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- [00:00]
CBOE Representative
Looking for more investing options? Meet cboe, the exchange that pioneered options trading. With exclusive trading products like VIX and SPX options, CBO can help you trade in any market environment. There are risks associated with CBOE Company products. Review the disclosures and disclaimers@cboe.com USDISclaimers so
- [00:16]
IBM Representative
there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions. Resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business IBM when you're
- [00:46]
Public.com Representative
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- [01:46]
Bloomberg Audio Studios Announcer
Bloomberg Audio Studios Podcasts
- [01:49]
Tom Keene
Record Radio News Bloomberg Money. This is the Bloomberg Money Podcast. I'm Tom Keene with Scarlet Fu. Join us each week for a smart look at the forces shaping your financial life. On personal finance, on retirement and wealth management, we will explore how people are earning, investing and building wealth. We are live Fridays at noon Eastern on Bloomberg Television. Subscribe to the podcast wherever you listen and as always, on the Bloomberg Terminal and the Bloomberg Business app. Romaine Bostick with us here of course, as he gets ready to exit out June, if you will. We're almost done with the second quarter and David Gura with us as well. Getting ready of course for Bloomberg this week. And David, it's hidden now and it's not in the Zeitgeist. Yes, but I think it's an editorial in the Washington Post which is in your wheelhouse. Elizabeth Warren is upset about Social Security, but the senator from old Ohio is as well. How do you get a Republican and a Democrat on the same page on Social Security?
- [02:55]
David Gura
Been a banner week for bipartisanship until the housing bill fell apart. But we saw kind of moves in that direction that we haven't seen in a long time. But Bernie Moreno, former car salesman, now senator from Ohio, and she coming together on this proposal to eliminate the cap on payroll taxes that go toward.
- [03:09]
Tom Keene
Raise the taxes on the rich people.
- [03:10]
David Gura
Raise taxes on the rich people. This is a roiling conversation not just between those two lawmakers, but a broader group of them. So I suggest that could be raised higher. They're suggesting it could be eliminated here. But the argument that's advanced in that piece that you mentioned in the Washington Post by the editorial board is in doing this, you don't stand to cure the problem with Social Security. It's solvency long term and it could have dramatic effects on the economy going forward. It could be a real hit to gdp.
- [03:32]
Tom Keene
Jack blew with this yesterday with his expertise last week with us, with his expertise on this. The thing I would note, David, is a pregnant paragraph that says if they do this, if you get a Warren Marino bipartisan effort, the marginal tax in Ohio will be like Sweden. The marginal tax in the Commonwealth of Massachusetts will be like France.
- [03:51]
David Gura
Higher than any place in Europe, I think was the line. So Senator Warren acknowledging that, but moving forward nonetheless.
- [03:58]
Scarlet Fu
Romain, I want to turn to you with your work on the close the inflation picture for us, what it's been this week and then looking into next week with the jobs report. Higher, higher, you got to do more than tie.
- [04:10]
Romain Bostick
I mean, and we talk about the headline numbers. I know the Fed loves to strip things out, but as you know, I mean, Tom does not actually go to the grocery store. But for those of us who actually have to shop and fill our tank, we.
- [04:22]
Tom Keene
I go to the liquor store. I don't go to the exact same.
- [04:26]
David Gura
Even Christine is wandering around. I don't know.
- [04:29]
Romain Bostick
I mean, 4% on the headline PC numbers above 4% over 3% on the headline CPI number. Even the core, we're still talking elevated levels. And it gets to this idea of what's driving that. We can talk about oil and gas prices. Look, oil is down, as you were just pointing out. That's good. I'm going to fill up my tank for the first time in three months. Grocery prices are still high, but there's a lot of hidden inflation out there. One thing we talked about on the close there was a 15% jump in basically what they call computer software and accessories. But here's the problem that doesn't really get factored into cpi. It has basically a weighting of like a fraction of a fraction of a percent. So that doesn't show up. But you're going to buy a new
- [05:04]
Tom Keene
computer, aren't you on a weekly basis. This is important. I'm so intimidated remains here that we have to, as Andrew Marsh used to say we have to produce the show. Let's listen to some of the Bloomberg voices and inflation.
- [05:20]
Scarlet Fu
Right now the problem is inflation. 40% of the CPI basket is running above 3% right now. This is an American per people that is going to have to contend with ongoing inflationary pressures.
- [05:32]
Dan Skelly
Supply driven inflation which could be oil from the US Iran conflict, that's an issue. But if we can fade some of the supply driven shocks which we are seeing in terms of oil prices and where they've plummeted, we can live with that.
