of add to that liquidity problem?

How much does the treasury issuance sort of add to that liquidity problem?

Well, so the first three hundred billion or so, we're kind of benign. You saw money move out of the Fed's facility overnight facility. People were like, oh, look at this. You know, I'm going to move it into into treasury bills, money market funds. Where are we going going forward? I mean, if inflation is as sticky as the inflation used to say it's going to be. Then, if I'm a money market fund, I'm going to say, wait a minute, I'm not going to go into bills. If I think the Fed's going to raise interest rates one more time in twenty twenty three, maybe it's September, maybe it's December, then I'll wait and I'll keep my money at the FED. Meaning they're not going to naturally absorb all of this treasury issuance, keeping that effect benign, and you end up having quantitative tightening join with treasury built issuance, and you're having a double pulling of liquidity out of the system.

Well, so the first three hundred billion or so, we're kind of benign. You saw money move out of the Fed's facility overnight facility. People were like, oh, look at this. You know, I'm going to move it into into treasury bills, money market funds. Where are we going going forward? I mean, if inflation is as sticky as the inflation used to say it's going to be. Then, if I'm a money market fund, I'm going to say, wait a minute, I'm not going to go into bills. If I think the Fed's going to raise interest rates one more time in twenty twenty three, maybe it's September, maybe it's December, then I'll wait and I'll keep my money at the FED. Meaning they're not going to naturally absorb all of this treasury issuance, keeping that effect benign, and you end up having quantitative tightening join with treasury built issuance, and you're having a double pulling of liquidity out of the system.

All right, I consider myself a pretty good reader. That the nuns of Blessed Saque instilled that in me early age. But I'll tell you what, I am not reading the FED meeting minutes come out later today.

All right, I consider myself a pretty good reader. That the nuns of Blessed Saque instilled that in me early age. But I'll tell you what, I am not reading the FED meeting minutes come out later today.

That's why we have people like Danielle.

That's why we have people like Danielle.

That's why I have people like Mount Sacred Heart. So we're like, okay, yeah, very good. So what will you be looking for in these meeting minutes.

That's why I have people like Mount Sacred Heart. So we're like, okay, yeah, very good. So what will you be looking for in these meeting minutes.

The softer the landing narrative, the more they're gonna stick with their higher for longer.

The softer the landing narrative, the more they're gonna stick with their higher for longer.

Okay, So I.

Okay, So I.

Mean, look, minutes can be massaged. Janet Yellen said so in two thousand and eight. She said, minutes can be like any other tool in the toolbox. It's not like the minutes from a corporate board meeting or something like that. In the three weeks that are that come in between, the Fed can change what actually occurred inside that room. It's kind of like magic. So if they want to nod to retail sales being stronger than what was expected, then you can have a more hawkish tone in these minutes. And that's what I'm anticipating.

Mean, look, minutes can be massaged. Janet Yellen said so in two thousand and eight. She said, minutes can be like any other tool in the toolbox. It's not like the minutes from a corporate board meeting or something like that. In the three weeks that are that come in between, the Fed can change what actually occurred inside that room. It's kind of like magic. So if they want to nod to retail sales being stronger than what was expected, then you can have a more hawkish tone in these minutes. And that's what I'm anticipating.

What about the difference between j Powell's standard line. You know that we're going to keep rates higher for I think last time he said for years or did so. At the same time, we get a dot plot, which I know is not a forecast from the Fed, but it is each individual members essentially forecasts, right, that showed at least one full percentage point of rate cuts next year. How can he say We're going to keep rates at this level for years and everybody, even you know, assuming I'm assuming the voters are saying no, it's going to come down one percent.

What about the difference between j Powell's standard line. You know that we're going to keep rates higher for I think last time he said for years or did so. At the same time, we get a dot plot, which I know is not a forecast from the Fed, but it is each individual members essentially forecasts, right, that showed at least one full percentage point of rate cuts next year. How can he say We're going to keep rates at this level for years and everybody, even you know, assuming I'm assuming the voters are saying no, it's going to come down one percent.

So it's kind of like if you ever heard one martini, two martini three Martini's floor, so he can he can withstand one or two descents and maintain his power base. You start to get to a number like three, and you start to say, is there a mutiny on the FMC. So we might see descent next year from some of the more dubbish contingency. He might want to hold out for longer, and that might mean that we see his first real dissent. And we have, I mean, we've seen Neil Kashgari, who used to be the most delish person on planet Earth, become like, you know, we're not finished fighting Involution yet. So he's like very hellkish.

So it's kind of like if you ever heard one martini, two martini three Martini's floor, so he can he can withstand one or two descents and maintain his power base. You start to get to a number like three, and you start to say, is there a mutiny on the FMC. So we might see descent next year from some of the more dubbish contingency. He might want to hold out for longer, and that might mean that we see his first real dissent. And we have, I mean, we've seen Neil Kashgari, who used to be the most delish person on planet Earth, become like, you know, we're not finished fighting Involution yet. So he's like very hellkish.

