WEBVTT - Stocks Under Pressure, Russia Sanctions 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.119 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:47.040 the Bloomberg Terminal, and the Bloomberg Business app right now. 0:00:47.040 --> 0:00:49.680 And we have all sorts of side agreements with our guests. 0:00:49.800 --> 0:00:53.200 I mean, you know, there's like sensitive issues between UNC 0:00:53.400 --> 0:00:56.120 and Duke guests and all that. With Paul, one of 0:00:56.160 --> 0:00:59.160 the things we have is David Rosenberg will not come 0:00:59.200 --> 0:01:03.240 on unless the Toronto Maple Leafs lose joining us now. 0:01:03.520 --> 0:01:07.639 David Rosenberg of course Montreal Canadians fan. He is based 0:01:07.640 --> 0:01:10.479 in Toronto in the Foreign Lands, and he joins us. 0:01:10.400 --> 0:01:14.840 From Rosenberg Research. David, is disinflation still in place? 0:01:15.760 --> 0:01:19.840 Well, I do believe that the trend towards lower inflation 0:01:20.280 --> 0:01:25.319 is intact, notwithstanding what happened in January, which seems to 0:01:25.360 --> 0:01:29.560 be to be quite a bit of early year noise, 0:01:30.280 --> 0:01:34.200 you know, related to some specific idiosyncratic factors, you know, 0:01:34.280 --> 0:01:39.120 auto insurance premiums, health insurance premiums. I'd say that, you know, Tom, 0:01:39.160 --> 0:01:41.360 we talked about this last time, and we've talked about 0:01:41.360 --> 0:01:45.679 it like almost forever, about how flawed a statistic the 0:01:45.760 --> 0:01:50.160 CPI is when twenty seven percent of the index is 0:01:50.200 --> 0:01:56.400 one question to a sample of homeowners, which is how 0:01:56.480 --> 0:01:58.800 much do you think your home price? How much you 0:01:58.840 --> 0:02:02.000 think you can brant your home your unicord for and 0:02:02.120 --> 0:02:06.680 so you know that's the the owner's equivalent rant in 0:02:06.760 --> 0:02:11.080 particular is an ongoing source of frustration for people like me. 0:02:11.200 --> 0:02:14.160 But I do think that the overall trend okay, is 0:02:14.200 --> 0:02:14.920 going to be intact. 0:02:15.160 --> 0:02:18.160 David, you own the high ground on this to review 0:02:18.200 --> 0:02:20.040 this quickly with a lack of time because Paul wants 0:02:20.080 --> 0:02:22.679 to get in. There's a guy named Ferrell at merri 0:02:22.760 --> 0:02:24.480 Lynch a few years ago, and he had this young 0:02:24.520 --> 0:02:28.200 Turke named Rosenberg who owned the slicing and Dicing of inflation. 0:02:28.639 --> 0:02:33.400 If you don't like CPI, what inflation series? David Rosenberg 0:02:33.440 --> 0:02:34.880 should we pay attention. 0:02:34.600 --> 0:02:37.800 To Well, you know what's interesting is that, you know, 0:02:37.919 --> 0:02:41.400 in December, I think it was Governor Waller had said 0:02:41.400 --> 0:02:45.080 that the FED was increasingly shifting its focus from you know, 0:02:45.160 --> 0:02:49.359 the government data towards what business contacts we're telling them, 0:02:49.840 --> 0:02:52.800 And you know, we're going to get the base book tomorrow, 0:02:52.960 --> 0:02:57.519 and the last couple of base books have said decisively 0:02:57.919 --> 0:03:01.080 that the corporate sector is seeing diminished power. The ability 0:03:01.080 --> 0:03:05.800 to pass on cost increases has gone down materially. So 0:03:05.960 --> 0:03:07.960 I think you have to. I mean, so much of 0:03:08.000 --> 0:03:12.040 the CPI, even the PC deflator are imputed guesswork, They're 0:03:12.080 --> 0:03:15.880 imputed pricing in the service sector. So I'd say turn 0:03:16.000 --> 0:03:18.200 your attention to the things you can see, touch and 0:03:18.240 --> 0:03:22.520 feel in the product sector. And when people say to me, well, 0:03:22.560 --> 0:03:25.519 but you know all the disinflation's been in