1 00:00:18,120 --> 00:00:20,720 Speaker 1: Hello, and welcome to the Credit Edge, a weekly markets podcast. 2 00:00:20,880 --> 00:00:23,840 Speaker 1: My name is James Crumbie. I'm a senior editor at Bloomberg. 3 00:00:23,840 --> 00:00:28,200 Speaker 2: And I'm Jody Lurry, a senior credit analyst covering leisure, lodging, gaming, restaurants, 4 00:00:28,200 --> 00:00:30,440 Speaker 2: and rental car companies at Bloomberg Intelligence. 5 00:00:31,040 --> 00:00:32,559 Speaker 3: This week, we're very pleased to. 6 00:00:32,520 --> 00:00:36,280 Speaker 2: Welcome Lisa Coleman, head of Global Investment Grade Corporate Credit 7 00:00:36,320 --> 00:00:37,839 Speaker 2: at JP Morgan Asset Management. 8 00:00:37,880 --> 00:00:39,680 Speaker 3: How are you, Lisa, I'm great. 9 00:00:39,840 --> 00:00:41,839 Speaker 4: Thank you so much for having me over today. 10 00:00:42,560 --> 00:00:44,919 Speaker 2: Well, it's wonderful to have you and I'm just so 11 00:00:44,960 --> 00:00:48,360 Speaker 2: excited to dip into an area that I'm extremely passionate about. 12 00:00:48,400 --> 00:00:50,560 Speaker 1: Great, see Lisa. Just to set the scene there before 13 00:00:50,560 --> 00:00:53,760 Speaker 1: we begin, Global markets are getting whipswored by recession fears 14 00:00:53,800 --> 00:00:57,800 Speaker 1: and haphazard and erretic US policymaking, particularly on trade. Despite 15 00:00:57,840 --> 00:01:01,000 Speaker 1: that credit spreads are quite thin the board, there's a 16 00:01:01,040 --> 00:01:03,280 Speaker 1: hope that the longer term trajectory of the US economy 17 00:01:03,280 --> 00:01:06,800 Speaker 1: remains up despite some short term pain and volatility. Market 18 00:01:06,800 --> 00:01:10,039 Speaker 1: optimists believe the new administration has their back and will 19 00:01:10,040 --> 00:01:12,200 Speaker 1: do its best to defend the economy, that everything will 20 00:01:12,240 --> 00:01:14,720 Speaker 1: be okay in the end, bond and loan markets are 21 00:01:14,720 --> 00:01:17,240 Speaker 1: pricing in very low odds of US recession, even as 22 00:01:17,280 --> 00:01:21,280 Speaker 1: talk of economic downturn and stagflation become more frequent, with 23 00:01:21,400 --> 00:01:24,440 Speaker 1: consumers throwing in the towel and business leaders putting investments 24 00:01:24,480 --> 00:01:27,240 Speaker 1: on hold, complaining that they can't take long term decisions 25 00:01:27,240 --> 00:01:31,160 Speaker 1: in this kind of an environment. Treasury yields meanwhile remain high, 26 00:01:31,280 --> 00:01:34,319 Speaker 1: keeping buyers of fixed income happy, especially those with floating 27 00:01:34,400 --> 00:01:37,560 Speaker 1: rate assets. Above all, there's not enough supply of corporate 28 00:01:37,560 --> 00:01:40,760 Speaker 1: debt to satisfy the growing demand. But what's your view, lease, 29 00:01:40,760 --> 00:01:42,280 Speaker 1: So there seems to be a lot of risk out 30 00:01:42,319 --> 00:01:45,160 Speaker 1: there that isn't maybe in the price. And from your standpoint, 31 00:01:45,200 --> 00:01:48,280 Speaker 1: are we stressing too much? How our high grade borrowers 32 00:01:48,320 --> 00:01:50,480 Speaker 1: doing in this environment at the moment? 33 00:01:50,680 --> 00:01:52,800 Speaker 4: Hey, how much time do we have to talk about this? 34 00:01:53,080 --> 00:01:54,320 Speaker 1: We can go on. We have time. 35 00:01:54,600 --> 00:01:57,240 Speaker 4: So look, I mean, the way I like to think 36 00:01:57,280 --> 00:02:01,280 Speaker 4: about it is, there's so much news bombarding us every 37 00:02:01,360 --> 00:02:05,720 Speaker 4: day and the markets are just you know, swooning back 38 00:02:05,760 --> 00:02:08,400 Speaker 4: and forth depending upon the news flow. So for me, 39 00:02:09,200 --> 00:02:11,880 Speaker 4: I always try to take things back down to the basics, 40 00:02:12,480 --> 00:02:15,839 Speaker 4: and so when I think about companies, you know, what's 41 00:02:16,000 --> 00:02:19,880 Speaker 4: underpinning the strength of companies today, and so maybe we 42 00:02:19,919 --> 00:02:22,760 Speaker 4: could start there and hopefully not get too much into 43 00:02:22,800 --> 00:02:23,320 Speaker 4: the weeds. 