13 Burst results for "Steve Kane"
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"Fed's going to have to stay hawkish keep their foot on the brake um and probably increases the likelihood somewhat toxically that we have a harder landing because that's going to have to over tighten and the fed focuses on lagging indicators labor market inflation which which lagged the cycle so it probably means the fed you know it almost guarantees i think the fed stays too tight for too long so it just from our standpoint instead of being a 2003 call it moves into 2023 rather it moves into 24 probably middle of 2024. hey steve i'm just looking at bloomberg the u .s corporate high yield total return index up 6 .5 percent year to day that's a heck of an improvement off of last year do i still have room to go with my high yield well i think you're still carrying it you know seven plus percent you um know it sort of depends we think you'll do okay with high yield you're starting with enough yield cushion where you can withstand some rate rise a little bit of spread widening we don't think you're being compensated well in high yield relative to other high quality parts of the market even treasuries or investment grade corporate bonds because we expect that spread on high yield to uh to widen as we get into a recession but i do think high yield is not a horrible place to be and and collect a seven percent coupon it means you can withstand some price volatility and still you know eke out a positive return how about the rest of the credit universe anything interesting there yeah you know you yeah you probably heard us talk uh over and over again we'll continue to uh you know talk on agency mortgages it continues to kind of underperform high yield and corporate bonds but spreads are really wide over 170 basis points treasury that's uh almost 70 basis points more than investment great corporate bonds with no credit risk um it's also liquid um uh and has no credit risk which we think is you know really attractive going into recession there's a lot of reasons they've underperformed um you know including the fed is not lying and whatnot but we think it's an extremely attractive part of the market all right steve thanks so much for giving us some of your time we always appreciate it steve kane he is the co -cio and the generalist portfolio manager at t c w investment management uh one of the smartest group of folks out there i can tell you but based upon my experience with them over the years stuff we're gonna have more coming up this is blimberg let's get some company news right now steve rapaport paul despite topping quarterly estimates and touting in roles in ai computing shares of advanced micro devices are down more than six percent bloomberg's ed ludlow reports they said that the market for their ai offering which is an ai accelerator gpu or a gpu cpu hybrid is 150 billion dollars by 2027 amd said that in the quarter gone customer engagement with their ai products grew 7x but i think there's a sense that engagement does not mean tangible sales it's still a future opportunity thanks said cbs stock has been up most of today's session following better than expected revenue and profits in the second quarter more from bloomberg's abigail doolittle they beat on the surface level prescriptions filled was a positive the revenue grew 7 .6 % nearly 29 billion dollars the insurance medical benefit ratio grew to 86 .2 % the bad news of next year and the year after for 2024 they're saying they can no longer meet their guidance of nine dollars per share earnings per share and for 2025 they can no longer meet dollars of earnings per share so that is weighing on the stock thanks abigail wwe chairman vince mcmahon was served last month with a search warrant and a grand jury subpoena related to allegations that he paid millions of dollars to settle claims of sexual misconduct wwe disclosed those developments in a regulatory filing today the company also revealed mcmahon is on medical leave following spinal surgery and those of the stories were following this hour i'm steve rapoport this is bloomberg more of bloomberg markets coming up followed by sound on that's next on bloomberg radio missed your bloomberg favorite radio show bloomberg business week masters in business bloomberg intelligence and more are also available as podcasts listen today on apple spotify and anywhere else no one knows where this market will go right now it feels like a but one thing's for certain there's a way through it and the experience and guidance of a merrill advisor can help you get there because where there's a bull there's a way find an advisor at ml .com slash bullish merrill a bank of america company what would you like the power to do investing involves risk merriman pierce spinner veteran and smith incorporated registered broker dealer registered investment advisor member sipc holman subsidiary of bank of america corp your landscape business is ever -changing there could be a lot more selling to come ours it is to get some headlines on a bring to our audience we also have the unknown of how much can financial assets take we have something else in common the small
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"Television and the Bloomberg Business app this is a Bloomberg Business Flash It's 1240 on Wall Street we check do markets all day long at Bloomberg the Dow the S &P Nez stack all in the red off session lows right at the numbers we've got a 320 point drop right now for the Nez stack composite index tech stocks leading the way lower Nez stack now down 2 .2 percent S &P down 56 drop there of 1 .2 percent Dow industrials down 241 points a decline of six tenths of one percent broad -based selling today with the Russell 2000 down now by one and a half percent 10 -year yield 4 .08 percent with a two -year that's yielding 4 .89 percent spot gold down seven dollars a ounce to 1936 a drop there of four tenths of one percent and west texas intermediate crude is down two and a half percent 79 37 for a barrel of WTI lots of cross currents today Chuck Lieberman is chief investment officer at advisors capital management and on surveillance alan's this morning he was asked for his reaction to the fish downgrade it's hard to imagine that anyone is aware of the uh... budget deficit uh... it's just large uh... way too large everyone knows that um... and so this is hardly a surprise or hardly inconsistent with what we know about the budget uh... but i don't think it's going to put a lot of pressure on the u s government to reform its ways and you can hear more of that conversation on the surveillance podcast you can download it wherever you get your podcast after the bell today it'll be qualcomm and paypal among many others today we have shares of qualcomm down one point two percent paypal down three point four percent and of course tomorrow apple and amazon apple down down now by one point seven percent amazon down three point one percent coming up at one o 'clock wall wall street time an interview with richard francis co -head of america's sovereigns at pitch ratings i'm charlie pellet and that is a bloomberg business flash all right charlie pellet thank you so much we appreciate that uh... molly smith paul swinney here in the bloomberg interactive brokers studio are also streaming that's what the kids do these days for over over on youtube you can check it out uh... search bloomberg global news you'll find our stream their art it's not every day you know a rating it she downgrades my government's credit rating i mean that doesn't seem very atriotic uh... but i don't know if the market cares or should care so i'm gonna check with an expert steve kane co -cio in general's portfolio manager t c w investment management firm out there in l .a. South Figueroa street if my memory serves from back in the day hey steve do you guys at t c w sit around in your uh... are you fixing come geeks it around do you really care that much uh... not really and uh... and the market doesn't seem to care either uh... if it's a little embarrassing i mean you know uh... no government wants to be a rating agencies say they uh... they don't think you're as credit worthy but there's really no new news in the in the downgrade uh... you know that the uh... the factors in the rationale they use the the erosion of governments and the uh... the debt ceiling issue and the uh... increasing the deficit and the rising debt to gdp these are all things that uh... market participants news there's really not any new news what could have been an issue is some technical selling if investors are sensitive to the the rating on treasury debt but that's really not the case uh... investors in the indexes don't look to be the actual uh... rating so it really has had uh... in effect no no impact to us or to the markets it appears well steve that's what i wanted to actually follow up with you about on this idea that there are you know any any possible for selling in on for any of you guys listening there's some investors that may be can only curl hold certain ratings of debt so that's why this might have been an issue but there really isn't a whole lot of triple -a debt dead out there to begin with so i can imagine there are a ton of funds that only allow themselves to hold triple -a dead yeah there there isn't and the other thing that happened back in 2011 when we went through this the first time with S &P is people began to ask the question well what happens if we get another downgrade and a lot of investors change their policy to just allow the holding of US Treasury debt regardless of rating so I think that this while the timing isn't anticipated I think people were prepared for this and we haven't heard of any for so alright so if you're not focusing you and your colleagues not you know obsessing over the the Fitch downgrade what are you guys thinking about what are some of the two or three things that you guys are working on as you think about your portfolio well we're we're taking the long view and it's the long view is getting longer based upon our view that eventually the you know five plus percent of tightening in the big rise in interest rates and the tightening of financial conditions is going to slow the economy and create a recession so we're looking for signs of that to occur and you can see some signs you know the inverted yield curve that tightening of credit standards and senior loan officer survey there's indications in the labor market with the jolt survey but the dominance of coincident information in terms of what's going on in the labor market consumer spending and corporate earnings is suggesting the economy is not about to roll over anytime soon so we're looking for forward -looking signs you know in labor the market and the credit markets and we are seeing them but it's just playing out in a very very slow fashion yeah i mean i think a lot of people would tell you that the the data that you're referencing here is um you know really supporting that soft landing call we saw B of A today reverse their recession argument that they're seeing now the soft landing is the most likely outcome what do you think it would take for you and your colleagues to get a bit more optimistic on the US outlook? I think it would be for the market to get more pessimistic meaning i think we take comfort actually a little bit a in contrarian sense to the fact that everybody's getting warmed up and really comfortable with the Goldilocks soft landing scenario the last time we were sort of hearing a lot of this no landing talk was early March and what happened and the yield curve was 100 basis points inverted what happened we banking had prices you know there were plenty of soft landing calls back in 2006 2007 even early 2008 before the worst financial crisis and recession you know up until the pandemic so i i don't think that we're uh our long -term view is is in any way uh you know uh deterred if you will by the consensus moving in the other direction we understand why and i think what it just means is the
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"In the high quality parts of the high yield market. Stay in those double BS and high single base, the things that the economy does take a downturn even though it sounds like you don't think it's happening that you'll be protected. In that part, most of that will be single B market really is fairly default resistant. And I would say to make a general statement about high yield is that part of the market is pretty sound fundamentally from a leverage standpoint, liquidity standpoint. The fundamentals for the high yield market look pretty good. Going into this recession. So we don't expect a huge default cycle. I think our cautiousness is we just think you're going to get better entry points. We just think spreads are going to widen even if it's a relatively benign default cycle. We still think spreads are going to get a couple of hundred basis points wider. So we're keeping our prouder dry. But I do think that if you go out and buy high yield today, you'll underwrite a little bit of volatility, but you're certainly not going to lose money. Hey, Steve, just real quick. 20 seconds. What are your analysts? What's a recession model look like for your analysts? No revenue growth, declining growth. You mean for our credit analyst? Yes, what are they running? Oh, it's kind of, it's really industry by industry. I mean, the disparity of industry returns is significant. Okay. So a lot of them are starting to shift in the negative direction. So what we've seen thus far is relatively decent revenue trends and very negative earnings trends, meaning you're seeing a lot of cost pressure in that type of thing. Steve, great stuff, always appreciate getting a few minutes of your time, Steve Kane, kiso CIO, generalist portfolio manager, TC W investment management. They're based in LA. They got like 225 billion massive under management, not bad. It's worth a trip to LA. This is Bloomberg. All right, let's get some company news
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"An indicator seasonal pickup in rebar prices ahead of the construction period has failed to materialize and could be a canary in the coal mine this according to Bloomberg intelligence. S&P 500, 41 points higher than sub 1%, 4097 on the index. The Dow is up 234 points. That's up 7 tenths of a percent NASDAQ 100 right now up 250 points that's a rise of 2% right now. The two year yield, ten basis points higher 4.05%, Robert and Brooklyn, here you go, ten year yield is up 6 basis points were at three 50. We're doing customer ports now. Nice. We should be fine. I should do. I encourage listeners to write in. Yeah? And make requests. Sure. My email, everyone knows MT Miller at Bloomberg dot net, or you can I beam me, that's the best way. Yeah. We're talking financial reporting requests, by the way. Not the kind of requests you get. I'm going to leave that there. Leave that there. All right, let's talk fixed income here, folks. John Tucker, thank you very much. A fixed thing of 2020 to brutal year. I don't care. There was no place to hide equities or fixed income and really not too many places to fix to come space to hide it. Either a little bit better this year, the Bloomberg aggregate U.S. aggregate total return value is up about 3.5% this year. So they're doing a little bit better and when you want to talk fixed income you need to go talk to the folks at TC W, they're pretty big in that biz Steve Kane co CIO and generalist portfolio manager for TC W investment management joins us. Steve, you guys are doing a little bit better this year than last. What's kind of driving or what are the areas of opportunity you guys see in a fixed income space this year? Well, we're seeing quite a bit of opportunity actually. First of all, sort of getting up to your general point of returns being positive is we think we're getting towards the end of the fed hiking cycle and the market's beginning to anticipate that. And that means that rates are likely to be coming down. So the first thing we like is the overall rate market and specifically the front end of the market where you're getting the highest yields and we expect that part of the market to rally the most going forward. And then beyond that, I think, would rather pessimistic about the economy. We think that the reason rates are going to be going down is because you're going to be entering a recession sometime later this year early next year, which means we're defensive on lower quality credit, but we like lots of areas of the higher quality parts of the fixed income market away from treasuries. You've heard us talk AD nauseum about the agency mortgage market. We think that's very attractive that continues to lag recently. It's lagging due to the fact that the FDIC through BlackRock is selling agency mortgages that were taken over through the SVB and signature bank takeovers if you will by the FDIC. But we like that area. We're modestly constructive on investment grade corporate credit. We think that's fair. And then we like high quality parts of the securitized market, including non agency residential mortgages. Why do you think, I mean, in light of today's inflation data, which I realize is only one point, but core PCE quarter over quarter up to 4.9% from 4.4% in the last reading and more than economists had estimated. We were looking at 4.7. So we're going back to 5 and it looks like climbing, how can the fed even consider lowering rates in that type of environment? It's a really good question. And the answer in the short term is they can't cut rates. As a matter of fact, they're the markets pricing this in. They're likely to hike next week if they're at their meeting and maybe even another time. I think we're at the view that the market is getting a little ahead of itself in terms of expecting easing as early as September of this year. But we do think whether it's one or two more hikes that the cumulative effects of all the tightening 5.5 and a half percent is ultimately going to slow the economy down. We're beginning to see signs of it in various areas, housing, certainly the business investment part of the GDP report suggests that businesses are pulling back in a fairly significant way. The last thing to go and it's still hanging in there is labor market and we do think that it's just a matter of time before you start to see bigger and bigger layoffs and loosening in the labor market. And that's sort of the key part of the equation that's going to get overall inflation heading towards that 2% total. I'll just repeat the GDP numbers that we got this morning for our listeners. We got annualized GDP quarter over quarter of 1.1%. That compares to 2.6% in the previous reading, and we were looking for 1.9. So much worse than expected much worse than the previous number, a real decline, what happens if we get into a situation where GDP is coming down unemployment is going up and inflation is stuck at 5%. Is that something you could imagine? Yeah, yeah, certainly. As a matter of fact, it's very typical at the beginning of a recession because inflation lags that you get this sort of temporary period of stagflation where kind of economic activity is declining, unemployment is rising, but inflation is yet to adjust to kind of adjust with a bit of a lag. So yes, there will be a period of time where it looks like a real conundrum for the fed because inflation will be lagging. And the risk is that they are too focused on that lagging indicator. State too tight for too long and worsen the recession instead of sort of looking forward and understanding that inflation trends are heading down. Hey, Steve, unlike my colleague Matt Miller, I'm willing to take some risk in life. And I'm willing to go out to the high yield space here. You know, I'm not really not recession camp, or if it is one, it's going to be pretty shallow. Some willing to take on some credit risk here. Can you steer me somewhere or not? Says the guy who has the bulk of its wealth and munis. Exactly. Here's high yield, there's a wide variety of risk within high yield. There's the double B's down to the triple C's things trading at par yielding 7.8%. Things trading 50 cents on the dollar and likely to default. So big range. I think what I would advise you, Paul, is your financial adviser for the day. You stay
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"So we talk a lot about inflation, Jess. We know that, right? It's kind of almost like a ping Pong game. Don't you feel like 'cause there's people who have some really strong thoughts about it and where it's going. All right, whether it's not gonna come dramatically down to that 2% target for the fed or the sticky word, everybody likes to keep mentioning Derek. All right, so let's get to it into a most read story on the Bloomberg, a team of Bloomberg reporters covering how trillions of dollars are at stake as Wall Street is super split over the path of inflation with us is Bloomberg news chief correspondent for global macro markets, a favorite here at Bloomberg, Liz McCormick. She's with us via Zoom in New York City. Hey Liz, so good to have you here with Jess and myself. Love this story. It is so a story of our times. It isn't unusual, though I feel like that there's disagreement between economists or market strategists on Wall Street and yet this is a pretty big one. Walk us through it. Yeah, true. We always kind of have a lot of disagreement but what I think Carol gets to why this is even more important now this like just as is it sticky is inflation going to keep coming down is we're seemingly getting at a pivotal point with the fed because supposedly they're getting close to done. Let's say we can't call when, but maybe they hike next week. They might hike in June, but nonetheless, they're close. So after that, what happens in a lot of that depends on inflation, right? So I think what the divide is and the views on inflation is kind of even more important now because we're close to the end and that means there's the fed stay there or do they ease like you guys have talked the market is pricing that. So I think, you know, like I said, there's lots of big investors here in this story, like I said, there's a swath of us reporters and they don't all agree. But I think it's kind of compelling. There's that strong views by several of them that say, you know, inflation has come down pretty fast, but it's going to be slow moving from here. The fed is not going to be able to pivot to easing, even if the economy falters a little bit because they're just enemy number one remains inflation. And there's the other side that just says, hey, it's going to go on and the economy is going to create our fed has to ease. So there you go. That in a nutshell. Hey Liz, break it down as far as when it comes to these specific firms because you have double line thinking that inflation is still going to be sticky, but then you have alliance. You have TC W in a different type of camp who's on which sort of team at this point. Yeah, right. So like it's funny like TC do you always spoke to Steve Kane, and he was saying, you know, and it's funny because in pals, one of his pressers, someone was saying, how many times it said he said disinflation or whatever. It's the new drinking game. There should be. Anyway, go ahead. Yeah, but Steve gay was saying we're seeing a lot of disinflationary forces already. And that that's going to carry momentum plus like, you know, bearing in mind that there is this thing still to come of all the fed tightening they've already done, which we know there's those long and variable lags we've started to see like people say the fed started to break some things like you were talking about what the issues in the regional banks and that they feel like this is just going to kind of keep coming in force that I don't know if you was just mentioning Carol that about the consumer like when the consumer people have had a job so they're doing okay but you see I saw a consumer confidence go on when the consumer really says I'm not going to spend more and my prices aren't down that much. You know that maybe then the momentum on inflation keeps coming. And I think that's like TC W is saying it's going to build, you know. I do think about as a consumer. If I look at prices still staying high, I'm going to start making choices about where I'm going to have to, like in terms of where I spend my money. I want to go back for a second. When it comes to fed policy Liz, what is the lag officially? Is it a year? Like when do we really feel the punch from this past year of fed heightening and raising of rates? Well, that's another one economists all have their different particular views, but let's say they are saying, usually it's 12 months. I remember in the beginning of there were some saying the lag would be less this time around and but I don't think it was. So I mean, the fed started in March of 2022, the last year, right? It was over about a little over a year from there, and they went faster than they've ever gone, at least in my ear of watching fed. So I think you're going to start continuing to feel it more. I think we've talked about this before. You say, ah, did I want to fix my deck? Maybe not because my heloc is at 7% now, right? You know what I mean? So I think margin people are going to start saying things like that more and more. Like you can choose. I don't really need this new thing even though I want it because it's more expensive. There's no free money anymore. Unfortunately, right? Liz, what is the bond market telling us because we did see record short net short position when it came to hedge funds against the ten year treasury so does that mean the bond market isn't positioned correctly for a potential pause this year? Well, that's a great question, Jess, because you know my colleague Garfield Reynolds had written a story about that. And what's interesting is you have this kind of hot hedge fund money that's leaning very hard into being short. But so that's in some of the CFTC data we can look at. They're like the leveraged funds. And then I'm kind of like a little surprised because they got a bit burned in March when the banking crisis broke and yields tumbled, but I think they have a strong conviction. But on the other side, because you can look at it in the other parts of the data, there's some of the kind of call it asset managers kind of regular money. They're still long. So there's a bit of a divide there. There's also some kind of arb trading you can do, but I do think the kind of the trend followers, the quants, are still leaning to short. And that means like you're right. It depends what happens. They kind of think inflation is going to stay around. Fed's going to stay, you know, at least even if they stop tightening. But if this stuff unravels and there's so many uncertainties, I hate to even bring up the debt ceiling because
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"Over the long term. But Steve, you know, University of California just got a guaranteed 11 and a quarter percent over 6 years of the B re investment. Can I get in on that kind of return? You're going to have to call BlackRock on that one. I just need 4 billion. If we pool our money, you know, can we all get that? Yeah, maybe, maybe. If you've got 99.9% of it, I'm willing to chip in. How amazing is that kind of return, Paul? What would you do for that? 11 and a quarter percent guaranteed over 6 years. Sounds like a structured note that my financial adviser pushes in my way all the time. Steve, is there any place here in the fixed income space that you're just not willing to go at this point? Well, I would say we're cautious on the lower quality, the triple C area of high yield and lower quality parts of EM. Those are the areas that are kind of no goes. I would say we're cautious on down the capital structure in securitized particularly commercial real estate related securitization. So I think most people are now there's a shakeout going in the office sector, particularly lower quality BC properties and commercial office property and we're staying away from that as well. But top of the capital structure, triple-A double-A stuff is pretty attractive. All right. Good stuff, Steve Kane, co CIO, journalist portfolio manager at TC W investment management. You guys undergrad at University of California Berkeley. That gets me smart people there. Yeah, the UC system is pretty good. I think we just highlighted exactly $4 billion you're right, and that's a great return for them. But I guess if you put up that kind of capital, I think the barrier to entry to the 11 and a quarter percent guaranteed returns club. You've got to have a spare 4 billion just sitting around. Yep, exactly right. So fixed income is Steve Kane, TC W said, it's going to be better in 2023 than it was in 2020
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"Paul. All right, John Tucker, good stuff. We appreciate that. You know, you think about 2022, Matt, I mean, yeah, it was tough for the equity investors, but the fixed income folks got just walloped and, you know, to the level that they hadn't seen in decades, some of them hadn't seen ever. So the question is it's someone told us yesterday it was the worst year for fixed income since 17 like 46 or something. These guys were getting just ripped last year. So hopefully better this year. Let's bring in one of the big players in the fixed income biz that Steve Kane co CIO and generalist portfolio manager. It's this little shop out in LA TC W investment management. Steve, we're licking the wounds on 2022. I mean, are you guys out there TC W saying? It's gotta be better this year. Yeah, I'll go out on a limb here and say that 2023 bond market returns are going to be better than -13%. Last year. So you can put that. You can write that one down. By the way, is that total return? That's total return for the Barclays aggregate index. And yes, it was a blue probably year. And it was actually, it was actually the second consecutive calendar negative year for bonds. They were slightly negative in 2021. So we're due for a good year. Yeah, we wanted to point out that's the Bloomberg Barclays aggregate index. Yeah, we paid good money for that. So where in the fixed income space are you guys starting to do your early 2023 work? Well, we are we've been positioned for a few months now for kind of a turn in the turn in the cycle and improving conditions in the bond market. So throughout last year, we were lengthening our duration. We view the rate environment today is mildly attractive. I think that we're kind of long in terms of our duration positioning, but I would say that we recognize we're going to see some volatility. We're not blue skies ahead. We're likely to see some negative surprises and some volatility. So but nonetheless, I think as we look out over the long term, we see four to 5% yield for investment grade corporate bonds and investment grade bonds in general is very attractive. So yes, we're positioned for that. We like what I would say generally speaking is a high quality areas of the market. The areas of the market that are not default sensitive. So we do expect defaults to pick up across a range of lower quality assets. But when you look at agency mortgage backed securities, triple-A and double-A rated securitized assets yielding 200 to 300 basis points over treasuries. We view that as really attractive value today. The concern is that we hit a recession in 2023, and that's why you like the high quality stuff, right? Because we've started to see some little cracks in the credit market in terms of, well, let's see, massive leveraged loan issuance. Pulsinger said, the global financial system is vastly over leveraged and Matthew mish warned that defaults could rise to 9% this year if the fed stays on its aggressive monetary aggressive hiking path. Is that why you say high quality? Absolutely. Yeah, that's exactly right. Meaning, if you're a triple C company trying to finance yourself in the high yield market of loan market, you're looking at double digit cost of capital anywhere between 11 and 15% or maybe even not getting that rate at all. And a lot of companies with high leverage just can't finance themselves. That financing rate just doesn't work. So that's how you get defaults. Is the market just won't sort of accept what won't land. Well, you get another mini budget issue. I mean, anywhere around the world, right? And it was so interesting to watch the fallout in the guilds market. And it contagion spread from that tiny island nation, you know, to New York City, the capital of global finance. I know that Apollo Apollo chief executive Mark Rowan said, that was maybe the first of many hiccups and that we could see other issues like the LDI blow up that we saw in the UK. Yeah, I think you will see a problem. I think though what you're like to lead to see is what I would say is on the Richter scale, something of the 5 level type problems as opposed to what we saw in 2008 with the financial system on the brink. And the reason is the banking system both particularly in the U.S., but globally is a much better shape than it was going into the financial crisis. So you're likely to see some problems we