Bloomberg Businessweek Weekend - September 12th, 2025

23:32Explain that, Dan. So what that means is, as Tim talked about, it's iris scanning, the orbs. Right. Going forward in the future, especially in a robotic world, bots everywhere, you're not going to be able to just identify through a blue check. It's really going to be iris scanning. What they've done already, 15 million humans on the platform, I believe going to about 100 million over the next year. That's going to be a form of identification. That's probably the most privacy lockbox out there, and it's secured by a token, a world token. So my view and our view as a team, this is early days in terms of where this is all heading, and that's why we want to do the strategy now.

24:10What's to prevent somebody else from doing the same thing? They're playing a different game than they are. They're NVIDIA in 2022. In other words, relative to what Sam, Alex, and the team have built out, I mean, from an infrastructure and authentication perspective, they are, I think, miles ahead. I don't see anyone that could catch them. That's why we bet on World as part of the ACO strategy, and obviously having someone like Tom Lee and Bitminer, big investor, that's another support that we're so excited to have. You've also got an ETF that launched back in June. It's the Dan Ives Wedbush AI Revolution ETF.

24:45It's up 16 % since launch. It's outperformed the S &P 500 and the NASDAQ 100. Broadcom, Google, NVIDIA, TSMC, Apple, they're the top holdings. Somebody watching right now might be like, okay, he's got a clothing company. He's chairman of this crypto treasury company. He has his day job at Wedbush. How am I sure that he's going to manage this ETF and have the time and resources to manage this ETF in my interest? I think that's a great question. I'd say when you think about my chairman role, it's all related to AI and the infrastructure. In other words, this is interrelated to my view of where the AI revolution gets built out.

25:23And the reality is that 95 % of my time has spent 3.5 million air miles the last 25 years. I think what's enabled to distinguish us is feet on the ground, talking, whether it's private, public, partners. And really, I think that's how investors have grown to. Do you add Aedco Holdings to the Ives ETF? No, no. That would be a total separate operation. How do you keep firewalls between it, though? Like there's going to be people who are saying, yeah, of course Dan's going to talk up that he loves Alphabet and that he loves NVIDIA. I mean he's got an ETF. Like I've just – how do we – Sure, on the ETF.

26:00Like we lean on you for like transparent views. And part of how investors know is the ETF is all based on our AIR 30. It's all based on our research. So the reality is I think part of how we've gotten so – I'd say from an investor perspective, we've had massive reception for the ETF is because it's our 30 names that ultimately we've used the winners. And we change that every quarter. And that's – I think you talk about ETF, what it's based on. It's all based on the research. and got everyone here that knows Dan Ives. They know like feet on the street, not sitting there in some Peter Millar 15th floor of a New York City office building.

26:43And the only time he traveled is two times to San Francisco. Yeah, you just got back from Australia. Yeah, so I literally landed here from Australia. What were you doing there? Yeah, so part work, part pleasure. So it was fun because look, I mean, when we talk AI revolution, like in Sydney, in Melbourne, packed meetings, because the reality is that this is not just U.S. and that's why I spend so much of my time traveling around the globe. What might be the irrational exuberance part of kind of the trade today or the tech trade or the AI trade? And just got about 30 seconds. There's got to be some fluff out there.

27:18Just because you say AI 40 times in a conference call doesn't make yourself an AI name. Look, just because like Tim, he was wearing an AI shirt because he says it 15 times and says Tim on the back AI, My view is you have to distinguish the winners and the real ones from the fakes. And that's the reality. And that's what we spend all of our time doing. The one company you're most bullish on right now, public company. Messy of AI, Palantir. That's going to a trillion in the next two or three years. And I always say the haters hate it. Hate it at$15, despise it at$80. Say it's super expensive at$150.

27:50They'll be saying the same thing at a trillion. Our thanks to Dan Ives, Global Head of Technology Research at Wedbush Securities. Still ahead on Bloomberg Businessweek, JP Morgan's Priya Misra on the bond market, the upcoming Fed meeting. That is our coverage from Future Proof 2025 in Huntington Beach, California continues. This is Bloomberg.

28:25Play Bloomberg 1130. We continue with this special edition of Bloomberg Business Week, highlighting interviews from this week's Future Proof Festival in sunny Huntington Beach, California. Yeah, it's a great opportunity to talk to people, all different types of RIAs, registered investment advisors, and some with specialties, whether it comes to private credit, alt assets. But we also got a lot of the, I don't know, traditional investment financial community, A lot of folks that are often on Bloomberg and, you know, got to talk about the upcoming Fed meeting this week, the jobs data revisions that we got last week.

29:03You know, all of the data that was coming at us and try to make some consensus about what this means for investors in terms of strategy. And, you know, whether it was equities we talked or often fixed income. On that, surging debt and deficits, a relentless attack on the U.S. Central Bank and the most aggressive tariff policies in almost a century. The question, a recipe for bond market chaos? One person says, guess again. For all the shocks U.S. Treasuries have absorbed during the first months of President Donald Trump's tempestuous second term, the market has held up remarkably well, even as government bonds from the U.K.

29:38to Japan have been pummeled amid heightened fiscal concerns. We also got news this week that the Core Consumer Price Index rose as expected in August, keeping the Fed on track to cut rates next week. Now, before we got any data, we caught up with Priya Misra, Core Plus Bond ETF Portfolio Manager, JP Morgan, who joined us at Future Proof. There's a lot going on. If you think about everything we've had to deal with this year, you know, tariffs, Fed independence, the deficit, it's just and then you look at equities at their highs and now bonds doing well. So what's going on? So our view is everything is actually consistent with a soft landing.

30:15What I actually think equity people call soft landing and bond people call soft landing. Yeah, the growth in the 1 % to 2 % range. Inflation is a problem. It's not at 2%, but it's not as high as people feared when we first heard tariffs. So it's allowing the Fed to start to cut rates. And then you've had this slowdown in the labor market. I think the hope is it stops right here. There's low fire, low hire. We don't quite make it to the high fire world. that the Fed can cut just enough in terms of time as well as how much they cut to get the economy to stay in the soft landing mode. I think that's the hope.

