WEBVTT - Week of Whiplash in Treasuries Is Closing With Muddied Outlook 0:00:02.520 --> 0:00:10.480 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business 0:00:10.520 --> 0:00:14.400 Week Daily reporting from the magazine that helps global leaders 0:00:14.400 --> 0:00:18.320 stay ahead with insight on the people, companies, and trends 0:00:18.360 --> 0:00:23.360 shaping today's complex economy. Plus global business, finance and tech 0:00:23.440 --> 0:00:27.320 news as it happens. The Bloomberg Business Week Daily Podcast 0:00:27.640 --> 0:00:32.000 with Carol Masser and Tim Stenebeck on Bloomberg Radio. 0:00:32.360 --> 0:00:34.920 Let's get to what has been the week of whiplash 0:00:34.960 --> 0:00:36.760 when it comes to US treasuries. 0:00:37.159 --> 0:00:39.479 I really have focus on rates too around the globe. 0:00:39.520 --> 0:00:42.480 We've got a great roundtable Irid Jersey, Bloomberg Intelligence chief 0:00:42.560 --> 0:00:45.919 US interest rates strategists, and Sarah Hunt, chief market strategist 0:00:45.920 --> 0:00:50.280 at Alpine Saxon Woods, both here in studio. Traders are 0:00:50.600 --> 0:00:55.640 increasingly questioning what Treasury Secretary's next move will be after 0:00:55.680 --> 0:00:57.080 what's been I think it's safe to say a bit 0:00:57.080 --> 0:01:00.320 of a turbulent market bond market this past week. 0:01:01.000 --> 0:01:02.040 Sarah, how do you see it? 0:01:03.200 --> 0:01:06.399 I think that it was a surprise that they that 0:01:06.680 --> 0:01:08.280 he came out and said this is what we're going 0:01:08.319 --> 0:01:09.440 to do in the long end of the curve. I 0:01:09.440 --> 0:01:11.720 think everyone's been looking at worsh Chairman warsh and looking 0:01:11.760 --> 0:01:13.240 at the Fed and seeing what's going to happen with 0:01:13.280 --> 0:01:15.440 interest rates there. I don't think that people were expecting 0:01:15.640 --> 0:01:17.880 the Treasury Secrete to come out and make his own 0:01:17.920 --> 0:01:21.119 news on this particular front. And I think there are, 0:01:21.720 --> 0:01:23.920 as you can see, quite a lot of questions about one, 0:01:23.959 --> 0:01:26.399 how this is actually going to work mechanically too, whether 0:01:26.480 --> 0:01:28.240 or not this is going to actually help the long 0:01:28.319 --> 0:01:30.440 end of the curve, which was arguably the idea, because 0:01:30.480 --> 0:01:31.240 you've you round. 0:01:31.080 --> 0:01:33.279 Tripped that all it did and didn't it didn't. 0:01:33.720 --> 0:01:35.600 And on the other hand, gold is just like, okay, 0:01:35.680 --> 0:01:38.280 we're gone, and it just is going again today. And 0:01:38.319 --> 0:01:40.640 I think that that's, you know, whether or not the 0:01:40.680 --> 0:01:42.760 only signal that gold gives is that we don't like 0:01:42.800 --> 0:01:45.520 anybody else's decisions, or it's just a way to play 0:01:45.520 --> 0:01:48.760 a different angle. I think that you're seeing the reverse 0:01:48.800 --> 0:01:51.280 and interest rates didn't reverse gold, so that maybe an 0:01:51.360 --> 0:01:52.800 anticipation of further movement. 0:01:52.880 --> 0:01:55.000 Gold up five percent this week. Yeah, we've seen a 0:01:55.000 --> 0:01:55.360 big move. 0:01:55.480 --> 0:01:57.360 I mean, Ira, where do you stand on this now 0:01:57.400 --> 0:01:59.240 that this is Friday, it's been a couple of days. 0:02:00.320 --> 0:02:01.360 Yields are still moving up. 0:02:01.560 --> 0:02:04.200 Yeah, Well, yields are kind of flatish right from the 0:02:04.240 --> 0:02:06.160 beginning of the week. So yeah, it did a whole 0:02:06.160 --> 0:02:08.520 lot of nothing. You know, devil is in the details 0:02:08.520 --> 0:02:10.160 here a little bit, so you know, we won't find 0:02:10.200 --> 0:02:12.560 out the exact size, you know, he says maybe next 0:02:12.639 --> 0:02:16.079 week that they'll tell us more information. I did think 0:02:16.080 --> 0:02:18.800 it was really funny when Scott Besson said, you know, 0:02:18.840 --> 0:02:21.320 we're doing this because there's you know, low liquidity in 0:02:21.320 --> 0:02:23.200 the middle of summer and things like that. But this 0:02:23.240 --> 0:02:27.680 doesn't start till September ninth, so I'm not exactly this summer, 0:02:28.639 --> 0:02:32.080 I guess, but it's not August, it's not now. And 0:02:32.080 --> 0:02:33.680 in fairness, like I was looking at the depth of 0:02:33.680 --> 0:02:35.920 the market actually right around the time that he said that, 0:02:36.160 --> 0:02:38.280 and actually the depth of the market was not bad, right. 0:02:38.320 --> 0:02:41.880 The depth of the market was your typical summerish levels, 0:02:41.960 --> 0:02:45.480 not insanely low. So it's not like they really needed 0:02:45.480 --> 0:02:47.760 the direct liquidity support here that. 0:02:47.919 --> 0:02:49.680 I was going to say political or did the market 0:02:49.720 --> 0:02:50.800 need this? Sarah? 0:02:50.840 --> 0:02:52.399 So I you know, it's interesting. 0:02:52.480 --> 0:02:55.640 I think that people have been concerned globally about rates rising, 0:02:55.720 --> 0:02:58.320 especially on the long end, and that's been a problem 0:02:58.360 --> 0:03:00.480 for investors. It's been a problem for all these companies 0:03:00.520 --> 0:03:02.440 that are now trying to finance the entire. 0:03:02.240 --> 0:03:03.520 AI build out government. 0:03:03.680 --> 0:03:07.560 So the question is, are we doing something because this 0:03:07.760 --> 0:03:09.520 exact amount of money is going to make a change, 0:03:09.600 --> 0:03:11.040 or is the fact that we're saying we're going to 0:03:11.080 --> 0:03:13.400 do something reminding everyone that the government can come in 0:03:13.400 --> 0:03:14.639 at any time and change the game. 0:03:14.680 --> 0:03:16.480 And I think it's a little bit to me of that. 0:03:16.520 --> 0:03:17.840 I don't know how you feel about that I read, 0:03:17.840 --> 0:03:19.680 but that was my take, was a little bit like 0:03:19.720 --> 0:03:22.160 we're going to do something and not just stand there 0:03:22.200 --> 0:03:23.399 and let the market figure it out. 0:03:23.720 --> 0:03:23.919 Yeah. 0:03:24.440 --> 0:03:26.720 I think they did this, and it was kind of underwhelming, Right. 0:03:26.720 --> 0:03:28.799 It's kind of like the Federal Reserve in December of 0:03:28.840 --> 0:03:32.040 two thousand and seven when they did you know, they 0:03:32.160 --> 0:03:34.320 did a forty billion dollar program for a three hundred 0:03:34.360 --> 0:03:37.360 million dollar problem, and so something like that. Maybe there 0:03:37.400 --> 0:03:39.560 will be a little bit more shock and all. But 0:03:39.600 --> 0:03:41.880 there are risks to what they're doing too, right, like 0:03:41.880 --> 0:03:43.680 if they're going to issue a whole lot of tea 0:03:43.680 --> 0:03:45.320 bills in order to buy back a lot of debt, 0:03:45.320 --> 0:03:47.560 and let's call this what it is, if it's going 0:03:47.600 --> 0:03:51.920 to work, and if the President and Treasury Secretary are 0:03:51.920 --> 0:03:54.240 really serious about getting long end yields down, they have 0:03:54.320 --> 0:03:56.440 to do this in size, and we have to then 0:03:56.520 --> 0:03:59.160 call this an operation Twist similar to what the Treasury 0:03:59.200 --> 0:04:02.880 Department did in ninety sixties. And they if they do that, 0:04:03.200 --> 0:04:05.920 the one big risk for them is what happens if 0:04:05.960 --> 0:04:08.280 the Federal Reserve has to raise interest rates because they're 0:04:08.280 --> 0:04:11.280 going to be issuing te bills which capture that interest 0:04:11.320 --> 0:04:14.600 rate move almost immediately compared to thirty year debt, which 0:04:14.680 --> 0:04:17.280 you know obviously takes thirty years to recapture that new 0:04:17.320 --> 0:04:18.200 interest rate environment. 