the good sector, well, 0:03:25.680 --> 0:03:28.720 those are the prices you can actually have reliability on 0:03:28.800 --> 0:03:32.120 as opposed to imputed services. My big concern is that 0:03:32.160 --> 0:03:35.600 it's the service sector that the FED is most focused on, 0:03:36.000 --> 0:03:38.840 and that is the most unreliable components you have within 0:03:38.880 --> 0:03:41.960 the CPI and PC deflator. So I say, look at 0:03:42.040 --> 0:03:44.440 the prices of the things you can see, touch and feel, 0:03:45.040 --> 0:03:49.560 and they're actually in a deflationary momentum, and I expect 0:03:49.560 --> 0:03:51.280 that that will persist over the next year. 0:03:51.920 --> 0:03:54.440 So, David, this is a good week to be an economist. 0:03:54.520 --> 0:03:57.320 Lots of economic data coming out this week, including we're 0:03:57.320 --> 0:03:59.600 going to hear from FED Chairman Jpowe. Do you expect 0:03:59.600 --> 0:04:02.680 the chairman into, I don't know, try to walk back 0:04:02.720 --> 0:04:05.560 a little bit some of the December commentary. It seems 0:04:05.640 --> 0:04:08.480 like the economic data is supporting just kind of waiting 0:04:08.480 --> 0:04:09.760 here on rate cuts. 0:04:10.360 --> 0:04:12.960 Well, firstly, it's always a great time to be an economist. 0:04:13.400 --> 0:04:16.800 This makes no exception. We just have to fasten our 0:04:16.839 --> 0:04:20.159 seatbelt and stay at our desks twenty four to seven. Look, 0:04:20.200 --> 0:04:24.000 the Fed has already walked back that dubbishness in December, 0:04:25.240 --> 0:04:29.080 and you know, the market's leapt on some you know 0:04:29.760 --> 0:04:32.440 comment that I think Mary Daily made about that maybe 0:04:32.440 --> 0:04:35.000 March would be the date, and of course then the 0:04:35.080 --> 0:04:37.920 futures price in you know, six rate cuts, not three. 0:04:37.960 --> 0:04:40.600 The Fed has successfully calibrated the market back to where 0:04:40.600 --> 0:04:44.440 it was in December. I expect that I think he's 0:04:44.440 --> 0:04:48.520 going to be pretty hawkish, and everybody is lined up 0:04:48.720 --> 0:04:52.000 hawkish relative to where they were in December, and the 0:04:52.080 --> 0:04:54.240 question is going to be will he sound more or 0:04:54.320 --> 0:04:57.479 less hawkish than what's priced in right now? My big 0:04:57.520 --> 0:05:00.479 concern actually, and this is coming from a on bull 0:05:00.640 --> 0:05:03.280 and who would be ordinarily a dove on the FED, 0:05:03.320 --> 0:05:05.320 I think he's going to sound pretty hawkish tomorrow. 0:05:06.200 --> 0:05:08.160 How about the I mean, we're gonna get some data here. 0:05:08.200 --> 0:05:10.680 I mean again a big data week here. You got 0:05:10.680 --> 0:05:12.720 the payrolls on Friday. I mean, that's kind of one 0:05:12.760 --> 0:05:15.080 of the issues for this market is the labor market's 0:05:15.080 --> 0:05:16.280 been very strong here. 0:05:17.120 --> 0:05:19.119 Well, look, if you bow down to the holy grail 0:05:19.200 --> 0:05:21.320 of non farm payrolls, that's what you would believe. And 0:05:21.360 --> 0:05:23.400 of course that's all the FED focus on as non 0:05:23.400 --> 0:05:25.839 farm payrolls. And I've almost given up trying to forecast 0:05:25.920 --> 0:05:29.240 the number because last year, last year, half of the 0:05:29.240 --> 0:05:31.120 growth of non farm pay rolls didn't even come from 0:05:31.160 --> 0:05:33.600 the survey. It came from the birth death model, where 0:05:33.600 --> 0:05:37.760 we used to call the plug factor. But frankly, if 0:05:37.800 --> 0:05:41.040 you look at the household survey and especially the contraction 0:05:41.160 --> 0:05:43.880 and full time jobs over the past six months, yeah, 0:05:44.279 --> 0:05:47.000 I mean, we're replacing part of full time jobs with 0:05:47.040 --> 