- [05:42]
Tom Keene
The sharpest oil supply shock in history have somewhat, has somewhat ambiguous effects. We're learning that supply disruption risk is higher than widely believed. This is probably the really last bad
- [05:51]
Romain Bostick
headline inflation report we're going to have for a while.
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Tom Keene
The economy is going to strengthen. Inflation probably is going to slow down.
- [05:57]
David Gura
We're going to see peak rates and
- [05:59]
Tom Keene
peak inflation in the second quarter of this year.
- [06:02]
Dan Skelly
Inflation is still at way too high above the top of the range.
- [06:06]
Tom Keene
Great set of voices remain. I look at this as a debate into July and it really cuts both ways. I got people looking persistent 3 percentage and Goldman Sachs Sachs this week really moving down to a potential sub 3% even towards 2%.
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Romain Bostick
And this is going to be a big debate at the next Fed meeting at the end of the month because remember we talk about sort of the outline that Kevin Wash has for where he thinks inflation is going. But don't forget you have Lisa Cook, Alberta Muslim and all those people really talking about this idea to underneath that headline number there's a feel out there that people have that does have to direct read through into the economy.
- [06:39]
Tom Keene
Did you see the CFA pass rate? I did see level one, level two. I know it was like it's coming back. I mean they got through the pandemic.
- [06:47]
Romain Bostick
They got through the pandemic, it's coming back. And you know the importance of that is coming back in terms of being able to really understand the fundamentals of our economy and our market.
- [06:56]
Tom Keene
Abby, Joseph Cohen with us. It'll be great to see as well One more LISA yeah, David, I want
- [07:01]
Scarlet Fu
to bring it back to you on the war in Iran. Oil, that vessel that was hit, how is that affecting traffic continuing to flow through the strait?
- [07:08]
David Gura
Interestingly, it is continuing to flow, but I think we all kind of took a breath when that happened. The expectation is a lot of these ship owning companies are very cautious about how they're maneuvering their ships through there. And we saw the UN Agency that oversees maritime issues indicating that, you know, this can't stand. So this is still very much a roiling issue that I think policymakers around the world are facing, companies are facing too. And yes, oil prices are down. We're waiting on gas prices to come down even more substantially. But we should point out, yes, there was that initial meeting that took place in Switzerland, but very little progress as we understand has been made since. And that's really what we're waiting for
- [07:38]
Tom Keene
is some indication this has been a successful success. I didn't know they were in speaking terms. LISA yes, it's amazing. Only when the camera this weekend. What do you got on Bloomberg this week?
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David Gura
Samantha Power, the foreign administrator of US is on a long conversation and it's almost a year since that agency was closed. So we talked about the consequences of that as she sees in the consequences of those cuts, especially as we see this Ebola outbreak really picking up steam in Africa.
- [07:59]
Tom Keene
David Gur, thank you. Romain, thank you so much for the close this evening. Coming up, without question, our conversation of the day. ANDY Joseph Cohen, formerly with Goldman Sachs with Columbia University, Europe, afraid, as Lisa mentioned, about the turmoil, the cacophony in the market. Abby Joseph Cohen, the courage to own equities. Thank you guys. I did I did not know you weren't speaking to.
- [08:34]
CBOE Representative
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- [09:05]
IBM Representative
thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slashed repetitive tasks and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off Deep in the work that moves the business. Let's create smarter business.
- [09:34]
Public.com Representative
IBM support for the show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on Public. You can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English like if the Vix hits 25, buy a put option on the S&P 500 or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk. Monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors, LLC. SEC registered advisor complete disclosures available@public.com disclosures.
- [10:48]
Tom Keene
Welcome back Bloomberg Money. Lisa Matteo in for Scarlet Food today. I'm Tom Keene. Thrilled you're with us here on Personal finance. Dance on retirement. A different twist on wealth management as well. She is simply iconic. Abby Joseph Cohen was with Goldman Sachs for years, definitive on the equity markets. A pinata for the bears. Beaten up on her constantly as the market went up and up. We'll show a great chart of that here in a moment and then wander to something more magical. Columbia Business School teaching grizzled graduate students. What did you thrill to have here? What did you say to the graduate students this week about Alan Greenspan?
- [11:26]
Abby Joseph Cohen
Well, first of all, Tom and Lisa, I'm delighted to be here with you today. There's so much to say about Alan Greenspan and so much has already been said. There were two personal episodes that I had with Alan and both of them left me smiling when I thought about it. And let me discuss the first one, which is the more recent one. Not that long ago, just a handful of years ago, Alan published a book that he had co written with Alan Woodridge from Wooldridge, rather from the Economist, about capitalism in the United States. And it was so incredibly sharp they asked me to moderate the panel and the discussion with him at that point was right on topic. And to your point, one of his concerns had to do with budget deficits and also Social Security.