And still and still says we're not done exactly.

And still and still says we're not done exactly.

It was just a few days ago.

It was just a few days ago.

Our good friends at Goldman Sachs, I guess, on Sunday put out a note saying that they expect the rate cut in the second quarter of next year. Was that just to sell books or do you think there's something to.

Our good friends at Goldman Sachs, I guess, on Sunday put out a note saying that they expect the rate cut in the second quarter of next year. Was that just to sell books or do you think there's something to.

That talking a book at Goldman? My gosh, I've never heard of such, just thinking. Look, Goldman tax has tremendous influence on the New York Fed. The New York Fed has a permanent vote on the Federal Open Market Committee, this is a known known so it's I think Goldman is definitely trying to control the narrative, and they've done a very good job of that in the past, of having you know, a very extra large influence on FED thinking. But you know, Powell's not an academic. Powell was the one who brokered the treasury scandal at Solomon Brothers with Warren Buffett in nineteen ninety eight when he was just a Treasury the secretary. Powell's not intimidated by bankers.

That talking a book at Goldman? My gosh, I've never heard of such, just thinking. Look, Goldman tax has tremendous influence on the New York Fed. The New York Fed has a permanent vote on the Federal Open Market Committee, this is a known known so it's I think Goldman is definitely trying to control the narrative, and they've done a very good job of that in the past, of having you know, a very extra large influence on FED thinking. But you know, Powell's not an academic. Powell was the one who brokered the treasury scandal at Solomon Brothers with Warren Buffett in nineteen ninety eight when he was just a Treasury the secretary. Powell's not intimidated by bankers.

Sorry.

Sorry.

Interesting, one of the things that you were telling us about Palell around s and p you know, thirty seven, thirty eight hundred, was that he wants to break the FED. Put. He wants to destroy the idea that the FED is going to come to your rescue. Mister market. Every time the equity indexes fall now we're at forty five hundred, he is that making it harder for him to succeed. When the market just continues dully as they raise.

Interesting, one of the things that you were telling us about Palell around s and p you know, thirty seven, thirty eight hundred, was that he wants to break the FED. Put. He wants to destroy the idea that the FED is going to come to your rescue. Mister market. Every time the equity indexes fall now we're at forty five hundred, he is that making it harder for him to succeed. When the market just continues dully as they raise.

No, it's making it easier for him. I mean, he's basically shut down the commercial mortgage backed securities market. So that's one corner of securitization that's vaporized into thin air. When in March of twenty twenty, the entire commercial real estate industry was like, hold on, we need a bail out too.

No, it's making it easier for him. I mean, he's basically shut down the commercial mortgage backed securities market. So that's one corner of securitization that's vaporized into thin air. When in March of twenty twenty, the entire commercial real estate industry was like, hold on, we need a bail out too.

But he's taken.

But he's taken.

He's actually created price discovery in a market where none existed. There was a building that just sold for sixty seven percent off of its prior appraisal in San Francisco a few days ago. So he's slowly killing off lines of speculation into the markets. I think the CLO market is next. So let the stock market be as high it once. It gives Powell license to continue depleting liquidity from the system and taking out some of the most speculative forms covers the word yeah, all right, So I mean this in the nicest way possible, Danielle.

He's actually created price discovery in a market where none existed. There was a building that just sold for sixty seven percent off of its prior appraisal in San Francisco a few days ago. So he's slowly killing off lines of speculation into the markets. I think the CLO market is next. So let the stock market be as high it once. It gives Powell license to continue depleting liquidity from the system and taking out some of the most speculative forms covers the word yeah, all right, So I mean this in the nicest way possible, Danielle.

But you are that's data geek of the highest magnitude. What data are you looking at that? Maybe we're not so.

But you are that's data geek of the highest magnitude. What data are you looking at that? Maybe we're not so.

I follow two things very closely. The employee retention credit it's advertised everywhere by a manage.

I follow two things very closely. The employee retention credit it's advertised everywhere by a manage.

I mean we we.

I mean we we.

It surpassed thirty billion for the first time in the month of July, so on a twelve month run rate, it's pumping four hundred billion dollars into the economy, very real money. That's about one and a half percentage point of GDP growth on an annualized basis. We're seeing that manifest and much higher international travel. So it's going to your kind of your top quintile of earners, if you will, and that's being actively sold. So I'm paying very close attention to active fiscal stimulus for billion dollars a year is not nothing. In Daily Jobcuts dot Com, we've gone from five business closings to nine from the summer months after the debt sealing reserves into August. The founder of the website said he's seeing a massive increase in companies just closing up shop in August, saying I don't see over the horizon the holiday season, holiday shopping season saving me. So I'm paying really close attention to main Street as well.

