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tv   Bloomberg Markets Americas  Bloomberg  October 7, 2021 10:00am-11:00am EDT

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guy: thursday the seventh. it is 30 minutes into the trading day. i'm guy johnson in london. alix steel is over in new york. this is "bloomberg markets." maybe i am just shocked by the fact that, unsurprisingly, we punted the debt ceiling football. energy prices are coming down. vladimir putin can maybe take credit for that. equity markets feeling a little bit calmer. alix: it feels like putin and mcconnell calmed all the markets. is it an intermission, though? because none of the problems are actually being solved. the s&p managed to get up by 1.3%. all of the cyclical sectors are leading the way higher. energy the underperformer,
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although still green in the space as oil takes a bit of a break. the nasdaq up by 1.4%, so that is moving higher. you've got tech encyclicals all moving up. at the same time, yields moving higher in the u.s., up two basis points on the 10 year. this is the highest level we have seen since june 2021. the fix below 20, but what is going to happen in eight weeks? what is going to be different? i wonder if the same conversation is going to take place in a few more weeks. guy: we punted the football down the field, but have we ultimately solved the problem? let's figure out the answers to these questions. we are going to take you to the centers of action, basically. these are the main stories we are following. emily wilkins of bloomberg government has the latest on the debt ceiling showdown. we are going to talk to ira jersey of bloomberg intelligence about exactly how markets are pricing the risk, even though a default has been averted for
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now. are we going to get a ratings downgrade? mike mckee is here to break down the latest numbers and look forward to the payroll number tomorrow. we've got a live shot of the senate floor. we need to talk about what is happening there. we are nearing a deal on that short-term increase in the debt ceiling that will effectively pull the u.s. back from the brink of that payment default, but have we actually avoided that? emily wilkins joining us to discuss that subject. is that the case? we kicked it down the road. i don't know the details of the short-term solution. can you tell me what is going on? emily: we don't know what the details look like either. late last night, senator chuck schumer came to the floor and said they were still working out the details of what this deal is going to be. we are expecting more on that this morning. the senate has just formerly
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started their session for the day. lawmakers are hoping there can be a vote today. senators are supposed to head back home to their districts and be there for the next week. lots of questions about what this is going to look like, but you guys are absolutely right to point out the fact that this doesn't really resolve anything. republicans say that they will not be voting for a long-term increase of the debt limit. democrats are continuing to say they do not want to use that reconciliation process, which would require them to name how much further they want to push the debt limit up. both of them are worried about potential electoral consequences in next year's midterms. at this point, it is not really clear how this gets resolved. it is just a question of how much time do we have to potentially come to an agreement. alix: uncertainty still there. thanks a lot, emily wilkins of bloomberg government. ceos including jp morgan ceo jamie dimon sounding the alarm on a potential catastrophe in case a deal to raise the debt ceiling isn't increased.
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he met with resident biden and treasury secretary janet yellen. >> number one is really a morality point. we all teach our children they are supposed to meet our obligations. i don't think the nation should be any different. there are huge economic costs already being borne by companies and lawyers trying to figure out what this means if this happens. it is already affecting the stock market. number three, we should get rid of the debt ceiling. we don't need to have this kind of brinkmanship every couple of years. alix: even if the u.s. avoids default, what kind of reputational damage has been done? joining us for a market take his ira jersey, rates strategist for bloomberg intelligence. what we learned, the debt ceiling does matter. you need to price it in in some way. how do you do that when there is no drop dead date? ira: there's a couple of different ways, and you are seeing it in the market. if you look at short-term credit default swaps on the u.s., those have spiked significantly over
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the last couple of weeks. if you look at a six or one-year cds, those have really inverted significantly because there are people worried that there might be a technical default at some point in the near future. this just kicks the can down the road, so one of the reactions we are seeing now is the t-bills in that late october time to poke, they are starting to rally a little bit. they were lower -- they will lower yields for those bills. but those september bills have started to widen out. not a lot yet, but it will be coming. i think if we do get another standoff, you will have more market angst. you are likely to has significant volatility in equity markets and the like. i don't think this leads to a downgrade because ultimately, this is about the fifth time we have done this over the last decade, and every time congress does raise the debt ceiling. i am not always in jamie dimon's camp. this time i am. i am tired of the debt ceiling. it is not something we should
