1 00:00:04,760 --> 00:00:08,080 Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 2 00:00:08,119 --> 00:00:11,200 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,280 --> 00:00:14,480 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:14,520 --> 00:00:16,880 Speaker 1: you and your money, whether at the grocery store or 5 00:00:16,920 --> 00:00:20,680 Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes, 6 00:00:20,840 --> 00:00:29,000 Speaker 1: SoundCloud and at Bloomberg dot com. For all of us here, 7 00:00:29,440 --> 00:00:32,120 Speaker 1: I just want to figure out how to introduce Barry Banister, 8 00:00:32,240 --> 00:00:36,240 Speaker 1: chief equity strategist that as step Nicholas. You know, Barry, 9 00:00:36,440 --> 00:00:41,120 Speaker 1: when I mentioned earlier to Tom Keene that you were 10 00:00:41,159 --> 00:00:44,040 Speaker 1: coming on the program, he kind of lit up a 11 00:00:44,040 --> 00:00:47,240 Speaker 1: little bit. A little bit, he lit up a little bit. Yeah, 12 00:00:47,360 --> 00:00:49,199 Speaker 1: I think that kind of he that was that was 13 00:00:49,280 --> 00:00:52,239 Speaker 1: something that rang a bell with him. So I'm wondering, 14 00:00:52,760 --> 00:00:55,960 Speaker 1: how long have you been doing this. I've been a 15 00:00:56,040 --> 00:00:58,760 Speaker 1: strategist for about seven years, and then prior to that, 16 00:00:58,840 --> 00:01:02,040 Speaker 1: for about three years, I was a analyst in the 17 00:01:02,080 --> 00:01:05,120 Speaker 1: equity side, sell side as well as by side. So 18 00:01:05,200 --> 00:01:09,280 Speaker 1: you've seen the cycles come and go yeah, quite a few. Yeah, 19 00:01:09,680 --> 00:01:13,520 Speaker 1: And I use the word cycle specifically be and I 20 00:01:13,880 --> 00:01:15,600 Speaker 1: think you know why. And I'm wondering if you would 21 00:01:15,640 --> 00:01:19,120 Speaker 1: just describe where we are in the cycles that you 22 00:01:19,160 --> 00:01:22,919 Speaker 1: pay attention to. Yeah, one of the things that we've 23 00:01:23,080 --> 00:01:26,800 Speaker 1: differed on from from the earliest days is that the 24 00:01:26,840 --> 00:01:30,959 Speaker 1: Fed really began hiking in May, when what's called the 25 00:01:30,959 --> 00:01:35,919 Speaker 1: Atlanta Fed Shadow Fed funds rate bottomed at minus three uh. 26 00:01:36,040 --> 00:01:39,480 Speaker 1: It's a complex calculation based on options pricing models, but 27 00:01:39,520 --> 00:01:42,040 Speaker 1: what it really describes is the effect of q E 28 00:01:42,240 --> 00:01:45,760 Speaker 1: rate suppression, forward guidance twist, and other things the Fed did. 29 00:01:46,400 --> 00:01:49,480 Speaker 1: So we've been in a tightening cycle for several years, 30 00:01:50,200 --> 00:01:53,240 Speaker 1: and I do think that at about a two interest 31 00:01:53,320 --> 00:01:55,720 Speaker 1: rate on Fed funds, we will reach a point where 32 00:01:55,720 --> 00:01:58,200 Speaker 1: it's just too much, but that's not going to happen 33 00:01:58,400 --> 00:02:00,760 Speaker 1: in the next six to nine. So I think the 34 00:02:00,800 --> 00:02:05,120 Speaker 1: market looks pretty good to the spring of eighteen. Well 35 00:02:05,200 --> 00:02:07,240 Speaker 1: until the spring of eighteen. What do you do. Just 36 00:02:07,240 --> 00:02:09,680 Speaker 1: stay where you are right now. We've been a big 37 00:02:10,040 --> 00:02:14,280 Speaker 1: positive bull on the reflation trade, more so last year 38 00:02:14,400 --> 00:02:17,000 Speaker 1: on energy. I was three months early on that, and 39 00:02:17,040 --> 00:02:20,519 Speaker 1: then un financials again I was three months early. We've 40 00:02:20,520 --> 00:02:25,040 Speaker 1: had a few soft months since the election, approximately mid December, 41 00:02:25,480 --> 00:02:27,760 Speaker 1: as the Fiscal House is trying to get an order 42 00:02:27,840 --> 00:02:30,560 Speaker 1: and it is very difficult. This is not an administration 43 00:02:30,600 --> 00:02:33,000 Speaker 1: that thought it would win, so there was no government 44 00:02:33,000 --> 00:02:35,840 Speaker 1: in waiting, and so things are in a bit of disarray. 45 00:02:35,880 --> 00:02:38,840 Speaker 1: But I think things will get better. And with the 46 00:02:38,919 --> 00:02:41,880 Speaker 1: clarity on that, the FEDS clarity that they've been giving 47 00:02:42,040 --> 00:02:45,959 Speaker 1: some growth abroad, I think things look good for another 48 00:02:46,120 --> 00:02:50,040 Speaker 1: move up in the reflation trade and that would include energy. 49 00:02:50,240 --> 00:02:56,480 Speaker 1: Would that include financials? It is primarily financials, obviously banks. 50 00:02:56,960 --> 00:03:01,240 Speaker 1: It's also the capital spending side of technology, a little 51 00:03:01,280 --> 00:03:05,840 Speaker 1: different than the social media side. It's also that includes software, 52 00:03:05,880 --> 00:03:09,280 Speaker 1: semis and things like that, continuing or resuming the run 53 00:03:09,320 --> 00:03:13,680 Speaker 1: that they've had. It also includes industrial and some basic materials. 54 00:03:13,680 --> 00:03:15,440 Speaker 1: Although we have to be careful not to assume that 55 00:03:15,440 --> 00:03:19,600 Speaker 1: the Chinese are going to employ a fixed investment model forever. Uh, 56 00:03:19,639 --> 00:03:21,680 Speaker 1: they have to reduce that as a share of GDP. 57 00:03:22,200 --> 00:03:24,959 Speaker 1: But generally, yes, it's a more pro cyclical, more pro 58 00:03:25,080 --> 00:03:28,280 Speaker 1: global growth bet and I think it looks pretty good 59 00:03:28,400 --> 00:03:33,760 Speaker 1: into the spring of eighteen. So for the SMP right now, 60 00:03:34,760 --> 00:03:37,960 Speaker 1: if you've participated and you're looking at it on an 61 00:03:37,960 --> 00:03:41,640 Speaker 1: annual basis, although I mean every it really makes no sense, 62 00:03:41,680 --> 00:03:46,280 Speaker 1: but uh, you're five percent, what would you do Yeah. 63 00:03:46,320 --> 00:03:49,280 Speaker 1: One of the things about low interest rates is it 64 00:03:49,320 --> 00:03:51,480 Speaker 1: can be two things. One, you can have a low 65 00:03:51,600 --> 00:03:55,080 Speaker 1: rate because you're fearful of deflation. So what you have 66 00:03:55,240 --> 00:03:57,600 Speaker 1: is a very low real rate and a very low 67 00:03:57,640 --> 00:04:01,400 Speaker 1: inflation rate, and that's not necessarily good. It does help 68 00:04:01,440 --> 00:04:04,840 Speaker 1: your multiples, your PE multiples, because you're discounting the cash 69 00:04:04,840 --> 00:04:07,480 Speaker 1: flows at a low interest rate. But when you switch 70 00:04:07,520 --> 00:04:11,000 