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Speaker 1: Hello, and welcome to another edition of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wisenthal, Managing editor of Bloomberg Markets. My colleague

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Speaker 1: and co host Tracy Elloway is away this week. She's

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Speaker 1: out in the desert uh and on safari near Abu Dhabi.

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Speaker 1: UH So we miss her this week, but we have

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Speaker 1: a special episode this week. Another one of our colleagues

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Speaker 1: is with us. Today we're going to talk to or

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Speaker 1: me I guess I should say. Today I'm going to

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Speaker 1: talk to Lorcan roach Kelly. He's our handyman social media

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Speaker 1: expert at Bloomberg Market, also a expert on the Eurozone,

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Speaker 1: the ECB, and most extraordinarily, he comes to us from

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Speaker 1: the small town or village of six mile Bridge, Ireland,

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Speaker 1: where he has a farm with cows. And I'm pretty

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Speaker 1: sure he's the only person in six mile Bridge who

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Speaker 1: has a Bloomberg terminal. I don't know that for sure,

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Speaker 1: but I'm like ninett nine percent sure. And we're going

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Speaker 1: to talk a little bit about what's going on in

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Speaker 1: the Eurozone these days. There's a lot of tension once

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Speaker 1: again around government and the banks. But before we get

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Speaker 1: to that conversation, I want to uh talk to Lorcan

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Speaker 1: about how he became a farmer who is also a

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Speaker 1: expert on the e c B. So Lorcan, thank you

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Speaker 1: very much for joining the Odd Lots podcast. Joe, great

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Speaker 1: to be here. So Lorcan, let's start from the beginning.

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Speaker 1: There aren't many people who are experts on the ECB

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Speaker 1: and the Eurozone who also live on an operating farm

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Speaker 1: with cows. What's your background? How did you? Where does

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Speaker 1: your story start? Take us from as far back as

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Speaker 1: you'd like to go. I suppose, I'm I suppose it

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Speaker 1: was was start the bit that people might be interested in,

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Speaker 1: which is how I got to be where I am,

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Speaker 1: And it's a I suppose the start of it starts

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Speaker 1: out with a bit of a tragedy away and that

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Speaker 1: I used to work as an exposive engineer in the mind,

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Speaker 1: which just straight up is the best job in the world.

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Speaker 1: At the end of every day, no matter how bad

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Speaker 1: your day is being you get to blow up a

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Speaker 1: lot of stuff, which is incredibly therapeutic. I think everybody

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Speaker 1: should get to blow something up at some point. It

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Speaker 1: was it would solve many of the world's problems. What

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Speaker 1: are the kind of skills that you have to have

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Speaker 1: to be an explosive engineer. What what is the job

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Speaker 1: really involved? You have to to run really fast. That's

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Speaker 1: the number one skill. I think that is basically what

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Speaker 1: it is with exposes. When you're exposing in the mind,

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Speaker 1: you have to design an explosive blast in a way

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Speaker 1: that it will blast what you want to blast and

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Speaker 1: leave everything else alone. It's very important that you don't

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Speaker 1: blow up the stuff you don't want to blow up.

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Speaker 1: And it's my background is engineering, so it's that's what's

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Speaker 1: that's kind of spatial development stuff. That was kind of

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Speaker 1: fush a lot of what I was doing anyway, So

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Speaker 1: this was Ireland. What kind of mining is big in Ireland?

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Speaker 1: And the base metal, lead and zinc mines. We have

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Speaker 1: one of the biggest lead zinc mine in Europe is

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Speaker 1: in Ireland. It's writing, it's pretty much mine. That was

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Speaker 1: the moment, has been there since the nineteen seventies. All right,

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Speaker 1: so let's take the next step. So then what did

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Speaker 1: you do after? So after in two thousand and seven,

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Speaker 1: my my first wife dies and so I've left for

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Speaker 1: two children. So I was in mining, which meant I

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Speaker 1: traveled a lot, So obviously I had to stop that

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Speaker 1: job come home. Look after the kids, and I found

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Speaker 1: self in the position where I was very time rich

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Speaker 1: and cash poor. And if you remember two thousand seven,

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Speaker 1: thou there was one event that was dominating the world

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Speaker 1: at the time. I think I remember that and that

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Speaker 1: that was the financial crisis. So I was, like I said,

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Speaker 1: I was time rich. So I started looking into this,

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Speaker 1: going okay, I'm naturally curious, I suppose. So I started looking.

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Speaker 1: It's going, okay, what what's causing this? What does it mean?

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Speaker 1: And I found a lot of the corbadge I was

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Speaker 1: reading was very saying and then that's what I mean.

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Speaker 1: It is like everyone was on the same path saying

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Speaker 1: the same thing, saying to say, like the euro is

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Speaker 1: going to fall apart, the whole world's going to hell

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Speaker 1: in a hand basket by gold. You hadn't studied this before.

