October 28, 2024 • 49 mins
What would YOU like to hear about on Bloomberg? Help make shows like ours even better by taking our Bloomberg audience survey.
Watch Alix and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense, & Airlines Analyst, discusses Boeing launching a nearly $19 billion share sale to address liquidity needs. Steve Man, Bloomberg Intelligence Senior Auto Analyst, discusses Volkswagen saying it will close three German factories. Shana Sissel, President and CEO at Banríon Capital Management, joins to discuss her outlook on the markets. Kirsten Fontenrose, President of Red Six International, joins to discuss weekend news out of the Mideast. RJ Gallo, Senior Portfolio Manager, Fixed Income at Federated Hermes, discusses the latest on the fixed income space. Rhett Buttle, CEO at Public Private Strategies, discusses the impact that business leaders can make by advocating for safe and secure elections. Corey Cantor, BNEF Lead US Electric Vehicle Analyst, discusses the EV market.
Hosts: Paul Sweeney and Bailey Lipschultz
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Affo, cardplay and Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
or watch us live on YouTube.
Speaker 2 (00:23):
Boeing hitting the market. I'm raising some money up to
nineteen large, maybe fourteen billion in common, maybe five billion
in preferred. I think they can get this done pretty quickly.
Everybody knows the Boeing name. It's been trading in these
levels for a long time, so we know where the
value is. George Ferguson, he's the analysts responsible for all
(00:43):
this stuff. He's a senior airspace, defense and airlines analysts
for Bloomberg Intelligence. George, if they are able to get
this deal done again, roughly nineteen billion of incremental new equity,
what's that going to do for him? How much time
is I going to buy him?
Speaker 3 (00:57):
So we think it probably buys them a couple of quarters, right.
So on the call the other day, on the evening's
call for three Q, they indicated that they thought they'd
burn four four and a half billion dollars in four
Q similar to what they burned in two Q at
that burn rate, what it gets maybe even you know,
(01:18):
three quarters or the burn I wouldn't I would hope
they wouldn't need all that, but we did here. Again
their outlook that the first half of next year they
expect to be largely a cash use scenario and for
the full year they'd be cash used'd go sounded like
they would go cash positive sometime in the second half,
they hoped, so two three quarters.
Speaker 4 (01:39):
So, George, just in terms of how large this can be,
we know that they launched the shelf to raise up
to twenty five billion. Do you think that gets close
to maxing it out just because it's going and they
simply probably can.
Speaker 3 (01:54):
Well, I guess you know they have to, you know,
sort of really, I mean, there's a lot of dilution here, right,
so really be concerned about dilution. But you know, last
I look, the shares were down a couple percent, so
it seemed like the market's not that concerned about whatever
delution is going to occur here. I think the bigger
amount they have, right, the more staying power, obviously, the
more they can look at the union across the negotiating table.
(02:18):
And say we can hang out for a long time.
We really need you to rethink your idea on let's
say something like a pension, right.
Speaker 5 (02:26):
And so I think, you know, more money helps them there.
Speaker 3 (02:30):
And look, the aerospace supply chain still isn't stable, right,
so Airbus should be sort of moving towards fifty rate
on a three twenty as they close out the year.
Speaker 5 (02:41):
Here, we're not seeing it.
Speaker 3 (02:43):
We're seeing them in the forties still, so they're sort
of proof positive to us.
Speaker 5 (02:47):
You know, we're.
Speaker 3 (02:47):
Seeing more noise out of the engine makers. They're still
sort of working to get their supply chains fully functioning
coming out of the pandemic. So it's not a given
that just once they get this strike past them that
Bowe's going to have, you know, clear skies ramp up quickly,
generate cash and not have any additional problems. So I
think raising more, raising above twenty billion, which yeah, I
(03:10):
think could certainly happen here, just buys them more time
in a world that is just has a lot more
variables in it than you know, than most other industries.
Speaker 5 (03:20):
The airspace industry is more more variables right.
Speaker 2 (03:23):
Now, George, what are you hearing about this strike here?
Has there been any movement here? Have they been able
to narrow in on a or a topic or two
or three? What are what are you hearing?
Speaker 3 (03:34):
I'm hearing it has a lot to do about pensions,
right I'm still this weekend, I'm hearing noise out of
the unions on the on the West coast, and that
that noise, you know, not trying to demean it. It's
it's the commentary is probably better way of putting it.
Out of the union is really around a pension now,
you know, I have heard the machinists presidents say that,
(03:58):
you know, if they can't give a pension, they should
Boeing should be prepared to give somewhere else. So it
sounds like there is flexibility, but it sounds like a
lot of it has to do with retirement plans and
what the union thought they lost a decade ago. They
did lose the pension a decade ago, and they think
they lost a very valuable benefit. And it sounds like
there's a lot of focus on that right now.
Speaker 4 (04:21):
And we saw the report at the end of last
week that the company could sell their Starliner space program.
What's your thinking on that? Is a more streamlined Boeing
more attractive to equity investors.
Speaker 3 (04:33):
Look, I think Boeing could potentially do some streamlining. I
frankly think the space business isn't necessarily the place.
Speaker 5 (04:41):
For them to do the streamlining.
Speaker 3 (04:43):
But I do think they're looking for pieces of the
company that aren't core to sort of aircraft, you know,
defense aircraft, commercial aircraft, and so space I think stands
out for that. The problem I have though with the
space business is they've got a launch business called the
United Launch a line.
Speaker 5 (05:00):
It's with Lockheed.
Speaker 3 (05:01):
It's not as competitive as SpaceX, right, I know from
people I talked to in the industry, SpaceX can deliver
things into orbit much cheaper. You know, I think the
Boeing Lockheed joint venture suffers from I think some of
those sort of structural challenges inside any big defense contract
that they're not nimble and they're not cheap. And I
(05:24):
think you know, star Liner, they took four point six
billion to develop a capsule. It's supposed to be the
second capsule to the SpaceX capsule, which one as well.
You know, NASA wantce redundancy to deliver to the International
Space Station.
Speaker 5 (05:40):
There's a commitment in there. I think they have to.
Speaker 3 (05:42):
Deliver or at least have to go to the space
station at least twice a year for a number of years.
I don't see NASA, you know, letting them off that
that requirement. So they're gonna have to find someone else
to step in to a program they've already developed, to
take it over and commit to making you know, deliveries
(06:03):
to the space station or shots to the space station
twice a year. I think that they're going to be
hard pressed to really get much money from that, because again,
they don't they don't deliver cheap.
Speaker 5 (06:13):
They're overruns on Starliner two. So I just think it's.
Speaker 3 (06:17):
Going to be a real challenge to really generate much
cash from that. That's been on the market too for
a while, and nobody's bitten so far. I understand Blue
Origin looked at it, and now they're going to the
equity markets for twenty billion in equity. So I think
that's a sign of what they think they can generate
for that business just isn't there, I don't think all.
Speaker 6 (06:35):
Right, George, thanks so much for the update. Appreciate it
as always.
Speaker 2 (06:38):
George Ferguson, Senior Aerospace, Defense and Airlines sentists for Bloomberg Intelligence,
Boeing in the market for you know, up to nineteen
billion dollars in some equity common stock, preferred stock. We'll
see stock's only off one percent years. So, as George
was suggesting, it seems like the market's okay with the delution.
I mean, it is what it is. You kind of
knew this was coming. It's been well telegraphed.
Speaker 4 (07:00):
We reported it back in early October, so almost four
weeks ago. At this point that they were in talks
with advisors, that stock was about one point fifty three.
Right now it's one fifty three to five. So when
you think about it, we're continuing to see the stock
move sideways. As you mentioned, the big question is what
kind of a discount, How quickly does this deal get done,
and what are the terms that actually get agreed upon
for that convertible debt, Just because when as George mentioned,
(07:23):
when you talk dilution, if you're an equity investor, I'm
sure you want to clean balance sheet, but you also
don't want to get squeezed out of your position.
Speaker 2 (07:29):
Yep, it's actually and then presumably that'll strengthen their position
with the union. Just in terms of talking about this
upcoming contract.
Speaker 1 (07:36):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on applecar Play 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.
Speaker 2 (07:54):
Let's switch hears to the global auto industry. A little
bit different story there is. The best I could tell
the two may your headwinds for the auto industry is
one China, which is obviously a huge growth market for
the global auto industry. It's slowing and the local brands
there are improving dramatically, so they're getting much more competitive there.
And then the second thing is, oh, yeah, they got
this whole transition to evs and how do you do that?
(08:16):
We heard some some really cautious news out of Volkswagen today.
Volkswagen eyes closing three German factories in a cost cutting push.
Let's check them with Steve Man, he covers the global
auto industry for Bloomberg Intelligence. Steve talked to us first
about this Volkswagen news here, I mean shutting German factories.
They don't typically do that, So how much, how much
(08:38):
hurt are they feeling over their VW.
Speaker 7 (08:41):
Oh, they're in the world of pain at the moment.
You kind of mentioned it, Paul. They are hurting around
the world in all three major regions of the auto market.
You know, US, they're not They're not that big of
a they don't have that big of a presence in
the US. You're up, you know, it's sales are down.
(09:01):
You're not only hearing it from Volkswagen, but also Silentis
as well. You know, their stock is down quite a
bit over the past few months. And in China, you know, China,
the Chinese OEMs are taking a lot of market share
in China, They're they're entering the EU market. Like you
said earlier, you know, Chinese automaker are just much quicker
(09:26):
in transitioning to EVS in that region than any of
the foreign OEMs operating in China at the moment. So,
you know, Volkswagen is feeling it.
Speaker 4 (09:38):
And how does that kind of position a company And
you're up one of the biggest automakers trying to compete
with US automakers who are having their own issues and
as well as kind of the potential pent up demand
at least in terms of capacity production capacity in China.
Speaker 7 (09:55):
Yeah, there, I mean de pent up the capacity in China.
It is really not EV capacity. It's actually really ICE capacity,
internal combuntion engine vehicle capacity.
Speaker 8 (10:07):
Uh.
Speaker 7 (10:08):
There's been a lot of closing of those plants in China.
Volkswagen has closed one of its plants in China with
his partner Shanghai Auto sai C. You know, Ford has
closed a number of plants. Hyundai has closed a number
of plants. And these are all companies that have not
transitioned to EV as fast as the OEM's companies like
(10:31):
GM and BUYD taking huge market share from the foreign automakers.
By D is actually the biggest now biggest automaker in
terms of volume in China.
Speaker 2 (10:41):
All right, So what is Global Auto to do about China?
What is the strategy?
Speaker 6 (10:46):
Do you think?
Speaker 2 (10:46):
Because I think if I've got these Chinese companies that are,
you know, getting better and better every day, what do.
Speaker 1 (10:52):
I do there?
Speaker 2 (10:53):
Do I walk away from this market? I can't do that.
Speaker 6 (10:55):
It's too big.
Speaker 9 (10:56):
Yeah, that's I know.
Speaker 7 (10:58):
You know, if you look at the four OEMs operating
in China five years ago, they were they had market
share over fifty percent in the last couple of years,
they basically have changed position.
Speaker 5 (11:10):
Uh.
Speaker 7 (11:10):
You know, the Chinese OEM has more and more capacity,
more and more market share, uh, and it's growing. There's
a number of ways they can attack this. They need,
you know, they either invest a lot of money uh
and and really grow evs and not just evs, but
these user interface. Chinese consumers are buying cars because they
(11:32):
like the user interface that the Chinese OEMs are offering them.
So they need to build more evs. They need to
look at revamping their software to cater the local customers
in China.
Speaker 5 (11:45):
Well.