0:04:18.920 --> 0:04:21.160 Sarah, what do you think it means for the FED? 0:04:21.200 --> 0:04:24.279 Does this that all kind of alter when we do 0:04:24.480 --> 0:04:26.880 get I move find FED. 0:04:27.160 --> 0:04:28.880 I'm not sure what the answer to that is. 0:04:28.920 --> 0:04:32.240 And I don't know if there's any actual coordination going 0:04:32.240 --> 0:04:33.080 on that we don't know about. 0:04:33.120 --> 0:04:34.960 I mean, what we see is what the headlines are. 0:04:35.000 --> 0:04:37.279 We don't see what everybody's talking about it behind the 0:04:37.320 --> 0:04:39.760 closed doors. So whether or not there is a conversation, 0:04:39.839 --> 0:04:42.360 I couldn't tell you. One would hope that there might 0:04:42.400 --> 0:04:44.719 be some sort of coordination or at least an understanding, 0:04:44.760 --> 0:04:46.880 because otherwise then you start to look like you've got 0:04:47.279 --> 0:04:48.880 government departments fighting one another. 0:04:49.160 --> 0:04:50.880 So what's your take on that. 0:04:51.160 --> 0:04:53.480 Well, I think that they're not coordinating, because if they 0:04:53.480 --> 0:04:56.159 were coordinating, then the Federal Reserve would not have stopped 0:04:56.160 --> 0:04:58.640 buying tea bills. The Federal Reserve was doing these reserve 0:04:58.680 --> 0:05:01.160 management purchases, buying ten billion dollars of tea bills every 0:05:01.160 --> 0:05:04.400 single month. So if they were coordinating, and Treasury Secretary 0:05:04.400 --> 0:05:06.960 Besant said to Kevin Walsh, Hey, we're going to be 0:05:07.040 --> 0:05:09.400 issuing more tea bills to buy thirty year debt, how 0:05:09.400 --> 0:05:11.560 about you buy some of those tea bills. Well, the 0:05:11.560 --> 0:05:14.279 Fed's not buying those tea bills. So if there was coordination, 0:05:14.320 --> 0:05:15.120 it was pretty poor. 0:05:16.360 --> 0:05:19.520 Is this President Trump potentially to saying, hey, Scott besstt, 0:05:19.560 --> 0:05:21.080 I need you to do something because my fed share 0:05:21.160 --> 0:05:21.920 isn't doing something. 0:05:22.160 --> 0:05:22.960 Is it possibly? 0:05:23.440 --> 0:05:25.520 I don't absolutely possible? 0:05:25.600 --> 0:05:28.599 Right again, I think we're all trying to understand, struggling 0:05:28.640 --> 0:05:31.719 to understand exactly what the point is in the timing frame. 0:05:31.880 --> 0:05:34.680 So fast forward, Okay, so do we get answers at 0:05:34.760 --> 0:05:36.640 Jackson Hole is coming week? I mean, we have a 0:05:36.640 --> 0:05:39.400 fed share who has already shown he doesn't like to 0:05:39.440 --> 0:05:41.960 say a lot or lay out the metrics of what 0:05:42.520 --> 0:05:44.560 that you know what metrics he is following and the 0:05:44.600 --> 0:05:47.160 FED is following the FOMC in terms of figuring out 0:05:47.200 --> 0:05:48.160 monetary policy. 0:05:48.520 --> 0:05:50.000 Do you think we're going to get anything this week? 0:05:50.080 --> 0:05:52.720 Well, he's told us he's going to frame the big 0:05:52.839 --> 0:05:55.360 questions and you can lay them out. 0:05:55.400 --> 0:05:56.839 But if you don't say what you're following. 0:05:56.920 --> 0:06:00.360 Well, and this is the challenge that Kevin wore really 0:06:00.400 --> 0:06:02.080 has had, and I don't think he's done a particularly 0:06:02.080 --> 0:06:04.520 good job in communicating with the markets, because you have 0:06:04.560 --> 0:06:06.839 to give the markets something, right, you can't give them nothing, 0:06:06.880 --> 0:06:09.279 and he's basically given the markets nothing. So he has 0:06:09.360 --> 0:06:11.440 to either say give some kind of forward guidance or 0:06:11.520 --> 0:06:15.440 say if this happens, then we will react this way, 0:06:15.640 --> 0:06:17.720 so give a reaction function. You have to do one 0:06:17.720 --> 0:06:20.320 of those two things. It's interesting because you put MERPHN. King, 0:06:20.600 --> 0:06:24.480 former Bank of England governor on the Communications Task Force. 0:06:24.800 --> 0:06:27.960 This is what Murphy King wants to do. He says that, hey, 0:06:28.000 --> 0:06:30.360 we want to give the reaction function. We don't want 0:06:30.360 --> 0:06:33.920 to give forward guidance. But Kevin worsh clearly has if 0:06:33.920 --> 0:06:36.359 he read that paper, then he's not following it for sure. 0:06:36.600 --> 0:06:38.599 Well, and I also think that you're at the point 0:06:38.640 --> 0:06:41.200 now where you have to really look at that speech. 0:06:41.240 --> 0:06:42.640 If you were if it was going to be under 0:06:42.640 --> 0:06:44.000 a microscope, now it's under five. 0:06:44.080 --> 0:06:47.479 Right now, you went from yes, this is where all 0:06:47.520 --> 0:06:50.360 every LM is going to get that speech, and we're 0:06:50.360 --> 0:06:51.920 going to get analysis. 0:06:51.480 --> 0:06:53.600 And everybody was focused on the FED and then they 0:06:53.640 --> 0:06:55.320 turned to the Treasury. So now the fed's now and 0:06:55.360 --> 0:06:57.080 now they're extra focused on what they're going to say. 0:06:57.120 --> 0:06:59.200 And the fact that the communication has been I would 0:06:59.200 --> 0:07:02.360 say uneven a word that you could use, doesn't help 0:07:02.440 --> 0:07:04.680 the situation, and I think that it makes it more 0:07:04.720 --> 0:07:07.360 important to clarify whatever. So I think Jackson hole is 0:07:07.400 --> 0:07:08.719 you know, we're all going to be sitting around on 0:07:08.720 --> 0:07:09.840 Friday watching what's going. 0:07:09.720 --> 0:07:11.600 On, and we'll probably all fall asleep because it won't 0:07:11.640 --> 0:07:12.600 be very interesting, but. 0:07:12.520 --> 0:07:13.280 We're going to have to watch. 0:07:15.920 --> 0:07:17.600 Well, we're gonna be waiting for the walk, right, We're 0:07:17.600 --> 0:07:18.480 gonna be waiting for all this. 0:07:19.040 --> 0:07:21.400 Tomkenlee's are going to be there. It's going to be interesting. 0:07:21.600 --> 0:07:23.600 Sarah layer on top of this, and we've already talked 0:07:23.600 --> 0:07:26.680 with Ara about this about the data center build out, 0:07:26.680 --> 0:07:28.520 and you write in your notes the pushback against data 0:07:28.560 --> 0:07:30.360 center build That could be a blessing in disguise, as 0:07:30.360 --> 0:07:33.480 well as investor concern over CAPEX spending has been growing 0:07:33.480 --> 0:07:35.280 as the hyperscalers commit ever more. 0:07:35.120 --> 0:07:36.480 Equity and debt to the buildout. 0:07:36.720 --> 0:07:40.800 We've been talking about how the hyperscalers and everybody are 0:07:40.840 --> 0:07:43.120 related tapping credit markets and what that's done to maybe 0:07:43.120 --> 0:07:45.120 crowding out the treasury trade. 0:07:45.120 --> 0:07:48.040 What's top like, what are how. 0:07:47.920 --> 0:07:51.000 Worried are you about all of this tapping of the 0:07:51.040 --> 0:07:52.520 credit market for these AI guys. 0:07:52.680 --> 0:07:54.920 I think that there was definitely concern about how much 0:07:54.960 --> 0:07:56.960 money was being raised, how fast, and at the same 0:07:56.960 --> 0:07:58.880 time you've got the government racing into raising I mean 0:07:58.880 --> 0:08:02.280 everyone's raising money, right, so that was an issue. Whether 0:08:02.360 --> 0:08:04.120 or not this money is actually going to have a 0:08:04.160 --> 0:08:06.560 return on investment is another question that people have been 0:08:06.920 --> 0:08:09.760 going crazy about the idea that it's an arms race, 0:08:09.800 --> 0:08:12.080 that you have to spend faster than China. The fact 0:08:12.120 --> 0:08:14.080 that there may be a bottleneck could be a blessing 0:08:14.080 --> 0:08:15.800 in this guy is just in the fact that people 0:08:15.840 --> 0:08:17.840 are worried so much about that spend and how much 0:08:17.840 --> 0:08:19.440 of that spend is coming out of debt and equity 0:08:19.440 --> 0:08:21.800 and no longer cash flow, and if that slows down, 0:08:21.880 --> 0:08:24.360 maybe that gives investors some room whether or not that 0:08:24.480 --> 0:08:29.000 becomes a further race to the top between China. I mean, 0:08:29.000 --> 0:08:31.320 I'm not sure how to look at that capex relative 0:08:31.400 --> 0:08:34.040 to other things that I think that investors are struggling. 