30:50Why are you so confident that the tariff-induced inflation that we've seen has not been as prominent as people initially thought it would be? We just had Barry Riddalt on. He said, hey, a lot of people pulled forward, a lot of companies pulled forward, so the tariffs haven't hit them yet. Right. Right. And so I think that is the risk scenario. But I'll get to your question. So it hasn't happened yet. Now, again, we're looking at the future and maybe it can happen because I was using inventory. And now when I'm paying more as a company, I can pass it on. Here's the issue. Companies are realizing that consumers are cost conscious.

31:26And passing on price increases entirely runs the risk of consumers stopping buying or reducing the amount that they're buying. So I think that's why companies might be taking some of the tariffs in their margins. Margins are high. So they can afford to take some of the cost in the margins. Some of it, the currencies work. Some of it, maybe the foreign producer is taking some of that hit. So I think that through the value chain is being absorbed at different spots. But the other part is look at the rest of inflation. So maybe goods inflation does pick up because companies have to pass on at least some of it.

32:00And Governor Waller thinks about half of it will be passed. Some people argue one third. Some part is going to be. Look at the U.S. consumer basket is really 75 percent services. So we're looking at service inflation, wages, rent inflation, ex-rent core services. It's not coming down, but it's not going back up. In fact, wages, we're seeing signs that wages are starting to slow down. So our thought is even if you get the goods related price increases, services will likely offset it. And that's why Chair Powell, something he said in Jackson Hole, which I thought was the first time I've heard it in a while, that it could be short-lived, meaning that they can look through any tariff-related increases.

32:41Now, it has to be tariff-related. So let's see. We get a CPI report later this week. Our view is services is going to not be as troublesome. Goods might look troublesome, but they can put it down as one-off. It sounds like if things aren't so bad in terms of inflationary pressures, and if you, as you kind of laid out in terms of the jobs report, maybe it was just that one month, you know, that we're not going to continue to see losses. Why do we need to cut rates? Is it just in, I keep hearing, no, I shouldn't say keep, but the idea of an insurance cut just in case. Is that what this is all about?

33:14So I think the starting point is where I focus on the starting point. We're in restrictive territory. If we were at neutral level... Even though financial conditions are really loose? Yeah, but interest-sensitive sectors. Look at housing. Look at consumer durables. So sectors of the economy that are sort of levered to interest rates are in a weak spot. So that's why that restrictive level of interest rates matter. And if the Fed sees... But it's not the Fed mandate, right? Like, when I think about interest rates to help the housing market, all I can think about is the financial crisis. And I realize there are a lot of things going on at that point, Priya.

33:48But I do wonder, is that what the Fed needs to be concerned about? So I think they've got other tools for it, whether it's regulation or making sure that, you know, banks are not lending. Do you remember the ninja loans back then? The no income, no job. Right. Or assets. That was what the A was for and people were getting loans. So I think there's other ways to ensure that there's not excesses. But when you look at the one tool that they have, interest rates, we're in restrictive territory. Inflation is slowly heading down, which is impressive given the extent of tariffs. The average effective tariff rate is 15%, and yet inflation is not accelerating, and the job market is slowing.

34:24I think why Chair Powell was a little maybe hesitant in July was he wasn't sure is it demand or supply. And both factors are impacting the labor market. But there's clear evidence, I think, that the demand side is there. Demand is slowing. You're seeing it in college age, the unemployment rate for young people. You're seeing it in hiring plans. That was pretty stark on Friday. We talked about that. The numbers that we got for young people. I mean, anybody can speak anecdotally about this who has young graduates from college or young people in their household. It's not pretty out there. And that's why it's hard to put that on immigration.

35:00There's absolutely an immigration impact on the labor market, but not when you look at the young people who are not getting jobs straight out of college. So I think there's a demand aspect. Now, is it AI? Is it tariffs? Is it uncertainty? Hard to disentangle what's driving it. But there is a demand aspect. And so I think the Fed is looking at that and saying, well, let's reduce some of that restrictiveness. I think talk of 50 basis points cut next week, that might be a little aggressive. Because I think that is in case you see signs that layoffs have really picked up. We do have an initial claims report, one report.

35:33That really spikes. I think we can talk back about 50. They don't have to get aggressive. But just start that process and remain data dependent. What do you think the revisions on the labor data tomorrow? I mean, we've been so focused on that. What do you think that's going to show? It's going to be between 800 ,000 and a million. So it's going to be a big number down. I don't think it should be a big surprise. The labor market was the outperformer when we looked at everything else. So I think the fact that these revisions will actually bring the labor market in line with GDP, in line with consumer spending.

36:04And so, you know, and is it, I don't think it's political. I think it's just data collection has been an issue really since the pandemic and globally. You look at response rates globally. It's something we should all think about. How do we get more accurate data? And I think this is, maybe revisions is the way to do it. Well, Mike McKee was talking about this, and he says, you know, people are responding. They're just, the responses are slower. And so that the revisions finally take all of that into account. So how do we get people to respond more quickly, right, so that the data is more relevant in a timely manner?

36:34Yeah, maybe you're supposed to spend more money, figure out some modern way of asking people questions. What's the call technology, maybe? Hey, speaking of that, I'm curious about the immigration side of things and the way you're looking at immigration from your perspective. As somebody who invests in fixed income, recommends fixed income, and thinks about strategy. Because we're seeing a real crackdown, obviously, here in the U.S., and that has implications for labor to market. It also has implications for demand. And Augusta Sarraiva, who writes for our economy team, had this really interesting piece out over the weekend about Hispanic consumers hitting the brakes as U.S.

37:09firms warn of a pullback. So now we're starting to hear U.S. firms talk about this segment of the population spending less as a result of an immigration crackdown. How are you looking at that? Yeah, it was a great article. I read it and it sort of hit a nerve because a lot has been talked about immigration and the impact on the labor market. What about immigration and growth? It's a source of demand. housing, consumption in general, and this idea that R-star, so I'm going to take it down to, I'm a bond PM, so I live in the R-star world. Go there, we love this. But what is neutral interest rate?

37:40And there's been this argument that actually neutral rate is maybe it's 3.5, maybe it's 4. You know, you didn't ask me, but there are people who tell me we're at neutral. Stock market's high, we're at neutral, Fed doesn't need to cut rates. And then I say, look at the interest-sensitive sectors. They're all kind of frozen, slowing, so it is restrictive. But what is that neutral rate? I think immigration was a big part of why that neutral rate has gone up. Like in 2010 or 2008 to 2020, we argued the neutral rate was 2, 2.5. Now people are saying maybe it's 3, 3.5. How much of that is immigration?

38:15And so if immigration is heading low and this is a structural trend, then I would argue maybe that neutral rate is low. And so where should the 10-year be in equilibrium? 3.5 to 4 seems fine. In a recession, it's going well below 3.5, but we're not pricing in a recession. So I don't see a disconnect between bonds and stocks. They're both or spreads for that matter. They're all telling you an okay economy, Fed cutting just enough, and hopefully we just stay here. But if things slow down more, well, then the Fed's going to cut a lot more, then that 10-year is getting much lower. So I bring it to whether it's consumption or the labor market, that immigration impacts that neutral rate lower.

38:54Priya, just got about 30, 40 seconds here. So you add all this up. There's your macro. What does it mean for investors in the fixed income world? Where should they be allocating assets? So fixed income should give you income and diversification. It's giving you both right now. In income, in real terms, the 10-year is giving you 2 % real rates. 30-year is giving you even more. So I would say own fixed income for yield. And then you have to go out the curve. Diversification is where that curve comes in. You need a little bit of duration. I don't know anybody who's long the 10-year. Well, I know myself.

39:23We're along a little bit of the tenure. A lot of people are nervous about the deficit. The deficit is better today because of tariff revenues. So I think it's priced in. You're getting paid to extend. Take a little bit of credit risk. Own some duration. The economy is okay. So you can look at fixed income for that income. And if you've got, what role does fixed income play in a portfolio? If you've got risk assets, you want to hedge those risk assets. Own a little bit of five, ten year duration. Don't have to go further out, but that's where you'll get that diversification benefit. Our thanks to Priya Misra, Core Plus Bond ETF Portfolio Manager at J.P.

39:58Morgan. And that wraps up our first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio. Coming up in the next 60 minutes, much more from Future Proof 2025. We hear from Masters and Business host Barry Ritholtz to get his opinion of Fed independence, plus BlackRock's Jamie Majera on bringing private credit to the retirement class. Also, a psychologist's take on investing. And, well, I got to say, he also added some numbers, too, to back it all up in terms of his thinking. This is Bloomberg Business Week. I'm Carol Masser. And I'm Tim Stenevec. Stay with us. More from Bloomberg Business Week Daily coming up after this.

40:35You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, highlighting our conversation from this past week's Future Proof Festival held in Huntington Beach, California. I should say lovely Huntington Beach, California. It was pretty sweet. You sound like you still want to be there. Well, you know, I'm a happy girl when I'm near a beach. You really are.

41:08I will say. I didn't know you could be so productive, Carol Master, lying in the sand just with your iPhone working on the show because that's pretty cool. I did do it. You did. Hey, plenty more, including a conversation with the host of the Masters in Business podcast. Yeah, Barry Ritholtz, you all know him. Plus, a chief behavioral officer on how psychology and behavioral finance are coming to the forefront of wealth management. Carol, I didn't even know this job existed. Exactly. That's a fascinating conversation. You know, the other interesting conversations and a major theme of Future Proof was AI.

41:43No surprise, right? But everybody trying to figure out how to use AI when it comes to investment management, what does it mean going forward? I don't know. I don't think anybody knows. I don't think so either. And I think the question a lot of people have is, okay, am I still going to take on the same role in the world of AI moving forward? Will I still need the same number of employees? What's it going to do for my business? but also equally important, what's it going to do for the non-AI companies that we invest in? When are we going to see that result of increased productivity? Yeah, exactly.

42:15I think that's the stage we're moving into when it comes to AI in a big way. All right, first up this hour, though, there is a trend picking up momentum. As the big U.S. banks partner up with asset managers, just about a week ago, Bloomberg reported that Citigroup is entrusting BlackRock with tens of billions of dollars of clients' investments in a move that will close the bank's only remaining in-house asset manager and outsource more of its wealth unit's offerings. In a new partnership, BlackRock will manage the assets of thousands of the bank's wealthiest clients who currently have accounts with Citi Investment Management.

42:49Our next guest involved in all of this, Jamie Majera, was named head of U.S. Wealth Advisory in July. Her job also includes heading up retirement at BlackRock. It's the world's largest asset manager, which noshed a record$12.5 trillion in assets as of the company's most recent quarterly update. She joined us from Future Proof. How are you? I'm great. I mean, we're at the Future Proof Festival. It doesn't get better than this. This is beautiful. It's pretty amazing, right, to talk about what's going on in the markets against this backdrop. I want to ask you, though, about the news last week. You were definitely quoted in one of the Bloomberg stories.

43:22It was exclusive. You said this is a sector-defining moment. How come? Well, you know, the thing that I find so interesting about the wealth market is that as firms are getting larger, right? As wealth management firms, as banks, they're getting larger and they're looking to really lean in on what they do best, which is serving their clients, expanding their relationships with their clients. And as they do that, they need to work with partners, partners who can be their outsource provider, who can take on the investment management, who can build custom solutions for them. And so this is just one example of a very large global bank asking BlackRock, selecting BlackRock, to be their outsource provider.

43:59But we're seeing this every single day from financial advisors all around the country. They're looking to work with firms like BlackRock so that we can customize solutions for them and take on the investment management so they can do what they do best, serve their clients, expand their client reach. So this is just the beginning of a lot more to come. Just the beginning. So much more to come. I was just going to ask, should we, should investors expect more of these partnerships to be announced? Absolutely. Absolutely. And by the way, today, BlackRock has over 30 ,000 financial advisors just in the U.S.