- [12:23]
Tom Keene
I look at Alan Woodridge, his work with our editor in chief John Micklethwait. And it is that horse historical construct the Greenspan critics will say he got wrong. Regulation. Did you perceive that while sitting at Goldman Sachs?
- [12:36]
Abby Joseph Cohen
When I met with Alan and other members of the fomc, I did talk about the regulatory aspect. And the thing that was interesting to me is that they were well aware of some of the problems that were developing in the housing market, for example, and in the subprime credit market. And that was his biggest concern, the so called irrational exuberance speech which so many people think was about the stock market. I had met with him just a few days before. I think that speech was largely about fixed income markets. He was concerned, for example, example about the inadequate risk premia in corporate bonds. He was also concerned about the inadequate risk premia in sovereign markets outside the United States, particularly for some of the smaller, newer countries that had not yet established themselves or established their credibility.
- [13:28]
Scarlet Fu
Can you explain why Greenspan, why he's, he's his key to understanding today's Fed?
- [13:34]
Abby Joseph Cohen
Yeah, I think that he, his approach was an important one. First of all, very long dated. He wasn't terribly interested in the short term market moves either in stocks or bonds, number one. And number two, he and the team spent a great deal of time looking at economic developments, what was happening not month to month, but the underlying structure. And one of the conversations I remember most with Allen and the FOMC had to do with work that I had done in the early 1990s about the technological changes underway in the US economy, what that meant in terms of providing problems, analyzing data because we weren't collecting the data properly.
- [14:21]
Tom Keene
It's like she knows her script. It's like she was in the planning meetings for Bloomberg Money. Let me do this. I got to bring this up. Abby, is this, this is from our most famous paper on Aristotle and it's giant Peter Bernstein. It is one thing to set up a mathematical model that appears to explain everything that sounds familiar. Our lives teem with numbers, but we sometimes forget that numbers are only tools. That's where we are right now, isn't it?
- [14:47]
Abby Joseph Cohen
That's exactly where we are. And the training I received as a junior economist at the Fed helped set me up in terms of looking at things in that way. In addition, looking at the economy in the 1990s, recognizing that economic data we're not picturing and not capturing what was happening in the newer, faster growing segments of the economy. The same thing is happening right now. Very often we forget that GDP and So many of the other statistics are samples. Right. We won't know for three years, four years what the real numbers were because we're working off of samples. And if those samples are based upon the companies and industries that used to be important rather than the ones that are important or will become important, we mislead ourselves in terms of what's going on.
- [15:38]
Scarlet Fu
Would you be able to dig into some of the dilemmas that are facing the current fomc?
- [15:43]
Abby Joseph Cohen
They have many. Yes, many.
- [15:45]
Scarlet Fu
Where do I start?
- [15:46]
Abby Joseph Cohen
That's right. And.
- [15:47]
Tom Keene
And it's going to take the rest of the program.
- [15:50]
Abby Joseph Cohen
I'll try to be brief.
- [15:52]
Justine Ali
Yes.
- [15:52]
Abby Joseph Cohen
You know, we all know that's a first. Please give me another two hours. You know, Kevin Marsh has announced setting up new task forces, and one of those has to do with data analysis and data quality, and I give him a hats off on that because it's really, truly needed. There are some fabulous people at the Fed who work on data all the time. And to recognize that they need some additional assistance in terms of identifying which are the data items, statistics that are really important. And if I can point out that we've not done a good job as a nation on this, the Bureau of Labor Statistics that we rely on so much has been underfunded now, not just in this administration, but going back several years. So at a time when the economy has gotten more complicated, more tied into the global economy, we need more information, not less. We're getting less information.
- [16:55]
Tom Keene
I've got to squeeze this in here. We're going to come back with Abby Joseph Cohen. But this is definitive. It's the Ibbotson chart of Yale University. It was definitive, I'm going to say, 30, 40 years ago. Right. Roger Ibbotson. Abby Joseph Cohen. Help codify this. This is a logarithm chart. Slope matters, as my friend Brian Sullivan used to tell me. The Depression in the lower left corner, the Guadalcanal Low of 1942, and up, up in a way with the optimism of Abby Joseph Cohen. Do we still have the optimism of the Ibbotson chart?
- [17:28]
Abby Joseph Cohen
I think we're at an important point of inflection now, Tom, because you mentioned the CFA program. I'm a cfa. I was chair of the board of the CFA Institute. So I believe in digging through the numbers and digging through valuation. Right now, the valuations basically say everything's fabulous. And when things are priced to perfection, that's when investors need to be concerned and careful.
