Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p m L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. We
Speaker 1: are broadcasting from the Bloomberg Interactive Broker's studios and it
Speaker 1: is a pleasure to welcome the most recent recipient of
Speaker 1: the Nobel Prize in Medicine. James Patrick Allison, perhaps better
Speaker 1: known as Dr Jim Allison, joins us here in our
Speaker 1: eleven Trio studios. Dr Allison, thank you very much for
Speaker 1: being here and congratulations on your Nobel Prize. And I'm
Speaker 1: wondering if you could just describe before you tell us
Speaker 1: about how you play the harmonica, and you know you've
Speaker 1: got a musical side that I think it's pretty interesting.
Speaker 1: When did you learn that you had won the Nobel
Speaker 1: Prize along with your counterpart in Japan? Yesterday morning? My
Speaker 1: son called me about five thirty and so, Dad, you
Speaker 1: did it, you know, And and uh, I thought, what
Speaker 1: what I was just waking up, you know. And then
Speaker 1: uh then a call came in from Sweden after that
Speaker 1: and uh, you know, confirming it. So it's rather than
Speaker 1: nice that my son was first though. Tell me, uh, well,
Speaker 1: congratulations again, Dr Alison. Can you just give us a
Speaker 1: sense of how hard it was to do the research
Speaker 1: and persevere with it when a lot of people thought
Speaker 1: that your field of immuno oncology was voodoo science. Yeah
Speaker 1: it was. It was you know, voodoo or snake oil
Speaker 1: or various terms were used. You know, I just didn't
Speaker 1: pay much attention to that was just background noise. I
Speaker 1: focused on really understanding mechanisms of how the immune system
Speaker 1: worked until I had the details down and could just
Speaker 1: knew exactly what I thought, at least exactly what we
Speaker 1: needed to do. So what is this amano oncology. Well,
Speaker 1: it's it's using your immune system, either targeting it or
Speaker 1: in my case, just unleashing it to attack cancer cells.
Speaker 1: Because you've got these cells called T cells that go
Speaker 1: all around your body and they're kind of the soldiers
Speaker 1: of the immune system and they recognize things that ought
Speaker 1: not to be their virus infected cells or cancer cells
Speaker 1: or whatever, recognize them Um, it's a wonderfully complex and
Speaker 1: interesting process that I've been working on since nine two,
Speaker 1: and um, you know, it's it's just a beautiful thing,
Speaker 1: and we finally learned how to manipulate it, to direct
Speaker 1: it to ourselves to actually attack cancer. Dr Allison as
Speaker 1: the professor and also Chair of Immunology and Executive Director
Speaker 1: of Immunotherapy at the MD Anderson Cancer Center, can you, uh,
Speaker 1: maybe describe how your discovery can not only apply to
Speaker 1: specific cancers that people may have, but for the whole
Speaker 1: understanding of how to fight cancer when it's diagnosed. Yes, well, well,
Speaker 1: this this approach is radically different from most approaches to
Speaker 1: cancer theory, which target the cancer cell. This has the
Speaker 1: therapy itself has nothing to do with the cancer cell
Speaker 1: at all. It has to do with manipulating the immune
Speaker 1: system just generally, so potentially it could work against any
Speaker 1: kind of cancer, at least when I conceived of this
Speaker 1: in the mid nineties, that was the idea. Since you're
Speaker 1: not treating cancer, you're treating the immune system, it could
Speaker 1: work against anything, and it turned out that that was
Speaker 1: not quite right. But but it works very well well
Speaker 1: against melanoma, for example, Patients that just get a a
Speaker 1: single round of treatment with with the drug I developed,
Speaker 1: and we're live ten years. I mean they're basically cured.
Speaker 1: Their live ten years after therapy and when added to
Speaker 1: a second drug that that Hanjo played a major role
Speaker 1: in discovering. The response rates about sixty and we don't
Speaker 1: know how long they're going. But it's been approved by
Speaker 1: the FDA now not only for melanoma, but for lung cancer,
Speaker 1: kidney cancer, bladder cancer, Hodgkinson and Foma, had neck cancer,
Speaker 1: and the list goes on and on, merken cell cancering, um,
Speaker 1: you know, so it is broadly applicable. But unfortunately, what
Speaker 1: we've learned in the last few years since these approval
Speaker 1: started coming in is there are cancers that don't response.