Speaker 7 (11:45):
The other the other option is really to close shop
and you know, focus, refocus their their investments and their costs.
They know how to you know, they know how to
operate in Europe, they know how to operate in the US.
They know how to do, you know, sell more cars
in their local markets. That that may be one option
is to just retrench. But you know, that's that's not
(12:07):
an unfortunate approach if they had to do that in
the biggest auto market in the world.
Speaker 4 (12:13):
When I look at Europe, are there any automakers well positioned?
I mean, Stilantis is hitting getting hit by four performance
in the US BMW has an expensive recall. Mercedes Bins
has been struggling in China, Like is anyone winning well?
Speaker 7 (12:26):
Relatively speaking, I think the German luxury automakers, the BMW,
Mercedes are faring better than the mass market, but they're
also feeling the pain, right They're all the luxury brands
are also feeling the pain.
Speaker 5 (12:42):
You know.
Speaker 7 (12:42):
BMW and Mercedes just reported, you know, lower sales in China.
And you know, I also am concerned. And it's a
matter of time because there are companies like Neil, there
are companies that are xpunk, you know, they're also moving
up market competing with the Mercedes and BMW. So I think,
(13:04):
relatively speaking, just to answer your question, the luxuries are
doing better, but you know, time will tell if they
can you know, maintain you know, some of the sales
that they have in China.
Speaker 2 (13:17):
All right, Steve, thanks so much for joining us there.
Steve Man, he covers the global global autos and industrials
for Bloomberg Intelligency spased down in our Princeton, New Jersey office,
So getting the latest on VW closing some plants, cutting
some staff, trying to cut some costs here as they
face the some headwinds coming out of China, as well
as the continued costs of going over to electric vehicles.
Speaker 1 (13:40):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on fo Car Playing and
Broun Auto with the Bloomberg Business App. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 2 (13:56):
All right, our next guest, let me see if I
got this conjugated right. She's in Chicago, though, but she's
a Boston native and fan of the Red Sox, which
means she's rooting for the Dodgers. I think I've got
that rate. Shane Sissel, president and CEO of a ban
Rionn Capital Management, joins us here in our Bloomberg Interactive Broker.
Speaker 6 (14:13):
Studio that I get that right.
Speaker 10 (14:14):
We totally got that right. I think, guys we were
saying before, Dave Roberts has to continue to do everything
he can to help the Red Sox, whether it be
win a World Series as a player, as give the
Red Sox World Series as a manager, and now he
needs to make sure.
Speaker 2 (14:28):
That the Yankees prevent the Yankees. I get the whole
concept there, all right, Before we get to your market
call which we want to talk about pink ETF. Talk
to me about that.
Speaker 10 (14:36):
Yes, so pink ETF is near and dear to my heart.
I am a breast cancer survivor and October is breast
cancer Awareness month. The pink ETF is issued by Simplify
Asset Management. It is a healthcare ETF. It invests in healthcare,
is not specific to cancer or breast cancer in general.
(14:57):
It's the only pro bono ETF on the market, meaning
the manager does it pro bono and they donate all
of the net profits of the fund through its expense
ratio to the Susan G. Comen Foundation for Breast Cancer Research.
So you know it's October, yeap breast cancer on this month.
(15:18):
You can do your part and this is an interesting
way to do that. Fund has a great track record.
Speaker 2 (15:24):
Yeah, absolutely, nice Caaren from Springlake. That's for you. Talk
to us about the markets. What do we do here?
Do we just sit on the sidelines until the election's
over and then become investors again? What are you telling
your clients about these markets these days?
Speaker 5 (15:37):
Well?
Speaker 10 (15:38):
I mean yeah, I mean the election is the number
one most important piece of news that the markets is
waiting for we have a virtual tie and almost all
the polls and I have opinions on where I think
that kind of leans. But in that kind of environment,
companies are reluctant to make any big Capex decision, are
(16:00):
kind of putting a pause on policy, waiting to see,
you know, who wins, because the rules could be substantially
different depending on who becomes the victor.
Speaker 4 (16:12):
Well, what do you make, Shana of the betting market?
We talk kind of ad nauseum. It feels like at
poly market and predicted and how that impacts it. What
the Trump trade is or isn't. If we're still in
agreement that it's a coin flip, how are people positioning
if we are kind of at least reading about in
Bloomberg's reporting about kind of the so called Trump trade,
(16:33):
if it still feels kind of like a deadlock.
Speaker 10 (16:36):
Well, I think there's this one little caveat nuance to this,
which is that I think in polls that are showing
a deadlocked electorate that is actually pro Trump in my opinion, right,
I think we've seen this in every election he's been
(16:57):
involved in. The Polls tend to underestimate his voting, his
voters because being associated as a Trump voter has some
negative connotation in the broad public right, so people are
less likely to be honest about it until they get
into the the voting booth, and then it doesn't matter
(17:18):
because it's truly anonymous or we hope. So in that case,
I think that when you see something where it's a
virtual tie, it's probably leaning more in Trump's direction.
Speaker 11 (17:30):
Than it is in Harris's direction.
Speaker 2 (17:32):
That's just my opinion, all right, So elections aside, it
seems like we've got a FED that's accommodative, seems like
earnings generally remain fairly strong, the economy remains fairly strong,
in inflation coming down.
Speaker 5 (17:46):
Is that?
Speaker 2 (17:47):
How constructive is that for you guys in terms of
taking risk in this market in place?
Speaker 10 (17:50):
Well, I think this is a market where you can
take risk. So for me, the way I position portfolios
is I want to make sure I can get the
most upside.
Speaker 11 (18:00):
I can from the equity markets because I.
Speaker 10 (18:02):
Think that the probability of upside in the equity markets
is quite high, and I think it's also high probability
of risk assets outperforming, so I want to be able
to take that risk. I'm not as certain about fixed
income markets. So I'm taking some of my fixed income
allocation and putting it into more alternative strategies, which I
(18:23):
think do better than fixed income but allow me to
take more risk and equities because they are diversifiers that
tend to reduce overall portfolio risk. So that's kind of
how I'm positioning myself.
Speaker 4 (18:35):
Right now within taking on risk. When you say that,
do you mean within large caps? Are you skewing out
more towards like a small cap? I just am looking
at in terms of earnings we're going to hear from
this week alone Alphabet, AMD, Microsoft, Meta, Apple, Amazon, and
that's really cap X comments have been making up so
much of the Nvidia trade. So when you're looking at
(18:55):
allocating risks to equities, what does that look like?
Speaker 10 (18:58):
So I do think it involved some of the high
flyer growth stocks. We haven't had an environment that's conducive
to small caps or value in a while. Jason Trendert
from STRTIGAZ did a great piece last week called ten
Things I Think, I Think, and one of the things
he talked about is in since two thousand and nine,
we've been in this perpetual QE cycle where companies haven't
(19:20):
been permitted to fail, and we've been in this perpetual
late cycle business cycle. The business cycles kind of disappeared,
and in doing that, it's been a complete headwind to
anything that would benefit from things winning and losing and
not allowing companies to fail has kind of also increased
(19:41):
the haves and have nots. So I'm willing to take
more risk in those larger cap names. That's where I
actually think there is more risk, but also things like bitcoin,
which is not a stock obviously, but is a risk asset.
In my opinion, I would argue small caps could be
considered a risk asset, but value wouldn't be right. So
(20:03):
you're probably staying away from some of your cyclicals and
you're going with your more risk growth beta names.
Speaker 11 (20:10):
Is where I would be paying attention right.
Speaker 2 (20:12):
Now, Shane. I know you have a lot of experience
in alternatives, and I've been surprised when I talk to
retail advisors how willing they are to embrace alternatives and
to a much higher percentage of their portfolio than I
would have thought. Where do you see opportunities in alternatives
these days? Private equity, private credit has becomes so big.
Hedge funds where do you see alternatives? How do you
(20:33):
talk your clients about that?
Speaker 10 (20:34):
So private credit is credit, it's correlated to credit markets.
Private equity is equity, it's correlated to equity markets. So
they belong in equity and fixed income. And while they
are alternatives in the sense that their liquidity terms and
not available to everyone, they're not necessarily diverse fying alternatives.
I think the opportunities lie in those diverse fying alternatives,
(20:55):
things like hedge equity, and there's a million different ways
to slice that pie. That's a pro and a con
of that asset class. It's you know, they all kind
of get thrown in together, but you can do hedge
equity a million different ways, market neutral, managed future is
global macro, more those hedge fund type strategies, but also
looking at you know, things like sports rights. I've talked
(21:16):
about this a million times because I'm a huge sports
fan and it resonates with me. But there's real opportunity
here for you to be able to bring diversification into
your portfolio using things like that. And while advisors are
definitely more open to alternatives than they've been before, it's
mostly because their clients are demanding it.
Speaker 11 (21:35):
Right.
Speaker 10 (21:35):
It's because if they don't, then they could lose those relationships.
And ALTS, I would argue, is a relationship builder because
you can really I mean, it's such a huge universe,
you can really find things that will resonate with your
client on a million different levels. So they're seeing that,
but seventy five percent advisors still don't use alts and
(21:56):
the vast majority are allocating something like five percent, where
institutions is more like twenty five to thirty. So there's
a huge gap there. Still, it's going to take a
long time to get there, and we as an industry
have not done advisors any favor by making investing in
any sort of alternative incredibly difficult, operationally cumbersome, and in some.
Speaker 11 (22:16):
Cases just annoying.
Speaker 10 (22:18):
Like just a trade BTL, which is an alternative ETF.
If you tried to do that in your Fidelity or
Schwab account, you'd get a pop up saying that you
need to change your risk tolerance to aggressive. And I
would argue, if I am an aggressive investor, i am
definitely not doing hedge, dequity or market neutral like that's
like completely counterintuitive. But because of that, it sort of
(22:41):
makes people shy away because you've got to change your
client's risk tolerance and it's not reflective of reality just
to be able to make a trade.
Speaker 4 (22:47):
And when you talk sports diversification sports rights, like, I
immediately think of the fact that the Atlanta Braids are
publicly traded. Is that what you mean or how do
you think about allocation to sports is an alternative investment?
Speaker 11 (22:59):
No, I think the private equity aspect of it.
Speaker 10 (23:02):
So my favorite fund in that space is the one
managed by Avenue Capital because I think that what they're
doing is really interesting. They weren't one of the high
flyers that was approved by the NFL, but they invest
in MLB and NBA and things of that.
Speaker 11 (23:18):
Mark Lazari is the kind of founder of that firm.
He used to own the.
Speaker 10 (23:23):
Box, but he talks about it also in the credit sense.
Most people don't realize that banks won't lend to sports
teams because the goal to have a franchise that's worth
anything is based on whether or not you win, and
you don't win if you don't spend, and banks don't
like that so much. So, you know, teams, when they
(23:44):
need access to the credit markets, they don't really have
any place to go, so that fund does that. They
also do what they call emerging sports. So I've done
a bunch of interviews talking about cricket, Like, cricket is
an incredibly interesting area of private equity is looking at
buying cricket teams.
Speaker 11 (24:01):
Women's sports is huge.
Speaker 10 (24:03):
You know, you have the yacht league that's out there
and some of this as we have the proliferation of
streaming services and everybody trying to get live events because
that's really the only way you can get ad dollars.
Speaker 11 (24:14):
You're seeing this more and more.
Speaker 10 (24:15):
Which gives you more and more opportunity to make money
in sports that maybe we wouldn't have paid attention for.
Speaker 11 (24:21):
A while back.
