1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 2 00:00:05,360 --> 00:00:07,640 Speaker 1: along with my co host Lisa Brahma wits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:18,000 Speaker 1: podcast or wherever you listen to podcasts. As well as that, 7 00:00:18,079 --> 00:00:23,639 Speaker 1: Bloomberg dot Com Pacific guests and Electric got a little 8 00:00:23,680 --> 00:00:26,560 Speaker 1: bit of some good news yesterday's California cleared it of 9 00:00:26,600 --> 00:00:30,760 Speaker 1: responsibility for one of the deadliest fires in two thousand seventeen. 10 00:00:30,800 --> 00:00:32,440 Speaker 1: To give us a sense of how important that is 11 00:00:32,520 --> 00:00:35,600 Speaker 1: to the company, let's bring in Kite. Kid is a 12 00:00:35,720 --> 00:00:39,880 Speaker 1: senior industrials and utilities analysts for Bloomberg Intelligence. He joins 13 00:00:39,960 --> 00:00:43,279 Speaker 1: us in the Bloomberg Interactive Broker studio here in New York. So, Kit, 14 00:00:43,920 --> 00:00:47,000 Speaker 1: does this reprieve at least or at least an exhoneration 15 00:00:47,159 --> 00:00:50,440 Speaker 1: of that seventeen fire that the liability associated with that? 16 00:00:50,800 --> 00:00:53,440 Speaker 1: Does that protect the company or save the company from bankruptcy? 17 00:00:54,240 --> 00:00:57,680 Speaker 1: I don't think it does, Paul. I think, uh, we're 18 00:00:57,680 --> 00:01:00,880 Speaker 1: gonna see it be worth about ten bill in in 19 00:01:00,880 --> 00:01:07,119 Speaker 1: in less exposure. They still have twenty billion left of exposure. Uh. 20 00:01:07,120 --> 00:01:10,800 Speaker 1: And maybe most important, UH, they have the concern that 21 00:01:10,880 --> 00:01:16,200 Speaker 1: any future wildfire could lead rapidly to very large liabilities 22 00:01:16,240 --> 00:01:19,000 Speaker 1: similar to what they have on the books. Now. One 23 00:01:19,040 --> 00:01:20,919 Speaker 1: thing that I'm struck by, kid, is that this comes 24 00:01:20,959 --> 00:01:25,240 Speaker 1: with a backdrop of several reading agencies saying that they 25 00:01:25,240 --> 00:01:29,600 Speaker 1: could downgrade Californian utilities, possibly even to junk as a 26 00:01:29,600 --> 00:01:32,520 Speaker 1: result of the liability kind of policies that they have. 27 00:01:32,880 --> 00:01:35,920 Speaker 1: In other words, that utilities can be found liable for 28 00:01:36,240 --> 00:01:38,880 Speaker 1: damages from some of these wildfires. How much does that 29 00:01:38,959 --> 00:01:43,360 Speaker 1: ratchet up the pressure? I think it It puts pressure 30 00:01:43,400 --> 00:01:46,840 Speaker 1: on California officials, but you wouldn't know it so far. 31 00:01:46,920 --> 00:01:52,320 Speaker 1: Let's put it that way. The governor yesterday expressed um 32 00:01:52,360 --> 00:01:55,400 Speaker 1: some sensitivity to these issues, and he said he was 33 00:01:55,760 --> 00:01:59,000 Speaker 1: indicated he was trying to move things along faster. But 34 00:01:59,160 --> 00:02:02,400 Speaker 1: faster in the California means maybe in six months will 35 00:02:02,640 --> 00:02:08,919 Speaker 1: start to see some results. So it's moving slow. And 36 00:02:08,919 --> 00:02:11,560 Speaker 1: and the problem is pg n E says we're running 37 00:02:11,560 --> 00:02:15,680 Speaker 1: out of cash. So uh, they feel like on a 38 00:02:15,840 --> 00:02:19,480 Speaker 1: liquidity basis, they need to get something done right away, 39 00:02:19,560 --> 00:02:23,600 Speaker 1: and also in order to basically hold the feet to 40 00:02:23,680 --> 00:02:28,200 Speaker 1: the fire of all the parties in California and get 41 00:02:28,320 --> 00:02:31,800 Speaker 1: something done about As Paul mentioned, this long term issue 42 00:02:32,040 --> 00:02:34,600 Speaker 1: of what happens the next time there's a fire and 43 00:02:34,639 --> 00:02:38,520 Speaker 1: everybody sues them again, Well, what happens being a homeowner 44 00:02:38,520 --> 00:02:42,080 Speaker 1: in California myself and a customer of Pennie, what happens 45 00:02:42,120 --> 00:02:44,800 Speaker 1: when this company does go into bankruptcy? Do the lights 46 00:02:44,800 --> 00:02:47,840 Speaker 1: go out in California? Oh? No, everything, everything runs along 47 00:02:47,919 --> 00:02:51,320 Speaker 1: just fine. They just got five and a half billion 48 00:02:51,360 --> 00:02:55,600 Speaker 1: in UH debt or in possession financing, so if anything, 49 00:02:55,639 --> 00:02:58,080 Speaker 1: their liquidity has improved in the near term. Ike, I 50 00:02:58,120 --> 00:03:00,639 Speaker 1: think it's fair to say neither the company in nor 51 00:03:00,800 --> 00:03:07,000 Speaker 1: California governor, or the regulators and other officials. Nobody is 52 00:03:07,080 --> 00:03:11,040 Speaker 1: going to be interested in operations not going well. And 53 00:03:11,080 --> 00:03:13,720 Speaker 1: in fact, the company has indicated one of the things 54 00:03:13,800 --> 00:03:18,360 Speaker 1: they'll do in bankruptcy is increased spending for safety UH 55 00:03:18,400 --> 00:03:23,480 Speaker 1: and for capital investment in the UH type of capital 56 00:03:23,520 --> 00:03:27,799 Speaker 1: spending for green projects that California always wants. So they're 57 00:03:27,840 --> 00:03:31,200 Speaker 1: trying to say and do the right things that at 58 00:03:31,240 --> 00:03:34,440 Speaker 1: least in California people should be saying, Oh good, they're 59 00:03:34,480 --> 00:03:37,640 Speaker 1: spending money where I want it, uh, and they want 60 00:03:37,640 --> 00:03:39,680 Speaker 1: to come out of it, of course with people saying, 61 00:03:40,000 --> 00:03:42,040 Speaker 1: by the way, here's the revenues for what you spent. 62 00:03:42,360 --> 00:03:46,200 Speaker 1: So going back to the decision yesterday that PGNI is 63 00:03:46,200 --> 00:03:50,480 Speaker 1: not responsible for the deadly two seventeen fires, does that 64 00:03:50,640 --> 00:03:54,640 Speaker 1: set any precedent for what their potential liability could be 65 00:03:55,080 --> 00:04:00,360 Speaker 1: in wildfires? I don't think it does, Lisa, because in 66 00:04:00,400 --> 00:04:04,520 Speaker 1: that case, UH, in the Tubs fire, what we had 67 00:04:04,600 --> 00:04:08,560 Speaker 1: was the company did say a while ago, months ago, 68 00:04:08,640 --> 00:04:11,360 Speaker 1: that they didn't think they were responsible, and that turned 69 00:04:11,360 --> 00:04:15,480 Speaker 1: out to be accurate. In the case of the eighteen fire, 70 00:04:16,360 --> 00:04:19,560 Speaker 1: the company has indicated, well, we did have some wires 71 00:04:19,600 --> 00:04:23,320 Speaker 1: that were down and some UH equipment that looked in 72 00:04:23,480 --> 00:04:28,000 Speaker 1: bad shape. So if anything, that's indicating, I think that 73 00:04:28,160 --> 00:04:32,760 Speaker 1: the potential for some real major liability is still there. 