Speaker 1: There's a clear blastoma and pancreatic cancer, and the response
Speaker 1: rates and other cancers are um. You know, it's not everybody.
Speaker 1: It's somewhere or in combinations up to our job now
Speaker 1: hours to get that up as close to a percent
Speaker 1: as we can and in as many kinds of cancer.
Speaker 1: And that's the goal of the minotherapy platform and INMDI
Speaker 1: Anderson that that run together with Dr pad biny Sharma,
Speaker 1: who's an oncologist that yes, yes, Dr Allison, I'm wondering,
Speaker 1: You've been working on this particular type of cancer treatment
Speaker 1: for nearly four decades, and over that time, I'm wondering,
Speaker 1: do you feel like we are much closer to a
Speaker 1: fundamental breakthrough to make cancer less fatal? Yes, I think
Speaker 1: we're are, and i think we're already there in some
Speaker 1: kinds of cancer. As I said, six melanoma patients. When
Speaker 1: we started this work, the median survival after diagnosis of
Speaker 1: metastatic melanoma was eleven months. It was basically a death sentence,
Speaker 1: and there were no drugs that had ever had any
Speaker 1: impact on that at all until we came along. And now,
Speaker 1: like I said, twenty percent of people alive ten years
Speaker 1: after treatment, and you know even more when you're using combinations.
Speaker 1: So uh, but there's you know, so this is a
Speaker 1: fundamental shift and how to treat cancer. Again, you don't
Speaker 1: treat the cancer, You treat the immune system and unleash
Speaker 1: it to go after the cancer on its own. And
Speaker 1: so this is going to be I would predict, not
Speaker 1: not replace chemotherapy and radiation and things like that, but together.
Speaker 1: That's the unique thing about immunotherapy is that it can
Speaker 1: be used together with these other kinds of therapy to
Speaker 1: improve their their efficacy. And the one thing that one
Speaker 1: key thing that the immune therapy is offered that the
Speaker 1: others don't is that once you've got a T cell,
Speaker 1: you've got it for the rest of your life. Just
Speaker 1: real quick, Which companies you're working on to develop actual applications?
Speaker 1: A lot several companies, but key and helping us developers
Speaker 1: a little company called Meta Acts. It's since been by
Speaker 1: Bristol Myers squib so we do a lot of work
Speaker 1: with them, but we also work with a number of
Speaker 1: other companies. Dr jam Melissa, congratulations, Thank you so much
Speaker 1: for joining us. Truly a pleasure to speak with you
Speaker 1: and thank you for what you do. A lot of
Speaker 1: people I know are very grateful. Dr Jim Allison, Professor
Speaker 1: in Chair of Immunology at the MD Anderson Cancer Center
Speaker 1: in Houston, also the winner of the Nobel Prize for Medicine,
Speaker 1: Thank you so much and really an inspiration with respect
Speaker 1: the perseverance for nearly four decades on something that a
Speaker 1: lot of people dismissed. Really a pleasure having you here.
Speaker 1: We are broadcasting from the Bloomberg Interactive Broker's studios. This
Speaker 1: is the time we talk about trade. And indeed, after
Speaker 1: yesterday's public airing of the details of the U S
Speaker 1: m C A much more and much more. Yes, you
Speaker 1: have new concessions for US farmers, new rules for digital commerce,
Speaker 1: and rules for US content for automobiles. Here to help
Speaker 1: us understand the trade agreement is Duncan Would, director of
Speaker 1: the Mexico Institute at the Wilson Center, and he joins
Speaker 1: us now from Washington. Do you see Duncan Wood, thank
Speaker 1: you very much for being with us. What can you
Speaker 1: tell us about the details of this agreement and what
Speaker 1: do you believe the ramifications of the agreement will be
Speaker 1: for all three of the economies Mexico, the United States,
Speaker 1: and Canada. Well, let's say, yeah, that's a pretty big question,
Speaker 1: considering the economy is to combine, their trade is more
Speaker 1: than fort of one point four billion trillion dollars UM.
