1 00:00:03,360 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 2 00:00:13,480 --> 00:00:17,560 Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:32,720 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg I 5 00:00:32,760 --> 00:00:37,159 Speaker 1: wonder if Gabrielle Gabriella would want to dream baroness this 6 00:00:37,280 --> 00:00:40,640 Speaker 1: week so you're better prepared to talk to Gabriella. Not 7 00:00:40,680 --> 00:00:44,200 Speaker 1: necessarily nice big photograph of Lloyd Blank. Find of Goldman 8 00:00:44,240 --> 00:00:48,520 Speaker 1: sax On the Barons. Uh. Gabriella Santos is the vice 9 00:00:48,560 --> 00:00:53,199 Speaker 1: president for JP Morgan and our global market strategist for 10 00:00:53,360 --> 00:00:56,040 Speaker 1: JP Morgan Asset Management. Gabriella, thank you very much for 11 00:00:56,080 --> 00:00:59,480 Speaker 1: being here. Good morning. You know, as I was mentioning 12 00:00:59,480 --> 00:01:02,840 Speaker 1: to Tom, looked like there was a crush people who 13 00:01:02,960 --> 00:01:06,800 Speaker 1: really wanted to be in that room, And I'm wondering 14 00:01:06,959 --> 00:01:10,600 Speaker 1: if you felt that there may be obviously you were 15 00:01:10,640 --> 00:01:14,880 Speaker 1: not there, if there was a change in sentiment because 16 00:01:14,920 --> 00:01:18,360 Speaker 1: of the remarks that were televised and broadcast by the 17 00:01:18,400 --> 00:01:21,280 Speaker 1: President on that Friday, and whether that has had any 18 00:01:21,360 --> 00:01:24,880 Speaker 1: effect in your mind about investor psychology. So if we 19 00:01:24,920 --> 00:01:27,800 Speaker 1: think about how investors are feeling right now. They're feeling 20 00:01:28,240 --> 00:01:32,120 Speaker 1: quite good about the global economy. They're feeling like we're 21 00:01:32,120 --> 00:01:36,479 Speaker 1: finally on solid footing, but they're also wondering what could 22 00:01:36,520 --> 00:01:41,400 Speaker 1: disrupt that balance. And so what I think UH investors 23 00:01:41,400 --> 00:01:45,160 Speaker 1: were looking for in that speech was any sort of 24 00:01:45,760 --> 00:01:50,440 Speaker 1: UH sign or inkling really around trade policy, which is 25 00:01:50,560 --> 00:01:54,000 Speaker 1: seen as perhaps one of those risks that could disrupt 26 00:01:54,000 --> 00:01:57,200 Speaker 1: this really good environment we're seeing for the global economy. 27 00:01:57,240 --> 00:02:00,200 Speaker 1: And in that sense, I do think it was is 28 00:02:00,680 --> 00:02:05,120 Speaker 1: well received. Uh. It was seen as a pragmatic UH 29 00:02:05,280 --> 00:02:09,639 Speaker 1: speech by someone who doesn't want to disrupt that balance 30 00:02:09,680 --> 00:02:11,640 Speaker 1: for the U. S and global economy. But I do 31 00:02:11,720 --> 00:02:14,760 Speaker 1: still think that there are some trade anxieties lingering in 32 00:02:14,800 --> 00:02:17,760 Speaker 1: the back of investors minds. Well, certainly we've got the 33 00:02:17,840 --> 00:02:21,240 Speaker 1: last meeting, I think today in Montreal of the last 34 00:02:21,280 --> 00:02:25,880 Speaker 1: meeting for this round of NAFTA renegotiation talks. Having said 35 00:02:25,919 --> 00:02:29,320 Speaker 1: that we don't know what's going to happen, UH, let's 36 00:02:29,360 --> 00:02:33,680 Speaker 1: say things stay the same status quo Latin America specifically, 37 00:02:33,800 --> 00:02:36,280 Speaker 1: I want to get your thoughts investing in Latin America. 38 00:02:36,800 --> 00:02:39,080 Speaker 1: I smile when you say that, because it's it's really 39 00:02:39,120 --> 00:02:42,280 Speaker 1: the first time, I would say, in six seven years 40 00:02:42,680 --> 00:02:47,240 Speaker 1: where Latin America is actually a positive story, right, so 41 00:02:47,280 --> 00:02:51,200 Speaker 1: we do see growth turning around. Latin America is likely 42 00:02:51,280 --> 00:02:53,959 Speaker 1: to grow at potential this year for the first time 43 00:02:54,000 --> 00:02:56,680 Speaker 1: in those six seven We've got rising commodity prices. That's 44 00:02:56,720 --> 00:02:59,679 Speaker 1: got to be good for countries that mind copper for 45 00:02:59,720 --> 00:03:03,840 Speaker 1: Exa flore Brazil getting past their petrobrass scandal. Yes, so 46 00:03:04,080 --> 00:03:07,680 Speaker 1: rising or just stable commodity prices are definitely a support 47 00:03:07,720 --> 00:03:10,160 Speaker 1: for the region. But even more than that, I think 48 00:03:10,160 --> 00:03:12,840 Speaker 1: it's about a lot of countries having really hit rock 49 00:03:12,880 --> 00:03:16,160 Speaker 1: bottom when it comes to economic growth, and Brazil really 50 00:03:16,160 --> 00:03:19,200 Speaker 1: comes to the forefront. Uh So it's about a cyclical 51 00:03:19,240 --> 00:03:23,520 Speaker 1: improvement and also the perspective of a structural improvement with 52 00:03:23,919 --> 00:03:28,280 Speaker 1: several changes in administrations towards a more business family stand Gabriela. 53 00:03:28,360 --> 00:03:30,720 Speaker 1: We spoke with a finance maner of Indonesia today, a 54 00:03:30,919 --> 00:03:37,520 Speaker 1: lengthy conversation with Mr Maliani Um. Indonesia's maybe a textbook 55 00:03:37,640 --> 00:03:42,120 Speaker 1: of the complexity we don't see as equity investors. It's 56 00:03:42,120 --> 00:03:44,880 Speaker 1: not just about buying a telephone company anymore. Is that 57 00:03:45,240 --> 00:03:49,320 Speaker 1: how do you go about acquiring shares to make capital 58 00:03:49,360 --> 00:03:54,560 Speaker 1: gain in these complex stories, these complex nations. So, I mean, 59 00:03:54,720 --> 00:03:57,360 Speaker 1: if you think about all of the different puzzle pieces 60 00:03:57,400 --> 00:04:00,520 Speaker 1: that make up this term that we use of emerging markets, 61 00:04:00,920 --> 00:04:03,640 Speaker 1: it's really very very complex, right, And and so the 62 00:04:03,680 --> 00:04:06,680 Speaker 1: way that we approach emerging markets is we have to 63 00:04:06,760 --> 00:04:10,000 Speaker 1: have people on the ground, right, people who truly understand 64 00:04:10,080 --> 00:04:15,320 Speaker 1: the dynamics in these economies, the dynamics and the political sphere, 65 00:04:15,360 --> 00:04:18,279 Speaker 1: and frankly just the dynamics at the company level. Right. 