74 00:04:32,960 --> 00:04:35,680 Speaker 1: Do we have this issue where there's you know, real 75 00:04:36,640 --> 00:04:38,919 Speaker 1: in the West. There seems to be fires all throughout 76 00:04:38,920 --> 00:04:40,760 Speaker 1: the West every year. Do we have other utilities that 77 00:04:40,800 --> 00:04:45,160 Speaker 1: are at risk like PGANI, I haven't seen it. I 78 00:04:45,200 --> 00:04:51,960 Speaker 1: think it it really looked. Utilities are UH creatures of regulators, right, 79 00:04:52,040 --> 00:04:56,320 Speaker 1: I mean the regulator monopolies. If their revenues are higher 80 00:04:56,360 --> 00:05:00,440 Speaker 1: than their costs, then they're fine. If the regulator don't 81 00:05:00,520 --> 00:05:03,000 Speaker 1: raise their revenues to cover their costs, then you get 82 00:05:03,000 --> 00:05:05,600 Speaker 1: this kind of situation. And the other states, so far 83 00:05:06,360 --> 00:05:09,840 Speaker 1: we seem to have had the regulators on board with 84 00:05:09,960 --> 00:05:14,040 Speaker 1: the idea that if you have costs, even extreme costs 85 00:05:14,040 --> 00:05:18,560 Speaker 1: for fires and so on, obviously we have to reimburse 86 00:05:18,600 --> 00:05:21,360 Speaker 1: the utility for for what happened. It gets tricky when 87 00:05:21,720 --> 00:05:25,200 Speaker 1: there are real issues of liability, as there might be 88 00:05:25,320 --> 00:05:28,280 Speaker 1: in the case of PG and E. Kick contledge, has 89 00:05:28,279 --> 00:05:31,800 Speaker 1: ever been so exciting to cover utilities? Well, it's it's 90 00:05:31,800 --> 00:05:34,279 Speaker 1: a low bar, but I would I would say no. 91 00:05:34,600 --> 00:05:40,279 Speaker 1: And how many years have been? Twenty five, twenty seven 92 00:05:40,320 --> 00:05:42,640 Speaker 1: years and now around the block it's been. It's been 93 00:05:42,680 --> 00:05:45,680 Speaker 1: a while, and this is the apex of this is 94 00:05:45,720 --> 00:05:50,239 Speaker 1: the big time Kick Cottledge senior Industrials and Utilities analysts 95 00:05:50,240 --> 00:05:53,960 Speaker 1: for Bloomberg Intelligence joining us here in our Bloomberg Interactive 96 00:05:54,000 --> 00:05:58,880 Speaker 1: Brokers studios. Certainly, utilities have become an incredibly hot spot. 97 00:05:59,200 --> 00:06:02,960 Speaker 1: This is the industry that's thought of as boring, the staple, 98 00:06:03,080 --> 00:06:06,280 Speaker 1: the safe haven, and now we have this being the 99 00:06:06,480 --> 00:06:09,599 Speaker 1: fodder for distressed investors such as Kenyon Capital, which is 100 00:06:09,640 --> 00:06:13,720 Speaker 1: now diving in a lot of question marks around California's 101 00:06:13,800 --> 00:06:32,600 Speaker 1: utility complex. If Venezuela could get even messier, it has. 102 00:06:32,640 --> 00:06:36,320 Speaker 1: We now have two presidents in the nation, with Juan 103 00:06:36,520 --> 00:06:40,160 Speaker 1: Guido uh the thirty five year old opposition who has 104 00:06:40,240 --> 00:06:44,640 Speaker 1: risen up getting a sign off from legislation to be 105 00:06:44,760 --> 00:06:47,520 Speaker 1: the president, Nicholas Maduto, who is the current or was 106 00:06:47,560 --> 00:06:51,240 Speaker 1: the president, saying he is still the president. All of 107 00:06:51,279 --> 00:06:54,279 Speaker 1: this is raising the specter of regime change, which is 108 00:06:54,320 --> 00:06:58,080 Speaker 1: something that the U. S. President Trump has supported. The 109 00:06:58,200 --> 00:07:00,760 Speaker 1: question is how much does this really mean that the 110 00:07:00,839 --> 00:07:03,840 Speaker 1: situation in Venezuela is about to shift? Joining us now, 111 00:07:03,839 --> 00:07:05,800 Speaker 1: I'm very pleased to say in our Bloomberg Interactive Broger 112 00:07:05,839 --> 00:07:10,160 Speaker 1: Studios is Yakov Arnapolon, portfolio manager focused on emerging markets 113 00:07:10,200 --> 00:07:13,840 Speaker 1: at PIMCO, normally in London, but he is here with 114 00:07:13,920 --> 00:07:17,920 Speaker 1: us in New York. Hopefully good luck getting out uh Jacova. 115 00:07:18,200 --> 00:07:20,600 Speaker 1: So let's start with Venezuela. Do you think that this 116 00:07:20,760 --> 00:07:22,680 Speaker 1: is the moment that we are finally going to see 117 00:07:22,800 --> 00:07:27,680 Speaker 1: regime change that will allow the Venezuelan economy to regrow 118 00:07:27,760 --> 00:07:31,120 Speaker 1: a bit well, i'd say, taking taking a step back. 119 00:07:31,320 --> 00:07:33,600 Speaker 1: Let's just remember what is going on in the country. 120 00:07:33,600 --> 00:07:36,600 Speaker 1: It's a humanitarian crisis, if you're called. There was a 121 00:07:36,720 --> 00:07:39,680 Speaker 1: story a little while ago saying that over the past year, 122 00:07:40,240 --> 00:07:43,400 Speaker 1: an average Venezuela lost twenty four pounds in weight because 123 00:07:43,640 --> 00:07:46,280 Speaker 1: one of the three Venezuelans is facing starvations a nation 124 00:07:46,320 --> 00:07:49,040 Speaker 1: of thirty plus million people, that's Tamuline people in starvation. 125 00:07:49,120 --> 00:07:51,960 Speaker 1: So let's say we're all hoping for a gene change, 126 00:07:52,320 --> 00:07:54,600 Speaker 1: and it's all very heavy stuff, and we certainly would, 127 00:07:54,640 --> 00:07:56,200 Speaker 1: you know, would love to see the back of Maduro. 