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Speaker 1: You don't have a background in economics or finance or

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Speaker 1: anything like that. I did economics and it's in high school,

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Speaker 1: and beyond that, I hand on anything with it. So

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Speaker 1: it was basically you had a lot of time on

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Speaker 1: your hands. You saw that the world was kind of

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Speaker 1: falling apart. There was a lot of anxiety in Ireland,

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Speaker 1: and in particular because of how big the banking sector was,

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Speaker 1: and so you just wanted to sort of scratch an

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Speaker 1: itch and see what the heck was going on. Actually,

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Speaker 1: and I think it's like with the firmans well at

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Speaker 1: the time, but the firms that I say, if the firm,

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Speaker 1: my father is eight years old this year, the farm

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Speaker 1: is still in his name because Irish people are very

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Speaker 1: funny about farmland. You never sell land, you never give

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Speaker 1: it away. You have to wait for the generation above

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Speaker 1: you to die before you get it, which sounds very macavelium,

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Speaker 1: but how it is. But then whatever, when I was

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Speaker 1: growing up, there was the five children in my family.

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Speaker 1: Five wasn't the family. And my mother always sets was

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Speaker 1: when you were growing you have to go to college.

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Speaker 1: You have to get a good degree, or you end

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Speaker 1: up with the firm. The firm was always the threat.

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Speaker 1: It's the white elephant, that the thing that nobody wants

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Speaker 1: to have because you're you're kind of stoked. You can't

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Speaker 1: ever sell it. You've got an asset, that money, but

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Speaker 1: you can't lick with it. It's been the family for

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Speaker 1: twenty five generations. You have to hold it for the

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Speaker 1: next generation. So you didn't go to college and you

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Speaker 1: ended up with something that that's pretty much what happened. Yes,

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Speaker 1: I was the black sheep, so the black sheep ended

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Speaker 1: up with the cows. So what what was you said?

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Speaker 1: You were curious? What was the first thing you looked into?

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Speaker 1: What was the first question you suddenly answered to? I

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Speaker 1: think that the first question. I thought that it was

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Speaker 1: how are ever was saying that the Irish banks you

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Speaker 1: should throw a draw money from the banks. Everyone should

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Speaker 1: be deposit flights. And my my first question was what's

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Speaker 1: the mechanics? So this is my engineering backgrounds, like what's

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Speaker 1: the mechanics that are keeping the banks open? If everyone

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Speaker 1: is taking their money out? Should the banks fall over? Like?

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Speaker 1: How are they not closing down? Because the one thing

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Speaker 1: we didn't have when we weren't having we're bank failures.

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Speaker 1: And I was nosing around asking people because Joe I

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Speaker 1: knew nothing, so I was able to ask the really

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Speaker 1: dumb questions that other people wouldn't like to ask. And

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Speaker 1: I got talking to an Orish economists called David McWilliams,

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Speaker 1: who I ended up actually working for after a while

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Speaker 1: because end up being his researcher. And as part of

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Speaker 1: that research gig I was doing, I was finding I

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Speaker 1: was reading, like I said, I was trying rich. I

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Speaker 1: was reading lots of bank banks plan annual reports, all

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Speaker 1: the hundred forty five pages of them, just to try

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Speaker 1: and figure out my own head how this machine that

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Speaker 1: is a bank works. And the thing I was finding

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Speaker 1: out with them was like, the banks are still standing

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Speaker 1: because they're getting liquidity, which is money from somewhere. And

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Speaker 1: it was to find joke, to follow the money, where

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Speaker 1: is this money coming from? And as part of that.

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Speaker 1: In two thousand and nine, I think it was I

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Speaker 1: was reading Anglo Irish Banks, which is probably one of

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Speaker 1: the worst banks that whatever existed in the Arby manage,

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Speaker 1: reading there any report and there was a footnote number

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Speaker 1: six seventeen on page A hundred and twenty seven which

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Speaker 1: they were getting eleven billion euros from the Irish Central

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Speaker 1: Bank as part of the master Loan We Purchase agreement,

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Speaker 1: which is a bit technical. But I saw that I

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Speaker 1: don't know what that is, so I'll ask somebody. So

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Speaker 1: I got onto some like Jaredson's Banks spot Is and

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Speaker 1: ask loan Purchase agreement and they said this is something

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Speaker 1: we used to use in the nineties when Ireland had

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Speaker 1: its own currency. That floated to balance the currency at

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Speaker 1: the end of the day. And then the next question

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Speaker 1: asked was why white. Where have you seen that written down?

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Speaker 1: And I said, I saw it on Anglo Irish Banks

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Speaker 1: two thousand nine report. And then the next thing they

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Speaker 1: said to it was we didn't have this conversation and

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Speaker 1: they hope, Okay, there's definitely something here, so and to

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Speaker 1: to find trying to find out about that. I found

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Speaker 1: out about this thing called Emergency Liquidity Assistance e l

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Speaker 1: A back in two thousand nine when I think it was.

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Speaker 1: It was supposed to be a secret, but they just

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Speaker 1: show didn't think any would ever ask about it. So

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Speaker 1: they literally had this thing buried in a footnote deep

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Speaker 1: in an annual report that they didn't really want anyone

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Speaker 1: to look into. But it was sort of it answered

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Speaker 1: the mystery of mysteries because there was a big part

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Speaker 1: of the balant sheet and that they had to put

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Speaker 1: it in their banat the number and they have to

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Speaker 1: explain where the number came from. So they explained it

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Speaker 1: in a way that kind of Joe, don't look any furthers,

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Speaker 1: don't look behind the Nobody else was poking around and

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Speaker 1: asking these questions. Besides you, not that I know of.