44:28who are already relying on us to be their outsourced provider. Then you enter a firm like Citi, a massive global bank. There will be more firms coming who are going to come to BlackRock and ask for this type of partnership. So you guys see a lot. How would you describe the investment environment? We were just talking to Matt Middleton, who puts on this event, and said last year it was all about the upcoming U.S. elections. They've happened, right? And we have a president who's very active on things that really impact the investment environment. How would you describe the environment today? Look, I think a lot of people with reason, of course, have uncertainty around economics, uncertainty around tariffs, uncertainty around everything and what that means for their portfolio.

45:07What I find most positive and exciting is the fact of all of these people who are thinking about, what does this mean to my savings? What does this mean to my ability to retire? What does this mean to my ability to send my children to school? Well, they're working with professionals like financial advisors, like so many of the advisors that are here. And the job of the advisor is to help them navigate that uncertainty and help them focus on the long term, right? It's about time in the market, not timing the market. And that's something that we believe very strongly. What are the questions that they're asking right now, especially the wealthier clients?

45:38What do they want to know? What do they want to invest in? What opportunities do they want you to provide? Yeah, there's two massive things. One is taxes. Help me better manage my taxes. I can control for that. I can't control markets. Help me better manage. It's so funny that you say that. I feel like all of a sudden we've noticed too, I think, in conversations that it's, yes, about returns, but it is about tax advantages. Tax alpha. Yes, exactly. Tax alpha. Tax alpha. So go ahead. Forgive me. But you're right. That is top of mind for high net worth, ultra high net worth investors because, one, they can control it.

46:12Two, there's actually a pretty significant implication on their portfolios when you think about taxes. And so it's exactly why a few years ago, BlackRock acquired a company called Appirio. Appirio was a direct indexing company, a platform that had best in class capabilities to help end investors customize portfolios, right? Single security portfolios, maybe for their values, their beliefs, most importantly, their taxes. And today that's one of our largest growing platforms. Appirio direct indexing, also SpiderRock, where you can do custom overlay, custom options overlay. Think about that Apple executive that worked at Apple for years and years and years and has all of this Apple stock.

46:51That's emotional for them. They want to hold on to that. There's a lot of tax implications in that. But at the same time, they can hedge against that. They can run options on top of that. And that is top of mind. Okay, so taxes is one thing. What's the other one? Private markets. Yeah, I knew you were going to say that. Of course you did. Private markets, every headline. What part of that specifically? When you think of alternatives, when you think of private markets, where? Yeah, so let me take a step back and say one of the things we believe very, very, very strongly at BlackRock is our job is to help make it easier for investors to access the full power of the capital markets.

47:23Now, previously, capital markets meant public markets. We know the opportunities that exist beyond the public markets in the realm of private companies. And so it's why last year we acquired Prequin from a data perspective. We acquired GIP, HPS, because we feel so strongly. Prequent being, I know, for those of us in the journalism world, I mean, that's where we go in terms of for data on the private markets. Every slide, every chart you see, source frequent. And it is really the only source of truth on private markets. And so if we have that in addition to all of these capabilities that help us build products that allow people to more efficiently access the private markets, then we can better serve our clients in the wealth market, not just institutions any longer, and also in retirement.

48:07We're talking with Jamie Majira, Managing Director, Head of U.S. Wealth Advisory and Head of Retirement at BlackRock here at Future Proof in Huntington Beach. We reported, too, that I think Larry Fink, your CEO, has talked about and your CFO about offering target date retirement funds that include private assets next year. I mean, it meshes kind of with a survey that you guys put out today that talks about 24 % of retirement plans are considering adding alt assets over the next year, private equity, credit, and other investments. Is that still on track? Can you give us an update? Yeah, absolutely.

48:41So yes, it is still on track. Look, I think there's been a lot of headlines from a lot of different firms about people coming to market with ideas of how to incorporate private markets. Safely, right? Because we have to remind everybody they're not as liquid as a lot of investments that normally your retirement funds go into. Yeah, there are many considerations that plan sponsors and investors need to think about to make sure it's right for them. Our view is that if we can do this thoughtfully, strategically, integrating private markets, private assets into a target date fund alongside of public markets and manage that glide path so it's appropriate for people at different stages of their life, then we can actually deliver them 15 % more returns over a 40-year or 15 % more retirement assets, I should say, over a 40-year time horizon.

49:23That's a long time and that's a lot more retirement savings. And so we believe strongly in that. We are on track. We actually are already in market as well in the smaller and mid-sized retirement space. So we partnered with a company called Great Gray, and we're powering their glide path so that they can incorporate public and private markets into one target date solution. When we think about target date solutions now, what we know and what we've experienced is the asset allocation between equities and fixed income. Do we get to a point where that's not even a choice anymore? It's like equities, fixed income, and privates?

50:00It's interesting. I think for so long, people have thought about the 60-40 portfolio. Equity is fixed income. Some people may be as old we are to say 50-30-20. That 20 % might be 10 % private equity, 10 % private credit, different diversified assets in there. But absolutely, I think the new portfolio, the portfolio of the future to fund these longer lives has to incorporate private assets. You know, one of the things out of your survey that I thought was really interesting was guaranteed income is now a top priority. 86 % of workplace savers want it. And for the first time, 100 % of employers say they feel responsible for helping participants generate income and retirement.

50:38I keep thinking about my father who had a pension and VA benefits and investments. And not a lot of people are doing pensions, right? Or anything anymore. And so I am curious about how employers are thinking about this. That struck me. Yeah. So it's so interesting because you raise such a good point. So employers used to have pension plans. Right. And then the conversion to defined contribution. Well, we're now seeing pensionization of defined contribution. Think about private assets have been available in pensions for decades. Well, now they'll be available in 401k plans, retirement plans. Same thing with guaranteed income.

