1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg pim L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p and L 6 00:00:20,840 --> 00:00:35,320 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. In Vienna, 7 00:00:35,440 --> 00:00:38,479 Speaker 1: OPEC agreeing to extend its oil production cuts to the 8 00:00:38,640 --> 00:00:42,000 Speaker 1: end of the year, trying to rebalance the market. They 9 00:00:42,040 --> 00:00:44,519 Speaker 1: say the job is yet to be completed. Here to 10 00:00:44,560 --> 00:00:47,440 Speaker 1: tell us, Morris Jason Schenker. He is the president of 11 00:00:47,560 --> 00:00:51,040 Speaker 1: Prestige Economics and he is also a Bloomberg prophet and 12 00:00:51,080 --> 00:00:53,760 Speaker 1: he joins us from Vienna. Jason, what can you tell 13 00:00:53,840 --> 00:00:56,160 Speaker 1: us about this move by OPEC? It doesn't seem to 14 00:00:56,200 --> 00:00:58,480 Speaker 1: have done much for the price of oil. It was 15 00:00:58,640 --> 00:01:01,960 Speaker 1: higher earlier in the rating session, now down three tents 16 00:01:01,960 --> 00:01:07,960 Speaker 1: of a percent. Thats a barrel for West Texas Intermediate Crew. Well, 17 00:01:08,000 --> 00:01:10,520 Speaker 1: there's a couple of dynamics going on here, pim. And 18 00:01:10,600 --> 00:01:13,440 Speaker 1: the first is that we don't have a finished agreement 19 00:01:13,959 --> 00:01:16,959 Speaker 1: as to whether it's six months or nine month extension, 20 00:01:17,080 --> 00:01:21,200 Speaker 1: whether the cuts in production will go through October one 21 00:01:21,440 --> 00:01:26,240 Speaker 1: or January one of two thousand nine, so that's not 22 00:01:26,400 --> 00:01:28,800 Speaker 1: quite yet fully done. I was actually just up in 23 00:01:28,800 --> 00:01:32,000 Speaker 1: the ministerial room where they were taking a break between 24 00:01:32,080 --> 00:01:34,559 Speaker 1: the OPAC part of the meeting and now the OPAQ 25 00:01:34,640 --> 00:01:38,760 Speaker 1: and non opec um discussions around production. So there's no 26 00:01:38,880 --> 00:01:42,680 Speaker 1: official word out yet as to how long the extension 27 00:01:42,720 --> 00:01:44,880 Speaker 1: the cuts is going to be. And I think that 28 00:01:45,000 --> 00:01:47,480 Speaker 1: might be why we're seeing some choppy price action and 29 00:01:47,520 --> 00:01:50,400 Speaker 1: crew today because we don't yet have a firm thing 30 00:01:50,440 --> 00:01:55,160 Speaker 1: on the table. Jason, what could OPEC agree to that 31 00:01:55,160 --> 00:02:00,640 Speaker 1: would materially move the price of oil? Well, I mean, 32 00:02:00,680 --> 00:02:03,160 Speaker 1: I think it's a matter of time. You know, the 33 00:02:03,520 --> 00:02:07,040 Speaker 1: longer the inventories fall and the more price support we're 34 00:02:07,120 --> 00:02:09,919 Speaker 1: likely to see. Um they are well, you know, I 35 00:02:10,240 --> 00:02:12,880 Speaker 1: doesn't explicitly target the price of crude, but what they 36 00:02:12,919 --> 00:02:16,720 Speaker 1: are explicitly targeting is the five year average, and so 37 00:02:16,760 --> 00:02:19,280 Speaker 1: as the Central Bank of Oil, much like the FED 38 00:02:19,320 --> 00:02:22,880 Speaker 1: that doesn't necessarily target the US exchange rate for the 39 00:02:22,960 --> 00:02:25,519 Speaker 1: dollar or level for the stock market. You know, they're 40 00:02:25,520 --> 00:02:29,560 Speaker 1: not explicitly targeting the price of oil, but they're targeting instead. Uh, 41 00:02:29,680 --> 00:02:33,320 Speaker 1: this other more macro factor which these inventory levels. So 42 00:02:33,360 --> 00:02:35,600 Speaker 1: I think what's gonna be really important for the price 43 00:02:35,639 --> 00:02:37,840 Speaker 1: of CREWD in the next year plus is how the 44 00:02:37,840 --> 00:02:41,440 Speaker 1: global economy shakes out. And next year looks like it's 45 00:02:41,440 --> 00:02:43,280 Speaker 1: going to be a good year, and if those inventories 46 00:02:43,320 --> 00:02:45,920 Speaker 1: continue to fall, growth is strong, we can see crewed 47 00:02:45,960 --> 00:02:49,359 Speaker 1: between sixty seventy bucks and as average price for the 48 00:02:49,400 --> 00:02:52,000 Speaker 1: year for w t I. But that is only if 49 00:02:52,919 --> 00:02:59,320 Speaker 1: these production cuts are continued. Well, you know, I think 50 00:02:59,440 --> 00:03:01,880 Speaker 1: that we're to see them continued, whether it's six months 51 00:03:01,960 --> 00:03:04,480 Speaker 1: or nine months. I think we we haven't quite seen 52 00:03:04,520 --> 00:03:08,079 Speaker 1: the full answer on yet, but I think that you're 53 00:03:08,120 --> 00:03:10,799 Speaker 1: like to see some level of extension even without them, 54 00:03:10,800 --> 00:03:13,080 Speaker 1: You're like to see prices supported. But I'd say that 55 00:03:13,160 --> 00:03:16,519 Speaker 1: there's more short term upside risk and also more upside 56 00:03:16,560 --> 00:03:18,760 Speaker 1: risk at the back end of next year if we 57 00:03:18,800 --> 00:03:21,560 Speaker 1: see these inventories move towards a five year average. The 58 00:03:21,600 --> 00:03:24,280 Speaker 1: reason why I'm asking is because you're talking about six 59 00:03:24,440 --> 00:03:27,919 Speaker 1: to seventy dollars a barrel. It's getting cheaper for shale 60 00:03:27,919 --> 00:03:30,960 Speaker 1: producers in the US to pump oil, and they are 61 00:03:31,000 --> 00:03:34,760 Speaker 1: producing more and more, especially as prices rise. How much 62 00:03:34,920 --> 00:03:38,280 Speaker 1: does that sort of remove the importance of opex decision 63 00:03:38,360 --> 00:03:40,520 Speaker 1: here because shale can just sort of compensate. On the 64 00:03:40,560 --> 00:03:45,120 Speaker 1: other side, well, it's still really important because the thing 65 00:03:45,160 --> 00:03:48,040 Speaker 1: with shale is, while they're trying to cut their way 66 00:03:48,080 --> 00:03:50,960 Speaker 1: to profitability and more money has come into the space, 67 00:03:51,440 --> 00:03:55,120 Speaker 1: you still have investors being a little bit gunshine in 68 00:03:55,520 --> 00:03:57,920 Speaker 1: terms of they want to make sure they're making really 69 00:03:58,000 --> 00:04:00,400 Speaker 1: good investments. So a lot of funds have been raised. 70 00:04:00,720 --> 00:04:03,360 Speaker 1: You've seen a lot of money interested in the space, 71 00:04:03,880 --> 00:04:05,920 Speaker 1: but you're seeing funds kind of hold back on the 72 00:04:05,920 --> 00:04:09,800 Speaker 1: allocation of capital because everybody's holding out for a sweetheart deal, 73 00:04:10,360 --> 00:04:13,400 Speaker 1: and if you need to wait for higher break even prices, 74 00:04:13,800 --> 00:04:16,400 Speaker 1: then those won't really be sweetheart deals. So you can 75 00:04:16,440 --> 00:04:19,680 Speaker 1: see more production come online, but you know it's not 76 00:04:19,760 --> 00:04:23,839 Speaker 1: as you know, the decision to drill the well, you know, 77 00:04:24,000 --> 00:04:28,279 Speaker 1: isn't necessarily going to be um as mercenary as Okay, 78 00:04:28,320 --> 00:04:30,800 Speaker 1: the price goes up another dollar and they're gonna pull 79 00:04:30,839 --> 00:04:33,560 Speaker 1: the trigger on it. But I think if we see 80 00:04:33,600 --> 00:04:35,720 Speaker 1: a significant rise in prices, that's kind of why I 81 00:04:35,760 --> 00:04:38,680 Speaker 1: say sixty to seventy kind of as an average range, 82 00:04:38,760 --> 00:04:40,920 Speaker 1: because you know, if you get close to seventy. Get 83 00:04:40,920 --> 00:04:44,280 Speaker 1: above seventy, there will be more drilling action, but that's 84 00:04:44,320 --> 00:04:46,880 Speaker 1: also going to a company. The demand side that usually 85 00:04:46,920 --> 00:04:50,560 Speaker 1: pulls price is higher because oil, like other commodities, is 86 00:04:50,600 --> 00:04:54,120 Speaker 1: bought and not sold, which means the demand side honestly 87 00:04:54,279 --> 00:04:56,040 Speaker 1: is going to be more important for prices in the 88 00:04:56,080 --> 00:04:58,880 Speaker 1: immediate term. Jason, how much of this is all due 89 00:04:58,920 --> 00:05:01,279 Speaker 1: to the fluctuation in the value of the US dollar, 90 00:05:03,480 --> 00:05:05,200 Speaker 1: Not that much, pim I mean a lot of this 91 00:05:05,320 --> 00:05:07,760 Speaker 1: has to do with the fact that China was in 92 00:05:07,760 --> 00:05:11,039 Speaker 1: a manufacturing recession. If you look at the monthly Sittion 93 00:05:11,200 --> 00:05:14,640 Speaker 1: Manufacturing p m I on index that's coming out tonight 94 00:05:14,720 --> 00:05:18,880 Speaker 1: at eight pm Eastern time, that index was below fifty. 95 00:05:18,960 --> 00:05:22,640 Speaker 1: It's an indication of manufacturing growth, and small and medium 96 00:05:22,680 --> 00:05:27,200 Speaker 1: sized manufacturers in China was below fifty, indicating recession between 97 00:05:27,200 --> 00:05:31,600 Speaker 1: December fourteen and June of two thousands sixteen, and that's 98 00:05:31,640 --> 00:05:36,359 Speaker 1: the exact time window when oil inventories built. In other words, 99 00:05:36,480 --> 00:05:40,120 Speaker 1: big surprise, the biggest net importer of the world, China 100 00:05:40,520 --> 00:05:45,240 Speaker 1: was in a recession while global inventories of oil went up. 101 00:05:45,279 --> 00:05:47,640 Speaker 1: So that's actually a critical part of the story because 102 00:05:47,720 --> 00:05:50,880 Speaker 1: China has been expanding since and perhaps even more important 103 00:05:50,880 --> 00:05:52,880 Speaker 1: than the decision today will be what happens with that 104 00:05:52,960 --> 00:05:56,520 Speaker 1: number tonight and incoming months real quick? Did they play 105 00:05:56,560 --> 00:06:03,520 Speaker 1: ominous music? As the Russian advocate walked in, there's no 106 00:06:03,600 --> 00:06:06,400 Speaker 1: ominous music at OPEC, and I don't generally think there's 107 00:06:06,760 --> 00:06:09,200 Speaker 1: any music here except for when we've had, you know, 108 00:06:09,240 --> 00:06:11,480 Speaker 1: parties at sheren Boune and they, you know, they bring 109 00:06:11,480 --> 00:06:15,760 Speaker 1: out the Viennese Orchestra when when occasionally we had a party. 110 00:06:15,800 --> 00:06:19,160 Speaker 1: One year they had at the the old doors of 111 00:06:19,240 --> 00:06:22,840 Speaker 1: the Old Exchange and the Vienna Voice Choir serenaded us. 112 00:06:22,839 --> 00:06:26,240 Speaker 1: But no ominous music. Usually it's more Viennese flair than that. 113 00:06:26,800 --> 00:06:29,440 Speaker 1: Jason Shanker, thank you so much for joining us. Jason 114 00:06:29,440 --> 00:06:34,200 Speaker 1: Shanker president of Prestige Economics as well as a Bloomberg prophet, 115 00:06:34,279 --> 00:06:37,760 Speaker 1: and he is there in Vienna as OPEC leaders meet 116 00:06:37,760 --> 00:07:04,560 Speaker 1: to talk about furthering output cuts. North Korea launching a 117 00:07:04,600 --> 00:07:08,320 Speaker 1: missile that lands in the Sea of Japan. It is 118 00:07:08,760 --> 00:07:13,560 Speaker 1: described as a ballistic missile launch into continental and this 119 00:07:13,640 --> 00:07:17,480 Speaker 1: missile launch also brings a response from the US government, 120 00:07:17,520 --> 00:07:20,000 Speaker 1: President Donald Trump saying that after a phone call with 121 00:07:20,080 --> 00:07:24,440 Speaker 1: President of China Jijing ping that major news sanctions will 122 00:07:24,480 --> 00:07:28,440 Speaker 1: be imposed on North Korea, perhaps an embargo on oil 123 00:07:28,880 --> 00:07:31,600 Speaker 1: shipments to North Korea. Here to help us understand more 124 00:07:31,640 --> 00:07:34,360 Speaker 1: about this is Leland Miller. He is the chief executive 125 00:07:34,400 --> 00:07:37,720 Speaker 1: of the China beij Book International and he joins us 126 00:07:37,720 --> 00:07:40,040 Speaker 1: here in our eleven three oh studios levelan thank you 127 00:07:40,080 --> 00:07:43,880 Speaker 1: for being with us. Maybe just lay out for our listeners, 128 00:07:44,400 --> 00:07:50,720 Speaker 1: what exactly do you perceive as being the most current risk. Well, 129 00:07:50,800 --> 00:07:53,360 Speaker 1: the what we're seeing right now is a build up 130 00:07:53,520 --> 00:07:56,480 Speaker 1: of capabilities by the North Koreans, and they are not 131 00:07:56,600 --> 00:07:59,480 Speaker 1: yet at the point where they can shoot a missile 132 00:08:00,000 --> 00:08:02,960 Speaker 1: to the continental United States with a payload that matters. 