1 00:00:05,920 --> 00:00:08,840 Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 2 00:00:08,880 --> 00:00:11,640 Speaker 1: Along with my co host Lisa Brabowitz. Each day we 3 00:00:11,720 --> 00:00:15,240 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,320 --> 00:00:17,920 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:18,079 --> 00:00:20,840 Speaker 1: or the trading floor. Find the Bloomberg P M L 6 00:00:20,960 --> 00:00:34,479 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Fears 7 00:00:34,560 --> 00:00:37,640 Speaker 1: of a trade war between the US and China have 8 00:00:38,479 --> 00:00:41,680 Speaker 1: subsided a bit. Here with US is Mike McDonough, chief 9 00:00:41,720 --> 00:00:46,760 Speaker 1: economist for financial Products at Bloomberg. Mike, I want to 10 00:00:46,840 --> 00:00:50,720 Speaker 1: start with the news that the Trump administration is urging 11 00:00:50,840 --> 00:00:54,720 Speaker 1: China to lower tariffs on cars and open its markets 12 00:00:54,800 --> 00:00:58,280 Speaker 1: to you as financial services. This this comes as part 13 00:00:58,320 --> 00:01:01,440 Speaker 1: of talks to resolve uh, the rise in trade tensions. 14 00:01:01,680 --> 00:01:03,120 Speaker 1: What do you make of this? I mean, how much 15 00:01:03,160 --> 00:01:06,640 Speaker 1: credence can we put in some of these measures coming 16 00:01:06,640 --> 00:01:09,800 Speaker 1: to pass? Uh? You know, I think that there there 17 00:01:10,000 --> 00:01:14,319 Speaker 1: is a willingness from China to um implement some of 18 00:01:14,360 --> 00:01:16,520 Speaker 1: these changes. But I think the timeline that may be 19 00:01:16,600 --> 00:01:19,440 Speaker 1: President Trump has in mind and the timeline that China 20 00:01:19,480 --> 00:01:21,320 Speaker 1: may have in line maybe where you have a difference. 21 00:01:21,360 --> 00:01:23,240 Speaker 1: But that doesn't mean there can't be some sort of 22 00:01:23,319 --> 00:01:26,080 Speaker 1: compromise in some of these areas. You know, it's an 23 00:01:26,120 --> 00:01:30,080 Speaker 1: interesting Trade in China is an interesting topic because it's 24 00:01:30,200 --> 00:01:33,360 Speaker 1: one area where a lot of leaders around the world 25 00:01:33,760 --> 00:01:37,480 Speaker 1: may actually agree with President Trump. Uh. And when you 26 00:01:37,480 --> 00:01:39,480 Speaker 1: you look at this situation, the problem is it looks 27 00:01:39,480 --> 00:01:43,000 Speaker 1: like President Trump really wants some sort of short term 28 00:01:43,360 --> 00:01:46,679 Speaker 1: gain that he could show. Look, I did this victory victory, 29 00:01:46,760 --> 00:01:49,840 Speaker 1: a very short term victory, which this is kind of 30 00:01:49,840 --> 00:01:52,000 Speaker 1: the damaging aspect of it. Right, nobody's going to win 31 00:01:52,040 --> 00:01:54,040 Speaker 1: from a trade war. The especially the US will get 32 00:01:54,120 --> 00:01:57,120 Speaker 1: hit especially hard if there were a trade war. But 33 00:01:57,560 --> 00:02:00,480 Speaker 1: you know, we're missing this opportunity to have a sort 34 00:02:00,520 --> 00:02:03,400 Speaker 1: of multilateral approach where we joined together with a lot 35 00:02:03,400 --> 00:02:06,080 Speaker 1: of the other countries that China's trading with and and 36 00:02:06,160 --> 00:02:08,320 Speaker 1: go through the w t O or more traditional mether 37 00:02:08,800 --> 00:02:13,760 Speaker 1: um uh channels. Uh. And it's that that's someone unfortunate. 38 00:02:13,840 --> 00:02:16,240 Speaker 1: But I do think there could be some short term 39 00:02:16,320 --> 00:02:21,840 Speaker 1: compromise on certain things. So, Mike, I'm looking at equity 40 00:02:21,919 --> 00:02:25,640 Speaker 1: markets today, Dow Jones off its earlier highs, but still 41 00:02:25,720 --> 00:02:28,480 Speaker 1: up about one and a half percent, and you could 42 00:02:28,520 --> 00:02:33,040 Speaker 1: see a green across the screen throughout the US indices. UM. 43 00:02:33,160 --> 00:02:36,000 Speaker 1: People could attribute various reasons for this, but one of 44 00:02:36,040 --> 00:02:38,520 Speaker 1: them could be that these that the potential for a 45 00:02:38,600 --> 00:02:42,079 Speaker 1: trade war has gone down, right, that that there has 46 00:02:42,120 --> 00:02:45,240 Speaker 1: been a softening in the discussion around China and the US. 47 00:02:45,240 --> 00:02:50,600 Speaker 1: Our markets being too complacent in taking the words from 48 00:02:51,040 --> 00:02:54,720 Speaker 1: Treasury Secretary Minution and the Chinese officials for saying that 49 00:02:54,760 --> 00:02:57,360 Speaker 1: they're making some progress here. You know, I don't think so. 50 00:02:57,400 --> 00:03:00,000 Speaker 1: I think when you look at really since President Trump 51 00:03:00,040 --> 00:03:02,120 Speaker 1: was elected, there's a lot of reasons that markets have 52 00:03:02,160 --> 00:03:04,160 Speaker 1: been going up. But the two big macro ones. One 53 00:03:04,280 --> 00:03:07,079 Speaker 1: is the expectation that the Feds going to be very 54 00:03:07,080 --> 00:03:10,640 Speaker 1: gradual and normalization, and the second important input was that 55 00:03:10,680 --> 00:03:14,240 Speaker 1: there wasn't going to be any major disruption to international trade. 56 00:03:14,520 --> 00:03:17,240 Speaker 1: I think many times now we've seen Rehderick get really 57 00:03:17,560 --> 00:03:20,920 Speaker 1: hot on a bunch of topics out of out of Washington, 58 00:03:21,360 --> 00:03:24,200 Speaker 1: this now being trade, and then the action though had 59 00:03:24,200 --> 00:03:26,880 Speaker 1: the follow through has been a fraction of what the 60 00:03:26,919 --> 00:03:29,560 Speaker 1: original rhetoric indicated it might be. So I think we 61 00:03:29,600 --> 00:03:31,399 Speaker 1: could be seeing another case of that. So I think 62 00:03:31,720 --> 00:03:35,360 Speaker 1: the market taking this, uh, this new input into consideration, 63 00:03:35,440 --> 00:03:38,080 Speaker 1: and it might say that it overreacted. The market may 64 00:03:38,120 --> 00:03:41,160 Speaker 1: have overreacted a bit last week, uh, and is now 65 00:03:41,240 --> 00:03:43,920 Speaker 1: kind of normalizing to the reality of the