0:08:33.600 --> 0:08:35.520 With enjoy the crowd. I don't know how to look 0:08:35.559 --> 0:08:36.040 at it either. 0:08:36.160 --> 0:08:38.360 Like I feel like increasingly we say this, we see 0:08:38.360 --> 0:08:40.520 the headlines, we see the spend, and we're trying to 0:08:40.520 --> 0:08:41.640 put it in context. 0:08:41.760 --> 0:08:45.040 I also want to ask you about where equities go 0:08:45.080 --> 0:08:49.480 from here, especially rates stay high equity, because like we 0:08:49.600 --> 0:08:51.840 haven't really seen I mean even this week, like it 0:08:51.880 --> 0:08:54.839 hasn't been carnage in the S and P five hundred, 0:08:55.600 --> 0:08:58.880 but the thirty year yields is you know, at these highs, 0:08:58.920 --> 0:09:01.360 like does this continue? Your is there really going to 0:09:01.360 --> 0:09:02.000 be some movement? 0:09:02.080 --> 0:09:02.240 Well? 0:09:02.679 --> 0:09:05.160 I sort of think that this is where Treasury came 0:09:05.200 --> 0:09:07.000 in and did something to the long end, because that 0:09:07.080 --> 0:09:08.920 was starting to get investors word and you were seeing 0:09:08.960 --> 0:09:11.640 the S and P start to degrade and the indices 0:09:11.880 --> 0:09:15.880 and other stocks underneath it as well. It's really going 0:09:15.920 --> 0:09:17.439 to be it's a combination of it's going to be 0:09:17.480 --> 0:09:19.319 about earnings. And somebody made the point this morning, and 0:09:19.360 --> 0:09:21.160 I can't remember who it was. They were saying, yeah, 0:09:21.160 --> 0:09:24.480 earnings are great. People are outspending those earnings. And that's 0:09:24.480 --> 0:09:26.240 a really good point because as we get into twenty 0:09:26.280 --> 0:09:28.280 twenty seven, are we going to continue to up the 0:09:28.320 --> 0:09:31.600 ante on spend and are the earnings going to follow? 0:09:31.800 --> 0:09:34.640 And I think that that's really earnings is the biggest 0:09:34.720 --> 0:09:37.640 problem or benefit to the S and P. And right 0:09:37.679 --> 0:09:40.080 now that's all been working in everybody's favor. If that 0:09:40.160 --> 0:09:42.480 starts to trip and that second derivative starts to go, 0:09:42.520 --> 0:09:44.040 it doesn't even have to go down, it just has 0:09:44.040 --> 0:09:47.360 to grow less fast, and that becomes an issue unto itself, 0:09:47.400 --> 0:09:48.559 given where valuations are. 0:09:48.640 --> 0:09:49.520 Can we just keep going? 0:09:49.640 --> 0:09:52.839 This is really great? Come back next Friday. Sure, I'll 0:09:52.840 --> 0:09:56.880 be in Princeton, said, all right, right, maybe a couple 0:09:56.880 --> 0:09:58.439 of weeks from now, Ivery Jersey. 0:09:58.440 --> 0:10:01.120 Thank you so much, Bloomery Intelligence, Chief you Interest Rates Strategists, 0:10:01.120 --> 0:10:04.120 and Sarah Hunt, chief market strategist at Alpine Saxon Woods. 0:10:05.160 --> 0:10:08.280 Stay with us. More from Bloomberg Business Weekdaily coming up 0:10:08.559 --> 0:10:09.079 after this. 0:10:12.880 --> 0:10:16.720 You're listening to the Bloomberg Business Week Daily podcast. Catch 0:10:16.800 --> 0:10:19.480 us live weekday afternoons from two to five East. During 0:10:19.480 --> 0:10:22.920 this listen on Applecarplay and Android Otto with the Bloomberg 0:10:22.960 --> 0:10:25.679 Business app, or watch us live on YouTube. 