128 00:07:56,920 --> 00:08:02,000 Speaker 1: But despite the recent developments, UM, the base cases resolution 129 00:08:02,120 --> 00:08:06,240 Speaker 1: is not necessarily in hand. The army still supports him, 130 00:08:06,320 --> 00:08:11,280 Speaker 1: and their international communities is fairly split. So although that 131 00:08:11,440 --> 00:08:14,520 Speaker 1: we've had this big spike in Venezuela's like you said, 132 00:08:14,520 --> 00:08:17,560 Speaker 1: the international community is fairly space right. So you've got 133 00:08:17,600 --> 00:08:19,440 Speaker 1: the U S, You've got Columbia, You've got some of 134 00:08:19,480 --> 00:08:23,080 Speaker 1: the other nations nearby Venezuela, but then you have Russia 135 00:08:23,120 --> 00:08:25,960 Speaker 1: and China, right, And I think Mexico has come out 136 00:08:26,480 --> 00:08:29,200 Speaker 1: in favor of Madura as well. MLOs. I think we 137 00:08:29,200 --> 00:08:33,199 Speaker 1: went on record supporting the current administration. So I think 138 00:08:33,200 --> 00:08:35,160 Speaker 1: the point is it's it's it will take a while 139 00:08:35,200 --> 00:08:37,559 Speaker 1: to resolve this, and even assuming we do, if and 140 00:08:37,640 --> 00:08:41,000 Speaker 1: when we see regime change, there's probably still going to 141 00:08:41,080 --> 00:08:45,880 Speaker 1: be conflicting claimants, you know, the bond holders, some of 142 00:08:45,880 --> 00:08:49,360 Speaker 1: the sovereign creditors like Russian China, So you know that. 143 00:08:49,480 --> 00:08:51,640 Speaker 1: I think that's one of the reasons we've seen volatility 144 00:08:52,480 --> 00:08:54,640 Speaker 1: um but you know it's in margine markets. We see 145 00:08:54,679 --> 00:08:58,240 Speaker 1: volatility in other places and and even to the extent Venezuela. 146 00:08:58,280 --> 00:09:00,520 Speaker 1: I mean maybe there's been some u f and AS prices. 147 00:09:01,120 --> 00:09:03,640 Speaker 1: There have been other spots in em where we do 148 00:09:03,679 --> 00:09:07,319 Speaker 1: you think some of this optimism year to date is justified. 149 00:09:07,840 --> 00:09:10,720 Speaker 1: If regime change does not take place in the streets, 150 00:09:11,160 --> 00:09:13,480 Speaker 1: how does the country resolve the fact that it has 151 00:09:13,600 --> 00:09:17,319 Speaker 1: two presidents? Is this a legal proceeding that needs to 152 00:09:17,360 --> 00:09:20,720 Speaker 1: take place? What are next steps? I'm not sure there 153 00:09:20,720 --> 00:09:24,560 Speaker 1: are many precedents for that. I think it'll take That's 154 00:09:24,559 --> 00:09:26,719 Speaker 1: another you know, I'd say it was fairly complex, and 155 00:09:26,760 --> 00:09:28,640 Speaker 1: now it's even more complex. It probably will take a 156 00:09:28,640 --> 00:09:30,880 Speaker 1: while to sort out, and you know, I guess the 157 00:09:30,960 --> 00:09:33,760 Speaker 1: two sides just won't recognize each other. So you just 158 00:09:33,800 --> 00:09:36,520 Speaker 1: said that perhaps there are other areas and emerging markets 159 00:09:36,520 --> 00:09:39,680 Speaker 1: where the optimism is more warranted. First is so that 160 00:09:39,720 --> 00:09:42,080 Speaker 1: means the optimism that we've seen of late in Venezuela 161 00:09:42,080 --> 00:09:44,640 Speaker 1: and assets you think is unwarranted. Yeah, I think that 162 00:09:45,080 --> 00:09:47,960 Speaker 1: some of this you four year round regime change, you know, 163 00:09:48,000 --> 00:09:50,559 Speaker 1: to extend this drags on, and the stand of drags on. 164 00:09:50,720 --> 00:09:53,040 Speaker 1: You know, maybe we do see bond prices come off 165 00:09:53,080 --> 00:09:55,240 Speaker 1: once again, so the rally perhaps has gone too far there. 166 00:09:55,360 --> 00:09:58,400 Speaker 1: So where are the other places in emerging markets where 167 00:09:58,480 --> 00:10:00,800 Speaker 1: you think the optimism is warranted? You know? Well, well, 168 00:10:01,240 --> 00:10:04,959 Speaker 1: I'd say Egypt is one good example, very compliant with 169 00:10:05,040 --> 00:10:08,040 Speaker 1: the IMF program, will continue to like the currency, continue 170 00:10:08,080 --> 00:10:11,800 Speaker 1: to like the bonds, um significant economy, hugely important on 171 00:10:11,880 --> 00:10:16,040 Speaker 1: Arab street. And that's one example. And we're watching very 172 00:10:16,080 --> 00:10:19,920 Speaker 1: closely countries that to have elections this Yere, Argentina and Ukraine, 173 00:10:20,640 --> 00:10:25,280 Speaker 1: single bee credits. It's kind of hairy. Let's obviously because 174 00:10:25,320 --> 00:10:28,120 Speaker 1: of these political developments and and markets are fairly worried 175 00:10:28,120 --> 00:10:30,560 Speaker 1: about what's going to happen. But to the extent they're 176 00:10:30,600 --> 00:10:32,839 Speaker 1: able as their sense thread the needle and to extend, 177 00:10:32,880 --> 00:10:37,199 Speaker 1: we see positive outcome, So to extend the incumbents succeed 178 00:10:37,400 --> 00:10:39,920 Speaker 1: to stay in place in both countries, that could be 179 00:10:39,960 --> 00:10:43,160 Speaker 1: a significant boost to asset prices. Taking look at China, 180 00:10:43,280 --> 00:10:46,560 Speaker 1: do the trade talks which seem to be coming back 181 00:10:46,600 --> 00:10:49,480 Speaker 1: to the fore a little bit? See the activity level 182 00:10:49,480 --> 00:10:51,040 Speaker 1: seems to be a little bit better than maybe it 183 00:10:51,120 --> 00:10:53,920 Speaker 1: was for the last several months. Does that how do 184 00:10:53,960 --> 00:10:56,400 Speaker 1: you view that? You are you? How constructive are you 185 00:10:56,440 --> 00:10:59,120 Speaker 1: that any type of meaningful trade agreements can be made 186 00:10:59,120 --> 00:11:02,280 Speaker 1: between China and you US? I'd say we're a skeptical 187 00:11:02,320 --> 00:11:05,280 Speaker 1: there as well. The anticipation is there will be a 188 00:11:05,280 --> 00:11:07,000 Speaker 1: true there will be the ton that's going to happen 189 00:11:07,080 --> 00:11:08,679 Speaker 1: next couple of weeks, So what sorry, a couple of 190 00:11:08,720 --> 00:11:10,679 Speaker 1: I guess a couple of months. Maybe it won't be 191 00:11:11,200 --> 00:11:14,360 Speaker 1: by March first, Let's say it's another there will be 192 00:11:14,400 --> 00:11:18,240 Speaker 1: an extension, but but we'll probably see something. How meaningful 193 00:11:18,360 --> 00:11:20,559 Speaker 1: is that? Beyond the headlines? I think that's where we'll 194 00:11:20,600 --> 00:11:22,679 Speaker 1: have a lot of questions and and you know, we 195 00:11:22,760 --> 00:11:26,160 Speaker 1: do anticipate a resumption of conflict later in the year now, 196 00:11:26,200 --> 00:11:28,480 Speaker 1: simply because a