51:12That's what the benefit of a pension was, but there's no flexibility around that. So BlackRock has created a solution. It's a target date fund solution. It's called LifePath Paycheck. And what it does is it actually delivers you the option, the choice to have guaranteed income. You can choose to take that or not, but it's giving savers and employers the option to have their employees have more security, have more simplicity, have more confidence in their retirement income. One of the things I'll just add is that I found so interesting in our survey. When you look at retirees, 27 % of retirees, only 27%, are confident in their ability to live through retirement on their savings.

51:53Well, that's discouraging. It's discouraging. So what's the implication of that, just in the last minute that we have with you? Because that has implications beyond our own portfolios. That has real societal implications. It has societal implications in that there is going to be this whole group of Americans who are trying to live through retirement. Maybe they do another job. Maybe they spend differently. That shouldn't be the case. Longer lives should be a blessing. They shouldn't be a challenge. And that's where guaranteed income comes in. That's where the modernization of 401k plans to include private assets comes in.

52:20And that's where more advice comes in, which is why we are here at Future Proof Festival. Advisors play a massive role in this. Our thanks to Jamie Majera, head of U.S. Wealth Advisory and Retirement at BlackRock. You're listening to a special edition of Bloomberg Business Week featuring our favorite conversations from the Future Proof Festival. Next up, a familiar voice to the Bloomberg audience, Barry Ritholtz, the host of Masters in Business and At The Money. We talk interest rates and Fed independence and a whole lot more with him. That's next. This is Bloomberg. This is the Bloomberg Business Week Daily Podcast.

52:52Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say, Alexa, play Bloomberg 1130. As you know, we are highlighting our coverage of the Future Proof Festival that was held early in the week in Huntington Beach, California. Now, the event brings together financial advisors, wealth managers, and company execs, all involved in the wealth ecosystem to talk about the future of the business and the factors impacting investor money. With us at Future Proof, a man quite familiar to our audience, Barry Ritholtz.

53:28He's host of the Bloomberg podcast and broadcast, Masters in Business and at the Money. He's also chairman and CIO of Ritholtz Wealth Management, which is a close partner with the event. We also know that sometimes you've got to scratch a client's itch to prevent them from engaging in worse behavior. I like to say you can't get alpha if you don't at least lock in beta. So think of your portfolio. I know it's sunny and 80, hard to talk about Christmas trees. But if the core of your portfolio is a broad passive index, that's the tree, hey, what's the garland? What's the ornaments you want to put on that?

54:05If you want to say, hey, I want a broad value index to accentuate all the gains I've already seen in technology. And by the way, the same thing is taking place overseas. You have 15 years of U.S. outperformance. Maybe it's time to think about broader exposure overseas, international, and international value. That's how you'll, if you can't pick who's the big winner from AI, pick all the secondary winners that are going to be able to be more productive, more profitable. So I love talking with you. I'm amazed that we haven't talked politics at all. Sure. Especially like AI, if you think about last, was it last week, the big dinner of the big tech CEOs all in D.C.

54:52surrounding the president. AI was a big part of, you know, they were kind of thanking him for what he's doing in terms of the world of AI. Where is politics? What did Joe have to say about politics? Did it even enter into the conversation? So I tried to push that question a little bit. And the consensus I've gotten, and I don't want to put words into his mouth, but the consensus I've gotten from economists on both the left and the right have been, hey, this was a very robust economy heading into 2025. It's starting to slow. That doesn't mean we're going into a recession, but it's starting to look more and more like growth is going to not be 3%.

55:32Yeah. Probably isn't going to be 2%. And the consensus seems to be that this is an unforced error, that this is between the craziness of the Doge layoffs and just generally the mayhem, not just the tariffs themselves. Hey, if I said we're going to pass a consumer VAT tax, you would think that's bearish for consumer spending and bearish for the economy. Someone like Joe says it's we look at tariffs as a tax on the consumer. So far, the pass-through hasn't showed up yet because, first of all, a lot of companies ordered, and this is me speaking, not him. There was a lot of inventory build in advance of the tariffs, and then tariffs were on, tariffs were off.

56:15A lot of things pulled forward. Right. So it's taken a while to work its way through the system. It seems that it's just starting to show up both in hiring and in inflation. We've got a minute left, Barry. I promised we'd talk about the Fed with you because it doesn't seem like the bond market is taking seriously the threat to Fed independence. Why do you think that is? I honestly don't know. To me, I'm a stock guy as much as I own fixed income on munis and tips and things like that. It seems like James Carville was right in the 1990s. But in the 2020s, the stock market is the most feared asset class because it was the stock market.

56:54Well, it's not sending a message that the Fed in finance is threatened. Well, I think the market is pragmatic and cares less about academic discussions of independence and loves lower rates. Now, maybe it's inflationary down the road, but the difference between stocks and bonds is bonds are about a return of capital, which means you're waiting five or ten years. Stocks are about the next quarter, at least when you look at, you know, in the short run, it's a voting machine. In the long run, it's a weighing machine. I think in the short run, it's a probability machine. And the stock market is saying, Fed independence is a concern, but give us some of those delicious low rates.

57:35We will let us show you what we can do. If you take 7 ,500 basis points off, everybody's going to party. And that's what the market is looking at one to two quarters out. As long as you're not worried that those low rates mean that everything's coming undone and the economy's falling apart. I mean, the odds, if you... Just quickly. Torsten Slock said there was a 0 % chance of a recession in January. Yeah. He moderated that. I would have said 10 % in January. Now we're 45%, 55%. Does it change your view as chief investment officer at Ritholtz Wealth Management on what your clients should be doing?

58:09Because you have a whole part of your book dedicated to buying the entire haystack. Don't look for the needle. Just buy the haystack. And you guys do that at Ritholds. So, yeah, we very much do that. But we also know that sometimes you've got to scratch a client's itch to prevent them from engaging in worse behavior. I like to say you can't get alpha if you don't at least lock in beta. So think of your portfolio. I know it's sunny and 80, hard to talk about Christmas trees. But if the core of your portfolio is a broad passive index, that's the tree, hey, what's the garland? What's the ornaments you want to put on that?