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Speaker 1: I remember I wrote about the l A in two

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Speaker 1: thousand and ten emergency and at the time because I

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Speaker 1: use the first the first point of any investigations to

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Speaker 1: just go to Google and type the words in and

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Speaker 1: see what comes up. And nothing came up, like the

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Speaker 1: ECB hadn't even published their rules for l A in

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Speaker 1: a meaningful way at that stage. So that's where I started, right.

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Speaker 1: So then I because the guys worked for Dave McWilliams.

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Speaker 1: He's a he writes for a broad audience. He wasn't

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Speaker 1: FreeFly interested in isn't he knew his audience the intrixees

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Speaker 1: of Central Banks Banet. So I started a blog as

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Speaker 1: I write with this thing, just like Joe. It was

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Speaker 1: aimed at that's what nerds like myself and that became

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Speaker 1: very popular. And through that becoming popular, then I think

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Speaker 1: the ft picked up in a few How did people

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Speaker 1: find it? That's not a lot over that step, because

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Speaker 1: I want had a blog and that's how I got started.

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Speaker 1: But how do people find your blog? Who was reading it? Ums?

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Speaker 1: For TO? A lot of this is for TO this

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Speaker 1: time it's with um Paul Murphy at FT Alphabelle who

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Speaker 1: was starting in this thing called markets Lie the ft

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Speaker 1: Alp and then they still run it to this day.

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Speaker 1: Well they start talking about today and you could comment

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Speaker 1: and say, look, I think this is important. I think

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Speaker 1: one of the things that I thought it was on

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Speaker 1: it one day and I said, look, I think this

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Speaker 1: how anglers panks t open is important, and I pointed

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Speaker 1: towards this blog and Paul then took my blog and

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Speaker 1: republished it at the Alphaville blog itself. And once you

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Speaker 1: get re published once or twice, like, the thing just

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Speaker 1: gets the momentum and then you're seeing as an expert

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Speaker 1: in So I started following you on Twitter it maybe

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Speaker 1: late two thousand nine, but that you had really made

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Speaker 1: your name by that point at least among a very

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Speaker 1: sort of narrow influential media set as someone who really

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Speaker 1: knew the ins and outs by that point of the

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Speaker 1: Irish banking system. Okay, so you're on the farm and

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Speaker 1: through the magic of the Internet and blogs and Twitter,

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Speaker 1: you start to establish yourself as someone who's really done

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Speaker 1: the work to figure out what's going on in Ireland,

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Speaker 1: what's next, What's what, what's where? Did where did it

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Speaker 1: lead from there? And then the next thing, I'm an

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Speaker 1: American UM company who are obviously looking to get some

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Speaker 1: European coverage. Yeah, tracked me down through via Twitter and

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Speaker 1: the ends and offered me a job. That would you

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Speaker 1: like to come to New York. We'll fill you over.

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Speaker 1: We'd like to sit down and child just see how

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Speaker 1: we're looking for for a view on the whole Eurozone

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Speaker 1: that we're not getting. I think maybe it's an important

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Speaker 1: point that I made to the guy in the don's

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Speaker 1: gonna end up working for is there are seventeen there

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Speaker 1: were times seventeen countries that use the Euro Area. The

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Speaker 1: US use the Euros the currency. There's only one that

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Speaker 1: speaks English. That's aren't a lot of particularly at the

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Speaker 1: time there's two thousand nights as and said a lot

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Speaker 1: of the media. I suppose feed that was coming into

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Speaker 1: New York, particularly in the Wall Streets, was coming out

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Speaker 1: of London, and at the time maybe still exists now,

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Speaker 1: there was a certain bias amongst reportage from London on

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Speaker 1: the euro Area, as in, look at that terrible thing

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Speaker 1: over there, it's falling apart, It's going to burn to

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Speaker 1: the ground, aren't we So betver not been in the

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Speaker 1: euro So all I had to do all is do.

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Speaker 1: But I kind of once I figured out how the

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Speaker 1: ECB worked and how they were proping off the entire

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Speaker 1: system through E l A when they had to what say,

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Speaker 1: things might get bad, but for things to break, it's

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Speaker 1: going to be a very big jump from where we are. Yeah,

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Speaker 1: I remember, you know, because I was following the Eurozone

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Speaker 1: crisis pretty intently back then, and I remember how you know,

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Speaker 1: it would sort of one there would be the period

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Speaker 1: when everyone was talking about Greece and then everyone was

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Speaker 1: talking about Spain. But I really did appreciate when Ireland

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Speaker 1: was in the spotlight, simply because it was the only

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Speaker 1: time when I could read the local press that follow

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Speaker 1: up was happening in the parliament or the Doyle is

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Speaker 1: you call it, because I could actually understand what the

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Speaker 1: politicians were saying. So I really did appreciate that, And

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Speaker 1: I think it's kind of a broader point that I

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Speaker 1: also I've learned a lot, is that if you can

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Speaker 1: ever get to the source of information, get to the

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Speaker 1: source information. Because if you read reports, especially on the report,

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Speaker 1: say on the German parliament or the Greek tournament, it's

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Speaker 1: always true and Lens that always so, and the UK

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Speaker 1: press is not known for. It's sort of like cool,

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Speaker 1: level headed, lack of hyperbole. Is. Yeah, they have papers

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Speaker 1: to sell and they're good at selling papers. I guess.