situation. Well, 66 00:03:43,920 --> 00:03:47,680 Speaker 1: so that what do you have to see before you 67 00:03:47,720 --> 00:03:50,760 Speaker 1: would bet on the idea of a trade war heating 68 00:03:50,840 --> 00:03:53,760 Speaker 1: up materially more than what we've seen in the past, 69 00:03:53,760 --> 00:03:55,360 Speaker 1: But you would you would need to see action, not 70 00:03:55,440 --> 00:03:57,800 Speaker 1: just words, right, You would need to see actual tariffs 71 00:03:57,800 --> 00:04:01,080 Speaker 1: being implemented on a wide swim off of goods, not 72 00:04:01,320 --> 00:04:05,360 Speaker 1: you know, not very targeted, relatively small uh, tariffs that 73 00:04:05,440 --> 00:04:07,480 Speaker 1: don't have that much of an impact on the US 74 00:04:07,600 --> 00:04:10,520 Speaker 1: or Chinese economy, like steel are aluminum tariffs don't have 75 00:04:10,600 --> 00:04:12,920 Speaker 1: a major and they're not They're bad, and I don't 76 00:04:12,960 --> 00:04:15,520 Speaker 1: think they're a good thing to have occur, but they're 77 00:04:15,520 --> 00:04:17,760 Speaker 1: not going to have a major impact alone on either 78 00:04:17,800 --> 00:04:20,200 Speaker 1: of the U s or the or the Chinese economy. 79 00:04:20,520 --> 00:04:22,480 Speaker 1: So um, you know, just sort of shifting a little 80 00:04:22,480 --> 00:04:27,840 Speaker 1: bit from China to Canada and Europe. The steel and 81 00:04:28,040 --> 00:04:32,640 Speaker 1: aluminum tariffs that we talked about so extensively weeks ago, Uh, 82 00:04:32,880 --> 00:04:35,640 Speaker 1: can we now write them off? Is largely non existent. 83 00:04:35,760 --> 00:04:38,640 Speaker 1: Since everybody's gotten an exception. Well, this is another this 84 00:04:38,720 --> 00:04:41,080 Speaker 1: is another example of what I was talking about, where 85 00:04:41,080 --> 00:04:44,200 Speaker 1: the rhetoric is really high, really hot. Uh, and then 86 00:04:44,240 --> 00:04:47,560 Speaker 1: when you actually see the implementation, it's a fraction of 87 00:04:47,600 --> 00:04:49,720 Speaker 1: what was originally indicated would happened. So I mean, I 88 00:04:49,720 --> 00:04:52,360 Speaker 1: wouldn't write anything off yet we don't know what's going 89 00:04:52,400 --> 00:04:54,359 Speaker 1: to happen. You know, you're one tweet away from the 90 00:04:54,400 --> 00:04:57,440 Speaker 1: markets being very concerned. Again, well, but this is my point. 91 00:04:57,520 --> 00:05:00,640 Speaker 1: Are we or our markets going to learn to ignore 92 00:05:00,680 --> 00:05:05,240 Speaker 1: those tweets as all bark and no bite. Uh hasn't 93 00:05:05,279 --> 00:05:08,080 Speaker 1: happened so much yet. I think eventually the market could 94 00:05:08,080 --> 00:05:10,560 Speaker 1: get desensitized to tweets. I guess it matters what the 95 00:05:10,560 --> 00:05:13,240 Speaker 1: tweet says. Uh, it matters is it a new target, 96 00:05:13,279 --> 00:05:16,159 Speaker 1: is it a new idea? Um? Is their indications of 97 00:05:16,200 --> 00:05:18,760 Speaker 1: a follow through? Does you know if if there is 98 00:05:18,800 --> 00:05:21,960 Speaker 1: a tweet that targets another country, does that country then 99 00:05:22,040 --> 00:05:25,600 Speaker 1: respond with their own not tweet necessarily, but their own 100 00:05:25,600 --> 00:05:28,960 Speaker 1: communication that indicates that this could but could then escalate. 101 00:05:29,000 --> 00:05:30,360 Speaker 1: So I think there's a lot of factors you need 102 00:05:30,400 --> 00:05:32,560 Speaker 1: to look at. Maybe a tweet in and of itself 103 00:05:32,600 --> 00:05:36,200 Speaker 1: about steeler aluminum tariffs or um some of these Chinese 104 00:05:36,240 --> 00:05:38,560 Speaker 1: tariffs might not have the same impact it had last week, 105 00:05:38,880 --> 00:05:40,880 Speaker 1: but um, you know, you still got to be on 106 00:05:40,880 --> 00:05:42,640 Speaker 1: the lookout for it and see what happens in the 107 00:05:42,680 --> 00:05:45,160 Speaker 1: aftermath of that tweet. Mike mcdonna, thank you so much 108 00:05:45,200 --> 00:05:48,799 Speaker 1: for being with us. Mike mcdonot, Chief economist for financial 109 00:05:48,839 --> 00:06:06,400 Speaker 1: Products at Bloomberg. We've talked a lot about ETNA recently 110 00:06:06,720 --> 00:06:09,800 Speaker 1: in light of a CBS bid to buy Etna. But 111 00:06:09,839 --> 00:06:13,839 Speaker 1: there's another side of Etna, the Etna Foundation, that has 112 00:06:13,920 --> 00:06:18,440 Speaker 1: been studying what makes a community healthy, what impact the 113 00:06:18,480 --> 00:06:22,279 Speaker 1: opioid epidemic has had on the nation, and going forward, 114 00:06:22,520 --> 00:06:25,719 Speaker 1: what can make the nation in a better position health wise. 115 00:06:25,800 --> 00:06:28,880 Speaker 1: Dr Garth Graham joins me now. He's president of the 116 00:06:28,880 --> 00:06:32,440 Speaker 1: ETNA Foundation, which is based in Hartford, Connecticut. Uh. The 117 00:06:32,480 --> 00:06:37,360 Speaker 1: Etna Foundation just released its inaugural Healthiest Communities rankings. So 118 00:06:37,480 --> 00:06:39,560 Speaker 1: who's healthy, who's healthiest in this in this kind of 119 00:06:39,640 --> 00:06:41,640 Speaker 1: well so, you know, based on this ranking, we saw 120 00:06:41,680 --> 00:06:44,440 Speaker 1: a lot of communities in Virginia and Colorado that trended 121 00:06:44,480 --> 00:06:47,120 Speaker 1: to the top of the list. What's important to understand 122 00:06:47,200 --> 00:06:50,360 Speaker 1: here with what we're publishing is that health you know, 123 00:06:50,400 --> 00:06:52,320 Speaker 1: we only spend a couple of hours a year in 124 00:06:52,360 --> 00:06:54,920 Speaker 1: the doctor's office. At the most, health is defined by 125 00:06:55,000 --> 00:06:57,880 Speaker 1: everything else, all the stuff that's happening in the community. 