44 00:02:23,400 --> 00:02:24,840 Speaker 5: But you know, one of the. 45 00:02:24,800 --> 00:02:28,680 Speaker 4: Things we do is we try to understand what the 46 00:02:28,720 --> 00:02:31,520 Speaker 4: earnings growth looks like for companies, and so in our 47 00:02:31,560 --> 00:02:35,119 Speaker 4: world of credit, that means EBITDAH because that's an important 48 00:02:35,160 --> 00:02:40,240 Speaker 4: foundation for understanding the direction that leverage is going. And 49 00:02:40,320 --> 00:02:45,200 Speaker 4: so crucial to that is working with our analyst team 50 00:02:45,800 --> 00:02:49,920 Speaker 4: and we try to project out what forward EBITDUG growth 51 00:02:50,000 --> 00:02:54,680 Speaker 4: will look like for industrial companies, and that really allows 52 00:02:54,760 --> 00:02:58,080 Speaker 4: us to get a baseline for you know, what do 53 00:02:58,080 --> 00:03:00,400 Speaker 4: we expect companies to do. But also so if we 54 00:03:00,440 --> 00:03:05,480 Speaker 4: can aggregate up this individual company data into sectors and 55 00:03:05,520 --> 00:03:08,840 Speaker 4: then into the broader market, it can also provide us 56 00:03:08,840 --> 00:03:13,359 Speaker 4: some bottom up insight that can complement what we're getting 57 00:03:13,360 --> 00:03:17,600 Speaker 4: from top down economic data. So when we were ending 58 00:03:18,440 --> 00:03:22,440 Speaker 4: the fourth quarter of last year, we had asked our analysts, 59 00:03:22,520 --> 00:03:27,080 Speaker 4: so where do you think going forward for the next 60 00:03:27,120 --> 00:03:29,560 Speaker 4: twelve months, where do you think growth is going to 61 00:03:29,560 --> 00:03:35,320 Speaker 4: come in for the median industrial company? And the EBIT 62 00:03:35,400 --> 00:03:38,880 Speaker 4: down number was coming in around five percent, which feels 63 00:03:38,920 --> 00:03:41,760 Speaker 4: about right, you know, it's again we're not using like 64 00:03:41,800 --> 00:03:43,600 Speaker 4: the you can't comp that to the S and P 65 00:03:44,320 --> 00:03:47,320 Speaker 4: expectations because this is median. It's and we have a 66 00:03:47,320 --> 00:03:51,120 Speaker 4: different composition. But it gives you directionally where we were thinking. 67 00:03:51,840 --> 00:03:55,480 Speaker 4: And in fact, in the fourth quarter, oddly enough, you 68 00:03:55,480 --> 00:03:58,480 Speaker 4: know where did EBITDUG growth come in around five percent? 69 00:03:59,440 --> 00:04:01,400 Speaker 4: But now you know here we are, we're starting a 70 00:04:01,400 --> 00:04:03,800 Speaker 4: new quarter, and where do we think we're going to 71 00:04:03,800 --> 00:04:06,920 Speaker 4: be in twenty five And you know, to the point 72 00:04:06,920 --> 00:04:09,440 Speaker 4: you were making earlier James, about you know, a lot 73 00:04:09,480 --> 00:04:13,080 Speaker 4: of news hitting the market and fears. We began this 74 00:04:13,240 --> 00:04:18,400 Speaker 4: year with companies really guiding down a little bit from 75 00:04:18,400 --> 00:04:20,800 Speaker 4: where they were. You know, it makes sense is we're 76 00:04:20,800 --> 00:04:23,640 Speaker 4: starting a new year, companies have a chance to refresh, 77 00:04:23,960 --> 00:04:28,000 Speaker 4: they're recognizing some uncertainties, and so we saw earnings getting 78 00:04:28,120 --> 00:04:32,080 Speaker 4: guided down and in fact the starting point for us 79 00:04:32,640 --> 00:04:36,279 Speaker 4: now when we're looking at that forward growth for twenty 80 00:04:36,320 --> 00:04:40,480 Speaker 4: five is an EBADUG growth number actually closer to three percent. 81 00:04:41,920 --> 00:04:45,240 Speaker 4: So that's a big difference. Now, look, I think there's 82 00:04:45,279 --> 00:04:48,359 Speaker 4: probably a little bit of wiggle room in there and 83 00:04:48,440 --> 00:04:51,720 Speaker 4: a little bit of uncertainty, but I think that you know, 84 00:04:51,760 --> 00:04:54,480 Speaker 4: that is a starting point gives us a little bit 85 00:04:54,560 --> 00:04:57,520 Speaker 4: less of a cushion in the event that we start 86 00:04:57,560 --> 00:04:59,040 Speaker 4: to get bad news on tariffs. 87 00:05:00,680 --> 00:05:04,719 Speaker 2: So, Lisa, you were one of our steamed guests at 88 00:05:04,720 --> 00:05:08,440 Speaker 2: the end of the year for our Credit Outlook event, 89 00:05:09,160 --> 00:05:13,520 Speaker 2: and during that event, everybody talked about potential for spreads 90 00:05:13,560 --> 00:05:18,360 Speaker 2: going even tighter, and it was a yield versus spread conversation. Now, now, 91 00:05:18,400 --> 00:05:21,160 Speaker 2: something you brought up which you touched on just now 92 00:05:21,200 --> 00:05:23,479 Speaker 2: with the fundamentals, but you said there were three parts 93 00:05:23,520 --> 00:05:27,200 Speaker 2: that you look at, fundamentals, technicals, and valuations. So it 94 00:05:27,240 --> 00:05:29,480 Speaker 2: sounds like the fundamental side you're a little bit less 95 00:05:29,480 --> 00:05:33,400 Speaker 2: optimistic about going into this year, But how are you 96 00:05:33,400 --> 00:05:35,839 Speaker 2: feeling on the technicals and the valuations. 