It surpassed thirty billion for the first time in the month of July, so on a twelve month run rate, it's pumping four hundred billion dollars into the economy, very real money. That's about one and a half percentage point of GDP growth on an annualized basis. We're seeing that manifest and much higher international travel. So it's going to your kind of your top quintile of earners, if you will, and that's being actively sold. So I'm paying very close attention to active fiscal stimulus for billion dollars a year is not nothing. In Daily Jobcuts dot Com, we've gone from five business closings to nine from the summer months after the debt sealing reserves into August. The founder of the website said he's seeing a massive increase in companies just closing up shop in August, saying I don't see over the horizon the holiday season, holiday shopping season saving me. So I'm paying really close attention to main Street as well.

Wow, very good, Daniel de Martinez to watch the fiscal side, you know, because not a lot of fedgeeks do not close enough attention to the fiscal highly relevant.

Wow, very good, Daniel de Martinez to watch the fiscal side, you know, because not a lot of fedgeeks do not close enough attention to the fiscal highly relevant.

It's highly relevant.

It's highly relevant.

Daniel de Martinez Booth CEO and chief strategist at QI Research, joining us live here in our Bloomberg Interactive Broker studio, which is always a treat.

Daniel de Martinez Booth CEO and chief strategist at QI Research, joining us live here in our Bloomberg Interactive Broker studio, which is always a treat.

You're listening to the tape Cat's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and 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.

You're listening to the tape Cat's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and 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.

You know, against my better judgment, I'm told we got to talk about Washington and politics and all that stuff that happens the making of the sausage. And if we're gonna do that, we're gonna go to our ace, and that is Nathan Dean. He's the senior policy Analyst US Latin America for Bloomberg Intelligence. Bloomberg Intelligence, we got people that just do everything, and we got a guy who is mister Washington, DC, and that's Nathan Dean. He joined us live here in our Bloomberg Interactive Brokers studio. Nathan, where I want to start is kind of with President Biden last week seemingly getting a little tougher with China, but it seems like you kind of pulled some punches there. Talk to us about what Biden did via I think executive order last week with China and kind of what it means.

You know, against my better judgment, I'm told we got to talk about Washington and politics and all that stuff that happens the making of the sausage. And if we're gonna do that, we're gonna go to our ace, and that is Nathan Dean. He's the senior policy Analyst US Latin America for Bloomberg Intelligence. Bloomberg Intelligence, we got people that just do everything, and we got a guy who is mister Washington, DC, and that's Nathan Dean. He joined us live here in our Bloomberg Interactive Brokers studio. Nathan, where I want to start is kind of with President Biden last week seemingly getting a little tougher with China, but it seems like you kind of pulled some punches there. Talk to us about what Biden did via I think executive order last week with China and kind of what it means.

Yeah, exactly. So President Biden put out an executive order essentially directing Treasury to limit or prohibit US investments, so primarily private equity venture capital fund investment into China in certain sectors like quantum computing, AI, artificial I'm sorry, semiconductors. Now, this was a much narrower order than what had previously been anticipated, so I think the markets were actually kind of happy with that. We don't think there's going to be that much of an impact here, you know, most of I think if you look at the private equity firms today, the big ones, they're about two percent below in terms of total assets with exposure to China. So this is really just a symbolism executive order. Now the Treasury has to implement it, so things could change, and with anything in the US China relations, you know, Biden can always pull the plug if you know it suits as well.

Yeah, exactly. So President Biden put out an executive order essentially directing Treasury to limit or prohibit US investments, so primarily private equity venture capital fund investment into China in certain sectors like quantum computing, AI, artificial I'm sorry, semiconductors. Now, this was a much narrower order than what had previously been anticipated, so I think the markets were actually kind of happy with that. We don't think there's going to be that much of an impact here, you know, most of I think if you look at the private equity firms today, the big ones, they're about two percent below in terms of total assets with exposure to China. So this is really just a symbolism executive order. Now the Treasury has to implement it, so things could change, and with anything in the US China relations, you know, Biden can always pull the plug if you know it suits as well.

You did have the at the end of last month, the House Select Committee on the Chinese Communist Party. Oh that's a Is that really the name? The House Select Committee on the Chinese Yeah, it's lucky they threw the word communist in there, so we know how they feel about them, right, that's a little bit loaded. They they alleged that Blackrock is investing in Chinese companies acting against US interest. Now I'm guessing this is a Republican controlled committee. Obviously those guys don't like Larry Fink. He's like the new George Soros for a lot on the right. But we had a story by Sila brush Out yesterday. I said Blackrock, MSCI and other firms are bracing for tighter oversight. Is that is that talk on Capitol Hill going after these big, big Wall Street fund managers.

You did have the at the end of last month, the House Select Committee on the Chinese Communist Party. Oh that's a Is that really the name? The House Select Committee on the Chinese Yeah, it's lucky they threw the word communist in there, so we know how they feel about them, right, that's a little bit loaded. They they alleged that Blackrock is investing in Chinese companies acting against US interest. Now I'm guessing this is a Republican controlled committee. Obviously those guys don't like Larry Fink. He's like the new George Soros for a lot on the right. But we had a story by Sila brush Out yesterday. I said Blackrock, MSCI and other firms are bracing for tighter oversight. Is that is that talk on Capitol Hill going after these big, big Wall Street fund managers.