0:05:49.760 part time jobs. There's been practically no growth in the 0:05:49.800 --> 0:05:52.320 household of survey over the course of the past half year. 0:05:52.360 --> 0:05:55.239 If those survey you'll be thinking, this recession is probably 0:05:55.240 --> 0:05:56.719 staring us in the face. The other thing I would 0:05:56.760 --> 0:06:01.159 just mention is this, look at the divergence between the 0:06:01.240 --> 0:06:04.640 non farm payroll headlines and the work week. The work 0:06:04.640 --> 0:06:07.400 week is already back at recession levels. So I know, 0:06:07.480 --> 0:06:09.599 I hear this all the time. The employment numbers, they're 0:06:09.760 --> 0:06:13.400 robust economy. But actually you know, when you dig beneath 0:06:13.400 --> 0:06:18.000 the veneer, even of the beloved payroll survey, and you 0:06:18.040 --> 0:06:21.080 look at the hours worked, it's telling you something a 0:06:21.160 --> 0:06:23.440 little more insidious that what was happening in the labor 0:06:23.480 --> 0:06:26.240 market than what the current consensus narrative is. 0:06:26.520 --> 0:06:28.480 David, you got to leave it there, David Rosenberg. I 0:06:28.480 --> 0:06:29.839 don't want to go longer. We can't. 0:06:29.920 --> 0:06:33.400 David Rosenberg at Rosenberg Research in Toronto, we got a 0:06:33.480 --> 0:06:36.120 huge response when he's done. Thank you for the response 0:06:36.160 --> 0:06:36.440 on it. 0:06:47.000 --> 0:06:47.880 This is a joy. Right now. 0:06:47.880 --> 0:06:51.440 I'm constant under with a senior advisor at Macro Policy Perspectives, 0:06:51.839 --> 0:06:54.520 Paul wants to griller here on the domestic economy, which 0:06:54.520 --> 0:06:55.840 is what we do with Diane swank. 0:06:56.240 --> 0:06:59.240 But we ran into each other last night at the 0:06:59.240 --> 0:07:00.760 council and four in relations. 0:07:02.120 --> 0:07:04.480 You know, I sort of thought I should go by 0:07:04.520 --> 0:07:06.800 and get some of the quality horse divorce that they 0:07:06.800 --> 0:07:08.479 have at the CFR. 0:07:07.960 --> 0:07:08.800 And that wine. 0:07:08.839 --> 0:07:09.920 They'd be like, they'd be. 0:07:09.880 --> 0:07:13.480 Like, yeah, well they serve at least yes, CFR served boons. 0:07:13.200 --> 0:07:14.800 Fire last night. 0:07:15.560 --> 0:07:21.840 But instead I got a pecked room with a riveting 0:07:22.280 --> 0:07:26.360 Secretary of Commerce, the former governor of Rhode Island, Jeter Romando. 0:07:26.520 --> 0:07:33.280 Her intensity surprised me on our new Pacific rim efforts. 0:07:33.680 --> 0:07:35.480 I guess that's how I put it. What did you 0:07:35.560 --> 0:07:38.440 take away from the comments of a Secretary of Commerce 0:07:38.520 --> 0:07:38.960 last night? 0:07:39.440 --> 0:07:42.160 Well, one that you know, this is an important region 0:07:42.240 --> 0:07:44.920 for the US. There are you know, you look at 0:07:44.920 --> 0:07:49.760 the demographics of India, Indonesia, the Philippines, Thailand, these are 0:07:49.800 --> 0:07:54.360 all countries with highly favorable demographics. And then you look 0:07:54.400 --> 0:07:59.920 at the the opportunities for workforce development. You know, India 0:08:00.360 --> 0:08:03.880 is producing a huge number of engineers every year, right, 0:08:04.560 --> 0:08:08.240 and you think about the future of where everything's going 0:08:08.280 --> 0:08:11.760 with technology. The other thing that I felt was very 0:08:11.800 --> 0:08:14.360 interesting is this is a public private partnership where the 0:08:14.400 --> 0:08:17.960 governments to government relations give cover to make sure that 0:08:18.400 --> 0:08:21.360 you don't have what do we call it an excessive 0:08:21.400 --> 0:08:24.280 stroke of the pen risk? Right, So you have if 0:08:24.280 --> 0:08:26.000 you're going to go in and invest in these countries, 0:08:26.000 --> 0:08:28.840 that you have a little more durability and visibility. And 0:08:29.040 --> 0:08:31.520 this public private partnership aspect means it's going to be 0:08:31.640 --> 0:08:33.400 very difficult to dismantle this. 0:08:34.000 --> 0:08:35.280 Yeah, it's really important. 