66 00:04:18,680 --> 00:04:20,800 Speaker 1: So the way that we think about emerging markets is 67 00:04:20,839 --> 00:04:23,800 Speaker 1: really the most important thing when we look at the 68 00:04:23,800 --> 00:04:26,719 Speaker 1: long run is earnings, right, and that's the same for 69 00:04:26,800 --> 00:04:29,760 Speaker 1: emerging markets as well. So we have to have a 70 00:04:29,920 --> 00:04:34,200 Speaker 1: good feel for how earnings growth is looking in a 71 00:04:34,279 --> 00:04:37,200 Speaker 1: variety of companies countries. Just wants to know what to 72 00:04:37,279 --> 00:04:39,480 Speaker 1: buy or what to sell. Like should you be going 73 00:04:39,520 --> 00:04:41,760 Speaker 1: into the E t F E E M, for example, 74 00:04:41,839 --> 00:04:46,359 Speaker 1: what t H B I shares I shares CI emerging 75 00:04:46,400 --> 00:04:48,960 Speaker 1: markets CTF. So I would say that overall it's a 76 00:04:49,000 --> 00:04:52,760 Speaker 1: positive environment for emerging markets as a whole. Right, So 77 00:04:52,880 --> 00:04:56,080 Speaker 1: if passive is your only approach, that that's fine. But 78 00:04:56,440 --> 00:04:59,720 Speaker 1: if you are able to take the active approach. UM, 79 00:04:59,800 --> 00:05:02,120 Speaker 1: the there's definitely value to be had. And if you 80 00:05:02,160 --> 00:05:05,960 Speaker 1: look at the correlations between countries and emerging markets, they're 81 00:05:05,960 --> 00:05:08,680 Speaker 1: actually pretty low. So you are getting a bang for 82 00:05:08,720 --> 00:05:12,720 Speaker 1: your book for actually picking countries, picking stocks, and really 83 00:05:12,760 --> 00:05:15,520 Speaker 1: having that on the ground field. Give us a country. 84 00:05:15,640 --> 00:05:19,320 Speaker 1: So as we were mentioning Latin America, I feel quite 85 00:05:19,320 --> 00:05:22,320 Speaker 1: optimistic about um and it's not just because I'm Brazilian, 86 00:05:22,400 --> 00:05:24,440 Speaker 1: but I do think that there's a lot to be 87 00:05:24,480 --> 00:05:28,640 Speaker 1: said about Brazil this year with growth finally really picking 88 00:05:28,720 --> 00:05:31,440 Speaker 1: up and as a result, earnings growth picking up as well. 89 00:05:31,520 --> 00:05:33,760 Speaker 1: Where's week dollar play into that? If there's some monution 90 00:05:33,800 --> 00:05:37,400 Speaker 1: gets his way, even if it's eventually adjusted as it was. 91 00:05:38,320 --> 00:05:41,640 Speaker 1: Does does week dollar play into uh? Does week dollar 92 00:05:41,760 --> 00:05:45,320 Speaker 1: push against gains in those Latin American countries? No? Week 93 00:05:45,360 --> 00:05:48,600 Speaker 1: dollar is is really great actually for emerging markets. UM. 94 00:05:48,760 --> 00:05:51,719 Speaker 1: So if we think about just two main ways, right, 95 00:05:51,760 --> 00:05:56,000 Speaker 1: So a week or dollar relieve some pressure on inflation 96 00:05:56,240 --> 00:05:58,560 Speaker 1: in a lot of these countries. That allows their central 97 00:05:58,600 --> 00:06:02,120 Speaker 1: banks to keep rates pretty low, So that's helpful. That's 98 00:06:02,120 --> 00:06:06,839 Speaker 1: a change from with the strong dollar. And then lastly, 99 00:06:07,040 --> 00:06:09,479 Speaker 1: if you have a weaker dollar, it's also about the 100 00:06:09,520 --> 00:06:12,120 Speaker 1: signal it sends. It sends the signal that growth is 101 00:06:12,160 --> 00:06:16,400 Speaker 1: better elsewhere, that investors have a good risk appetite for 102 00:06:16,560 --> 00:06:19,360 Speaker 1: countries outside of the US. So all those factors actually 103 00:06:19,360 --> 00:06:22,080 Speaker 1: help emerging markets. A week dollar is a good thing. Okay, 104 00:06:22,080 --> 00:06:24,480 Speaker 1: So the weak dollar is a good thing. And if 105 00:06:24,600 --> 00:06:28,920 Speaker 1: you don't necessarily feel constrained to become a passive investor, 106 00:06:29,040 --> 00:06:32,000 Speaker 1: is there any industry group or any specific area that 107 00:06:32,080 --> 00:06:34,479 Speaker 1: you would recommend, Because I know that there are elections 108 00:06:34,520 --> 00:06:39,560 Speaker 1: coming up all over Latin America this year, So emerging 109 00:06:39,640 --> 00:06:44,440 Speaker 1: markets has beneath the surface, uh shifted shapes over the 110 00:06:44,440 --> 00:06:48,560 Speaker 1: past couple of years. It started rebounding in was purely 111 00:06:48,600 --> 00:06:51,800 Speaker 1: a commodity story, so materials, energy, and that was it. 112 00:06:52,080 --> 00:06:54,520 Speaker 1: We've moved on from that. Last year it was all 113 00:06:54,560 --> 00:06:57,320 Speaker 1: a story about technology and so Asia is the biggest 114 00:06:57,839 --> 00:07:01,040 Speaker 1: gainer there. I think this year it's a difference story. Um, 115 00:07:01,080 --> 00:07:04,440 Speaker 1: it's really two stories. It's about the improvement in domestic demand. 