Absolutely, And to your point, it's actually a bipartisan committee because being seen tough on China is good politics no matter who you are. So you know, when President Biden put out his order, we saw a statement from that committee from both parties essentially saying that this could have gone farther, and they wished it to have gone further. Now, the question about Blackrock and the other firms is what is considered oversight and what is actually going to happen. Now that committee cannot write legislation. They need other committees to do that. And with a Republican House, a Democratic Senate, and a president who also has to stare Juginepigi in the face at certain you know events. You know, I'm not sure there's actually going to be actionable concern for those firms, So it's mostly headline risk. Just always keep in mind that when it comes to China, Congress loves to be tough, but it's the White House that actually pulls things back and moderates it.

Absolutely, And to your point, it's actually a bipartisan committee because being seen tough on China is good politics no matter who you are. So you know, when President Biden put out his order, we saw a statement from that committee from both parties essentially saying that this could have gone farther, and they wished it to have gone further. Now, the question about Blackrock and the other firms is what is considered oversight and what is actually going to happen. Now that committee cannot write legislation. They need other committees to do that. And with a Republican House, a Democratic Senate, and a president who also has to stare Juginepigi in the face at certain you know events. You know, I'm not sure there's actually going to be actionable concern for those firms, So it's mostly headline risk. Just always keep in mind that when it comes to China, Congress loves to be tough, but it's the White House that actually pulls things back and moderates it.

Well, the White House, I mean Biden last week said that the Communist Party are bad folks, right, he said the best Elton wrote initiative, he called that the Debt and News initiative.

Well, the White House, I mean Biden last week said that the Communist Party are bad folks, right, he said the best Elton wrote initiative, he called that the Debt and News initiative.

Well, there's a difference between calling somebody bad folks and actually creating a trade deal or you know, sanctions and so forth that actually, you know, changes what we here in New York City are trading on.

Well, there's a difference between calling somebody bad folks and actually creating a trade deal or you know, sanctions and so forth that actually, you know, changes what we here in New York City are trading on.

All Right, you're down in DC, better or worse, you're in the swamp. You're part of it. Actually, quite frankly, to be honest, what is what is the feeling in DC about China? How worried should the world be about us and China? What's the feeling in DC?

All Right, you're down in DC, better or worse, you're in the swamp. You're part of it. Actually, quite frankly, to be honest, what is what is the feeling in DC about China? How worried should the world be about us and China? What's the feeling in DC?

So, you know, there was this thought of, you know, will we get into a war over a Taiwan and we have a national security analyst who has been writing about this on the terminal.

So, you know, there was this thought of, you know, will we get into a war over a Taiwan and we have a national security analyst who has been writing about this on the terminal.

The general thought on Washington is we're still years away.

The general thought on Washington is we're still years away.

I mean that this is not something that you can anticipate will happen in the next few years, you know. And when it comes to how do you approach this in terms of a market perspective, you know, it's sort of something that like everything that we've seen before has happened in the past. I mean, there's really you know, there's not been a lot of actions from China that haven't been actually done ten years ago, fifteen years ago, so forth. So you know, we're just still in this weight and see mode. I think most if you talk to most Congress folks, they're just rather happy to blast China and get the good politics from it.

I mean that this is not something that you can anticipate will happen in the next few years, you know. And when it comes to how do you approach this in terms of a market perspective, you know, it's sort of something that like everything that we've seen before has happened in the past. I mean, there's really you know, there's not been a lot of actions from China that haven't been actually done ten years ago, fifteen years ago, so forth. So you know, we're just still in this weight and see mode. I think most if you talk to most Congress folks, they're just rather happy to blast China and get the good politics from it.

I'm pretty excited because Ohio looks like it's going to be the next state to legalize marijuana, and this is something that we're following very closely. Right of course, for recreational use, that would be the twenty fourth state now still federally illegal. And Nathan, you follow closely the Safe Banking Act, which I think is actually moving slowly enough that following it closely is no problem, right, But the cool thing about Ohio is Shared Brown is our senator, the Senator from the Great State of Ohio, and he's also the chairman of the Senate Banking Committee. So if it's legal in his home state, does he have then more I guess covered a push for broader legalization federally.

I'm pretty excited because Ohio looks like it's going to be the next state to legalize marijuana, and this is something that we're following very closely. Right of course, for recreational use, that would be the twenty fourth state now still federally illegal. And Nathan, you follow closely the Safe Banking Act, which I think is actually moving slowly enough that following it closely is no problem, right, But the cool thing about Ohio is Shared Brown is our senator, the Senator from the Great State of Ohio, and he's also the chairman of the Senate Banking Committee. So if it's legal in his home state, does he have then more I guess covered a push for broader legalization federally.