Speaker 2 (24:22):
Yeah, lots of different opportunities out there. Shana Sisil, thank
you so much for joining us. Shane Sisil, She's a
president and CEO of ban reON Capital Management based in Chicago,
but originally from Boston. We've got that all cleared up.
Speaker 1 (24:37):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on applecar Play 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 playing Bloomberg eleven thirty.
Speaker 2 (24:55):
Let's switch gears and touch base on the ever changing
situation in the Middle East. Kirsten Fulton Rose joins as
president of Red six Solutions. Kirsten, I guess the most
recent data point that everyone's trying to digest here is
the Israeli response in its attack on Iran. How would
you characterize Israel's response sending approximate one hundred fighter jets
(25:19):
to attack some key logistical targets. What do you make
of that move?
Speaker 12 (25:26):
It's interesting. One hundred fighter jets sounds like a lot.
Speaker 13 (25:29):
They were sent in three waves, but this response was
actually designed to allow Iran to declare it requires no response.
Israel only hit military sites. They hit outside densely populated areas.
They had it most one civilian casualty. The Israeli defense
forces say that they targeted border radar systems with very
light warheads direct quote to remove Aroan's early warning capability,
(25:51):
and then they followed with the jets that struck carefully
selected sites.
Speaker 12 (25:56):
If we look at those sites.
Speaker 13 (25:58):
According to some experience US analysts who were looking at
unclassified imagery, Israel struck buildings in a couple of places,
including in Parchen and in Klojure, and there are two
reasons why these locations matter. One, Israel hit Clgier, which
is a large missile production site that's near Tehran but
not in it. The reports back in July that Hadro
(26:19):
was being expanded, So according to these analysts looking at
the imagery, Israel's pinpointed strikes could have significantly reduced Iran's
capacity to produce missiles, which then make it less apt
to want to continue this fight with Israel right now.
Second Partschen is a large military complex near Tehran as well,
so capital pays attention, but it's not actually feeling the hit.
(26:40):
The satellite imagery analysts tell us that Israel hit a
building there that was used for testing in an old
nuclear weapon weapons program that was called the Ahmad Plan.
This program was shut down about twenty years ago according
to international watchdogs, but Iran denied it ever worked on
a nuclear weapon there. So this target, we think was
a message to Tehran. We hit an old facility without personnel,
(27:03):
without nuclear material present this time, but we can reach
your nuclear facilities without you being able to prevent it
in the future.
Speaker 12 (27:11):
If we think it's necessary.
Speaker 4 (27:13):
And Kirsten, you have more than two decades of experience
working in our security with a focus in the Middle
East and Africa. One of the things that stood out
to me was that Israel distributed videos of Prime Minister
Benjamin n Yahoo and military chiefs coordinating the defense from
a ministry bunker, which was a rare acknowledgment of an
attack on Islamic Republican expansion what had been mostly a
(27:36):
shadow war. What do you make of the video being
distributed and how does that potentially impact kind of the
path forward.
Speaker 13 (27:44):
I think the reason for distributing the video was to
make it clear to the international community that Israel is
in a real war, that it is truly the existential
threat it feels it wants the international community to have
a sense of as well. While we're planning our response
on Israel on Iran, we are still taking hits from
Hazbala and from Hemas and perhaps from the Huthis. So
(28:05):
they're trying to let the international community know that this
is not something they're taking lately, that they're being arrogant,
that they really see the threat as serious. So that
means US support needs to stay high, that means Europe
needs to stay behind them. They're trying to make sure
that they continue to maintain this level of support and
this level of attention on the threat from their international
(28:26):
partners while they stage these responses, sometimes without listening closely
to their international partners.
Speaker 2 (28:33):
Kirsen, what do you think the end game is now
for Israel and maybe the timing associated with that.
Speaker 12 (28:40):
For Israel? The endgame is not with the international community
you would like to hear.
Speaker 13 (28:43):
The arguments for a ceasefire are ongoing from almost every
corner except from inside Israel, and often except from inside
parts of Hamas and parts of Habeala.
Speaker 12 (28:54):
For instance.
Speaker 13 (28:54):
You see that Hasbala right now is saying it will
not negotiate less it's not under attack, and their own
speaker of the parliament in Lebanon is negotiating for them.
Speaker 12 (29:02):
So Israel saying, look, we don't.
Speaker 13 (29:05):
Have space to talk about a ceasefire unless it's short
we get some of our hostages back so that we
can reduce the domestic pressure on us to bring hostages home.
But this conflict is not over as long as there
is still a threat, As long as all of these
groups continue to say one of their primary objectives is
to eliminate our state from the map. This threat will
continue to face us. We will continue to fight this
(29:27):
kind of onslaught every few years like we have for
decades now, unless we do something decisive. So they're looking
to uproot Hamas, uproot Hu's Baalah, shut down the Khuthi's
ability or will to fight this war on behalf of Hamas,
and to put Yourn on the back foot where it
is no longer has the capacity to strike and perhaps
(29:48):
no longer the will. It certainly does not have the
domestic support, but the hardliners in Iran's leadership are going
to push that fight going forward as well.
Speaker 12 (29:57):
This is not over.
Speaker 2 (29:58):
Yep, all right, That's kind of what what we're hearing
across the board. Kirsten, thank you so much for joining us.
Kirsten fontin Rose, she is the president of Red six Solutions,
joining us in Washington, DC via zoom kind of getting
the latest there. But again, it seems like this is
Israel saying, you know, we're going to settle everything here.
That's kind of our goal as opposed to maybe when
(30:18):
we started out a year ago, which is, you know,
neutralize Hamas and get her hostages back. This obviously is
much broader, much wider.
Speaker 1 (30:27):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on applecar Play 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.
Speaker 2 (30:44):
Thirty Billy Lipschild sitting in for Alex steel On Paul Sweeney.
We're live here on O Bloomberg in Arrector Brokers Studio,
streaming live on YouTube as well. Boy, if you we're
paying attention, the ten year treasury just in the last
five weeks has gone from a yield of three point
six percent to four point two six percent. Kind of
where we are today, that's a big time move here.
(31:05):
I don't know what's going on out there in the
bond market, but our next guest does. R J Gallow.
He's a senior portfolio manager of fixed income and Federated
at Hermes, coming to us from Pittsburgh, PA. No, they
do not have a team in the World Series, but
they have a good football team. So r J, thanks
so much for joining us here. My giants are coming
out to Pittsburgh tonight. It'd be nice to them. What's
(31:26):
going on in fixed income market?
Speaker 6 (31:27):
Again?
Speaker 2 (31:27):
That ten year treasury kind of got me by surprise
that the moves we've seen in rates, what's going on
out there?
Speaker 9 (31:34):
Yeah, well, good morning, Yeah, steals giants side always excited
in terms of the rates market. There's been quite a
turn of events basically since the Fed's ease. The fedies
fifty basis points, and you might recall leading into that meeting,
the expectation was twenty five. The Fed seemed to use
media outlets to lay the groundwork for a fifty basis
(31:56):
point ease, a bold move when the economy isn't back
doing well. Since the data, excuse me, since the FED
meeting and the fifty basis point ees, the data has
in fact affirmed that the economy is doing pretty well.
So you have the Fed layering in a large first
move in what will be a path of easing, and
an economy that has been quite resilient on the on
(32:17):
the labor and growth front, terms of things like retail
sales and CPI came in a little firmer than expected.
So you have an economy that's not showing signs of recession,
a FED that's committed to landing the economy outside of recession,
a soft landing as we've all come to call it.
And then you have the election coming up. All those
(32:38):
factors have leaned towards a significant repricing hire and yield.
You mentioned the ten year treasury I think if you
take a look at the implied rate on SOFA futures
out in June of twenty twenty six, the implied rate
has risen almost eighty basis points since September tenth. It
is now three point fifty five. It was one below
(33:00):
to eighty.
Speaker 5 (33:01):
Wow.
Speaker 9 (33:02):
So all those factors have really hit the bond market
pretty hard. It's now priced i think for perhaps an
inflationary election outcome, and that's the next big focus the
election itself.
Speaker 4 (33:12):
Well within that, we're eight days from the election. How
should investors be positioning just given the polls that we've
been seeing and how kind of markets have seemingly been
moving ahead of it.
Speaker 9 (33:23):
Yeah, well, the markets certainly have been moving, and by markets,
I'm sort of speaking broadly, the betting markets, starting probably
in the first week of October, just started shifting in
the direction of a Trump win and a red sweep
as the most probable of outcomes according to some of them,
you know, forty five to fifty percent probability of a
red sweep. That's a big change from where they were
(33:45):
in September. The financial markets, including the impact on rates,
I think the economy's resilience that I just described, and
the unwind of expectations to some degree of a deep
fed easing path, those were the primary drivers. But the
election risk and the prospect of an inflationary setup policies
from a Trump two point zero, we're secondary factors there.
(34:06):
I think it's safe to say that the market now
is leaning heavily in the direction that we just described,
but I would still think some caution is warranted. We're
leaning a little bit short, not aggressively. So there's a
lot of other complex factors out there. Kamala Harris could
surprise us on election day. We could actually have an
indeterminate election outcome. You go back to two thousand, a
(34:27):
highly indeterminate outcome between Gore and George W. Bush led
to yields falling, in flight to quality demand and risk
assets struggling. If we have prolonged and decision this time,
you might see a rerun of that script.
Speaker 2 (34:40):
So when you guys get together for your Monday morning
meeting plot out the week, where do you guys see
value these days?
Speaker 9 (34:49):
A great question, you know. So we started off the
year thinking the bond market was going to produce us
pretty good total returns, and then that was sort of
tempered earlier in twenty twenty four by the fact that
Inflame had a bit of a resurgence and started getting
a little sticky. We had a great run there from
say April all the way up through the expectations of
(35:10):
the FED easing, but now the total returns are getting
diminished yet again. So for example, if you look at
the aggregate index, your today's total return is just up
two percent over the last three months, it's just one
point two And it's been a brutal October. Over the
last thirty days we've lost two and a half percent.
A month to day, we've lost two point three percent.
So just betting on rates has not been compelling. But
(35:33):
that's not all that we do. We obviously look at
and actively managed duration, but we realize calling rates is
a dicey prospect, so we focus very heavily on other variables.
So the yield curve has steepened sharply in relation to
the FEDS easing and the prospect of inflationary policies to come.
We've played that rather well in our number of our portfolios,
(35:53):
positioning for YELD curve steepening, and that's been a way
to generate alpha within a fixed income portfolio. When it
comes to credit, we've been overweight mortgages. We remain cautious
on how you in corpus where we think spreads are
just not enticing enough. But the good news about a
fixed income portfolio, a highly diversified one is you can
move across sectors to look for opportunities. You can move
(36:14):
up and down the YOK curve for changes and it's
slope and shape in addition to taking some positions on duration.
So all in all, we've been deploying all those different
tools to varying degrees throughout what's been a moderate return
but a positive return year.
Speaker 2 (36:28):
All right, Urjie, thanks so much for joining us as always.
Speaker 5 (36:30):
R J.
Speaker 2 (36:30):
Gallow, Senior Portfolio Manager Fixed and come over there at
Federated Hermes.
Speaker 1 (36:35):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Applecar Play and Android
Auto with a Bloomberg Business app. You can also listen
live on Amazon Alexa from our flagship New York station.
Just say Alexa Play Bloomberg eleven thirty.
Speaker 2 (36:53):
All right, you're listening to Bloomberg Intelligence Belly Lipschultz sitting
in for alexel On Paul Sweeney live here in our
Bloomberg Interactive Brooker Studio, streaming live on YouTube as well.