133 00:08:03,000 --> 00:08:06,160 Speaker 1: So the real risk right now is that they over 134 00:08:06,240 --> 00:08:09,720 Speaker 1: signal themselves in a way that that irritates the Trump administration, 135 00:08:09,720 --> 00:08:13,160 Speaker 1: and the Trump administration overreacts or in some ways are 136 00:08:13,200 --> 00:08:15,880 Speaker 1: involved in some sort of proliferation with bad guys, and 137 00:08:15,920 --> 00:08:19,120 Speaker 1: that gives a reason to strike, whereas there may not 138 00:08:19,200 --> 00:08:22,120 Speaker 1: otherwise be that reason to strike when you say a 139 00:08:22,120 --> 00:08:24,160 Speaker 1: payload that matters. In other words, they can't get a 140 00:08:24,240 --> 00:08:26,520 Speaker 1: nuclear weapons small enough to get on some of these 141 00:08:26,520 --> 00:08:30,240 Speaker 1: ballistic missiles in order to hit the US just sort 142 00:08:30,240 --> 00:08:33,800 Speaker 1: of zooming out what are the options at this point 143 00:08:34,040 --> 00:08:37,079 Speaker 1: for the US, And certainly it seems like China is 144 00:08:37,120 --> 00:08:39,160 Speaker 1: at the center of them. So what would the US 145 00:08:39,200 --> 00:08:41,960 Speaker 1: have to give up for China to really get more 146 00:08:41,960 --> 00:08:44,680 Speaker 1: aggressive with North Korea. So the problem with this is 147 00:08:44,720 --> 00:08:46,240 Speaker 1: this is going to have to go on stages. It's 148 00:08:46,240 --> 00:08:50,800 Speaker 1: gonna be escalation pause, escalation pause, And there's almost no 149 00:08:50,880 --> 00:08:54,520 Speaker 1: way to jump from stage A to stage D without 150 00:08:54,600 --> 00:08:57,120 Speaker 1: going through the hoops at each stage. And what I 151 00:08:57,160 --> 00:08:59,720 Speaker 1: mean by that is they're going to the North Koreans 152 00:08:59,720 --> 00:09:02,480 Speaker 1: are going to have to show increased capabilities with their 153 00:09:02,520 --> 00:09:06,760 Speaker 1: missiles and with their miniaturization of the of their nuclear weapons. Uh, 154 00:09:06,880 --> 00:09:08,920 Speaker 1: the Trump administration is going to have to show an 155 00:09:08,960 --> 00:09:12,000 Speaker 1: increasing willingness to confront them. They're going to have to 156 00:09:12,080 --> 00:09:14,640 Speaker 1: show they're willing to to put a military solution on 157 00:09:14,679 --> 00:09:18,440 Speaker 1: the table. They're willing to go after the the areas 158 00:09:18,440 --> 00:09:21,320 Speaker 1: of the Chinese economy which have been too sensitive to 159 00:09:21,440 --> 00:09:23,640 Speaker 1: do to do that for in the past, so so 160 00:09:23,720 --> 00:09:26,320 Speaker 1: oil as you said, and also the banking system. And 161 00:09:26,320 --> 00:09:29,440 Speaker 1: there's gonna have to be this escalation in terms of 162 00:09:29,800 --> 00:09:32,400 Speaker 1: what the US is willing to do to stop a 163 00:09:32,440 --> 00:09:37,040 Speaker 1: North Korean UH nuclear capability, and what the North Koreans 164 00:09:37,080 --> 00:09:38,880 Speaker 1: are willing to do in order to push back against that, 165 00:09:38,960 --> 00:09:41,000 Speaker 1: and what the Chinese are involved. And this will keep 166 00:09:41,040 --> 00:09:43,960 Speaker 1: going until a certain point in which everyone will feel 167 00:09:44,000 --> 00:09:46,160 Speaker 1: it's more politically palatable to come to the table at 168 00:09:47,000 --> 00:09:50,240 Speaker 1: that point, but not until things have escalated that stage. 169 00:09:50,280 --> 00:09:52,400 Speaker 1: And we're not there yet. So let's say we get 170 00:09:52,400 --> 00:09:56,120 Speaker 1: through those stages. What are the different constituents going to 171 00:09:56,240 --> 00:09:59,880 Speaker 1: ultimately say they want. Well, if you look at North 172 00:10:00,040 --> 00:10:02,280 Speaker 1: Rea first and foremost, what do they want. They want 173 00:10:02,280 --> 00:10:04,920 Speaker 1: a continuation that Kim dynasty. They want peace, They want 174 00:10:04,920 --> 00:10:06,640 Speaker 1: all the sanctions to be ripped off so that their 175 00:10:06,640 --> 00:10:09,160 Speaker 1: economy can grow again. Um, they want to be a 176 00:10:09,200 --> 00:10:15,079 Speaker 1: normal country. And that's problematic considering the North Korean dynasty 177 00:10:15,160 --> 00:10:18,880 Speaker 1: and and and their history. UH. China wants to avoid 178 00:10:18,920 --> 00:10:21,080 Speaker 1: all of their worst case scenarios. So they've got a 179 00:10:21,120 --> 00:10:24,480 Speaker 1: worst case scenario that involves uh, you know, a U. 180 00:10:24,559 --> 00:10:28,040 Speaker 1: S missile strike on the Korean peninsula, refugee flows over 181 00:10:28,080 --> 00:10:31,000 Speaker 1: the over the North Korean border, but also some sort 182 00:10:31,040 --> 00:10:35,240 Speaker 1: of peaceful solution that comes too easy, where US troops 183 00:10:35,280 --> 00:10:38,360 Speaker 1: in South Korea basically swallows up North Korean and then 184 00:10:38,360 --> 00:10:41,480 Speaker 1: you've got a massive US ally on their border, supported 185 00:10:41,559 --> 00:10:43,840 Speaker 1: very strongly by the United States. That's also a worst 186 00:10:43,880 --> 00:10:46,080 Speaker 1: case scenario for them. So what they want is everyone 187 00:10:46,080 --> 00:10:49,760 Speaker 1: to feel pain and whatever solution ends up happening at 188 00:10:49,760 --> 00:10:55,200 Speaker 1: the end to be acceptable to China, but painful enough 189 00:10:55,240 --> 00:10:56,880 Speaker 1: to everybody else so that so that they can live 190 00:10:56,920 --> 00:11:00,000 Speaker 1: with it. Based on your analysis of the Chinese econ 191 00:11:00,040 --> 