Yeah. I mean, if Shared Brown wanted this thing done, he could have it done today. I mean, there's nothing that is prohibiting the Safe Banking Act other than Shared Brown and a couple of other senior senators. I'm both parties when it comes to the Safe Banking Act. The problem they have is or the bill has, is timing and the procedures. Now, there's a lot of people hoping that the Safe Banking Act goes as part of the funding bill that is going to come up to September. Now that's most likely going to end in a government shutdown, and Speaker McCarthy was talking about having a quick continuing, continuing lose resolution into December. That means the Safe Banking Act probably won't be assigned to that.

Yeah. I mean, if Shared Brown wanted this thing done, he could have it done today. I mean, there's nothing that is prohibiting the Safe Banking Act other than Shared Brown and a couple of other senior senators. I'm both parties when it comes to the Safe Banking Act. The problem they have is or the bill has, is timing and the procedures. Now, there's a lot of people hoping that the Safe Banking Act goes as part of the funding bill that is going to come up to September. Now that's most likely going to end in a government shutdown, and Speaker McCarthy was talking about having a quick continuing, continuing lose resolution into December. That means the Safe Banking Act probably won't be assigned to that.

Then you get into December.

Then you get into December.

There's only eight days where Congress is meeting per month, October, November, December, and then we're in election season. So I just I'm not sure the Safe Banking Act actually has a vehicle to get the passage unless Shared Brown steps up and says I want this done today. And I have not seen anything that says that he's in. You know, he's been a lot of he's been flirting a lot of yeah, well I like this, but also this and so forth. And there's a whole issue right now on Senator Jack. It's been trying to negotiate with Republicans on and they haven't made any headway on that.

There's only eight days where Congress is meeting per month, October, November, December, and then we're in election season. So I just I'm not sure the Safe Banking Act actually has a vehicle to get the passage unless Shared Brown steps up and says I want this done today. And I have not seen anything that says that he's in. You know, he's been a lot of he's been flirting a lot of yeah, well I like this, but also this and so forth. And there's a whole issue right now on Senator Jack. It's been trying to negotiate with Republicans on and they haven't made any headway on that.

What are you focusing on down there in DC legislation wise or otherwise that Matt and I are totally ignorant of.

What are you focusing on down there in DC legislation wise or otherwise that Matt and I are totally ignorant of.

Well, the shutdown, for one, I mean just said, yeah, that's big.

Well, the shutdown, for one, I mean just said, yeah, that's big.

Well the shutdown is actually we you know, we dust off our note every two years when this comes out, and when it comes to the shutdown, markets get scared within the first two days, and then once they realize that the economic impact of a short term shutdown isn't all that great, markets actually go up. If you look at the thirty day shutdown that happened under the President of Trump administration, the markets actually were pretty much fine with it. And if you're invested in the contractors. Well, most contractors, at least the big ones, have eighteen months, two year, two and a half year contracts. So the only people that are harmed are the contractors work in Washington, DC and those of us who can't take our kids.

Well the shutdown is actually we you know, we dust off our note every two years when this comes out, and when it comes to the shutdown, markets get scared within the first two days, and then once they realize that the economic impact of a short term shutdown isn't all that great, markets actually go up. If you look at the thirty day shutdown that happened under the President of Trump administration, the markets actually were pretty much fine with it. And if you're invested in the contractors. Well, most contractors, at least the big ones, have eighteen months, two year, two and a half year contracts. So the only people that are harmed are the contractors work in Washington, DC and those of us who can't take our kids.

To the zoo.

To the zoo.

See I mean when Nake and Deane you can go from China to the US government shutdown, to weed to the zoo, to the zoo all in one conversation.

See I mean when Nake and Deane you can go from China to the US government shutdown, to weed to the zoo, to the zoo all in one conversation.

You're listening to the Team canser Line program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business app, or listen on demand wherever you get your podcasts.

You're listening to the Team canser Line program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business app, or listen on demand wherever you get your podcasts.

Joining us since Studios. Doug Baker, He's a portfolio manager head of preferred Securities at Nouvene. Doug, I'm an issuer. Why would I consider issuing preferred stock? Sell me on it.

Joining us since Studios. Doug Baker, He's a portfolio manager head of preferred Securities at Nouvene. Doug, I'm an issuer. Why would I consider issuing preferred stock? Sell me on it.

It depends what geography you're talking about.

It depends what geography you're talking about.

It If you're talking about the United States, most SERI issuances from the bank and the insurance sector. Those two sectors banks in particular issue prefers primarily to meet capital requirements. Insurance companies capital requirements, but more importantly, they use prefer to help manage their ratings.

It If you're talking about the United States, most SERI issuances from the bank and the insurance sector. Those two sectors banks in particular issue prefers primarily to meet capital requirements. Insurance companies capital requirements, but more importantly, they use prefer to help manage their ratings.

So if I'm an investor, do I care if a stock is preferred or not when I buy it?

So if I'm an investor, do I care if a stock is preferred or not when I buy it?

Oh?

Oh?

Absolutely, I mean, because there are several components to the capital stock, and as a preferred investor, you're actually senior to the common investors, so that that's first off, So compared to the common shareholder, your senior.