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talk about. permanently suspending it would be something markets would like. it would give a lot of certainty to make sure that we don't have these kind of fights every couple of years, especially since this isn't a budget fight. this is just whether or not we are going to pay our bills. have the budget fight separate from this. guy: it will be interesting to see whether the rating agencies have already seen enough. maybe they change their view of the united states as well. we have seen that in the past. thank, indeed -- thank, indeed, -- thank you very much, indeed, ira jersey of bloomberg intelligence. this morning we get more positive data out of the united states focused on the labor market. u.s. weaker jobless claims -- u.s. weekly jobless claims were treating -- claims retreating in a broad-based decline. the big number we are going to be focusing on, bloomberg's mike mckee. michael: these numbers aren't going to change anybody's mind about tomorrow because they come
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after the survey period, but they are reassuring in this way. we saw jobless claims for the last month including during the survey week rising, and that wasn't what people expected to happen. now they have gone back down again, so that is reassuring that the labor market continues to heal. this is the total number of people who have been getting benefits. that is the cliff they had with the extended federal benefits went away, so all of these people not getting benefits anymore, there's a feeling that they will end up in the labor market, and we may see relatively strong job gains. here's what we are expecting for tomorrow. there has been a change in the troubled -- in the total number. we are at 500,000 now. it was 488,000 yesterday. that would be roughly double the august number, and that should be good enough to keep the fed on track for tightening. unemployment expected to fall a tick as the participation rate goes up by a tick. if the
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participation rate goes up, it makes it harder for the un-limit rate to come down forget there are a lot of job openings in the economy, so at this point it looks like we are set up for a decent payroll report, and that is what jay powell and the fed are looking for. alix: let's get to some breaking news. while brainard is commenting in a speech about the impact of climate -- lael brainard is commenting in a speech about the impact of climate change. she says climate disclosures should ultimately be mandatory, and that supervisory climate guidance for large banks may help, and that new climate disclosures will be needed. quick question, what do you make of that? michael: there's a couple of interesting points here. this was an unscheduled speech. there has been a lot of talk about who is going to get what job at the fed. in this speech, she makes the point that climate change could have important economic effects. this could be a long-term impact
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on the economy and could really affect financial institutions, not just banks, but insurers, so the fed has a role in doing this. it also comes up at a time when randal quarles, the fed vice-chairman for supervision, is about to leave. next wednesday is his last day as the vice chairman for supervision. does this mean she is angling for the job? she's making the point we should have these as part of the stress tests. jay powell has said they should not be part of the stress tests. we should monitor them, but don't make them a requirement in terms of whether you can distribute capital or not. an interesting dynamic, an interesting sort of split on the fed here. guy: elizabeth warren really has set the cat amongst the pigeons in all of this, hasn't she? some interesting decisions to be made over the next few weeks. mike mckee, thanks very much, indeed. we are going to carry on a
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little bit with that environmental theme, that climate concern theme. aniket shah, jeffries global head of esg, is going to be joining us later on. coming up, we are going to talk more about these markets. jonathan golub, credit squeeze u.s. equity -- credit suisse u.s. equity strategist, joining us next. this is bloomberg. ♪
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>> we are starting to experience elevated volatility in the markets which which can be attributed to the uncertainty that has been introduced by a
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delay in the debt limit. we would expect a continued delay would further destabilize the markets. guy: adena friedman of the nasdaq talking at that summit yesterday to talk about a way forward. the s&p hitting the highest level in nearly two weeks. abigail doolittle looking at the lift and why we are seeing it. abigail: today's volatility is to the upside, and that is an important point. there can be big moves to the upside, and the s&p 500 heading to its best day since july 20. the russell 2000 getting a solid bid. the index that underperformed yesterday up three days in around. the russell 2000 down yesterday, up 1.6%, its best day in almost a week. as for the volatility, it has been up, down, although the s&p 500 heading to a third update.