97 00:05:36,279 --> 00:05:40,960 Speaker 4: Okay, so you're right about the fundamentals, And if I 98 00:05:41,000 --> 00:05:43,560 Speaker 4: could just one other point on fundamentals before we talk 99 00:05:43,600 --> 00:05:46,800 Speaker 4: about technicals and valuations. One of the things that we 100 00:05:47,360 --> 00:05:50,760 Speaker 4: did is we did a little bit of stress testing 101 00:05:50,760 --> 00:05:53,520 Speaker 4: on the fundamentals and we said, we don't really know 102 00:05:53,520 --> 00:05:55,719 Speaker 4: where tariffs are going to shake out, but let's just 103 00:05:55,800 --> 00:06:00,000 Speaker 4: assume a ten percent across the board tariff that actually 104 00:06:01,080 --> 00:06:03,839 Speaker 4: is going to be a hit to these ebadon numbers. 105 00:06:04,040 --> 00:06:06,760 Speaker 4: By about a percentage point, and if I were to 106 00:06:06,760 --> 00:06:10,760 Speaker 4: put that in context, that gets us to ebadon numbers 107 00:06:11,200 --> 00:06:15,440 Speaker 4: that were prevalent back in twenty three. And remember in 108 00:06:15,480 --> 00:06:18,280 Speaker 4: twenty three that was a period where there were a 109 00:06:18,320 --> 00:06:23,159 Speaker 4: lot of fears about more of a hard landing, and 110 00:06:23,240 --> 00:06:25,600 Speaker 4: so I just think it's important to note that the 111 00:06:25,640 --> 00:06:29,840 Speaker 4: tariffs bring us into a territory that is. 112 00:06:29,839 --> 00:06:31,120 Speaker 5: A little bit more uncertain. 113 00:06:31,720 --> 00:06:35,279 Speaker 4: And also remember back in twenty three we were getting 114 00:06:35,600 --> 00:06:40,960 Speaker 4: some fiscal tailwinds from the IRA, from the Infrastructure Bill, 115 00:06:41,080 --> 00:06:43,919 Speaker 4: from the Chips and Science Act, which we may not 116 00:06:44,120 --> 00:06:48,760 Speaker 4: have sufficient or a similar kind of fiscal stimulus this year. 117 00:06:48,880 --> 00:06:51,760 Speaker 4: So just want to get that one point out. Now, 118 00:06:51,800 --> 00:06:54,760 Speaker 4: in the technicals, I think we're seeing a little bit 119 00:06:54,760 --> 00:06:57,360 Speaker 4: of a deterioration. In fact, we were just chatting about 120 00:06:57,360 --> 00:07:02,640 Speaker 4: this today in one of our STRES meetings. So in 121 00:07:02,880 --> 00:07:08,159 Speaker 4: twenty twenty four, what I think characterized some of the 122 00:07:08,279 --> 00:07:13,240 Speaker 4: strength in technicals were foreign flows and particularly European flows, 123 00:07:13,280 --> 00:07:17,680 Speaker 4: which were quite robust. The good news is, at least 124 00:07:17,720 --> 00:07:20,920 Speaker 4: since the beginning of the year, looking at TICK data 125 00:07:20,960 --> 00:07:26,200 Speaker 4: through January, we are seeing European flows still looking okay, 126 00:07:26,320 --> 00:07:28,280 Speaker 4: and in a way that kind of makes sense because 127 00:07:28,360 --> 00:07:32,600 Speaker 4: when we looked at the hedge spread for Europe, it 128 00:07:32,680 --> 00:07:35,720 Speaker 4: actually looks pretty good if you're a European investor looking 129 00:07:35,800 --> 00:07:38,120 Speaker 4: at the US market, so we can see how there 130 00:07:38,160 --> 00:07:41,800 Speaker 4: could be some demand there. But where we've seen I 131 00:07:41,800 --> 00:07:46,440 Speaker 4: think some deterioration would be in the area coming from Japan, 132 00:07:47,720 --> 00:07:51,480 Speaker 4: and so whether you're looking at things on a hedge 133 00:07:51,520 --> 00:07:56,000 Speaker 4: deal basis or on a hedge spread basis, the competition 134 00:07:56,120 --> 00:07:59,920 Speaker 4: from jgbs is pretty keen and we haven't seen that 135 00:08:00,200 --> 00:08:05,880 Speaker 4: years now. Granted, the Japanese investor hasn't been a big 136 00:08:06,840 --> 00:08:11,560 Speaker 4: contributor to flow, certainly last year, but we had thought 137 00:08:11,720 --> 00:08:14,600 Speaker 4: maybe this year we could see that change, but it 138 00:08:14,640 --> 00:08:17,680 Speaker 4: really doesn't look like with the way valuations for that 139 00:08:18,120 --> 00:08:21,520 Speaker 4: buyer base are looking that we can really count on that. 140 00:08:22,480 --> 00:08:24,880 Speaker 4: So then we have to shift our focus and say, 141 00:08:25,440 --> 00:08:29,360 Speaker 4: all right, well, domestically, you know what's going on with 142 00:08:29,480 --> 00:08:32,960 Speaker 4: mutual fun flows. And it's a little bit tough to 143 00:08:33,000 --> 00:08:37,360 Speaker 4: read the tea leaves right now, but EPFR started out 144 00:08:38,320 --> 00:08:42,840 Speaker 4: pretty strong for much of this year. However, the run 145 00:08:42,960 --> 00:08:45,520 Speaker 4: rate seems to be coming off a little bit. It's 146 00:08:45,559 --> 00:08:48,760 Speaker 4: still positive, but certainly not at the pace it was 147 00:08:49,559 --> 00:08:52,960 Speaker 4: several weeks ago. Now it's hard to know if that 148 00:08:53,200 --> 00:08:57,040 Speaker 4: is simply because there's more volatility investors or maybe a 149 00:08:57,080 --> 00:09:01,079 Speaker 4: little bit concerned at putting more money into fix income assets. 150 00:09:01,120 --> 00:09:04,760 Speaker 4: Who knows, And that could come back. But right now, 151 00:09:05,200 --> 00:09:09,280 Speaker 4: if we look at just a slightly lower run rate 152 00:09:09,480 --> 00:09:12,480 Speaker 4: or I shouldn't say slightly, a lower run rate of 153 00:09:12,520 --> 00:09:19,160 Speaker 4: EPFR and Japan investors not necessarily feeling that great about 154 00:09:19,160 --> 00:09:22,760 Speaker 4: the US market, and the European investor maybe coming in. 155 00:09:23,200 --> 00:09:26,120 Speaker 4: I feel like the technicals from where we were at 156 00:09:26,120 --> 00:09:28,720 Speaker 4: the beginning of the year have deteriorated. 157 00:09:29,760 --> 00:09:30,080 Speaker 5: Now. 158 00:09:30,280 --> 00:09:33,640 Speaker 4: The last point you asked me about was valuations, and 159 00:09:33,679 --> 00:09:37,360 Speaker 4: I think this is where I think we have to 160 00:09:37,400 --> 00:09:41,080 Speaker 4: be maybe a little bit more circumspect about how the 161 00:09:41,120 --> 00:09:46,760 Speaker 4: operating environment has changed. So when we look at spreads 162 00:09:46,800 --> 00:09:52,560 Speaker 4: where they are today, we're pricing in very low levels 163 00:09:52,600 --> 00:09:55,920 Speaker 4: of recession risk. And the way we think about that 164 00:09:56,000 --> 00:09:58,240 Speaker 4: as we go back and look at where spreads were 165 00:09:59,080 --> 00:10:02,800 Speaker 4: at various recessions andary periods and the distance from where 166 00:10:02,800 --> 00:10:06,480 Speaker 4: those spreads were to today and think about how much 167 00:10:06,520 --> 00:10:12,720 Speaker 4: predictability spreads are reflecting of recession coming forward, and so 168 00:10:12,800 --> 00:10:15,880 Speaker 4: it's virtually zero, and I would add that's also true 169 00:10:15,880 --> 00:10:19,160 Speaker 4: for Europe. But I think what's changed in the US 170 00:10:19,840 --> 00:10:22,439 Speaker 4: is bringing it all the way back to the fundamentals. 171 00:10:22,480 --> 00:10:22,800 Speaker 5: Again. 172 00:10:23,559 --> 00:10:28,960 Speaker 4: We're at a more precarious position starting the year, still positive, 173 00:10:29,440 --> 00:10:31,840 Speaker 4: but not the run rate that we were seeing at 174 00:10:31,840 --> 00:10:35,959 Speaker 4: the end of last year. And you know, again, the 175 00:10:36,000 --> 00:10:39,720 Speaker 4: tariffs are very uncertain, so we can't really have a 176 00:10:39,800 --> 00:10:42,840 Speaker 4: zero probability of recession. So what does that mean for me? 177 00:10:43,880 --> 00:10:46,120 Speaker 4: If we were to price in about a twenty percent 178 00:10:46,200 --> 00:10:49,520 Speaker 4: probability of recession, that would get you out to about 179 00:10:49,520 --> 00:10:52,440 Speaker 4: one hundred and twenty basis points on spreads. That feels 180 00:10:52,440 --> 00:10:55,800 Speaker 4: a little aggressive right now. But what I think it 181 00:10:55,840 --> 00:10:59,640 Speaker 4: does say is the idea of and I know we 182 00:10:59,640 --> 00:11:02,120 Speaker 4: throw out fifty five basis points when we were chatting. 183 00:11:02,360 --> 00:11:04,280 Speaker 4: That feels a little aggressive to me, and I think 184 00:11:04,320 --> 00:11:07,400 Speaker 4: that came up at that year end seminar and I 185 00:11:07,480 --> 00:11:10,240 Speaker 4: was probably a little bit more bullish on spreads. But 186 00:11:10,360 --> 00:11:13,760 Speaker 4: I think, you know, maybe this range of let's say 187 00:11:14,280 --> 00:11:17,360 Speaker 4: eighty eighty five basis points out to one hundred and 188 00:11:17,520 --> 00:11:20,240 Speaker 4: ten basis points could be the range that we find 189 00:11:20,280 --> 00:11:25,480 Speaker 4: ourselves in. And I think we just need to be 190 00:11:25,640 --> 00:11:28,199 Speaker 4: paid a little bit more for the uncertainty risk now 191 00:11:28,200 --> 00:11:28,840 Speaker 4: in the market. 