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Speaker 1: So let's sort of skip ahead, and how long did

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Speaker 1: you work for the American firm and what did you

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Speaker 1: He finished in twenty thirteen, I think, but to thirteen

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Speaker 1: finished and went to start on my own because I

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Speaker 1: developed a few clients in London, and by having my

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Speaker 1: own client based London, it was just meant I did

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Speaker 1: not have to fight. You know it states that's once

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Speaker 1: a month. And what did you do? These clients you

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Speaker 1: told you gave them your view on what was happening

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Speaker 1: in the year zones, give a view give I think

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Speaker 1: the clients particularly, we're interested in what the European Central Bank,

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Speaker 1: because by twenty people looked to central banks. I think

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Speaker 1: the big change between two thousand and seven and two

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Speaker 1: thousand and thirteen is in two thousand and seven thousand

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Speaker 1: people were still looking to governments to solve the problem.

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Speaker 1: By twelve thirteen normally looked to governments anymore. That sounds

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Speaker 1: so quaint, the idea that any any government could do anything.

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Speaker 1: Now we live in this time when central banks really

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Speaker 1: are all where the action is. So it's the point

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Speaker 1: I think that less than ten years ago we actually

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Speaker 1: might have believed the governments could be competent to fix something.

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Speaker 1: Ten years ago we were all kimdy and looks now

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Speaker 1: yeah crazy. Now we're all monitoris all right? So let's

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Speaker 1: jump ahead because now you're our colleague. You work at

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Speaker 1: uh Bloomberg. You came here I think early, just about

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Speaker 1: a year ago. You do uh social media, You do

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Speaker 1: some editing, you do some writing, you sort of do

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Speaker 1: your you do a little bit of everything. What's your

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Speaker 1: day like right now? I think there's a lot of

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Speaker 1: fascination and curiosity about this person who works for Bloomberg,

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Speaker 1: who lives on a farm with cows. Take me through

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Speaker 1: a day in the life of Lorcan. Right now you're

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Speaker 1: you're at busy time for Lorcan because right now is

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Speaker 1: calving season. Caving season kicked off the end of January,

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Speaker 1: beginning the ferry. So right now, on my day, I

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Speaker 1: get up our own sickly m go out check the cows,

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Speaker 1: because Joe check in the morning, how many cows do

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Speaker 1: you have? We've only got turkey cows, so we have

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Speaker 1: turts turkeys, and what is checking the cows entail. You

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Speaker 1: go up. I suppose I'm talking to a towny here,

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Speaker 1: so I better take this slowly. The first thing you

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Speaker 1: do is make sure they have feed and water. So

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Speaker 1: I come in what I'm sure they fed water, make

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Speaker 1: sure there's known new cars. I come in for seven

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Speaker 1: I am turned on my coming to my office, turn

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Speaker 1: on the terminal, turn on the web, and catch up

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Speaker 1: with what's happened in the markets where markets are going

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Speaker 1: for today. I've then got about an hour and a

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Speaker 1: half to get everything updates, to get the website updats,

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Speaker 1: get Twitter flowing, get Facebook flowing, and then I go

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Speaker 1: back out to the cows again for twenty minutes to

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Speaker 1: make sure they're okay. Back in again for nine o'clock,

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Speaker 1: and then I start. Every morning, I do this five

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Speaker 1: things that are happening in the markets today, posting and loss.

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Speaker 1: It goes out it's about nine nine fifteen. I'll started

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Speaker 1: writing that get the idea of where we're going, while

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Speaker 1: continuing to make sure that all the social media side

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Speaker 1: is updated. Once the five things is published, I'll go

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Speaker 1: for lunch for about twenty minutes. Lunches actually a but

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Speaker 1: back up to the cause. Make sure they get their

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Speaker 1: lunch because basically before I think it's are important, and

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Speaker 1: then come in for the afternoon work work at the

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Speaker 1: office for the afternoon, around five pm, finish up, back

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Speaker 1: out to the couch and then make sure that everything's okay,

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Speaker 1: come in, have a dinner and then normally about half

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Speaker 1: a night o'clock, go backups getting just check for calves

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Speaker 1: and stuff like that. Check for calves. On the typical day,

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Speaker 1: there's no calves. On the typical day, there's no calves,

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Speaker 1: but what the moment, because we're in calving season, there

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Speaker 1: is on a typical day, there's always the possibility of calves.

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Speaker 1: And you live your you live in a town of

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Speaker 1: six mile Bridge, right, So how many people? Where is

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Speaker 1: six mile Bridge? How many people live in six mile Bridge?

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Speaker 1: And why is it called that? Six month Bridge is

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Speaker 1: a town of about people. It's in the west of

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Speaker 1: Ireland's in a place called County Claire. It's handling enough.