We're eight days away from the election, and one aspect
the election we haven't really had to think about up
until the most cycled, most recent cycle or two is
just ensuring that we have safe and secure elections. That
(37:13):
is now a big deal, particularly with early voting and
mail and voting and all those things that came out
of the pandemic. Somebody who does think about that is
Rhet Buddle. He's the CEO of the Public Private Strategies
joining us here via zoom sod. How are you thinking
these elections are going to go next Tuesday and then
Wednesday and then Thursday? Are you what is your concern
(37:37):
level that we will in fact have safe and secure elections?
Speaker 8 (37:41):
Well, great to be with you. So, first of all,
I mean you know, America, as we know, you know,
over the last you know, set of election cycles has
primarily had very safe and secure elections, and I think
we're feeling confident about all the elections to date, and
many of the you know, state local officius have worked
very hard to prepare. I think, you know, one of
the bigger questions is, you know, we probably will not
(38:04):
have the exact results of the election on election night,
and so you know, it might be until Saturday or
Sunday until we know an official winner. And so one
of the pieces that we've been thinking a lot about
is really making sure that folks are preparing for that,
that they know that every vote is still being counted
and that the process might just take a while. But
that is the important role of democracy, making sure every
vote gets counted, and particularly for business owners, understanding that
(38:28):
this sort of period of uncertainty is a really important
moment for businesses to be able to you know, bring
some calm to the market, to be able to say
this is how democracy plays out, not just in the
role that they play in the markets, but also in
the role that they play as community leaders. You know,
for a lot of CEOs who have employees this can
be a fraught time, for example, and so it's really
important to know that, you know, every vote will be counted.
(38:50):
The elections are on part of be very safe and secure,
but we may have a period of uncertainty and that's okay,
and we just need to understand that that might be
the case. But it's an important part of letting democracy
play out.
Speaker 4 (39:02):
Well, I think back to twenty twenty when it took
a few days, but we were still in the midst
of the pandemic. Now in twenty twenty four, people will
be back into the office, back at work, back on
subways here in the New York and commuting around the country.
How does that actually kind of impact a delayed ruling
or delayed decision on who in fact will win the election,
(39:23):
especially as we see a number of contested seats across
the House and Senate.
Speaker 6 (39:28):
Yeah.
Speaker 8 (39:29):
Look, we're so used to having everything, you know, be
so instant instantaneous. We're used to obviously having a result,
you know, called on election night. The reality is, at
least for the national presidential election, we expect it to
be very close, and there's a number of states that
probably will take a few days to make sure that
every ballot is counted, and so you know, unlike where
(39:49):
we were all sort of huddled in our homes around
zoom screens or around TV screens, before you know, we
are going to have people going back into the office
and we know want the things we learned in twenty
sixty was that elections can invoke a lot of emotions
with employees and start a lot of conversation. And the
reality is is the workplace has become a really important
(40:09):
square for civic engagement. Right It's one of the places
where people interact, they talk to each other, and so
it's become increasingly important that business leaders and CEOs think
about the role they can play and sort of setting
the tone of the role that they can play in
sort of depoliticizing things and making sure that there's a
safe space. We've see in a lot of companies with
employee research groups that there's the opportunity to provide space
(40:30):
for dialogue. And so part of the work that we've
been doing under an initiative we created it's called the
Business and Democracy Initiative, is we've been working with business
leaders to help them prepare for this election to not
only sort of raise their voice in their communities to
talk about how this is the normal part of democracy,
but also to play an important role in sort of depolarizing,
de escalating and making sure that everyone's voices are heard
(40:52):
in this process over the next few weeks.
Speaker 2 (40:54):
And the business leaders that you do speak to, what
is a concern level, if at all, that we have
a recreation of something like January sixth to that level.
Speaker 8 (41:04):
Look, I think overall people feel that the election is
going to be safe and secure and that every vote
is counted. So that's that is a good point, you know.
I think generally what I hear from business leaders is,
you know, increasingly, you know, risk has become an issue
with just instability, and so even beyond the elections, you know,
there's a broader issue with the government, for example, not
(41:25):
being able to pass you know, funding bills that go
on for years, or the debate over the debt selling
for example, and not being able to reach resolution. So
there's that broader sort of risk level. You know, America,
as we all know, is the most important economy in
the world, and so having that certainty is really important
for business leaders. And I think over the last few years,
businesses have become increasingly frustrated that the government hasn't been
(41:47):
able to provide more stability and that partisanship is continued
to sort of really you know, make it difficult for
business leaders to make decisions, especially businesses who rely upon
the government for you know, a wide variety of factors.
So it's a broader sort of risk appetite rather than
just in this moment. But it's definitely something that boardrooms
and businesses are starting to look at.
Speaker 2 (42:07):
All right, fascinating times. And we'll have election day eight
days and then we'll have to see how many days
are for that it takes to get a declared winner
and loser. Redbuttle, he's the CEO of the Public PRIVCT Strategies,
that's the name of the firm there, and again eight
days away, so we'll have to see.
Speaker 9 (42:24):
Here.
Speaker 1 (42:26):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple car Play 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.
Speaker 2 (42:44):
We got an election coming up, so I'm told next
week one of the major issues from a policy perspective
that might see us a big difference depending upon who's
in the White House. Is kind of renewable energy, electric vehicles,
all that kind of stuff. So let's check out Corey
Kantra joins us, the lead US electric vehicle analysts. Yes,
(43:05):
we have one of those. He's at bn EF. Those
are the new energy finance people. He's in our Bloomberg
Interactive Broker's studio. Corey, how does your market, the electric
vehicle market looking at this election as to a Trump
presidency versus the potential Harris presidency is it?
Speaker 6 (43:20):
Are there material differences?
Speaker 14 (43:21):
Yeah, they're pretty big differences and great to be here
with you again. Paul and Bailey, still still doing the
EV thing. We basically are one week out of a
pretty pivotal moment of implementation of some pretty major US
federal policies. So everything from federal fuel economy standards that's
the kind of miles per gallon of new vehicles which
electric vehicles help automakers achieve, to the implementation of the
(43:44):
Inflation Reduction Act. So even though the law has passed
now over two years ago, you're going to see those
loans and grants from the federal government impacted all the
way up to the seventy five hundred dollars Clean Car
ev tax credit that people know and love in some
cases depending on who wins. Obviously, with the IRA, you're
going to need Congresses input on that, but there are
things that the Trump administration could do very early on
(44:06):
on the implementation side to make those credits a bit
more restrictive. So it's going to be big, but also
a split decision could have an impact too if you have,
say a Republican Congress with Kamala Harris's president or vice versa.
Speaker 4 (44:19):
And how does that actually impact the ability for these
car makers to sell cars? When I look at targets
of Biden administration having a certain number of evs. I'm
from California, where they lay out these overly ambitious goals five, six,
seven years down the road and then seemingly chop them
down when they get closer.
Speaker 14 (44:35):
Yeah, Bailey, I mean even beyond that, there's been a
kind of back and forth between California and the rest
of the country for a long time, known as you know,
the California Advanced Clean Cars to policy, which aims to
have one hundred percent of all new sales by twenty
thirty five is electric eighty percent fully electric, twenty percent
plug in hybrid. And so last time Trump was elected,
there is a lot of lawsuits, a lot of uncertainty
(44:57):
in the market. Makes it very difficult from an automaker
perspective actually planned. And so these automakers for a long
time have wanted both the carrots, which are these IRA
kind of subsidies and incentives on grants and loans, and
then they'd be willing to take the stick, which is
the fuel economy standards.
Speaker 6 (45:11):
So we have to see how it shapes out.
Speaker 14 (45:13):
But from the automakers that we speak to, it's a
pretty confusing policy environment. But given that the globe is
moving towards electric vehicles and cleaner cars in general, they
have to kind of prepare to move that way regardless.
And it's just how quickly in the US are they
going to move in that direction?
Speaker 2 (45:28):
The Chinese are moving very aggressively. How do you expect
them to do outside of China? Will there be market
for Chinese evs in Europe?
Speaker 6 (45:37):
In the US? Yeah, it's a really good question, Paul.
Speaker 14 (45:40):
And you know, looking at the data which we do
at BNEF, you can see Chinese automakers like BYD making
upground in places like Brazil, in places like Latin America,
in places like Israel, you know where you might not
expect to see Chinese automakers. They've been moving into Europe
and there's been a pushback with all the tariffs and
back and forth there. I think that's also why the
US election does have a big impact, because if there's
(46:01):
no kind of counter bailing force coming out of the US.
You see what's going on with Volkswagen on the European
side today, it's going to maybe make the road easier
for those Chinese automakers on electric to kind of shift
into those export markets, because if Tesla isn't focused on
making more affordable evs, then there's really only going to
be one major player in town. It doesn't mean, you
know that Chinese automakers are going to be the only
(46:24):
ones who are making mass evs, but it's a pretty
big transformation at the global auto market level, just like
when the Japanese automakers came onto the scene.
Speaker 6 (46:32):
So I think that's the way I like to think
about it.
Speaker 14 (46:34):
It doesn't mean that you know evs are going to
be sold everywhere overnight, but without a kind of other
major automaker, that's where I.
Speaker 6 (46:41):
Think a lot of these countries are going to turn.
Speaker 4 (46:43):
And if we do see tariffs on some magnitude, yeah,
what does that actually mean for the market for Elon
Musk's Tesla who he's had a very prominent role campaign
for Donald Trump as well as other companies.
Speaker 14 (46:56):
I think when it comes to US tariffs, you know
that could buy you. I think some time you look
at the one hundred percent tariff that the Buying Administration
put on Chinese EV makers. While there weren't that many
Chinese EV makers selling electric vehicles here currently, Jili Group,
which owns Volvo and Pollstar, was pretty much the major
automaker impacted.
Speaker 6 (47:14):
So that's why you saw those prices.
Speaker 14 (47:15):
Or the Volvo Ex thirty, which is a really popular
model globally not sold here yet. It's keeping BYD out
for a little bit longer. But if the automakers like
GM or Stillantis or Ford aren't helped or don't move
towards electric vehicles, you know, maybe it buys you two, three,
four years. But all the while BYD and other Chinese
automakers are making more investments in battery technology, and I
(47:36):
think regardless of who wins, you need to see more
of those investments here on batteries because those are going
to be important not only for electric vehicles but for
the grid as well, and you're letting China get a
major competitive advantage.
Speaker 2 (47:47):
What are the US manufacturers doing? Have they pulled back
on their EV investments.
Speaker 14 (47:51):
We've definitely seen at the global level those EV targets
moving back. I think Ford in particular, you saw them
move their new EV models.
Speaker 6 (47:58):
Out a couple of years.
Speaker 14 (47:59):
So it's let's so on the dollar amount and more
pushing it back. GM has seen better EV sales. In fact,
the third quarter this year was the best in the
US that they had seen to date, with the Equinox
and Blazer and Lyric really taking off. To make one
bright point, Bailey, your home state of California actually saw
in that third quarter the best EV share of sales
they've ever had at twenty seven percent, So that's twenty
(48:20):
three percent, about almost twenty four percent fully electric, the
rest plug in hybrid.
Speaker 2 (48:25):
So it's pretty good calif Like, what's the US average?
Speaker 14 (48:27):
US average has been at about ten percent now nine
and a half ten percent. Yeah, far California twice twice
the average. But what's significant about that is California had
been stuck at about twenty five percent. Tesla actually for
four quarters in a row in California has seen decline
in deliveries because of I think some of the kind
of Tesla or musk fatigue, and so to see California
(48:51):
begin to grow again from the other automakers, even as
Tesla's pullback is pretty significant.