126 00:06:58,160 --> 00:07:01,560 Speaker 1: You know, where you can get fresh fruits and VEGTA, bikeability, walkability, 127 00:07:01,680 --> 00:07:04,800 Speaker 1: safe housing, making sure that um, you know, you can 128 00:07:04,880 --> 00:07:07,719 Speaker 1: do all the things environment ere we breathe. So what 129 00:07:07,839 --> 00:07:10,720 Speaker 1: we try to really define with this ranking is a 130 00:07:10,720 --> 00:07:15,800 Speaker 1: common concept UM that your zip code defines your health 131 00:07:15,800 --> 00:07:19,440 Speaker 1: more than your genetic code UM. And really by looking 132 00:07:19,480 --> 00:07:21,600 Speaker 1: at all of those factors within a zip code, that 133 00:07:21,640 --> 00:07:25,760 Speaker 1: really influences how long people live. So I'm just wondering, 134 00:07:26,000 --> 00:07:29,480 Speaker 1: when a community is determined to be healthy, does that 135 00:07:29,520 --> 00:07:34,400 Speaker 1: mean that they can enjoy lower insurance premiums in uh 136 00:07:34,440 --> 00:07:38,600 Speaker 1: in tandem with nicer lives. And conversely, if you live 137 00:07:38,640 --> 00:07:41,880 Speaker 1: in an unhealthy community, are premiums higher. Well, you know, 138 00:07:41,920 --> 00:07:44,400 Speaker 1: I'm not sure there's a wanton one connection with the premium. 139 00:07:44,400 --> 00:07:46,920 Speaker 1: I think there's if you're living in a community and 140 00:07:47,000 --> 00:07:51,560 Speaker 1: that community lacks healthcare access and you are healthier unhealthier 141 00:07:51,600 --> 00:07:53,520 Speaker 1: because of that community, you're going to spend a lot 142 00:07:53,560 --> 00:07:56,360 Speaker 1: more in healthcare. And so remember there's a difference between 143 00:07:56,400 --> 00:07:59,560 Speaker 1: health and healthcare. Health is when we are living a 144 00:07:59,640 --> 00:08:01,280 Speaker 1: healthy I be able to do all the things we 145 00:08:01,320 --> 00:08:03,160 Speaker 1: want to do. Health Care is when you're sick and 146 00:08:03,160 --> 00:08:04,960 Speaker 1: you got to go to the doctor's office and get treated. 147 00:08:05,320 --> 00:08:07,200 Speaker 1: But we want to emphasize is how do you make 148 00:08:07,200 --> 00:08:09,960 Speaker 1: people healthier in general? And how do you make sure 149 00:08:10,000 --> 00:08:12,120 Speaker 1: that they can enjoy their lives, enjoy their aspiration, and 150 00:08:12,240 --> 00:08:15,680 Speaker 1: enjoy their goals. And you know that's intrinsically linked to 151 00:08:15,760 --> 00:08:19,760 Speaker 1: the strength of the community around them. So perhaps when 152 00:08:19,840 --> 00:08:21,880 Speaker 1: you have to rely on the healthcare system, it's when 153 00:08:21,920 --> 00:08:26,080 Speaker 1: you are sick. Although a number of people are believing 154 00:08:26,200 --> 00:08:27,880 Speaker 1: or sort of having faith in the idea that they 155 00:08:27,920 --> 00:08:29,480 Speaker 1: will never get sick. Because there was a story on 156 00:08:29,480 --> 00:08:33,160 Speaker 1: the Bloomberg today looking at how a number of Americans 157 00:08:33,200 --> 00:08:37,199 Speaker 1: are dumping insurance because the premiums are going up. How 158 00:08:37,280 --> 00:08:39,120 Speaker 1: much have you noticed this trend and can you can 159 00:08:39,280 --> 00:08:42,880 Speaker 1: connect that to the healthy healthiness of community? So I 160 00:08:42,880 --> 00:08:46,720 Speaker 1: think in general, UM, we tend to overestimate how healthy 161 00:08:46,800 --> 00:08:49,600 Speaker 1: we are. UM And I think truth be told again, 162 00:08:49,800 --> 00:08:51,920 Speaker 1: we have to understand what are the kinds of things 163 00:08:51,920 --> 00:08:54,000 Speaker 1: that goes into making us healthy. I mean, if we 164 00:08:54,040 --> 00:08:56,600 Speaker 1: think about the day that we spend, we spend the 165 00:08:56,679 --> 00:08:59,360 Speaker 1: day interacting with family, with friends, and going out into 166 00:08:59,360 --> 00:09:02,560 Speaker 1: the environment, and those components of how we build that 167 00:09:02,760 --> 00:09:07,280 Speaker 1: social and community infrastructure really defines what makes us healthy. 168 00:09:07,640 --> 00:09:09,880 Speaker 1: And again understanding just how much time you know, I'm 169 00:09:09,880 --> 00:09:13,480 Speaker 1: a I'm a physician by training, by practice, and you know, 170 00:09:13,640 --> 00:09:16,880 Speaker 1: all the vast majority of health occurs outside of the 171 00:09:16,920 --> 00:09:19,600 Speaker 1: doctor's office, and a lot of that health is local. So, 172 00:09:19,679 --> 00:09:22,840 Speaker 1: like politics, all health is local. And so understanding what 173 00:09:22,880 --> 00:09:26,520 Speaker 1: are the components of local health UM that are making 174 00:09:26,520 --> 00:09:31,240 Speaker 1: communities healthier? Dr Graham, what's the responsibility of the healthcare 175 00:09:31,360 --> 00:09:34,320 Speaker 1: community with respect to the opioid epidemics and so a 176 00:09:34,320 --> 00:09:38,440 Speaker 1: lot of people think that it started with prescriptions of 177 00:09:38,480 --> 00:09:44,560 Speaker 1: oxycodone and other types of hard pain killing medications. Yeah, 178 00:09:44,600 --> 00:09:48,440 Speaker 1: so the health the opera emidemic is multi factorial. We 179 00:09:48,520 --> 00:09:51,880 Speaker 1: see challenges across the economic spectrum. There's no doubt though 180 00:09:51,920 --> 00:09:55,120 Speaker 1: that communities that are hardested are those communities where folks 181 00:09:55,120 --> 00:09:58,800 Speaker 1: of labs, jobs and infrastructure and issues around mental health 182 00:09:58,800 --> 00:10:03,160 Speaker 1: and addictions start to take more of um compounded tone. 183 00:10:03,600 --> 00:10:06,319 Speaker 1: And so you know, understanding just how we treat that 184 00:10:06,559 --> 00:10:09,840 Speaker 1: entire community and also understanding that the line to recover 185 00:10:09,960 --> 00:10:12,800 Speaker 1: for addiction is giving people hope, an opportunity, and so 186 00:10:12,880 --> 00:10:15,920 Speaker 1: understanding that when we build that community infrastructure that makes 187 00:10:15,920 --> 00:10:18,760 Speaker 1: that community stronger, we then have people if they survive 188 00:10:18,800 --> 00:10:21,440 Speaker 1: on the locks an operiod overdose and they get a 189 00:10:21,480 --> 00:10:23,720 Speaker 1: locks own or an operiod reversing treatment, they go back 190 00:10:23,760 --> 00:10:27,720 Speaker 1: into a healthier community and healthy infrastructure. So again, all 191 00:10:27,720 --> 00:10:30,960 Speaker 1: health is still defined as those components of local activity 192 00:10:31,320 --> 00:10:33,680 Speaker 1: that make both a family and a community is stronger. 