0:10:26.200 --> 0:10:29.280 There's a story that is definitely of great interest to 0:10:29.640 --> 0:10:31.960 the Bloomberg community, the market community, right. 0:10:31.880 --> 0:10:33.960 Yeah, it's all about the probe into the business of 0:10:34.000 --> 0:10:37.640 Guggenheim co founder and CEO Mark Walter. Of course, he 0:10:37.800 --> 0:10:41.319 just sold off the La Lakers and reports talks about 0:10:41.480 --> 0:10:45.200 other possible asset sales, and it's all about the insurance 0:10:45.240 --> 0:10:46.760 companies of Guggenheim. 0:10:46.800 --> 0:10:48.320 I feel like we keep learning more and more about 0:10:48.320 --> 0:10:50.600 the story, but it's wild. We did have a team 0:10:50.640 --> 0:10:55.079 of reporters finding out exclusively that the investigation into his businesses, 0:10:55.120 --> 0:10:57.600 his insurance business, has also led to the Department of 0:10:57.760 --> 0:11:01.400 Justice to a small but pro lific credit reader. So 0:11:01.480 --> 0:11:03.800 let's get to it here with the team's reporting. And 0:11:03.840 --> 0:11:06.080 then one of the journalists on the story is Eva 0:11:06.080 --> 0:11:09.679 Benny Morrison. She's Bloomberg new Legal reporter. She joins us 0:11:09.679 --> 0:11:12.240 here in New York City. Eva, thank you, thank you 0:11:12.280 --> 0:11:14.360 for coming on. We've been talking about this story a lot. 0:11:14.960 --> 0:11:17.920 Start with the investigation. Why is the Justice Department seeking 0:11:18.000 --> 0:11:21.319 records from Egan Jones. What do we need to understand 0:11:21.360 --> 0:11:24.960 about how this investigation continues to evolve and why. 0:11:24.920 --> 0:11:27.000 They are all of a sudden, this small. 0:11:28.160 --> 0:11:32.280 Little known maybe firm, but as we know a prolific 0:11:32.400 --> 0:11:35.440 credit reader, is all of a sudden now a target 0:11:35.559 --> 0:11:37.280 or at least of interest for the DOJ. 0:11:39.080 --> 0:11:42.000 So a key part of this investigation is looking at 0:11:42.120 --> 0:11:45.280 how some of the insurance companies linked to Mark Walter 0:11:46.160 --> 0:11:50.920 made loans to affiliated parties. Originally these transactions were marked 0:11:51.000 --> 0:11:54.600 US unaffiliated, but it since turned out that the insurance 0:11:54.600 --> 0:11:58.200 businesses have had to restate twenty billion or so worth 0:11:58.240 --> 0:12:02.480 of these assets, and along with that, many of the 0:12:02.520 --> 0:12:06.680 assets have investment grade ratings from this credit radar called 0:12:06.679 --> 0:12:09.480 Egan Jones. So what we've learned over the past few 0:12:09.559 --> 0:12:12.920 days in our reporting is that the DOJ is requesting 0:12:12.960 --> 0:12:18.360 information from Egan Jones about these ratings. So they've asked 0:12:18.760 --> 0:12:22.680 from material related to Delaware Life in Clear Spring as well. 0:12:23.080 --> 0:12:25.800 This doesn't suggest that by any means that Egan Jones 0:12:25.880 --> 0:12:29.880 is a target, but sort of shows the wide net 0:12:29.920 --> 0:12:32.800 that prosecutors are casting to try and figure out how 0:12:33.040 --> 0:12:36.440 billions of dollars are worth, sorry, billions of dollars worth 0:12:36.440 --> 0:12:40.720 of loans from these insurers ended up being funneled out 0:12:40.760 --> 0:12:41.960 to affiliated parties. 0:12:42.800 --> 0:12:47.199 What does it signal when a company when an insurance 0:12:47.280 --> 0:12:52.960 company is using a credit reading firm like Egan Jones. 0:12:53.000 --> 0:12:56.000 I mean, look, I mean they're approved, they're able to 0:12:56.840 --> 0:12:58.479 give credit readings. 0:12:58.080 --> 0:13:00.679 So it's not necessarily not bad. 0:13:00.760 --> 0:13:04.200 But what can we learn about you know, the fact 0:13:04.240 --> 0:13:07.240 that this company was working with this particular reading agency. 