lot of the issues around I P 197 00:11:28,679 --> 00:11:31,760 Speaker 1: haven't been dealt with. And and also you know what 198 00:11:32,200 --> 00:11:35,119 Speaker 1: the data point that is important that we saw overnight 199 00:11:35,880 --> 00:11:41,200 Speaker 1: is the PBOC balance it expansion. Right, so they basically announced, uh, 200 00:11:41,280 --> 00:11:44,120 Speaker 1: the ability for local banks to issue more perps, more 201 00:11:44,200 --> 00:11:47,959 Speaker 1: eight year eighty one bonds and that in turn should 202 00:11:47,960 --> 00:11:49,920 Speaker 1: be actually quite a boost for the economy. Right, so 203 00:11:49,960 --> 00:11:52,360 Speaker 1: we should see a pickup and credit, we should see 204 00:11:52,400 --> 00:11:55,319 Speaker 1: a slow down in the deleveraging process. So that's actually 205 00:11:55,320 --> 00:11:59,360 Speaker 1: a pretty pretty decent near term boost. Would you be 206 00:11:59,400 --> 00:12:02,760 Speaker 1: a buyer of perpetual bonds sold? It's for a local 207 00:12:02,920 --> 00:12:05,360 Speaker 1: it's for local markets, it's by you know, by Chinese 208 00:12:05,360 --> 00:12:08,440 Speaker 1: banks for local investors you know, will pick our spots 209 00:12:09,679 --> 00:12:11,520 Speaker 1: with the will will pick our spots. That's not going 210 00:12:11,559 --> 00:12:13,800 Speaker 1: to be you know, but but look, if you if 211 00:12:13,840 --> 00:12:17,240 Speaker 1: you look across, there are some other large scale and 212 00:12:17,320 --> 00:12:20,080 Speaker 1: international banks with a significant presence in China and Asia 213 00:12:20,480 --> 00:12:23,560 Speaker 1: whose um asset prises, who's whose bonds and stocks are 214 00:12:23,600 --> 00:12:26,080 Speaker 1: trading at up on the back of this. Okay, so 215 00:12:26,160 --> 00:12:28,360 Speaker 1: a question for you, how much of your time do 216 00:12:28,400 --> 00:12:32,160 Speaker 1: you spend traveling if they're if they're a bit and 217 00:12:32,400 --> 00:12:34,800 Speaker 1: look at it. It helps to have a twenty five 218 00:12:34,840 --> 00:12:37,360 Speaker 1: strong team. It helps that. So we'd cover fifty to 219 00:12:37,400 --> 00:12:40,600 Speaker 1: sixty countries a year, among among the among us um 220 00:12:40,679 --> 00:12:43,040 Speaker 1: and some of it is obviously China. We've been to 221 00:12:43,120 --> 00:12:45,840 Speaker 1: China twice so far this year. Someone has come down 222 00:12:45,880 --> 00:12:48,040 Speaker 1: to going to d C as much as possible, given 223 00:12:48,200 --> 00:12:50,240 Speaker 1: that we have the FED, I, m F and the 224 00:12:50,280 --> 00:12:53,520 Speaker 1: White House which increasingly is dictating the path of asset 225 00:12:53,559 --> 00:12:56,360 Speaker 1: prices and Venezuela as we just discussed in China and 226 00:12:56,400 --> 00:12:59,920 Speaker 1: Russia with sanctions in Mexico with a lovely U S 227 00:13:00,080 --> 00:13:02,480 Speaker 1: m c A. So just real quickly, how did your 228 00:13:02,480 --> 00:13:05,959 Speaker 1: portfolio perform in December and January? Just broadly, I mean 229 00:13:06,120 --> 00:13:08,439 Speaker 1: I can look like a relatively calm person. I can 230 00:13:08,480 --> 00:13:12,760 Speaker 1: imagine last two months as an emerging market strategist. Well, 231 00:13:12,760 --> 00:13:14,760 Speaker 1: that's that's that's emerging markets here. There's a scene that 232 00:13:14,960 --> 00:13:18,720 Speaker 1: emerging markets give you the opportunity of a lifetime every quarter. Right, 233 00:13:19,000 --> 00:13:21,840 Speaker 1: So you know, there's we're used to that. There's comportunities 234 00:13:21,840 --> 00:13:25,640 Speaker 1: of many, many many, But you know we've been we've 235 00:13:25,640 --> 00:13:27,040 Speaker 1: been picking our spots and I think that's going to 236 00:13:27,160 --> 00:13:29,679 Speaker 1: continue to be the theme. Broadly speaking. Still like EM 237 00:13:29,760 --> 00:13:32,000 Speaker 1: think this is a good environment for EM in twenty 238 00:13:32,120 --> 00:13:36,520 Speaker 1: nineteen after the swoon of twenty eighteen. But we have 239 00:13:36,600 --> 00:13:38,439 Speaker 1: to pick our spots and again as always, going to 240 00:13:38,480 --> 00:13:40,920 Speaker 1: walk between the rain drops. Ten seconds local currency or 241 00:13:40,960 --> 00:13:44,480 Speaker 1: hard currency, em bonds, three months outlook local currency, twelve 242 00:13:44,480 --> 00:13:47,080 Speaker 1: month heard currency Yahko of Arnipole, and thank you so 243 00:13:47,120 --> 00:13:49,079 Speaker 1: much for being with us. Thanks. That was very interesting. 244 00:13:49,080 --> 00:13:51,760 Speaker 1: It's interesting. It's so many places around the world that 245 00:13:52,080 --> 00:13:56,400 Speaker 1: emerging market um UH strategist and investors can place their money, 246 00:13:56,720 --> 00:13:58,760 Speaker 1: but the management net risk on a global scale is 247 00:13:58,960 --> 00:14:01,040 Speaker 1: is just mind boggling. Yak of on a pull in 248 00:14:01,120 --> 00:14:03,719 Speaker 1: portfolio manage emerging markets from Pimco joining us in a 249 00:14:03,720 --> 00:14:06,600 Speaker 1: Bloomberg eleven thirty UH studio in New York. Thank you 250 00:14:06,679 --> 00:14:24,880 Speaker 1: so much. Remember, Paul, we used to talk about bitcoin. 251 00:14:25,160 --> 00:14:27,560 Speaker 1: Those days kind of ended. Huh. Yeah. I'm looking at 252 00:14:27,600 --> 00:14:30,720 Speaker 1: the five year chart of the Bitcoin index and it's 253 00:14:30,800 --> 00:14:33,120 Speaker 1: just extraordinary, going from you know, a couple of hundred 254 00:14:33,120 --> 00:14:37,760 Speaker 1: bucks early two and then here we are back down 255 00:14:37,840 --> 00:14:40,880 Speaker 1: at Yeah, and now JP Morgan is saying that it 256 00:14:40,920 --> 00:14:44,440 Speaker 1: costs more to mine bitcoin than the actual value itself. 