don't see it turning into some catastrophic global meltdown of any of any sort. We think this is going to be more your garden variety default cycle recession that the last one we had that I would say is most similar is the one in the early 2000 period post tech bubble. Hey, Steve, unlike my partner Matt here, I'm willing to take a little bit of risk in life. It says the guy who sits on his munis every weekend, cutting coupons. How about the high yield space? Do I dare venture there? Is that maybe taking a little bit too much risk and ahead of a recession? Here's what I'd say about high yield. High yield yields about 9% and if you bought the high yield market today and its totality and you put it in a drawer and came back in two years or two to three years, you'd be okay. You'd get a nice positive return, maybe earn that 9% or a little bit less. And you'd be okay. But between here and there, we think you're going to see a lot of volatility and you could see some negative returns in high yield over the interim meaning we think things get worse before they get better. So I think that depending on your time horizon and ours, we are looking to make total return. We're going to save our powder and wait for better buying opportunities. But again, if you buy high yield today at 9%, you're not going to lose money
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"These long-term buy and hold people? What are you guys doing? About all the trades that went the other way, but I'm happy to. Is the idea that basically when you, when you make that much money, you don't want to get greedy and you just cash in. Yeah, yeah, there's a lot of volatility in the UK is certainly not a an area where we have a lot of confidence in the near term direction of where things are heading. But when things get to extreme levels, like we saw, we weren't positive rates we're going to peak out or there would be intervention. That wasn't really the thesis. But the markets do push back against policymakers at some point and that will be the case with the currency as well. Bond vigilantes, they're back according to Ed yard Denny. So, Steve, how about credit quality here? A lot of folks are saying we're either in a recession or certainly heading towards one, it may even be a severe one. Your teams, your analysts, are they really sharpening their pencils and kind of checking out all the ratios to make sure that they're not overly exposed to credit risk? Yeah. Yes, we are. I mean, I think the areas to be very concerned about, I think, are anything that touches Europe given the degree of stress that that economy is going to be under what the energy crisis there. Here in the U.S., yes, we're definitely sharpening our pencils. There's areas of the market regulated areas like banks that we think notwithstanding the fact that banks typically do suffer a bit during recessions. We think the banks are well positioned today. And so there are areas of the investigate market where we sharpen the pencils. We've stressed what credits it look like in a recession, even the severe one. And feel very comfortable. And for example, money center bank senior debt of money center banks north of 200 basis points spread to treasuries. We think that's a very attractive risk return notwithstanding a fairly fairly bearish outlook for the economy. We do think we're heading for research. Is it too bearish? Is it too bearish? Yeah, drunken Miller said he would be, I think he said he'd be shocked if there wasn't a recession by the end of the year. Is there is high yield then too risky right now? Yeah, well, here's what I would say about high yield. As I mentioned, almost 10% yield. If you could buy your high yield today, put it in a drawer, do a rumple stealth skin fall asleep and wake up in 5 years, you'd be happy you did that. But high yield doesn't we're in a mark to market world total return world. And our sense is that we haven't hit the widen spreads on high yield in the cycle at 550 off treasuries are a little north of that. We think there's material widening. We're adding a little bit. We're seeing a little bit of opportunity, but we're saving our powder. We do think somewhere hundreds of basis points wide to hear is where you start to back up the truck. All right. Good stuff, as always, Steve Kane, co CIO, and general's portfolio manager, TC, W investment management. That meeting plus the capital group are your two anchor meetings when you go to Los Angeles. Those are the ones that you build your whole schedule around that. So when you're going out there to pitch your wares, TC W and capital group, good stuff. Right now, let's head down to Washington
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"There. Boy, it has been a brutal start to the year for fixed income traders. I'm looking at the Bloomberg global aggregate treasury total return index. It's all 15.5%. That's treasuries. I thought that stuff was supposed to be safe. Same thing for the corporate bond index off about 15%. And when I think about fixed income trading, the folks, I think that have been the most conservative slash bearish maybe have been the folks at TC W so I wonder what we should be doing now. Steve Kane, co CIO, and generals portfolio manager at TC W investment management. Steve, is that a fair characterization? Have you guys been more bearish or more conservative about fixed income investing over the last year or two, three than maybe the average bear? Well, we changed our position a little bit over the course of the year. We came into the year defensive. Okay. And now we're getting a little bit more excited. And that's what I'd like to hear. Yeah. And it has been brutal. I mean, to build on what you were saying earlier and maybe just a punctuated, it is the worst market in the history of the Bloomberg aggregate index in the history of that index, which goes back to the 70s. So where we sit today notwithstanding likely higher rates going forward, but we have over 3% treasury yields, four and a half to 5% investment grade corporate bonds, 8 and a half percent high yield. The return profile looks a little more symmetric looking forward. I mean, you've got some risk to it, but you certainly have some return built in too. So I think the way we would sort of characterize it qualitatively is it's not time to go all in on fixed income, but certainly it's not a bad time to increase allocation and that's what we've been doing. Sort of across the board, both our duration or our rate exposure as well as our exposure to mortgages and investment grade corporates. Steve, the wall of worry is very high when it comes to global events right now. Macroeconomic risks sees me. I have to ask though, what do you think is perhaps the number one bull case for bonds right now? Oh, it's simply that the fed almost by design. They won't say this as directly is going to engineer a recession here. And that is simply to fight the inflation dragon. They need to slow the economy down and do so in a way that creates a slack in the economy and the labor market and that in all likelihood involves a recession. So the bull case is really that the fed continues to tighten to the point where the economy rolls over. There's some signs that's happening already. And then the fed has to reverse course. And ultimately, ease, we're not calling for that necessarily in the near term, but certainly looking out into next year and beyond. It's not difficult to see the fed reversing course. So if recession is the bill is the bull case for bonds, does it matter how deep the recession is if it has to be something that kind of flushes out the market, something like O 8 or even the 99 dot com bubble popping type situation or if it can be perhaps a little bit more shallow like 2001, for example, does it matter when it comes to the investing thesis for bonds? Definitely does. And I think that's the debate right now that you hear on your show and others as to what this recession. The discussions move from soft landing to what the recession might look like. And definitely, if it's a deep recession, when great financial crisis type one, which we don't anticipate, that then you get emergency easing like you saw in O 8 and it's also what you saw on March of 2020. It's more likely we do get the shallow version. And the reason is that you don't see the