Speaker 1: you over psychologically from fear of deflation to a little 71 00:04:11,000 --> 00:04:14,480 Speaker 1: more confidence in reflation, it's almost like a light goes 72 00:04:14,560 --> 00:04:18,039 Speaker 1: on and you get the positive benefit of a super normal, 73 00:04:18,440 --> 00:04:22,960 Speaker 1: very low interest rate. Uh and as a result, you 74 00:04:23,040 --> 00:04:25,720 Speaker 1: get a very very high PE ratio. So we do 75 00:04:25,839 --> 00:04:30,800 Speaker 1: think that the dollar traily twelve month SMP earnings can 76 00:04:30,800 --> 00:04:34,240 Speaker 1: be discounted at a twenty multiple, which is a inverse 77 00:04:34,240 --> 00:04:37,840 Speaker 1: of a five mid grade corporate B double A yield, 78 00:04:38,000 --> 00:04:42,800 Speaker 1: and that puts you are So that's our target this year. Well, 79 00:04:42,839 --> 00:04:44,840 Speaker 1: all right, we're gonna we could write We're going to 80 00:04:44,920 --> 00:04:46,560 Speaker 1: write that down and then we'll be able to see 81 00:04:46,560 --> 00:04:48,880 Speaker 1: how that, you know, turns out for the for the 82 00:04:48,920 --> 00:04:52,080 Speaker 1: rest of the year. But Barry, you know, as I 83 00:04:52,160 --> 00:04:56,160 Speaker 1: look over your notes and also receive emails from people 84 00:04:56,200 --> 00:04:58,440 Speaker 1: who have followed your career in and listen to you 85 00:04:58,800 --> 00:05:01,920 Speaker 1: over the time. Uh. They go back to let's say 86 00:05:02,200 --> 00:05:07,239 Speaker 1: the post nine eleven UH world, and you wrote about 87 00:05:07,279 --> 00:05:11,800 Speaker 1: that what all the way back from two thousand and two. Mm. Yeah, 88 00:05:11,800 --> 00:05:14,080 Speaker 1: in two thousand one and two thousand I've been writing 89 00:05:14,120 --> 00:05:17,960 Speaker 1: about a a rotation into hard assets, which would be 90 00:05:18,120 --> 00:05:21,599 Speaker 1: commodities and to an extent real estate and gold and 91 00:05:21,640 --> 00:05:26,159 Speaker 1: things like that, UM and away from financial assets in 92 00:05:26,279 --> 00:05:29,280 Speaker 1: terms of relative strength, and the commodity cycle two thousand 93 00:05:29,480 --> 00:05:32,000 Speaker 1: two roughly to two thousand fifteen. Oil as you know, 94 00:05:32,080 --> 00:05:34,640 Speaker 1: rolled over in the OPEC price war and the FED 95 00:05:34,720 --> 00:05:37,720 Speaker 1: somewhat premature attempt to exit and raise rates when the 96 00:05:37,760 --> 00:05:40,120 Speaker 1: rest of the world was going to negative rates, so 97 00:05:40,200 --> 00:05:42,800 Speaker 1: that tended to crash the price of oil, as we 98 00:05:42,839 --> 00:05:45,640 Speaker 1: saw in So the commodity cycle was two thousand two 99 00:05:45,640 --> 00:05:49,400 Speaker 1: to two thousand and fifteen, we played that. UM. The 100 00:05:49,440 --> 00:05:53,240 Speaker 1: cycle now though, is most of a post debt deflation 101 00:05:53,440 --> 00:05:56,159 Speaker 1: and a global rebalancing and de leveraging. It gets into 102 00:05:56,240 --> 00:06:01,080 Speaker 1: very complicated global, cross border macroeconomics. And so I'm spending 103 00:06:01,080 --> 00:06:03,560 Speaker 1: most of my time now Pam, trying to be more 104 00:06:03,640 --> 00:06:08,760 Speaker 1: knowledgeable of macroeconomics and uh that occupies probably my time. 105 00:06:08,920 --> 00:06:11,919 Speaker 1: So so from that perspective, maybe you can share some 106 00:06:12,080 --> 00:06:17,800 Speaker 1: of your more recent uh understandings. Yeah, yeah, Well, I mean, 107 00:06:17,839 --> 00:06:20,039 Speaker 1: one of the things that's going on is the Chinese 108 00:06:20,080 --> 00:06:24,840 Speaker 1: savings surplus, which still exists, has to find a home. 109 00:06:24,880 --> 00:06:27,719 Speaker 1: It has to go someplace. If it stays domestic, it 110 00:06:27,760 --> 00:06:31,520 Speaker 1: inflates bubbles, drives credit growth. If it's exported, it bids 111 00:06:31,600 --> 00:06:35,640 Speaker 1: up housing prices in Brooklyn, and uh and Vancouver and 112 00:06:35,680 --> 00:06:39,920 Speaker 1: elsewhere and Toronto, you name it, uh and uh. So 113 00:06:39,960 --> 00:06:42,719 Speaker 1: what we're seeing now is a push in this administration, 114 00:06:42,839 --> 00:06:45,280 Speaker 1: which is I wouldn't classify it as mercantilist, but I 115 00:06:45,279 --> 00:06:48,240 Speaker 1: would say that they're unwilling to have eat The surplus 116 00:06:48,320 --> 00:06:50,719 Speaker 1: is the trade surpluses of every other country in the world. 117 00:06:51,040 --> 00:06:53,920 Speaker 1: So we're seeing a change in the global monetary order. 118 00:06:53,960 --> 00:06:56,200 Speaker 1: This is a very big deal. It's on the scale 119 00:06:56,240 --> 00:06:59,719 Speaker 1: of what happened in nineteen forties with the Breton Woods Agreement, 120 00:07:00,080 --> 00:07:02,080 Speaker 1: and the US is no longer willing to be the 121 00:07:02,160 --> 00:07:06,080 Speaker 1: dumping ground for the exports of all the other surplus countries, 122 00:07:06,120 --> 00:07:09,520 Speaker 1: from Germany to Mexico to China. And as a result, 123 00:07:09,520 --> 00:07:11,760 Speaker 1: there's a political change of foot and I think that 124 00:07:11,800 --> 00:07:14,040 Speaker 1: will gel over the next several years and we'll see 125 00:07:14,080 --> 00:07:19,280 Speaker 1: more of a balancing of savings investment in each country domestically, uh, 126 00:07:19,320 --> 00:07:22,200 Speaker 1: and that will reduce this role of trade. And we 127 00:07:22,240 --> 00:07:24,320 Speaker 1: have to figure out what all this means. That's a 128 00:07:24,400 --> 00:07:29,960 Speaker 1: very powerful statement. Well, the US had, I guess, decided 129 00:07:30,560 --> 00:07:34,520 Speaker 1: to uh, you know, to allow first it happened in 130 00:07:34,560 --> 00:07:37,320 Speaker 1: Europe after World War two, Martial Plan and so on, 131 00:07:37,440 --> 00:07:40,880 Speaker 1: that the US would be a source of of of 132 00:07:40,960 --> 00:07:43,400 Speaker 1: demand for their outputs so that they could modernize and 133 00:07:43,440 --> 00:07:47,080 Speaker 1: develop into capitalist democracies. Um. But then they did that 134 00:07:47,160 --> 00:07:49,280 Speaker 1: in Asia with some of the tigers, as you recall, 135 00:07:49,320 --> 00:07:51,200 Speaker 1: and I recall because we've been around a while, in 136 00:07:51,240 --> 00:07:55,080 Speaker 1: the ninety nineties the tiger economies. UM. Before that, it 137 00:07:55,160 --> 00:07:58,840 Speaker 1: was the Japanese and and of course the Koreans and Taiwanese. 