0:13:08.800 --> 0:13:13.600 I think you know, these insurance businesses were big clients 0:13:13.679 --> 0:13:16.839 for Egan Jones. I think from what we can gather, 0:13:17.800 --> 0:13:21.880 at least a fifth of the assets related to Mark 0:13:21.920 --> 0:13:26.960 Well Walter's insurance companies relied on Egan Jones ratings. So 0:13:27.480 --> 0:13:32.120 I think it shows despite Egan Jones being a relatively 0:13:32.160 --> 0:13:35.920 small firm, it does play a really outsized role in 0:13:36.200 --> 0:13:39.240 rating a lot of the assets in the insurance industry, 0:13:39.920 --> 0:13:43.600 particularly at a time where Will Street has really seized 0:13:43.679 --> 0:13:48.280 upon using policy hold of funds for other investments. 0:13:49.040 --> 0:13:52.559 Right, and as you guys right remind us an investment 0:13:52.600 --> 0:13:55.920 grade reading from a firm like Egan Jones can help 0:13:55.960 --> 0:13:58.080 lower the amount of capital the insurance must hold in 0:13:58.160 --> 0:14:01.840 case the assets sour, so allowing them to run essentially 0:14:01.880 --> 0:14:04.479 their businesses more efficiently. It's just kind of a good understanding, 0:14:04.920 --> 0:14:07.880 you know, Ava, we were talking about this after this 0:14:07.960 --> 0:14:11.880 story broke, and it's just this idea we saw it 0:14:12.000 --> 0:14:16.080 during the mortgage meltdown and the two thousand and eight crisis, 0:14:16.080 --> 0:14:20.200 that kind of somewhat cozy relationship right between ratings agencies 0:14:20.240 --> 0:14:25.440 and the companies that need those ratings. I'm not saying 0:14:25.480 --> 0:14:29.760 anything is untoward, but what are we hearing from the company, 0:14:30.080 --> 0:14:34.520 from the US Attorney's office in Manhattan, from TWUG Global, Like, 0:14:34.560 --> 0:14:35.800 what are they all saying about this? 0:14:37.760 --> 0:14:41.040 I can definitely speak to the US Attorney's office in 0:14:41.080 --> 0:14:43.120 Manhattan because that is a key part. 0:14:43.000 --> 0:14:43.400 Of my bait. 0:14:43.520 --> 0:14:46.440 And you know, we've heard from leadership over the past 0:14:46.480 --> 0:14:49.520 twelve months that they are very interested in what is 0:14:49.520 --> 0:14:50.960 happening in private credit. 0:14:51.360 --> 0:14:52.640 It's going out, it's going down. 0:14:52.960 --> 0:14:56.720 They're looking at how it's grown so quickly, whether marks 0:14:56.720 --> 0:15:01.160 are being applied correctly, and how the role of these 0:15:01.280 --> 0:15:06.080 third party firms, what role they kind of play in 0:15:06.440 --> 0:15:09.920 assuring investors that this stuff that they're investing in is 0:15:10.040 --> 0:15:14.480 in fact investment grade. And ratings agency is one Ratings 0:15:14.600 --> 0:15:19.040 agencies are one particular area that prosecutors have been very 0:15:19.120 --> 0:15:20.040 much interested in. 0:15:20.960 --> 0:15:23.760 Okay, so you're following this story. There's a lot of 0:15:24.360 --> 0:15:28.200 layers to this, you know, this kind of saga here. 0:15:28.680 --> 0:15:31.280 What is top of mind for you? What what are 0:15:31.320 --> 0:15:34.640 you watching next as you continue to kind of report 0:15:34.640 --> 0:15:35.040 this out. 0:15:36.320 --> 0:15:40.280 Yeah, absolutely so I am. I'm keeping a keen eye 0:15:40.320 --> 0:15:43.400 on where this how this all ends. For Mark Walter, 0:15:43.880 --> 0:15:47.280 We've seen that he has started selling down some of 0:15:47.320 --> 0:15:50.680 his assets, so for example, selling his steak in the 0:15:50.760 --> 0:15:56.080 Lakers recently were agreeing to it at least, and you know, 0:15:56.160 --> 0:16:00.280 seeing whether the by the insurance company saying that going 0:16:00.320 --> 0:16:02.760 to restate a lot of these transactions and some of 0:16:02.800 --> 0:16:04.960 these lines are going to be paid down, whether that's 0:16:05.080 --> 0:16:09.200 enough for regulators and for the DOJ to be satisfied 0:16:09.200 --> 0:16:13.200 with that as an outcome, or if the investigation continues 0:16:13.200 --> 0:16:16.000 at full throttle and we say we see some kind 0:16:16.000 --> 0:16:18.400 of penalty for some of the players. 