257 00:14:44,560 --> 00:14:48,640 Speaker 1: Joining us Mike mclogan, commodity strategist for Bloomberg Intelligence here 258 00:14:48,680 --> 00:14:52,520 Speaker 1: in our Bloomberg directive Broker Studios Mike, what's your take 259 00:14:52,760 --> 00:14:55,960 Speaker 1: on this JP morgan assessment that it now costs more 260 00:14:56,040 --> 00:14:59,480 Speaker 1: to mine bitcoin? Does this mean essentially, is this a 261 00:14:59,480 --> 00:15:02,760 Speaker 1: good thing or bad thing for their cryptocurency. I think 262 00:15:02,840 --> 00:15:05,560 Speaker 1: JP Morgan has been very good about pointing out one 263 00:15:05,600 --> 00:15:08,280 Speaker 1: of the key things about bitcoin mining is the number 264 00:15:08,280 --> 00:15:10,720 Speaker 1: one factor to really effect mining it's price. When the 265 00:15:10,760 --> 00:15:14,120 Speaker 1: price goes down, if it's not really the mining that matters. 266 00:15:14,480 --> 00:15:16,520 Speaker 1: And they put out a report this time last year 267 00:15:16,520 --> 00:15:18,560 Speaker 1: that I read three times, and they pointed that out. 268 00:15:18,680 --> 00:15:20,560 Speaker 1: And a lot most of the mining occurs in China, 269 00:15:20,920 --> 00:15:23,160 Speaker 1: and good luck really trying to measure what that costs 270 00:15:23,160 --> 00:15:26,320 Speaker 1: because there's connections with you know, political connections or whatever, 271 00:15:26,360 --> 00:15:28,720 Speaker 1: and there a lot of it's happening in Russia, so 272 00:15:28,840 --> 00:15:32,680 Speaker 1: it's hard to measure. But overall in those parts of 273 00:15:32,680 --> 00:15:34,440 Speaker 1: the world, I suspect they're probably making a profit and 274 00:15:34,440 --> 00:15:35,920 Speaker 1: they're getting what they want out of it, but that's 275 00:15:35,920 --> 00:15:38,120 Speaker 1: really insignificant for the price of being coined. The price. 276 00:15:38,200 --> 00:15:40,800 Speaker 1: To me that what really matters is currently it's taking 277 00:15:40,800 --> 00:15:44,120 Speaker 1: back the speculative frenzy that should continue. It's not I 278 00:15:44,120 --> 00:15:46,280 Speaker 1: think it's getting towards the end of the ball game. 279 00:15:46,520 --> 00:15:48,440 Speaker 1: But I always looking at it versus gold, and I 280 00:15:48,440 --> 00:15:51,080 Speaker 1: think it's going close back to the price of the 281 00:15:51,160 --> 00:15:53,440 Speaker 1: parounced price of gold, which is actually up today. So 282 00:15:53,600 --> 00:15:56,560 Speaker 1: I think that convergent is happening, will continue and probably 283 00:15:56,600 --> 00:15:59,600 Speaker 1: meet this year. So you had a great call on gold, 284 00:15:59,600 --> 00:16:01,400 Speaker 1: by the way, you which I remember from a couple 285 00:16:01,400 --> 00:16:04,240 Speaker 1: of months ago. So well, well done there. So bitcoin, 286 00:16:04,400 --> 00:16:07,360 Speaker 1: I mean give it. It's the volatility, said some of them. 287 00:16:07,440 --> 00:16:09,760 Speaker 1: You think a lot of speculaive volatility has come out 288 00:16:09,800 --> 00:16:12,360 Speaker 1: of the currency. What do you think the future is 289 00:16:12,560 --> 00:16:15,320 Speaker 1: of bitcoin? Well, that's the key thing. I think it's important. 290 00:16:15,360 --> 00:16:18,560 Speaker 1: Is I really believe that bitcoin is becoming digital gold. 291 00:16:18,640 --> 00:16:20,720 Speaker 1: We published on that today, and by digital gold, is 292 00:16:20,760 --> 00:16:22,800 Speaker 1: I look at it ten years from now. If it's not, 293 00:16:22,960 --> 00:16:25,760 Speaker 1: if we don't have some form of technology like cryptocurrency, 294 00:16:25,760 --> 00:16:28,120 Speaker 1: which is probably bitcoin, that is not a better form 295 00:16:28,160 --> 00:16:31,400 Speaker 1: of global currency, I'd be surprised. But it's happening fast. 296 00:16:31,440 --> 00:16:33,920 Speaker 1: And one thing we noted is it's been acting like 297 00:16:34,040 --> 00:16:37,200 Speaker 1: gold as an inverse factor to the dollar, which is 298 00:16:37,240 --> 00:16:39,880 Speaker 1: what you want to see. Bitcoin peaked in you know, 299 00:16:40,000 --> 00:16:42,440 Speaker 1: twenty thousand and right, about the time the dollar bottom 300 00:16:42,440 --> 00:16:44,560 Speaker 1: depending on how you measure, and the recent bottom in 301 00:16:44,600 --> 00:16:47,160 Speaker 1: bitcoin was when the dollar peaked, So it still has 302 00:16:47,200 --> 00:16:49,920 Speaker 1: more excesses that come out, but it's also just a 303 00:16:49,960 --> 00:16:52,800 Speaker 1: more modern version. I think it's getting there, and I 304 00:16:52,840 --> 00:16:54,720 Speaker 1: don't know what's going to replace it. People say there's 305 00:16:54,760 --> 00:16:57,280 Speaker 1: other coins, maybe it's going to go the way a whale. Well, 306 00:16:57,400 --> 00:16:59,560 Speaker 1: but it has the hash power. It has to come 307 00:16:59,640 --> 00:17:03,360 Speaker 1: compy patient power. You can't do a fift attack in bitcoin, 308 00:17:03,520 --> 00:17:06,199 Speaker 1: so to me, that's happened. It's just still too expensive. 309 00:17:06,520 --> 00:17:10,159 Speaker 1: The problem with the idea of bitcoin as digital gold, 310 00:17:10,400 --> 00:17:13,880 Speaker 1: in my mind, is that gold's price is determined not 311 00:17:14,040 --> 00:17:17,520 Speaker 1: just from its haven quality, but also from the fact 312 00:17:17,560 --> 00:17:21,880 Speaker 1: that people actually wear gold and use gold in uh 313 00:17:22,400 --> 00:17:26,400 Speaker 1: in a variety of ways. So how does crypto How 314 00:17:26,440 --> 00:17:29,240 Speaker 1: does bitcoin sort of get past that hurdle and having 315 00:17:29,280 --> 00:17:34,080 Speaker 1: the same kind of store of value reputation among investors, well, 316 00:17:34,160 --> 00:17:37,000 Speaker 1: also not having the other purpose transportation. It's the key thing. 317 00:17:37,000 --> 00:17:38,919 Speaker 1: It's hard to We all have gold in our bodies, 318 00:17:38,960 --> 00:17:40,960 Speaker 1: most of its jewelry, and you get that's in them. 319 00:17:41,000 --> 00:17:42,879 Speaker 1: One form for gold and gold historically has been a 320 00:17:42,920 --> 00:17:45,679 Speaker 1: store value, which you know, I view is still positive 321 00:17:45,720 --> 00:17:49,359 Speaker 1: in dollars speaking, but with bitcoin you can transport it 322 00:17:49,800 --> 00:17:51,280 Speaker 1: with a click of the button. You can you're in 323 00:17:51,359 --> 00:17:54,800 Speaker 1: Venezuela and Argentina or Turkey. You can diversify your doll 324 00:17:54,960 --> 00:17:58,080 Speaker 1: or your currency assets, which is this deflating paper into 325 00:17:58,160 --> 00:18:00,400 Speaker 1: something that is a little more stable. And then from there, 326 00:18:00,440 --> 00:18:02,919 Speaker 1: with gold you have to physically move and there's restrictions. 