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Speaker 1: It's ten minutes away from an international airport. There's an

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Speaker 1: airport in the west foreign and called Shannon, which means

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Speaker 1: it's quicker for me to get to London than this

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Speaker 1: for me to get to the capital of Ireland. Because

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Speaker 1: I can drive to the airport. Came a plane in London.

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Speaker 1: It's called six Mile Bridge because apparently years ago it

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Speaker 1: was six miles from the nearest town of Limerick, which

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Speaker 1: is kind of six miles from the nearest place people

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Speaker 1: actually want to be because there's a bridge. Is the

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Speaker 1: smallest in market town. It's got seven pubs, two churches

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Speaker 1: and two shops. Yeah. Our colleague Dash visited you in

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Speaker 1: Ireland last summer and I think, if I recall, he

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Speaker 1: couldn't find your plays and you didn't have cell service,

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Speaker 1: and you just walked into one of the pubs and

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Speaker 1: asked like, does anyone know Lorcan And they were able

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Speaker 1: to figure out who he was talking about, right, yeah,

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Speaker 1: pretty much immediately they knew who you're talking about. That

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Speaker 1: this is not saying that I'm someone that that spent

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Speaker 1: all of my time in the pub. I just spent

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Speaker 1: Tim's outlining how busy I about that? Clearly, I have

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Speaker 1: no time for clearly, clear um. And in the summer,

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Speaker 1: I remember you told me you right, you have a tractor, right,

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Speaker 1: and you could just be out there on your tractor,

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Speaker 1: on your iPad checking the terminal, right, yeah, yeah, yeah,

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Speaker 1: So during the summer. Sometimes if I do so has

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Speaker 1: an a lum day, I can I can bring my

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Speaker 1: ipen out detractor and then it's got a one of

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Speaker 1: the signal movement signal and I can update Twitter. I

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Speaker 1: can do Facebook from the tractor if I want. I

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Speaker 1: think it makes a lot of people here very jealous

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Speaker 1: in your lifestyle. I think whenever when anyone at the

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Speaker 1: office hears about that, that that's your I think that

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Speaker 1: immediately seems appealing. All right, let's um make the conversation

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Speaker 1: a little more topical, because once again there's a lot

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Speaker 1: of anxiety about Europe. We've seen some of the big

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Speaker 1: European banks, their stocks have really been getting slammed lately,

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Speaker 1: Deutsche Bank, Credit, Suez. We're starting to see UH some

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Speaker 1: increases in borrowing costs for some UH sovereign for some

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Speaker 1: governments again, Portuguese borrowing costs have been on the rise,

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Speaker 1: Italy and Spain picking up a little bit. What's going on?

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Speaker 1: Why are people suddenly sort of nervous again in Europe?

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Speaker 1: I can give you five reasons if you want, but

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Speaker 1: to de pick the one that I most believe in

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Speaker 1: be tricky. I think, first of all, if you look

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Speaker 1: at where banks, or if you do like the stress,

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Speaker 1: and how banks are making money up to two thousand

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Speaker 1: and seven and how banks are trying to make money

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Speaker 1: now are completely different worlds. It was basically, pilem high

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Speaker 1: and sell them cheap was the way you made money

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Speaker 1: in too does its just it was market share and

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Speaker 1: get get your marrigine as much as you can, and

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Speaker 1: there's no risk in the world, so you can slip

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Speaker 1: your profits. At the end of every year. Things will

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Speaker 1: blow up, as they eventually did, but fild the going

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Speaker 1: as good. You're making good money. These days, banks are

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Speaker 1: very very regulators, so I think that they're almost afraid

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Speaker 1: to try new things. The model that they used to

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Speaker 1: have is broken. So if I'm an investor and a

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Speaker 1: look at the bank and say, okay, how is this

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Speaker 1: this bank? That is this large mention it? But I say,

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Speaker 1: how was a large legacy bank going to make money

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Speaker 1: in the next five years? Where is my dividend yield

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Speaker 1: going to come from? I can't see it, But Joe,

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Speaker 1: but that's not myself. I can't see so I don't

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Speaker 1: think an investor could see it. And I think that's

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Speaker 1: but that's not the problems right now? Right now, we're

399
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Speaker 1: looking at a squeeze, so it'll last play into five weeks.

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Speaker 1: And European banks have got killed this year. And that's

401
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Speaker 1: not investors. These banks aren't going to be profitbly, are

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Speaker 1: going to have are going to struggle to be as

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Speaker 1: profitble as the world historically. There's something else happening. I

404
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Speaker 1: thought that something else is maybe investors are resetting their expectations.

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Speaker 1: There was like if you looked at Europe, the area,

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Speaker 1: the book case was very easy to make on it.

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Speaker 1: But there comes the point, as always investors, for you

408
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Speaker 1: have to investors say okay, show me the money, and

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Speaker 1: that point. We haven't got to that point. So investors

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Speaker 1: maybe just resetting their their ideas. Do you think that?