138 00:07:59,240 --> 00:08:02,400 Speaker 1: But what's happening now is China, which is simply too big, 139 00:08:02,440 --> 00:08:05,800 Speaker 1: has tried to follow that model and it's been very disruptive. 140 00:08:06,000 --> 00:08:08,800 Speaker 1: China is no longer a currency manipulator. China was a 141 00:08:09,040 --> 00:08:11,640 Speaker 1: manipulator two thousand and two thousand seven when they built 142 00:08:11,720 --> 00:08:15,320 Speaker 1: up their reserve position. So we gotta we gotta leave 143 00:08:15,320 --> 00:08:17,280 Speaker 1: it there, but I look forward to having you in 144 00:08:17,320 --> 00:08:23,080 Speaker 1: the future anytime. Barry Banister, chief equity strategists stifle financial 145 00:08:23,320 --> 00:08:40,040 Speaker 1: based in Baltimore, Maryland, Medicare and doctors. There are many 146 00:08:40,080 --> 00:08:45,400 Speaker 1: surveys that have produced results indicating that doctors are foregoing 147 00:08:45,679 --> 00:08:49,120 Speaker 1: entry into Medicare they no longer feel that it would 148 00:08:49,120 --> 00:08:52,880 Speaker 1: make financial sense. Joining us now is Dr Chris Chen. 149 00:08:52,920 --> 00:08:55,920 Speaker 1: He is the chief executive of Chen med and they 150 00:08:55,920 --> 00:09:00,000 Speaker 1: are a physician led primary care facility and he joined 151 00:09:00,160 --> 00:09:02,800 Speaker 1: just now on the phone. Thanks very much for being 152 00:09:02,800 --> 00:09:06,400 Speaker 1: with us a Dr Chen, Maybe you could just explain 153 00:09:06,720 --> 00:09:12,760 Speaker 1: the role that Medicare and the reimbursement practice of Medicare 154 00:09:13,320 --> 00:09:16,079 Speaker 1: works a little bit and so that we can understand 155 00:09:16,200 --> 00:09:18,920 Speaker 1: how the doctor fits in and some of the ways 156 00:09:19,000 --> 00:09:26,320 Speaker 1: in which you are challenging conventional notions. Hi, pim yep Um. 157 00:09:26,360 --> 00:09:31,760 Speaker 1: So you know, our practice primarily relies on Medicare advantage UM, 158 00:09:31,840 --> 00:09:36,679 Speaker 1: which is a subsegment of the overall Medicare UM population. 159 00:09:37,640 --> 00:09:40,960 Speaker 1: And what that means is is that there's a premium 160 00:09:41,000 --> 00:09:44,760 Speaker 1: that goes from Medicare over to a health plan um. 161 00:09:44,800 --> 00:09:46,720 Speaker 1: The way that we're able to work with these health 162 00:09:46,760 --> 00:09:49,719 Speaker 1: plans is that the health plan will then give us 163 00:09:49,760 --> 00:09:53,800 Speaker 1: a fixed amount of dollars to manage a patient, and 164 00:09:53,880 --> 00:09:57,560 Speaker 1: that really allows us to create really flexible and unique 165 00:09:57,559 --> 00:10:01,520 Speaker 1: and innovative models of care that can substantially improve the 166 00:10:01,559 --> 00:10:06,079 Speaker 1: outcomes of patients. What kind of pushback has there been 167 00:10:06,160 --> 00:10:12,360 Speaker 1: inside the doctor community if any well, you know, any 168 00:10:12,440 --> 00:10:17,000 Speaker 1: kind of change, um, can be difficult. Today in the 169 00:10:17,080 --> 00:10:21,000 Speaker 1: Medicare there's the Medicare fee for service world. Um. You know, 170 00:10:21,080 --> 00:10:23,959 Speaker 1: doctors are paid for you know, for volume, They're paid 171 00:10:23,960 --> 00:10:28,440 Speaker 1: for transactions. The more patients to see, the better you do. 172 00:10:29,280 --> 00:10:32,880 Speaker 1: In our model, which is primarily based in Medicare advantaged, Um, 173 00:10:32,920 --> 00:10:36,400 Speaker 1: we've created what is a value based care full risk 174 00:10:36,520 --> 00:10:38,679 Speaker 1: arrangement with health plans? What is that? What is it? 175 00:10:39,080 --> 00:10:41,480 Speaker 1: Because I just I want to understand where this came from, right, 176 00:10:41,520 --> 00:10:44,559 Speaker 1: because this is all has to do, I believe, with 177 00:10:44,679 --> 00:10:47,880 Speaker 1: the rules from the Medicare Access and the and the 178 00:10:47,960 --> 00:10:51,160 Speaker 1: chip re Or Authorization Act, because that really was kind 179 00:10:51,200 --> 00:10:56,920 Speaker 1: of something that changed the way doctors got paid, right right. 180 00:10:57,000 --> 00:11:00,240 Speaker 1: So um, you know there there's something called the care 181 00:11:00,240 --> 00:11:03,400 Speaker 1: advantage um, which is the private which is the private system, 182 00:11:03,400 --> 00:11:06,840 Speaker 1: as you said, would in which you the Medicare recipient 183 00:11:06,920 --> 00:11:10,560 Speaker 1: can have the premiums go to this private company Medicare advantage. 184 00:11:11,440 --> 00:11:14,880 Speaker 1: That's correct, and so there are many Medicare advantage health 185 00:11:14,880 --> 00:11:19,640 Speaker 1: plans out there, and essentially the premium dollar goes over 186 00:11:19,640 --> 00:11:21,880 Speaker 1: to these health plans, and these health plans have to 187 00:11:21,880 --> 00:11:24,960 Speaker 1: figure out how to improve the outcomes of patients and 188 00:11:25,120 --> 00:11:27,960 Speaker 1: ultimately reduce costs so that way they have some margin 189 00:11:28,080 --> 00:11:30,960 Speaker 1: left over, right, And so what a lot of these 190 00:11:31,000 --> 00:11:33,760 Speaker 1: health plans have done is they've gone out to physicians 191 00:11:34,120 --> 00:11:38,720 Speaker 1: UM and physician organizations like ours to create novel innovative 192 00:11:38,760 --> 00:11:44,199 Speaker 1: models that can ultimately improve that the outcomes of these 193 00:11:44,200 --> 00:11:47,840 Speaker 1: patients and subsequently reduce the cost so that way there 194 00:11:47,840 --> 00:11:51,559 Speaker 1: can be an opportunity to create margin on that patient population. 195 00:11:52,040 --> 00:11:56,000 Speaker 1: What is different about the way you would structure your 196 00:11:56,040 --> 00:12:00,640 Speaker 1: business having all of this information, Uh, if you had 197 00:12:00,679 --> 00:12:04,680 Speaker 1: a kind of clean slate. So you know, that's exactly 198 00:12:04,760 --> 00:12:07,200 Speaker 1: what Chen meant. Did you know we noticed that UM 199 00:12:07,440 --> 00:12:12,000 Speaker 1: about five of any given population within Medicare advantage accounts 200 00:12:12,000 --> 00:12:15,800 Speaker 1: for about fifty and seventy of costs. And so what 201 00:12:15,880 --> 00:12:18,319 Speaker 1: we notice is this population tends to be load of 202 00:12:18,400 --> 00:12:22,240 Speaker 1: moderate incomes, seniors with multiple chronic conditions. And so what 203 00:12:22,360 --> 00:12:25,760 Speaker 1: chen Mets sought to do was deliver you know, you 204 00:12:25,760 --> 00:12:31,240 Speaker 1: know these load of modernit incomes seniors, concierge level care um. 205 00:12:31,240 --> 00:12:32,959 Speaker 1: This is the kind of care that usually is only 206 00:12:33,000 --> 00:12:36,360 Speaker 1: available to you know, CEOs and executives at large companies. 