- [17:54]
Tom Keene
I mean, I look at this, Abby, and we have to be quick here. And I want to come back with you. But the fear that's out there now is an original fear. Is this time different? To borrow from Rogoff, there are always
- [18:07]
Abby Joseph Cohen
differences, but there are some things that are standard and basic, including corporate profitability, corporate balance sheets, and the underlying strength of an economy, which is measured not just in GDP and industrial production, but also job creation. And we are not creating sufficient jobs.
- [18:27]
Scarlet Fu
I actually did a story where it was about the high school students and how the rules are changing. Come the fall, they're going to be mandated to take personal finance or have some kind of exposure for it in order to graduate. Do you think this is a good thing, getting them started younger and younger into the personal finance?
- [18:44]
Abby Joseph Cohen
I think it's a fabulous idea because one thing we do know, it's not just the young people. It's also so people in middle age who don't know enough about personal finance. So the sooner the better. The other thing that's happening in the city of New York revolves around the Cornell Tech campus, which is on Roosevelt island, where there is now a program on entrepreneurship for high school students. Clearly, growth in this city and growth throughout the economy will depend upon knowledge of personal finance. Knowledge, knowledge and interest in entrepreneurship. And I think that educational institutions are getting their act together.
- [19:23]
Tom Keene
So what's so important here to Lisa's great question? I think of Rebecca Patterson providing real leadership on this to kids in education is you're getting more knowledgeable about innovation on an island of Cornell, really more knowledgeable at Columbia about personal finance, etcetera, etcetera. And yet we've got a politics in our city, including New York City, that doesn't like capitalism. I'm not sure they like innovation. What are your thoughts on the swing that we see of a large body of our public? They say capitalism has failed.
- [19:55]
Abby Joseph Cohen
I think many people are responding to the idea that there has been sluggish job growth, there has been sluggish wage growth, and people are feeling stressed. And when there is stress, be it either on the right or the left, there is a worry and a concern about what to do next. I hope that business leaders and political leaders will come together and recognize the focus has to be on growing the economy rather than just rearranging the slice of the pie. Although with regard to the slice of the pie, clearly we are seeing a very significant distortion, something very dramatic over the last 10 to 15.
- [20:36]
Tom Keene
Can I do an audible? Lisa? Of course there's a job opening. Abby, I don't know if you're aware that the New York Mets fired their manager. I can see you slotting in there with Mr. Cohen.
- [20:46]
Abby Joseph Cohen
Well, I am a Queens girl and a Mets fan. However, I am not sure that I'm the right person. I like to stick with things that I really know a lot about.
- [20:55]
Tom Keene
Well, okay, we'll try that. But we'll see if the dreaded Mets can do better. Certainly doing better than the Red Sox. Abby Joseph Cohen with us today. Thank you so much for joining us forever with Goldman Sachs and her Columbia University. Lisa.
- [21:07]
Scarlet Fu
All right, we have Dan Skelly. He's coming up with Morgan Stanley Wealth Management. He's going to be talking a lot about personal finance but also retirement. That's a big question. How should you change things up as you're looking to get to that stage? Or maybe you're near retiring stage. What should you be looking for? Dan Skelly joining us next on Bloomberg Money.
- [21:26]
Tom Keene
I look at where we are. Red Sox fired their manager. Mets fired their manager. It's a new trend that's going on.
- [21:33]
Scarlet Fu
It's a new day.
- [21:34]
Abby Joseph Cohen
The Knicks did not fire their manager.
- [21:35]
Tom Keene
The Knicks tenure. The Knicks manager has tenure, at least
- [21:40]
Abby Joseph Cohen
for the time being. Thank you both very much.
- [21:43]
Public.com Representative
Support for the show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on Public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English like if the Vix hits 25, buy a put option on the S&P 500 or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk, monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public Investing Brokered Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors, LLC. SEC registered advisor complete disclosures available@public.com disclosures
- [22:52]
Bloomberg Audio Studios Announcer
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- [24:00]
Venture Global Representative
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- [24:31]
Scarlet Fu
Tom, I want to talk about something you talk about, which is about the teens on their laptops doing the investing. Gen Z yes, they are going all in on investing, but there's a lot of things right. There's a line between investing and gambling starting to get blurred. We have social media playing this bigger role. So let's dig into it. We have Bloomberg's Justin Ali joining us. Justina, thank you for joining us. Want to start out with everything. We have prediction markets, right? We have the legality of sports trading. You have social media, right? You have, you know, Kalshee teaming up with some of these college students talking about this. Where does the downfall and Gen Z. How much involvement is this and what are the ramifications? Ramifications of it?