financial leveraging the banking systems very healthy, corporate balance sheets are reasonably healthy relative to past cycles. The consumers in decent shape. So there's not a whole lot of deleveraging and for selling that needs to take place and asset liquidation, if you will in the economy. So it's likely to be a little bit more drawn out, which will put the fed in a bit of a conundrum, so to speak, because if you get a slowdown, you get unemployment building and inflation still staying reasonably high. The fed no longer is it easy just to be hawkish. They will have a dilemma on their hands at that point. All right, Steve, you guys at TC W and for the folks listening and teaching students is monstrous asset management firm based out in LA $225 billion plus and fixed income assets. So you guys see everything out there. To the extent that you are kind of increasing your exposure a little bit here, where do you go? How do you go? Are there certain asset classes within fixed income that you were more they find more attractive now? Yes. And I would describe it thematically for us at least. It's sort of the late cycle playbook, which is you do a few things in this environment. You start adding duration because you're preparing for the turn in the cycle. And then in terms of what you buy, we like to stay high quality, late in the cycle. Because when you head into the recession, high yield tends to go through its default cycle and have significant underperformance. And even though we've seen some blinding, we think there's much more to go in high yield. So for us, it's things like agency mortgage backed securities, which you've heard us talk about before, but the value proposition there is compelling today, given the quality, given the low dollar price, given the positive convexity to use sort of a technical term. Now in the agency mortgage market, investment grade corporate bonds at a 150 off treasuries and again, we can look at a lot of individual issues and sectors of the investment grade corporate market. We think are very healthy from a fundamental standpoint. So broadly speaking, up in quality by investment grade bendable type credit. All right, Steve, appreciate it As always, you guys at TC W are great giving us some insights here on the fixed income space, Steve Kane, co CIO and journalist portfolio manager, TC W investment management. He mentioned that word convexity and my professors down at duke professor breeden and professor Kim Harvey both Chicago dudes like Steve Kane. They love talking about convexity. And I never really got it. So I said, you know what? I'm gonna, I don't think this fixing come markets for me. I'm gonna go be an equity analyst. I just have to tell stories about media companies. It's a lot easier than duration and convexity and stuff like that. But Steve king, he knows that stuff. Let's get out of Washington
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"The theme there You know Steve real quick here How do you follow the fed We're getting into this period where quantitative tightening is around the corner and so what does this mean in terms of what you do to buy yourself around what the fed does Well we take a disciplined approach We don't think we can sort of predict where the fed is going over short periods of time In fact I don't even think the fed knows where it's going I think the fed in some ways is following the data and following the markets and the markets leading the fed at times It's really the what we do is as the market prices and more and more tightening we think the chances of a slowdown and those higher rates ultimately slowing the economy down increase and therefore the rate environment looks more attractive So instead of sort of trying to predict whether the fed is going to hike ten times this year or 9 or 8 we simply as more tightening gets baked in we do that as a buying opportunity Steve Kane co CIO and general portfolio manager with TC W investment management We thank you as always breaking down the inflation numbers breaking down the odds of what we're going to see in this kind of inflationary yet growth slowdown environment I still don't know what the right narrative I think it's stagflation question is such an interesting one because it's not an environment people have seen for a long time certainly all these newer investors there's a joke that everyone makes to me on Wall Street all the time It's most investors my age have not made it through an inflationary cycle like this Oh yeah I have plenty of that I get it right here in-house But you know what I mean that's a lot of investors out there They have not seen this environment And even if you have it's not the same as the one we're seeing today So a lot of mistakes will be made a lot of things to be learned Yeah and I'm so glad you brought that up because if you look at the trading dynamics right it's the same deal These traders are in their 20s early 30s Until you quote age out essentially I'm not saying that there aren't older traders out there but this is part of the business essentially there's no secret to that And this is why history kind of repeats itself over and over again It's why you have the size and scope of what you're seeing now is similar to what we saw in 2000 and the dot com era And it's because the people trading now weren't the ones trading in 2000 They're thinking the exact same way Fun fact for you Did you know Throwing at me That almost 80% of Goldman Sachs workforce is millennial or younger Oh Do you think they know how to use TikTok You know I struggle with that But you know nowadays these big financial companies are paying TikTok for influencers to teach people how to invest how to trade So while you know I guess you have to get used to it if you don't watch already It is wild You know what I was watching an E trade commercial the other day owned by Morgan Stanley and they had a literal baby as the main character and it was them saying you know we need to bring back this baby from the wilderness something was taking a break from a straight and they're like investors are trading off memes now and what are we gonna do in the baby Literally like a one year old child actor was like a fake commercial and was like oh they're trading on memes I gotta come back to work And is that kind of dynamic where you can see some of these biggest players I did not do that commercial justice But I promise it was funny And the point I'm trying to make here is that you're seeing a lot of these major institutions especially online brokerages address the meme training And we didn't talk about memes but Elon Musk and his memes are on point on Twitter Do you think he has a mean guy No I think this is all from the figment of his imagination I mean fascinating fascinating stuff I mean I'm fascinated by also the volatility you're seeing in some of these markets A 30 handle on the fictionally Well you know that gets me riled up because the thing is once you get the vix that high obviously we saw people still trading through the first quarter but what happens is capital markets activity slows down So if companies aren't You know we're going to cut right in We are going to listen to it into a press conference Damian Williams a turning for the southern district of New York announced those charges filed against arcade capital management founder Bill Wong Here we go Yes special agent in charge to grow back SEC enforcement director for beer gray wall And CFTC deputy director of enforcement would also Today we unsealed racketeering conspiracy securities fraud wire fraud and market manipulation charges against Bill wall The founder of our key goes capital management and Patrick halligan the CFO of our king goes capital management for perpetrating a massive broad and market manipulation that nearly jeopardized our financial system The scheme was explored in scope We alleged that the defendants and their COVID spheres lied to banks to obtain billions of dollars at the then used to inflate the stock price a big number of public retreat companies The lies that the equation and the inflation fed more lives Round and round The last year the music stopped The bubble burst The prices dropped And when they did it billions of dollars nearly evaporated overnight And then aftermath so many people started searching for answers And.