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Speaker 1: I mean, this is a debate that's going on, and

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Speaker 1: a lot of people say the difference between now this

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Speaker 1: bank sell off and say the bank sell off we

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Speaker 1: saw in two thousand eight is not so much about

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Speaker 1: these banks are going to have these gigantic losses that

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Speaker 1: render them in solvent or It's not about that they're

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Speaker 1: going to have some liquidity run. It's just that people

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Speaker 1: don't like the business model. And so between the regulation,

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Speaker 1: the lack of robust upside people are just saying these

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Speaker 1: aren't very exciting businesses to be invested in. Yeah, I

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Speaker 1: think that that's a lot of it. I think that.

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Speaker 1: But there is something more because if you look at

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Speaker 1: the sell off that's happened in Europe, it's it's a

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Speaker 1: broad based sell off. Yeah, so it's like, we don't

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Speaker 1: like your business model, and also we don't like the

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Speaker 1: expectations for the economy in which you're trying to do business.

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Speaker 1: You've got that double time in there. You've then on

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Speaker 1: the fringes of all that, You've lots of other things

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Speaker 1: going on. You've got investors suddenly realizing that Coco bonds,

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Speaker 1: contingent convertible bonds are actually convertible if the contingency riises.

431
00:21:50,760 --> 00:21:53,800
Speaker 1: So this is a sort of a unique class of

432
00:21:53,920 --> 00:21:57,360
Speaker 1: security that's only been around since the crisis. It kind

433
00:21:57,400 --> 00:21:59,919
Speaker 1: of looks like dead, it kind of looks like equit.

434
00:22:00,480 --> 00:22:03,919
Speaker 1: But the idea is that this is these are investors

435
00:22:04,000 --> 00:22:08,479
Speaker 1: who had piled in getting above market yield and are

436
00:22:08,560 --> 00:22:11,359
Speaker 1: now starting to realize that there's no such thing as

437
00:22:11,400 --> 00:22:16,080
Speaker 1: a free lunch, and as these banks struggle with profitability,

438
00:22:16,320 --> 00:22:20,399
Speaker 1: that they could get clipped. Yeah, exactly. So the I

439
00:22:20,520 --> 00:22:23,400
Speaker 1: think that anything that makes investors nerves in a place

440
00:22:23,440 --> 00:22:26,159
Speaker 1: where they're not particularly keen on being invested, Nay, then

441
00:22:26,480 --> 00:22:28,320
Speaker 1: to get out. So if you see these Coco bonds

442
00:22:29,000 --> 00:22:31,320
Speaker 1: start to look like they're going to be converted. So

443
00:22:31,520 --> 00:22:33,879
Speaker 1: the Coco bond is a bond that pays seven So

444
00:22:34,000 --> 00:22:36,200
Speaker 1: you've got your bond that trade the power, you get

445
00:22:36,200 --> 00:22:40,360
Speaker 1: paid seven percent. That's absolutely it turns into equity. You're

446
00:22:40,400 --> 00:22:43,960
Speaker 1: a bond, a bond investor, you know what to behold

447
00:22:44,000 --> 00:22:46,160
Speaker 1: the next in the bank. And also at the point

448
00:22:46,200 --> 00:22:48,440
Speaker 1: where it converts to the equity, you're holding equally to

449
00:22:48,480 --> 00:22:50,920
Speaker 1: the bank that's had a massive equity squeeze that needs

450
00:22:50,960 --> 00:22:53,040
Speaker 1: to raise capital quickly, so you get an equi in

451
00:22:53,080 --> 00:22:56,399
Speaker 1: the bank that you'd never buy. Yeah, so that's but

452
00:22:56,480 --> 00:22:59,040
Speaker 1: again that's what Coca bond, that's what they're supposed to do.

453
00:22:59,320 --> 00:23:01,680
Speaker 1: But they're new, so there are people didn't that much

454
00:23:01,720 --> 00:23:05,720
Speaker 1: experience with them, Brands didn't know how to model them. Perhaps, yes,

455
00:23:06,880 --> 00:23:08,800
Speaker 1: I'm not buying that one, but perhaps the other thing

456
00:23:08,920 --> 00:23:12,000
Speaker 1: then I think that's important is if you look at

457
00:23:12,520 --> 00:23:16,600
Speaker 1: commodity assets, oil metals they will ignore goal but oil

458
00:23:16,680 --> 00:23:20,440
Speaker 1: mets they have got hammered and in the last fourteen

459
00:23:20,840 --> 00:23:24,359
Speaker 1: eighteen months they've just had a disastrous time. And that

460
00:23:25,080 --> 00:23:28,280
Speaker 1: is one of these things that just grinds down earnings,

461
00:23:28,359 --> 00:23:32,840
Speaker 1: grindsdowne profits, and grinds down the circulation of what for

462
00:23:32,920 --> 00:23:35,720
Speaker 1: what of a better phrase petrol dollars in the world. So,

463
00:23:35,880 --> 00:23:38,159
Speaker 1: if you've got a large sovereign wealth funds, and there

464
00:23:38,200 --> 00:23:40,440
Speaker 1: are lots of very large stuff and wealth funds that

465
00:23:40,680 --> 00:23:44,119
Speaker 1: have very large equity holdings, and we thought, u um,

466
00:23:44,600 --> 00:23:47,440
Speaker 1: if you look at the Norwegian ex so it is

467
00:23:47,520 --> 00:23:49,720
Speaker 1: huge equity holdings. A lot of the Gholft funds have