58:44If you want to say, hey, I want a broad value index to accentuate all the gains I've already seen in technology. And by the way, the same thing is taking place overseas. You have 15 years of U.S. outperformance. Maybe it's time to think about broader exposure overseas, international, and international value. That's how you'll, if you can't pick who's the big winner from AI, pick all the secondary winners that are going to be able to be more productive, more profitable. We're speaking with Barry Ritholtz. He's the host of the Masters in Business podcast on Bloomberg Radio and Radio Show. He's founder, chairman, and chief investment officer of Ritholtz Wealth Management.

59:28He's also the author of How Not to Invest the Ideas, Numbers, and Behaviors that Destroy Wealth and How to Avoid Them. So, Barry, if you were to add a new chapter to your book that came out earlier this year, It was published. It came out a few months ago. March 18th. So a lot has happened between now and then. What would it be on? So there's a chapter in the book called Love Trump, Hate Trump, That's No Way to Invest. And after the election in November, I heard from a number of people, clients, friends, family members, oh, this guy got elected again. I'm selling my house. I'm selling my stocks.

1:00:01And I said to them, hey, when he was elected in 2016, had you done that, Look at all the money you would have left on the table. And by the way, the same is true for Joe Biden in 2020 and for Barack Obama in 08 and 12. Your job as an investor, as a mom and pop long-term investor, is to not interfere with the market's ability to compound your portfolio. Gains on top of gains on top of gains. Dividends reinvested. If you look at the history of one of the Democrats in the White House, one of the Republicans in the White House, It's a fraction of just keeping it invested the entire time. Especially, you know, we see the Gen Z and the millennials significantly underinvested compared to the Gen X and the boomers.

1:00:47And it's like you guys have a 30, 40-year investment horizon. What happens in any random Tuesday or any random year shouldn't matter. You have 40 years to let it compound. hey, if you're a boomer and you're retiring in two years, you want to throttle back your risk, that has nothing to do with the president, tariffs, markets. It just has to do with, hey, we understand the sequence of returns problem. You don't want to retire into a big down year. So maybe 100 % equities isn't right. Maybe you should be closer to 60-40 and slide that down as you go. But the chapter I would write is about here's what everybody said about tariffs in April, and here's how this is going to be the end of Pax Americana, the end of the U.S.

1:01:30dollar, the U.S. equity market's going to hell. By the way, we're up 11%, 12 % for the year. If you ignored that noise from the lows, had you ignored that noise then, you're doing great. Had you gotten nervous and tapped out, you're pulling your hair out. You don't know when to get back in, and it's a problem. So the noise, the fear-mongering, just the easy temptation to give into your limbic system. In the book I wrote, we are not wired for this. And Bill Bernstein, the neurologist slash investor, said investors have to learn to control their limbic system. People who fail to do that are going to die poor.

1:02:15And it's really true. We're going to talk about the importance of psychology a little bit later on with Dan Crosby. He's Chief Behavioral Officer of Orion Advisor Solutions. So we're looking forward to that. Two things I really want to ask you, though. So many people talking about the importance of private markets. It makes me think my whole career in business news, which is a few decades, has all been about the public markets. And increasingly, everybody's saying it's all about private markets. And I wonder, is there going to be a world at some point where private markets are more dominant in somebody's portfolio, and rightfully so, than public markets?

1:02:47Do we really see that kind of a shift? I'm not so sure. I mean, here's the thing about every financial product that's ever come along since the beginning of time. Stocks, mutual funds, SPACs, trust, whatever it is, 90 % of them are junk. And the top 10 % are spectacular. So if you can get into the best fill-in-the-blank, mutual fund, ETF, venture capital fund, private credit, private equity, private real estate, private debt, fantastic. But just be aware there's a land rush. The best companies are going to deliver the best risk-adjusted returns relative to the fees. The bottom, I don't know, 50%, 60%, 70%, they're in there.

1:03:33They're not contributing to your portfolio the way the top tier is. It's Sturgeon's Law. 90 % of everything is crap. That just seems to be so concerned about why people are concerned about privates going into 401ks and retirement accounts. Because you're not going to get the best of the best is the argument. It depends on who's doing it. I won't name names or embarrass anybody now, but there are a number of shops that are multi-trillion dollar companies that have been doing this for decades. They have a deep research process, and they are fiduciaries and very customer-focused. I'm comfortable that 5%, 10%, 15%.

1:04:17I'm not quite at the 50, 30, 20 level yet. But if you can be with a shop that can get you access to the best of the best, having a few percentage of it is not going to hurt. Just remember, the fees are higher. The lockup periods are longer. If you need liquidity, maybe not for you. It's amazing how often I have conversations with people who are so enthusiastic about privates. And then you show, this is what it's going to cost. Here's the lockup. Not so much? It kind of scares them. So, hey, if you're 25, 30 years old and you've got a 30, 40-year investment horizon and you don't care about the lockup, you want to have 10, 15 percent of your portfolio in that, knock yourself out.

1:04:57Just be really selective. It doesn't matter. SPACs, mutual funds, ETFs. So public markets are not going away? I don't think so. And in fact – Because it sometimes feels really interesting, this shit. So, you know, there was a really fascinating study done that looked at the concentration in the MAG-7. And it's really misleading because the MAG-7 have made 859 acquisitions over the past 20 years. So the MAG-7 is really almost the MAG-750. That was Barry Ritholtz, host of the Bloomberg Masters in Business podcast and at the money. Barry, also chairman and CIO of Ritholtz Wealth Management. Still ahead on Bloomberg Business Week, how psychology and behavioral finance are coming to the forefront.

1:05:39of wealth management. That's next. This is Bloomberg.

1:05:46You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. We continue now with a special edition of Bloomberg Business Week, where we bring you highlights from our coverage of the Future Proof Festival in Huntington Beach, California. Before we wrap up our coverage, we wanted to share a chat from the event on the cross between behavioral economics and psychology, taking an outsized role in recent years on Wall Street and in investing.