192 00:11:30,280 --> 00:11:33,280 Speaker 2: So, Lisa, you bring up a couple of extremely good 193 00:11:33,320 --> 00:11:35,920 Speaker 2: points that I'm going to see if I can tackle 194 00:11:36,040 --> 00:11:41,439 Speaker 2: in one neat follow up question, So you talk about 195 00:11:41,480 --> 00:11:45,480 Speaker 2: how the international investor may or may not be as 196 00:11:45,640 --> 00:11:50,600 Speaker 2: comfortable in the US, there's potential indication for some sort 197 00:11:50,640 --> 00:11:54,920 Speaker 2: of flight to quality. How are you seeing that manifest 198 00:11:55,200 --> 00:11:57,720 Speaker 2: in the investment grade space? And when you think about 199 00:11:57,760 --> 00:12:00,240 Speaker 2: that three percent you doug or that you did, that 200 00:12:00,280 --> 00:12:04,520 Speaker 2: you've thrown out, how are you then thinking about leverage 201 00:12:05,040 --> 00:12:08,640 Speaker 2: in general? Are you seeing it massively grow? Are you 202 00:12:08,720 --> 00:12:13,320 Speaker 2: seeing it sort of old steady assuming that companies won't 203 00:12:13,320 --> 00:12:16,640 Speaker 2: bring on the debt. Where are you sort of measuring 204 00:12:16,679 --> 00:12:17,120 Speaker 2: all of that? 205 00:12:17,960 --> 00:12:18,200 Speaker 5: Yep. 206 00:12:18,600 --> 00:12:22,480 Speaker 4: So when we look at our median industrial company leverage 207 00:12:22,480 --> 00:12:26,360 Speaker 4: has been incredibly stable now for several quarters. We don't 208 00:12:26,360 --> 00:12:31,920 Speaker 4: look particularly stretched at all. And in fact, you know, 209 00:12:31,960 --> 00:12:35,120 Speaker 4: when we look at the behavior of companies, what's been 210 00:12:35,160 --> 00:12:38,360 Speaker 4: interesting is if we divide up the world into let's say, 211 00:12:38,360 --> 00:12:41,559 Speaker 4: our single A rated companies and our triple B rated companies, 212 00:12:42,320 --> 00:12:46,760 Speaker 4: what you find is the single A rated companies really 213 00:12:46,760 --> 00:12:49,600 Speaker 4: have been much more active in terms of share. 214 00:12:49,440 --> 00:12:50,440 Speaker 5: Buybacks and the like. 215 00:12:51,000 --> 00:12:53,559 Speaker 4: Whereas you're finding the triple B companies are much more 216 00:12:53,600 --> 00:12:57,959 Speaker 4: conservative and not going down that path. So in that regard, 217 00:12:58,160 --> 00:13:02,520 Speaker 4: I don't think we see any aggressive behavior. And I 218 00:13:02,559 --> 00:13:07,000 Speaker 4: would also add that operating margins have been very stable 219 00:13:08,559 --> 00:13:11,120 Speaker 4: and for our cohort that we look at the medians 220 00:13:11,160 --> 00:13:14,080 Speaker 4: around fifteen percent, that's pretty good and it's been stable 221 00:13:15,080 --> 00:13:20,280 Speaker 4: so that I don't see really any deterioration at that 222 00:13:20,360 --> 00:13:23,520 Speaker 4: point or at the point we're at now, which kind 223 00:13:23,559 --> 00:13:28,280 Speaker 4: of makes sense. And frankly, debt growth that's not been 224 00:13:28,400 --> 00:13:33,920 Speaker 4: rising as well, So you know, this flight to quality, 225 00:13:34,559 --> 00:13:38,160 Speaker 4: it's how does that manifest itself? And I think you know, 226 00:13:38,200 --> 00:13:41,000 Speaker 4: you can look at the performance of let's say single 227 00:13:41,000 --> 00:13:45,400 Speaker 4: A and triple B companies, and during this period where 228 00:13:45,400 --> 00:13:48,200 Speaker 4: we've had a little bit of volatility, they've been kind 229 00:13:48,200 --> 00:13:53,000 Speaker 4: of moving in tandem. And so for us, we think 230 00:13:53,160 --> 00:13:56,320 Speaker 4: maybe this is a good opportunity to try and upgrade 231 00:13:56,320 --> 00:13:59,599 Speaker 4: your portfolio a little bit and maybe you lean a 232 00:13:59,640 --> 00:14:04,800 Speaker 4: little bit more heavily into single A rated companies. The 233 00:14:04,920 --> 00:14:07,160 Speaker 4: other thing we like, and I've been focusing mainly on 234 00:14:07,240 --> 00:14:13,680 Speaker 4: in industrials, but I think banks offer a very good opportunity. 235 00:14:14,280 --> 00:14:16,600 Speaker 4: I know it's consensus that a lot of people. 236 00:14:16,320 --> 00:14:17,080 Speaker 5: Like the banks. 