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here's a ten-day chart of the s&p 500 futures. here's the decline that led to this feeling of volatility to the downside, but lots of chopped, and now the s&p 500 trying to go round trip, essentially erasing that loss, now down just 0.5%. if we take a broader, this time period, it is starting to look a little bit similar to 2011 relative to the charts. we have this beautiful uptrend. 2011 was the rally of qe@, but this choppy -- of qe2, but this choppy time period as traders were trying to figure out what was happening around the debt ceiling limit. it did lead to a correction. we don't know that that is the case, but this action here between the 100 day and 50 day moving average looks uncertain, tentative at best. it will be very interesting to see what it does lead to. but today we have solid gains for the major averages. alix: it was a fascinating 72
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hours. jonathan golub, credit suisse u.s. equity strategist, has a $4600 price target on the s&p and 5000 for 22 anyone -- for 2021. jonathan: 4600 this year and 5000 for next. alix: got it. that was me not reading proctor. i've got to get -- reading prompter. i've got to get my eyes checked. talk to me about the volatility we have seen. you've got the morgan stanleys of the world that are like, we are in this correctional phase here. then you have the jp morgan guys that want to buy the dip. where do you sit? jonathan: somewhere in the middle. let's look at what actually set this thing off or get the market volatility really started on september 22 when jay powell signaled that they were likely to taper starting in november.
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you've got a 20 basis point rise in interest rates, and then you started to get chopped up in this market, up and down. if you look at the last time we had a large rate increase, last november, but that was a very different set up. we had the vaccine announcement, and we were passing additional stimulus measures, and interest rates were going up because the market was seeing at her economics. -- seeing better economics. now we are starting to see weaker economics, but on a weaker backdrop, you now have the fed saying we are going to taper, and that is what is pushing up interest rates. so the cause of the rate rise is the big difference between now and a year ago. guy: ok, so let's say we see rates continue to go higher from here, that would get a decent number tomorrow, the taper is on track. we see this inflationary story persisting.
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the bank of england's new chief economist talking about it lasting longer, and rates continue to climb. but this is cost push inflation that is effectively moving this. where do i want to be in that scenario? jonathan: if you assume the interest rates are going up because you have a healthy economy and not because the fed is acting in a more hawkish way, first of all, you want to belong stocks because -- you want to be long stocks, and you want to be in cyclical companies that are more economically exposed. right now they are trading at a huge discount to technology, and they are delivering better growth. the value benchmark is expected to deliver faster eps growth and the growth benchmark each of the next four quarters, so good economic pushes that value trade hard. guy: hold your thoughts. i want to take everybody over to the senate right now. chuck schumer is speaking. i want to dig a listen to what he has to say -- to take a listen to what he has to say.
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alix: it looks like we just missed it, guy. but schumer did say a deal has been reached for a short-term debt deal. that is the headline that we have. we will have to see what the timelines are, and any other questions that we have. in particular, what happens now? what kind of leeway does this actually give them? can they replenish the funds that they used to get us to this point, to october 18? jonathan golub of credit suisse is still with us. even if you think the debt ceiling is a nonstarter for you as an equity strategist, it does bring up the question of where do you hide. where do you get a little safety if you need it? jonathan: if you think things are really going to go wrong, the strange thing is you have no choice but to go into u.s. treasuries because for all of this hoopla about us potentially
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defaulting, which we are not going to do, the treasury is still the safest place on earth. but with an equity markets, you would buy consumer staples and health care. like you said, we have been looking at this for the last decade, where every couple of years, there is this debate, and everybody predicts the end of the world, and at the end of the day, folks in congress basically make this go away. that is what equity investors are seeing. on investors are much closer to this and watching every move. equity folks roll their eyes and say we all know this is not going to happen, and let's just get back to things. i think the fed tapering is a market risk, and i think the jobs report tomorrow is a market risk. earnings season is a market risk. but the debt ceiling probably less so. guy: let's talk about what is going to happen with earnings. we seem to be moving may be
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moving maybe beyond the energy crisis, may be a -- maybe beyond the debt ceiling. who knows when they are going to ultimately come back. earnings are next, and that is something we need to think about post payrolls. there's all this pressure in the middle of the pnl. margins are going to be squeezed. we know that. is the top line going to compensate? jonathan: i am going to disagree with the way you are talking about this on the way it is being characterized. margins aren't being squeezed. costs are going up. if you have your cost go up but you are able to pass those on, you don't get a squeeze on margins. get a squeeze on costs. a big chunk of the costs of big public companies are fixed overheads. they lease equipment. they depreciate over time. those don't move up and down with the cost of oil or labor.
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so in an inflationary environment, if we look at the last five quarters, we have seen enormous earnings surprises. the average company beat by 19%, and almost all of that surprise was on the margin line even though costs were rising. so companies are going to complain about costs, but i think we are going to be surprised that margins are going to expand this quarter, not go down. actually, i think the question is how strong is the revenue line. alix: so how strong will the revenue line be? some say instead of being a cost push inflation like i was talking about, it is a demand pull inflation story, that the demand destruction hasn't been happening yet. you can see some of that in the survey data, like the and manufacturing data. when do you think we might see that kind of demand destruction, or do we not at all? jonathan: you talk about something where, because prices are higher, i don't want to go
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out to a restaurant. it is expensive. i think the bigger issue is there's delays. i can't get delivery of it. so there is demand for the vehicle, demand for me to go on vacation, demand for me to go and spend, and the delivery is backlogged. i think that is probably what is going to hold things back. i pulled this up regularly on my bloomberg terminal, gdp now shows the expectations for this quarter have been we getting little bit. guy: i totally take your point about delivery inflation. that certainly seems to be the story. you can get it now, the price is the same, but you have to wait for longer. there's two types of inflation in the system, both, i would argue, are going to slow down economic growth and be a drag. always insightful. great to get your take on what is happening with these markets. jonathan golub of credit suisse, greatly appreciated. let's go back to the senate floor. i don't think i have ever seen
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chuck schumer speak that quickly. we missed him. nevertheless, we are not going to miss emily wilkins because she is here now with the details. it was an incredibly short statement. did we learn anything from it? emily: yes, we learned that there is an agreement that will go into early december. that is apparently all the details that chuck schumer has to offer us right now. we are waiting to hear more details about exactly what this agreement will look like. do they name a dollar amount as far as the temporary debt ceiling raise? do they put a time limit on it? as well as trying to figure out how many republicans might go along with this. it will be interesting to see if the other 40 republicans one this short-term measure or not. i think we are going to be taking a look as the story continues to unfold. we are expecting a vote today, which means senators get to board all of their scheduled flights and fly back to their home states. but at this point, and we are
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also seeing the dow going up at this point, it seems like we are going to be able to avert defaulting on the debts on october 18, and now we have a showdown set for early december, which, if you remember, is when the government is currently funded through. we will have to have a new plan for the u.s. government and raising the debt limit. alix: as you point out, those twin limits which we were dealing with a few days ago are back in focus. something i was also interested in, do we know if they are going to let the funds that they had to use to get to this point to extend payments, do we replenish those funds? that is also going to matter in terms of when that dropdead date actually is. emily: that is a great question, one that reported have been asking since last night, trying to get a sense of does early december mean early december, or is it mid-december, late
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december. it is going to be something, this is truly breaking news. people who have been watching this show saw me on here 15 minutes ago saying we don't know yet, and now we know something. it is very much developing, and we will be keeping audiences informed as we begin to know more. guy: in terms of the impact this is going to have on the other aspects being debated in d.c. at the moment, talking about both the physical and human infrastructure programs the biden administration is trying to push through, we have seen the republicans slowing things down effectively. does this continue that process, meaning the democrats have got to focus here rather than focusing over here on where they want to spend their time? emily: if you ask lawmakers, they always like to say they have the ability to walk and chew gum, so i am sure there are some who will continue to work on the debt limit. even this week, it hasn't been
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big in the headlines, but president biden did hold two separate meetings with lawmakers asking them what their bottom line is going to be. i've spoken with lawmakers' offices who say they are in touch with the white house on what the spending lane is going to look like. the new deadline for this social spending plan is october 31. so that does mean that is a little bit closer now than the debt limit, but let's be clear, both of these issues are very tricky and difficult in their own way, and it is a -- it is going to take some time for both of them. alix: we've got to leave it there. emily wilkins of bloomberg government joining us. again, chuck schumer says the senate should vote on suspending the debt limit until december sometime later today. this is bloomberg. ♪
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♪ >> the amount that is going to be required to transition from