Speaker 2 (48:55):
All right, Corey, good stuff. As always Corey Canter. He's
a lead US electric Vehicle analyst at b n e F.
Speaker 1 (49:02):
This is the Bloomberg Intelligence podcast, available on apples, Spotify,
and anywhere else you get your podcasts. Listen live each
weekday ten am to noon 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.
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Affo, cardplay and Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
or watch us live on YouTube.
Speaker 2 (00:23):
Boeing hitting the market. I'm raising some money up to
nineteen large, maybe fourteen billion in common, maybe five billion
in preferred. I think they can get this done pretty quickly.
Everybody knows the Boeing name. It's been trading in these
levels for a long time, so we know where the
value is. George Ferguson, he's the analysts responsible for all
(00:43):
this stuff. He's a senior airspace, defense and airlines analysts
for Bloomberg Intelligence. George, if they are able to get
this deal done again, roughly nineteen billion of incremental new equity,
what's that going to do for him? How much time
is I going to buy him?
Speaker 3 (00:57):
So we think it probably buys them a couple of quarters, right.
So on the call the other day, on the evening's
call for three Q, they indicated that they thought they'd
burn four four and a half billion dollars in four
Q similar to what they burned in two Q at
that burn rate, what it gets maybe even you know,
(01:18):
three quarters or the burn I wouldn't I would hope
they wouldn't need all that, but we did here. Again
their outlook that the first half of next year they
expect to be largely a cash use scenario and for
the full year they'd be cash used'd go sounded like
they would go cash positive sometime in the second half,
they hoped, so two three quarters.
Speaker 4 (01:39):
So, George, just in terms of how large this can be,
we know that they launched the shelf to raise up
to twenty five billion. Do you think that gets close
to maxing it out just because it's going and they
simply probably can.
Speaker 3 (01:54):
Well, I guess you know they have to, you know,
sort of really, I mean, there's a lot of dilution here, right,
so really be concerned about dilution. But you know, last
I look, the shares were down a couple percent, so
it seemed like the market's not that concerned about whatever
delution is going to occur here. I think the bigger
amount they have, right, the more staying power, obviously, the
more they can look at the union across the negotiating table.
(02:18):
And say we can hang out for a long time.
We really need you to rethink your idea on let's
say something like a pension, right.
Speaker 5 (02:26):
And so I think, you know, more money helps them there.
Speaker 3 (02:30):
And look, the aerospace supply chain still isn't stable, right,
so Airbus should be sort of moving towards fifty rate
on a three twenty as they close out the year.
Speaker 5 (02:41):
Here, we're not seeing it.
Speaker 3 (02:43):
We're seeing them in the forties still, so they're sort
of proof positive to us.
Speaker 5 (02:47):
You know, we're.
Speaker 3 (02:47):
Seeing more noise out of the engine makers. They're still
sort of working to get their supply chains fully functioning
coming out of the pandemic. So it's not a given
that just once they get this strike past them that
Bowe's going to have, you know, clear skies ramp up quickly,
generate cash and not have any additional problems. So I
think raising more, raising above twenty billion, which yeah, I
(03:10):
think could certainly happen here, just buys them more time
in a world that is just has a lot more
variables in it than you know, than most other industries.
Speaker 5 (03:20):
The airspace industry is more more variables right.
Speaker 2 (03:23):
Now, George, what are you hearing about this strike here?
Has there been any movement here? Have they been able
to narrow in on a or a topic or two
or three? What are what are you hearing?
Speaker 3 (03:34):
I'm hearing it has a lot to do about pensions,
right I'm still this weekend, I'm hearing noise out of
the unions on the on the West coast, and that
that noise, you know, not trying to demean it. It's
it's the commentary is probably better way of putting it.
Out of the union is really around a pension now,
you know, I have heard the machinists presidents say that,
(03:58):
you know, if they can't give a pension, they should
Boeing should be prepared to give somewhere else. So it
sounds like there is flexibility, but it sounds like a
lot of it has to do with retirement plans and
what the union thought they lost a decade ago. They
did lose the pension a decade ago, and they think
they lost a very valuable benefit. And it sounds like
there's a lot of focus on that right now.
Speaker 4 (04:21):
And we saw the report at the end of last
week that the company could sell their Starliner space program.
What's your thinking on that? Is a more streamlined Boeing
more attractive to equity investors.
Speaker 3 (04:33):
Look, I think Boeing could potentially do some streamlining. I
frankly think the space business isn't necessarily the place.
Speaker 5 (04:41):
For them to do the streamlining.
Speaker 3 (04:43):
But I do think they're looking for pieces of the
company that aren't core to sort of aircraft, you know,
defense aircraft, commercial aircraft, and so space I think stands
out for that. The problem I have though with the
space business is they've got a launch business called the
United Launch a line.
Speaker 5 (05:00):
It's with Lockheed.
Speaker 3 (05:01):
It's not as competitive as SpaceX, right, I know from
people I talked to in the industry, SpaceX can deliver
things into orbit much cheaper. You know, I think the
Boeing Lockheed joint venture suffers from I think some of
those sort of structural challenges inside any big defense contract
that they're not nimble and they're not cheap. And I
(05:24):
think you know, star Liner, they took four point six
billion to develop a capsule. It's supposed to be the
second capsule to the SpaceX capsule, which one as well.
You know, NASA wantce redundancy to deliver to the International
Space Station.
Speaker 5 (05:40):
There's a commitment in there. I think they have to.
Speaker 3 (05:42):
Deliver or at least have to go to the space
station at least twice a year for a number of years.
I don't see NASA, you know, letting them off that
that requirement. So they're gonna have to find someone else
to step in to a program they've already developed, to
take it over and commit to making you know, deliveries
(06:03):
to the space station or shots to the space station
twice a year. I think that they're going to be
hard pressed to really get much money from that, because again,
they don't they don't deliver cheap.
Speaker 5 (06:13):
They're overruns on Starliner two. So I just think it's.
Speaker 3 (06:17):
Going to be a real challenge to really generate much
cash from that. That's been on the market too for
a while, and nobody's bitten so far. I understand Blue
Origin looked at it, and now they're going to the
equity markets for twenty billion in equity. So I think
that's a sign of what they think they can generate
for that business just isn't there, I don't think all.
Speaker 6 (06:35):
Right, George, thanks so much for the update. Appreciate it
as always.
Speaker 2 (06:38):
George Ferguson, Senior Aerospace, Defense and Airlines sentists for Bloomberg Intelligence,
Boeing in the market for you know, up to nineteen
billion dollars in some equity common stock, preferred stock. We'll
see stock's only off one percent years. So, as George
was suggesting, it seems like the market's okay with the delution.
I mean, it is what it is. You kind of
knew this was coming. It's been well telegraphed.
Speaker 4 (07:00):
We reported it back in early October, so almost four
weeks ago. At this point that they were in talks
with advisors, that stock was about one point fifty three.
Right now it's one fifty three to five. So when
you think about it, we're continuing to see the stock
move sideways. As you mentioned, the big question is what
kind of a discount, How quickly does this deal get done,
and what are the terms that actually get agreed upon
for that convertible debt, Just because when as George mentioned,
(07:23):
when you talk dilution, if you're an equity investor, I'm
sure you want to clean balance sheet, but you also
don't want to get squeezed out of your position.
Speaker 2 (07:29):
Yep, it's actually and then presumably that'll strengthen their position
with the union. Just in terms of talking about this
upcoming contract.
Speaker 1 (07:36):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on applecar Play 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.
Speaker 2 (07:54):
Let's switch hears to the global auto industry. A little
bit different story there is. The best I could tell
the two may your headwinds for the auto industry is
one China, which is obviously a huge growth market for
the global auto industry. It's slowing and the local brands
there are improving dramatically, so they're getting much more competitive there.
And then the second thing is, oh, yeah, they got
this whole transition to evs and how do you do that?
(08:16):
We heard some some really cautious news out of Volkswagen today.
Volkswagen eyes closing three German factories in a cost cutting push.
Let's check them with Steve Man, he covers the global
auto industry for Bloomberg Intelligence. Steve talked to us first
about this Volkswagen news here, I mean shutting German factories.
They don't typically do that, So how much, how much
(08:38):
hurt are they feeling over their VW.
Speaker 7 (08:41):
Oh, they're in the world of pain at the moment.
You kind of mentioned it, Paul. They are hurting around
the world in all three major regions of the auto market.
You know, US, they're not They're not that big of
a they don't have that big of a presence in
the US. You're up, you know, it's sales are down.
(09:01):
You're not only hearing it from Volkswagen, but also Silentis
as well. You know, their stock is down quite a
bit over the past few months. And in China, you know, China,
the Chinese OEMs are taking a lot of market share
in China, They're they're entering the EU market. Like you
said earlier, you know, Chinese automaker are just much quicker
(09:26):
in transitioning to EVS in that region than any of
the foreign OEMs operating in China at the moment. So,
you know, Volkswagen is feeling it.
Speaker 4 (09:38):
And how does that kind of position a company And
you're up one of the biggest automakers trying to compete
with US automakers who are having their own issues and
as well as kind of the potential pent up demand
at least in terms of capacity production capacity in China.
Speaker 7 (09:55):
Yeah, there, I mean de pent up the capacity in China.
It is really not EV capacity. It's actually really ICE capacity,
internal combuntion engine vehicle capacity.
Speaker 8 (10:07):
Uh.
Speaker 7 (10:08):
There's been a lot of closing of those plants in China.
Volkswagen has closed one of its plants in China with
his partner Shanghai Auto sai C. You know, Ford has
closed a number of plants. Hyundai has closed a number
of plants. And these are all companies that have not
transitioned to EV as fast as the OEM's companies like
(10:31):
GM and BUYD taking huge market share from the foreign automakers.
By D is actually the biggest now biggest automaker in
terms of volume in China.
Speaker 2 (10:41):
All right, So what is Global Auto to do about China?
What is the strategy?
Speaker 6 (10:46):
Do you think?
Speaker 2 (10:46):
Because I think if I've got these Chinese companies that are,
you know, getting better and better every day, what do.
Speaker 1 (10:52):
I do there?
Speaker 2 (10:53):
Do I walk away from this market? I can't do that.
Speaker 6 (10:55):
It's too big.
Speaker 9 (10:56):
Yeah, that's I know.
Speaker 7 (10:58):
You know, if you look at the four OEMs operating
in China five years ago, they were they had market
share over fifty percent in the last couple of years,
they basically have changed position.
Speaker 5 (11:10):
Uh.
Speaker 7 (11:10):
You know, the Chinese OEM has more and more capacity,
more and more market share, uh, and it's growing. There's
a number of ways they can attack this. They need,
you know, they either invest a lot of money uh
and and really grow evs and not just evs, but
these user interface. Chinese consumers are buying cars because they
(11:32):
like the user interface that the Chinese OEMs are offering them.
So they need to build more evs. They need to
look at revamping their software to cater the local customers
in China.
Speaker 5 (11:45):
Well.
Speaker 7 (11:45):
The other the other option is really to close shop
and you know, focus, refocus their their investments and their costs.
They know how to you know, they know how to
operate in Europe, they know how to operate in the US.
They know how to do, you know, sell more cars
in their local markets. That that may be one option
is to just retrench. But you know, that's that's not
(12:07):
an unfortunate approach if they had to do that in
the biggest auto market in the world.
Speaker 4 (12:13):
When I look at Europe, are there any automakers well positioned?
I mean, Stilantis is hitting getting hit by four performance
in the US BMW has an expensive recall. Mercedes Bins
has been struggling in China, Like is anyone winning well?
Speaker 7 (12:26):
Relatively speaking, I think the German luxury automakers, the BMW,
Mercedes are faring better than the mass market, but they're
also feeling the pain, right They're all the luxury brands
are also feeling the pain.
Speaker 5 (12:42):
You know.
Speaker 7 (12:42):
BMW and Mercedes just reported, you know, lower sales in China.
And you know, I also am concerned. And it's a
matter of time because there are companies like Neil, there
are companies that are xpunk, you know, they're also moving
up market competing with the Mercedes and BMW. So I think,
(13:04):
relatively speaking, just to answer your question, the luxuries are
doing better, but you know, time will tell if they
can you know, maintain you know, some of the sales
that they have in China.
Speaker 2 (13:17):
All right, Steve, thanks so much for joining us there.
Steve Man, he covers the global global autos and industrials
for Bloomberg Intelligency spased down in our Princeton, New Jersey office,
So getting the latest on VW closing some plants, cutting
some staff, trying to cut some costs here as they
face the some headwinds coming out of China, as well
as the continued costs of going over to electric vehicles.
Speaker 1 (13:40):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on fo Car Playing and
Broun Auto with the Bloomberg Business App. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 2 (13:56):
All right, our next guest, let me see if I
got this conjugated right. She's in Chicago, though, but she's
a Boston native and fan of the Red Sox, which
means she's rooting for the Dodgers. I think I've got
that rate. Shane Sissel, president and CEO of a ban
Rionn Capital Management, joins us here in our Bloomberg Interactive Broker.
Speaker 6 (14:13):
Studio that I get that right.
Speaker 10 (14:14):
We totally got that right. I think, guys we were
saying before, Dave Roberts has to continue to do everything
he can to help the Red Sox, whether it be
win a World Series as a player, as give the
Red Sox World Series as a manager, and now he
needs to make sure.
Speaker 2 (14:28):
That the Yankees prevent the Yankees. I get the whole
concept there, all right, Before we get to your market
call which we want to talk about pink ETF. Talk
to me about that.
Speaker 10 (14:36):
Yes, so pink ETF is near and dear to my heart.
I am a breast cancer survivor and October is breast
cancer Awareness month. The pink ETF is issued by Simplify
Asset Management. It is a healthcare ETF. It invests in healthcare,
is not specific to cancer or breast cancer in general.
(14:57):
It's the only pro bono ETF on the market, meaning
the manager does it pro bono and they donate all
of the net profits of the fund through its expense
ratio to the Susan G. Comen Foundation for Breast Cancer Research.
So you know it's October, yeap breast cancer on this month.
(15:18):
You can do your part and this is an interesting
way to do that. Fund has a great track record.
Speaker 2 (15:24):
Yeah, absolutely, nice Caaren from Springlake. That's for you. Talk
to us about the markets. What do we do here?
Do we just sit on the sidelines until the election's
over and then become investors again? What are you telling
your clients about these markets these days?
Speaker 5 (15:37):
Well?
Speaker 10 (15:38):
I mean yeah, I mean the election is the number
one most important piece of news that the markets is
waiting for we have a virtual tie and almost all
the polls and I have opinions on where I think
that kind of leans. But in that kind of environment,
companies are reluctant to make any big Capex decision, are
(16:00):
kind of putting a pause on policy, waiting to see,
you know, who wins, because the rules could be substantially
different depending on who becomes the victor.
Speaker 4 (16:12):
Well, what do you make, Shana of the betting market?
We talk kind of ad nauseum. It feels like at
poly market and predicted and how that impacts it. What
the Trump trade is or isn't. If we're still in
agreement that it's a coin flip, how are people positioning
if we are kind of at least reading about in
Bloomberg's reporting about kind of the so called Trump trade,
(16:33):
if it still feels kind of like a deadlock.
Speaker 10 (16:36):
Well, I think there's this one little caveat nuance to this,
which is that I think in polls that are showing
a deadlocked electorate that is actually pro Trump in my opinion, right,
I think we've seen this in every election he's been
(16:57):
involved in. The Polls tend to underestimate his voting, his
voters because being associated as a Trump voter has some
negative connotation in the broad public right, so people are
less likely to be honest about it until they get
into the the voting booth, and then it doesn't matter
(17:18):
because it's truly anonymous or we hope. So in that case,
I think that when you see something where it's a
virtual tie, it's probably leaning more in Trump's direction.
Speaker 11 (17:30):
Than it is in Harris's direction.
Speaker 2 (17:32):
That's just my opinion, all right, So elections aside, it
seems like we've got a FED that's accommodative, seems like
earnings generally remain fairly strong, the economy remains fairly strong,
in inflation coming down.
Speaker 5 (17:46):
Is that?
Speaker 2 (17:47):
How constructive is that for you guys in terms of
taking risk in this market in place?
Speaker 10 (17:50):
Well, I think this is a market where you can
take risk. So for me, the way I position portfolios
is I want to make sure I can get the
most upside.
Speaker 11 (18:00):
I can from the equity markets because I.
Speaker 10 (18:02):
Think that the probability of upside in the equity markets
is quite high, and I think it's also high probability
of risk assets outperforming, so I want to be able
to take that risk. I'm not as certain about fixed
income markets. So I'm taking some of my fixed income
allocation and putting it into more alternative strategies, which I
(18:23):
think do better than fixed income but allow me to
take more risk and equities because they are diversifiers that
tend to reduce overall portfolio risk. So that's kind of
how I'm positioning myself.
Speaker 4 (18:35):
Right now within taking on risk. When you say that,
do you mean within large caps? Are you skewing out
more towards like a small cap? I just am looking
at in terms of earnings we're going to hear from
this week alone Alphabet, AMD, Microsoft, Meta, Apple, Amazon, and
that's really cap X comments have been making up so
much of the Nvidia trade. So when you're looking at
(18:55):
allocating risks to equities, what does that look like?
Speaker 10 (18:58):
So I do think it involved some of the high
flyer growth stocks. We haven't had an environment that's conducive
to small caps or value in a while. Jason Trendert
from STRTIGAZ did a great piece last week called ten
Things I Think, I Think, and one of the things
he talked about is in since two thousand and nine,
we've been in this perpetual QE cycle where companies haven't
(19:20):
been permitted to fail, and we've been in this perpetual
late cycle business cycle. The business cycles kind of disappeared,
and in doing that, it's been a complete headwind to
anything that would benefit from things winning and losing and
not allowing companies to fail has kind of also increased
(19:41):
the haves and have nots. So I'm willing to take
more risk in those larger cap names. That's where I
actually think there is more risk, but also things like bitcoin,
which is not a stock obviously, but is a risk asset.
In my opinion, I would argue small caps could be
considered a risk asset, but value wouldn't be right. So
(20:03):
you're probably staying away from some of your cyclicals and
you're going with your more risk growth beta names.
Speaker 11 (20:10):
Is where I would be paying attention right.
Speaker 2 (20:12):
Now, Shane. I know you have a lot of experience
in alternatives, and I've been surprised when I talk to
retail advisors how willing they are to embrace alternatives and
to a much higher percentage of their portfolio than I
would have thought. Where do you see opportunities in alternatives
these days? Private equity, private credit has becomes so big.
Hedge funds where do you see alternatives? How do you
(20:33):
talk your clients about that?
Speaker 10 (20:34):
So private credit is credit, it's correlated to credit markets.
Private equity is equity, it's correlated to equity markets. So
they belong in equity and fixed income. And while they
are alternatives in the sense that their liquidity terms and
not available to everyone, they're not necessarily diverse fying alternatives.
I think the opportunities lie in those diverse fying alternatives,
(20:55):
things like hedge equity, and there's a million different ways
to slice that pie. That's a pro and a con
of that asset class. It's you know, they all kind
of get thrown in together, but you can do hedge
equity a million different ways, market neutral, managed future is
global macro, more those hedge fund type strategies, but also
looking at you know, things like sports rights. I've talked
(21:16):
about this a million times because I'm a huge sports
fan and it resonates with me. But there's real opportunity
here for you to be able to bring diversification into
your portfolio using things like that. And while advisors are
definitely more open to alternatives than they've been before, it's
mostly because their clients are demanding it.
Speaker 11 (21:35):
Right.
Speaker 10 (21:35):
It's because if they don't, then they could lose those relationships.
And ALTS, I would argue, is a relationship builder because
you can really I mean, it's such a huge universe,
you can really find things that will resonate with your
client on a million different levels. So they're seeing that,
but seventy five percent advisors still don't use alts and
(21:56):
the vast majority are allocating something like five percent, where
institutions is more like twenty five to thirty. So there's
a huge gap there. Still, it's going to take a
long time to get there, and we as an industry
have not done advisors any favor by making investing in
any sort of alternative incredibly difficult, operationally cumbersome, and in some.
Speaker 11 (22:16):
Cases just annoying.
Speaker 10 (22:18):
Like just a trade BTL, which is an alternative ETF.
If you tried to do that in your Fidelity or
Schwab account, you'd get a pop up saying that you
need to change your risk tolerance to aggressive. And I
would argue, if I am an aggressive investor, i am
definitely not doing hedge, dequity or market neutral like that's
like completely counterintuitive. But because of that, it sort of
(22:41):
makes people shy away because you've got to change your
client's risk tolerance and it's not reflective of reality just
to be able to make a trade.
Speaker 4 (22:47):
And when you talk sports diversification sports rights, like, I
immediately think of the fact that the Atlanta Braids are
publicly traded. Is that what you mean or how do
you think about allocation to sports is an alternative investment?
Speaker 11 (22:59):
No, I think the private equity aspect of it.
Speaker 10 (23:02):
So my favorite fund in that space is the one
managed by Avenue Capital because I think that what they're
doing is really interesting. They weren't one of the high
flyers that was approved by the NFL, but they invest
in MLB and NBA and things of that.
Speaker 11 (23:18):
Mark Lazari is the kind of founder of that firm.
He used to own the.
Speaker 10 (23:23):
Box, but he talks about it also in the credit sense.
Most people don't realize that banks won't lend to sports
teams because the goal to have a franchise that's worth
anything is based on whether or not you win, and
you don't win if you don't spend, and banks don't
like that so much. So, you know, teams, when they
(23:44):
need access to the credit markets, they don't really have
any place to go, so that fund does that. They
also do what they call emerging sports. So I've done
a bunch of interviews talking about cricket, Like, cricket is
an incredibly interesting area of private equity is looking at
buying cricket teams.
Speaker 11 (24:01):
Women's sports is huge.
Speaker 10 (24:03):
You know, you have the yacht league that's out there
and some of this as we have the proliferation of
streaming services and everybody trying to get live events because
that's really the only way you can get ad dollars.
Speaker 11 (24:14):
You're seeing this more and more.
Speaker 10 (24:15):
Which gives you more and more opportunity to make money
in sports that maybe we wouldn't have paid attention for.
Speaker 11 (24:21):
A while back.
Speaker 2 (24:22):
Yeah, lots of different opportunities out there. Shana Sisil, thank
you so much for joining us. Shane Sisil, She's a
president and CEO of ban reON Capital Management based in Chicago,
but originally from Boston. We've got that all cleared up.
Speaker 1 (24:37):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on applecar Play 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 playing Bloomberg eleven thirty.
Speaker 2 (24:55):
Let's switch gears and touch base on the ever changing
situation in the Middle East. Kirsten Fulton Rose joins as
president of Red six Solutions. Kirsten, I guess the most
recent data point that everyone's trying to digest here is
the Israeli response in its attack on Iran. How would
you characterize Israel's response sending approximate one hundred fighter jets
(25:19):
to attack some key logistical targets. What do you make
of that move?