327 00:18:02,960 --> 00:18:07,440 Speaker 1: Historically you can put basically, you can move move millions 328 00:18:07,480 --> 00:18:10,040 Speaker 1: of dollars or value on a thumb drive, and you 329 00:18:10,040 --> 00:18:11,680 Speaker 1: can't do with gold. And to me, that's where it's 330 00:18:11,680 --> 00:18:14,480 Speaker 1: going in the future. Right, I'm sorry, go ahead now, 331 00:18:14,520 --> 00:18:16,840 Speaker 1: it's just gonna ask. I love putting Mike on the spot. 332 00:18:16,880 --> 00:18:18,480 Speaker 1: I think we all do because he can handle it. 333 00:18:18,880 --> 00:18:23,280 Speaker 1: How do you think, how does one really value bitcoin? 334 00:18:23,720 --> 00:18:26,439 Speaker 1: It's not supplying demand, there's not the present value of 335 00:18:26,440 --> 00:18:29,480 Speaker 1: future cash flows. How do you value this thing? That's 336 00:18:29,520 --> 00:18:32,480 Speaker 1: the key thing? And I look at it more right now, 337 00:18:32,720 --> 00:18:35,080 Speaker 1: it's gonna be at some point transactions and I look 338 00:18:35,119 --> 00:18:37,560 Speaker 1: at it very similar to gold. So that's why I'm thinking, 339 00:18:37,560 --> 00:18:39,439 Speaker 1: what's going to happen this year? I'll be able to 340 00:18:39,480 --> 00:18:41,120 Speaker 1: get a better value on it when I see how 341 00:18:41,119 --> 00:18:42,920 Speaker 1: it reacts to what I expect is going to happen 342 00:18:42,960 --> 00:18:46,120 Speaker 1: than dollar peaking, and gold is obviously going to really 343 00:18:46,240 --> 00:18:49,280 Speaker 1: but actually valuing it. It's based on the demand. Now 344 00:18:49,320 --> 00:18:52,680 Speaker 1: historically do you think transactions, But it's really not a currency. 345 00:18:52,760 --> 00:18:55,800 Speaker 1: It's like gold is not based on transaccidents, based on 346 00:18:55,920 --> 00:18:58,120 Speaker 1: the desire to hold that and put in the vault 347 00:18:58,119 --> 00:19:00,439 Speaker 1: and put it away and diversify your portfolios. And to me, 348 00:19:00,920 --> 00:19:03,200 Speaker 1: that's what's going to be happening. But actually value it. 349 00:19:03,280 --> 00:19:05,760 Speaker 1: So I look at one way of value is looking 350 00:19:05,800 --> 00:19:08,600 Speaker 1: at volume trading, which is speculation and volumes way down. 351 00:19:08,640 --> 00:19:11,080 Speaker 1: So that means Bitcoin to me right now should go 352 00:19:11,119 --> 00:19:14,879 Speaker 1: down just based on the latest volume figures. But I 353 00:19:14,920 --> 00:19:18,680 Speaker 1: see it's it's it's just it's it's should find a 354 00:19:18,680 --> 00:19:21,280 Speaker 1: foundation at some point this year. Very interesting. Thanks Mike 355 00:19:21,720 --> 00:19:23,280 Speaker 1: again putting them on a spot. He can handle it. 356 00:19:23,320 --> 00:19:26,440 Speaker 1: That's Mike mcgloan. Mike's a commodity strategist for Bloomberg Intelligence. 357 00:19:39,920 --> 00:19:42,760 Speaker 1: When you think about asset classes that are experiencing extraordinary growth, 358 00:19:42,800 --> 00:19:45,560 Speaker 1: ETFs are absolutely at the top of that list. Uh. 359 00:19:45,680 --> 00:19:47,520 Speaker 1: To give us some color on what is going on 360 00:19:47,560 --> 00:19:50,240 Speaker 1: in the E t F marketplace today is Martin Kremenstein. 361 00:19:50,560 --> 00:19:53,840 Speaker 1: Martin's ahead of exchange traded funds at Nuvine Investments, which 362 00:19:53,840 --> 00:19:56,439 Speaker 1: I just learned is today is a subsidiary of t 363 00:19:56,600 --> 00:20:00,880 Speaker 1: I double a CREFT about nine seventy billion total assets 364 00:20:00,960 --> 00:20:03,040 Speaker 1: under management, of which about I think twenty billion of 365 00:20:03,080 --> 00:20:05,960 Speaker 1: those are e t s roughly, UM so it's about 366 00:20:06,760 --> 00:20:10,359 Speaker 1: in responsible investing assets of that about five million dollars 367 00:20:10,359 --> 00:20:12,879 Speaker 1: as ETFs. So what are they? What are you seeing 368 00:20:12,880 --> 00:20:15,800 Speaker 1: in fun flows right now on E t F s? 369 00:20:15,840 --> 00:20:19,000 Speaker 1: What what's hot? What's not? Um? So, we're seeing starting 370 00:20:19,000 --> 00:20:21,840 Speaker 1: to see quite a lot of investors interest and flow 371 00:20:21,880 --> 00:20:24,960 Speaker 1: into our responsible investing E t F A E S 372 00:20:25,000 --> 00:20:27,880 Speaker 1: G ones UM. We launched them a couple of years ago, 373 00:20:28,400 --> 00:20:30,200 Speaker 1: and we started see towards the back end of the 374 00:20:30,240 --> 00:20:32,359 Speaker 1: ear as they were getting towards the two year track record, 375 00:20:32,800 --> 00:20:35,320 Speaker 1: flows start to pick up and investors start to come in. 376 00:20:35,600 --> 00:20:37,480 Speaker 1: So E s G, which, for those who don't know, 377 00:20:37,560 --> 00:20:42,440 Speaker 1: was environment, Social and governance, right, and so that has 378 00:20:42,520 --> 00:20:46,480 Speaker 1: and I know it's always been fairly important metric or 379 00:20:46,680 --> 00:20:50,040 Speaker 1: or investment concern for European investors, not so much in US. 380 00:20:50,080 --> 00:20:52,920 Speaker 1: Are you sensing that E s G focused investing is 381 00:20:53,119 --> 00:20:55,800 Speaker 1: really gaining a popularity or or interest. I think so. 382 00:20:55,840 --> 00:20:58,159 Speaker 1: I mean, there's there's been a ton of kind of 383 00:20:58,240 --> 00:21:00,760 Speaker 1: news and kind of hot air about it it um, 384 00:21:00,800 --> 00:21:03,000 Speaker 1: but now we're actually starting to see investors come to 385 00:21:03,359 --> 00:21:05,680 Speaker 1: the market, and really it's because these products are now 386 00:21:05,720 --> 00:21:07,000 Speaker 1: the ones that are out there. The new ones are 387 00:21:07,040 --> 00:21:08,919 Speaker 1: starting to show that you don't have to give up 388 00:21:08,920 --> 00:21:12,960 Speaker 1: performance in order to have a responsible investing mandate. The 389 00:21:13,000 --> 00:21:15,359 Speaker 1: problem for me with wrapping my head around s G 390 00:21:15,560 --> 00:21:19,360 Speaker 1: funds is I don't totally understand what the standards are 391 00:21:19,440 --> 00:21:25,000 Speaker 1: to be an environmental, social, and governmental governmentally responsible company. 