Absolutely, I mean, because there are several components to the capital stock, and as a preferred investor, you're actually senior to the common investors, so that that's first off, So compared to the common shareholder, your senior.

But the.

But the.

Similarity with common stock is oftentimes the payments on a preferred or considered dividends. So for individuals you get that beneficial tax treatment a lot of instances. So so you're you're kind of moving up the capital stack.

Similarity with common stock is oftentimes the payments on a preferred or considered dividends. So for individuals you get that beneficial tax treatment a lot of instances. So so you're you're kind of moving up the capital stack.

You're a little you're safer in the event of a bust, which hopefully doesn't happen.

You're a little you're safer in the event of a bust, which hopefully doesn't happen.

Yeah, yeah, you are. Arguably you are on paper you are. The reality is that it just depends on the situation.

Yeah, yeah, you are. Arguably you are on paper you are. The reality is that it just depends on the situation.

Are most preferreds are they? Are they investment grading?

Are most preferreds are they? Are they investment grading?

Well, most of the issuers are in mosted issues. So so here's how it works.

Well, most of the issuers are in mosted issues. So so here's how it works.

If you look at the issuers on average, you're going to find that issuers are around.

If you look at the issuers on average, you're going to find that issuers are around.

A single a rated institution.

A single a rated institution.

However, the preferreds on average are triple B rated, and it's because they're subordinate in the capital stack the rating agencies, because that subordination will knock the ratings down typically four to five notches versus the senior ratio of that same issuer.

However, the preferreds on average are triple B rated, and it's because they're subordinate in the capital stack the rating agencies, because that subordination will knock the ratings down typically four to five notches versus the senior ratio of that same issuer.

So you have exposure to investment grade rated companies.

So you have exposure to investment grade rated companies.

However, the securities may not necessarily reflect that through their rating.

However, the securities may not necessarily reflect that through their rating.

All right, So we had the little mini bank crisis. The big banks. Oh, everybody's going to pay the price with some I guess higher credit, I guess hire more, more and more restrictions. How does that impact the preferred market and their use of you know, the bank's use of the preferred market.

All right, So we had the little mini bank crisis. The big banks. Oh, everybody's going to pay the price with some I guess higher credit, I guess hire more, more and more restrictions. How does that impact the preferred market and their use of you know, the bank's use of the preferred market.

So it's going to be, in our opinion, a lot like two thousand and seven eighty nine, where horrible, horrible situation right and earlier this year not as bad, but still pretty traumatic. But looking forward, it's going to create a great opportunity. We're going to see the regulatory environment change, which is going to benefit the credit investor, which includes the preferred investor. And one of the things that we're seeing now is a big build in capital or likely a big build in common equity capital going forward. So it's going to be at the expense of the common shareholder. It's going to dilute the return on equity, but it's going to enhance the credit profile for the credit investor, which includes the preferred investor.

So it's going to be, in our opinion, a lot like two thousand and seven eighty nine, where horrible, horrible situation right and earlier this year not as bad, but still pretty traumatic. But looking forward, it's going to create a great opportunity. We're going to see the regulatory environment change, which is going to benefit the credit investor, which includes the preferred investor. And one of the things that we're seeing now is a big build in capital or likely a big build in common equity capital going forward. So it's going to be at the expense of the common shareholder. It's going to dilute the return on equity, but it's going to enhance the credit profile for the credit investor, which includes the preferred investor.

So what do you like?

So what do you like?

What do we like? We like the big banks.

What do we like? We like the big banks.

We think that there are selective opportunities even in the regional bank space. We know that that's kind of you know, some people think that the regional banks just across the board are.

We think that there are selective opportunities even in the regional bank space. We know that that's kind of you know, some people think that the regional banks just across the board are.

Risky area of our market.

Risky area of our market.

But if you actually do the work, you do the objective analysis, things like commercial real estate, while they're risks, a lot of these headlines that we had earlier this year, you apply some analysis, you do some stress testing on it. Indeed a risk, but more from an earning's perspective, right. So we also like some of the spaces outside of our larger sectors banks insurance, like aircraft lessors, So you have aircraft leasing companies that are benefiting from this tremendous boom in air travel and they're the ones that are financing the airplanes. And so you do have some opportunities in spaces outside of banks insurance companies to play the preferred market. But at the end of the day, most of your exposure and preferreds is going to be financial services related.

But if you actually do the work, you do the objective analysis, things like commercial real estate, while they're risks, a lot of these headlines that we had earlier this year, you apply some analysis, you do some stress testing on it. Indeed a risk, but more from an earning's perspective, right. So we also like some of the spaces outside of our larger sectors banks insurance, like aircraft lessors, So you have aircraft leasing companies that are benefiting from this tremendous boom in air travel and they're the ones that are financing the airplanes. And so you do have some opportunities in spaces outside of banks insurance companies to play the preferred market. But at the end of the day, most of your exposure and preferreds is going to be financial services related.