116 00:07:04,640 --> 00:07:07,200 Speaker 1: So when we talk about Brazil turning around, the consumer 117 00:07:07,240 --> 00:07:11,080 Speaker 1: coming back, So that would argue for things like consumer names, 118 00:07:11,120 --> 00:07:14,400 Speaker 1: consumer discretionary as well as financials. And I think the 119 00:07:14,400 --> 00:07:18,840 Speaker 1: other second bigger story is also about big export powerhouses 120 00:07:18,920 --> 00:07:23,240 Speaker 1: benefiting from the improvement in industrial production and capex and 121 00:07:23,280 --> 00:07:26,240 Speaker 1: developed markets, and that would argue for things like industrials 122 00:07:26,240 --> 00:07:28,880 Speaker 1: in Asia. Well it seems as so Boeing not to 123 00:07:28,920 --> 00:07:32,320 Speaker 1: mention Asia for your second, but Boeing is certainly believing 124 00:07:32,360 --> 00:07:35,000 Speaker 1: in part of this because of the ongoing negotiations to 125 00:07:35,080 --> 00:07:39,560 Speaker 1: acquire a part or all of em Air, the aircraft 126 00:07:39,560 --> 00:07:43,360 Speaker 1: manufacturer in Brasila, Brazil. So that's still I would say 127 00:07:43,400 --> 00:07:47,840 Speaker 1: there's national trophy, right, so there are some political considerations 128 00:07:47,880 --> 00:07:50,800 Speaker 1: there the pres and this this is worse than talking 129 00:07:50,800 --> 00:07:54,120 Speaker 1: about blockchain with or bitcoin. I didn't say a thing 130 00:07:54,200 --> 00:08:02,160 Speaker 1: about bitcoin, did not going there. Gabriela Santos, Thank god, 131 00:08:02,160 --> 00:08:05,560 Speaker 1: we're out of time with JP. Morgan Asset Management. Thank 132 00:08:05,600 --> 00:08:21,720 Speaker 1: you so much. Whether it's down Dana Telsey, that tells 133 00:08:21,720 --> 00:08:24,320 Speaker 1: the advisory group. Dana, thank you for joining us. I'm 134 00:08:24,320 --> 00:08:28,240 Speaker 1: Bloomberg Radio, Bloomberg Television earlier where we dived into luxury. 135 00:08:28,600 --> 00:08:31,520 Speaker 1: Let's dive right now to the death of retail. Retail 136 00:08:31,560 --> 00:08:34,959 Speaker 1: is terrible. All the charts are ugly, except in junieh 137 00:08:35,160 --> 00:08:38,920 Speaker 1: of last year, they all started to vault higher in 138 00:08:39,040 --> 00:08:41,920 Speaker 1: share price. Macy's up. Maybe it's a big thing up 139 00:08:41,960 --> 00:08:44,800 Speaker 1: a little bit, but some of these stocks have really moved. 140 00:08:44,880 --> 00:08:47,920 Speaker 1: Let's go back. Why did retails start to do better 141 00:08:48,360 --> 00:08:51,680 Speaker 1: summer of last year? The group and Tom thank you 142 00:08:51,760 --> 00:08:54,559 Speaker 1: very much for having me exactly right. The group bottomed 143 00:08:54,559 --> 00:08:57,160 Speaker 1: in August and in mid November it improved with the 144 00:08:57,160 --> 00:09:00,320 Speaker 1: initial reads that this that the holiday see in the 145 00:09:00,320 --> 00:09:03,600 Speaker 1: fourth quarter outlook was off to a solid start, and 146 00:09:03,640 --> 00:09:07,000 Speaker 1: that was followed by tax reform becoming a reality. And 147 00:09:07,040 --> 00:09:11,040 Speaker 1: then from their keep it from mid August to mid November, 148 00:09:11,080 --> 00:09:14,120 Speaker 1: our stocks are up six eight percent versus the market, 149 00:09:14,200 --> 00:09:17,280 Speaker 1: up just under five and then from mid November until 150 00:09:17,320 --> 00:09:21,200 Speaker 1: now the stocks are up almost sev versus the market 151 00:09:21,280 --> 00:09:26,160 Speaker 1: up ten percent. And frankly, valuations on current consensual consensus 152 00:09:26,200 --> 00:09:29,000 Speaker 1: are certainly reasonable and earnings in our group are going 153 00:09:29,080 --> 00:09:32,120 Speaker 1: to benefit from lower tax rates, so you're still going 154 00:09:32,160 --> 00:09:35,640 Speaker 1: to have some momentum. With the easy comparisons, I mean 155 00:09:35,679 --> 00:09:38,400 Speaker 1: within this is the y up and is it at 156 00:09:38,400 --> 00:09:41,360 Speaker 1: the top line revenue in that crazy mix of unit 157 00:09:41,400 --> 00:09:44,800 Speaker 1: and price, or is it down the income statement where 158 00:09:44,800 --> 00:09:47,320 Speaker 1: they're finally going to maybe generate some cash. Which is 159 00:09:47,360 --> 00:09:49,920 Speaker 1: it at the top or the middle of the income statement. 160 00:09:50,040 --> 00:09:52,520 Speaker 1: It's both. I've got the top because there's a stronger 161 00:09:52,600 --> 00:09:55,600 Speaker 1: response to the fashion cycle. I got I have in 162 00:09:55,640 --> 00:09:58,920 Speaker 1: the middle. It's better position store fleets, it's improved the 163 00:09:59,000 --> 00:10:02,440 Speaker 1: commerce capability these I've got a macro. I have hir 164 00:10:02,600 --> 00:10:08,120 Speaker 1: income consumers and lower income consumers, each having more disposable dollars. 165 00:10:08,400 --> 00:10:11,240 Speaker 1: And I don't have the election hangover like you had 166 00:10:11,320 --> 00:10:16,119 Speaker 1: last year, Dana pim Fox. Here are you on Instagram 167 00:10:16,120 --> 00:10:18,880 Speaker 1: Buy any chance? Not right now? Okay? But you are 168 00:10:18,920 --> 00:10:21,600 Speaker 1: a member, right okay? So you're one of eight hundred 169 00:10:21,640 --> 00:10:25,960 Speaker 1: million users. Of those users are actually connected to a 170 00:10:26,120 --> 00:10:30,760 Speaker 1: business by choice. And where I'm going with this is 171 00:10:30,800 --> 00:10:34,240 Speaker 1: that Facebook, of course, the parent company of Instagram, now 172 00:10:34,320 --> 00:10:40,120 Speaker 1: has agreements to take data from in store UH positions 173 00:10:40,240 --> 00:10:43,200 Speaker 1: of customers. In other words, they can geo locate you 174 00:10:43,880 --> 00:10:47,160 Speaker 1: in a store. They then take the data from the 175 00:10:47,400 --> 00:10:52,920 Speaker 1: store and combine that with your online activity. Is that 176 00:10:53,200 --> 00:10:56,480 Speaker 1: something that you're seeing as being productive not only for 177 00:10:56,640 --> 00:11:00,800 Speaker 1: obviously Facebook, but for the stores themselves. You see more 178 00:11:01,120 --> 00:11:05,080 Speaker 1: focus on knowing more about your customer, whether it's from 179 00:11:05,200 --> 00:11:09,360 Speaker 1: social media, whether it's from CRM systems, whether it's from 180 00:11:09,440 --> 00:11:13,040 Speaker 1: enhanced loyalty programs. Instead of the customer just going to 181 00:11:13,080 --> 00:11:15,960 Speaker 1: the