00:11:02,400 Speaker 1: to me right now, is the economy in such a 192 00:11:02,480 --> 00:11:06,520 Speaker 1: strong position that it can that the political leadership can 193 00:11:06,559 --> 00:11:10,600 Speaker 1: actually come through on some of the things that you describe. Well, 194 00:11:10,800 --> 00:11:13,960 Speaker 1: the dynamics of she consolidating his power have to change 195 00:11:14,000 --> 00:11:16,680 Speaker 1: some of this. So the economy is rather strong. There's 196 00:11:16,720 --> 00:11:18,840 Speaker 1: a question right now in terms of the first half 197 00:11:19,720 --> 00:11:22,600 Speaker 1: and going forward, how much is she going to try 198 00:11:22,600 --> 00:11:25,640 Speaker 1: to restructure and rebalance the economy in a painful way. 199 00:11:25,800 --> 00:11:27,880 Speaker 1: Is he going to try some reform that's going to 200 00:11:27,920 --> 00:11:30,960 Speaker 1: actually cut growth and put him uh and and and 201 00:11:31,120 --> 00:11:34,200 Speaker 1: cause some problems for him? And the anti corruption anti 202 00:11:34,200 --> 00:11:36,720 Speaker 1: corruptions that he's put in place that has gotten some 203 00:11:36,800 --> 00:11:40,120 Speaker 1: pushback and it will continue to Any corruption and I pollution, 204 00:11:40,240 --> 00:11:43,000 Speaker 1: anti over capacity, everything he's doing right now can can 205 00:11:43,040 --> 00:11:45,760 Speaker 1: cause pain, but she is in such control that there's 206 00:11:45,800 --> 00:11:49,439 Speaker 1: not really a question of the political willpower in China 207 00:11:49,520 --> 00:11:51,280 Speaker 1: being able to push a solution. If she wants it, 208 00:11:51,280 --> 00:11:52,880 Speaker 1: he'll push it. And I don't I don't think that 209 00:11:52,960 --> 00:11:55,679 Speaker 1: the problem comes from China. So you said that everyone's 210 00:11:55,679 --> 00:11:58,800 Speaker 1: going to have to feel some pain from the US perspective. 211 00:11:59,160 --> 00:12:03,200 Speaker 1: What's the pain there? Well, I'm just looking at President Trump. 212 00:12:03,240 --> 00:12:05,360 Speaker 1: You know, he's repeated what every other president has said 213 00:12:05,360 --> 00:12:07,960 Speaker 1: for twenty years, which is, we will never allow the 214 00:12:08,000 --> 00:12:10,439 Speaker 1: North Koreans to have a nuclear missile. So if you're 215 00:12:10,440 --> 00:12:12,640 Speaker 1: gonna have an ultimate solution to that, there's no way 216 00:12:12,640 --> 00:12:14,959 Speaker 1: of ripping this away. There's the North Koreans are not 217 00:12:14,960 --> 00:12:17,800 Speaker 1: gonna give up their nuclear technology or their nuclear weapons, 218 00:12:18,000 --> 00:12:22,200 Speaker 1: and so the US solution, unfortunately, may have to involve 219 00:12:22,920 --> 00:12:27,400 Speaker 1: granting the North Koreans uh publicly acknowledging them to be 220 00:12:27,440 --> 00:12:29,839 Speaker 1: a nuclear power and to possibly bring them into the NPT. 221 00:12:30,200 --> 00:12:32,240 Speaker 1: Now do I like this No, I think it's awful, 222 00:12:32,320 --> 00:12:34,880 Speaker 1: But you know, you look at what's possible. The North 223 00:12:34,960 --> 00:12:37,280 Speaker 1: Koreans are not giving up their nuclear weapons. They saw 224 00:12:37,320 --> 00:12:39,679 Speaker 1: what happened in in in Libya. They saw what happened 225 00:12:39,679 --> 00:12:41,640 Speaker 1: in Iraq. They they're not going to do it. So 226 00:12:41,960 --> 00:12:44,560 Speaker 1: the question is is that what is the US willing 227 00:12:44,600 --> 00:12:48,400 Speaker 1: to backtrack on in order to get the threat reduced 228 00:12:48,559 --> 00:12:53,480 Speaker 1: on you know, missile strikes on the US mainland. You 229 00:12:53,520 --> 00:12:59,800 Speaker 1: also said that prolifer proliferation is the biggest risk. Just quickly, 230 00:13:00,120 --> 00:13:02,840 Speaker 1: is there any sense that North Korea is thinking of 231 00:13:02,920 --> 00:13:06,760 Speaker 1: exporting some moths nuclear capacity to say I ran, Well, 232 00:13:06,800 --> 00:13:09,000 Speaker 1: they have in the past, so that's that's the danger area. Now. 233 00:13:09,200 --> 00:13:12,880 Speaker 1: They did in the past, they traded technology, they sold technology. Um, 234 00:13:12,960 --> 00:13:15,360 Speaker 1: so they're perfectly capable of doing it. And there's no 235 00:13:15,440 --> 00:13:17,760 Speaker 1: there's no moral component here. North Korea will do whatever 236 00:13:17,800 --> 00:13:21,080 Speaker 1: it thinks is in its interest. The problem is is 237 00:13:21,120 --> 00:13:28,000 Speaker 1: that the Kim dynasty has has They have to realize 238 00:13:28,000 --> 00:13:30,280 Speaker 1: at this point that if they crossed that line, that 239 00:13:30,280 --> 00:13:32,280 Speaker 1: that could be a potential red line for the Trump 240 00:13:32,280 --> 00:13:35,320 Speaker 1: white House and and could bring a strike where otherwise 241 00:13:35,360 --> 00:13:37,000 Speaker 1: they might not get a strike, And so they have 242 00:13:37,040 --> 00:13:39,720 Speaker 1: to be very careful on that. Leland Miller, thank you 243 00:13:39,760 --> 00:13:42,120 Speaker 1: so much for joining us and for sharing your insights. 244 00:13:42,200 --> 00:13:46,359 Speaker 1: Leland Biller is chief executive of China beige Book International. 