237 00:14:17,840 --> 00:14:22,320 Speaker 4: But you know, when you look at bank earnings, bank 238 00:14:22,360 --> 00:14:26,760 Speaker 4: earnings have been very strong, capital has been very strong, 239 00:14:28,440 --> 00:14:32,880 Speaker 4: losses reserving has been low. I know there's been a 240 00:14:32,880 --> 00:14:38,840 Speaker 4: lot of talk about less regulation of banks, whether you 241 00:14:38,920 --> 00:14:43,040 Speaker 4: know that means uh Bassil three endgame, you know, keeping 242 00:14:43,120 --> 00:14:48,360 Speaker 4: things capital neutral, whether that means looking at the regional 243 00:14:48,400 --> 00:14:54,040 Speaker 4: banks where you require mark to market on securities portfolios, holding, 244 00:14:54,080 --> 00:14:57,160 Speaker 4: you know, issuing a little bit more debt for loss 245 00:14:57,160 --> 00:15:00,640 Speaker 4: absorption if that were to be necessary. U. I think 246 00:15:00,680 --> 00:15:02,680 Speaker 4: all these things, you know, when we look at them 247 00:15:02,680 --> 00:15:05,600 Speaker 4: all together, the picture is still one of a sector 248 00:15:05,640 --> 00:15:09,320 Speaker 4: that is in very good health. Yes, there might be 249 00:15:09,360 --> 00:15:12,440 Speaker 4: a little bit more or a little bit less regulation 250 00:15:12,640 --> 00:15:15,280 Speaker 4: for the jesips, maybe a little bit more regulation for 251 00:15:15,360 --> 00:15:19,000 Speaker 4: the regionals, but I think, you know, the resiliency of 252 00:15:19,000 --> 00:15:23,280 Speaker 4: these institutions make them very attractive in our opinion to hold. 253 00:15:23,720 --> 00:15:27,200 Speaker 4: And I would add likewise, for the European financials, particularly 254 00:15:27,240 --> 00:15:32,400 Speaker 4: European banks, the profitability is very strong, that capital is 255 00:15:32,520 --> 00:15:37,920 Speaker 4: very strong, reserves, you know, losses are very low. I 256 00:15:37,960 --> 00:15:39,760 Speaker 4: think they also make a lot of sense. 257 00:15:40,680 --> 00:15:43,640 Speaker 1: The picture of painting least is quite a bearish outlook. 258 00:15:43,640 --> 00:15:47,040 Speaker 1: You know a lot of uncertainty. Fundamentals are getting weaker. 259 00:15:47,960 --> 00:15:51,040 Speaker 1: You know, technicals at the margin, you know, when you 260 00:15:51,080 --> 00:15:55,120 Speaker 1: talk about Japan are going to be under pressure. But 261 00:15:55,280 --> 00:15:59,040 Speaker 1: then you know, spread still around ninety on the US 262 00:15:59,200 --> 00:16:02,480 Speaker 1: credit Every time there's there's a bout of volatility, everyone 263 00:16:02,520 --> 00:16:04,640 Speaker 1: you know in the EPTY market panics in the market drop, 264 00:16:04,720 --> 00:16:08,400 Speaker 1: but credit just holds rock steady. What's what's going on there? 265 00:16:09,200 --> 00:16:10,800 Speaker 5: You know, it's. 266 00:16:10,640 --> 00:16:17,000 Speaker 4: Funny, I think, I think because companies are in such 267 00:16:17,400 --> 00:16:20,440 Speaker 4: you know, in such robust financial condition. I mean, the 268 00:16:20,520 --> 00:16:22,000 Speaker 4: leverage metrics. 269 00:16:21,680 --> 00:16:22,920 Speaker 5: Haven't budged. 270 00:16:24,160 --> 00:16:27,560 Speaker 4: The you know, and we're talking about a slow down 271 00:16:27,760 --> 00:16:31,040 Speaker 4: in the rate of growth of EBITDA. It's still positive 272 00:16:31,080 --> 00:16:34,240 Speaker 4: growth though we're not talking about declines in ebit done 273 00:16:34,280 --> 00:16:40,520 Speaker 4: negative EBITDA. We're talking about you know, tariffs coming on board. 274 00:16:41,120 --> 00:16:44,480 Speaker 4: I think for many of our investment grade companies in 275 00:16:44,560 --> 00:16:47,800 Speaker 4: many sectors, they have the ability to manage through that 276 00:16:48,280 --> 00:16:50,320 Speaker 4: if they just know what the tariffs are going to be. 277 00:16:51,080 --> 00:16:55,480 Speaker 4: So to me, I think we're we're creating an environment 278 00:16:55,560 --> 00:16:59,720 Speaker 4: where things look a little bit less robust than the 279 00:16:59,720 --> 00:17:03,560 Speaker 4: word were last year. If we get through this tariff period, 280 00:17:04,040 --> 00:17:07,480 Speaker 4: liberation day, we find out what the tariffs are companies. 281 00:17:07,600 --> 00:17:10,879 Speaker 4: Companies can't adjust, they just need to know what it 282 00:17:10,920 --> 00:17:13,800 Speaker 4: is they're adjusting to. Then I think we get to 283 00:17:13,880 --> 00:17:17,919 Speaker 4: a point where we'll manage along and you know, I 284 00:17:17,960 --> 00:17:20,280 Speaker 4: think we just have to price in a little bit 285 00:17:20,320 --> 00:17:22,280 Speaker 4: more tail risk. And so that range that I was 286 00:17:22,280 --> 00:17:26,840 Speaker 4: talking about earlier feels okay to me. It's if we 287 00:17:26,960 --> 00:17:32,520 Speaker 4: start to see a meaningful shift in flows and I look, 288 00:17:32,560 --> 00:17:36,640 Speaker 4: I see, you know, everything we're talking about is shades 289 00:17:36,640 --> 00:17:41,840 Speaker 4: of adjustment, right, and