207 00:12:36,880 --> 00:12:39,480 Speaker 1: And and we are able to provide this level of 208 00:12:39,480 --> 00:12:42,880 Speaker 1: concierge care at no additional costs of the patient. So, 209 00:12:42,920 --> 00:12:45,880 Speaker 1: if you're a chen Met patient, what we're able to 210 00:12:45,880 --> 00:12:49,439 Speaker 1: deliver them is instead of the average doctor taking care 211 00:12:49,440 --> 00:12:53,240 Speaker 1: of twenty three patients, our doctors only take care of 212 00:12:53,240 --> 00:12:56,760 Speaker 1: for it in fifty. Instead of a doctor only spending 213 00:12:56,800 --> 00:13:01,240 Speaker 1: about thirteen to sixteen minutes a year with a FaceTime 214 00:13:01,280 --> 00:13:03,720 Speaker 1: with a patient, our doctors have been about a hundred 215 00:13:03,760 --> 00:13:09,000 Speaker 1: and sixty eight minutes. Well, the way we do give 216 00:13:09,040 --> 00:13:11,840 Speaker 1: us you reveal and pull back the curtain a little 217 00:13:11,840 --> 00:13:15,840 Speaker 1: bit absolutely, So, you know, by increasing access to care, 218 00:13:15,880 --> 00:13:19,560 Speaker 1: by providing this really high touch, concert level care that 219 00:13:19,600 --> 00:13:23,720 Speaker 1: includes transportation, medications on site, specialists on site, and this 220 00:13:23,800 --> 00:13:25,880 Speaker 1: high touch level of care, what we're able to do 221 00:13:26,320 --> 00:13:31,079 Speaker 1: is significantly reduced the hospitalization rate. Today we published that 222 00:13:31,160 --> 00:13:34,280 Speaker 1: we can reduce hospitalizations by thirty eight percent and so 223 00:13:34,360 --> 00:13:38,240 Speaker 1: what happens is when you can reduce hospitalizations, you substantially 224 00:13:38,240 --> 00:13:42,240 Speaker 1: reduce costs. What would be an example, So give us 225 00:13:42,240 --> 00:13:45,079 Speaker 1: a patient example being you know and you know, paint 226 00:13:45,120 --> 00:13:47,680 Speaker 1: the picture for us wonderful. So I have a patient 227 00:13:47,720 --> 00:13:52,280 Speaker 1: of mine. Um, his name is, let's call him Mr F. 228 00:13:53,160 --> 00:13:55,640 Speaker 1: Mr F came to me. He had been going to 229 00:13:55,679 --> 00:13:57,920 Speaker 1: the hospital about five times a year because he has 230 00:13:58,040 --> 00:14:02,559 Speaker 1: end stage heart failure. Okay, it's heart doesn't pump well anymore. Um, 231 00:14:03,480 --> 00:14:05,520 Speaker 1: it's it's weak and he keeps showing up in the 232 00:14:05,559 --> 00:14:09,240 Speaker 1: emergency room. Now, what I know is this is a 233 00:14:09,240 --> 00:14:12,079 Speaker 1: patient that you know in general and a normal traditional 234 00:14:12,200 --> 00:14:15,199 Speaker 1: fee for service Medicare environment will be seen for thirteen 235 00:14:15,240 --> 00:14:18,920 Speaker 1: to sixteen minutes a year of FaceTime. What I have 236 00:14:18,960 --> 00:14:21,240 Speaker 1: done is I see him and I will see him 237 00:14:21,320 --> 00:14:25,680 Speaker 1: every single week if necessary. And so initially when I 238 00:14:25,720 --> 00:14:28,320 Speaker 1: met him, he was actually in hospice. He was ready 239 00:14:28,360 --> 00:14:31,440 Speaker 1: to call it quits. And when I and you know, 240 00:14:31,480 --> 00:14:34,840 Speaker 1: after seeing him every single week, after providing him door 241 00:14:34,880 --> 00:14:39,440 Speaker 1: to doctor transportation, after giving his medications on site, after 242 00:14:40,000 --> 00:14:43,880 Speaker 1: having multiple conferences and coordinating his care with his other specialists, 243 00:14:45,200 --> 00:14:48,400 Speaker 1: I took him from being admitted five times a year, 244 00:14:48,480 --> 00:14:53,000 Speaker 1: of which each admission costs twenty tho dollars. Now he 245 00:14:53,040 --> 00:14:56,200 Speaker 1: has not been admitted in over four years, and he's 246 00:14:56,200 --> 00:14:59,400 Speaker 1: out of hospice, and so how do you but then 247 00:14:59,760 --> 00:15:05,640 Speaker 1: but there and not but but and you are who 248 00:15:05,680 --> 00:15:09,120 Speaker 1: pays you, how could you forward to do this? Right? 249 00:15:09,160 --> 00:15:11,920 Speaker 1: So this is perfect. So if a patient comes to us, right, 250 00:15:12,560 --> 00:15:16,080 Speaker 1: if they because we are actually taking the premium dollar, 251 00:15:16,360 --> 00:15:21,640 Speaker 1: the a Medicare advantage health plan will offload the a 252 00:15:21,760 --> 00:15:23,840 Speaker 1: percentage of the premium. So fix the amount of money 253 00:15:23,840 --> 00:15:26,840 Speaker 1: to us, right, And so therefore the patient ends up 254 00:15:26,840 --> 00:15:30,640 Speaker 1: in the hospital like like Mr F five times, okay, 255 00:15:30,800 --> 00:15:33,200 Speaker 1: and it's twenty knowledge every time they go to the hospital. 256 00:15:33,600 --> 00:15:36,400 Speaker 1: I pay for that. But the beautiful thing is if 257 00:15:36,440 --> 00:15:41,760 Speaker 1: I'm able to significantly reduce his catastrophic hospitalization rates, then 258 00:15:42,520 --> 00:15:44,800 Speaker 1: well I'm going to bet for benefit from that. And 259 00:15:44,840 --> 00:15:47,040 Speaker 1: so what we found is this is a scenario in 260 00:15:47,120 --> 00:15:49,960 Speaker 1: which if I can figure out a way to substantially 261 00:15:50,000 --> 00:15:55,040 Speaker 1: reduce the most costly admissions for our patients, patients win 262 00:15:55,840 --> 00:15:58,560 Speaker 1: because they're not getting sick. But also we win because 263 00:15:58,600 --> 00:16:01,360 Speaker 1: now we actually don't have to you know what what 264 00:16:01,440 --> 00:16:03,160 Speaker 1: that patient would have cost it would have been you know, 265 00:16:03,200 --> 00:16:06,600 Speaker 1: five times at an admission hundred thousand dollars a year 266 00:16:06,600 --> 00:16:09,520 Speaker 1: instead of that, you know, perhaps that patient actually hasn't 267 00:16:09,560 --> 00:16:13,000 Speaker 1: accrued any major catastrophic costs, so we actually are able 268 00:16:13,000 --> 00:16:16,000 Speaker 1: to make money. And what unique about chen Med is 269 00:16:16,000 --> 00:16:18,520 Speaker 1: that we're not not only can we do this in 270 00:16:18,960 --> 00:16:21,400 Speaker 1: what we started, which was in South Florida, but we've 271 00:16:21,400 --> 00:16:25,640 Speaker 1: been able to replicate this exact model across multiple practices 272 00:16:27,160 --> 00:16:30,880 Speaker 1: in nine U S geographies. So you know, what we've 273 00:16:30,880 --> 00:16:34,600 Speaker 1: discovered is this model of care is actually scalable and 274 00:16:34,720 --> 00:16:36,840 Speaker 1: we then surrounded well, we'll have to check in with 275 00:16:36,880 --> 00:16:40,080 Speaker 1: you and find out the future of chen Med is 276 00:16:40,120 --> 00:16:50,880 Speaker 1: the chief executive Dr. Chris chen We want to take 277 00:16:50,920 --> 00:16:53,760 Speaker 1: a moment to let you know about something new from Bloomberg. 