Right, So when I if I buy a preferred stock, I get a fixed rate a floating rate. He does it all work?

Right, So when I if I buy a preferred stock, I get a fixed rate a floating rate. He does it all work?

It depends what you buy, okay, And that's where I think active management can really help out, because there are preferreds out there that will just pay the same fixed rate coupon over the entire life of the security.

It depends what you buy, okay, And that's where I think active management can really help out, because there are preferreds out there that will just pay the same fixed rate coupon over the entire life of the security.

And if that's a perpetual.

And if that's a perpetual.

Security, a lot of investors don't realize they're taking a lot of duration risks or interest rate sensitivity risk with that. But there's also a large population of securities that they may start out paying a fixed rate coupon, but down the road that coupon can adjust, and not only does that allow you to benefit from a rise and rate environment, but it also helps you control that interest rate risk, which is really I think the primary risk of those fixed rate structures.

Security, a lot of investors don't realize they're taking a lot of duration risks or interest rate sensitivity risk with that. But there's also a large population of securities that they may start out paying a fixed rate coupon, but down the road that coupon can adjust, and not only does that allow you to benefit from a rise and rate environment, but it also helps you control that interest rate risk, which is really I think the primary risk of those fixed rate structures.

All Right, So what's the risk to the preferred market here? I mean, I guess I got concentration risk with the financials.

All Right, So what's the risk to the preferred market here? I mean, I guess I got concentration risk with the financials.

Yeah, So that's the first one that we mentioned, and then the second one we were just touching on to interest rate risk. Okay, Now, in our opinion, we think that the interest rate risk is probably the one that we can map the best. Truly, though, when it comes to financial service exposure, there's only so much we feel you can diversify away from that, so we do oftentimes. When we're having these these discussions with investors and they like preferreds, they want to add preferreds, one of the things that we ask them to do is, hey, check the rest of your client's portfolio. See how much other financial service exposure is there already, because you don't want to have them take an unintended bet on a sector unless they mean to do so.

Yeah, So that's the first one that we mentioned, and then the second one we were just touching on to interest rate risk. Okay, Now, in our opinion, we think that the interest rate risk is probably the one that we can map the best. Truly, though, when it comes to financial service exposure, there's only so much we feel you can diversify away from that, so we do oftentimes. When we're having these these discussions with investors and they like preferreds, they want to add preferreds, one of the things that we ask them to do is, hey, check the rest of your client's portfolio. See how much other financial service exposure is there already, because you don't want to have them take an unintended bet on a sector unless they mean to do so.

How do you first get into this?

How do you first get into this?

Was it?

Was it?

Were you doing your CFA and you're like, hey, I like this section.

Were you doing your CFA and you're like, hey, I like this section.

Well he went to the Here we Go University, Chicago Graduate School of the Business, which I love. The GSB Moniker. They've now received the kajillion dollars from mister Booth, so it's a Booth School of Business.

Well he went to the Here we Go University, Chicago Graduate School of the Business, which I love. The GSB Moniker. They've now received the kajillion dollars from mister Booth, so it's a Booth School of Business.

I get it.

I get it.

But I'm a GS big guy. There's not a bum I've done like a dozen Chicago NBA guys. There's not a bumm in THEO.

But I'm a GS big guy. There's not a bum I've done like a dozen Chicago NBA guys. There's not a bumm in THEO.

But they're they're all math people.

But they're they're all math people.

Yeah, well, yeah, they're geeky that way the math even our listen there are Bramowitz, who is super smart. She's undergraduate at Chicago. So they're all good. So anyway, but but.

Yeah, well, yeah, they're geeky that way the math even our listen there are Bramowitz, who is super smart. She's undergraduate at Chicago. So they're all good. So anyway, but but.

Prefers, did you pick this or were you at Neuvien? And they were like, somebody's got to do a preferred man, it's you.

Prefers, did you pick this or were you at Neuvien? And they were like, somebody's got to do a preferred man, it's you.

I hate to say it, but it's the latter. So when I first came into Nouvene, I was actually a derivatives guy. Yes, would you sure? And I don't tell many people this, but I was a derivative sales.

I hate to say it, but it's the latter. So when I first came into Nouvene, I was actually a derivatives guy. Yes, would you sure? And I don't tell many people this, but I was a derivative sales.

Guy at Lehman Brothers.

Guy at Lehman Brothers.

Okay, so that doesn't come up very often anymore, you know, you don't.

Okay, so that doesn't come up very often anymore, you know, you don't.

That's awesome.

That's awesome.

So if I'm a banker, If I'm a banker and I'm doing a new issue for Wells Fargo, You're like one of my first calls. Right, you're a big buyer in the marketplace.

So if I'm a banker, If I'm a banker and I'm doing a new issue for Wells Fargo, You're like one of my first calls. Right, you're a big buyer in the marketplace.

I would hope, I would hope we're up there. Yeah.

I would hope, I would hope we're up there. Yeah.

So we're typically having the conversations with syndicate desks in advance of a deal coming.