- [25:11]
Justine Ali
Yeah, I mean for my recent story, I spoke to some of them and a lot of them have told me that, you know, we tend to think that people just love gambling, right? But they've been kind of talking about how they feel like with the affordability crisis and generally this sense that you can't really just kind of reach the American dream these days with just, you know, one regular income. And so they kind of feel like they need to take big risks. And I think that might also be fueling a lot of the phenomenon that you just talked about, right? With like the rise of prediction markets and people trading options and people kind of betting on sports more. And it's kind of interesting. That kind of all fits into this broader socioeconomic picture that we're seeing.
- [25:52]
Scarlet Fu
And that's what I want to touch upon to this broader picture. I mean, I have a son, 24. So in this stage they're frustrated, right? They can't, some can't find a dream jobs, some are worried about AI, they're worried about if they can ever get a home. So is it more the economy than these other things we've been talking about?
- [26:09]
Justine Ali
Right, exactly. And there's this term that, you know, one podcaster coined, which is financial nihilism. And it's this idea that kind of if you feel like you can't reach your goals the regular way, you actually start kind of feeling more risk hungry because you feel like I don't have that much to lose anyway and so I might as well take these bigger risks. And that actually kind of fits into the broader literature about like kind of behavioral economics. And for instance, like one other phenomenon is that people tend to overestimate kind of like low probabilities. And we kind of see that in sports betting, for example, where a lot of people love these long shot bets or they love parlays, they love piling on bet, on bet, on bet. And you know, they don't have a very high chance of paying off. But when you look at the payoff that could be possible, that can look very attractive.
- [26:58]
Scarlet Fu
Oh, Justine, I hear about those parlays. We appreciate your time. I know, Tom, I know, I know.
- [27:04]
Tom Keene
Paul Sweeney and I, we just shake our heads ago. You got to be kidding me. There it is. It's a thing and I'm still not used to it. Thank you so much for that, Justine. Bloomberg money. And that means we need to go out and read 30 page reports boards. You can do that with Daniel Skelly and Lisa Shallot at Morgan Stanley. Skelley holds down the Ford head of equity model portfolio at work there. And It'll be a 20, 30, 40 page paper. Guess what? It's as simple as this. There's always one paragraph. The paradox of a placid market amid semi euphoria. We think next year. Oh, seven into 28. I can't believe that with a return on the big seven. Well, it could be a phenomenon with AI capital spending slows and all of a sudden free cash flow. Dan Scully joins us from Morgan Stanley. That paragraph stopped me cold. Am I supposed to buy Mag 7 this afternoon?
- [27:58]
Dan Skelly
Well, they're certainly cheaper than they were three weeks ago. And it's great to be back with you, Tom, and congratulations on the new program.
- [28:04]
Tom Keene
Thank You.
- [28:05]
Dan Skelly
So the big cloud overhanging the Mag 7 for nine months now has been excessive spending and we've seen a lot of growth, equity and capital flow into semis. They've had parabolic moves. We think today, if we were to draw historical reference, looks a lot like the first half of 1995 where semi interesting semis also came out strong out of the gate but eventually peaked, took a 50% drawdown and did nothing for a year. But chronologically we were in 96, 97 with four years left to go in the cycle. We think that's kind of what this cycle looks like.
- [28:36]
Tom Keene
The heart of this and your enthusiasm here for a redo of Mag 7 is when do you acquire new shares? It's something a phrase from John Templeton as well. Within Wealth Management, if you've got cash now, do you deploy it here? Are you waiting for a famous Lisa
- [28:52]
Dan Skelly
Charlotte signal we would be deploying today? And we think frankly a lot of folks have legacy positions in the Mag 7 which as we all know is truly just fang plus or minus three or four stocks. So these stocks have.
- [29:05]
Tom Keene
Yeah, this, this is the heart of the matter. Lisa is within Wealth Management with, you know what Dan Scully is doing. Everybody owns this stuff. Omg, a correction now, what is the major message into the second half?
- [29:18]
Scarlet Fu
Yeah, and you talk about Mag 7 so exposure. I mean, you're talking about retirees, near retirees, or should they change things up? I mean, should you move away and make it more diverse?
- [29:27]
Dan Skelly
Absolutely. And mag7 is but one part of a multipronged strategy within equities. We'd also be adding to some value ideas here that have lagged, that is financials and health care, which by the way, which should be some of the best adopters over time. We've only rewarded AI Capex so far. But what about the adopters? That's a longer term play. And then we're also advocating outside the US in terms of equity positions, but more broadly from an asset allocation standpoint. We've talked about hedging equity risk with real assets. That's been an okay play this year as well as long short hedge funds that have exploited the volatility.
- [30:02]
Scarlet Fu
I'm curious about your take on alternative assets in 401k plans.