278 00:16:53,960 --> 00:16:57,280 Speaker 1: Starting right now, you can use our iOS app or 279 00:16:57,360 --> 00:17:01,000 Speaker 1: our new Google Chrome extension to scan any news story 280 00:17:01,080 --> 00:17:05,080 Speaker 1: on any website, instantly revealing relevant news and market data 281 00:17:05,119 --> 00:17:08,879 Speaker 1: from Bloomberg and other sources related to companies and people 282 00:17:08,960 --> 00:17:12,119 Speaker 1: you're reading about. So no matter where you're reading the news, 283 00:17:12,160 --> 00:17:14,480 Speaker 1: you can bring the power of Bloomberg's news and data 284 00:17:14,520 --> 00:17:17,920 Speaker 1: with you. It's pretty amazing. Download our io s app 285 00:17:18,080 --> 00:17:20,480 Speaker 1: or search for the Bloomberg extension on the Chrome Store 286 00:17:20,520 --> 00:17:23,399 Speaker 1: to try it out. Learn more at Bloomberg dot com 287 00:17:23,680 --> 00:17:34,520 Speaker 1: slash lens. Let's take a look at Canada. Canada because 288 00:17:34,560 --> 00:17:36,920 Speaker 1: they are are neighbor to the north, but also because 289 00:17:36,960 --> 00:17:40,600 Speaker 1: President Donald Trump in a speech was promising to find 290 00:17:40,640 --> 00:17:44,320 Speaker 1: a solution to a trade dispute with Canada that well 291 00:17:44,480 --> 00:17:47,760 Speaker 1: has left many dairy farmers in Wisconsin and New York 292 00:17:47,800 --> 00:17:52,320 Speaker 1: without a market for their product. So, um, let's find 293 00:17:52,320 --> 00:17:56,800 Speaker 1: out more from Joe Light. He is our financial regulation reporter, 294 00:17:57,200 --> 00:18:01,160 Speaker 1: and this is not necessarily a out regulation. I wanted 295 00:18:01,240 --> 00:18:04,880 Speaker 1: to just bring in the Canada issue because, uh, when 296 00:18:04,880 --> 00:18:08,119 Speaker 1: we talk about home building, Uh, it's interesting how the 297 00:18:08,160 --> 00:18:11,359 Speaker 1: world gets connected very quickly, and I'm wondering, Joe, if 298 00:18:11,440 --> 00:18:13,400 Speaker 1: you can just kind of describe what what is all 299 00:18:13,480 --> 00:18:17,879 Speaker 1: going on here and maybe just bring in current events. Yeah. Sure, 300 00:18:17,920 --> 00:18:21,560 Speaker 1: So the um, as you mentioned, Trump talked to the 301 00:18:21,680 --> 00:18:25,200 Speaker 1: dairy community yesterday, and I've been doing some reporting on 302 00:18:26,000 --> 00:18:29,440 Speaker 1: Canada's imports of softwood lumber to the United States and 303 00:18:29,480 --> 00:18:32,760 Speaker 1: it's kind of a great example of how even for 304 00:18:32,880 --> 00:18:35,399 Speaker 1: you know, kind of the most basic of commodities, like 305 00:18:35,480 --> 00:18:38,639 Speaker 1: would you have all sorts of different lobbying groups and 306 00:18:38,680 --> 00:18:41,760 Speaker 1: interest groups on both sides of the border. Um with 307 00:18:41,800 --> 00:18:44,680 Speaker 1: thousands of jobs at stake, uh, you know, fighting each 308 00:18:44,680 --> 00:18:46,760 Speaker 1: other for a share of the US market. So in 309 00:18:46,760 --> 00:18:48,600 Speaker 1: the case of lumber, you know, this is a dispute 310 00:18:48,600 --> 00:18:52,800 Speaker 1: that's been going on for more than three decades. Canada 311 00:18:52,880 --> 00:18:55,800 Speaker 1: imports about five billion dollars of lumber into the U 312 00:18:55,920 --> 00:18:58,600 Speaker 1: s that's in that's in US dollars, and as a 313 00:18:58,640 --> 00:19:01,679 Speaker 1: trade dispute that maybe not many people in the United 314 00:19:01,680 --> 00:19:03,920 Speaker 1: States have heard of, but it means hundreds of thousands 315 00:19:03,960 --> 00:19:07,360 Speaker 1: of jobs in certain communities, communities in Oregon, communities in 316 00:19:07,440 --> 00:19:14,680 Speaker 1: British Columbia. Yeah. So so the so basically Canada subsidizes 317 00:19:14,840 --> 00:19:18,199 Speaker 1: is lumber industry. Most of the timberland and Canada is 318 00:19:18,240 --> 00:19:21,520 Speaker 1: owned by provincial governments. They charge a fee to timber 319 00:19:21,560 --> 00:19:25,160 Speaker 1: producers to cut the trees down and as a result, 320 00:19:25,359 --> 00:19:28,760 Speaker 1: um US companies say that Canadian producers are able to 321 00:19:28,880 --> 00:19:31,800 Speaker 1: sell their lumber in the United States at depress prices, 322 00:19:32,119 --> 00:19:36,000 Speaker 1: which which they say costs American American jobs, cost lumber 323 00:19:36,000 --> 00:19:39,720 Speaker 1: companies profits. And so as soon as next week, the 324 00:19:39,800 --> 00:19:45,000 Speaker 1: US government might be imposing huge tariffs on Canadian lumber imports, 325 00:19:45,040 --> 00:19:47,400 Speaker 1: and the threat of that has driven lumber prices up 326 00:19:47,880 --> 00:19:51,520 Speaker 1: by by more than twenty since since the election. And 327 00:19:51,680 --> 00:19:54,399 Speaker 1: part of that's because you know, Trump has talked very 328 00:19:54,440 --> 00:19:57,960 Speaker 1: tough on trade with Canada and UH, and you know, 329 00:19:58,000 --> 00:20:01,480 Speaker 1: American producers and Canadian producers, the lumber market is expecting 330 00:20:01,480 --> 00:20:03,679 Speaker 1: those tariffs to you know, and a new deal to 331 00:20:03,720 --> 00:20:07,679 Speaker 1: come in UH pretty tough. So tell us about the 332 00:20:07,720 --> 00:20:12,080 Speaker 1: price a lumber right now and what are the implications 333 00:20:12,119 --> 00:20:16,959 Speaker 1: for businesses for the lumber companies. So the price of lumber, 334 00:20:17,040 --> 00:20:21,320 Speaker 1: it's it's gone up two since UH. That's as of 335 00:20:21,400 --> 00:20:26,560 Speaker 1: the close yesterday, since the UH, since the election. And 336 00:20:26,680 --> 00:20:30,560 Speaker 1: for UH for a typical US home, the home builders 337 00:20:30,560 --> 00:20:33,960 Speaker 1: say that's added about three thousand dollars to the UH 338 00:20:34,080 --> 00:20:36,560 Speaker 1: to to the cost of a home. So so you 339 00:20:36,600 --> 00:20:38,080 Speaker 1: kind of have two sides here in the US. You 340 