468
00:23:49,840 --> 00:23:52,439
Speaker 1: equity holdings, and a lot of those equity holdings are

469
00:23:52,520 --> 00:23:55,320
Speaker 1: in financial stocks. That there has to be a point

470
00:23:55,359 --> 00:23:59,280
Speaker 1: where these governments say, okay, rather than putting in our

471
00:23:59,320 --> 00:24:01,479
Speaker 1: own people, there are too much pressure by cutting our

472
00:24:01,520 --> 00:24:03,840
Speaker 1: budget too much, We're going to spend some of a

473
00:24:04,000 --> 00:24:07,159
Speaker 1: rainy day fund and that means liquidation assets out of

474
00:24:07,200 --> 00:24:10,439
Speaker 1: the raining So basically, during the boom times of oil

475
00:24:10,520 --> 00:24:14,199
Speaker 1: you had these governments like Norway, Saudi Arabia and others.

476
00:24:14,680 --> 00:24:18,080
Speaker 1: They built up tons of cash because oil was so high.

477
00:24:18,200 --> 00:24:20,320
Speaker 1: They went out and bought all these assets and among

478
00:24:20,400 --> 00:24:24,320
Speaker 1: the assets that they owned we're financial stocks around the world.

479
00:24:24,800 --> 00:24:29,120
Speaker 1: Now that oil has been plunging, these government budgets are understrain.

480
00:24:29,560 --> 00:24:32,240
Speaker 1: These governments are then deciding that it might make sense

481
00:24:32,480 --> 00:24:34,640
Speaker 1: to sell down some of their assets, as you say,

482
00:24:34,960 --> 00:24:37,440
Speaker 1: liquid ad part of their rainy day fund. And this

483
00:24:37,640 --> 00:24:40,240
Speaker 1: is putting pressure on everything. But because they were so

484
00:24:40,400 --> 00:24:43,840
Speaker 1: heavy into financials, that could be one aspect driving the

485
00:24:43,920 --> 00:24:47,560
Speaker 1: selling here, but not even that could be an asset drive.

486
00:24:47,720 --> 00:24:50,600
Speaker 1: But also if I'm a bank investor myself and I'm

487
00:24:50,640 --> 00:24:53,240
Speaker 1: not a SOB wealth fund, I look at these ser

488
00:24:53,280 --> 00:24:55,320
Speaker 1: wealth funds and I think, Okay, the next thing they're

489
00:24:55,320 --> 00:24:58,560
Speaker 1: going to do if their financial shares, I'm going to

490
00:24:58,640 --> 00:25:00,400
Speaker 1: sell mine first to get out of the so even

491
00:25:00,440 --> 00:25:02,920
Speaker 1: if they're not selling yet, people want to get ahead

492
00:25:02,920 --> 00:25:05,200
Speaker 1: of the people want to get ahead of that so Lorkan.

493
00:25:05,280 --> 00:25:07,679
Speaker 1: In addition to the tensions at the Bank's, one thing

494
00:25:07,760 --> 00:25:12,280
Speaker 1: that we've been seeing lately is some renewed pressure on government.

495
00:25:12,680 --> 00:25:16,359
Speaker 1: We've been seeing in the last week Portuguese borrowing costs

496
00:25:16,400 --> 00:25:20,000
Speaker 1: have been rising. Is this a return to the same problem,

497
00:25:20,119 --> 00:25:24,200
Speaker 1: the sort of rebuke of austerity ongoing political problems that

498
00:25:24,280 --> 00:25:27,840
Speaker 1: hasn't really been solved in the Eurozone, I think to

499
00:25:27,960 --> 00:25:30,240
Speaker 1: an extent it can be seen as that, but I think,

500
00:25:31,000 --> 00:25:37,240
Speaker 1: as always, this time it's different. Investors are better as

501
00:25:37,359 --> 00:25:41,440
Speaker 1: differentiating between different European countries Eurea countries. The way it

502
00:25:41,600 --> 00:25:43,760
Speaker 1: used to be again in two thousand and ten Stars

503
00:25:43,760 --> 00:25:47,080
Speaker 1: eleven was you bought German sovereign debt, you sold the

504
00:25:47,160 --> 00:25:51,320
Speaker 1: periphery that's Portugal, Islands, Italy, Greece, in Spain is on

505
00:25:51,359 --> 00:25:53,200
Speaker 1: the edge, you sold it. If you look at what

506
00:25:53,280 --> 00:25:57,879
Speaker 1: happened last week, we has Portuguese tenure deal at four percent,

507
00:25:58,520 --> 00:26:02,719
Speaker 1: with the Irish government stategency selling ten year debt at

508
00:26:02,760 --> 00:26:06,600
Speaker 1: point nine yield. So you've a huge spread between two

509
00:26:06,680 --> 00:26:10,240
Speaker 1: of the former peripe countries. And that's because the investors saying, okay,

510
00:26:10,560 --> 00:26:12,920
Speaker 1: let's just let's it's not a euro problem, it's a

511
00:26:12,960 --> 00:26:16,400
Speaker 1: problem within these individual countries. In Portugal at the moment,

512
00:26:16,560 --> 00:26:19,480
Speaker 1: the government, there's socialist government that was elected and there

513
00:26:19,880 --> 00:26:22,280
Speaker 1: came in on a promise of reversing the spending cuts

514
00:26:22,359 --> 00:26:26,159
Speaker 1: of the previous administration, which is how all socist governments

515
00:26:26,160 --> 00:26:28,760
Speaker 1: are elected in European promises of reversing what the bad

516
00:26:28,800 --> 00:26:31,399
Speaker 1: guys did last time around, and then they find themselves

517
00:26:31,400 --> 00:26:33,560
Speaker 1: in a position where they have to implement the policies

518
00:26:33,920 --> 00:26:37,240
Speaker 1: of the previous government anyway, because as a small open

519
00:26:37,320 --> 00:26:40,200
Speaker 1: economy in the world, you don't have a huge amount

520
00:26:40,240 --> 00:26:43,080
Speaker 1: of choice over the policies you implement. You can't go

521
00:26:43,240 --> 00:26:45,920
Speaker 1: it alone. You can it's not like your United States,

522
00:26:46,359 --> 00:26:49,720
Speaker 1: who can set policy. You have to be an economy

523
00:26:49,800 --> 00:26:52,679
Speaker 1: that can exist as an antarchy in order to set policy.

524
00:26:53,080 --> 00:26:56,760
Speaker 1: A small, perifer European state doesn't have that autonomy. In

525
00:26:56,840 --> 00:26:59,119
Speaker 1: Ireland at the moment, there's an election campaign going on

526
00:26:59,160 --> 00:27:03,879
Speaker 1: the election June twenty six February, and politicians from the

527
00:27:04,080 --> 00:27:06,320
Speaker 1: entire width of the spectrum of the major parties from

528
00:27:06,400 --> 00:27:12,120
Speaker 1: left to right, to tell their policies apart is incredibly

529
00:27:12,200 --> 00:27:15,000
Speaker 1: difficult to an outsider, So there's a lot of consensus

530
00:27:15,080 --> 00:27:18,159
Speaker 1: that there is not much inclination to change course. The

531
00:27:18,280 --> 00:27:22,000
Speaker 1: Socialist Party or closest things aren't. As a socialist party,

532
00:27:23,359 --> 00:27:25,800
Speaker 1: I have already committed to maintaining arens twelve and a

533
00:27:25,800 --> 00:27:29,240
Speaker 1: half corporate tax rates. So if you're a socialist and

534
00:27:29,280 --> 00:27:32,520
Speaker 1: you're committing to maintaining al and a percent corporate tax rate,

535
00:27:32,680 --> 00:27:35,280
Speaker 1: you're kind of amazing. We can't really have any large

536
00:27:35,320 --> 00:27:38,639
Speaker 1: policy changes because we're a small, open economy and the

537
00:27:38,760 --> 00:27:42,120
Speaker 1: market will just wipe the economy out if they don't

538
00:27:42,160 --> 00:27:45,040
Speaker 1: like what we do. But in other places, like in Portugal,

539
00:27:45,480 --> 00:27:50,720
Speaker 1: in Spain, in Greece, there's clearly much sharper ideological divisions

540
00:27:50,760 --> 00:27:52,680
Speaker 1: between the parties. There are, and if you look, I

541
00:27:52,720 --> 00:27:54,439
Speaker 1: think Greece is a great example of We look at

542
00:27:54,480 --> 00:27:57,000
Speaker 1: Theresa being in government now over a year and when

543
00:27:57,040 --> 00:27:58,919
Speaker 1: they came in they were going to tear up everything

544
00:27:59,000 --> 00:28:02,080
Speaker 1: and starting you and would be a socialist paradise. A

545
00:28:02,240 --> 00:28:05,920
Speaker 1: year in there are strikes in Greece against the policies

546
00:28:06,000 --> 00:28:10,160
Speaker 1: of the Serisa government which are rather bizarty because of Greece,

547
00:28:10,400 --> 00:28:14,720
Speaker 1: supported by the Sarisa party against the Sarisa government. But

548
00:28:15,080 --> 00:28:17,720
Speaker 1: that's Greece. It's a strange face. Well, lorcan thank you

549
00:28:17,960 --> 00:28:22,520
Speaker 1: very much for joining us from six mile Bridge, Ireland

550
00:28:22,760 --> 00:28:26,399
Speaker 1: and telling us your story and giving us your perspective

551
00:28:26,640 --> 00:28:29,720
Speaker 1: on the latest stuff that's been going on. Thanks for

552
00:28:29,800 --> 00:28:32,879
Speaker 1: having me, Joe, absolutely, and thank you. That was another

553
00:28:33,080 --> 00:28:36,080
Speaker 1: edition of the Odd Lots podcast. I'm Joe Wisenthal. You

554
00:28:36,160 --> 00:28:38,560
Speaker 1: can follow me on Twitter at the Stalwart and if

555
00:28:38,600 --> 00:28:41,320
Speaker 1: you want to follow Lorcan. You should follow him at

556
00:28:41,480 --> 00:28:45,040
Speaker 1: on Twitter at Lorcan r K. Thank you very much

557
00:28:45,080 --> 00:28:53,560
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