193 00:10:33,840 --> 00:10:39,080 Speaker 1: As a practicing doctor, what have you learned about people 194 00:10:39,120 --> 00:10:43,520 Speaker 1: who use opioids, perhaps even patients of your own, that 195 00:10:44,200 --> 00:10:47,080 Speaker 1: perhaps might challenge some of the conceptions that people have 196 00:10:47,760 --> 00:10:49,960 Speaker 1: about Yeah, you know, one of the things that I 197 00:10:50,080 --> 00:10:55,760 Speaker 1: learned is it really does cross all lines, all geographic lines, 198 00:10:55,880 --> 00:11:00,080 Speaker 1: alsocio economic lines, um, all different kinds of different mean 199 00:11:00,240 --> 00:11:02,479 Speaker 1: is that you would not have expected to be impacted. 200 00:11:02,840 --> 00:11:04,800 Speaker 1: One of the most troubling things that many of us 201 00:11:04,840 --> 00:11:06,959 Speaker 1: have seen in both clinical and public health, and you 202 00:11:07,040 --> 00:11:10,960 Speaker 1: see reflected in the CDC data, is that the impact 203 00:11:10,960 --> 00:11:13,679 Speaker 1: that is happening on the youngest and most vibrant folks 204 00:11:13,720 --> 00:11:16,680 Speaker 1: within our community. And understanding that what we're doing is 205 00:11:16,960 --> 00:11:19,960 Speaker 1: what's happening here, is that it's not just you know, um, 206 00:11:20,240 --> 00:11:22,679 Speaker 1: folks who are in their twenties and thirties, but even 207 00:11:23,040 --> 00:11:26,199 Speaker 1: filtering down into younger folks within teenage years. And so 208 00:11:26,240 --> 00:11:28,520 Speaker 1: the recent CDC data points to the fact that the 209 00:11:29,160 --> 00:11:32,160 Speaker 1: decrease in life expectance in national that we're nationally that 210 00:11:32,240 --> 00:11:34,440 Speaker 1: we're seeing has a lot to do with the impact 211 00:11:34,480 --> 00:11:37,000 Speaker 1: that opiates are having on our youngest and most vibrant 212 00:11:37,320 --> 00:11:40,640 Speaker 1: And that's why you know, through efforts that we're doing 213 00:11:40,679 --> 00:11:43,760 Speaker 1: in the end a foundation tackling opiated epidemic, investing in 214 00:11:43,800 --> 00:11:46,880 Speaker 1: local communities, but also others across the board, we really 215 00:11:46,880 --> 00:11:49,080 Speaker 1: have to understand about the future of our country. Is 216 00:11:49,080 --> 00:11:53,680 Speaker 1: there any crossover between the ETNA Foundation and the healthcare provider? Yeah? 217 00:11:53,720 --> 00:11:57,400 Speaker 1: So you know, ETNA Foundation is a philanthropic arm of Enna. 218 00:11:57,520 --> 00:12:01,200 Speaker 1: So we invest again the local community and we invest 219 00:12:01,280 --> 00:12:03,680 Speaker 1: in We have a Healthy Cities and Counties Initiative where 220 00:12:03,679 --> 00:12:06,160 Speaker 1: we work. We work with fifty cities and counties across 221 00:12:06,160 --> 00:12:09,319 Speaker 1: the board to deal with local issues impact in those communities. 222 00:12:09,600 --> 00:12:12,720 Speaker 1: So we we are the arm that helps expand the 223 00:12:12,760 --> 00:12:16,360 Speaker 1: reach of our organization into local communities. Do you share 224 00:12:16,400 --> 00:12:19,120 Speaker 1: the data that you collect with the healthcare community? No, 225 00:12:19,240 --> 00:12:22,439 Speaker 1: So most of our funding are with partners and grantees 226 00:12:22,880 --> 00:12:26,160 Speaker 1: um So they may be state based organizations or even 227 00:12:26,559 --> 00:12:29,400 Speaker 1: local nonprofits and their data is their data. We just 228 00:12:29,440 --> 00:12:31,720 Speaker 1: help support them do work in the community. I mean, 229 00:12:31,760 --> 00:12:34,880 Speaker 1: does sort of look to your work to determine how 230 00:12:34,920 --> 00:12:38,280 Speaker 1: to sort of set pricing and determine how to sort 231 00:12:38,280 --> 00:12:41,680 Speaker 1: of view American health. No, we're a separate entity and 232 00:12:41,800 --> 00:12:44,679 Speaker 1: not a part of the business arm in terms of 233 00:12:45,040 --> 00:12:50,520 Speaker 1: um UH, that intersection between pricing and economics. That being said, 234 00:12:50,559 --> 00:12:53,080 Speaker 1: as part of the foundation as broad an enterprise, I 235 00:12:53,080 --> 00:12:56,080 Speaker 1: think we're all committed to this issue of building local, 236 00:12:56,160 --> 00:12:59,040 Speaker 1: healthy communities and trying to invest in communities, go as 237 00:12:59,120 --> 00:13:01,240 Speaker 1: local as we can, and find those partners who can 238 00:13:01,240 --> 00:13:04,959 Speaker 1: impact change. Dr Graham, just real quick, where are we 239 00:13:05,120 --> 00:13:08,600 Speaker 1: in the opioid epidemic? So, you know, for the past 240 00:13:08,840 --> 00:13:12,280 Speaker 1: couple of years as a country, as a nation, we've 241 00:13:12,360 --> 00:13:16,760 Speaker 1: seen our life expectancy decline, primarily driven by the impact 242 00:13:16,800 --> 00:13:20,480 Speaker 1: of the opioid epidemic on the younger population. I think 243 00:13:20,520 --> 00:13:23,600 Speaker 1: many folks have said that, you know, over the next 244 00:13:23,720 --> 00:13:27,360 Speaker 1: couple of years, is this continues to have that impact, 245 00:13:27,360 --> 00:13:29,720 Speaker 1: it will no longer be a bullet, it will be 246 00:13:29,720 --> 00:13:32,240 Speaker 1: a trend. So I think right now we're seeing we're 247 00:13:32,240 --> 00:13:34,040 Speaker 1: in the midst of the epidemic. I think we are 248 00:13:34,440 --> 00:13:37,360 Speaker 1: as a country, as a community, UM, I think fighting 249 00:13:37,400 --> 00:13:40,040 Speaker 1: for the lives of our youngest and most vulnerable. And 250 00:13:40,080 --> 00:13:42,080 Speaker 1: so I think the next couple of years, depending on 251 00:13:42,120 --> 00:13:44,760 Speaker 1: how we can come together, whether it be government or 252 00:13:44,800 --> 00:13:48,280 Speaker 1: public government, privac sector, I think we'll define where we go. 253 00:13:48,840 --> 00:13:52,079 Speaker 1: Dr Garth Graham, President of the ETNA Foundation, which is 254 00:13:52,120 --> 00:13:54,880 Speaker 1: based in Hartford, Connecticut, thank you so much for being 255 00:13:54,920 --> 00:14:11,920 Speaker 1: with us. The high old bond market is often thought 256 00:14:12,000 --> 00:14:15,160 Speaker 1: of as the canary in the coal mine for distress 257 00:14:15,280 --> 00:14:20,160 Speaker 1: in financial markets. Right now, it is not signaling any distress. 