Speaker 1: But what I can say is that I was happy
Speaker 1: to see a continuation of general principles of NaSTA UM
Speaker 1: in this new agreement. I think that we have actually
Speaker 1: ensured that the free trade environment in North America will
Speaker 1: continue pretty much across the board. UM. There are some
Speaker 1: areas where the Trump administration was successful in in winning
Speaker 1: concessions from his partners. Now to say that, obviously, you know,
Speaker 1: we talked a lot about the dairy industry in Canada,
Speaker 1: but we've also talked about the weakening of Chapter eleven
Speaker 1: investor they dispute mechanisms UM and you know, and also
Speaker 1: we've we've seen you know, this insistence on higher regional
Speaker 1: content in the auto sector as well as um A
Speaker 1: content a minimum content level of forty percent coming from
Speaker 1: factories where works makes sixteen an hour or more. So,
Speaker 1: you know, I think that perhaps the most interesting element
Speaker 1: of all of this is to say that business is
Speaker 1: going to accept it. Business is going to celebrate the
Speaker 1: fact that they now have legal certainty that investments can
Speaker 1: continue in the region, and they're going to work with
Speaker 1: the rules of the of the new agreement to try
Speaker 1: to deepen the integration that we've already seen in North America.
Speaker 1: So I take it as a positive step forward. It's
Speaker 1: far from perfect as an agreement, but which free trade
Speaker 1: agreement is um and you know, this is one thing
Speaker 1: that I think that you know, as we read be
Speaker 1: the text and great. So we're finding that despite all
Speaker 1: of the little irritance that are still there, um, and
Speaker 1: some precedents that have been set which are uncomfortable for
Speaker 1: free traders. It's a step in the right direction, all right.
Speaker 1: One thing that I'm struggling with is does this agreement
Speaker 1: move more toward freer trade with fewer barriers or more
Speaker 1: towards sort of more protectionist approach. And I'm thinking in
Speaker 1: particular the sixteen dollars an hour provision, which will effectively
Speaker 1: either forced Mexico to dramatically increase pay or else produce
Speaker 1: things in the US more. Yeah. I mean that you've
Speaker 1: identified one of the clearest examples of a less free
Speaker 1: trade approach. UM. And uh, you know, I think that
Speaker 1: that's that's the thing that will stand out for for
Speaker 1: a lot of people. UM. We also have to recognize
Speaker 1: that the you know, the this new agreement doesn't resolve
Speaker 1: the problems over Section to Study two on aluminum feel. Um,
Speaker 1: it doesn't really resolve the dispute over the potential application
Speaker 1: of Section two study to on or the automobile sector.
Speaker 1: Because whilst Canada and Mexico have carved out UM an
Speaker 1: exemption from that up to two points six million vehicles
Speaker 1: a year UM, that they're still going to be subject
Speaker 1: to it, which you know goes against the principles of
Speaker 1: free trade. However, you know, on the positive side, I
Speaker 1: would say this, what we've seen is we've seen a
Speaker 1: modernization of a of an agreement that you know, is
Speaker 1: more than two decades old, that was considered to be
Speaker 1: an old Lady of free trade agreement. We've included new
Speaker 1: issues so that the new agreement applies to areas of
Speaker 1: digital trade, intellectual property. You know, there's some interesting work
Speaker 1: there on on financial services, and so these are I mean,
Speaker 1: it looks much more like a twenty first century free
Speaker 1: trade agreement than the NAFTA did, and I would say
Speaker 1: that that extends the reach of free trade in the
Speaker 1: North American region. Can this agreement or parts of this
Speaker 1: agreement be used in future negotiations with China? I think
Speaker 1: that's certainly. Um. What's what's behind a lot of the year,
Speaker 1: at least some of the language that's been there, um.