So we're typically having the conversations with syndicate desks in advance of a deal coming.

They're whining and dining you. They're the guy. You're the guy that they need to get to.

They're whining and dining you. They're the guy. You're the guy that they need to get to.

Yeahs kind of gone the way of the dinosaur.

Yeahs kind of gone the way of the dinosaur.

We don't get this. But what we do is we give them the feedback.

We don't get this. But what we do is we give them the feedback.

We're going to be one of the largest typically players in a book or in a deal for someone like that, you know, so our larger competitors are gonna get the phone call too. But the nice thing about that is we get to help drive the terms of the deal in favor of our investors.

We're going to be one of the largest typically players in a book or in a deal for someone like that, you know, so our larger competitors are gonna get the phone call too. But the nice thing about that is we get to help drive the terms of the deal in favor of our investors.

So yeah, we're typically the.

So yeah, we're typically the.

Ones that will get, you know, the phone calls before the deal really comes to market to get a you know, temperature check of what we're looking for.

Ones that will get, you know, the phone calls before the deal really comes to market to get a you know, temperature check of what we're looking for.

So when Paul was on the street, it was all and I'm sure when you started as well, you were flying everywhere twice a week, you were living out of a hotel half the time, constantly face to face meetings. And now is it completely changed.

So when Paul was on the street, it was all and I'm sure when you started as well, you were flying everywhere twice a week, you were living out of a hotel half the time, constantly face to face meetings. And now is it completely changed.

It's actually going back to that oh yeah, back, yeah, So we're doing I mean, I think we're the virtual you know kind of remote meetings are That's going to be still a big component of it. But yeah, I think feet on the ground and I think getting involved with folks face to face in a room.

It's actually going back to that oh yeah, back, yeah, So we're doing I mean, I think we're the virtual you know kind of remote meetings are That's going to be still a big component of it. But yeah, I think feet on the ground and I think getting involved with folks face to face in a room.

Look, there's just better communication.

Look, there's just better communication.

That way, and it also builds a level of trust that Hey, you know, it's easy for me to say on the phone, like, yeah, we're gonna have interest at this type of level, but to do that in person, I think there's just a different connection there. And I think having that level of trust with you know, our partners on the syndicate side, with our investors is truly important. So that FaceTime, that in person travel has really picked up, i would say, over the past years.

That way, and it also builds a level of trust that Hey, you know, it's easy for me to say on the phone, like, yeah, we're gonna have interest at this type of level, but to do that in person, I think there's just a different connection there. And I think having that level of trust with you know, our partners on the syndicate side, with our investors is truly important. So that FaceTime, that in person travel has really picked up, i would say, over the past years.

So, how many new issues do you guys at Moving buy like you for your preferred fund?

So, how many new issues do you guys at Moving buy like you for your preferred fund?

Like, there haven't been many lately, and this out this is one of the technicals to our market that's been incredibly supportive valuations and it's going to stay this way. We've had more preferreds redeemed this year than new issue can keep up with. So yeah, and part of it is that, you know, as the economy slows, our outlook is banks aren't going to need as much capital because they're balance sheet shrinks, right, not as many people want loans, and if they're not making loans all, the size of balance sheet shrinks, and their capital is measured as a percent of their balance sheet. So we're seeing more redemptions and we're seeing new issuance, but when new issuance comes, use of proceeds as almost to refinance or to call an existing preferred.

Like, there haven't been many lately, and this out this is one of the technicals to our market that's been incredibly supportive valuations and it's going to stay this way. We've had more preferreds redeemed this year than new issue can keep up with. So yeah, and part of it is that, you know, as the economy slows, our outlook is banks aren't going to need as much capital because they're balance sheet shrinks, right, not as many people want loans, and if they're not making loans all, the size of balance sheet shrinks, and their capital is measured as a percent of their balance sheet. So we're seeing more redemptions and we're seeing new issuance, but when new issuance comes, use of proceeds as almost to refinance or to call an existing preferred.

And it gets snapped up because people are looking for the prefers. There's no supply.

And it gets snapped up because people are looking for the prefers. There's no supply.

They're looking to reinvest their cash, and luckily for them, they're in this interest rate environment. The structures that we're seen are very attractive, talking mid seven percent type coupons with adjustable rate, you know, a component down the road after the.

They're looking to reinvest their cash, and luckily for them, they're in this interest rate environment. The structures that we're seen are very attractive, talking mid seven percent type coupons with adjustable rate, you know, a component down the road after the.

First call date. You know, it would be a little bit more concerned if we.

First call date. You know, it would be a little bit more concerned if we.

Were in a low interest rate environment and folks didn't have this attractive opportunity. We do think that the Yeffords are coming to market today are going to be a rare vintage because of these higher coupons.

Were in a low interest rate environment and folks didn't have this attractive opportunity. We do think that the Yeffords are coming to market today are going to be a rare vintage because of these higher coupons.

He's attractive structure.

He's attractive structure.

So so more often than not, we're participating in the new deals that we do see.