245 00:13:46,440 --> 00:13:51,280 Speaker 1: Talking about North Korea and how the different phases of 246 00:13:51,360 --> 00:14:14,400 Speaker 1: this negotiation are likely to play out. Ali Baba people 247 00:14:14,679 --> 00:14:17,720 Speaker 1: clamored for its I p O, they are now clamoring 248 00:14:18,040 --> 00:14:22,560 Speaker 1: for its seven billion dollars of bonds sold in the US. 249 00:14:22,680 --> 00:14:25,400 Speaker 1: I want to bring in Claire Boston, corporate finance reporter 250 00:14:25,440 --> 00:14:27,720 Speaker 1: for Bloomberg News. She joins us here in our eleven 251 00:14:27,760 --> 00:14:29,640 Speaker 1: three oh studios to talk about it. Claire, can you 252 00:14:29,640 --> 00:14:31,960 Speaker 1: give us a sense of why there was so much 253 00:14:32,040 --> 00:14:34,840 Speaker 1: demand for this debt sale? Can you also put it 254 00:14:34,840 --> 00:14:38,200 Speaker 1: into context as far as a size and scope with 255 00:14:38,240 --> 00:14:41,440 Speaker 1: respect to Chinese issuers. Thanks so much for having me, 256 00:14:41,520 --> 00:14:44,200 Speaker 1: Lisa UM. When it comes to this deal, there were 257 00:14:44,200 --> 00:14:46,600 Speaker 1: several things that stuck out UM. One is that Ali 258 00:14:46,680 --> 00:14:48,880 Speaker 1: Baba is not a frequent issue or this is only 259 00:14:49,200 --> 00:14:52,320 Speaker 1: their second deal UM and their first since their inaugural 260 00:14:52,360 --> 00:14:55,520 Speaker 1: deal in UM. Also, it's a bit of a higher 261 00:14:55,600 --> 00:14:57,960 Speaker 1: rated deal. It's a had a triple or had a 262 00:14:58,280 --> 00:15:00,400 Speaker 1: single A plus rating UM at s P and the 263 00:15:00,400 --> 00:15:05,240 Speaker 1: equivalent end moodies and for many investors, UH, many investment 264 00:15:05,240 --> 00:15:07,320 Speaker 1: grade bonds now are more like the triple B range. 265 00:15:07,320 --> 00:15:09,920 Speaker 1: So this is a opportunity to get some higher quality 266 00:15:09,960 --> 00:15:13,120 Speaker 1: paper UM in terms of what this means for the market. Uh, 267 00:15:13,320 --> 00:15:17,440 Speaker 1: this is the biggest UM Asian corporate deal UM this year, 268 00:15:17,840 --> 00:15:19,800 Speaker 1: and it's just a little bit smaller than Ali Baba's 269 00:15:19,880 --> 00:15:23,840 Speaker 1: UM inaugural deal. In why do they need the money? 270 00:15:24,280 --> 00:15:26,680 Speaker 1: They said that they were going to UM, you know, 271 00:15:26,720 --> 00:15:29,040 Speaker 1: look at investments or you know, kind of growth in 272 00:15:29,080 --> 00:15:31,800 Speaker 1: the future. It was sort of a general UM bonds, 273 00:15:31,800 --> 00:15:37,000 Speaker 1: nothing specific, going to invest in artificial intelligence companies, They're 274 00:15:37,080 --> 00:15:42,840 Speaker 1: going to expand their relationship with their suppliers in in China, 275 00:15:43,000 --> 00:15:46,600 Speaker 1: but nothing specific by growth, which is you know, something 276 00:15:46,640 --> 00:15:49,000 Speaker 1: that bond investors like to hear. It's you know, maybe 277 00:15:49,000 --> 00:15:51,160 Speaker 1: a little bit more palatable than just you know, paying 278 00:15:51,200 --> 00:15:54,160 Speaker 1: equity holders with your debt than just investing in your 279 00:15:54,160 --> 00:15:57,480 Speaker 1: bank account. I wonder they'll claire, Uh, with the respect 280 00:15:57,560 --> 00:16:01,400 Speaker 1: to the denomination, right, this is dollar denominated debt, I'm wondering, 281 00:16:01,440 --> 00:16:04,320 Speaker 1: does that indicate that Ali Baba is looking to expand 282 00:16:04,600 --> 00:16:07,280 Speaker 1: in the US. It's hard to say, but um, you know, 283 00:16:07,320 --> 00:16:09,640 Speaker 1: in terms of this bond sale, they definitely UM, we're 284 00:16:09,640 --> 00:16:13,640 Speaker 1: going after US investors in addition to Chinese investors, and 285 00:16:13,680 --> 00:16:17,680 Speaker 1: they were targeting UM, you know, some of their sort 286 00:16:17,720 --> 00:16:22,960 Speaker 1: of marketing calls to both areas. So Tencent is reportedly 287 00:16:23,000 --> 00:16:26,360 Speaker 1: looking to follow this up with their own bond sale. 288 00:16:26,360 --> 00:16:28,520 Speaker 1: Can you give us any color about that. Yes, they 289 00:16:28,560 --> 00:16:31,400 Speaker 1: announced um yesterday that they you know, may follow in 290 00:16:31,400 --> 00:16:34,320 Speaker 1: the marketplace. Uh, we don't have any information about, you know, 291 00:16:34,360 --> 00:16:37,000 Speaker 1: whether they were inspired by Ali Baba or anything. But 292 00:16:37,040 --> 00:16:39,680 Speaker 1: Ali Baba had forty six billion dollars of demand, our 293 00:16:39,720 --> 00:16:43,600 Speaker 1: sources tell us. UM, so that might be an indication that, uh, 294 00:16:43,640 --> 00:16:46,880 Speaker 1: you know, US investors are hungry for Chinese corporate debt. Well, 295 00:16:46,880 --> 00:16:49,560 Speaker 1: it's certainly pushing up issuance, correct. I mean, we're at 296 00:16:49,560 --> 00:16:53,160 Speaker 1: the three billion mark for the first time. Yeah, we are. 297 00:16:53,480 --> 00:16:57,040 Speaker 1: We have already set the this is the Asia Japan 298 00:16:58,160 --> 00:17:02,280 Speaker 1: Asia extra bond up goo And what was he talking about? 299 00:17:02,320 --> 00:17:06,480 Speaker 1: That's investment grade and way more. Um. Yeah. So it's 300 00:17:06,480 --> 00:17:08,239 Speaker 1: been a strong year for Asian issuance, and it's been 301 00:17:08,240 --> 00:17:11,200 Speaker 1: a strong year for US investment grade sales overall. Um. 302 00:17:11,280 --> 00:17:14,600 Speaker 1: A few weeks ago we passed last year's record. Um. 303 00:17:14,680 --> 00:17:17,120 Speaker 1: So we are now at the all time for US 304 00:17:17,160 --> 00:17:20,800 Speaker 1: investment grade bond sales. So I'm gonna just channel my 305 00:17:20,880 --> 00:17:24,240 Speaker 1: inner pessimist and say, well, you know, granted, Ali Baba 306 00:17:24,320 --> 00:17:27,879 Speaker 1: is ahemist hensent. They're like the biggest companies in China 307 00:17:28,040 --> 00:17:30,840 Speaker 1: and they're grabbing market share and they're grabbing the envy 308 00:17:30,880 --> 00:17:33,120 Speaker 1: of a lot of tech companies here in the US. 309 00:17:33,160 --> 00:17:37,359 Speaker 1: But having a dollar denominated debt does raise a currency issue, right, 310 00:17:37,440 --> 00:17:41,040 Speaker 1: especially with the UN and any potential fluctuations. There No 311 00:17:41,040 --> 00:17:44,080 Speaker 1: one cares about that, right, It's it's hard to tell, 312 00:17:44,160 --> 00:17:46,160 Speaker 1: you know. I mean, I think that they lay out 313 00:17:46,160 --> 00:17:50,600 Speaker 1: their risk factors UM pretty obviously and their various documentations 314 00:17:51,080 --> 00:17:53,760 Speaker 1: they