Speaker 1: I mean, the most obvious stand out here is that
Speaker 1: is the question of currency manipulation. There was no reason
Speaker 1: to include currency manipulation provisions in a NAFTA. Biggest neither
Speaker 1: Canada nor Mexico engage in that kind of behavior. But
Speaker 1: clearly the United States wanted to establish a precedent whereby
Speaker 1: they could take this language to any potential um future
Speaker 1: free tech trade deal. And you know, the Japanese have
Speaker 1: already um signals that they're nervous about that, they know
Speaker 1: that that's coming to their for their their negotiations with
Speaker 1: the United States. And of course this set the president
Speaker 1: for China in particular, Dungan, I'm struck by the fact
Speaker 1: that you think that disagreement will be good for US
Speaker 1: energy companies. Can you explain? Yeah, I think that it
Speaker 1: is that it's good for US energy companies because, first
Speaker 1: of all, Mexico was excluded from the original provisions energy
Speaker 1: provisions of the NAFTA UM and you know it, it's
Speaker 1: specifically required that it was excluded from the free trade
Speaker 1: of of of oil and gas because Mexico's system at
Speaker 1: the time was a closed system UM. Since two thousands thirteen,
Speaker 1: Mexico has opened up its oil and gas sector. Mexico
Speaker 1: now has a market oriented energy sector and that has
Speaker 1: been under threat with the With the new government's coming
Speaker 1: into power in December in Mexico, the government of Andersman,
Speaker 1: while lops Overdorf, who was opposed to private investment in
Speaker 1: the oil and gas sector. But what this treaty ensures
Speaker 1: is two things. One that there will continue to be
Speaker 1: the free trade in molecules and electrons across the North
Speaker 1: American space. And to that Chapter eleven um provisions in
Speaker 1: in other words, investor states dispute settlement mechanisms will apply
Speaker 1: continue to apply to the energy sector, in particular to
Speaker 1: oil and gas. And so that gives a lot of
Speaker 1: the investors American companies that are invested in Mexico, that
Speaker 1: gives them legal certainty which they wouldn't have had otherwise.
Speaker 1: Duncan Wood, thank you so much for joining us and
Speaker 1: for analyzing uh the agreement to in such a short
Speaker 1: period of time to give us such a deep insight.
Speaker 1: Duncan Wood is director of the Mexico Institute at the
Speaker 1: Wilson Center in Washington, d C. The topic now is
Speaker 1: student loans and helping us here to understand this is
Speaker 1: Brendan Coughlin. He is the president of consumer Lending at
Speaker 1: Citizens Bank. Brendon, thanks very much for coming in. Maybe
Speaker 1: just set this stage, because you know, I keep hearing
Speaker 1: a lot of numbers like one and a half trillion
Speaker 1: dollars in student loan debt. But the student loan market
Speaker 1: includes private debt, it also includes debt that in many
Speaker 1: cases is guaranteed by the federal government. Can you explain
Speaker 1: the marketplace and what we're facing. Yeah, absolutely, and thanks
Speaker 1: for having me here today for what's I think one
Speaker 1: of the country's biggest challenges. The student loan um that
Speaker 1: did just cross one point five trillion. It's growing at
Speaker 1: about twice the pace of inflation, and projections put it
Speaker 1: out at three trillion um in in just another ten years.
Speaker 1: So just a very alarming situation that we're dealing with
Speaker 1: here that the country is going to be living with
Speaker 1: for a long time. You are right, when you get
Speaker 1: a new loan to go first to go to school,
Speaker 1: about of the time that that loan is issued by
Speaker 1: the federal government through a variety of programs, and about
Speaker 1: seven percent of the time it's issued by a bank
Speaker 1: which has full underwriting UH and an assessment of your
Speaker 1: ability to repay, versus the federal government, which which has
Speaker 1: very very limited underwriting. So you just put out a
Speaker 1: survey where you talked to a number of younger individuals
Speaker 1: in America about their student debt loads. Regret is sort
Speaker 1: of laced into every result of this survey, just to
Speaker 1: regret that they incurred so much debt. I'm just wondering,
Speaker 1: apart from going over some of the details of the
Speaker 1: actual survey, what could they have done to ameliorate some
Speaker 1: of these uh regrets. Yeah, you know, this is it's
Speaker 1: it's highly emotional when when you're entering school and the
Speaker 1: discussion between parents and children often is not detailed enough,
Speaker 1: and folks don't understand what they're truly signing up for,
Speaker 1: and they're not having the hard conversation of return on investment.