258 00:14:20,240 --> 00:14:23,120 Speaker 1: Joining me right now. Ken Monahan, co director of high 259 00:14:23,160 --> 00:14:28,240 Speaker 1: Yield at a MOONDI pioneer overseeing more than fifty billion dollars. Uh. 260 00:14:28,480 --> 00:14:31,520 Speaker 1: You know, can I want to focus a little bit 261 00:14:31,640 --> 00:14:34,960 Speaker 1: not on high yields, but on investment grade because there's 262 00:14:35,000 --> 00:14:38,000 Speaker 1: a question, as we see all of these mergers and 263 00:14:38,040 --> 00:14:42,840 Speaker 1: acquisitions going on in investment grade UH, Corporate America, how 264 00:14:42,840 --> 00:14:45,240 Speaker 1: many of these deals will end up in the high 265 00:14:45,240 --> 00:14:48,040 Speaker 1: old bond market. Well, it at least it's something we're 266 00:14:48,040 --> 00:14:50,480 Speaker 1: concerned about, are thinking about going forward. If we look 267 00:14:50,520 --> 00:14:54,680 Speaker 1: at the uh M and A activity in the bond 268 00:14:54,760 --> 00:14:57,600 Speaker 1: market right now, there's about two d and fifty billion 269 00:14:57,680 --> 00:15:00,840 Speaker 1: dollars of transactions to be financed this year, and that's 270 00:15:00,920 --> 00:15:02,560 Speaker 1: off of a number last year that was about a 271 00:15:02,640 --> 00:15:05,720 Speaker 1: hundred and seventy five billion. So you think about headline names, 272 00:15:05,720 --> 00:15:09,280 Speaker 1: We've got the Courier acquisition of Dr Pepper, We've got 273 00:15:09,320 --> 00:15:12,400 Speaker 1: the Signat acquisition of express Scripts, We've got the General 274 00:15:12,440 --> 00:15:15,600 Speaker 1: Mills acquisition of Blue Buffalo. There's a lot of transactions 275 00:15:15,640 --> 00:15:18,160 Speaker 1: going on a lot of these companies if you look 276 00:15:18,200 --> 00:15:22,120 Speaker 1: at them post the acquisition or sporting leverage ratios which 277 00:15:22,480 --> 00:15:24,560 Speaker 1: look much more like a high yield company than an 278 00:15:24,600 --> 00:15:27,800 Speaker 1: investment grade company. And I think the rating agencies thus 279 00:15:27,800 --> 00:15:31,040 Speaker 1: far have been giving uh these companies a little bit 280 00:15:31,080 --> 00:15:33,800 Speaker 1: of leeway to get their houses in order through synergies 281 00:15:33,840 --> 00:15:37,160 Speaker 1: and assets sales post acquisitions before they make any final 282 00:15:37,240 --> 00:15:40,760 Speaker 1: pronouncements on ultimate rating action. Well, yeah, you can see that. Fitch, 283 00:15:40,800 --> 00:15:45,080 Speaker 1: for example, has Etna on a rating watch negative after 284 00:15:45,200 --> 00:15:49,400 Speaker 1: CVS agreed to acquire the company. I'm just wondering, as 285 00:15:49,400 --> 00:15:53,280 Speaker 1: a high yield debt investor, how do you play in 286 00:15:53,840 --> 00:15:57,840 Speaker 1: debt that gets downgraded from investment grade to high yield 287 00:15:57,920 --> 00:16:00,960 Speaker 1: after an acquisition, do you buy? Do you sell? I mean, 288 00:16:01,000 --> 00:16:04,400 Speaker 1: what's what's your move? Well, you know, we certainly look 289 00:16:04,440 --> 00:16:06,640 Speaker 1: at it, you know, and there's a lot of investors 290 00:16:07,000 --> 00:16:08,640 Speaker 1: in the high yeld space that would say, okay, well 291 00:16:08,640 --> 00:16:11,520 Speaker 1: it's now entered my index or my benchmark, I need 292 00:16:11,560 --> 00:16:13,520 Speaker 1: to be invested in it, and we don't happen to 293 00:16:13,560 --> 00:16:15,920 Speaker 1: look at it that way. We'll be much more selective 294 00:16:15,920 --> 00:16:19,120 Speaker 1: there that there things that we will buy that happened 295 00:16:19,160 --> 00:16:22,000 Speaker 1: to be now or what we call fallen angels formally 296 00:16:22,040 --> 00:16:24,480 Speaker 1: investment grade companies that fall into the hig yield space, 297 00:16:24,680 --> 00:16:27,160 Speaker 1: and there's a lot we ignore. We just don't think 298 00:16:27,200 --> 00:16:30,160 Speaker 1: that they were inappropriately valued. I guess another question is 299 00:16:30,240 --> 00:16:33,080 Speaker 1: you have at one point three trillion dollar US high 300 00:16:33,120 --> 00:16:37,440 Speaker 1: old bond market. Let's say some of the record volume 301 00:16:37,680 --> 00:16:41,480 Speaker 1: of triple B companies corporate debt, some of it gets 302 00:16:41,520 --> 00:16:43,640 Speaker 1: downgraded all of a sudden. You could see this universe 303 00:16:43,640 --> 00:16:47,480 Speaker 1: of high yeld debt expand dramatically with a limited number 304 00:16:47,520 --> 00:16:50,800 Speaker 1: of investors. Could you see spreads? Could you see yields 305 00:16:50,840 --> 00:16:53,840 Speaker 1: blowout in response in the high led bond market? Well, 306 00:16:53,840 --> 00:16:56,440 Speaker 1: we certainly did. When General Motors and Ford enter the 307 00:16:56,520 --> 00:16:58,680 Speaker 1: High Yield Index a number of years ago. Is a 308 00:16:58,800 --> 00:17:03,480 Speaker 1: matter of fact, a number of the designers of benchmarks 309 00:17:03,520 --> 00:17:07,600 Speaker 1: reacted as a result. They went from having benchmarks that 310 00:17:07,680 --> 00:17:11,520 Speaker 1: were we called unconstrained constraints, so they limited the amount 311 00:17:11,760 --> 00:17:14,920 Speaker 1: of that anyone issuer could represented the index to two 312 00:17:14,960 --> 00:17:18,880 Speaker 1: percent because Ford and General Motors, because they were such 313 00:17:19,000 --> 00:17:22,680 Speaker 1: large issuers, actually overwhelmed the hih yield marketplace. Now, I 314 00:17:22,720 --> 00:17:26,320 Speaker 1: don't think any of the transactions we mentioned, like Dr Pepper, 315 00:17:26,520 --> 00:17:28,400 Speaker 1: not that we're suggesting that's