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"Jarrett thank you so much It was just flagged to me that a listener has said they like our program To that listener we thank you so much We are very happy to be here Paul Sweeney mat Miller off today Katie Gupta here from the interactive broker studio boomer headquarters New York City shinola what's so striking to me is you have these massive earnings you have this massive movement the S&P 500 up only 0.6% Yeah it's fascinating And in the commercial break we were just talking about some of these big big businesses You see a huge move in Microsoft pricing power thumb tech businesses still doing really well but growth is slowing Across the board So what does that look like in the next wave of investing Yeah and honora grana from blurring a telescope just recently joining us literally minutes ago and just said I don't know why people think tech is immune from this growth slowdown It's not It's just better prepared And that's a very good point It kind of seems like the stock is perhaps being punished for that or at least it was the case yesterday today The S&P 500 tech broadly in the green Let's pose that question to Scott Kessler global sector lead of TMT at the third bridge group Scott always a pleasure Thank you for joining us You're actually also my former employer or not used was a little bit third bridge was my former employer so I have a special place in my heart for third bridge commentary Talk to us a little bit about this question Scott is tech better positioned for this growth slowdown And if so why hasn't seen so much pain year to date Yeah well thanks for the warm comments about third bridge So I get look a couple of things First I think a lot of folks paint TMT sector with one brush It is not a monolith Within the sector you have cloud software and you have wireless telecom You have in some cases some payment providers and you have let's call it legacy security software You have PC hardware and you have semiconductors It is a very big and broad and diverse sector That being said look there's no question that those areas that historically have been thought of as more cyclical and I would put probably semiconductors and hardware in that category they are more than likely going to be more impacted by growth slowdown then other areas that are maybe later cycle such as software and services The other thing you need to look at are what are the secular growth trends right So on one hand you're looking at cloud software I think there's a very strong set of tailwinds for that particular area However these are some companies that have been doing fantastically well largely as a result of the pandemic and now coming out of that Suddenly those tailwinds have turned into headwinds There's a lot of headwinds right There are a lot of headwinds and I think people don't ask this enough People go when they talk about the stock market they ask what to buy But what about what to sell When you look at the parts of technology and media and telecom that are going to hit the most troubles in the next 12 months where are they I mean look over the next 12 months I mean there are a lot of different areas to focus on From a fundamental perspective I think one of the areas that people have been focusing on more recently is hardware for example hardware saw a very substantial bump as a result of suddenly everyone having to work at home to essentially attend school at home So you saw the deployment of a massive amount of Chromebooks laptops et cetera but now we're coming out of COVID times hopefully and the comparisons are very very challenging So that would be an area where I think people need to look at what I was talking about in terms of balancing kind of secular growth considerations versus the cyclicality of the economy where we're likely to see some slowing for a variety of reasons Scott how much should we be worried or should tech investors be worried about the China of it all Whether it comes to supply chain issues whether it comes to COVID lockdowns or simply Chinese demand for some of these tech companies and tech services Yeah I mean it's a good question right I think over the last couple of years even predating COVID the importance of China from a supply chain perspective has become problematic for a lot of companies And I think given the continuing COVID lockdowns there there is no indication that we're going to see a normalization anytime soon Look we speak to experts day in and day out There's a big focus not surprisingly on kind of the technology supply chain Semiconductors and production And we have experts that have told us that normalization won't come until 2023 People frankly have been caught flat footed in terms of the magnitude and the duration of the supply chain issues That is not going to abate within kind of the short term And I think that's something people need to recognize Now you also pointed out something that people wonder about which is kind of demand considerations I would say for a lot of technology vendors TMT providers China is not as big a consumer of those products and services as you might think If you consider the fact that a lot of Internet media isn't even accessible within Mainland China I think that explains a lot of why there isn't that much of a potential kind of demand and revenue impact there And then the last thing I'd say is China has been building out its own TMT sector They've been investing very aggressively in semiconductors for example And so that's something that people need to be aware of as well Scott Kessler global sector lead of TMT over a third bridge We thank you so much as always for joining us We're going to jump right into our next guest here We want to talk about the markets we want to talk about the impact But let's stick with that China theme and for that Steve Kane co CIO and general portfolio manager with TC W invest management investment management talks to us and joins us here on.