Speaker 1: And as you make your choices, whether it's which school
Speaker 1: or how much you're gonna pay, or how to pay
Speaker 1: for it, and really all of it comes back to
Speaker 1: that doing your homework and being more prepared so you
Speaker 1: make these decisions eyes wide open um going into school.
Speaker 1: How many smaller or I guess for profit universities do
Speaker 1: you think would shutter if people did more of this
Speaker 1: sort of risk reward but benefit analysis. Yeah, there's certainly
Speaker 1: a handful of decent for profit schools, but but by
Speaker 1: and large, many of them would be in real, real challenge.
Speaker 1: If you looked at the return on investment on some
Speaker 1: of these, and and did an assessment of the tuition
Speaker 1: you'd pay versus the um the salary, and the graduation
Speaker 1: rates coming out. And keep in mind the graduation rate
Speaker 1: across the entire country, including four year public and private institutions,
Speaker 1: is right around fifty. So most of our issue in
Speaker 1: the country is that these kids are not matriculating to graduation. UM.
Speaker 1: When you do get to graduation, you have a much
Speaker 1: higher success rate of um of of of getting a
Speaker 1: good job, but it's particularly exacerbated in the for profit sector.
Speaker 1: For sure. There was a report there is a report
Speaker 1: from the Brookings Institute about student loans, and one of
Speaker 1: their conclusions is that by three forty percent of borrowers
Speaker 1: made default on their student loans. We're talking about five
Speaker 1: hundred and sixty billion dollars in unpaid debt. Does that
Speaker 1: make sense to you? Well, so, the data, as as
Speaker 1: we kicked off here, with most of the debt being
Speaker 1: issued by the federal government, the data is not um
Speaker 1: readily publicly available UM to digest in a way that
Speaker 1: makes that easily answerable. But that does seem consistent with
Speaker 1: all the information I've heard UM and and in the
Speaker 1: federal portfolios, customers are considered performing even if they're on
Speaker 1: a um A plan to repay, which could be as
Speaker 1: little as a five dollar a month payment. So if
Speaker 1: you owe seven hundred and you're paying five dollars a
Speaker 1: month from from a statistical perspective, that's not considered um
Speaker 1: in default. But you know, that's pretty darn close to
Speaker 1: default in my book. So we've got a lot of
Speaker 1: customers out there in the marketplace and the federal program
Speaker 1: that are not paying back. You know, if you juxtapose
Speaker 1: that against the banks, our default rate is about two
Speaker 1: percent as a as an industry, Citizens is at below
Speaker 1: one percent. So it's a very very stark difference between
Speaker 1: bank loans and government loans. All right, I want to
Speaker 1: get this more clear. So Brendan, you're the president of
Speaker 1: Consumer Letting It Citizens Bank. We know that student loans
Speaker 1: have become an increasing problem as its surges in the
Speaker 1: total outstanding and people talk about how to drag on
Speaker 1: the economy. Basically, these young people have so much debt
Speaker 1: they can't save anything, and they can't spend on a house,
Speaker 1: and they're they're they're postponing their family formations and not
Speaker 1: having kids because they're really expensive. Um. One thing that
Speaker 1: I'm wondering from you, how does a private organization play
Speaker 1: in this space ace and profit from this space at
Speaker 1: a time when there is such this this huge weight
Speaker 1: out there that is sort of weighing down everything. Yeah. Look,
Speaker 1: we we can't control the entire environment. Obviously. The biggest
Speaker 1: issue here is the ever increasing tuition costs across the country,
Speaker 1: and it's going faster than inflation. So the only place
Speaker 1: that families are finding their way to pay for it
Speaker 1: is either you know, postponing retirement or or taking out debt.
Speaker 1: What we can do is is inside of the framework
Speaker 1: of a bank. We've done a couple of things, so
Speaker 1: we put a more affordable option out there than most
Speaker 1: of the government programs, at least the ones that aren't subsidized.