Speaker 12 (25:26):
It's interesting. One hundred fighter jets sounds like a lot.
Speaker 13 (25:29):
They were sent in three waves, but this response was
actually designed to allow Iran to declare it requires no response.
Israel only hit military sites. They hit outside densely populated areas.
They had it most one civilian casualty. The Israeli defense
forces say that they targeted border radar systems with very
light warheads direct quote to remove Aroan's early warning capability,
(25:51):
and then they followed with the jets that struck carefully
selected sites.
Speaker 12 (25:56):
If we look at those sites.
Speaker 13 (25:58):
According to some experience US analysts who were looking at
unclassified imagery, Israel struck buildings in a couple of places,
including in Parchen and in Klojure, and there are two
reasons why these locations matter. One, Israel hit Clgier, which
is a large missile production site that's near Tehran but
not in it. The reports back in July that Hadro
(26:19):
was being expanded, So according to these analysts looking at
the imagery, Israel's pinpointed strikes could have significantly reduced Iran's
capacity to produce missiles, which then make it less apt
to want to continue this fight with Israel right now.
Second Partschen is a large military complex near Tehran as well,
so capital pays attention, but it's not actually feeling the hit.
(26:40):
The satellite imagery analysts tell us that Israel hit a
building there that was used for testing in an old
nuclear weapon weapons program that was called the Ahmad Plan.
This program was shut down about twenty years ago according
to international watchdogs, but Iran denied it ever worked on
a nuclear weapon there. So this target, we think was
a message to Tehran. We hit an old facility without personnel,
(27:03):
without nuclear material present this time, but we can reach
your nuclear facilities without you being able to prevent it
in the future.
Speaker 12 (27:11):
If we think it's necessary.
Speaker 4 (27:13):
And Kirsten, you have more than two decades of experience
working in our security with a focus in the Middle
East and Africa. One of the things that stood out
to me was that Israel distributed videos of Prime Minister
Benjamin n Yahoo and military chiefs coordinating the defense from
a ministry bunker, which was a rare acknowledgment of an
attack on Islamic Republican expansion what had been mostly a
(27:36):
shadow war. What do you make of the video being
distributed and how does that potentially impact kind of the
path forward.
Speaker 13 (27:44):
I think the reason for distributing the video was to
make it clear to the international community that Israel is
in a real war, that it is truly the existential
threat it feels it wants the international community to have
a sense of as well. While we're planning our response
on Israel on Iran, we are still taking hits from
Hazbala and from Hemas and perhaps from the Huthis. So
(28:05):
they're trying to let the international community know that this
is not something they're taking lately, that they're being arrogant,
that they really see the threat as serious. So that
means US support needs to stay high, that means Europe
needs to stay behind them. They're trying to make sure
that they continue to maintain this level of support and
this level of attention on the threat from their international
(28:26):
partners while they stage these responses, sometimes without listening closely
to their international partners.
Speaker 2 (28:33):
Kirsen, what do you think the end game is now
for Israel and maybe the timing associated with that.
Speaker 12 (28:40):
For Israel? The endgame is not with the international community
you would like to hear.
Speaker 13 (28:43):
The arguments for a ceasefire are ongoing from almost every
corner except from inside Israel, and often except from inside
parts of Hamas and parts of Habeala.
Speaker 12 (28:54):
For instance.
Speaker 13 (28:54):
You see that Hasbala right now is saying it will
not negotiate less it's not under attack, and their own
speaker of the parliament in Lebanon is negotiating for them.
Speaker 12 (29:02):
So Israel saying, look, we don't.
Speaker 13 (29:05):
Have space to talk about a ceasefire unless it's short
we get some of our hostages back so that we
can reduce the domestic pressure on us to bring hostages home.
But this conflict is not over as long as there
is still a threat, As long as all of these
groups continue to say one of their primary objectives is
to eliminate our state from the map. This threat will
continue to face us. We will continue to fight this
(29:27):
kind of onslaught every few years like we have for
decades now, unless we do something decisive. So they're looking
to uproot Hamas, uproot Hu's Baalah, shut down the Khuthi's
ability or will to fight this war on behalf of Hamas,
and to put Yourn on the back foot where it
is no longer has the capacity to strike and perhaps
(29:48):
no longer the will. It certainly does not have the
domestic support, but the hardliners in Iran's leadership are going
to push that fight going forward as well.
Speaker 12 (29:57):
This is not over.
Speaker 2 (29:58):
Yep, all right, That's kind of what what we're hearing
across the board. Kirsten, thank you so much for joining us.
Kirsten fontin Rose, she is the president of Red six Solutions,
joining us in Washington, DC via zoom kind of getting
the latest there. But again, it seems like this is
Israel saying, you know, we're going to settle everything here.
That's kind of our goal as opposed to maybe when
(30:18):
we started out a year ago, which is, you know,
neutralize Hamas and get her hostages back. This obviously is
much broader, much wider.
Speaker 1 (30:27):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on applecar Play 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.
Speaker 2 (30:44):
Thirty Billy Lipschild sitting in for Alex steel On Paul Sweeney.
We're live here on O Bloomberg in Arrector Brokers Studio,
streaming live on YouTube as well. Boy, if you we're
paying attention, the ten year treasury just in the last
five weeks has gone from a yield of three point
six percent to four point two six percent. Kind of
where we are today, that's a big time move here.
(31:05):
I don't know what's going on out there in the
bond market, but our next guest does. R J Gallow.
He's a senior portfolio manager of fixed income and Federated
at Hermes, coming to us from Pittsburgh, PA. No, they
do not have a team in the World Series, but
they have a good football team. So r J, thanks
so much for joining us here. My giants are coming
out to Pittsburgh tonight. It'd be nice to them. What's
(31:26):
going on in fixed income market?
Speaker 6 (31:27):
Again?
Speaker 2 (31:27):
That ten year treasury kind of got me by surprise
that the moves we've seen in rates, what's going on
out there?
Speaker 9 (31:34):
Yeah, well, good morning, Yeah, steals giants side always excited
in terms of the rates market. There's been quite a
turn of events basically since the Fed's ease. The fedies
fifty basis points, and you might recall leading into that meeting,
the expectation was twenty five. The Fed seemed to use
media outlets to lay the groundwork for a fifty basis
(31:56):
point ease, a bold move when the economy isn't back
doing well. Since the data, excuse me, since the FED
meeting and the fifty basis point ees, the data has
in fact affirmed that the economy is doing pretty well.
So you have the Fed layering in a large first
move in what will be a path of easing, and
an economy that has been quite resilient on the on
(32:17):
the labor and growth front, terms of things like retail
sales and CPI came in a little firmer than expected.
So you have an economy that's not showing signs of recession,
a FED that's committed to landing the economy outside of recession,
a soft landing as we've all come to call it.
And then you have the election coming up. All those
(32:38):
factors have leaned towards a significant repricing hire and yield.
You mentioned the ten year treasury I think if you
take a look at the implied rate on SOFA futures
out in June of twenty twenty six, the implied rate
has risen almost eighty basis points since September tenth. It
is now three point fifty five. It was one below
(33:00):
to eighty.
Speaker 5 (33:01):
Wow.
Speaker 9 (33:02):
So all those factors have really hit the bond market
pretty hard. It's now priced i think for perhaps an
inflationary election outcome, and that's the next big focus the
election itself.
Speaker 4 (33:12):
Well within that, we're eight days from the election. How
should investors be positioning just given the polls that we've
been seeing and how kind of markets have seemingly been
moving ahead of it.
Speaker 9 (33:23):
Yeah, well, the markets certainly have been moving, and by markets,
I'm sort of speaking broadly, the betting markets, starting probably
in the first week of October, just started shifting in
the direction of a Trump win and a red sweep
as the most probable of outcomes according to some of them,
you know, forty five to fifty percent probability of a
red sweep. That's a big change from where they were
(33:45):
in September. The financial markets, including the impact on rates,
I think the economy's resilience that I just described, and
the unwind of expectations to some degree of a deep
fed easing path, those were the primary drivers. But the
election risk and the prospect of an inflationary setup policies
from a Trump two point zero, we're secondary factors there.
(34:06):
I think it's safe to say that the market now
is leaning heavily in the direction that we just described,
but I would still think some caution is warranted. We're
leaning a little bit short, not aggressively. So there's a
lot of other complex factors out there. Kamala Harris could
surprise us on election day. We could actually have an
indeterminate election outcome. You go back to two thousand, a
(34:27):
highly indeterminate outcome between Gore and George W. Bush led
to yields falling, in flight to quality demand and risk
assets struggling. If we have prolonged and decision this time,
you might see a rerun of that script.
Speaker 2 (34:40):
So when you guys get together for your Monday morning
meeting plot out the week, where do you guys see
value these days?
Speaker 9 (34:49):
A great question, you know. So we started off the
year thinking the bond market was going to produce us
pretty good total returns, and then that was sort of
tempered earlier in twenty twenty four by the fact that
Inflame had a bit of a resurgence and started getting
a little sticky. We had a great run there from
say April all the way up through the expectations of
(35:10):
the FED easing, but now the total returns are getting
diminished yet again. So for example, if you look at
the aggregate index, your today's total return is just up
two percent over the last three months, it's just one
point two And it's been a brutal October. Over the
last thirty days we've lost two and a half percent.
A month to day, we've lost two point three percent.
So just betting on rates has not been compelling. But
(35:33):
that's not all that we do. We obviously look at
and actively managed duration, but we realize calling rates is
a dicey prospect, so we focus very heavily on other variables.
So the yield curve has steepened sharply in relation to
the FEDS easing and the prospect of inflationary policies to come.
We've played that rather well in our number of our portfolios,
(35:53):
positioning for YELD curve steepening, and that's been a way
to generate alpha within a fixed income portfolio. When it
comes to credit, we've been overweight mortgages. We remain cautious
on how you in corpus where we think spreads are
just not enticing enough. But the good news about a
fixed income portfolio, a highly diversified one is you can
move across sectors to look for opportunities. You can move
(36:14):
up and down the YOK curve for changes and it's
slope and shape in addition to taking some positions on duration.
So all in all, we've been deploying all those different
tools to varying degrees throughout what's been a moderate return
but a positive return year.
Speaker 2 (36:28):
All right, Urjie, thanks so much for joining us as always.
Speaker 5 (36:30):
R J.
Speaker 2 (36:30):
Gallow, Senior Portfolio Manager Fixed and come over there at
Federated Hermes.
Speaker 1 (36:35):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Applecar Play and Android
Auto with a Bloomberg Business app. You can also listen
live on Amazon Alexa from our flagship New York station.
Just say Alexa Play Bloomberg eleven thirty.
Speaker 2 (36:53):
All right, you're listening to Bloomberg Intelligence Belly Lipschultz sitting
in for alexel On Paul Sweeney live here in our
Bloomberg Interactive Brooker Studio, streaming live on YouTube as well.
We're eight days away from the election, and one aspect
the election we haven't really had to think about up
until the most cycled, most recent cycle or two is
just ensuring that we have safe and secure elections. That
(37:13):
is now a big deal, particularly with early voting and
mail and voting and all those things that came out
of the pandemic. Somebody who does think about that is
Rhet Buddle. He's the CEO of the Public Private Strategies
joining us here via zoom sod. How are you thinking
these elections are going to go next Tuesday and then
Wednesday and then Thursday? Are you what is your concern
(37:37):
level that we will in fact have safe and secure elections?