- [30:06]
Dan Skelly
It's a very thorny issue. I think ultimately it's going to, it's going to be implemented over time once we figure out all the rules and rails. But at the moment there's I think, a growing realization that alternatives are going to help diversify a legacy 6040 playbook which with very high correlations between fixed income and equities. That may not be as relevant to me.
- [30:27]
Tom Keene
Dan, you don't know this but at Bloomberg they have the Tom Keene rude moment of the week. My rude moment of the week was a Gary Gensler, the former chairman of the sec and being a wise ass, I said to the good Gary Gensler, I said hey Gary, what about those persons bought Bitcoin at 110, 110 down to where I rely on Lisa 5958,000 as well. How do you and Morgan Stanley handle losses in retail bitcoin?
- [30:53]
Dan Skelly
Tom, I could never imagine that snarky comment from you ever. That's like a first. Kudos to my teammate Danny Galindo who's really led the research thought leadership around crypto and digital for some time. And as he's outlined on this channel before, he's outlined this four seasons of crypto crypto and we've been talking about being in a crypto winter at the moment. Eventually that will fall and we think going into next year as we get closer to the next having we'll have a better crypto take.
- [31:20]
Tom Keene
Let's go to first principles on retirement. We're living longer.
- [31:24]
Dan Skelly
Yes.
- [31:24]
Tom Keene
Does that mean I need equities longer? Is it just that simple?
- [31:28]
Dan Skelly
You need to stay in the market. Absolutely. But you also need to think about the mix of equities. You need to think about hedging some of those concentrated legacy bets. And we can do do that with.
- [31:37]
Tom Keene
How do you somebody who got lucky with Apple.
- [31:40]
Dan Skelly
There might be option strategies around that and specific tax strategies and we are definitely leading the charge on that front. But the other thing to mention as well is thinking about cash flow. Right. A lot of these folks had once upon a time relied on traditional fixed income. We think dividend growers in particular is another source of rising cash flow that makes sense for retirees.
- [32:00]
Scarlet Fu
I want to talk about the markets quickly. I'm seeing the reaction from geopolitical, you know, issues that have been, we've been faced with what does it look like going into midterm elections? How do you think things are going to be different?
- [32:10]
Dan Skelly
It's such a great question. And look over the last year the markets and the economy have looked through policy shocks, be it domestic in nature, whether it was Liberation Day or whether it was Iran and the Middle East. Most recently we've been saying the market's been treating policy shocks as pop up ads. And it's been along the way of this longer Winding main story around AI and a resilience, resilient consumer. Let's be intellectually honest. We do think the next pop up ad is the midterms. And so we think it probably does cap some of the upside that we've benefited from with this 20% move off the March 30 low. And you know, look at the end of the day, as we always do amid these political cycles, we'll get through it and we'll start thinking about opportunities in 27.
- [32:50]
Scarlet Fu
I love the pop up ad reference. I want to quickly mention the Fed with Kevin Warshire. You excited about? What are you concerned about?
- [32:58]
Dan Skelly
Another excellent question. And look when you talk to Alan
- [33:01]
Tom Keene
Zentner and so she said two excellent questions. I've had none. It's to zero. Continue, Mr. Scaly.
- [33:10]
Dan Skelly
You're still on our list. You're still on our radar. So when you talk to Alan Zanner and some of our friends in institutional research, Matt Hornbach and others friends of the show, look, we had all like the street been expecting cuts this year. We've been priced out of that. I think what we're most excited about is in terms of the task forces, how does he really restructure the nature of the Fed and the communications longer term? And secondly, he did obviously advocate for a bit more hawkish front on short rates and getting back to 2% but we all know he also wants to reduce the size of the balance sheet. So ultimately we actually interpret that as somewhat of a wash in terms of a little bit more dovish ness on one end and a little bit more hawkish on the other end.
- [33:49]
Tom Keene
Scaly on rebalancing, what's the formula for rebalancing at Morgan Stanley?
- [33:54]
Dan Skelly
So it's so it's an excellent point to be fair and I would say it's 1, 2, 1 people don't think about enough because at the end of the day a lot of these positions in a concentrated manner have drifted. And so look what we advocate, Tom, is to be in touch with your adviser on a quarterly, yearly, whatever works basis and think about your original plan vis a vis the effective weightings. And today, like I said, I think in particular whether It Be Financials, Mag7, some of the international themes, Japan that we like, these are things that have drifted lower in recent months and we would be rebalancing higher into.
- [34:30]
Tom Keene
I mean this is really cool folks, what you just heard. There's gospel for me that you don't have a rigid formula and rebalancing. I think that I'm not going to mince words. I think that's a death here. So without original formula right now, somebody saying I was rocking it on Mag 7 and now I can't retire next quarter, next month, next year. It's about patience, isn't it? I mean you're rocking it and things are great and then all of a sudden you get a June or a May here and then you got to have the courage to stay with it. That's where we are right now.
- [35:01]
Dan Skelly
Absolutely. And memory prices are through the roof as we all know. And when you have major commercial companies who have the utmost negotiating leverage like an Apple, talking about no longer being able to hold the line on pricing, everything works until it doesn't. And so our point is not only does the MAG7 look attractive as this spending and capex cycle ultimately plateaus, as they all do in Internet, in shale etc. It's not a negative signal overall. Ironically, it's the most positive signal for the rest of the market because the market, 80% percent of the S and P attribution this year is in semi's IT hardware and power. It hasn't even looked at the adoption wave of AI. And that's what we're really positive on on the coming years.
- [35:40]
Scarlet Fu
And you mentioned the market. So one of the things in your notes you pointed out is you called it the economy amid a remarkable stock market backdrop, but you called it an unremarkable economy. So what do you mean by that?
- [35:51]
Dan Skelly
So this is one of our nuances in our, in our framing and you know, look what we would say and Tom will maybe get a kick out of this but drawing on some of our essay favorite SAT words, this is a classic juxtaposition between a unremarkable economic environment amid a remarkable rally in a capex winners. Why is it an unremarkable economy? Two reasons. One is, as I just mentioned, we would, I think intuitively perceive policy shocks to have more lasting effect. They're not number one. And number two, going back on a comment I made three years ago coming out of the that 22 hiking cycle, I think the consensus is realizing more and more that this economy has shifted, paradigm shifted away from more inflation and rate sensitive vectors towards more inelastic type economy goods to services, high income people spending on those services and spending. All three of those dynamics are seemingly going on in perpetuity despite month to month fluctuations in Fed expectations or oil prices. And that's unremarkable in the sense that it's no longer out of consensus. The consensus has come to agree or understand something we were talking about three years ago.
- [36:59]
Tom Keene
You got to come back. We got another half hour here at least. Dan Scully, thank you so much.
- [37:02]
Dan Skelly
Thank you.
- [37:03]
Tom Keene
With Morgan Stanley here and I just can't say enough about that paragraph. Looking at 18 months on Mag 7 now.
- [37:10]
Jonathan Levin
You got it.
- [37:10]
Scarlet Fu
Bloomberg Money is your new destination for personal finance cross platform effort that extends beyond your television including our new Digital Hub at bloomberg.com/money. Got to check it out.
- [37:21]
Tom Keene
Tom, books on Alan Greenspan. How about a nasty little thin book from the gentleman of Washington University of St. Lawrence Governor Lawrence Meyer wrote a very terse book on Alan Greenspan a term at the Fed. It's a must read for anybody with an interest in American economics. Short, terse, tight. I love that that book about the machinery of the Greenspan Fed. Everyone knows Sebastian Melby's excellence doing so many good things right now. Particularly at the Council on Foreign Relations. The man who knew well just simply it is the definitive book on the chairman and then 13 bankers. This is a sleeper. This is an important book by the laureate Simon Johnson and James Clark. 13 Bankers is on the crisis and and near the back of the book Alan Greenspan shows up to consider regulation gone wrong. Those are three different books I think
- [38:17]
Scarlet Fu
so they each relate differently to different
- [38:18]
Tom Keene
each of his life, different times in their life and different parts of the Greenspan legacy. It's not just here's a big thick book to read. Although the Bellamy book is just allegiant. It's the one everyone says that's the one to read.
- [38:31]
Scarlet Fu
Now I don't want to put you on the spot but I'm going to Greenspan played a big role in your life. Big influence. Huge influence. We have a picture here of you with Greenspan. There we go. How much of it? You're looking good Tom Keene. But talk about that, the impact that he did have on your life.
- [38:49]
Tom Keene
He was great. I don't want to get into it too far but it was really quite a personal relationship. He single handedly changed my life. There's no other way to put that. But he was great and I think what we really hit it off was he was a legit clarinet. Clarinet player. He was not like pretend, like weekend warrior. He was the real deal before he discovered economics as well.
- [39:14]
Scarlet Fu
I love it. Let's turn to someone who can talk more about this. We want to bring in Bloomberg columnist Jonathan Levin. He has a great article out now. Jonathan, I want to ask you about Alan Greenspan. He was known for kind of fine tuning the economy during the tech changes. So when we look at Kevin Warsh, can he go about those shame, can he follow the same playbook?
- [39:34]
Dan Skelly
Yeah.