Speaker 1: So when you go to school, we will give you
Speaker 1: a rate that's better, and we will underwrite you to
Speaker 1: make sure we think you have a reasonably good chance
Speaker 1: to pay the bank back, which is good for us
Speaker 1: in the student hold on second, I want to want
Speaker 1: to press you on that. So in other words, you decide,
Speaker 1: is this person competent? Are they studying something that's actually
Speaker 1: going to give them some leg up when they go
Speaker 1: try to apply for a job. Are those some of
Speaker 1: the things that you look at. We don't. We don't
Speaker 1: look at their their intended degree. Um, there's a lot
Speaker 1: of risk of redlining and unfair treatment on things like that.
Speaker 1: But we do look at their income. Their parents are
Speaker 1: typically co signing, which is forcing this conversation and the
Speaker 1: family and the household around is this the right decision
Speaker 1: for us? We both have some skin in the game.
Speaker 1: Let's make sure so all those things lead to a
Speaker 1: better and more informed decision, which dramatically improves the ability
Speaker 1: to repay for the student at the end of it.
Speaker 1: We've also introduced a refinance program when you come out
Speaker 1: of school, which uh most folks surprisingly don't even know
Speaker 1: about yet, um and spending the market for five or
Speaker 1: six years. When you get out of school, if you
Speaker 1: get a job, the first thing you should do is
Speaker 1: look to trade in your old student loans because you
Speaker 1: got underwritten when you're eighteen, living with your parents with
Speaker 1: no credit score, and now you're gainfully employed, you've built
Speaker 1: some credit and hopefully you're on the way to moving
Speaker 1: out for mom and dad. Right, your profile could not
Speaker 1: be more different than when you got that loan, and
Speaker 1: we've been saving students about two and fifty dollars a
Speaker 1: month on their student loan debt, which gets back to
Speaker 1: your question around accelerating your ability to buy a home, household, formation,
Speaker 1: getting married, having kids. Now, that refinancing that you just
Speaker 1: spoke about, and I give you about twenty seconds here,
Speaker 1: that refinancing could be for private student debt, but it
Speaker 1: can also be for public for federal student debt. Right.
Speaker 1: That's that's exactly correct. Consumers make no distinction between the two,
Speaker 1: and um, we we will refinance either one of them
Speaker 1: is in most of the industry that's in this business
Speaker 1: will as well. You know, one of the stats the
Speaker 1: survey put out was about sixty percent of students have
Speaker 1: buyer's remorse on their decisions. So either they wish they
Speaker 1: went to a less expensive school or in some cases
Speaker 1: they wish they didn't go to school at all. So
Speaker 1: once you've made that decision, it is what it is,
Speaker 1: but you can take control of your finances, refinance it
Speaker 1: and make it more affordable for you. Brendan Coughlin, thank
Speaker 1: you so much for being here. Brendan Coughland is President
Speaker 1: of Consumer deposits and lending for Citizens Bank in Providence,
Speaker 1: Rode Island. The leader of Italy's Five Star movement, Luigi
Speaker 1: de Mayo, has warned that Italy's government will not retreat
Speaker 1: quote a millimeter from its spending plans amid pressures from
Speaker 1: the European Union. Here to tell us more is Alberto Gallo,
Speaker 1: partner portfolio manager for Algebras Macro Credit fund at Algebras,
Speaker 1: and he's also a Bloomberg opinion column this and he
Speaker 1: joins us, Now, Alberto, what if you make of Mr
Speaker 1: Demio's statement? It looks a lot like the altitude the
Speaker 1: type of posture that the former finance minister in Greece,
Speaker 1: you know, Mr Barro Farkas had versus Europe, so very confrontational. Um.
Speaker 1: And it is the opposite to his coalition partner Saldini
Speaker 1: from the Northern League. So you have a government with
Speaker 1: two parties. One has been voted in the south of
Speaker 1: the country. Um. The other one has been voted in
Speaker 1: the north, which is reached sure and more industrial. Um.
Speaker 1: You know. Mr Demira has been falling behind in contensus
Speaker 1: since the coalition started in Italy, while Mr Sylvenia has
Speaker 1: been gaining, so I think this is a competition to
Speaker 1: raise the voice against Europe, to try to gain back
Speaker 1: some votes. There is an internal dynamic between Mr. Demia Mr.