0:16:18.080 --> 0:16:20.760 Involved here, how long am I it take to get 0:16:20.800 --> 0:16:23.360 some kind of resolution about what's the next step forward here, 0:16:23.480 --> 0:16:25.240 especially on a legal basis, just quickly? 0:16:26.360 --> 0:16:29.840 Yeah, Look, financial crime cases, investigations can take a very 0:16:29.880 --> 0:16:32.240 long time. We know this one has been going since 0:16:32.240 --> 0:16:35.600 at least the fall last year. So it's anyone's guest. Really, 0:16:36.000 --> 0:16:38.360 it could take months, it could take weeks. We'll just 0:16:38.400 --> 0:16:39.040 have to watch and. 0:16:38.960 --> 0:16:41.720 Say, yeah, it's very interesting. 0:16:41.760 --> 0:16:44.080 We know it's certainly something that's always top of mind 0:16:44.640 --> 0:16:47.800 for folks here on Wall Street and certainly those who 0:16:48.120 --> 0:16:50.880 read into the Bloomberg terminal. Hey, Eva, thank you, We 0:16:50.920 --> 0:16:53.280 really appreciate it. Eva, Benny Morrison and Bloomberg new senior 0:16:53.400 --> 0:16:54.840 legal reporter joining us there. 0:16:55.080 --> 0:16:58.960 You're listening to the Bloomberg Business Week Daily podcast. Catch 0:16:59.040 --> 0:17:01.200 us live weekly afternoons from two to five. 0:17:01.280 --> 0:17:01.440 Yes. 0:17:01.480 --> 0:17:04.520 During that listen on Applecarplay and Android Otto with the 0:17:04.600 --> 0:17:08.000 Bloomberg Business app, or watch us live on YouTube. 0:17:08.400 --> 0:17:11.199 Well, President Trump said he would allow terror relief for 0:17:11.400 --> 0:17:13.800 some ground beef imports and a bit to lower prices 0:17:13.800 --> 0:17:16.879 for American consumers. It's a key concern ahead of November 0:17:16.960 --> 0:17:20.560 midterm elections. We talked about it with our own Jason 0:17:20.920 --> 0:17:23.679 Jeff Mason earlier in the two o'clock hour. Here's what 0:17:23.720 --> 0:17:26.639 the President said though on truth Social he said that 0:17:26.680 --> 0:17:29.000 for the next ninety days, the United States will allow 0:17:29.080 --> 0:17:31.960 up to three hundred thousand metric tons of product for 0:17:32.080 --> 0:17:36.200 ground beef to be imported with no out of quota tariff. 0:17:36.840 --> 0:17:39.600 President went on to say, we have a commitment that 0:17:39.640 --> 0:17:42.200 this beef will be sold at twenty five percent below 0:17:42.320 --> 0:17:45.920 current market prices. I still feel like, and I think 0:17:45.960 --> 0:17:47.960 folks think, there are still more details to be known. 0:17:47.960 --> 0:17:50.040 What we do know or what we. 0:17:50.040 --> 0:17:52.439 Don't know is what we want to ask our next reporter, 0:17:52.520 --> 0:17:55.040 Alena Pang is Bloomberg News agriculture reporter. 0:17:55.200 --> 0:17:56.280 She joins us on set. 0:17:56.560 --> 0:17:59.040 Elena, You've been following what's been going on in beef prices. 0:17:59.040 --> 0:18:03.200 We've all moaned about the high cost. What is significant 0:18:03.240 --> 0:18:04.920 about what we got from the president or is there 0:18:05.000 --> 0:18:06.000 still stuff to be known. 0:18:06.920 --> 0:18:09.840 The biggest unknown, I think is where the supplies are 0:18:09.880 --> 0:18:12.440 coming from. People are watching that really closely. I think 0:18:12.440 --> 0:18:16.920 the biggest bets are probably Australia, Brazil, Argentina. I think 0:18:16.960 --> 0:18:19.840 this move has been really interesting for the market because 0:18:19.840 --> 0:18:22.480 it's the latest in a series that Trump has tried 0:18:22.520 --> 0:18:26.359 to do so. He already tried to boost imports from Argentina, 0:18:26.520 --> 0:18:28.600 which for the first half of the year are about 0:18:28.640 --> 0:18:32.199