actually do in their bond sale have a put 315 00:17:53,760 --> 00:17:57,359 Speaker 1: provision that basically says that if issues arise with the 316 00:17:57,400 --> 00:18:00,880 Speaker 1: Chinese government UM that prevent Ali Baba from business, the 317 00:18:00,920 --> 00:18:03,400 Speaker 1: bonds can be called back at one of one cents 318 00:18:03,400 --> 00:18:06,360 Speaker 1: in the dollar, So you'd actually make money. Well where 319 00:18:06,359 --> 00:18:09,560 Speaker 1: are they trading now? Yeah, some of them have traded up. Actually, 320 00:18:09,720 --> 00:18:11,639 Speaker 1: you know, you saw that sort of traditional new issue 321 00:18:11,640 --> 00:18:13,920 Speaker 1: pop um. Several are already passed one of one cents 322 00:18:13,960 --> 00:18:16,240 Speaker 1: on the dollar. But you know, we'll see here you go, 323 00:18:16,320 --> 00:18:18,399 Speaker 1: you lose money if you bought them. Now, why men 324 00:18:18,680 --> 00:18:21,239 Speaker 1: at issue? I know, but I'm just saying because this 325 00:18:21,320 --> 00:18:24,480 Speaker 1: is it's relevant. Yes, Uh, you know, that's kind of 326 00:18:24,520 --> 00:18:26,920 Speaker 1: a sign of healthy demand in the marketplace. You know, 327 00:18:26,960 --> 00:18:29,040 Speaker 1: when you see that, you know as soon as they 328 00:18:29,280 --> 00:18:31,720 Speaker 1: hit the market and they're already up a center too. 329 00:18:32,320 --> 00:18:35,320 Speaker 1: Well you say healthy demand, it might be just exuberant demand, 330 00:18:35,359 --> 00:18:38,520 Speaker 1: do you think. I mean, basically, we've got nothing by 331 00:18:38,600 --> 00:18:41,000 Speaker 1: any fans. I mean, but they're being pushed out of 332 00:18:41,080 --> 00:18:44,320 Speaker 1: a lot of other government debts. So investment grade is 333 00:18:44,359 --> 00:18:46,880 Speaker 1: the new government debt. And this is just another example 334 00:18:46,880 --> 00:18:48,640 Speaker 1: where we were seeing that search for yield. It's kind 335 00:18:48,640 --> 00:18:50,520 Speaker 1: of been the story of the past several years at 336 00:18:50,520 --> 00:18:53,640 Speaker 1: this point, and it seems to be one that will continue. 337 00:18:54,359 --> 00:18:57,320 Speaker 1: Thank you very much. Claire Boston is always much appreciated 338 00:18:57,359 --> 00:19:01,200 Speaker 1: corporate finance reporter for Bloomberg News, giving some details about 339 00:19:01,200 --> 00:19:06,040 Speaker 1: that Ali Baba bond sales seven billion dollars of US 340 00:19:06,119 --> 00:19:32,280 Speaker 1: dollar denominated debt. He joins US now Cliff Marine, deputy 341 00:19:32,320 --> 00:19:35,840 Speaker 1: Chief investment Officer for Mass Mutual Financial Group, helping to 342 00:19:35,920 --> 00:19:39,639 Speaker 1: manage more than a hundred and sixty billion dollars in assets. 343 00:19:39,840 --> 00:19:43,119 Speaker 1: Mass Mutual's total assets are over six hundred and fifty billions. 344 00:19:43,119 --> 00:19:45,919 Speaker 1: You've got to include their subsidiaries, for example, Barings and 345 00:19:46,240 --> 00:19:49,639 Speaker 1: Oppenheimer Funds. He's based in a Springfield, bass but he 346 00:19:49,760 --> 00:19:52,359 Speaker 1: joins us in our eleven three oh studios. Cliff, always 347 00:19:52,400 --> 00:19:54,600 Speaker 1: a pleasure. Thanks for coming in. You know, Before we 348 00:19:54,640 --> 00:19:57,439 Speaker 1: get to some specifics about you know, investments and so on, 349 00:19:57,480 --> 00:20:01,120 Speaker 1: I just want to understand if the X Overhaul plan 350 00:20:01,240 --> 00:20:04,800 Speaker 1: that is being considered in Washington or actually to be 351 00:20:04,880 --> 00:20:09,199 Speaker 1: passed and become law, do you have any sense of 352 00:20:09,240 --> 00:20:12,880 Speaker 1: what this would do to the budget, to the deficit 353 00:20:12,960 --> 00:20:16,000 Speaker 1: of the United States, particularly, you know, what this would 354 00:20:16,040 --> 00:20:19,480 Speaker 1: mean for all of the obligations that the government has 355 00:20:19,560 --> 00:20:24,560 Speaker 1: for things like Social Security, medicare as well as all 356 00:20:24,560 --> 00:20:29,480 Speaker 1: the other entitlement programs, never even mind the municipal programs. Well, 357 00:20:29,520 --> 00:20:33,000 Speaker 1: this plan is a very giant puzzle. It's very complicated, 358 00:20:33,000 --> 00:20:34,720 Speaker 1: a lot of moving parts. It's like a chess game 359 00:20:34,760 --> 00:20:37,040 Speaker 1: going on because we hear different things every day. But 360 00:20:37,080 --> 00:20:40,000 Speaker 1: the bottom line is our country has twenty point five 361 00:20:40,119 --> 00:20:43,119 Speaker 1: trillion dollars of debt today. Last year, for year in 362 00:20:43,119 --> 00:20:47,280 Speaker 1: September three, two thousand seventeen, our government produced revenues or 363 00:20:47,280 --> 00:20:50,440 Speaker 1: receipts of three point three trillion and spent almost four trillion, 364 00:20:50,520 --> 00:20:54,200 Speaker 1: So we had a deficit around six and fifty billion dollars, 365 00:20:55,000 --> 00:20:56,639 Speaker 1: and that deficit has been coming down. It was a 366 00:20:56,640 --> 00:20:58,719 Speaker 1: little bit lower the year before, but the years during 367 00:20:58,760 --> 00:21:02,520 Speaker 1: the financial crisis was over trillion dollars. So we've accumulated 368 00:21:02,680 --> 00:21:04,439 Speaker 1: a lot of debt. Our debt is more than doubled 369 00:21:04,480 --> 00:21:07,040 Speaker 1: over the last ten years, so that is an issue. 370 00:21:07,040 --> 00:21:10,760 Speaker 1: And then we have all the obligations for soul security 371 00:21:10,840 --> 00:21:15,680 Speaker 1: and then for pensions for federal employees in the medical benefits, 372 00:21:15,880 --> 00:21:18,040 Speaker 1: and that is not included in the twenty and a 373 00:21:18,080 --> 00:21:20,240 Speaker 1: half trillion. So if you look at all that debt 374 00:21:20,240 --> 00:21:23,040 Speaker 1: and all the obligations, which add up to some people 375 00:21:23,080 --> 00:21:25,840 Speaker 1: say a hundred trillion dollars, it is a bit challenging 376 00:21:25,920 --> 00:21:28,480 Speaker 1: and nobody's really talking about this or addressing it. So 377 00:21:28,600 --> 00:21:30,840 Speaker 1: from an investment perspective, Cliff, does that mean that you 378 00:21:30,880 --> 00:21:34,480 Speaker 1: are avoiding treasuries altogether. No, No, we are still behind treasuries. 