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"And Matt Miller Arlo Guthrie on Thanksgiving Wait is Arlo Guthrie is Arlo's son father His dad Dad okay so woody and then Arlo and then Arlo has a kid who's also like famous right I don't know I don't know about that Or I'm thinking of like loud and Wainwright the third Loud and wing right there I don't know skunk in the middle of the road I don't know why I group them together but we'll get to that somewhere Great Jared thank you so much We appreciate that Of course You're all about Elton John You went to Elton John yesterday Awesome Was it good Awesome How old is that guy 72 73 or something like that Band was great He was great Sold out at the garden The garden was rocking last night So it was a lot of fun He's got a big tweezer and it tri state area for a long time Anyway Steve Kane co CIO and generals portfolio manager at TC W investment management He went to University of Chicago got his MBA there Matt which means he understands the booth The booth school of vaccine I'm an equity guy Steve So I don't really I didn't pay too much attention to that business school But you're a fixed income portfolio manager What do you do here in a rising interest rate environment Well hopefully you had your duration short going back a year or so which we were fortunate to do But I would say that things are getting a little bit more interesting in the fixed income world from a value perspective And I think along the rate environment we think the front end of the curve is starting to look interesting A one 62 year that discounts 8 fed tightenings over the next 15 months or so It looks reasonable Now when you look out the curve we're not as excited 2% ten year and 30 year just beyond just not getting much term premium or really getting paid for the risk out the curve So in general what we tell investors is keep your duration Sure keep your focus on the front end of the curve So if we get 8 rate hikes or more would that surprise you then No not at all I mean the fed is I mean of course it depends on what happens with inflation and with the economy and all that But our view is inflation is going to run hot Certainly for the balance of this year and maybe well into next year given what we're seeing in the labor market and with wages certainly energy prices feeding into that as well Yes no the fed is almost regardless of what happens with Russia and Ukraine or even the stock market The fed's locked into a tightening path here Given the high level of inflation and the fact that they really need to begin to get to work to address that Steve what does history have to tell us about the ability of the fed to fight inflation I kind of feel like inflation is just because there's a bunch of ships off the port of Long Beach in the portrait clogged and there's nobody to move this stuff and there's no truckers and what can the fed really do there The fit can do nothing Lined up lined up outside of ports There's absolutely nothing they can do The fed can really just monetary policy affect financial conditions and the demand side of the economy through interest rate sensitive sectors of the economy which means they have a very blunt instrument as we all know in terms of dealing with inflation and inflation works with the lag So the sort of unfortunate thing from an inflation forecasting standpoint is even though they are going to be hiking the impact of those hikes is going to affect the economy with the lag and then inflation with even a further lag So it's not going to really have an immediate effect on the supply side of the economy at all How important is it to get the rest of the FOMC confirmed I don't think it really matters all that much I mean you have your big three in place Powell brainerd and Williams the president of the New York fed And I don't think you need a full slate of fed governors and presidents to necessarily make decisions So I think yes it would be nice but I don't think it's an effect in any way their policy making decisions Steve you know when the fed made this pivot to a more hawkish stance I think the market was talking about three rate increases Now potentially as many as 7 how do you feel about that discussion point of is the fed behind the market Are they trying to play catch up How do you think about that Yeah I think they are And I think what happened is they went with the transitory supply bottleneck view for a while and I think what changed is they began to see tightness in the labor market And unemployment at 4% and wages rising very quickly and sort of forward looking indicators like the quits rate at historical highs people leaving their jobs voluntarily All suggest that this is more than a temporary phenomenon that affected the labor market I think the fed is behind the curve In fact and because wages in the employment market do not react quickly to changes in interest rates So again it's going to be some period of time and some amount of fed tightening and slowing in the economy before you see an impact on the labor market All right Steve thanks so much for joining us to really appreciate it Always love talking to the folks at TC W get this $225 billion in fixed income assets I mean that is a meeting When you go to LA to see clients you've got to lock down that PCW meeting first and foremost capital group as well Steve Kane co CIO and generalist p.m. at TCD I wonder why all the fixed income the big fixed income shops are out on the West Coast I know It's a good point It's a smart timco you know Especially after being at the booth school of business Steve must have been pumped to go I mean he was at pimco too so he was he's a California Fixed income guy Yeah And he went to Berkeley undergrad so smart dude but when I think about Chicago business school it's still GSB to me graduate school of business But then mister booth donated a gajillion dollars so he gets to put his name on it All right right.
Bloomberg Radio New York
"steve kane" Discussed on Bloomberg Radio New York
"Bloomberg one O 6 one this inferences go Bloomberg 9 60 to the country SiriusXM channel one 19 and around the globe the Bloomberg business app and Bloomberg radio dot com This is Bloomberg markets All right coming up we're gonna talk fixed income Inflation defends stagflation we need to get to the bottom of this and we talk to the good folks at TC W Steve Kane will join us there He's a p.m. Plus Tara J Frank's gonna talk to us about the Bloomberg 2022 gender equality index will dig into that coming up in this half hour as well but first it's good for Derek And the equities are down Paul amid rising tensions with rush after Ukraine indicated several government of bank websites have been a subject of a cyberattack How big is the effect As fees down a half a percent down 20 downs down a quarter of a percent down 86 And the NASDAQ's down 8 tenths of a percent down a 108 to ten years down 8 30 seconds the yield is 1.96% West Texas intermediate crude's office earlier highs now up about 6 cents of a percent at 92 52 a barrel Comic scolds up a tenth of a percent in 1909 60 an ounce The dollar yen one 1507 The Euro dollar 1357 the British pound the dollar 35 57 Tell me when you walked into your Starbucks to get your extra vanilla no fat latte with soy Did you hear your barista singing You can't scare me I'm sticking to the union I'm sticking to the union till the day I die a Woody Guthrie song The U.S. labor board has rejected a bid by Starbucks to block the counting of unionization ballots in Arizona The decision could pave the way for an expanded labor foothold for the coffee chain depending on the outcome of those votes Who sings Woody Guthrie anymore That's a Bloomberg business flash Bloomberg markets continues now with I started to say Woody Guthrie but it's actually Paul Sweeney.