1:06:20On that, we were joined by Dr. Daniel Crosby, Chief Behavioral Officer at Orion Advisor Solutions. The firm, in its own words, supports$5.2 trillion in assets under administration across 25 ,000 advisory firms in the U.S. It also manages more than$100 billion in wealth assets for advisors. We should note Dr. Crosby's first book, Personal Benchmark, Integrating Behavioral Finance and Investment Management, was a New York Times bestseller. What is a chief behavioral officer? Yes, it's a great question. My mom would like to know as well. A chief behavioral officer, the role of the advisors that we serve is more and more about helping people avoid the very worst of human behavior.

1:07:01And if you look at the research on how advisors add dollars and cents value to their clients' lives, a meta-analysis of this shows that they add about seven times as much by keeping people out of their own way as they do even something like asset management. So it's an incredible value. And I think in the age of AI, it's just going to be an even bigger value. So how do they read through the behavioral cues? Because I'm just thinking, Daniel, that there are people who are overly confident, like I know exactly what I'm doing. And then there are people who are really, really nervous. and I'm just trying to figure out how do you read through all of those cues if you're sitting down with a client.

1:07:34Well, what's cool is now we can use technology to do that. And in a very short order, two different ways. We have a variety of assessments that we'll get at someone's financial personality, but also through what psychologists call revealed preferences. By looking at what they do, people tend to be pretty poor descriptors of their own behavior. We don't have to ask them what they're like. We can look at how they act and we can infer from their behavior. That's one of the great things about working. Like what? Give us an example. Oh, just how in my mind. You know, instead of asking someone how overconfident are you, you look at things that are descriptive of overconfidence.

1:08:10Overtrading, you know, failure to use an advisor, jumping in and out of positions, being skittish, things like this would be representative of fear or overconfidence. So there are trading behaviors that are emblematic of the different sorts of things that Dr. Thaler studied. Is it the right answer to everything? Just do nothing? Like, don't follow your urges. I'll give you an example. I have a friend who was freaking out during the tariff, so-called Liberation Day. And he sold a bunch of equities. And he's like, everything is different. We're in a different world. He's not an investment manager.

1:08:50He's in medicine. He has an advisor, but he told his advisor to sell. His advisor told him not to. But he did it anyway. And he's convinced that this is a different world that we're living in, pre and post tariffs? Well, one of the tricky things is that you definitely should do less than you think you should. And being good at investing requires a different set of understanding and a different set of skills than just about anything else in life. If you want to get stronger, you lift more weights. If you want to get wiser, you read more books. If you want to make more money, you tend to do less.

1:09:18And in fact, this has been studied in 19 different countries in every country where it's ever been studied, the more people trade, the worse they tend to do. That is a very consistent finding. It's monotonic. It's stepwise, right? The more you trade, the worse you tend to do. So maybe not do nothing, but definitely do less than you think you should. So set it and forget it. More or less. I mean, you could do a lot worse than set it and forget it. So how do you do something like, you come to an event like this, you go to a lot of other financial conferences, you go to Milken on the West Coast in the spring, and everybody's talking about private markets.

1:09:50And so you're like, oh my gosh, maybe I need to be in this more aggressively. How do you weave that into maybe your strategy or should you ignore it? How do you, I don't know, how do you deal with new trends? AI, the exuberance that we're seeing over that. Yeah, yeah, yeah. One of the things that we understand is that the best portfolio for you is going to look a little different than it is for me. So something like AI stocks, something like something like private markets may have a place depending on who you are and what you value. I'm also a big proponent of sinning a little, right? There's something like I'll encourage people - Sinning a little?

1:10:28Sinning a little, like having three to 5 % of your wealth in sort of a fun account where you get to take big risks because you like being involved in markets. Eric Valchunas, our colleague at Bloomberg Intelligence, calls this the hot sauce, where people throw something into ARK or crypto or something. Sure, right? It's a cheat meal. And it sort of scratches that itch. It's like, okay, you can mess around with that money. Just don't touch everything else. That's exactly right. So it's an imperfect decision that keeps you from a much larger, sort of life-altering bad decision. And I'm happy with that trade-off.

1:11:02I don't know. Piece of advice to investors then. And thinking about psychology and behavioral economics or behavioral investment thinking. Yeah. If you want to change your behavior, there's really three things you need, three E's, right? The first is the right education. You need to know a little bit about markets. They need to listen to you all, right? The next is an environment. The environment is very predictive of how you do. Are you getting the right inputs, right? Are you listening to the right sources? Are you listening to the right voices? And the last one's encouragement. People who work with a professional do a lot better than people who don't.

1:11:34And it's largely because they have that person in their corner. And this applies whether it's a global pandemic and a shutdown of the economy, whether it's the global financial crisis or a president that some say is erratic and policies can change a lot. Yeah, I think that's right. The flavor of the disruption will vary from moment to moment, but the fundamentals of what we should do beneath that very rarely do. Well, come back. We would love to continue this conversation. This was fun. Thanks. Daniel Crosby, he's Chief Behavioral Officer at Orion Advisor Solutions, joining us here at Future Proof.

1:12:05Future Proof. Bloomberg Business Week, live at Future Proof in Huntington Beach. Today's show is sponsored by VanEck, marking its 70th anniversary this year, with a legacy defined by forward-thinking strategies, resilience through market cycles, and an enduring commitment to clients. Jennifer Grancio is back with us, global head of ETFs over at TCW. They've got more than$200 billion across investment solutions as of the mid of this year, midpoint. ETF platforms have more than$4 billion, a lot under management. They see a lot of flows. We want to remind everybody to Jennifer, the former CEO of the impact investment firm Engine No.