379 00:21:34,480 --> 00:21:37,119 Speaker 1: We have to buy treasuries as a large investor in 380 00:21:37,200 --> 00:21:40,320 Speaker 1: high quality assets. But it is a challenge to our 381 00:21:40,320 --> 00:21:42,439 Speaker 1: country that is going to have to be addressed, not 382 00:21:42,480 --> 00:21:45,959 Speaker 1: today tomorrow, but sometime over the next three, five, ten years. 383 00:21:46,000 --> 00:21:48,160 Speaker 1: You also did buy some of those Ali Baba bonds 384 00:21:48,160 --> 00:21:50,000 Speaker 1: that we were just talking about. Is that correct? Yes? 385 00:21:50,280 --> 00:21:52,960 Speaker 1: Does it concern you that they are earning money in 386 00:21:53,160 --> 00:21:55,919 Speaker 1: u N and trying to pay back dollars? No, The 387 00:21:55,960 --> 00:21:59,800 Speaker 1: company is a financial powerhouse, has a sixty billion dollar 388 00:22:00,119 --> 00:22:03,520 Speaker 1: at cap. It doesn't have that much debt. I'm trying 389 00:22:03,520 --> 00:22:06,280 Speaker 1: to remember talking to our guys yesterday. Um it has 390 00:22:06,320 --> 00:22:08,159 Speaker 1: fourteen billion dollars in debt. It has more than that 391 00:22:08,200 --> 00:22:10,240 Speaker 1: in cash. It is growing, and it's using the bond 392 00:22:10,240 --> 00:22:14,720 Speaker 1: market with these low rates to effectively finance instead of 393 00:22:14,800 --> 00:22:19,240 Speaker 1: using equity, using debt, paying three four for long term debt, 394 00:22:19,440 --> 00:22:21,520 Speaker 1: and it is a very smart way for them to 395 00:22:22,200 --> 00:22:25,040 Speaker 1: raise capital. From us as an investor, we're diversifying our 396 00:22:25,080 --> 00:22:28,119 Speaker 1: bond portfolio. We don't really invest a lot in the 397 00:22:28,119 --> 00:22:29,840 Speaker 1: public bond market today is not a lot of value, 398 00:22:29,880 --> 00:22:33,080 Speaker 1: but we are selectively buying names that we like, and 399 00:22:33,200 --> 00:22:35,800 Speaker 1: we like Ali Bob as a company. So you mentioned 400 00:22:35,800 --> 00:22:39,000 Speaker 1: that you're not participating in the public markets as much 401 00:22:39,040 --> 00:22:42,119 Speaker 1: as you perhaps have done in the past. Can you 402 00:22:42,160 --> 00:22:45,359 Speaker 1: give us some examples, some ideas of what in the 403 00:22:45,440 --> 00:22:49,120 Speaker 1: private market you have found to be attractive. We've been 404 00:22:49,160 --> 00:22:52,200 Speaker 1: making real estate loans mortgages first, mortgages on very large 405 00:22:52,240 --> 00:22:55,640 Speaker 1: buildings in very large dollar amounts. Again, the public bond 406 00:22:55,680 --> 00:22:58,000 Speaker 1: investors can invest in those. We don't have liquidit in those, 407 00:22:58,040 --> 00:23:00,679 Speaker 1: but they do add a lot of and spread to 408 00:23:00,720 --> 00:23:03,840 Speaker 1: our portfolio. What kind of yield we've been getting on 409 00:23:03,880 --> 00:23:06,880 Speaker 1: our private corporate debt about a hundred basis points more 410 00:23:07,720 --> 00:23:11,000 Speaker 1: for ill liquid assets that we cannot sell. But we 411 00:23:11,080 --> 00:23:15,600 Speaker 1: have very high quality bars, single A, triple B bars, 412 00:23:16,280 --> 00:23:19,720 Speaker 1: and we've been overweight in that sector. And we've been 413 00:23:19,760 --> 00:23:22,440 Speaker 1: also buying CLO liabilities that markets tighten this year, but 414 00:23:22,480 --> 00:23:25,280 Speaker 1: that's been an overweight we've had. We think that it 415 00:23:25,400 --> 00:23:27,359 Speaker 1: was a miss price. It's less miss price today, but 416 00:23:27,400 --> 00:23:31,399 Speaker 1: we're buying these less known, less liquid assets that add 417 00:23:31,400 --> 00:23:34,160 Speaker 1: more yield to our portfolio and long term basis with clos. 418 00:23:34,200 --> 00:23:36,280 Speaker 1: Are you buying equity? Are you buying triple A paper? 419 00:23:36,320 --> 00:23:39,119 Speaker 1: What are you buying? We buy primarily triple A, double A, 420 00:23:39,800 --> 00:23:42,919 Speaker 1: and then what about other sort of a liquid investments 421 00:23:42,960 --> 00:23:45,199 Speaker 1: because this has gotten increasingly crowded as a lot of 422 00:23:45,200 --> 00:23:48,679 Speaker 1: insurance companies and UH and pensions and hedge funds and 423 00:23:48,720 --> 00:23:50,640 Speaker 1: private equity firms have all been trying to go into 424 00:23:50,720 --> 00:23:53,760 Speaker 1: private debt and some of these less liquid asset classes. Uh, 425 00:23:53,960 --> 00:23:56,959 Speaker 1: have you had to go further into the esoteric space? 426 00:23:57,640 --> 00:24:00,280 Speaker 1: So where we've been buying primarily investment grade because because 427 00:24:00,320 --> 00:24:02,800 Speaker 1: we are highly rate insurance company, we do buy middle 428 00:24:02,840 --> 00:24:05,880 Speaker 1: market loans, which we believe have much better value today 429 00:24:05,880 --> 00:24:09,280 Speaker 1: than high yield public bonds. And in the investment rate space, 430 00:24:09,280 --> 00:24:11,200 Speaker 1: again we're overweighting that because of the nature of our 431 00:24:11,200 --> 00:24:14,800 Speaker 1: company and our liabilities and our assets. UM corporate debt 432 00:24:15,000 --> 00:24:18,800 Speaker 1: to some other unusual things like private equity firms into funds, 433 00:24:19,080 --> 00:24:21,880 Speaker 1: closed end funds. We are lender in both the debt 434 00:24:22,000 --> 00:24:24,680 Speaker 1: in the preferred stock. We think those are very well secured, 435 00:24:24,800 --> 00:24:27,159 Speaker 1: very low risk. With private equity firms, you're lending to 436 00:24:27,320 --> 00:24:31,159 Speaker 