Speaker 1: Slvina are trying to raise for more consensus. However, the
Speaker 1: you know, some of the business components of the country
Speaker 1: are feeling the pain. As you know, yield go up
Speaker 1: and investment drives up. So we you know, we think
Speaker 1: that Indian Mrs Slvinia will win more consensus and this
Speaker 1: could bring a more rational stand to the government to
Speaker 1: the debate with Europe. So I guess you know, there's
Speaker 1: the internal the deliberations about the votes that the Five
Speaker 1: Star Party could pick up. These are there's the external
Speaker 1: factor here, which is exactly as you're mentioning Albert Alberto,
Speaker 1: the yields rising and if you look at ten year
Speaker 1: Italian yields now rising to the highest since March. I'm wondering,
Speaker 1: from your vantage point, are yields poised to go much higher?
Speaker 1: In part because the European Union is fed up with
Speaker 1: the Italian drama and it's withdrawing from its stimulus program. Anyway,
Speaker 1: this is it's hard to understand and predict the dynamic
Speaker 1: of every tweet. You know, of every statement generally the
Speaker 1: consensus and you know very well this from the US
Speaker 1: administration as well. I have no idea what you're talking about.
Speaker 1: Other too, the consensus is very very short. You know,
Speaker 1: US investors have gone into emerging market, but no one,
Speaker 1: no one likes Europe. So there is a contents tous
Speaker 1: saying that Yales would go to for four or five percent.
Speaker 1: Having said that, the two point four percent number for
Speaker 1: the budget deficitit is just point one percent higher than
Speaker 1: last year. So you know last year we have two
Speaker 1: point three percent def that Italy has a current account surplus,
Speaker 1: which means that you know, the dest it comes from
Speaker 1: interest costs UM. There's there's more experts than imports UM.
Speaker 1: And there's eight trillion of savings that Italians have and
Speaker 1: around seventy percent of bonds are held either by the
Speaker 1: bank compitily through easyb purchases or by tellent institutions. So
Speaker 1: really here the government is making an effort at creating
Speaker 1: financial volatility, trying to gain contensus from public opinion, trying
Speaker 1: to portray the EU as a as an enemy, and
Speaker 1: we've seen this before in other countries. Having said that
Speaker 1: the coalition is fragile um, it's not stable, and you
Speaker 1: could see a point where the Northern supporters of Mr
Speaker 1: Slbini say this is enough. You know, you're damaging our business.
Speaker 1: You need to break up from Mr Demand who has
Speaker 1: been promising effectively free income to uh to be unemployed
Speaker 1: and very high spending which are unrealizable. And you can
Speaker 1: see that from the latest declaration of success. You know
Speaker 1: Mr Slovini is absent, so he's not taking a position
Speaker 1: in favor of uh in in in extreme favor of
Speaker 1: the budget is taking a much more moderate position. So
Speaker 1: there's gonna be clearly stumble latility. But if you look
Speaker 1: through that, there's potentially attractive opportunities also in other parts
Speaker 1: of Europe, not necessarily in equally, but other parts that
Speaker 1: are widening, that are falling in sympathy with with Italy.
Speaker 1: You look at Spain, for example, or the UK, well
Speaker 1: you have you have bond yield adjusted for currency in
Speaker 1: the UK or in Spain, which are wider than many
Speaker 1: emerging markets. You know, if you look at the Barclays bonds,
Speaker 1: subbortinated bonds are wider than Ecuador. If you look at
Speaker 1: the Spanish banks, you know they're wider than uh stub
Speaker 1: story and African sovereigns. So there is a structural short
Speaker 1: in Europe. Um, you don't need Europe to have extremely
Speaker 1: high growth, you just need Europe not to break up
Speaker 1: too and you get paid very well for that for that.
Speaker 1: Alberto Guello, thank you so much for being with us,
Speaker 1: and really interesting to think that even if Italy perhaps
Speaker 1: is not a buy right now given the political uncertainty,
Speaker 1: the relative widening of other areas in Europe do offer
Speaker 1: some opportunities. Alberto Gaello, Partner and portfolio manager for the
Speaker 1: Algebras Macro Credit Fund at Algebras Investments. Thanks for listening
Speaker 1: to the Bloomberg P and L podcast. You can subscribe
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