00:20:38,080 --> 00:20:39,760 Speaker 1: have the people who buy the lumber and the people 341 00:20:39,760 --> 00:20:41,600 Speaker 1: who sell the lumber. The people who buy the lumber 342 00:20:41,640 --> 00:20:45,479 Speaker 1: they want to keep these lumber imports cheap, so so 343 00:20:45,560 --> 00:20:48,520 Speaker 1: they they don't want to see the the US UH 344 00:20:48,880 --> 00:20:52,240 Speaker 1: impose these UH impose these tariffs. The people who sell 345 00:20:52,400 --> 00:20:56,040 Speaker 1: sell the lumber, you know, big timber companies like wire Houser, 346 00:20:56,080 --> 00:20:59,760 Speaker 1: which actually has some UH they've they've got some for 347 00:21:00,080 --> 00:21:01,880 Speaker 1: in Canada as well as the US, but most mostly 348 00:21:01,880 --> 00:21:05,920 Speaker 1: in the US. UH. Local lumber companies and in places 349 00:21:05,960 --> 00:21:10,520 Speaker 1: like how wide is the gap between Canadian lumber and 350 00:21:10,760 --> 00:21:15,040 Speaker 1: the US lumber. So, so the tariffs that they're that 351 00:21:15,080 --> 00:21:17,880 Speaker 1: they're hoping to so the lumber market, it's a it's 352 00:21:17,920 --> 00:21:21,560 Speaker 1: a Canadian lumber in US lumber is competing with each other. Right, 353 00:21:21,960 --> 00:21:24,480 Speaker 1: So the you know, because it's traded right, I mean, yeah, 354 00:21:24,840 --> 00:21:28,919 Speaker 1: traded right, it's up three three points six today, right, 355 00:21:28,960 --> 00:21:30,560 Speaker 1: And but I've been looking, I'm going back all the 356 00:21:30,560 --> 00:21:33,239 Speaker 1: way to May of of last year, and you're right, 357 00:21:33,280 --> 00:21:36,800 Speaker 1: it's up. The prices up more than right, and and 358 00:21:36,800 --> 00:21:40,000 Speaker 1: and so the Canadian Canadian US lumber is always competing, 359 00:21:40,040 --> 00:21:43,000 Speaker 1: so they're selling for about the same price. The difference 360 00:21:43,040 --> 00:21:46,200 Speaker 1: here is that the cost of lumber, of producing lumber 361 00:21:46,200 --> 00:21:48,879 Speaker 1: in Canada, U S companies say, is much lower. So 362 00:21:48,920 --> 00:21:53,120 Speaker 1: the tariffs that UM we're the US is inspected expected 363 00:21:53,160 --> 00:21:56,520 Speaker 1: to impose as soon as next week or starting next week, 364 00:21:56,720 --> 00:22:01,040 Speaker 1: could run a run between thirty and according to some analysts, 365 00:22:01,080 --> 00:22:03,840 Speaker 1: and the impact of that would be to make US 366 00:22:03,920 --> 00:22:06,840 Speaker 1: companies much more competitive, at least in their eyes, and 367 00:22:06,840 --> 00:22:09,800 Speaker 1: to make Canadian companies much less competitive, which could result 368 00:22:09,800 --> 00:22:13,159 Speaker 1: in you know, mills closing in Canada, perhaps mills opening 369 00:22:13,160 --> 00:22:15,720 Speaker 1: in the US, and the US market share of the 370 00:22:15,840 --> 00:22:20,080 Speaker 1: lumber market rising. So that would benefit companies obviously that 371 00:22:20,160 --> 00:22:23,440 Speaker 1: have these operations in the United States. That's right, Yeah, 372 00:22:23,440 --> 00:22:25,199 Speaker 1: it say so so that this is all This is 373 00:22:25,200 --> 00:22:28,480 Speaker 1: all about the US market share versus the versus the 374 00:22:28,520 --> 00:22:31,199 Speaker 1: Canadian market share. For for the lumber producers, for the 375 00:22:31,240 --> 00:22:34,840 Speaker 1: home builders. You know, they're so frustrated by the UH 376 00:22:35,000 --> 00:22:37,760 Speaker 1: quickly rising costs of lumber that you know, they're already 377 00:22:37,760 --> 00:22:40,440 Speaker 1: looking for sources of supply elsewhere. They send a trade 378 00:22:40,440 --> 00:22:44,880 Speaker 1: delegation to Chile in September. They've been talking to governments 379 00:22:44,880 --> 00:22:48,639 Speaker 1: and producers in Sweden and Brazil, you know, basically anybody 380 00:22:48,640 --> 00:22:51,240 Speaker 1: who grows trees because they want to keep What about 381 00:22:51,240 --> 00:22:55,920 Speaker 1: alternatives to lumber for home builders, and you know that's uh. 382 00:22:56,119 --> 00:22:58,639 Speaker 1: I I think we're they're going to be framing homes 383 00:22:58,680 --> 00:23:02,040 Speaker 1: with with soft lumber for UH for quite a while. 384 00:23:02,040 --> 00:23:05,640 Speaker 1: I don't think they're gonna try to reinvent the reinvent 385 00:23:05,680 --> 00:23:07,840 Speaker 1: the home building process. And I mean obviously, but not 386 00:23:07,920 --> 00:23:12,920 Speaker 1: you know, in other places, in other places around the world. Um, 387 00:23:13,119 --> 00:23:17,359 Speaker 1: they use other you know, materials to to do build 388 00:23:17,440 --> 00:23:20,320 Speaker 1: large scale housing. Yeah. And and you know one of 389 00:23:20,320 --> 00:23:24,919 Speaker 1: the points that the timber producers make is that that 390 00:23:25,080 --> 00:23:28,280 Speaker 1: lumber you know, they say, is it's not it's not 391 00:23:28,400 --> 00:23:30,240 Speaker 1: the bulk of a cost of a home. You know, 392 00:23:30,320 --> 00:23:33,040 Speaker 1: the bulk of a cost of a home comes in, uh, 393 00:23:33,080 --> 00:23:36,560 Speaker 1: you know, labor costs and other materials, land costs, and 394 00:23:36,560 --> 00:23:41,119 Speaker 1: and so they they're um, uh, the lumber lobby United 395 00:23:41,119 --> 00:23:43,320 Speaker 1: States says, they're you know, at least somewhat you know, 396 00:23:43,400 --> 00:23:47,320 Speaker 1: mystified that the home builders are fighting so hard against 397 00:23:47,800 --> 00:23:51,479 Speaker 1: against these tariffs. But you know, all already homebuilders are 398 00:23:51,480 --> 00:23:55,119 Speaker 1: competing against um, against existing homes with the new homes, 399 00:23:55,400 --> 00:23:57,879 Speaker 1: and so it's it's difficult for them to pass the 400 00:23:57,920 --> 00:24:01,280 Speaker 1: costs nder buyer. So this this rise in LUMBERCASI, it's 401 00:24:01,320 --> 00:24:04,000 Speaker 1: directly into their profits. Thanks very much for joining us. 402 00:24:04,040 --> 00:24:07,440 Speaker 1: Joe Light. Hey Joe, what's your Twitter handle? It's at 403 00:24:07,520 --> 00:24:10,520 Speaker 1: Joe Light. That's all you need to know. Our financial 404 00:24:10,560 --> 00:24:14,719 Speaker 1: regulation reporter joining us from Washington. Home builders could be 405 00:24:14,800 --> 00:24:27,200 Speaker 1: losers in an early test of Donald Trump's trade policy. 