store, the store is coming to the customer. But 182 00:11:16,040 --> 00:11:19,000 Speaker 1: you need to marry this activity of buying with the 183 00:11:19,040 --> 00:11:21,920 Speaker 1: activity of doing. And what we're seeing is we're seeing 184 00:11:21,920 --> 00:11:25,760 Speaker 1: experiential retail come to the forefront. Well, the reason I 185 00:11:25,800 --> 00:11:28,640 Speaker 1: mentioned this all is beriential retail PIM is where your 186 00:11:28,640 --> 00:11:32,800 Speaker 1: will experience. It just means spend more. But think about it. 187 00:11:32,840 --> 00:11:36,000 Speaker 1: You have gyms like Yoga Works, you have beauty salons 188 00:11:36,080 --> 00:11:38,800 Speaker 1: like dry Bar. You have movies which are now wine 189 00:11:38,840 --> 00:11:41,600 Speaker 1: dine and reclined theaters like I Pick. So I have 190 00:11:41,679 --> 00:11:45,880 Speaker 1: a new way that customers are trafficking and center JANEA 191 00:11:45,880 --> 00:11:51,840 Speaker 1: has helped us wine dine and he doesn't even need 192 00:11:51,880 --> 00:11:54,000 Speaker 1: the movie. He just wants to do all three. He 193 00:11:54,000 --> 00:11:56,960 Speaker 1: doesn't you need it all and it happens. Okay. But 194 00:11:57,080 --> 00:12:00,000 Speaker 1: having said that, what I was going with this Instagram 195 00:12:00,000 --> 00:12:03,160 Speaker 1: an online connection is about a third of the content 196 00:12:03,280 --> 00:12:06,559 Speaker 1: that people who use Instagram save you know the new 197 00:12:06,679 --> 00:12:11,880 Speaker 1: save post feature are from business accounts, right, so that 198 00:12:11,920 --> 00:12:14,760 Speaker 1: means they're using it as a wish list of products 199 00:12:14,800 --> 00:12:19,000 Speaker 1: that they may eventually purchase. And as a result, you 200 00:12:19,040 --> 00:12:21,400 Speaker 1: now know that as a merchant and you can help 201 00:12:21,440 --> 00:12:24,360 Speaker 1: them make that purchase in some way exactly. Well, what 202 00:12:24,679 --> 00:12:27,440 Speaker 1: are the things you're seeing is where are companies investing 203 00:12:27,480 --> 00:12:30,760 Speaker 1: their advertising dollars. You've seen a shift going on, and 204 00:12:30,760 --> 00:12:33,760 Speaker 1: the shift for social media and Instagram is what we're 205 00:12:33,760 --> 00:12:37,680 Speaker 1: seeing happen. Dana. One final question, who's battling best against 206 00:12:37,720 --> 00:12:41,240 Speaker 1: the onslaught known as Gucci? Who's like like fighting Gucci 207 00:12:41,320 --> 00:12:43,040 Speaker 1: the best? I mean, you have to think there's a 208 00:12:43,040 --> 00:12:45,560 Speaker 1: couple of companies out there. Have LVMH, who has so 209 00:12:45,640 --> 00:12:48,800 Speaker 1: many brands and so many creative directors. You have PVH 210 00:12:48,880 --> 00:12:52,120 Speaker 1: with Calvin Klein and with Tommy Hilfiger. And let's see 211 00:12:52,120 --> 00:12:55,280 Speaker 1: what caring does given the fact that Gucci, I mean, 212 00:12:55,320 --> 00:12:58,240 Speaker 1: as you said, the momentum is continuing. I think something 213 00:12:58,280 --> 00:13:01,640 Speaker 1: conservative for you, Dana, like the Margaret Leather pump. You 214 00:13:01,679 --> 00:13:04,640 Speaker 1: can't make this up, folks, The Queen Margaret Leather pump 215 00:13:04,679 --> 00:13:10,000 Speaker 1: at Bergdorf one thousand, one fifty dollars. Every home should have, 216 00:13:10,640 --> 00:13:12,960 Speaker 1: well at least the black ones, but maybe even pin 217 00:13:13,080 --> 00:13:15,880 Speaker 1: the pink and the black ones as well. Dana, Telsey, 218 00:13:15,960 --> 00:13:19,040 Speaker 1: thank you so much, greatly appreciate it. With Telsey Advisory 219 00:13:19,040 --> 00:13:31,679 Speaker 1: Group as well. Just the final chapter of his book, 220 00:13:32,600 --> 00:13:35,480 Speaker 1: call It twenty Pages, is probably a good place for 221 00:13:35,520 --> 00:13:39,200 Speaker 1: the President to start a strategy for competing in a 222 00:13:39,240 --> 00:13:44,839 Speaker 1: globalized world. After the Pierceborgan interview Edward Alden. His book 223 00:13:44,880 --> 00:13:48,559 Speaker 1: Failure to Adjust is absolutely phenomenal. It is a dense 224 00:13:49,160 --> 00:13:53,080 Speaker 1: pro read on how Americans got left behind and the 225 00:13:53,080 --> 00:13:56,640 Speaker 1: global economy. Ted Alden, good morning, Um, is you write 226 00:13:56,679 --> 00:14:00,520 Speaker 1: about the startling comments the President made to Mr Morgan 227 00:14:01,559 --> 00:14:04,560 Speaker 1: about Europe. I've had a lot of problems with the 228 00:14:04,600 --> 00:14:08,959 Speaker 1: European Union and may morph into something very big. Um, 229 00:14:09,000 --> 00:14:11,840 Speaker 1: He's gone after people that we usually think of, Why 230 00:14:11,920 --> 00:14:15,120 Speaker 1: go after Europe? Well, I presume the reason he's going 231 00:14:15,160 --> 00:14:17,800 Speaker 1: after Europe is the same reason he's going after Mexico 232 00:14:18,040 --> 00:14:20,520 Speaker 1: and after South Korea and after China, which is the 233 00:14:20,640 --> 00:14:24,440 Speaker 1: large trade surplus that Europe, mostly Germany runs with the 234 00:14:24,520 --> 00:14:26,840 Speaker 1: United States. But it is an odd choice. I mean, 235 00:14:26,880 --> 00:14:29,920 Speaker 1: if you look at where the real challenges on trade lie, 236 00:14:30,040 --> 00:14:33,160 Speaker 1: China looms by far the largest. We could sure use 237 00:14:33,200 --> 00:14:35,200 Speaker 1: the Europeans help on that one. We could use the 238 00:14:35,240 --> 00:14:40,960 Speaker 1: Europeans help, which speaks of maybe multilateral is too strong. Uh, 239 00:14:41,160 --> 00:14:42,880 Speaker 1: some would say hope in prayer. I don't mean to 240 00:14:42,960 --> 00:14:46,960 Speaker 1: give it, but I mean, really the body language that 241 00:14:47,080 --> 00:14:50,360 Speaker 1: Davos was, Okay, we're bilateral, but we're gonna make the rules. 242 00:14:50,960 --> 00:14:53,400 Speaker 1: Is that what he wants with Europe as well? We're bilateral, 243 00:14:53,640 --> 00:14:56,880 Speaker 1: but we make the rules on bree cheese. I don't know. 244 00:14:56,960 --> 00:14:59,280 Speaker 1: It's it's a little puzzling. I mean, you know, the 245 00:14:59,360 --> 00:15:01,480 Speaker 1: chance to make the rules on breeches and it wasn't 246 00:15:01,480 --> 00:15:03,760 Speaker 1: gonna happen even there. But that was the t tip talks, 247 00:15:03,800 --> 00:15:06,360 Speaker 1: and those have been suspended either the Europeans nor this 248 00:15:06,440 --> 00:15:10,120 Speaker 1: administration or particularly eager to move forward to. But I 249 00:15:10,160 --> 00:15:12,200 Speaker 1: would think that there are some at least some lowest 250 00:15:12,240 --> 00:15:16,760 Speaker 1: common denominator possibilities for cooperation and and and that would 251 00:15:16,760 --> 00:15:19,000 Speaker 1: be on China. I mean, European companies are having the 252 00:15:19,080 --> 00:15:22,920 Speaker 1: same problems in China that American companies are having. Um, 253 00:15:22,960 --> 00:15:25,280 Speaker 1: that's a much bigger fish to fry, it seems to 254 00:15:25,360 --> 00:15:27,920 Speaker 1: me than than worrying about Germany's trades are plus with 255 00:15:27,960 --> 00:15:29,640 Speaker 1: the United States, most of which is, you know, kind 256 00:15:29,680 --> 00:15:33,400 Speaker 1: of fairly come by that. Germans are a great manufacturing nation. 257 00:15:33,440 --> 00:15:35,400 Speaker 1: They make really good products. That's kind of the way 258 00:15:35,400 --> 00:15:38,080 Speaker 1: the world's supposed to work on question. Do we have 259 00:15:38,200 --> 00:15:43,160 Speaker 1: a quote unquote excuse me, it's a plague, folks, massive 260 00:15:43,200 --> 00:15:47,560 Speaker 1: trade deficit? Do we have a massive trade deficit with Germany? Well, 261 00:15:47,560 --> 00:15:49,400 Speaker 1: it's I mean it's large, it's you know, in the 262 00:15:49,440 --> 00:15:52,000 Speaker 1: sort of sixty seventy billion dollar range. But if you know, 263 00:15:52,040 --> 00:15:54,640 Speaker 1: if you compare it to the definite of China, which 264 00:15:54,760 --> 00:15:57,360 Speaker 1: over three fifty billion dollars. No, I don't think massive 265 00:15:57,480 --> 00:16:00,720 Speaker 1: is the right word. I think significant. Perhaps I'm running 266 00:16:00,800 --> 00:16:03,840 Speaker 1: based on the title of your book, Failure to Adjust 267 00:16:03,840 --> 00:16:07,080 Speaker 1: how Americans got left behind in the global economy. What 268 00:16:07,120 --> 00:16:10,240 Speaker 1: would be a specific example of something that we would 269 00:16:10,280 --> 00:16:13,600 Speaker 1: see in another country that we don't see here that 270 00:16:13,640 --> 00:16:17,040 Speaker 1: you find that we're left behind? Oh, a whole bunch 271 00:16:17,040 --> 00:16:18,880 Speaker 1: of things. I mean, you look at at the existence 272 00:16:18,920 --> 00:16:22,720 Speaker 1: of apprenticeship programs and and work education experience far more 273 00:16:22,760 --> 00:16:26,080 Speaker 1: prevalent in Europe. You look at their system for supporting 274 00:16:26,160 --> 00:16:29,160 Speaker 1: unemployed workers and getting them back into the job market. 275 00:16:29,200 --> 00:16:32,840 Speaker 1: The average European country spends five or six times what 276 00:16:32,880 --> 00:16:35,160 Speaker 1: we do. Okay, but hang on, hang on right there, okay, 277 00:16:35,160 --> 00:16:37,280 Speaker 1: So hang on right there with unemployment, So why do 278 00:16:37,320 --> 00:16:40,080 Speaker 1: you have chronically high unemployment in a place like Spain. 279 00:16:40,840 --> 00:16:43,040 Speaker 1: Oh well, look, I mean Spain is not, you know, 280 00:16:43,120 --> 00:16:45,360 Speaker 1: particularly the best model here, and there are lots of 281 00:16:45,400 --> 00:16:48,200 Speaker 1: reasons for high unemployment. Um, what I'm saying is that 282 00:16:48,280 --> 00:16:52,280 Speaker 1: if you lose your job in Germany or Denmark, or 283 00:16:52,320 --> 00:16:55,560 Speaker 1: Sweden or most of them. Wait wait wait wait wait 284 00:16:55,560 --> 00:16:57,680 Speaker 1: wait wait. You can't cherry pick this, can you. I mean, 285 00:16:57,680 --> 00:16:59,360 Speaker 1: I'm just saying, Look, if you look at the europe 286 00:16:59,560 --> 00:17:01,520 Speaker 1: you're telling you're saying that the United States has got 287 00:17:01,600 --> 00:17:06,119 Speaker 1: left behind for unemployment benefits. We do have unemployment insurance, 288 00:17:06,760 --> 00:17:10,160 Speaker 1: and you have a completely different mindset when it comes 289 00:17:10,160 --> 00:17:13,399 Speaker 1: to the labor market here because of the effect of unions. Right, 290 00:17:13,560 --> 00:17:16,320 Speaker 1: Unions sit on the boards of most companies in Germany. 291 00:17:16,720 --> 00:17:18,840 Speaker 1: Oh look, I have I would agree that there are 292 00:17:18,920 --> 00:17:22,000 Speaker 1: reasons for the difference. I'm just saying that if you're 293 00:17:22,040 --> 00:17:25,680 Speaker 1: trying to get maximum benefits out of your workforce, retrain 294 00:17:25,760 --> 00:17:27,199 Speaker 1: them for the jobs that are available. You've got six 295 00:17:27,240 --> 00:17:29,760 Speaker 1: million jobs open in the United States right now, and 296 00:17:29,840 --> 00:17:32,840 Speaker 1: manufacturers crying bloody murder because they don't have folks with 297 00:17:32,840 --> 00:17:35,240 Speaker 1: the skills to fill those jobs. And we are doing 298 00:17:35,320 --> 00:17:37,240 Speaker 1: little or nothing as a country to try to meet 299 00:17:37,280 --> 00:17:39,760 Speaker 1: that demand, so you feel that the it's a government's 300 00:17:39,760 --> 00:17:43,040 Speaker 1: responsibility to do that. No, not necessarily. I mean, if 301 00:17:43,080 --> 00:17:45,080 Speaker 1: you look at the Swedish model, it's all run by 302 00:17:45,119 --> 00:17:48,440 Speaker 1: the companies with some cooperation from the union. Excuse me, 303 00:17:48,480 --> 00:17:51,200 Speaker 1: I got a bit of tom I think I think 304 00:17:52,520 --> 00:17:55,760 Speaker 1: everybody's got the plague. I mean, it's it is. It's 305 00:17:55,760 --> 00:17:59,879 Speaker 1: a bad season, absolutely, it is a bad bad season. 306 00:18:00,119 --> 00:18:02,159 Speaker 1: Within you know all that we're going What are you 307 00:18:02,160 --> 00:18:04,960 Speaker 1: even listened for from the state of the Union. I 308 00:18:05,000 --> 00:18:08,280 Speaker 1: assume it's going to be the same discussion as Davos, 309 00:18:08,400 --> 00:18:10,480 Speaker 1: which is, you know, this is the way America is 310 00:18:10,520 --> 00:18:14,320 Speaker 1: doing it. We're angry, We're an aggrieved America. So these 311 00:18:14,359 --> 00:18:16,399 Speaker 1: are the rules, and if you want to participate, great, 312 00:18:16,440 --> 00:18:19,480 Speaker 1: But is that a trade policy? Well, it's not a 313 00:18:19,480 --> 00:18:21,119 Speaker 1: trade policy in the sense that you've got to make 314 00:18:21,160 --> 00:18:23,399 Speaker 1: some choices. Obviously you can pick fights, and there's some 315 00:18:23,440 --> 00:18:26,080 Speaker 1: fights worth picking, but I think the president has got 316 00:18:26,080 --> 00:18:29,040 Speaker 1: to decide which those are. Are we more worried about NAFTA, 317 00:18:29,080 --> 00:18:30,919 Speaker 1: or be more worried about Korea, or may be more 318 00:18:30,960 --> 00:18:34,359 Speaker 1: worried about China? Are we more worried about Germany? What's 319 00:18:34,400 --> 00:18:37,240 Speaker 1: the order of priority? And how is the United States 320 00:18:37,240 --> 00:18:39,000 Speaker 1: going to go after these we we we may know 321 00:18:39,160 --> 00:18:42,679 Speaker 1: more very soon when the announcements are made with respect 322 00:18:42,760 --> 00:18:45,480 Speaker 1: to China trade policy, which are which are coming soon. 323 00:18:45,520 --> 00:18:48,399 Speaker 1: But I'm hoping to get some clear sense of the 324 00:18:48,520 --> 00:18:52,879 Speaker 1: hierarchy of priorities for this administration on trade. Well, the 325 00:18:52,880 --> 00:18:56,280 Speaker 1: most recent news perhaps is the Bombardier deal. Right. Bombardier 326 00:18:56,359 --> 00:18:59,600 Speaker 1: can now start shipping those C series jets to Delta 327 00:18:59,680 --> 00:19:01,960 Speaker 1: air Lines because of that ruling of the U. S 328 00:19:02,000 --> 00:19:05,680 Speaker 1: Trade Panel that was on Friday, Right, And so that 329 00:19:05,840 --> 00:19:08,520 Speaker 1: means that Boeing isn't going to get what it wants. 330 00:19:08,880 --> 00:19:10,800 Speaker 1: Is this an indication of the kind of things you're 331 00:19:10,800 --> 00:19:14,040 Speaker 1: talking about? Well, I mean you can't necessarily conflate this 332 00:19:14,119 --> 00:19:16,719 Speaker 1: with the Trump administration's policy. That decision was made by 333 00:19:16,720 --> 00:19:20,200 Speaker 1: the International Trade Commission, which is an independent body, long 334 00:19:20,320 --> 00:19:23,480 Speaker 1: history of independence. They looked into the case and simply said, 335 00:19:23,600 --> 00:19:26,879 Speaker 1: you know, Boeing's claim for having been injured doesn't hold up, 336 00:19:26,920 --> 00:19:28,400 Speaker 1: and I think a lot of the analysts looking at 337 00:19:28,400 --> 00:19:31,280 Speaker 1: it thought that was the correct decision. Um Interestingly, though, 338 00:19:31,280 --> 00:19:34,040 Speaker 1: those planes are now coming from Alabama. I mean, bombard 339 00:19:34,040 --> 00:19:36,240 Speaker 1: you entered into a joint venture with Airbus to produce 340 00:19:36,280 --> 00:19:38,639 Speaker 1: them inside the United States, in part because they were 341 00:19:38,680 --> 00:19:40,800 Speaker 1: having their own problems, but in part to get around 342 00:19:40,800 --> 00:19:43,800 Speaker 1: what they feared would be tariffs. So so it doesn't 343 00:19:43,800 --> 00:19:46,920 Speaker 1: that end up being a good thing for the United States. Absolutely, 344 00:19:46,960 --> 00:19:49,240 Speaker 1: I mean one of the really interesting things about Trump's 345 00:19:49,280 --> 00:19:52,400 Speaker 1: policy is that in the short run, it can pay 346 00:19:52,440 --> 00:19:54,960 Speaker 1: some benefits. I mean you look at h at the 347 00:19:54,960 --> 00:19:58,000 Speaker 1: announcement by Chrysler to bring its light truck production back 348 00:19:58,000 --> 00:20:00,719 Speaker 1: from Mexico. That was a hedge a against the NAFTA 349 00:20:00,760 --> 00:20:03,200 Speaker 1: going away, which would have meant that those vehicles face 350 00:20:03,280 --> 00:20:06,960 Speaker 1: to tariff. You look at the announcements by Apple, you 351 00:20:07,000 --> 00:20:10,040 Speaker 1: look at the expansion announcements by Toyota. I mean, companies 352 00:20:10,040 --> 00:20:12,720 Speaker 1: are trying to say to the President, yeah, we're going 353 00:20:12,800 --> 00:20:15,600 Speaker 1: to bed big on America, and and the tax reform helps, right, 354 00:20:16,480 --> 00:20:18,439 Speaker 1: corporate tax looks a heck of a lot better than 355 00:20:19,440 --> 00:20:22,320 Speaker 1: So there's no question it can pay some benefits. Question 356 00:20:22,359 --> 00:20:25,600 Speaker 1: is do other countries respond in ways that harm us 357 00:20:25,640 --> 00:20:28,080 Speaker 1: export interests? We have seen that, yet we have we 358 00:20:28,160 --> 00:20:33,760 Speaker 1: have economists at all explained to us the trade dynamics 359 00:20:33,800 --> 00:20:37,359 Speaker 1: against savings equal investment and all that. Let's have you do. 360 00:20:37,440 --> 00:20:42,639 Speaker 1: It is a more international relations specialist. When we say 361 00:20:42,960 --> 00:20:46,480 Speaker 1: deficits are bad or surpluses are bad, that's confusing to 362 00:20:46,560 --> 00:20:50,000 Speaker 1: our listeners. What do we want? Do we want a 363 00:20:50,040 --> 00:20:52,840 Speaker 1: little deficit, do we want a surplus? What? What is 364 00:20:52,960 --> 00:20:55,919 Speaker 1: the goal? I mean? I think the goal should be 365 00:20:56,000 --> 00:20:59,720 Speaker 1: global economic growth, and we obviously want a big piece 366 00:20:59,720 --> 00:21:01,720 Speaker 1: of that. And that's where the focus on the depth. 