going to get into high 316 00:17:28,480 --> 00:17:33,000 Speaker 1: yield necessarily, that any of these transactions themselves would overwhelm 317 00:17:33,040 --> 00:17:35,520 Speaker 1: the marketplace or the indices to the degree that it 318 00:17:35,560 --> 00:17:38,520 Speaker 1: did with Foreign General Motors. But it certainly would be 319 00:17:38,600 --> 00:17:41,280 Speaker 1: if if if a number of these companies were ultimately downgraded, 320 00:17:41,320 --> 00:17:43,680 Speaker 1: it would be a significant shift in the market. Let's 321 00:17:43,680 --> 00:17:47,960 Speaker 1: talk about the supply demand dynamic. In another way, There's 322 00:17:47,960 --> 00:17:50,439 Speaker 1: been a lot of talk about foreign investors, who are 323 00:17:50,440 --> 00:17:54,320 Speaker 1: one of the major buyers of US credit stepping away. 324 00:17:54,440 --> 00:17:58,199 Speaker 1: I'm wondering, from your vantage point, how significantly is this 325 00:17:58,280 --> 00:18:01,800 Speaker 1: the case. Yeah, well, um, you know a Mundi Pioneers, 326 00:18:01,800 --> 00:18:05,159 Speaker 1: a global firm UH, and we have global clients, and 327 00:18:05,240 --> 00:18:08,680 Speaker 1: we certainly had seen a lot of inflows UH from 328 00:18:08,960 --> 00:18:12,160 Speaker 1: UH non US investors into the corporate credit market, both 329 00:18:12,200 --> 00:18:15,120 Speaker 1: investment grade and high yield UM. So whether we're looking 330 00:18:15,160 --> 00:18:18,399 Speaker 1: at Asian investors and European investors, we seem to have 331 00:18:18,440 --> 00:18:22,320 Speaker 1: seen that slow somewhat this year. UM. Whether that changes 332 00:18:22,440 --> 00:18:25,840 Speaker 1: or not, it's unclear, but clearly the hedging costs, the 333 00:18:25,920 --> 00:18:29,800 Speaker 1: cost of hedging back to one's native currency, have increased 334 00:18:30,400 --> 00:18:32,720 Speaker 1: over the course of two thousand and seventeen and into 335 00:18:32,720 --> 00:18:34,960 Speaker 1: two thousand and eighteen, and we think that's at least 336 00:18:34,960 --> 00:18:40,280 Speaker 1: one factor UH that's impacting investors overseas investors willingness to 337 00:18:40,359 --> 00:18:43,520 Speaker 1: buy corporate credit in the United States. So the risks 338 00:18:43,560 --> 00:18:47,159 Speaker 1: are clearly rising, whether it's the risk of downgrades from 339 00:18:47,200 --> 00:18:52,560 Speaker 1: mergens and acquisitions, whether it's the foreign bid declining for 340 00:18:52,720 --> 00:18:56,159 Speaker 1: US corporate credit. And yet a lot of high yield 341 00:18:56,200 --> 00:19:00,800 Speaker 1: debt has gotten sold, including from Tesla and Uber companies 342 00:19:00,840 --> 00:19:05,080 Speaker 1: that are burning through cash. What do you make of that? Well, historically, 343 00:19:05,080 --> 00:19:07,400 Speaker 1: if you look at the high yield marketplace, it has 344 00:19:07,800 --> 00:19:12,440 Speaker 1: financed technology companies, but most technology companies that have had 345 00:19:12,560 --> 00:19:15,680 Speaker 1: has financed have been companies that have been much further 346 00:19:15,760 --> 00:19:19,720 Speaker 1: along in their business cycle UM, where there was let's 347 00:19:19,760 --> 00:19:22,800 Speaker 1: say a software company, where there was a certainty or 348 00:19:22,920 --> 00:19:27,640 Speaker 1: a consistency with cash flows. The problem with uh Tesla's 349 00:19:27,840 --> 00:19:30,119 Speaker 1: or the Ubers of the world. These are companies that 350 00:19:30,160 --> 00:19:32,160 Speaker 1: are still very much of the building portion of their 351 00:19:32,200 --> 00:19:36,200 Speaker 1: business cycle, and therefore they've got large negative cash flows. UM. 352 00:19:36,280 --> 00:19:38,560 Speaker 1: That makes them much more difficult to finance in the 353 00:19:38,600 --> 00:19:42,200 Speaker 1: credit markets, and that's why historically those businesses have been 354 00:19:42,240 --> 00:19:44,919 Speaker 1: financed with equity and sometimes that they've gone to the 355 00:19:44,960 --> 00:19:48,480 Speaker 1: debt markets, they've used convertible bonds rather than high yield bonds. 356 00:19:48,520 --> 00:19:52,600 Speaker 1: So have you been buying their loans? Um? We generally 357 00:19:52,640 --> 00:19:55,359 Speaker 1: don't like to comment on specific companies, but we've been 358 00:19:55,440 --> 00:19:57,960 Speaker 1: much more cautious about the technology sector. Why don't we 359 00:19:57,960 --> 00:20:01,000 Speaker 1: be very very diplomatic. Is there any any sector that 360 00:20:01,080 --> 00:20:03,720 Speaker 1: you're particularly bullish on. Well, we've been more bullish on 361 00:20:03,760 --> 00:20:06,240 Speaker 1: the housing market. UM continue to be that we think 362 00:20:06,280 --> 00:20:09,199 Speaker 1: that there is still some value there. We've been bullish 363 00:20:09,200 --> 00:20:11,600 Speaker 1: on the steel industry and we've been bullish on it 364 00:20:11,720 --> 00:20:15,280 Speaker 1: prior to what's gone on with regards to some of 365 00:20:15,280 --> 00:20:18,720 Speaker 1: the trade barriers that were put up recently by the 366 00:20:18,720 --> 00:20:21,800 Speaker 1: White House. Uh, and we think that those are two 367 00:20:21,800 --> 00:20:24,600 Speaker 1: sectors that will continue to benefit given the current state 368 00:20:24,640 --> 00:20:28,080 Speaker 1: of the economy. As you pointed out early in our conversation, UM, 369 00:20:28,200 --> 00:20:30,080 Speaker 1: the high yield market, which has often thought of as 370 00:20:30,080 --> 00:20:32,880 Speaker 1: the canary in the coal mine, hasn't been singing this time. UM. 371 00:20:32,920 --> 00:20:35,800 Speaker 1: We don't think that the that the fundamentals are actually 372 00:20:35,800 --> 00:20:39,720 Speaker 1: pretty strong still. So what'll you have to see to 373 00:20:39,840 --> 00:20:46,359 Speaker 1: change that too? You know? Uh. Business cycles, as we know, 374 00:20:46,440 --> 00:20:49,200 Speaker 1: generally don't end because they get they die of old age. 375 00:20:49,240 --> 00:20:53,919 Speaker 1: They die because companies start doing more foolish things. So 376 00:20:53,960 --> 00:20:55,639 Speaker 1: you worry about