406 00:24:30,359 --> 00:24:33,600 Speaker 1: High yield. Well, if you're looking for high yield, what 407 00:24:33,680 --> 00:24:35,919 Speaker 1: does that mean these days? High yield was up to 408 00:24:35,920 --> 00:24:39,520 Speaker 1: nearly three percent as of the end of February, and 409 00:24:39,560 --> 00:24:42,640 Speaker 1: then it's stumbled. Well, let's find out more from Ken Monahan. 410 00:24:42,720 --> 00:24:45,359 Speaker 1: He is the head of Global High year Yield at 411 00:24:45,359 --> 00:24:48,359 Speaker 1: a mundy Smith Breeden. They helped him manage ten point 412 00:24:48,440 --> 00:24:52,440 Speaker 1: nine billion dollars and they're based in Durham, North Carolina. Ken, 413 00:24:52,440 --> 00:24:54,520 Speaker 1: Thanks very much for being with us. Why don't you 414 00:24:54,560 --> 00:24:57,400 Speaker 1: first just explain a little bit about your role there, 415 00:24:57,440 --> 00:25:00,639 Speaker 1: what you are actively doing, and then tell us your 416 00:25:00,680 --> 00:25:03,800 Speaker 1: perspective on what's happening with with yields right now for 417 00:25:04,160 --> 00:25:06,880 Speaker 1: these specific types of bonds. Yeah, I Keim, and thanks 418 00:25:06,880 --> 00:25:09,520 Speaker 1: for asking me to join you today. Um. I'm focused 419 00:25:09,520 --> 00:25:11,840 Speaker 1: on the global high yield markets. So that includes not 420 00:25:11,920 --> 00:25:14,879 Speaker 1: only the US high yield marketplace, which we're all familiar with, 421 00:25:15,280 --> 00:25:17,840 Speaker 1: but also the European high yield market as well as 422 00:25:17,880 --> 00:25:20,639 Speaker 1: emerging market corporate debt. So you're looking at a marketplace 423 00:25:20,680 --> 00:25:25,400 Speaker 1: which is approximately two point trillion dollars, of which about 424 00:25:26,160 --> 00:25:29,240 Speaker 1: that is US high yield, about is Europe and about 425 00:25:29,880 --> 00:25:32,680 Speaker 1: the remainder is is e M corporate. So that's that's 426 00:25:32,680 --> 00:25:34,520 Speaker 1: what my focus is. And I've been doing this for 427 00:25:34,960 --> 00:25:36,720 Speaker 1: a long time with more gray hair than I care 428 00:25:36,760 --> 00:25:39,639 Speaker 1: to count. Okay, all right, well well maybe all right, 429 00:25:39,680 --> 00:25:43,120 Speaker 1: so so share some of your wisdom with us right now. Well, 430 00:25:43,160 --> 00:25:44,639 Speaker 1: as you mentioned, I said, we had we had a 431 00:25:44,640 --> 00:25:48,320 Speaker 1: pretty strong rally coming into February. Market was up quite strong, 432 00:25:48,359 --> 00:25:50,800 Speaker 1: and then kind of petered out in March. And I 433 00:25:50,800 --> 00:25:52,360 Speaker 1: think that there were a couple of head winds we 434 00:25:52,359 --> 00:25:55,639 Speaker 1: were experiencing. Certainly one of them was in the retail 435 00:25:55,720 --> 00:25:57,840 Speaker 1: side of things. Obviously, there's been a lot of headline 436 00:25:57,840 --> 00:26:00,760 Speaker 1: news both for investment grade companies as well as how 437 00:26:00,800 --> 00:26:04,840 Speaker 1: you'd companies like Jake Crewe for example, and sears Um 438 00:26:05,119 --> 00:26:07,720 Speaker 1: regarding head winds in the retail space, and that I think, 439 00:26:08,280 --> 00:26:11,920 Speaker 1: what's your prognosis? Well, you know, I think that that 440 00:26:12,119 --> 00:26:15,119 Speaker 1: both are facing ultimate restructuring. Um. I think it's pretty 441 00:26:15,160 --> 00:26:16,840 Speaker 1: much in the news already on J. C. Penny and 442 00:26:16,840 --> 00:26:19,479 Speaker 1: dialogue is taking place with creditors as it as we 443 00:26:19,560 --> 00:26:23,240 Speaker 1: speak with sears it's uh, it's been a longer term issue. 444 00:26:23,280 --> 00:26:26,760 Speaker 1: They've been uh deteriorating in quality for a long period 445 00:26:26,760 --> 00:26:31,760 Speaker 1: of time and uh and uh the equity uh controlling 446 00:26:31,800 --> 00:26:34,560 Speaker 1: equity shareholders you know, has been selling the crown jewels 447 00:26:34,600 --> 00:26:37,879 Speaker 1: along the way, uh to keep the engine going. And uh, 448 00:26:37,960 --> 00:26:40,879 Speaker 1: you know, I think ultimately that will doesn't solve the 449 00:26:40,920 --> 00:26:44,720 Speaker 1: problem that Sears of of a deteriorating business. Well just 450 00:26:44,760 --> 00:26:48,119 Speaker 1: give you Sears, of course we know is rutten and 451 00:26:48,400 --> 00:26:53,040 Speaker 1: owned by Eddie Lampert hedge fund manager. And well I'll 452 00:26:53,040 --> 00:26:55,080 Speaker 1: just say investor at this point because I mean I'm 453 00:26:55,119 --> 00:26:58,399 Speaker 1: looking at the Sears holdings and it's a one and 454 00:26:58,440 --> 00:27:01,199 Speaker 1: a half billion dollar market capital right now. Yeah, well 455 00:27:01,240 --> 00:27:02,840 Speaker 1: you know him. It's that it's like that old story 456 00:27:02,960 --> 00:27:06,800 Speaker 1: or the old adage, when a good business, a bad business, 457 00:27:06,840 --> 00:27:09,800 Speaker 1: and a great management team to come together, it's usually 458 00:27:09,840 --> 00:27:12,879 Speaker 1: the bad business that keeps his reputation intact. So I 459 00:27:13,200 --> 00:27:16,880 Speaker 1: think that's what you're seeing here right now. Interesting. Okay, So, um, 460 00:27:17,520 --> 00:27:19,240 Speaker 1: where do you want to go? Because you know you 461 00:27:19,280 --> 00:27:21,840 Speaker 1: said there's the two point two trillion and then you 462 00:27:21,840 --> 00:27:24,280 Speaker 1: know you can slice and dice it really either by 463 00:27:24,359 --> 00:27:28,000 Speaker 1: industry or by currency. What's the best way to approach 464 00:27:28,000 --> 00:27:30,040 Speaker 1: what is happening now? Because I mean we are late 465 00:27:30,119 --> 00:27:32,639 Speaker 1: in a cycle. We are late in a cycle. But 466 00:27:32,680 --> 00:27:35,199 Speaker 1: you know, I think you know you we're not necessarily 467 00:27:35,280 --> 00:27:38,840 Speaker 1: expecting the cycle to blow up the way the way 468 00:27:39,000 --> 00:27:40,960 Speaker 1: it did in a way or oh nine. I think 469 00:27:40,960 --> 00:27:43,560 Speaker 1: you know, we know you talked to sociologists. They also 470 00:27:43,640 --> 00:27:46,400 Speaker 1: they always talked about the concept of recency and primacy, 471 00:27:46,920 --> 00:27:50,000 Speaker 1: the concepts being you know, you were most impacted or 472 00:27:50,000 --> 00:27:53,720 Speaker 1: by our most recent experience, which in this case obviously 473 00:27:53,760 --> 00:27:55,760 Speaker 1: was the O eight or O nine recession as well 474 00:27:55,800 --> 00:27:57,640 Speaker 1: as the first one we've had exposure to. I think 475 00:27:57,760 --> 00:27:59,639 Speaker 1: the O eight