0:08:35.320 --> 0:08:37.719 Constant Hunter, thank you so much for that, paul I. 0:08:38.480 --> 0:08:41.080 You know, I love when I have mild my radar down. 0:08:41.120 --> 0:08:43.840 I'm really like, you know, it's okay, it's going to 0:08:43.840 --> 0:08:46.360 be an event. Great Constant Hunters there, That alone is 0:08:46.400 --> 0:08:49.680 worth it. Elizabeth Economy was there with their public service, 0:08:50.120 --> 0:08:53.480 working with the Secretary at Connors and instead I got 0:08:53.520 --> 0:08:58.400 a riviting Raymondo on the new approach to the Pacific RIM. 0:08:58.440 --> 0:08:59.920 I don't know what it means the next three years out. 0:09:00.120 --> 0:09:01.960 It was tangible concerts. And then that kind of brings 0:09:01.960 --> 0:09:03.520 to the question that a lot of folks have, which 0:09:03.600 --> 0:09:06.720 is what's going on with China and how do I 0:09:06.880 --> 0:09:09.000 deal with China. It's almost like you talk to an 0:09:09.000 --> 0:09:11.440 emerging market first and they're like, it's a big part 0:09:11.440 --> 0:09:14.199 of my MSCI index, but a lot of folks say 0:09:14.240 --> 0:09:16.760 it's uninvestable. How do you think about China when you 0:09:16.760 --> 0:09:17.920 think about that part of the world. 0:09:18.559 --> 0:09:21.079 Yeah, so it's interesting. I mean, so I'll just start 0:09:21.080 --> 0:09:24.400 with this. When you look at the US when we 0:09:24.480 --> 0:09:27.480 had our when the global financial crisis hit, so before that, 0:09:27.880 --> 0:09:31.920 real estate was six percent of our GDP and the 0:09:32.480 --> 0:09:36.360 recovery from that took over a decade. Okay, Now, if 0:09:36.440 --> 0:09:40.840 we benchmark that six percent, real estate is twenty five residents, 0:09:40.920 --> 0:09:45.080 really twenty five to thirty percent of China's GDP and 0:09:45.360 --> 0:09:47.959 we're now, by the way, at three percent in the US. Right, 0:09:48.040 --> 0:09:50.640 so let's say you cut that in half. It's going 0:09:50.679 --> 0:09:52.520 to take at least a decade or two for them 0:09:52.559 --> 0:09:56.800 to recover. You're looking at Japan is the preview movie, right, 0:09:57.200 --> 0:09:59.840 it is the preview movie. And look how many years 0:10:00.080 --> 0:10:02.599 took back to get back to the right level and there, 0:10:02.679 --> 0:10:04.719 you know, to get back to previous highs in their 0:10:04.720 --> 0:10:07.920 equity market. It's going to be very difficult for them 0:10:08.000 --> 0:10:09.520 to make progress here. And I will just say this 0:10:09.559 --> 0:10:11.600 about their GDP numbers. You know how they get those 0:10:11.640 --> 0:10:15.080 GDP numbers. They revise the previous years. So the way 0:10:15.120 --> 0:10:17.200 you can see what's going on is you can look 0:10:17.200 --> 0:10:20.520 at China GDP as a percent of US GDP, and 0:10:20.559 --> 0:10:24.040 you can look at that ratio and that continues to 0:10:24.679 --> 0:10:28.160 go down, and so they are growing at a slower 0:10:28.160 --> 0:10:29.240 pace than they say they are. 0:10:29.440 --> 0:10:31.120 Yeah, it's just extraordinary. 0:10:31.160 --> 0:10:31.439 I don't know. 0:10:31.520 --> 0:10:34.680 Yeah, again, that gives you a great framework comparing it 0:10:34.720 --> 0:10:36.640 to the US and great financial crisis. Let's bring it 0:10:36.679 --> 0:10:39.520 back to here. I mean, we think about the US 0:10:39.640 --> 0:10:41.760 economy and Tom and I We've talked about it with 0:10:41.920 --> 0:10:45.839 various guests on this program. But seemingly the exceptionalism of 0:10:45.880 --> 0:10:49.400 the US economy here relative to China, for example, relative 0:10:49.440 --> 0:10:54.640 to European economies in the UK, maybe is that something 0:10:54.679 --> 0:10:58.800 that can continue the US almost kind of exceptional versus 0:10:58.800 --> 0:10:59.720 other parts of the world. 