not something being completely upended. And 290 00:17:41,920 --> 00:17:46,320 Speaker 4: so I can see us and I still maintain that 291 00:17:46,480 --> 00:17:50,480 Speaker 4: maybe we'll have a carry like year return for investment 292 00:17:50,520 --> 00:17:57,639 Speaker 4: grade credit in the absence of some external event, whether 293 00:17:57,720 --> 00:18:01,760 Speaker 4: that be brought about through tear, whether that be brought 294 00:18:01,800 --> 00:18:05,720 Speaker 4: about through some extraneous event we don't know about. But 295 00:18:05,840 --> 00:18:10,280 Speaker 4: I would envision a period where we should be fairly stable, 296 00:18:10,359 --> 00:18:12,200 Speaker 4: but you just need to be paid a little bit 297 00:18:12,240 --> 00:18:14,000 Speaker 4: more to hold it. 298 00:18:14,080 --> 00:18:15,760 Speaker 1: And you don't expect a ton of downgrades. 299 00:18:17,640 --> 00:18:21,480 Speaker 4: I don't at this point in time. There are obviously 300 00:18:21,520 --> 00:18:26,800 Speaker 4: some large issuers that have been downgraded, but now I don't. 301 00:18:26,960 --> 00:18:30,800 Speaker 4: In fact, the trend still seems to be reasonably positive. 302 00:18:32,000 --> 00:18:32,239 Speaker 3: You know. 303 00:18:32,760 --> 00:18:36,840 Speaker 4: The other thing which we haven't talked about is, you know, 304 00:18:37,800 --> 00:18:40,640 Speaker 4: look at what's going on with Europe right now, and 305 00:18:40,880 --> 00:18:44,080 Speaker 4: that to me is a very interesting story. And this 306 00:18:44,240 --> 00:18:51,119 Speaker 4: comes around to the whole global growth story because you know, 307 00:18:51,440 --> 00:18:54,320 Speaker 4: we went through a period of time where growth was 308 00:18:54,359 --> 00:18:57,240 Speaker 4: so anemic in Europe and we were waiting for the 309 00:18:57,280 --> 00:19:01,040 Speaker 4: ECB to continue to cut and then we were worried 310 00:19:01,080 --> 00:19:05,640 Speaker 4: about tariffs. And now we've got Germany, you know, passing 311 00:19:05,680 --> 00:19:11,320 Speaker 4: these these programs for infrastructure and for defense spending, and 312 00:19:11,480 --> 00:19:15,440 Speaker 4: you know, these are multi year fiscal you know, fiscal 313 00:19:15,560 --> 00:19:19,840 Speaker 4: impulses that will have a positive impact on many companies. 314 00:19:20,720 --> 00:19:24,240 Speaker 4: And so I think, you know, we've now got another 315 00:19:24,320 --> 00:19:28,480 Speaker 4: part of the corporate market that should be beneficiaries. And 316 00:19:28,560 --> 00:19:32,280 Speaker 4: these are companies that are they may be based in Europe, 317 00:19:32,280 --> 00:19:34,679 Speaker 4: but they issue in dollar, they issue in euro they 318 00:19:34,720 --> 00:19:38,040 Speaker 4: issue in different currencies, and these are ones that you know, 319 00:19:38,160 --> 00:19:42,760 Speaker 4: perhaps we want to be focused on as beneficiaries, you know, 320 00:19:42,800 --> 00:19:45,359 Speaker 4: in the area of capital goods for example. You know, 321 00:19:45,400 --> 00:19:48,080 Speaker 4: there'll be companies that that I think will do well 322 00:19:48,160 --> 00:19:51,880 Speaker 4: and and some of the analysis that we've done also 323 00:19:52,000 --> 00:19:56,320 Speaker 4: when we're thinking about you know, these two opposing forces, 324 00:19:57,080 --> 00:20:00,560 Speaker 4: one of tariffs that that's bad that could imposed on 325 00:20:00,600 --> 00:20:06,520 Speaker 4: European companies, and one of infrastructure spending and defense spending 326 00:20:06,560 --> 00:20:10,200 Speaker 4: that creates a positive stimulus. We find that at least 327 00:20:10,240 --> 00:20:14,440 Speaker 4: in this coming year, the two probably offset each other, 328 00:20:15,200 --> 00:20:18,119 Speaker 4: which is terrific, you know, if you've got something to 329 00:20:18,160 --> 00:20:21,399 Speaker 4: offset the potential damage of tariffs. But as we start 330 00:20:21,400 --> 00:20:24,359 Speaker 4: to look into twenty six and twenty seven, there should 331 00:20:24,359 --> 00:20:28,080 Speaker 4: be a positive impulse for companies as a result of this. 332 00:20:30,240 --> 00:20:34,600 Speaker 2: So, Lisa, something that I'm curious about. You know, you 333 00:20:34,800 --> 00:20:37,880 Speaker 2: hint a little bit at this earlier, but you talk 334 00:20:37,920 --> 00:20:40,000 Speaker 2: about how margins have kind of held study and how 335 00:20:40,080 --> 00:20:42,840 Speaker 2: companies are still doing well, but. 336 00:20:42,960 --> 00:20:44,960 Speaker 3: We have that tariff potential. 