the M and A side, which we 377 00:20:55,760 --> 00:20:58,200 Speaker 1: just talked about, UM, and then you worry about how 378 00:20:58,240 --> 00:21:01,719 Speaker 1: aggressive that the central Bank will be. And the FEDS 379 00:21:01,720 --> 00:21:06,200 Speaker 1: obviously is beginning to not necessarily take away the punch bowl, 380 00:21:06,240 --> 00:21:07,920 Speaker 1: but maybe they put a drain on the bottom of 381 00:21:07,960 --> 00:21:10,360 Speaker 1: it and they're beginning to take some of the liquid out. Um. 382 00:21:10,400 --> 00:21:12,359 Speaker 1: If the e c B moves as well, maybe that 383 00:21:12,440 --> 00:21:15,359 Speaker 1: becomes more more troublesome, but we don't think that happens 384 00:21:15,359 --> 00:21:17,720 Speaker 1: this year. FED is dimming the lights in the bar 385 00:21:17,880 --> 00:21:19,639 Speaker 1: Ken Monahan, thank you so much for being with us 386 00:21:19,720 --> 00:21:23,359 Speaker 1: co director of High Yield at a Moundi Pioneer, which 387 00:21:23,400 --> 00:21:27,880 Speaker 1: oversees more than fifty billion dollars of assets from Durham, 388 00:21:27,920 --> 00:21:32,520 Speaker 1: North Carolina. Definitely an interesting time, especially with the proportion 389 00:21:32,640 --> 00:21:36,600 Speaker 1: of triple B rated debt in the investment grade market 390 00:21:36,600 --> 00:21:40,600 Speaker 1: being the highest it's ever been, raising the issue of 391 00:21:40,760 --> 00:21:59,320 Speaker 1: what happens if some of this gets downgraded. As part 392 00:21:59,400 --> 00:22:03,800 Speaker 1: of the spending bill that was passed last week in Congress, 393 00:22:04,520 --> 00:22:08,639 Speaker 1: a particular type of fund, business development funds, were allowed 394 00:22:08,840 --> 00:22:13,040 Speaker 1: to incur more leverage to boost returns. Here joining us 395 00:22:13,040 --> 00:22:15,320 Speaker 1: now to talk about that and other things affecting the 396 00:22:15,320 --> 00:22:19,520 Speaker 1: middle market space. David Dulham, President of Gladstone Investment Corporation 397 00:22:19,760 --> 00:22:23,280 Speaker 1: based in McLean, Virginia. David, thank you so much for 398 00:22:23,359 --> 00:22:26,399 Speaker 1: being here. First, can you lay out what the change 399 00:22:26,720 --> 00:22:29,000 Speaker 1: was that was made? And it was sort of slipped 400 00:22:29,040 --> 00:22:32,560 Speaker 1: in to the bill that was passed last week. Surely 401 00:22:32,640 --> 00:22:37,120 Speaker 1: said thank you for having me on UM. Basically, BBC's 402 00:22:37,200 --> 00:22:41,600 Speaker 1: business development companies have been limited, if you will, to 403 00:22:41,800 --> 00:22:45,200 Speaker 1: a leverage ratio of one layer of debt to one 404 00:22:45,280 --> 00:22:49,040 Speaker 1: layer of equity. It's been that way since BBCs were created. 405 00:22:49,119 --> 00:22:52,360 Speaker 1: So what this bill basically allows is that we can 406 00:22:52,400 --> 00:22:55,320 Speaker 1: now go from one to one leverage, if you will, 407 00:22:55,400 --> 00:22:58,919 Speaker 1: to a two to one leverage. So for each dollar 408 00:22:59,240 --> 00:23:03,960 Speaker 1: of equity that any fund has, theoretically they can increase 409 00:23:04,040 --> 00:23:06,760 Speaker 1: it by another one to two to one. There are 410 00:23:06,880 --> 00:23:11,680 Speaker 1: those some requirements, and as as most things, the details 411 00:23:11,680 --> 00:23:15,399 Speaker 1: are important, and in this case, each BDC will have 412 00:23:15,560 --> 00:23:19,240 Speaker 1: to get shareholder approval by at least fifty percent of 413 00:23:19,240 --> 00:23:21,920 Speaker 1: shareholders to be able to increase from the one to 414 00:23:22,040 --> 00:23:25,360 Speaker 1: one to two to one, and it may be affected 415 00:23:25,440 --> 00:23:29,119 Speaker 1: somewhat by other restrictions in their capital structures, such as 416 00:23:29,119 --> 00:23:31,960 Speaker 1: any lines of credit or preferred shaw instiences that they have, 417 00:23:32,320 --> 00:23:35,119 Speaker 1: where there are some restrictions in there which will have 418 00:23:35,200 --> 00:23:38,080 Speaker 1: to be worked through, if you will. But having said that, 419 00:23:38,160 --> 00:23:41,520 Speaker 1: it definitely will be a positive. I believe in that 420 00:23:42,119 --> 00:23:45,119 Speaker 1: two to one leverage is not huge leverage, certainly relative 421 00:23:45,160 --> 00:23:48,240 Speaker 1: to other financial institutions, and it will give an opportunity 422 00:23:48,320 --> 00:23:51,200 Speaker 1: for a higher return on equity for those funds that 423 00:23:51,240 --> 00:23:53,680 Speaker 1: are able to employ it. So, just taking a step back, 424 00:23:53,680 --> 00:23:57,840 Speaker 1: business development companies typically invest in smaller and mid sized 425 00:23:57,960 --> 00:24:01,480 Speaker 1: US companies through debt and equity UH and they get 426 00:24:01,560 --> 00:24:05,560 Speaker 1: some tax benefits as a result. Uh, and they are 427 00:24:05,680 --> 00:24:08,040 Speaker 1: typically the I P of they have initial public offerings 428 00:24:08,040 --> 00:24:09,879 Speaker 1: and there raise a certain amount of capital that they 429 00:24:09,920 --> 00:24:13,439 Speaker 1: can then invest in these smaller companies. Right correct. Okay, 430 00:24:13,600 --> 00:24:15,960 Speaker 1: So I'm wondering, since you run a b DC, a 431 00:24:16,000 --> 00:24:20,440 Speaker 1: business development company Gladstone Investment Corporation, are you planning to 432 00:24:20,520 --> 00:24:23,560 Speaker 1: increase the leverage in response to this new rule that 433 00:24:23,720 --> 00:24:27,280 Speaker 1: was allowed. Yes, we certainly are looking into it to 434 00:24:27,440 --> 00:24:30,479 Speaker 1: determine how we go about getting that done, including, as 435 00:24:30,520 --> 00:24:34,240 Speaker 1: I mentioned, our shareholder reproval. Absolutely, I think it's a 436 00:24:34,359 --> 00:24:37,119 Speaker 1: very positive thing. The industry has been working on this 437 00:24:37,200 --> 00:24:39,200 Speaker 1: for a while and it's good to see it happen. 