0:11:00.080 --> 0:11:02.560 Well, and the reason that people are so uncertain about 0:11:02.559 --> 0:11:05.319 this is because we don't fully understand productivity. 0:11:05.679 --> 0:11:05.760 Right. 0:11:05.840 --> 0:11:09.200 If we understood productivity, you would have governments adding a 0:11:09.280 --> 0:11:12.760 cup of capital investment and a third of a cup 0:11:12.840 --> 0:11:16.400 of R and D investment, and sprinkle on some education 0:11:16.760 --> 0:11:21.000 and upskilling, and then voil, you'd have this productivity growth. Right, 0:11:21.080 --> 0:11:24.440 So we're in this productivity surge. The question is how 0:11:24.480 --> 0:11:26.840 long will it last and what is underpinning it? And 0:11:26.880 --> 0:11:30.360 we see a number of things underpinning it. So just 0:11:30.440 --> 0:11:35.400 the healing of supply chains helped reduce sand in the gears. 0:11:35.760 --> 0:11:39.360 Then you have people resorting all through the pandemic into 0:11:39.440 --> 0:11:42.360 jobs that were better fits for them. That improves productivity. 0:11:42.640 --> 0:11:44.480 And on the flip side, now you have people staying 0:11:44.480 --> 0:11:45.280 at jobs longer. 0:11:45.760 --> 0:11:47.559 You and I tell you, she gave me a dissertation 0:11:47.640 --> 0:11:49.319 last time. I learned more from her than I learned 0:11:49.360 --> 0:11:50.680 from the Secretary of Commerce. 0:11:51.080 --> 0:11:52.000 Cut to the chase. 0:11:52.160 --> 0:11:56.120 You and Diane Swank have a fabulous holistic view of 0:11:56.160 --> 0:11:59.959 the economy. If we get a productivity growth to steal 0:12:00.120 --> 0:12:02.000 from the former president, is. 0:12:01.960 --> 0:12:03.439 It morning in America? 0:12:03.640 --> 0:12:03.880 Yes? 0:12:05.160 --> 0:12:07.240 Why does so many of our listeners say no? 0:12:08.360 --> 0:12:11.400 You know, it's it's hard to see it when you're 0:12:11.400 --> 0:12:14.760 in the middle of it, I think, And you know, 0:12:14.960 --> 0:12:17.439 there's also a great deal of uncertainty right now, right 0:12:17.600 --> 0:12:20.040 people don't People don't know. Am I going to lose 0:12:20.080 --> 0:12:23.280 my job because of AI? We You know, you look 0:12:23.320 --> 0:12:25.680 at the deep fakes that are out there. It's becoming 0:12:25.760 --> 0:12:28.840 harder to know what to trust, right And was it 0:12:28.880 --> 0:12:31.600 Warren Buffett who said that trust is a really powerful 0:12:31.920 --> 0:12:33.200 I'm probably misquoting him. 0:12:33.080 --> 0:12:36.120 But you know, it's okay, You're allowed to do that. 0:12:36.720 --> 0:12:40.120 It was either Munger or Buffett who said that trust 0:12:40.160 --> 0:12:42.240 is the most powerful force in the universe. Right, and 0:12:42.280 --> 0:12:46.160 so we're in a low trust environment and that to 0:12:46.200 --> 0:12:48.199 me is the biggest risk to the economy. 0:12:48.800 --> 0:12:50.400 How about this labor economy. We're going to get a 0:12:50.440 --> 0:12:53.360 big print here on Friday. For a lot of folks, 0:12:53.360 --> 0:12:56.280 including myself, I'm just kind of surprised that the resilience 0:12:56.280 --> 0:12:59.200 of the US labor market isn't real. 0:12:59.280 --> 0:13:00.720 Is it as strong as it appears to be. 0:13:01.160 --> 0:13:03.160 Yeah, that's a great question. So one of the things 0:13:03.160 --> 0:13:06.400 we do at micro policy perspectives is we do earning 0:13:06.480 --> 0:13:09.960 scraping and look at what companies are saying about hiring 0:13:10.000 --> 0:13:13.840 and firing intentions. So what we see is the companies 0:13:14.120 --> 0:13:18.000 while they're hiring less and intention to lay people off 0:13:18.040 --> 0:13:21.800 has gone up slightly. You do see companies continue to 0:13:21.920 --> 0:13:24.679 laborhoard and the way that they're doing this is they 0:13:24.679 --> 0:13:28.440 are reducing hours work, right. So in reality, what that 0:13:28.480 --> 0:13:31.880 does is it reduces total income, which reduces spending power. 