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our fossil fuel economy to the clean energy economy is very dramatic, probably the largest amount of money that will ever get spent on infrastructure over a five-year period. alix: that was bruce flat, brookfield asset management ceo, talking about the energy transition that is underway. how does the recent spike in power prices in natural gas change that conversation, if at all? we want to get more on that with aniket shah, jeffries global head of esg research. it has been a difficult few months for natural gas prices. does this change the public will towards energy transition? do we need to slow it down? aniket: if anything, we need to speeded up. what we are realizing is that the world remains fundamentally addicted to fossil fuels. that has risks associated with
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it. the investor community is very interested in financing and energy transition, but it needs to happen in a coordinated way. it has to be done thoughtfully and over time, and i we are realizing right now is that these things are difficult. they require a lot more collaboration and coordination than is currently happening. but the view of the yes you community, the short-term pressures are not a reason to slow down the energy transition. if anything, it means we should accelerate it, but do it in a thoughtful way. guy: what happens if government takes a different stance? what happens if government, worried by the fact zoomers, voters -- that consumers, voters are ultimately having to pay more and are seeing their electricity supplies, their gas supplies becoming more and more problematic, and government decides maybe we are going too fast? is there a danger that the investment community is too far
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out in front? aniket: i don't think there is a danger that the investor community is too far out front. he danger is that, frankly, governments haven't really thought this through. we really need national pathways to achieve a low carbon future. there needs to be much more thoughtful energy planning from major economies. the investor community needs to be behind long-term energy transition pathways, and the government needs to support communities and groups of people when there are fluctuations like the one we are in right now. how do the politics play themselves out? i am not a political analyst, but in the esg world we are often understanding consumer sentiment and voting sentiment, and the interesting thing is that people want and energy transition, but they want it to be fair. to us, it really shows the importance of long-term thinking
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that isn't there right now from a lot of governments. alix: you kind of all have to do it together, or else it doesn't count as much. with china saying buy power at all costs, in addition to coal, that is going to create some problems. so how do you find the best, most properly valued opportunities? aniket: our view is always to think about the long-term when it comes to sustainability transitions and yesterday. -- and esg. this is the whole construct of energy transition has to be viewed with a multi-decade mindset, and that is something investors are not used to doing, especially today. but the clients we speak to our, and they are saying over the next 30 years, we need to transition the economy to a net zero economy. that means $100 trillion plus of investments in capital investments across all kinds of
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technologies, sectors, and so on , in renewables and storage and batteries, and electric transportation. that thesis has not changed at all. it does not change because of short-term inflationary pressures or what are very serious energy issues right now in europe and in china. the long term remains intact. what we are seeing with our clients is a desire to have better and more thoughtful thinking from regulators on this energy transition. that is what we are looking for. guy: you talk about the need for it to be long-term thinking, but there is also a need to compress time frames. for instance, we have the energy situation here in europe, and you are saying that should mean we should be accelerating what we are doing. what are the biggest blockages in terms of that acceleration process? when you are think about investing long-term, but thinking about picking up the
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rate of change, does that put you in a different place then you would have been if this energy crisis isn't happening, and we were to continue at the original rate of change? i am wondering if you need to go to different areas, if we need to accelerate this. aniket: it is important to get some numbers straight here. globally, the world still gets around 80% of its primary energy from fossil fuels. that number was only 83 20 years ago. renewables globally is the same as it was 10 years ago. i don't even think we are having an acceleration of the energy transition. if you look at total one of climate finance, we are roughly where we were a few years ago with a slight increase by 5% to 6% a year. so it is not as if the actual
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world economy is quickly transitioning. what the energy crisis shows right now is that we are still very much a fossil fuel economy, and if you underinvest in fossil fuels in the short-term, which is what happened over the last couple of years, you are going to have these types of energy spikes. we are of the view that you have to have the long-term in mind, but as you say, the short-term has to deal with these trade-offs. you have to deal with these trade-offs and frankly, a lot of this has to do with better investments from the state and a better regulatory approach. guy: we are going to have to leave it there. great stuff. thank you very much, indeed. mitch mcconnell speaking now, which is good news. let's take a listen to what he has to say. sen. mcconnell: -- desperate rhetoric of diplomacy.