438 00:24:39,520 --> 00:24:41,560 Speaker 1: How much do you think that you could increase returns 439 00:24:41,600 --> 00:24:45,040 Speaker 1: as a result of this, Well, you know, it's it's 440 00:24:45,040 --> 00:24:48,760 Speaker 1: hard to tell. Obviously, depends how much leverage anyone fund 441 00:24:48,760 --> 00:24:52,159 Speaker 1: would would access, but you know most of us have 442 00:24:52,480 --> 00:24:55,639 Speaker 1: returns on equity if you will, are we, depending on 443 00:24:55,680 --> 00:24:58,560 Speaker 1: how you count it, that are in the say anywhere 444 00:24:58,560 --> 00:25:03,960 Speaker 1: In our case, we're over because we are differentiated business 445 00:25:04,000 --> 00:25:07,760 Speaker 1: development company gain meaning glass own investment because we actually 446 00:25:07,760 --> 00:25:10,880 Speaker 1: when we buy a business, we are we're using both 447 00:25:10,920 --> 00:25:13,840 Speaker 1: our own debt and our equity, so we are differentiated 448 00:25:13,880 --> 00:25:18,000 Speaker 1: from most BDCs that are lenders. So my anticipation is 449 00:25:18,200 --> 00:25:23,080 Speaker 1: with the ability to access at least another say half 450 00:25:23,119 --> 00:25:27,760 Speaker 1: of our of another layer of debt, we'll be able 451 00:25:27,800 --> 00:25:30,960 Speaker 1: to have a lower cost of capital, and therefore I 452 00:25:30,960 --> 00:25:33,439 Speaker 1: would expect our returns could be increased. I don't know 453 00:25:33,560 --> 00:25:38,760 Speaker 1: ten perhaps just because of incremental leverage. David, It's interesting 454 00:25:38,800 --> 00:25:42,280 Speaker 1: the timing of this because there's a lot of money 455 00:25:42,440 --> 00:25:44,720 Speaker 1: chasing yield right now, and there's a lot of money 456 00:25:44,760 --> 00:25:49,640 Speaker 1: looking in the small and MidCap space with an increasing 457 00:25:49,680 --> 00:25:52,840 Speaker 1: number of private credit funds raised by number of private 458 00:25:52,840 --> 00:25:55,800 Speaker 1: equity firms and even hedge funds. And I'm wondering, are 459 00:25:55,800 --> 00:25:59,520 Speaker 1: you concerned that valuations are getting too heady h and 460 00:25:59,560 --> 00:26:03,320 Speaker 1: that the and is so great that the investment opportunities 461 00:26:03,359 --> 00:26:07,600 Speaker 1: really just aren't there, right, It's a great question. UM, 462 00:26:07,640 --> 00:26:10,960 Speaker 1: I would say this we have. It's not new necessarily, 463 00:26:11,000 --> 00:26:13,520 Speaker 1: I would say the last number of years we've certainly 464 00:26:13,920 --> 00:26:16,679 Speaker 1: been in this environment where I would call it challenging, 465 00:26:17,280 --> 00:26:20,160 Speaker 1: UH in terms of finding and investing in these new 466 00:26:20,200 --> 00:26:26,000 Speaker 1: biout opportunities. UM. As far as the traditional b dcs 467 00:26:26,040 --> 00:26:28,960 Speaker 1: and lending b dcs, I think clearly this This is 468 00:26:29,000 --> 00:26:31,480 Speaker 1: going to help because it will have a tendency to 469 00:26:31,560 --> 00:26:34,840 Speaker 1: lower the cost of capital for those b dcs. For 470 00:26:34,840 --> 00:26:37,600 Speaker 1: farns like my own Glass own investment, where we are 471 00:26:37,720 --> 00:26:42,560 Speaker 1: a biot oriented BDC. Our challenge is really competing with, 472 00:26:42,680 --> 00:26:45,760 Speaker 1: as you said, the other private equity firms that have 473 00:26:45,920 --> 00:26:48,520 Speaker 1: a fair amount of capital. This is going to help 474 00:26:48,680 --> 00:26:52,280 Speaker 1: us because our cost of capital will also be a 475 00:26:52,280 --> 00:26:55,840 Speaker 1: bit lower. So where perhaps we might have been challenged, 476 00:26:55,920 --> 00:26:58,359 Speaker 1: let's say in a buyout where you know, seven or 477 00:26:58,400 --> 00:27:01,040 Speaker 1: eight times even d A was a problem, we might 478 00:27:01,080 --> 00:27:04,160 Speaker 1: be able to raise all our valuations a little bit 479 00:27:04,400 --> 00:27:07,240 Speaker 1: and therefore actually be a bit more competitive. But overall, 480 00:27:07,320 --> 00:27:10,840 Speaker 1: let's say it's challenging in finding good new opportunities, and 481 00:27:10,880 --> 00:27:12,760 Speaker 1: indeed it is a bit frothy, but it's been that 482 00:27:12,800 --> 00:27:14,959 Speaker 1: way for the last couple of years, and I'm not 483 00:27:15,040 --> 00:27:18,119 Speaker 1: sure I see it changing dramatically going forward in the 484 00:27:18,160 --> 00:27:20,560 Speaker 1: next few years, as long as the economy continues as 485 00:27:20,600 --> 00:27:22,680 Speaker 1: it is. So it doesn't concern you to add a 486 00:27:22,720 --> 00:27:24,720 Speaker 1: little more leverage at this point because we still have 487 00:27:24,840 --> 00:27:28,359 Speaker 1: some some time left. Yeah, not really, And as I say, 488 00:27:28,400 --> 00:27:30,359 Speaker 1: it will help us in terms of I think being 489 00:27:30,400 --> 00:27:34,159 Speaker 1: even more competitive and certainly a potential for greater return 490 00:27:34,200 --> 00:27:38,480 Speaker 1: on equity, which of course benefits our public shareholders. David Dulham, 491 00:27:38,520 --> 00:27:41,480 Speaker 1: thank you so much for joining me. David Dulham, President 492 00:27:41,600 --> 00:27:45,280 Speaker 1: of Gladstone Investment Corporation. It trades in the NASDACK as 493 00:27:45,359 --> 00:27:49,920 Speaker 1: gain G a I N. It is based in McLean, Virginia, 494 00:27:50,200 --> 00:27:54,760 Speaker 1: and this particular shift in the leverage allowance for business 495 00:27:54,800 --> 00:27:58,040 Speaker 1: development companies was tucked into the one point three trillion 496 00:27:58,040 --> 00:28:02,280 Speaker 1: dollar spending bill that was passed by US Congress last week. 497 00:28:03,480 --> 00:28:06,040 Speaker 1: Thanks for listening to the Bloomberg P and L podcast. 498 00:28:06,359 --> 00:28:10,280 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, 499 00:28:10,400 --> 00:28:13,840 Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm 500 00:28:13,880 --> 00:28:17,880 Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. 501 00:28:18,000 --> 00:28:20,600 Speaker 1: It's one before the podcast. You can always catch us 502 00:28:20,640 --> 00:28:22,240 Speaker 1: worldwide on Bloomberg Radio.