367 00:21:01,800 --> 00:21:05,320 Speaker 1: That doesn't necessarily make a lot of sense because generally speaking, 368 00:21:05,359 --> 00:21:08,320 Speaker 1: when the U. S economy grows more strongly, the trade 369 00:21:08,359 --> 00:21:11,439 Speaker 1: deficit goes up. Um that said, you know, there are 370 00:21:11,480 --> 00:21:13,119 Speaker 1: things you don't want to do. You don't want to 371 00:21:13,160 --> 00:21:16,879 Speaker 1: be running a big budget deficit, which US government has 372 00:21:16,920 --> 00:21:18,760 Speaker 1: been doing for a long time. You don't want a 373 00:21:18,840 --> 00:21:22,119 Speaker 1: currency that's too strong that knocks you out of global markets. 374 00:21:22,160 --> 00:21:24,480 Speaker 1: And I have some sympathy with the Trump administration on 375 00:21:24,560 --> 00:21:27,040 Speaker 1: that one. So so I don't think the trade deficit 376 00:21:27,119 --> 00:21:31,040 Speaker 1: alone is a good metric. But attracting investment, attracting jobs, 377 00:21:31,040 --> 00:21:33,320 Speaker 1: boosting exports, those are all good things that we want 378 00:21:33,359 --> 00:21:36,800 Speaker 1: to pay attention to as a country. Tell all the 379 00:21:37,960 --> 00:21:54,639 Speaker 1: concept formulations failure to adjustice is wonderful booking. Are you 380 00:21:54,800 --> 00:21:59,440 Speaker 1: gallows with Federated, which runs a huge amount of coupon money. 381 00:21:59,440 --> 00:22:03,240 Speaker 1: His focus, he's on municipal bonds. He's had of something 382 00:22:03,520 --> 00:22:07,440 Speaker 1: called the duration committee. R J. Gallo, with your experience 383 00:22:07,520 --> 00:22:11,280 Speaker 1: in in fixed income, what does the duration committee do 384 00:22:11,359 --> 00:22:15,160 Speaker 1: at a shop like Federated? Good morning Tom and him 385 00:22:15,200 --> 00:22:18,080 Speaker 1: and thanks for having me um. Our main role on 386 00:22:18,119 --> 00:22:22,800 Speaker 1: the Duration Committee is to make tactical calls on the 387 00:22:22,840 --> 00:22:26,760 Speaker 1: direction of underlying US market yields, focusing on treasuries obviously 388 00:22:26,760 --> 00:22:29,439 Speaker 1: the you know, sort of the basis for US fixed income. 389 00:22:30,119 --> 00:22:33,639 Speaker 1: Our goal there is to generate alpha, generate access return 390 00:22:34,440 --> 00:22:37,639 Speaker 1: by shading our duration shorter along depending upon what we 391 00:22:37,720 --> 00:22:41,520 Speaker 1: expect from a macroeconomic context and a market outcome. Uh. 392 00:22:41,560 --> 00:22:43,640 Speaker 1: You know, it's a it's a tough job. Calling rates 393 00:22:43,720 --> 00:22:45,840 Speaker 1: is never an easy thing to do, especially with massive 394 00:22:46,200 --> 00:22:48,920 Speaker 1: central bank balance sheets. But that's our goal. Okay, what's 395 00:22:48,960 --> 00:22:52,719 Speaker 1: the level of sweat at the esteemed Federated group this morning? 396 00:22:52,760 --> 00:22:55,199 Speaker 1: And I say that in the sense of all of 397 00:22:55,200 --> 00:23:00,240 Speaker 1: our listeners understand yield up, price down. We're it is 398 00:23:00,320 --> 00:23:06,480 Speaker 1: Federated hide in two thousand. Well, uh, it's interesting you 399 00:23:06,840 --> 00:23:09,160 Speaker 1: say that we we we meet on an ad hoc 400 00:23:09,240 --> 00:23:12,600 Speaker 1: basis and at least monthly to to adjust our duration call. 401 00:23:12,720 --> 00:23:16,440 Speaker 1: We have been tactically short uh for for quite some time, 402 00:23:16,480 --> 00:23:20,120 Speaker 1: but to varying degrees. That worked rather well last year 403 00:23:20,240 --> 00:23:22,240 Speaker 1: for all bonds the eight years, and in of course 404 00:23:22,320 --> 00:23:25,200 Speaker 1: last year was a relentless flattner. This year we're seeing 405 00:23:25,240 --> 00:23:29,560 Speaker 1: all yields heading higher, which is more typical. I looked 406 00:23:29,560 --> 00:23:32,080 Speaker 1: at the data going back forty five years, and only 407 00:23:32,119 --> 00:23:35,240 Speaker 1: four times in forty five years has the yield on 408 00:23:35,320 --> 00:23:38,359 Speaker 1: the ten year gone in a different direction than the 409 00:23:38,359 --> 00:23:41,840 Speaker 1: market weighted average yield on the entire bar Cap Treasury index. 410 00:23:42,160 --> 00:23:44,400 Speaker 1: Last year was one of those years. Phenomenal to say 411 00:23:44,440 --> 00:23:46,440 Speaker 1: that again, that's so important to say it again, Tim, 412 00:23:46,480 --> 00:23:48,560 Speaker 1: jump in here. Only four times in forty five years 413 00:23:48,560 --> 00:23:50,720 Speaker 1: of history of the bar Cap Treasury Index has the 414 00:23:50,760 --> 00:23:53,480 Speaker 1: yield on the index gone in a different mathematical direction 415 00:23:53,760 --> 00:23:55,560 Speaker 1: than the yield in the ten year, and last year 416 00:23:55,560 --> 00:23:58,280 Speaker 1: was one of those years. In other words, it was extraordinary, 417 00:23:58,920 --> 00:24:01,480 Speaker 1: and we anticipate this year will be a little bit 418 00:24:01,520 --> 00:24:04,000 Speaker 1: more normal in that sense that all yields will be 419 00:24:04,040 --> 00:24:07,000 Speaker 1: heading higher. We're not positioning for a massive spike or 420 00:24:07,040 --> 00:24:09,600 Speaker 1: a massive bear market, or a rerun of the taper tantrum. 