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putin is unfazed and undeterred. military modernization, cyber mischief. this doesn't exactly scream ready for good-faith engagement. most of all, the administration's hollow rhetoric has done nothing to deter the growing threat from communist china. just this month, beijing has sent a record number of military aircraft on provocative missions to taiwan's airspace, as senior pentagon officials have warned. we are witnessing a strategic breakout by china. democrats still refused to let us adequately fund our own military and defense. the bonded administration's budget falls woefully short of our requirements for greater competition with china and with russia. all the more so given the
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inevitable growing terror threat. and here in congress, democrats are doubling down on this reckless misstep. democrats want to spend trillions of dollars on a socialist wishlist at home while leaving the servicemembers who keep us safe overseas in the lurch. now, i don't expect chairman sanders or certain radicals in the house to be keen on using reconciliation to fund our military. hardly. guy: senator mitch mcconnell speaking, addressing the debt issue at the beginning of the statement he is making. he's now moved on and talk a little bet about what is happening in terms of the geopolitical ramifications of what is happening in the energy markets. it is interesting, i find it fascinating that both sides actually have not spent much time in their statements they have made today dwelling on the deal that is being done in terms of the debt ceiling. they have both gone through it
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really quickly and made very cursory statements about what is happening here. we have learned a little bit, but we haven't learned a lot. it feels like odd politics to me that neither one once to apportion blame or take credit for what is happening here in terms of getting this deal done. i sense that they are both kind of, this is a temporary truce. this is nothing more. alix: it really depends on how you are going to spin it. elizabeth warren saying mcconnell caved, but analysts at goldman sachs looking at the treasury market are like, that thing is actually going -- like, nothing is going to actually change. it is not like republicans are going to come to the table. they still have to work out what that final human infrastructure number is going to be. it does still feel like there's more uncertainties. we did learn, irrespective of what mcconnell was saying, the department of energy is not going to be releasing any stockpiles from the spr. they are not going to limit
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exports. that permeated the market a little yesterday and combed energy prices. guy: absolutely. it is interesting that everything seems to be calming down at once, but you feel as if everything is just being put on hold. the energy story isn't done. the debt ceiling story isn't done. the markets have breathed a sigh of relief at the moment that we have avoided a near-term deadline. i feel like i have lived through this a number of times. the european debt crisis felt exactly the same. alix: that is not a good comparison. [laughter] guy: exactly, because that ended brilliantly. invesco launching two brand-new crypto related etf's. john hoffman, the head of americas etf and indexed strategies, joining us next on what they are up to. at they are up to.
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♪ guy: 44 minutes past the hour. live from london, i'm guy johnson. alix steel is in new york. invesco, one of the largest etf companies in the world, has created two new etf's designed to track crypto markets. with bitcoin hovering around $55,000, the question is, will more etf's bring more price movement? bloomberg's sonali basak setting us up. sonali: look how lucrative a trade it has been to be in bitcoin. you have seen a more than 80% rise year to date, and we are hovering right around $55,000 now, much higher than anyone at
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the beginning of the year thought it would be by this time. if you look at the derivative plays, look at the grayscale trust, the most highly watched measure of these derivative trades. it is up more than 30%. there's a question out there about whether you hold these derivative plays or whether you invest in bitcoin itself when you see those types of movements. if you look one level lower, you have another derivative here. for example, arc innovation's etf. cathie wood believes in cryptocurrencies, blockchain technologies as a key game changer to financial services. this is up about 3% on the year. if you invested in the physical itself, you would be up higher than the derivative plays, which leads you to wonder, what is the purpose of them? alix: that is such a good point. great stuff. you are sticking with us. invesco's new crypto etf in the
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landscape more broadly, we are going to break that down with john hoffman, the firm's head of america's etf and indexed strategies. let's pick up where sonali left off. if you can outperform with straight up bitcoin, why do we need all these derivative rots? what is the thinking behind it -- derivative products? what is the thinking behind it? john: there continues to be more funds launching to provide different exposure. if you take a step, blockchain is a relatively mary -- is a revolutionary technology. if you could flashback to the late 1990's and think about the internet back then, i remember dialing up on a modem, and now i can swipe my phone and have a package arrived at my door 25 years later. we are at the early days of this blockchain evolution. so today, invesco has expanded our offering. we launched two blockchain etf's , one that is brought investment in the whole ecosystem, the publicly traded companies building this world, and one that is more specific, which is
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really geared at the companies building the cryptocurrency part of the economy. there's many ways to access this new and emerging asset class, and we expect there to be a continual evolution of more products to allow clients more toys to access these markets. guy: at some point we are going to get deep into the world of crypto etf's. at some point, the regulators going to clear it. what happens to these products then? are these just place markers for when that happens? what happens to these kind of etf's when we get that clearance? john: not at all in terms of a placeholder. we have an analog at invesco we can look back at. we started etf's 15 years ago. we also provide exposure to the equities portion of the commodities market, so you can buy a basket of securities, than