392 00:21:25,119 --> 00:21:27,040 Speaker 1: So how do you even measure these things? They seems 393 00:21:27,080 --> 00:21:29,680 Speaker 1: brother fuzzy. Yes, so I think you're right. It is 394 00:21:29,720 --> 00:21:31,480 Speaker 1: a little fuzzy, and it's certainly on the industry to 395 00:21:31,480 --> 00:21:34,160 Speaker 1: do a better job of explaining that. I think though. 396 00:21:34,200 --> 00:21:36,240 Speaker 1: What you can do is you can take an industry, 397 00:21:36,920 --> 00:21:40,439 Speaker 1: say like technology, and you can mark each company according 398 00:21:40,480 --> 00:21:43,800 Speaker 1: to the material s G factors for that industry. So 399 00:21:43,960 --> 00:21:47,000 Speaker 1: for technology, it's can be things like data privacy, data 400 00:21:47,080 --> 00:21:50,720 Speaker 1: security under the social environmental is less important to them. 401 00:21:50,800 --> 00:21:52,720 Speaker 1: And then if you do like we do, you compare 402 00:21:52,760 --> 00:21:55,160 Speaker 1: tech companies to each other and you select just within 403 00:21:55,240 --> 00:21:57,760 Speaker 1: a sector, the best performing companies. You're able to give 404 00:21:57,800 --> 00:22:01,399 Speaker 1: a market exposure within a product and and and then 405 00:22:01,520 --> 00:22:04,679 Speaker 1: be able to enhance the s G characterists of that portfolio. 406 00:22:05,040 --> 00:22:07,600 Speaker 1: And over time we've seen that actually can give you 407 00:22:07,640 --> 00:22:10,680 Speaker 1: better returns. So it returns. So let's just talk about 408 00:22:10,680 --> 00:22:14,440 Speaker 1: over time, how have returns been for E s G 409 00:22:14,600 --> 00:22:17,119 Speaker 1: funds or companies that score highly on E s G. 410 00:22:17,240 --> 00:22:20,320 Speaker 1: Has there been a tight correlation in terms of our 411 00:22:20,359 --> 00:22:22,840 Speaker 1: performance or under performance? So what we've seen, so we 412 00:22:22,880 --> 00:22:24,879 Speaker 1: have a two year track record now for our first 413 00:22:24,960 --> 00:22:28,280 Speaker 1: E s G products, and we've seen strong out performance 414 00:22:28,440 --> 00:22:30,879 Speaker 1: for the two value products are large cap value product 415 00:22:31,000 --> 00:22:33,440 Speaker 1: a MidCap value product. They're both in the top quartile 416 00:22:34,080 --> 00:22:36,719 Speaker 1: of their peer group, right, and that includes active managers 417 00:22:36,760 --> 00:22:38,280 Speaker 1: as well as index funds. So that's that's a good 418 00:22:38,280 --> 00:22:41,119 Speaker 1: performance for an index product. Our small cap product is 419 00:22:41,160 --> 00:22:43,480 Speaker 1: in the top six percent for its peer group. And 420 00:22:43,520 --> 00:22:45,080 Speaker 1: it makes sense because when you look at what you're 421 00:22:45,119 --> 00:22:49,040 Speaker 1: scoring on E s G, right, do you waste material resources? Um? 422 00:22:49,080 --> 00:22:50,879 Speaker 1: Do you have good do you pollute? Do you have 423 00:22:50,920 --> 00:22:55,120 Speaker 1: good relationships with your customers, with your client, with your workers, 424 00:22:55,160 --> 00:22:56,800 Speaker 1: with the regulators? And then do you have a good 425 00:22:56,800 --> 00:22:59,880 Speaker 1: good governance structure, those oral markers of kind of well 426 00:23:00,000 --> 00:23:01,719 Speaker 1: on companies, and so it can be looked at as 427 00:23:01,760 --> 00:23:05,040 Speaker 1: another way of defining quality um and quality goes very 428 00:23:05,119 --> 00:23:07,240 Speaker 1: very strongly with value. We know that it also goes 429 00:23:07,320 --> 00:23:09,720 Speaker 1: very strongly with small caps. Yeah, but I just push 430 00:23:09,800 --> 00:23:12,280 Speaker 1: back a little bit. Do you talk about privacy with 431 00:23:12,400 --> 00:23:15,360 Speaker 1: big tech? And I'm just wondering. Facebook shares did phenomenally 432 00:23:15,359 --> 00:23:18,920 Speaker 1: well before they were sort of illuminated as potentially having 433 00:23:18,920 --> 00:23:22,080 Speaker 1: privacy issues, and then their shares crashed. I mean, how 434 00:23:22,119 --> 00:23:24,200 Speaker 1: how much at risks are you with some of these 435 00:23:24,240 --> 00:23:27,359 Speaker 1: metrics following the trend of picking up on news and 436 00:23:27,400 --> 00:23:30,240 Speaker 1: then uh and then punishing the start after the fact. 437 00:23:30,640 --> 00:23:33,040 Speaker 1: So we never held Facebook in our large cap growth 438 00:23:33,040 --> 00:23:36,360 Speaker 1: portfolio from the start because it's big privacy issue. Last 439 00:23:36,400 --> 00:23:38,600 Speaker 1: year it wasn't the first time that had issues in 440 00:23:39,440 --> 00:23:42,199 Speaker 1: hence the agreement that had with the ftc UM. And 441 00:23:42,240 --> 00:23:44,040 Speaker 1: so I think when you're an investor, even if you 442 00:23:44,119 --> 00:23:46,520 Speaker 1: don't believe in the principle of response to investing, you 443 00:23:46,560 --> 00:23:48,800 Speaker 1: should actually look at a company's s G score if 444 00:23:48,800 --> 00:23:51,480 Speaker 1: you can get hold of it, and if it changes drastically, 445 00:23:51,760 --> 00:23:53,439 Speaker 1: you should want to know why look at the underlying 446 00:23:53,440 --> 00:23:55,639 Speaker 1: reason and have they fixed that issue. If they haven't, 447 00:23:55,680 --> 00:23:58,879 Speaker 1: then that it would not be in your UH, in 448 00:23:58,880 --> 00:24:01,160 Speaker 1: your your category for s G. I'm just wondering how 449 00:24:01,240 --> 00:24:05,440 Speaker 1: much have e SG funds outperformed of late UM SO. 450 00:24:05,600 --> 00:24:08,240 Speaker 1: I think last year our large cap value portfolio outperformed 451 00:24:08,280 --> 00:24:10,800 Speaker 1: the Russell one K value by about four hundred basis 452 00:24:10,800 --> 00:24:15,439 Speaker 1: points UM, our large cap growth portfolio outperformed the Russell 453 00:24:15,680 --> 00:24:18,399 Speaker 1: one K growth by a hundred basis points. Hundred basis 454 00:24:18,440 --> 00:24:21,399 Speaker 1: points out performance in small cap UM and then I 455 00:24:21,480 --> 00:24:23,800 Speaker 1: think we were on on kind of with the benchmark 456 00:24:23,880 --> 00:24:28,240 Speaker 1: of for MidCap growth and value. So do CEOs care 457 00:24:28,280 --> 00:24:30,800 Speaker 1: about E s G? Do they recognize that it's becoming 458 00:24:30,840 --> 00:24:34,680 Speaker 1: a bigger part of investors, certainly retail investors and maybe 459 00:24:34,720 --> 00:24:38,000 Speaker 1: institutional investors in their investment process. Have you do you 460 00:24:38,000 --> 00:24:41,120 Speaker 1: think CEOs care? They do UM and I think it's 461 00:24:41,160 --> 00:24:43,280 Speaker 1: been driven because this is this is something that's relatively 462 00:24:43,680 --> 00:24:45,880 Speaker 1: new for the retail space, but the institutional space it's 463 00:24:45,880 --> 00:24:47,800 Speaker 1: been a big deal for a while. The endowments of 464 00:24:47,840 --> 00:24:50,280 Speaker 1: foundations UM you've seen kind of some of them been 465 00:24:50,320 --> 00:24:53,639 Speaker 1: removing fossil fuels from their portfolio. Is removing cold companies. UM. 466 00:24:53,840 --> 00:24:55,639 Speaker 1: This is a conversation that's been going on for a while. 467 00:24:55,800 --> 00:24:58,600 Speaker 1: It's only now kind of you know, percolating down to 468 00:24:58,680 --> 00:25:00,919 Speaker 1: the retail level. This is something that I think you 469 00:25:00,920 --> 00:25:02,639 Speaker 1: can see more and more compliance on because it is 470 00:25:02,680 --> 00:25:05,159 Speaker 1: starting to move stock prices. I think, So, how do 471 00:25:05,200 --> 00:25:07,840 Speaker 1: you market this to whom? UM? So really we we 472 00:25:07,960 --> 00:25:10,879 Speaker 1: market it to financial advisors, a lot of whom are 473 00:25:10,880 --> 00:25:12,879 Speaker 1: having clients coming to them saying what do you know 474 00:25:12,880 --> 00:25:15,919 Speaker 1: about responsible investing, particularly when they do succession planning with 475 00:25:16,240 --> 00:25:20,280 Speaker 1: the spouses and and the children of their clients. But honestly, 476 00:25:20,320 --> 00:25:22,480 Speaker 1: when you see the performance from our small cap portfolio 477 00:25:22,520 --> 00:25:24,800 Speaker 1: from our large cap value, UM, we can go out 478 00:25:24,800 --> 00:25:26,040 Speaker 1: and say, you know what, if you're looking at using 479 00:25:26,080 --> 00:25:28,000 Speaker 1: value in your portfolio, you should look at an E 480 00:25:28,119 --> 00:25:30,080 Speaker 1: s G quality set of factors with it. When you're 481 00:25:30,080 --> 00:25:31,880 Speaker 1: looking at small caps, you should really look at look 482 00:25:31,920 --> 00:25:33,360 Speaker 1: at it through as an E s G lens as well. 483 00:25:34,040 --> 00:25:37,200 Speaker 1: There's a question I'm really looking for it which which 484 00:25:37,240 --> 00:25:41,760 Speaker 1: sectors score poorly on E s G. UM. So the 485 00:25:41,800 --> 00:25:45,760 Speaker 1: traditional old school response social responsible investing, where you just 486 00:25:45,800 --> 00:25:49,640 Speaker 1: stripped out sectors UM that were kind of poor performing. 487 00:25:49,760 --> 00:25:52,879 Speaker 1: You'd always just remove energy and you remove utilities, and 488 00:25:52,920 --> 00:25:55,520 Speaker 1: that's why a lot of the older products were essentially 489 00:25:56,040 --> 00:25:58,199 Speaker 1: just growth portfolios, because once you remove those, it's very 490 00:25:58,200 --> 00:26:00,800 Speaker 1: hard to build value. UM from our perspective, we want 491 00:26:00,800 --> 00:26:03,760 Speaker 1: to have all sectors represented within an asset class because 492 00:26:03,800 --> 00:26:05,840 Speaker 1: we want to give asset class representation because if you're 493 00:26:05,920 --> 00:26:08,000 Speaker 1: if you're building portfolios and these five products are part 494 00:26:08,000 --> 00:26:10,800 Speaker 1: of an overall suite, you can build full ass allocation portfolios. 495 00:26:11,000 --> 00:26:14,160 Speaker 1: We need the products to actually perform particularly stress environments 496 00:26:14,200 --> 00:26:17,480 Speaker 1: like their asset classes. Just real quickly in in thirty seconds. 497 00:26:17,520 --> 00:26:20,520 Speaker 1: I'm wondering, I've frankly heard some surprise that there hasn't 498 00:26:20,520 --> 00:26:23,160 Speaker 1: been more money going into E s G. What's your 499 00:26:23,160 --> 00:26:25,639 Speaker 1: sense of that it takes time. We we have a 500 00:26:25,640 --> 00:26:28,240 Speaker 1: two year track record for our domestic products. Our international 501 00:26:28,240 --> 00:26:31,119 Speaker 1: products only have eighteen months of coll fix income is 502 00:26:31,119 --> 00:26:33,000 Speaker 1: a little less than that. When we're more of these 503 00:26:33,000 --> 00:26:35,600 Speaker 1: products have three year track records, they get their their 504 00:26:35,640 --> 00:26:38,720 Speaker 1: star rankings and you can see the benefit out there. UM, 505 00:26:38,760 --> 00:26:40,560 Speaker 1: I think you'll see more money come in and advised 506 00:26:40,600 --> 00:26:42,600 Speaker 1: and investors a skeptical of back tests, right, they all 507 00:26:42,600 --> 00:26:45,000 Speaker 1: look beautiful. We need to show them that it works 508 00:26:45,040 --> 00:26:46,520 Speaker 1: out in the market, and that's what we're doing at 509 00:26:46,520 --> 00:26:48,760 Speaker 1: the moment. Martin Crenstein, thank you so much for being 510 00:26:48,800 --> 00:26:51,280 Speaker 1: with us, for having it. Thank you very much. Martin 511 00:26:51,280 --> 00:26:54,440 Speaker 1: Crenstein has head of exchange traded Funds at Uvene Investments, 512 00:26:54,440 --> 00:26:57,840 Speaker 1: which is a subsidiary of t I A. Kraft overseeing 513 00:26:57,960 --> 00:27:02,560 Speaker 1: nine and seventy billion dollars here in New York. Thanks 514 00:27:02,560 --> 00:27:04,879 Speaker 1: for listening to the Bloomberg pen L podcast. You can 515 00:27:04,880 --> 00:27:07,720 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 516 00:27:07,800 --> 00:27:10,800 Speaker 1: podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter 517 00:27:10,840 --> 00:27:13,119 Speaker 1: at pt Sweeney. I'm Lisa A. Bram Wits. I'm on 518 00:27:13,160 --> 00:27:15,960 Speaker 1: Twitter at Lisa A. Bram Wits. One Before the podcast, 519 00:27:16,000 --> 00:27:18,600 Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio.