Transcripts For BLOOMBERG Bloomberg Markets Americas 2024071

In the wake of several Mass Shootings, he says the senate will look at expanded the ground checks. Red on the table, socalled flag loss to keep guns away from dangerous people. Mcconnell has a post most gun laws in the past. A Political Drama is playing out in italy. His deputy is trying to bring down the countries populist coalition and force snap elections. Salvini wants lawmakers to vote out the government as soon as next week. He says he and his party are tired of infighting with their coalition allies. Global news 24 hours a day, onair, and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. Im Mark Crumpton. This is bloomberg. Live from bloomberg World Headquarters in new york, im vonnie quinn. Amanda im amanda lang in toronto. Welcome to Bloomberg Markets. Our bloombergby and Bnn Bloomberg audiences. What a week it has been for global markets. We will wrap up the week, and escalate in trade war with the u. S. And china sign currencies, bonds, stocks. One stock caught in the volatility is zillow. The company is blaming the slide on an underestimation of the time it will take to close home purchases. Pressure but the fate of the Worlds Largest Exchange Traded fund rests on the help of a group of twentysomethings. We will dive into that story coming up. First a quick check on the markets. Definitely seeing across the board reaction to those trade talks, including President Trump suggesting no big deal if talks to not resume with china. The broader s p 500 has all groups declining. But industrials are right behind. Energy moving higher today. Take a look at the u. S. Dollar. The dollar has shown strength recently, is expected to do so as yields around the world fall. Speaking of yields, mark mentioned the political turmoil in italy. Interesting to see the reaction in the italian sovereigns. That is the relationship between the yields in italy and the bund. Back at levels we have not seen in some time. Based on the risk quality, it is a tight yield. Something simple but pretty illustrative. Spread, backsury down to 9. 5 basis points. That is from last week. Last week we were above 20 basis points. It has been pretty muted all year but we are far away from the elevated levels of 2016, 17. 2022year but we are far away frm the elevated is a pretty narrowd already. 9. 5, you can see why some people are saying this could be a recession indicator. Amanda we are also watching the stockpile of negative yielding bonds hitting fresh records. The market value of the negative yielding index hitting 56 trillion, and it is melting at a pretty steep pace. Brian, i have read a lot of what you have written over the month with great interest. I am trying to figure out what is going on. I want to start with this. That is being advanced, find out if you make if you think it makes any sense. Because of the way we think about savings, negative yielding instruments of various kinds make sense. Can we buy that argument, or is this just another kind of argument . Over the past few weeks, as this pile has grown, you have seen these arguments come out, that maybe this is something we will have to live with for the foreseeable future. For so long, people would say this cannot last, this is a shoot huge bubble, german bunds, and they have been burned. If you want goes, to have a risk free savings account, you may have to pay a little bit for that, because there is so much saving. People value their Retirement Funds now in a different way because you have People Living longer and spending two decades in retirement. Vonnie even with quarterly refunding going up and more supply, we are not seeing any auctions, reduced demand for these securities. What is to stop at 15 trillion, why can we go much further . That is a good point. Yesterday you saw potentially rumors that germany would start issuing more debt to Fund Climate Change related projects. Set off on that because people are waiting for that, more supply to offset this relentless demand at any price. We still have not seen it. The set off on that because people are waiting for that, more u. S. , at least as ama goes, there is no sense that there will be any decline in this amount of deficit going forward. Amanda just to stick with his argument, if we are changing the way we are thinking about the return we need, when does that factor into riskier assets like stocks . You are sort of seeing it. No matter what happens, every time there is a pullback in the stock market, eventually buyers are merge and buy that did. That is kind of a risky thing to be counting on going forward, but at the same time, it is the only game in town. If you lose all yield on the bond market, you have no choice but to pile into the stock market man hope for the best, hope for a price appreciation. You have this forever rally in risk assets that is kind of risky, but when the bond deal not think what else are you supposed do . Vonnie thank you for that. For more on negative yields, stocks are reacting, and all the volatility we have seen in the markets, we turn to the anna han of wells fargo. When you see the 2 10 spread going from above 200 basis points to below 10, you have to ask, did recession is really changed that much in a week . Anna the yield curve flattening is on the forefront of peoples minds because it is often tied to recession. Putting this in context, you still have from economic indicators, and not just from this quarters earnings season, but previous quarters, that the fundamentals are there. Growth is slowing but we dont think we are seeing recession in the next six months. About thiseresting yield curve is how it weighs on Investor Sentiment. Amanda Investor Sentiment and business sentiment. We are starting to see some concerns about the investment levels at a time when we want to see them. Confidence may be the issue. Issues, what trade these inversions tell people what is happening. If we say recession and off, couldnt become self fulfilling . Anna that is the danger with sentiment. It can have a negative feedback loop. We have had a lot of negative news concentrated in the last week, and that can shift investors focus from the big picture to what just happened. When you shake that sentiment, that can be a blow to consumer spending. That could accelerate the growth slowed and we have seen. Vonnie what our clients asking you this week . It seems like more action has gone on in bonds. We retracted the losses that we had earlier, and that we are back to pretty much flat. We have already rebounded, already hitting again the 50 day. Investors are asking, if i want to be defensive, where should i be . You have traditional situations and utilities, but we are pointing investors investors for the food, beverage, and tobacco space. You have better valuations there, better upside opportunity. Big picture, our stance is mixing two styles. A high quality stance but also with value. We term it quality with the right price. Amanda would you say were at a time when come to securities election, you may want to think about companies that are very exposed to the u. S. Market and not parts of age or asia that are engaging in more protectionist behaviors . Anna it depends on the investor that is asking. If you are confident finding value in the european and asian markets, that could be an opportunity. Our focus is really in the u. S. Where we are looking besides food, beverage, tobacco, we also like semiconductors. Capital goods space, diversified financials. Vonnie do you like semis as a group or do you have to look under the hood and pick . Anna we look at it as a group. The fundamental seem to be sound. You have a lowering in earnings expectations but the fundamentals are there. Values multiple wisely good compared to the markets. If you look at it in the larger picture, it is the macro overhang that is weighing the sector down. We are still in the camp that rather than uncertainty in the china trade situation, you have decreased uncertainty. As that passes, that will be a relief or the group. We do have some the contagion when you look at japan, korea, also getting into trade spats. Is that a concern, that we see the contagion spreading into the region . Anna yes, and we are keeping a close eye on that. So far it has not changed our stance, but something to keep in the back of your mind. Also with sentiment and credit. How do you measure the marginal impact of the president talking about the u. S. Dollar, does it change your thoughts on where the dollar is headed . Anna do you measure the marginal impact of the president talking about the u. S. Dollar, it has certainly been interesting with trump and his tweets. With his stance, it is difficult to put a finger on it and quantify. The best we can do is see the reaction in equity markets. We have seen in the past President Trump has a negotiating tactic. We have tried to figure out that pattern and become more used to it. In equityee shocks market, you know this is unexpected. But any unexpected news always takes time to digest. We like to look longer term. When we think longerterm, we still see upside for equities. Amanda we will leave it there, han. You, anna we mentioned there is a power outage has been a power outage in london, parts of the southeast u. K. Han. Wethey are now saying the power issue has been resolved. They areo information, not releasing information about what caused it, but it has been resolved at this time. Coming up, the end to a rough week for zillow. Shares down 14 as it reported earnings. The company is learning that selling homes is actually tough business. This is bloomberg. Amanda this is Bloomberg Markets. Im amanda lang in toronto. Vonnie im vonnie quinn in new york. Zero voters having a rough week, the worst since november, the stock is down 5 today but it was already battered after reporting its earnings. Homeforecast in their new flipping business would lose 80 million in the first quarter. Patrick clark is here with the story. This is a business that it got into that kind of upset its key clients, that had got itself into the home buying and selling business. When we look at the numbers, will they stay with it . They are now selling homes at a pace of about a billion dollars a year, and that is only meant to expand. They have said in three to five years, they want to sell upwards of 5000 homes a month. They still have a long way to go to get there and i think they have every intention of doing it. While they are building it out to that degree, i think people are starting to realize there will be a lot of choppiness along the way. Did the results have more to do with the Housing Market or Advertising Market . Patrick both, and they are connected. A couple wrinkles in this business of buying and selling homes, had to disclose the number of homes that are taking longer to sell than expected. 4 of their inventory has been sitting 60 days or more beyond what the target date was for selling it. That is inventory sitting on our balance sheet. That doesnt look great. The Mortgage Business they are trying to get into the home flipping business is taking longer to scale than expect it. At the same time, they are also trying to change the way they sell ads to Real Estate Agents. They want to charge Real Estate Agents for leads when home sales close and take a bigger cut. The way they do it now, they sell you a ball budget of leads, do your best to sell the homes. So they are getting closer to the transaction. It does expose them to more volatility in the Housing Market because now they are on the getting paid when homes actually sold so thats interesting. For investors shortterm, it them longerl take for them to recognize revenue advertising is this. Amanda do we feel as if investors will be patient and wait to see . In terms of growth sales, there is some real bulk here. Is their willingness to wait for the profit to follow . Patrick hard to say. Every time this Company Reports earnings, the shares spike in one direction or the other. Advertising is this. Amanda there is certainly some investors who believe in this, who see the longterm potential, think it gives zillow an opportunity to become a much bigger ebony than it already is. You also have a fair amount of skeptics. Noise, whenrt of the difficulty of building out this ambitious new operation leads to a stumble here and there, there is a lot of downward pressure on the stock, as we have seen this week, shares declined by 20 or so. It is not the first time this has happened. They have also headquarters where they have released some good news, and shares have gone the other way. That they havey proven the business yet, it is just that they have shown enough to get Investor Sentiment on their side. Vonnie when you look at the bloomberg, you find competitors, but there are no close competitors. Patrick they are in a unique corner of the real estate industry, they are the ubiquitous place where people start looking for homes in the United States. Now increasingly in canada as well. There is not a headtohead player. Zillow offers, the home flipping business. There is a start up called opendoor back by softbank who is much bigger in this business. Redfin is a brokerage, a tech forward brokerage. Others have tried the same thing. In terms of being the starting place for people to start their home search, having this advertising business to Real Estate Agents, zillow is pretty unique. Amanda we have to leave it there, patrick clark, great to have your thoughts. Spys future. The fate of the Worlds Largest etf pack to the fate of 11 million millennials. This is bloomberg. Vonnie this is Bloomberg Markets. Im vonnie quinn in new york. Amanda im amanda lang in toronto. The fate of the Worlds Largest Exchange Traded funds rests on the health of a group of twentysomethings. Thanks to a quirk in a legal structure used to set up the spy , more than 250 billion rests on the longevity of 11 million ordinary kids born between 1990 and 1993. Lets go to rachel evans who covers our etf coverage. This sounds random. Not a bloomberg story. If it was not a bloomberg story, i might not believe it. This all harkens back to the early 1990s when we didnt have anything called an extreme traded fund. We had a bunch of executives at the American Stock Exchange trying to work out how they can create an Investment Vehicle that could list on the Stock Exchange. In doing this, they explored a number of different structures. The one they settled on was Unit Investment trust. The thing about the Unit Investment trust, theoretically, it only last for 25 years. Normally has a set termination date. However, as spies started to gain traction and interest, they realized what yvonne years would not be enough, and that is where the names came in, allowing the fund to extend beyond the lifetime of those individuals. 2118 isey are very old, one they would next expire. Amanda what made the story fascinating, all of those kids had no idea that they were the beneficiaries of this trust, if you will. They dont get anything out of it, they were just related to people at the American Stock Exchange. They are still relatively young, that is the good news. That whengal fact they die, what happens to the spider . Does it have to be wound up like another trust is wound up . That is an interesting question. We reached out to the Stock Exchange to see what the plans were for when we do get to the point after these 11 deaths. At the moment, they declined to comment. Im not sure if they have a plan behind the scenes. It does leave one speculating about how this might work. There was an interesting column this afternoon looking at the ways that spy might become spy version two in the final scenario. The situation is relatively straightforward in the sense that you have 20 years after the death of these individuals, so there is a long lead time to make things right for investors. You can set up a new fund and encourage assets to gradually move over as people redeem their money. Then new investors would be put into this new trust. It is potentially a straightforward solution to this, when we get to that point. Vonnie you track down these 11. You spoke to them and some of them did not know each other. We spoke to eight out of the 11 people within the spy documentation. A few of them are related to one another. Brother or sisters, or their cousin. But they were not really aware of their involvement in this documentation. One person understandably asked them, tryingishing to steal their identity. Some interesting conversation being had, explaining what an etf was, how they were involved. Tot of the month we spoke were connected through having a relation that worked at the American Stock Exchange at the time. Out, theth pointing internet did not really exist in the 1990s when this was happening. Thinking, was in that irresponsible for their parents to put forward their names . These were arcane documents that were buried away. To reiterate, they get no financial good out of this whatsoever. Our thanks to rachel evans. Fascinating story. For me and amanda, thank you for tuning in. Dont forget to go to gtb for those charts. 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