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exxon and chevron at halliburton and those names, and yet we still have the direct exposure if you want to buy oil futures or gold. so both exist because they have different return patterns and different profiles and are built for different investment purposes within a portfolio. so fast forward 10 years, these products will be as relevant as they are today, even as more efficient ways to access the physical currency continues to build. sonali: why did you guys decide to put 15% of the holdings in one of these etf's in the grayscale bitcoin trust? we know grayscale wants to convert into an etf at some point as well. is there any conflict for you there? john: both solutions have a 15% investment that is directly invested in bitcoin, and we think to participate in this
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ecosystem, you need direct exposure in some capacity, and you need all of the companies building the infrastructure around this. if you are really getting a true play on this space, we think there they need to have some exposure to the physical currency as well, or to the physical capability as well. these both hold that investment at about 15%. sonali: what do you think about the sec's moves? there was a lot of talk this week about potentially cnn etf within the next 12 months. do you expect that to be the case, that we could see your bitcoin etf's sometime soon? john: there's tremendous focus on the first bitcoin etf, and we are working on that with our partners. that is not the final destination, though. if you fast-forward out further, we see a whole shelf of physical capability, different combinations of coins, different
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weighting methodologies, all providing different return patterns. this is a technology. it is 12 years old, and people think of this space, we all think in terms of years, but if you look in terms of the network effects, we are starting to see the financialization as the next network effect. there's no question whether there will be an etf here at some point. it is just a matter of when. alix: in the broader market landscape, what happens when we have a week like this week? big volatility, then a huge bullish reversal. clearly we are exposed to geopolitical stuff like an energy crisis, the debt ceiling limit. what are you noticing in terms of flows and positioning, and tie that back into crypto and what it moves with. john: you have seen an interesting move in the, diverging from the
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macroenvironment up to 54,000 right now. we believe in long-term investing in the product we build for the long-term asset allocation. think the great thing about etf's is you can buy had long, you can sell it short. there's options available on the product. so we see so many different investor types utilizing the products for exposure, and it does not always translate into the view in the particular markets. we continue to see strong flows in our commodity range and our broad equity capabilities this year, and that trend is persisting even in the recent weeks with the volatility you pointed out. guy: what are investors using crypto for in this environment? it is fascinating to see tech up, crypto up, crypto up, tech down. i'm wondering what purpose it is serving for the many people buying it right now. john: we are certainly hearing
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from investors the interest in this space. we have talked about continuing to evolve that product suite. it is really about a return pattern that, as you pointed out, may be divergent from traditional asset classes. this may be the first new asset class and around 100 years that we are seeing evolve right in front of us. there's clearly a play on scarcity. there's an inflation topic with what we are seeing with government spending right now. there is a play around that. there's tremendous interest in this space. but we also see is there's a tremendous need for education, and that is what we are most excited about, partnering with galaxy and others to educate around this asset class that is quickly emerging. sonali: really quickly, are investors souring on growth etf's right now? john: we continue to see strong flows and some of our growth products like qqq, which just
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reached $200 billion in aum. we are not seeing that trade sour in our etf lineup. we continue to see the growth trade in terms of flows into our suite. guy: super interesting. thank you for your time today. we really appreciate it. sonali, always appreciate your time as well. this is bloomberg. ♪
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alix: senator chuck schumer as well as mitch mcconnell saying there's a debt ceiling deal. they will hopefully vote on that in the senate. this would let the u.s. meted supplications through december 3, which sets us up for a really rough or early december. markets feeling the optimism, removing the key risk in the short. yields pushing higher by about
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four basis points. you are around the equity highs for the s&p, and the vix volatility continues to sink lower. what we learned for me is that the debt ceiling clearly does matter because it has an effect on higher interest rates. inflation matters and all of that, but there is a feedthrough, and the markets do react to that. just look at the rally over the last 24 hours. guy: i think you can point at the rally and see different things if you want. you've got what is happening with energy prices. that's a factor. the debt ceiling is definitely there. thursday, november 25, isn't that thanks giving? the politicians maybe having to curtail some of their plans. we will be potentially worrying about this all again. the european flows is coming up next. this is bloomberg. ♪
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>> the countdown is on in europe. this is "bloomberg markets: european close," with guy
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johnson and alix steel. ♪ guy: thursday the seventh of october. what do you need to know out of europe this hour? energy prices continue to fall after yesterday's comments from vladimir putin suggesting that russia is ready to deliver more gas. at the iea saying today that moscow can do much more. the energy price rises will continue. yields dropping broadly across the euro zone, particularly in the periphery. this is the ecb is looking at a new post pepp bond buying program. we will hear from the governor of the greek central bank. let's talk about where we are with markets. equities

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