0:13:31.960 --> 0:13:35.240 So it softens the economy. But people don't lose their jobs, 0:13:36.200 --> 0:13:37.640 and that's an important factor. 0:13:38.080 --> 0:13:40.240 Are you working less time? I'm not working any less. 0:13:40.360 --> 0:13:43.480 No, I we talked about this last you can see 0:13:43.720 --> 0:13:45.920 you see she put, I had a Martine or two. 0:13:46.280 --> 0:13:49.400 So you know we're talking to constants about this last night. 0:13:49.880 --> 0:13:52.720 We're all working harder than we've ever worked before. And 0:13:52.760 --> 0:13:55.560 I think part of is a digital thing. Like you know, 0:13:55.600 --> 0:13:57.680 I'm working all weekend because boom, it's right there on 0:13:57.720 --> 0:14:00.280 your screen or you know, I'm on the after I'm 0:14:00.320 --> 0:14:03.760 trying to pretend I'm you know, being good and I'm 0:14:03.760 --> 0:14:06.920 on my phone worried about you know, stochastic movements in 0:14:07.000 --> 0:14:10.080 the market or whatever. Conston, thank you so much, Thank you, 0:14:10.200 --> 0:14:12.080 thank you for that perspective off what you and I 0:14:12.160 --> 0:14:14.439 saw at the console and Foreign Relations. 0:14:18.960 --> 0:14:23.840 Meghan Robson Joints is US credit strategy at BNP Pariba. Megan, 0:14:24.080 --> 0:14:27.600 you know, in terms of credit here, you know I'm 0:14:27.680 --> 0:14:30.120 not buying a recession, so I think I can take 0:14:30.160 --> 0:14:34.400 some credit risk here. Where do you send me so well? 0:14:34.400 --> 0:14:36.400 First of all, thank you for having me so I 0:14:36.480 --> 0:14:39.080 you know, we completely agree with what you just said. 0:14:39.160 --> 0:14:43.200 Downside risks look a lot lower and continue to diminish 0:14:43.280 --> 0:14:46.680 especially in the high old space where you've seen issuers 0:14:46.720 --> 0:14:52.080 chip away at refinancing walls, and since October borrowing yields 0:14:52.200 --> 0:14:55.000 have come down, so it means the penalty to refi 0:14:55.480 --> 0:14:58.960 has come down. So within the leverage finance space, we 0:14:59.040 --> 0:15:01.760 do like taking some credit risks, so single bees we 0:15:02.120 --> 0:15:05.120 think look attractive. We're more selective on triple c's, but 0:15:05.120 --> 0:15:07.480 there definitely are some sectors and names where we like 0:15:07.600 --> 0:15:10.960 to add there. And then also you know, with fewer 0:15:11.040 --> 0:15:14.040 rate cuts, you can look to the double B loan 0:15:14.080 --> 0:15:17.400 space to offer a pickup and carry where you have 0:15:17.440 --> 0:15:20.560 a yield advantage of about one hundred basis points relative 0:15:20.680 --> 0:15:22.640 to fixed rate high yield at the moment. 0:15:22.880 --> 0:15:24.960 So I mean, I have to admit, Megan, I was 0:15:24.960 --> 0:15:28.800 surprised that in last year twenty twenty three, that US 0:15:28.880 --> 0:15:32.040 high yield was the place to really make your money 0:15:32.080 --> 0:15:33.760 in the fixed income space. Last year, with all the 0:15:33.800 --> 0:15:37.200 talk of a recession around everybody's corner, high yield was 0:15:37.200 --> 0:15:40.080 the place to be. So is that I can still 0:15:40.120 --> 0:15:41.720 go on that that far out on the risk curve. 