1:12:391, which took on Exxon. You're going to be iconic forever. This is going to go with you wherever you go because it was really significant. I think also you joined us at Milken during that time when you guys were in the midst of that. And that's where sort of like I still know you from. But I think people still know you from that, as Carol mentioned. Yeah, I mean, engine number one was a moment in time where I think we had just started to think about energy transition at a very big level. It's not just green, it's brown, and it was going to require so much to move the world towards better sources of energy, electrification, all the power we need for reshoring in the U.S.

1:13:17So, yeah, that was a great moment in time. And then we folded in a lot of the work we had done there into TCW. Well, talk about what you are doing because energy is a big theme in terms of investing here for you guys. For sure. So if you think about the world today, as much as it's volatile and we're never sure exactly what's going to happen or how things are going to play out, if you think about TCW, we started as an equity firm, and then we even got a great public-private credit business. And so on the equity side, a lot of what we do is fundamental, concentrated portfolios that help you diversify from the index fund and the direct indexing you have at the core because the market is broadening.

1:13:54And we have a huge opportunity as investors to actually take advantage of how do you profit from the fact that we're seeing different sources of energy. And we have a huge demand for energy for AI and data centers, but also for the reshoring of manufacturing. How do you do that in an environment where the administration, depending on who's in the White House, changes their view on the future of energy? Like does a 180? I mean, you have the president wanting to actually doing it, trying to cancel offshore wind projects. And really, anything that isn't oil, it seems like he's not interested in, save for nuclear.

1:14:27But that's a bigger time horizon. Yeah, but that's how we think about it. So from a TCW perspective, we've been investing in the energy and power transition. We do that through the ETF-powered PWRD. But when we think about that, that's a very long trend. So that's over decades and decades. And so the way we think about it is we, as managers, want to invest for you so that we're paying attention to one administration to the other and what happens. And there will be some changes. But if you think about the changes in the traditional brown so that they can electrify and be more productive in a market like the Permian on oil, that's really important.

1:15:04Nuclear is incredibly important. And then what Trump said on actually supporting more nuclear, yeah, it's a long-run game. But that's great intermittent power. So we like to think about it very broadly, and it transcends administrations. But does it mean you ignore wind and solar? That can be part of our portfolio as well. We're looking at things that from a very long-term perspective will make sense. And you think even though wind is under so much pressure right now, in a different administration, it could come back? It will be part of the solution. It's not the lead place to make money in the next couple of years.

1:15:33And we're active managers, so we can take that into account in terms of the way we manage the portfolio. Where is money going across your platforms? Where are the flows going in? Where are the flows coming out? We would see, if I answer it maybe on an industry question, and then I can talk about TCW, we see active equity is tough. So in active equity, investments are very selective. So what we're doing in active equity, products like Powered or AIFD for AI, they're selective. They're meant to be complementing to big index holdings. And on fixed income, a lot of money continues to come into fixed income and continues to come into active fixed income.

1:16:10We're also big in private credit, not in the ETF space and products that are appropriate there. But both a fixed income and private credit are probably the places we see the most money coming in. Really? Not surprising. It feels like everything is private credit. I mean, I don't... It does. It does, but on the other hand, it's early. So if you think about a portfolio and if you think about biggest institutions in the world, they're invested in some kinds of private credit, but they're looking to get into private ABF because it's diversifying. But in wealth portfolios, if you think about the average investor or registered investment advisors, they're looking at how to take advantage of returns that can be like our core plus income ETF flexor.

1:16:54That's returning almost 7 % with over 5 % annual yield. That's very attractive. When you move into safe, controlled, careful private credit, you're still picking up multiple percentage points a year. So people should do it carefully. But it's a big opportunity. Do you see that opportunity continuing to grow in a weakening environment? We do. Again, if you go out and you survey, there's a McKinsey report that just came out surveying institutions and wealth. And private credit by far is the place that people are most interested in, most increasing allocations in. What confidence do you have that we have the right regulatory oversight on this?

1:17:30In a world where private credit still, there is a lack of transparency, and people don't, maybe not all investors understand that it's not liquid, like a lot of other investments? It's the right question, which is from a responsibility perspective as asset managers or for wealth managers, we should always be in a dialogue with clients on do they understand the liquids. When you do a semi-liquid product, for example, for us, we have things that have many, many year, five plus year drawdowns. That's not a liquid product. We wouldn't tell clients that that's a liquid product. In the asset-backed finance space, we have an interval fund, but the loans there are getting, kind of turning over within two to four years.

1:18:08So there's a little bit more liquidity there. So I think we'll watch the regulatory space, but investor education and responsibility by the managers is critical. So when it comes to private credit, you're looking for things where it is two to four years that they're turning over? It's a little bit more liquid. That's a little bit more liquid. And so if you think about private credit in the private securitized or asset-backed finance space, the loans are self-amortizing in two to four years. That's a space we think an interval fund makes sense. We manage an interval fund there. There are other places where it's just not that liquid, and that should be a private market product.

1:18:39Still a lot of interest in AI and the fund that tracks that? A huge amount of interest in AI. And I think everybody's interested in, one, what's happening with AI, who wins, what happens. But people are also looking at how to invest in it. So at TCW, we manage an ETF AI FD, which is investing very broadly in AI. And that's an opportunity to take advantage of, yes, it holds NVIDIA, but it also holds Broadcom and other companies that are benefiting and early winners in the trade. When you come to an event like this, I mean, is there a narrative you're picking up on that might be surprising? I'm just curious.

1:19:14Just got about 30 seconds here. I think from this conference, which is full of wealth advisors, they are trying to figure out how does artificial intelligence affect their business? How do they get smarter about it? And how can they adopt new outsourcing and new technologies so that they can spend more time actually serving their clients? Our thanks to Jennifer Gransio, Global Head of ETFs at TCW. And that wraps up the weekend edition of Bloomberg Business Week from Bloomberg Radio at the Future Proof Festival in Huntington Beach, California this past week. You can catch all the conversations from the event on the Bloomberg and at Bloomberg.com.

1:19:48Thank you so much for joining us. I'm Tim Stenebeck. And I'm Carol Masser. Have a good and safe weekend, everyone. This is the Bloomberg Business Week Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.