or O nine one was a highly 476 00:27:59,680 --> 00:28:02,520 Speaker 1: unu to a one because it impacted the banking system 477 00:28:02,520 --> 00:28:04,800 Speaker 1: in a major way. And obviously we've had the banks 478 00:28:04,800 --> 00:28:07,800 Speaker 1: recapitalized in the US in particular, there's some that are 479 00:28:07,840 --> 00:28:09,960 Speaker 1: still need to work in Europe, but the U S 480 00:28:10,000 --> 00:28:13,480 Speaker 1: banks have raised a lot of capital. So whatever headwinds 481 00:28:13,480 --> 00:28:16,480 Speaker 1: were expecting talking about late in the credit cycle, I 482 00:28:16,520 --> 00:28:20,680 Speaker 1: don't think we're necessarily expecting it to be is broader 483 00:28:20,680 --> 00:28:25,880 Speaker 1: recession when it ultimately occurs, as we experienced in eight 484 00:28:25,960 --> 00:28:27,239 Speaker 1: or oh nine. You know, if you look back at 485 00:28:27,280 --> 00:28:30,560 Speaker 1: previous recessions, he would typically find that they impacted you know, 486 00:28:30,560 --> 00:28:32,680 Speaker 1: one or two industries in particular. So if you look 487 00:28:32,720 --> 00:28:37,280 Speaker 1: back at the O two three oh two oh three recession, um, 488 00:28:37,320 --> 00:28:40,000 Speaker 1: that one was much more focused on telecom. So there's 489 00:28:40,000 --> 00:28:43,600 Speaker 1: certainly some sectors right now that uh that you know, 490 00:28:43,680 --> 00:28:46,440 Speaker 1: would cause concerns going forward, and maybe the ones that 491 00:28:46,480 --> 00:28:48,680 Speaker 1: will be most impacted, you know, if we have a 492 00:28:48,680 --> 00:28:51,360 Speaker 1: recession in a year or two. Retail is perhaps at 493 00:28:51,400 --> 00:28:53,640 Speaker 1: the top of the list, but there's others like technology, 494 00:28:54,080 --> 00:28:56,000 Speaker 1: uh that some are concerned about as well. You know, 495 00:28:56,040 --> 00:28:58,800 Speaker 1: you can argue that oil and gas and metals and 496 00:28:58,840 --> 00:29:00,959 Speaker 1: mining already had a session of their own, you know, 497 00:29:01,000 --> 00:29:05,240 Speaker 1: secular problems, uh with the kind of period from late 498 00:29:05,280 --> 00:29:08,360 Speaker 1: to fourteen through the early part of last year. Hm. 499 00:29:08,880 --> 00:29:11,400 Speaker 1: I'm just digesting all that because you know that, I mean, 500 00:29:11,440 --> 00:29:13,920 Speaker 1: that's a that's an interesting scenario if it if it 501 00:29:13,960 --> 00:29:17,160 Speaker 1: plays out that way. Yeah, you know, I think, look, 502 00:29:17,880 --> 00:29:20,800 Speaker 1: do you think how many how many interest rate increases 503 00:29:20,840 --> 00:29:23,040 Speaker 1: do you think are on the table right now? Well, 504 00:29:23,040 --> 00:29:25,160 Speaker 1: it looks like it looks like too for this year, 505 00:29:25,200 --> 00:29:29,520 Speaker 1: I think, is what our guess is. But I recognize 506 00:29:29,560 --> 00:29:34,040 Speaker 1: that an increase in interest rates can impact uh corporate credit. 507 00:29:34,080 --> 00:29:36,400 Speaker 1: But I think the things that we get concerned about 508 00:29:36,440 --> 00:29:39,960 Speaker 1: typically Um, coming into a recession or laid in the 509 00:29:39,960 --> 00:29:42,240 Speaker 1: credit cycle, we're not seeing as much of this time 510 00:29:42,480 --> 00:29:45,200 Speaker 1: so typically you know, so is there anything worth buying 511 00:29:45,280 --> 00:29:47,120 Speaker 1: right now? Well? I think that there is. I think 512 00:29:47,160 --> 00:29:49,240 Speaker 1: you know, we're gonna let's recognize that the benefit of 513 00:29:49,240 --> 00:29:51,880 Speaker 1: the high yield marketplaces for US high yield is that 514 00:29:51,880 --> 00:29:54,880 Speaker 1: you're picking up effectively one point seven basis points a 515 00:29:54,960 --> 00:29:57,040 Speaker 1: day of of current income. All right, so I'll give 516 00:29:57,040 --> 00:29:59,000 Speaker 1: you a thirty seconds, go ahead. Well, I you know, 517 00:29:59,040 --> 00:30:01,680 Speaker 1: I think that the the answer from our perspective is is, 518 00:30:02,040 --> 00:30:04,120 Speaker 1: you know, we still think that there's opportunities in the 519 00:30:04,160 --> 00:30:08,480 Speaker 1: steel sector for example. UM, we're ultimately looking for opportunities 520 00:30:08,480 --> 00:30:10,440 Speaker 1: in retail. We recognize that there's going to be the 521 00:30:10,440 --> 00:30:13,000 Speaker 1: proverbial throwing the baby out with the bath water, and 522 00:30:13,040 --> 00:30:15,480 Speaker 1: there are retailers that they're going to survive. Uh. You know, 523 00:30:15,520 --> 00:30:17,760 Speaker 1: we look at L Brands, for example, is a perfect 524 00:30:17,760 --> 00:30:20,120 Speaker 1: example of a very high quality credit and a double 525 00:30:20,160 --> 00:30:22,640 Speaker 1: B space that could be investment grade if it wished 526 00:30:22,640 --> 00:30:24,640 Speaker 1: to be. Uh. They've done a better job at taking 527 00:30:24,640 --> 00:30:26,959 Speaker 1: care of their shareholders, and they have their bondholders, and 528 00:30:27,080 --> 00:30:28,960 Speaker 1: those bonds are under pressure. At some point they'll be 529 00:30:29,000 --> 00:30:32,320 Speaker 1: interesting to buy. Maybe not yet. Yeah, well I'm checking 530 00:30:32,360 --> 00:30:34,720 Speaker 1: them on the Bloomberg and uh well, if we'll have 531 00:30:34,800 --> 00:30:36,840 Speaker 1: to see, well, we're gonna put them there and then 532 00:30:36,880 --> 00:30:39,520 Speaker 1: you know what, we'll have you back and we'll be 533 00:30:39,600 --> 00:30:43,160 Speaker 1: able to sort of track the progress of those uh 534 00:30:43,640 --> 00:30:46,600 Speaker 1: L brands bonds. Thanks very much for joining us. Ken 535 00:30:46,640 --> 00:30:49,320 Speaker 1: Monahan is the head of Global high Yield at a 536 00:30:49,400 --> 00:30:53,240 Speaker 1: Mundy Smith Breeden, helping to manage ten point nine billion dollars. 537 00:30:53,240 --> 00:31:01,840 Speaker 1: They're based in Durham, North Carolina. Thanks for listening to 538 00:31:01,880 --> 00:31:05,240 Speaker 1: the Bloomberg pien L podcast. You can subscribe and listen 539 00:31:05,240 --> 00:31:10,640 Speaker 1: to interviews at iTunes, SoundCloud, or whatever podcast platform you prefer. 540 00:31:10,920 --> 00:31:14,200 Speaker 1: I'm Pim Fox. I'm out there on Twitter at pim Fox. 541 00:31:14,480 --> 00:31:17,200 Speaker 1: I'm out there on Twitter at Lisa Abramo. It's one 542 00:31:17,480 --> 00:31:20,240 Speaker 1: before the podcast. You can always catch us worldwide on 543 00:31:20,240 --> 00:31:21,040 Speaker 1: Bloomberg Radio.