Speaker 8 (37:41):
Well, great to be with you. So, first of all,
I mean you know, America, as we know, you know,
over the last you know, set of election cycles has
primarily had very safe and secure elections, and I think
we're feeling confident about all the elections to date, and
many of the you know, state local officius have worked
very hard to prepare. I think, you know, one of
the bigger questions is, you know, we probably will not
(38:04):
have the exact results of the election on election night,
and so you know, it might be until Saturday or
Sunday until we know an official winner. And so one
of the pieces that we've been thinking a lot about
is really making sure that folks are preparing for that,
that they know that every vote is still being counted
and that the process might just take a while. But
that is the important role of democracy, making sure every
vote gets counted, and particularly for business owners, understanding that
(38:28):
this sort of period of uncertainty is a really important
moment for businesses to be able to you know, bring
some calm to the market, to be able to say
this is how democracy plays out, not just in the
role that they play in the markets, but also in
the role that they play as community leaders. You know,
for a lot of CEOs who have employees this can
be a fraught time, for example, and so it's really
important to know that, you know, every vote will be counted.
(38:50):
The elections are on part of be very safe and secure,
but we may have a period of uncertainty and that's okay,
and we just need to understand that that might be
the case. But it's an important part of letting democracy
play out.
Speaker 4 (39:02):
Well, I think back to twenty twenty when it took
a few days, but we were still in the midst
of the pandemic. Now in twenty twenty four, people will
be back into the office, back at work, back on
subways here in the New York and commuting around the country.
How does that actually kind of impact a delayed ruling
or delayed decision on who in fact will win the election,
(39:23):
especially as we see a number of contested seats across
the House and Senate.
Speaker 6 (39:28):
Yeah.
Speaker 8 (39:29):
Look, we're so used to having everything, you know, be
so instant instantaneous. We're used to obviously having a result,
you know, called on election night. The reality is, at
least for the national presidential election, we expect it to
be very close, and there's a number of states that
probably will take a few days to make sure that
every ballot is counted, and so you know, unlike where
(39:49):
we were all sort of huddled in our homes around
zoom screens or around TV screens, before you know, we
are going to have people going back into the office
and we know want the things we learned in twenty
sixty was that elections can invoke a lot of emotions
with employees and start a lot of conversation. And the
reality is is the workplace has become a really important
(40:09):
square for civic engagement. Right It's one of the places
where people interact, they talk to each other, and so
it's become increasingly important that business leaders and CEOs think
about the role they can play and sort of setting
the tone of the role that they can play in
sort of depoliticizing things and making sure that there's a
safe space. We've see in a lot of companies with
employee research groups that there's the opportunity to provide space
(40:30):
for dialogue. And so part of the work that we've
been doing under an initiative we created it's called the
Business and Democracy Initiative, is we've been working with business
leaders to help them prepare for this election to not
only sort of raise their voice in their communities to
talk about how this is the normal part of democracy,
but also to play an important role in sort of depolarizing,
de escalating and making sure that everyone's voices are heard
(40:52):
in this process over the next few weeks.
Speaker 2 (40:54):
And the business leaders that you do speak to, what
is a concern level, if at all, that we have
a recreation of something like January sixth to that level.
Speaker 8 (41:04):
Look, I think overall people feel that the election is
going to be safe and secure and that every vote
is counted. So that's that is a good point, you know.
I think generally what I hear from business leaders is,
you know, increasingly, you know, risk has become an issue
with just instability, and so even beyond the elections, you know,
there's a broader issue with the government, for example, not
(41:25):
being able to pass you know, funding bills that go
on for years, or the debate over the debt selling
for example, and not being able to reach resolution. So
there's that broader sort of risk level. You know, America,
as we all know, is the most important economy in
the world, and so having that certainty is really important
for business leaders. And I think over the last few years,
businesses have become increasingly frustrated that the government hasn't been
(41:47):
able to provide more stability and that partisanship is continued
to sort of really you know, make it difficult for
business leaders to make decisions, especially businesses who rely upon
the government for you know, a wide variety of factors.
So it's a broader sort of risk appetite rather than
just in this moment. But it's definitely something that boardrooms
and businesses are starting to look at.
Speaker 2 (42:07):
All right, fascinating times. And we'll have election day eight
days and then we'll have to see how many days
are for that it takes to get a declared winner
and loser. Redbuttle, he's the CEO of the Public PRIVCT Strategies,
that's the name of the firm there, and again eight
days away, so we'll have to see.
Speaker 9 (42:24):
Here.
Speaker 1 (42:26):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple car Play 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.
Speaker 2 (42:44):
We got an election coming up, so I'm told next
week one of the major issues from a policy perspective
that might see us a big difference depending upon who's
in the White House. Is kind of renewable energy, electric vehicles,
all that kind of stuff. So let's check out Corey
Kantra joins us, the lead US electric vehicle analysts. Yes,
(43:05):
we have one of those. He's at bn EF. Those
are the new energy finance people. He's in our Bloomberg
Interactive Broker's studio. Corey, how does your market, the electric
vehicle market looking at this election as to a Trump
presidency versus the potential Harris presidency is it?
Speaker 6 (43:20):
Are there material differences?
Speaker 14 (43:21):
Yeah, they're pretty big differences and great to be here
with you again. Paul and Bailey, still still doing the
EV thing. We basically are one week out of a
pretty pivotal moment of implementation of some pretty major US
federal policies. So everything from federal fuel economy standards that's
the kind of miles per gallon of new vehicles which
electric vehicles help automakers achieve, to the implementation of the
(43:44):
Inflation Reduction Act. So even though the law has passed
now over two years ago, you're going to see those
loans and grants from the federal government impacted all the
way up to the seventy five hundred dollars Clean Car
ev tax credit that people know and love in some
cases depending on who wins. Obviously, with the IRA, you're
going to need Congresses input on that, but there are
things that the Trump administration could do very early on
(44:06):
on the implementation side to make those credits a bit
more restrictive. So it's going to be big, but also
a split decision could have an impact too if you have,
say a Republican Congress with Kamala Harris's president or vice versa.
Speaker 4 (44:19):
And how does that actually impact the ability for these
car makers to sell cars? When I look at targets
of Biden administration having a certain number of evs. I'm
from California, where they lay out these overly ambitious goals five, six,
seven years down the road and then seemingly chop them
down when they get closer.
Speaker 14 (44:35):
Yeah, Bailey, I mean even beyond that, there's been a
kind of back and forth between California and the rest
of the country for a long time, known as you know,
the California Advanced Clean Cars to policy, which aims to
have one hundred percent of all new sales by twenty
thirty five is electric eighty percent fully electric, twenty percent
plug in hybrid. And so last time Trump was elected,
there is a lot of lawsuits, a lot of uncertainty
(44:57):
in the market. Makes it very difficult from an automaker
perspective actually planned. And so these automakers for a long
time have wanted both the carrots, which are these IRA
kind of subsidies and incentives on grants and loans, and
then they'd be willing to take the stick, which is
the fuel economy standards.
Speaker 6 (45:11):
So we have to see how it shapes out.
Speaker 14 (45:13):
But from the automakers that we speak to, it's a
pretty confusing policy environment. But given that the globe is
moving towards electric vehicles and cleaner cars in general, they
have to kind of prepare to move that way regardless.
And it's just how quickly in the US are they
going to move in that direction?
Speaker 2 (45:28):
The Chinese are moving very aggressively. How do you expect
them to do outside of China? Will there be market
for Chinese evs in Europe?
Speaker 6 (45:37):
In the US? Yeah, it's a really good question, Paul.
Speaker 14 (45:40):
And you know, looking at the data which we do
at BNEF, you can see Chinese automakers like BYD making
upground in places like Brazil, in places like Latin America,
in places like Israel, you know where you might not
expect to see Chinese automakers. They've been moving into Europe
and there's been a pushback with all the tariffs and
back and forth there. I think that's also why the
US election does have a big impact, because if there's
(46:01):
no kind of counter bailing force coming out of the US.
You see what's going on with Volkswagen on the European
side today, it's going to maybe make the road easier
for those Chinese automakers on electric to kind of shift
into those export markets, because if Tesla isn't focused on
making more affordable evs, then there's really only going to
be one major player in town. It doesn't mean, you
know that Chinese automakers are going to be the only
(46:24):
ones who are making mass evs, but it's a pretty
big transformation at the global auto market level, just like
when the Japanese automakers came onto the scene.
Speaker 6 (46:32):
So I think that's the way I like to think
about it.
Speaker 14 (46:34):
It doesn't mean that you know evs are going to
be sold everywhere overnight, but without a kind of other
major automaker, that's where I.
Speaker 6 (46:41):
Think a lot of these countries are going to turn.
Speaker 4 (46:43):
And if we do see tariffs on some magnitude, yeah,
what does that actually mean for the market for Elon
Musk's Tesla who he's had a very prominent role campaign
for Donald Trump as well as other companies.
Speaker 14 (46:56):
I think when it comes to US tariffs, you know
that could buy you. I think some time you look
at the one hundred percent tariff that the Buying Administration
put on Chinese EV makers. While there weren't that many
Chinese EV makers selling electric vehicles here currently, Jili Group,
which owns Volvo and Pollstar, was pretty much the major
automaker impacted.
Speaker 6 (47:14):
So that's why you saw those prices.
Speaker 14 (47:15):
Or the Volvo Ex thirty, which is a really popular
model globally not sold here yet. It's keeping BYD out
for a little bit longer. But if the automakers like
GM or Stillantis or Ford aren't helped or don't move
towards electric vehicles, you know, maybe it buys you two, three,
four years. But all the while BYD and other Chinese
automakers are making more investments in battery technology, and I
(47:36):
think regardless of who wins, you need to see more
of those investments here on batteries because those are going
to be important not only for electric vehicles but for
the grid as well, and you're letting China get a
major competitive advantage.
Speaker 2 (47:47):
What are the US manufacturers doing? Have they pulled back
on their EV investments.
Speaker 14 (47:51):
We've definitely seen at the global level those EV targets
moving back. I think Ford in particular, you saw them
move their new EV models.
Speaker 6 (47:58):
Out a couple of years.
Speaker 14 (47:59):
So it's let's so on the dollar amount and more
pushing it back. GM has seen better EV sales. In fact,
the third quarter this year was the best in the
US that they had seen to date, with the Equinox
and Blazer and Lyric really taking off. To make one
bright point, Bailey, your home state of California actually saw
in that third quarter the best EV share of sales
they've ever had at twenty seven percent, So that's twenty
(48:20):
three percent, about almost twenty four percent fully electric, the
rest plug in hybrid.
Speaker 2 (48:25):
So it's pretty good calif Like, what's the US average?
Speaker 14 (48:27):
US average has been at about ten percent now nine
and a half ten percent. Yeah, far California twice twice
the average. But what's significant about that is California had
been stuck at about twenty five percent. Tesla actually for
four quarters in a row in California has seen decline
in deliveries because of I think some of the kind
of Tesla or musk fatigue, and so to see California
(48:51):
begin to grow again from the other automakers, even as
Tesla's pullback is pretty significant.
Speaker 2 (48:55):
All right, Corey, good stuff. As always Corey Canter. He's
a lead US electric Vehicle analyst at b n e F.
Speaker 1 (49:02):
This is the Bloomberg Intelligence podcast, available on apples, Spotify,
and anywhere else you get your podcasts. Listen live each
weekday ten am to noon 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.
Popular Podcasts
40s and Free Agents: NFL Draft Season
Daniel Jeremiah of Move the Sticks and Gregg Rosenthal of NFL Daily join forces to break down every team's needs this offseason.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
The Bobby Bones Show
Listen to 'The Bobby Bones Show' by downloading the daily full replay.