0:15:43.360 --> 0:15:46.400 So we do think you're The argument for owning high 0:15:46.440 --> 0:15:49.000 yield and credit right now is really more of a 0:15:49.040 --> 0:15:51.480 carry argument, So we don't see a lot of We 0:15:51.480 --> 0:15:54.000 don't see a lot of spread upside from here. In fact, 0:15:54.000 --> 0:15:56.640 our target spread target for the end of the year 0:15:56.840 --> 0:15:59.680 is a bit wider from these levels. But we do 0:15:59.720 --> 0:16:03.520 think spreads widen. It's a good opportunity for investors to 0:16:03.600 --> 0:16:06.400 add to risk, sort of by the dip, if you will. 0:16:06.880 --> 0:16:10.200 And the argument for carry here for credit here is 0:16:10.440 --> 0:16:13.200 definitely more of a carry one rather than spreads tightening. 0:16:13.400 --> 0:16:16.960 Well, let's talk about that because Bramo one on one, 0:16:17.080 --> 0:16:19.480 Lisa Bramo, it's would say spreads are in I mean, 0:16:19.520 --> 0:16:22.720 that's all there is definance, folks. If you've got corporate 0:16:22.800 --> 0:16:26.360 bonds and they have a yield of say six in 0:16:26.800 --> 0:16:30.520 Megan Robson's full faith and Credit world is four, and 0:16:30.560 --> 0:16:33.520 then the yield comes from six into five, the spread 0:16:33.560 --> 0:16:36.160 goes from two percent to one percent, and from two 0:16:36.240 --> 0:16:39.880 hundred basis points to one hundred basis points. Where are 0:16:40.440 --> 0:16:43.480 spreads right now, Megan? Are they absurdly tight? 0:16:45.560 --> 0:16:48.920 So we think they're you know, historically on a percentile basis, 0:16:49.200 --> 0:16:51.960 spreads are absolutely trading tight. So look at the investment 0:16:52.000 --> 0:16:54.800 grade market. Over the last month or so, we've been 0:16:54.840 --> 0:16:58.480 trading at ninety to ninety five basis points, so you know, 0:16:58.680 --> 0:17:02.080 higher quality companies giving you some spread pick up relative 0:17:02.120 --> 0:17:05.600 to treasuries high yield. We're trading at about three hundred 0:17:05.640 --> 0:17:08.800 to three ten over. That's been the range over the 0:17:08.880 --> 0:17:10.720 last over the last month or so. 0:17:11.160 --> 0:17:14.560 I had this discussion last night Megan sas hours in here. 0:17:14.720 --> 0:17:16.240 Elboy, you know Paul. 0:17:16.160 --> 0:17:20.760 Smart, he's out of control, he is, Meghan, should our 0:17:20.800 --> 0:17:25.040 audience be buying triple C paper Isn't that like telling 0:17:25.080 --> 0:17:27.440 somebody to buy, you know, some silver mine off the 0:17:27.520 --> 0:17:28.560 Vancouver Index. 0:17:30.440 --> 0:17:34.000 So we're not recommending. We're not recommending triple c's at 0:17:34.040 --> 0:17:37.439 this point. And I think that it's more prudent if 0:17:37.440 --> 0:17:39.879 you do want to add into hygeld risk single bees. 0:17:40.040 --> 0:17:42.000 It's a place where you can still get a bit 0:17:42.040 --> 0:17:44.560 of a pickup and carry, but without really taking a 0:17:44.560 --> 0:17:47.399 lot of that risk. And Tom to your point, Triple 0:17:47.440 --> 0:17:50.520 C's have already tightened a lot to start the year, 0:17:50.640 --> 0:17:53.000 so I think the trade to add to triple c's 0:17:53.040 --> 0:17:57.160 has already played out, and at these levels trading pretty tight. 0:17:57.240 --> 0:18:00.320 I mean, you're at a wicked conservative French bank knowing 0:18:00.359 --> 0:18:03.960 me a B rated single B rated bond is a 0:18:04.000 --> 0:18:06.119 speculation or an investment. 0:18:07.960 --> 0:18:10.119 So I think in the in the high yield market 0:18:10.240 --> 0:18:14.359 where it is fixed rate and issuers have chipped away 0:18:14.640 --> 0:18:17.280 and brought down their maturities for this year, I think 0:18:17.280 --> 0:18:20.840 it's I think it's a prudent investment, lower volatility. But 0:18:21.040 --> 0:18:23.520 in the in the loan space, I would agree with you, 0:18:23.560 --> 0:18:27.520 where you have floating rate coupons. Continued debate about whether 0:18:27.640 --> 0:18:31.320 or not we actually get the rate cuts that consensus expects. 