1: the private equity firms or to their companies both. I 437 00:24:31,480 --> 00:24:33,520 Speaker 1: really can't mention their names, but we haven't lending to 438 00:24:33,640 --> 00:24:36,639 Speaker 1: funds and two different structures they've done that. UM, we 439 00:24:36,760 --> 00:24:40,480 Speaker 1: think a very secure and represent really good value for 440 00:24:40,480 --> 00:24:43,680 Speaker 1: our policy holders. Now, the conditions that have pushed you 441 00:24:43,760 --> 00:24:48,119 Speaker 1: into these kinds of let's just say alternative investments, I 442 00:24:48,119 --> 00:24:51,800 Speaker 1: mean that in a more generic way. Uh, do those 443 00:24:51,840 --> 00:24:56,239 Speaker 1: conditions conditions? Do you believe that they will continue? In 444 00:24:56,320 --> 00:24:58,919 Speaker 1: other words, are we going to maintain this level of 445 00:24:59,080 --> 00:25:02,160 Speaker 1: low interest So we're in the fourth quarter of two 446 00:25:02,160 --> 00:25:05,560 Speaker 1: thousand seventeen. This all started in the fourth quarter of 447 00:25:05,600 --> 00:25:08,720 Speaker 1: two thousand and eight, so we've had nine full years 448 00:25:08,760 --> 00:25:11,560 Speaker 1: of these very lower industrates. I call this an unconventional, 449 00:25:12,320 --> 00:25:17,760 Speaker 1: highly unusual, radical era of monetary policy. And how long 450 00:25:17,800 --> 00:25:19,480 Speaker 1: will this continue? We don't know. We wouldn't you know, 451 00:25:19,520 --> 00:25:21,159 Speaker 1: three years, five years ago, we thought would be out 452 00:25:21,160 --> 00:25:23,800 Speaker 1: of it already. But the economy is certainly getting better. 453 00:25:24,200 --> 00:25:27,880 Speaker 1: The stock market is booming right now, and you would 454 00:25:27,880 --> 00:25:29,960 Speaker 1: think that we would start in the United States is 455 00:25:30,000 --> 00:25:32,600 Speaker 1: being the adult here in his raising rates. So we're 456 00:25:32,680 --> 00:25:35,600 Speaker 1: raised short term rates base points several times. We're going 457 00:25:35,640 --> 00:25:37,920 Speaker 1: to do it again here in December. But you look 458 00:25:37,960 --> 00:25:40,919 Speaker 1: at Europe, you look where rates are in Germany, you 459 00:25:40,920 --> 00:25:43,800 Speaker 1: look at rates in Japan. The two year rate in 460 00:25:43,840 --> 00:25:47,440 Speaker 1: Germany's negative sixty nine basis points. In Japan, it's negative seventeen. 461 00:25:47,800 --> 00:25:50,560 Speaker 1: The ten year rates is almost zero in Japan, it's 462 00:25:50,600 --> 00:25:54,359 Speaker 1: thirty eight basis points in Germany. So investors around the 463 00:25:54,359 --> 00:25:56,240 Speaker 1: world look in the United States as being the higher 464 00:25:56,320 --> 00:25:59,000 Speaker 1: yielding area, and that's where a lot of the demand 465 00:25:59,040 --> 00:26:00,879 Speaker 1: is coming to push ours and keep our rates as 466 00:26:00,920 --> 00:26:03,560 Speaker 1: low as they have been. The yield Curtish shifted this year. 467 00:26:03,880 --> 00:26:05,560 Speaker 1: The two year yield is up a lot, it's from 468 00:26:05,560 --> 00:26:07,400 Speaker 1: about a hundred and twenty to about one and three 469 00:26:07,480 --> 00:26:10,000 Speaker 1: quarters per cent here this year, but the ten year 470 00:26:10,080 --> 00:26:15,280 Speaker 1: yield is actually down start it's almost to So we've 471 00:26:15,280 --> 00:26:18,320 Speaker 1: had um the FED being proactive, and I think that's 472 00:26:18,320 --> 00:26:21,120 Speaker 1: the right thing to do. So just real quick, you're 473 00:26:21,160 --> 00:26:24,040 Speaker 1: talking about some of the alternative investments that you're going into. 474 00:26:24,560 --> 00:26:27,720 Speaker 1: What kind of yield bogey are you going for? Given 475 00:26:27,800 --> 00:26:30,520 Speaker 1: those investments and given the mandate of staying within the 476 00:26:30,560 --> 00:26:34,080 Speaker 1: investment grade. Well, everything is still priced off a treasury yield. 477 00:26:34,119 --> 00:26:37,320 Speaker 1: So we're trying to get a premium yield over US treasuries. 478 00:26:37,840 --> 00:26:40,400 Speaker 1: And you can look at public bonds, you can buy 479 00:26:40,440 --> 00:26:42,520 Speaker 1: all day long, you can buy and sell them, and 480 00:26:42,680 --> 00:26:44,960 Speaker 1: we're actually getting a premium, as I said, on private 481 00:26:44,960 --> 00:26:47,720 Speaker 1: corporate debt of almost a hundred basis points. Real estate 482 00:26:47,720 --> 00:26:50,480 Speaker 1: mortgages are less than that, but they are still I 483 00:26:50,520 --> 00:26:53,440 Speaker 1: think they're better investments. Structurally, you don't have liquidity, but 484 00:26:53,560 --> 00:26:55,520 Speaker 1: our intent we're a long term hold. We're not investing 485 00:26:55,520 --> 00:26:58,480 Speaker 1: for quarters, We're investing for years. And decades, and we've 486 00:26:58,520 --> 00:26:59,920 Speaker 1: been doing this for a long time and it's it's 487 00:27:00,000 --> 00:27:03,600 Speaker 1: actually a good long term strategy in my mind. Cliff Urine, 488 00:27:03,720 --> 00:27:05,960 Speaker 1: we love having you on. Yeah, it's great to see you. 489 00:27:06,000 --> 00:27:09,760 Speaker 1: Cliff Urine is Deputy Chief Investment Officer of mass Mutual 490 00:27:09,800 --> 00:27:13,120 Speaker 1: Financial Group, helping to oversee a hundred and sixty billion 491 00:27:13,280 --> 00:27:22,840 Speaker 1: dollars of assets. It's based in Springfield at Massachusetts. Thanks 492 00:27:22,840 --> 00:27:25,480 Speaker 1: for listening to the Bloomberg P and L podcast. You 493 00:27:25,480 --> 00:27:29,280 Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud, 494 00:27:29,400 --> 00:27:32,880 Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm 495 00:27:32,920 --> 00:27:36,920 Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. 496 00:27:37,040 --> 00:27:39,639 Speaker 1: It's one before the podcast. You can always catch us 497 00:27:39,680 --> 00:27:41,240 Speaker 1: worldwide on Bloomberg Radio.