- [39:35]
Jonathan Levin
The point of my column on Greenspan is, is like, look, it's obviously very tempting to draw parallels between AI and the Internet era. And of course, Greenspan's famous call in the late 90s was letting the economy sort of, sort of run because he thought, you know, incipient productivity was so strong, you know, we didn't have to worry too much about inflation. My argument is, is that beyond those ostensible similarities, there are a lot of differences. So, you know, take for instance the fact that, you know, Greenspan had demographics on his side, the great moderation. He, you know, enjoyed a long period of relatively low and stable energy prices. Obviously that's not at all similar to the world we're living in today. And you know, he was, he was also following in the footsteps of the goat he comes after, after Paul Volcker. And the trajectory for inflation expectations is improving big time when he gets in there.
- [40:39]
Tom Keene
So Jonathan, thank you so much for mentioning that. The idea of Volk Volcker to Greenspan is underplayed to me, Jonathan, in your wonderful column. The distinction here is Greenspan gets a victory lap on his productivity. All done in hindsight is Chairman Warsh. Is he going to get a victory lap on productivity?
- [41:00]
Jonathan Levin
I mean, I think the risk here is, is that, you know, it's, it's too much of a gamble. It's too much of a gambler, Tom. And the, you know, the reason being is that we have a lot of signs, as I was saying, that, you know, like the other factors are not particularly benign here. The energy market does not seem to be behaving itself. It's behaving itself this week. But who knows what the rest of Warsh's tenure is going to bring. And meanwhile, again, the trajectory is not good. This is not a world in which Paul Volcker has just crushed inflation and we feel like we've finally gotten inflation expectations under control. On the contrary, this is a world in which we thought we had inflation expectations under control and we are just now coming off of five, five years in which I don't think we've lost the anchor, but it seems like we're moving in the wrong direction.
- [41:58]
Tom Keene
Jonathan Levin, thank you so much. We Bloomberg Opinion, Bloomberg Money on a Friday before we dash into, well, sort of a kind of like week and then the 4th of July week, it's like a two day workweek which is normally what Lisa Matteo works. Let's do a look ahead.
- [42:17]
Scarlet Fu
Let's do it. So, yes, so next Friday, of course, the bond market is closed. The stock market is closed. The bond market actually closes Thursday at 2pm the jobs report is Thursday.
- [42:27]
Tom Keene
I just learned that.
- [42:28]
Scarlet Fu
Yes, because we're close Friday. I'm learning there. So it's Thursday. So the change in nonfarm payrolls for June, want to hit a few numbers, 115,000. The prior was 172,000. The change in private payrolls, 125,000. The prior 120,000. But the employment rate for June, 4.3%, same as the prior. And we get to average hourly earnings month over month, 0.3% same as the prior year over year, three and a half percent. The prior was taken in the look
- [42:56]
Tom Keene
ahead here, looking into 2028 is as we were earlier in the show, is the job economy hasn't cracked yet. Everybody's been waiting for it to fall apart.
- [43:06]
Scarlet Fu
They have. And we'll see what happens next week. And so keep in mind, right in your calendar for Thursday.
- [43:10]
Tom Keene
So what is Bloomberg this weekend doing on a Fourth of July extravaganza?
- [43:14]
Scarlet Fu
We are going to the Intrepid. That's what we're doing. No, it's and it's a great because you have the parade of ships coming down.
- [43:20]
Abby Joseph Cohen
Right.
- [43:20]
Scarlet Fu
So you have that. So we'll be talking about that and have a lot of people come to the Intrepid to talk to us about it. But just in D.C. itself, there's so much going on. Tom, you have the 250th birthday. So that's why you have the National Independence Day parade. You have on Constitution Avenue. There's a lot more. There's a concert on the West Lawn of the US Capitol, massive fireworks display like we will also have here in New York. But we're excited to be out there on the Intrepid.
- [43:45]
Tom Keene
We'll have to see it. Bloomberg. And this weekend you've got the important interview, David Gura with the aid on aid aid and the collapse of that program. What else are you looking at this week?
- [43:56]
Scarlet Fu
I actually did an interesting study. There's I went to Brooklyn Preparatory High School and I spoke with students there because come next year, they have different changes. It is mandated that they take or have some kind of.
- [44:08]
Tom Keene
You mentioned this with Abby Joseph.
- [44:10]
Scarlet Fu
Yes, yes. So it's an interesting perspective to see them. And they just had their last day of school today. So we'll see how it goes into the fall.
- [44:17]
Tom Keene
This is the Bloomberg Money Podcast bringing you a smart look 32 this is the Bloomberg Money Podcast, bringing you a smart look at the forces shaping your financial life. I'm Tom Keene with Scarlet Fu. You can watch the show live on Bloomberg Channel every Friday at noon Wall street time. Subscribe to the podcast on Apple, Spotify or wherever you listen. And as always, on the Bloomberg Terminal and the Bloomberg Business App.
- [44:50]
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