0:18:31.359 --> 0:18:34.959 I think their single bees are are much riskier. Where 0:18:35.040 --> 0:18:38.320 you have interest coverage is hovering around just one time, 0:18:38.520 --> 0:18:42.560 so given floating rates are higher, the fundamentals, I think 0:18:42.640 --> 0:18:44.960 much more vulnerable on the single bee long side. 0:18:45.000 --> 0:18:46.840 Well, did you see the banner Ari put out on 0:18:46.880 --> 0:18:49.640 YouTube Tom Keane recommends triple C bonds. 0:18:50.240 --> 0:18:53.000 You're getting me into trouble in there. In trouble, you know, 0:18:53.000 --> 0:18:55.000 I have another tang mimosa. 0:18:55.080 --> 0:18:59.160 Okay, hey Megan, what are the sectors that you guys 0:18:59.320 --> 0:19:01.199 like here in in the credit space. 0:19:03.040 --> 0:19:08.159 So in an investment grade, we're recommending sectors that we 0:19:08.359 --> 0:19:11.119 see as de leveraging this year. So there is this 0:19:11.119 --> 0:19:13.120 this theme we think will be important over the next 0:19:13.200 --> 0:19:17.359 year or two where companies are incentivized to pay down debt, 0:19:17.359 --> 0:19:21.400 and you saw that last quarter, particularly in investment grade healthcare, 0:19:21.720 --> 0:19:25.439 investment grade telecom sectors where more defensive, they have a 0:19:25.480 --> 0:19:28.920 lot of free cash flow and are actively paying down debt. 0:19:29.000 --> 0:19:31.919 So that's a positive grand story. And then and then 0:19:31.920 --> 0:19:35.439 in the highield space, we're recommending in overweight to media. 0:19:35.560 --> 0:19:36.160 So nice. 0:19:36.440 --> 0:19:39.440 This is based on the election, you know, so we 0:19:39.440 --> 0:19:44.040 we're forecasting. We are forecasting a pickup in election advertising 0:19:44.080 --> 0:19:48.240 spend relative to the last election cycle. So you've already 0:19:48.320 --> 0:19:52.000 seen a lot of fundraising from both political parties and 0:19:52.640 --> 0:19:54.560 likely that will be put to work. 0:19:54.640 --> 0:19:56.960 We're going to end the interview, but Megan, we can't 0:19:57.000 --> 0:19:59.159 seen you don't have a tantrument if we don't do this, 0:19:59.520 --> 0:20:00.239 are you on? 0:20:00.320 --> 0:20:01.119 Paul Sweeney? 0:20:01.600 --> 0:20:06.000 You can buy the debt sixty three percent of Warner 0:20:06.040 --> 0:20:07.960 Brothers Discovery. 0:20:08.440 --> 0:20:09.760 For total return. 0:20:11.760 --> 0:20:14.480 So we're of course with the media not not a 0:20:14.520 --> 0:20:18.200 wholesale buy on every sector. But look in the highield space, 0:20:18.240 --> 0:20:20.920 there's a lot of a lot of credits that have 0:20:21.119 --> 0:20:24.840 bottomed fundamentals last year and are absolutely improving in terms 0:20:24.880 --> 0:20:27.800 of their free cash flow. They have locked in more 0:20:28.160 --> 0:20:31.959 ad spend and you can see the leverages is definitely 0:20:32.000 --> 0:20:35.600 manageable relative to history, and so we stand by the 0:20:35.640 --> 0:20:36.520 high yeld media pick. 0:20:36.640 --> 0:20:38.000 Yeah, I mean that's kind of what we've heard in 0:20:38.000 --> 0:20:40.959 the past time high yield credit, I mean a media 0:20:41.000 --> 0:20:43.680 credit a lot better than media equity. So that's kind 0:20:43.680 --> 0:20:45.560 of what we hear. Megan Robson, thanks so much for 0:20:45.640 --> 0:20:49.040 joining us, Megan Robson, US Credit Strategy BNP Parry Bowbi, 0:20:49.080 --> 0:20:50.800 thank you forgetting your thoughts there, and. 0:21:01.600 --> 0:21:03.600 Let us look at the front pages as we do 0:21:03.680 --> 0:21:06.159 that around the world. She's never seen a Seltzer. 0:21:06.280 --> 0:21:10.120