421 00:24:10,040 --> 00:24:12,480 Speaker 1: But we think that the U S economy, the global economy, 422 00:24:12,680 --> 00:24:15,920 Speaker 1: even the inflation picture are such that yields should be 423 00:24:15,960 --> 00:24:19,560 Speaker 1: heading upwards and and a cautious duration short is warranted 424 00:24:20,160 --> 00:24:21,760 Speaker 1: in terms of what are you how you gonna make money? 425 00:24:21,760 --> 00:24:24,760 Speaker 1: And fixed income well, when when high quality treasury yields 426 00:24:24,800 --> 00:24:27,360 Speaker 1: are rising, you know clearly that's some price loss, that's 427 00:24:27,359 --> 00:24:30,320 Speaker 1: a headwind to total return. But active management and the 428 00:24:30,359 --> 00:24:34,760 Speaker 1: other fixed income sectors UH presents opportunities. Nevertheless, and we're 429 00:24:34,800 --> 00:24:38,560 Speaker 1: still overweight for example, corporate high yield UH. There's a 430 00:24:38,560 --> 00:24:41,159 Speaker 1: lot of caution about evaluation there. We've peeled back a 431 00:24:41,200 --> 00:24:43,560 Speaker 1: little bit, but we remain overweight relative to our neutral 432 00:24:43,600 --> 00:24:47,600 Speaker 1: positioning there. We're looking for opportunities in other spaces. We 433 00:24:47,640 --> 00:24:50,800 Speaker 1: think munties, for example UM are a portion of the 434 00:24:50,880 --> 00:24:54,520 Speaker 1: US fixed income marketplace where you can get relatively attractive 435 00:24:54,560 --> 00:24:57,119 Speaker 1: total returns versus treasuries. Well, that's why I wanted to 436 00:24:57,160 --> 00:25:00,000 Speaker 1: go with you is the municipal bond market and are 437 00:24:59,880 --> 00:25:03,720 Speaker 1: to well. Recently Embarons talking about pension fund liabilities for 438 00:25:03,840 --> 00:25:07,440 Speaker 1: public pension funds, having said that what area of the 439 00:25:07,560 --> 00:25:10,800 Speaker 1: muni market would you be interested in? We're talking revenue 440 00:25:10,840 --> 00:25:15,760 Speaker 1: bonds or anything specific. We tend to be and have 441 00:25:15,960 --> 00:25:17,960 Speaker 1: been for for a while now, and I would say 442 00:25:18,119 --> 00:25:20,720 Speaker 1: we arguably were little early. In some cases, we tend 443 00:25:20,720 --> 00:25:25,159 Speaker 1: to be overweight revenue sectors that have a greater leverage 444 00:25:25,240 --> 00:25:27,879 Speaker 1: or exposure, if you will, to the economic cycle. So 445 00:25:27,960 --> 00:25:32,000 Speaker 1: that would include areas like toll road revenue bonds airport 446 00:25:32,080 --> 00:25:35,080 Speaker 1: revenue bonds, both of which have done relatively well in 447 00:25:35,440 --> 00:25:39,520 Speaker 1: an absolute return standpoint and a relative return standpoint, because 448 00:25:39,520 --> 00:25:41,720 Speaker 1: the underlying economy has been winded the back of the 449 00:25:41,760 --> 00:25:45,600 Speaker 1: performance of those types of issuers. Um, we also tend 450 00:25:45,640 --> 00:25:49,399 Speaker 1: to be a little underweight local geos. Uh. There we 451 00:25:49,400 --> 00:25:52,320 Speaker 1: were a little early, I admit. Um. The pension challenge 452 00:25:52,800 --> 00:25:58,080 Speaker 1: is well known. It is, however not universal. Pension challenges 453 00:25:58,080 --> 00:26:00,280 Speaker 1: are far greater in states like New Jersey and Anois 454 00:26:00,280 --> 00:26:03,040 Speaker 1: than they are in Florida, for example, and so there 455 00:26:03,040 --> 00:26:06,720 Speaker 1: are plenty of opportunities to be selective about which geos 456 00:26:06,760 --> 00:26:09,399 Speaker 1: you own, and we have tended to do that. The 457 00:26:09,480 --> 00:26:13,679 Speaker 1: market does create opportunities where assets are mispriced or poorly 458 00:26:13,800 --> 00:26:17,800 Speaker 1: priced relative to the risk they present. So, for example, Illinois, 459 00:26:17,800 --> 00:26:20,760 Speaker 1: in the first part of last year, everybody hated Illinois, 460 00:26:20,800 --> 00:26:23,679 Speaker 1: and the spreads were huge, you know, two fifty basis 461 00:26:23,720 --> 00:26:26,880 Speaker 1: points over triple A munis. We felt ultimately they were 462 00:26:26,880 --> 00:26:30,399 Speaker 1: going to resolve their multi year budget impass, and we 463 00:26:30,400 --> 00:26:33,880 Speaker 1: were adding at that time that was a huge opportunity 464 00:26:33,880 --> 00:26:36,800 Speaker 1: for out performance with which actually worked. Of course, pensions 465 00:26:36,800 --> 00:26:38,959 Speaker 1: aren't fixed in Illinois because they finally got a budget. 466 00:26:39,160 --> 00:26:41,680 Speaker 1: So that's a multi chapter story that still has many 467 00:26:41,760 --> 00:26:44,520 Speaker 1: chapters to go. But our active management is focusing on 468 00:26:44,560 --> 00:26:47,119 Speaker 1: revenue bonds and taking risk when we feel like prices 469 00:26:47,119 --> 00:26:50,040 Speaker 1: are compensating us for taking that risk in spots even 470 00:26:50,040 --> 00:26:54,159 Speaker 1: where geo's may be struggling with pension challenges. Thank you 471 00:26:54,200 --> 00:26:55,919 Speaker 1: so much, r J. Gillow. We need to get you 472 00:26:55,960 --> 00:26:58,240 Speaker 1: back for a longer discussion. We're sorry with a new 473 00:26:58,280 --> 00:27:00,480 Speaker 1: slow today, but we sent a raid to this is 474 00:27:00,480 --> 00:27:09,760 Speaker 1: an important discussion on those challenges. Thanks for listening to 475 00:27:09,800 --> 00:27:14,320 Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on 476 00:27:14,400 --> 00:27:20,240 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 477 00:27:20,280 --> 00:27:23,560 Speaker 1: on Twitter at Tom Keene Before the podcast, you can 478 00:27:23,640 --> 00:27:26,800 Speaker 1: always catch us worldwide. I'm Bloomberg Radio