337 00:20:46,760 --> 00:20:49,040 Speaker 2: A lot of the companies, at least in my sector 338 00:20:49,440 --> 00:20:54,960 Speaker 2: post COVID cut costs in order to bolster margins, particularly 339 00:20:54,960 --> 00:20:59,000 Speaker 2: as they waited for consumers to come back. Thinking about 340 00:20:59,040 --> 00:21:01,920 Speaker 2: in that context, you know, obviously the leisure space is 341 00:21:02,080 --> 00:21:05,480 Speaker 2: indirectly affected by tariffs, you know, as compared to something 342 00:21:05,520 --> 00:21:09,560 Speaker 2: like autos that's much more directly affected. Where are you 343 00:21:09,640 --> 00:21:14,320 Speaker 2: sort of thinking in terms of measuring the tariff effect, 344 00:21:14,520 --> 00:21:17,120 Speaker 2: seeing what sort of cushion different types of companies have. 345 00:21:17,760 --> 00:21:19,199 Speaker 3: Where are you thinking in terms of. 346 00:21:21,560 --> 00:21:25,359 Speaker 2: How it's going to Oh, are companies going to be 347 00:21:25,400 --> 00:21:28,320 Speaker 2: able to absorb this and push it on or is 348 00:21:28,359 --> 00:21:31,960 Speaker 2: it going to be something that's so overhanging in this environment. 349 00:21:33,520 --> 00:21:37,080 Speaker 4: So I think that's exactly the question to ask, and 350 00:21:37,200 --> 00:21:39,440 Speaker 4: maybe what I can do is give you two extremes. 351 00:21:41,359 --> 00:21:44,240 Speaker 4: One in an area that you'll be familiar with is 352 00:21:44,280 --> 00:21:48,640 Speaker 4: the retail space, an area where margins are already pretty thin, 353 00:21:49,320 --> 00:21:52,520 Speaker 4: and as you point out, I mean, companies there have 354 00:21:52,640 --> 00:21:57,080 Speaker 4: had to really adapt, work on supply chain, work on 355 00:21:57,160 --> 00:22:01,240 Speaker 4: cutting costs, trying to figure out efficiencies, and so the 356 00:22:01,359 --> 00:22:05,679 Speaker 4: room for error is pretty low in a space that 357 00:22:05,840 --> 00:22:12,399 Speaker 4: is highly exposed to foreign goods. And so when you 358 00:22:12,440 --> 00:22:17,399 Speaker 4: think about the retail companies, for many of them, at 359 00:22:17,480 --> 00:22:21,360 Speaker 4: least in the investment grade universe, as a percentage of sales, 360 00:22:21,480 --> 00:22:24,720 Speaker 4: imports run between let's say a third and fifty percent, 361 00:22:25,359 --> 00:22:28,840 Speaker 4: So it's substantial. And you know, one of the things 362 00:22:28,840 --> 00:22:31,920 Speaker 4: that many companies have done is they've tried to move 363 00:22:31,960 --> 00:22:35,960 Speaker 4: a little bit further away from China and diversify into 364 00:22:36,000 --> 00:22:39,360 Speaker 4: other spaces. You know, Vietnam is often cited is a 365 00:22:39,600 --> 00:22:44,520 Speaker 4: sourcing point, and yet you know, in a world where 366 00:22:44,600 --> 00:22:48,760 Speaker 4: tariffs are going to be spread across many countries, potentially 367 00:22:49,800 --> 00:22:53,400 Speaker 4: they're going to be very much in the crosshairs. Look 368 00:22:53,400 --> 00:22:57,560 Speaker 4: at Mexico, you know, retailers get fresh foods from Mexico 369 00:22:57,640 --> 00:23:00,760 Speaker 4: and the like. When you think of about you know, 370 00:23:00,840 --> 00:23:04,560 Speaker 4: other areas which I didn't mention, like China or Vietnam 371 00:23:04,600 --> 00:23:07,520 Speaker 4: and the like, it's appaeril, you know, it's electronics and 372 00:23:07,560 --> 00:23:11,200 Speaker 4: other things. So that they will be very much impacted. 373 00:23:12,280 --> 00:23:12,560 Speaker 3: Now. 374 00:23:12,960 --> 00:23:14,560 Speaker 4: You know, one of the things they can do is 375 00:23:14,600 --> 00:23:17,399 Speaker 4: they can go back to their suppliers and squeeze them more. 376 00:23:17,920 --> 00:23:20,680 Speaker 4: But you probably are aware of the article which highlights 377 00:23:20,680 --> 00:23:23,159 Speaker 4: that the Chinese government is saying no, no, you know 378 00:23:23,680 --> 00:23:25,800 Speaker 4: you can't. You can't absorb any of more of this 379 00:23:25,960 --> 00:23:28,960 Speaker 4: when the large US retailers are pushing back on you. 380 00:23:30,200 --> 00:23:33,160 Speaker 4: So that becomes a little bit challenging. But I think 381 00:23:33,200 --> 00:23:36,480 Speaker 4: what some of the largest retailers are very good at 382 00:23:36,880 --> 00:23:41,840 Speaker 4: is understanding the price points for the different products that 383 00:23:41,880 --> 00:23:46,720 Speaker 4: they offer, and so understanding where that elasticity is. And 384 00:23:47,080 --> 00:23:49,919 Speaker 4: I would almost think about this as let's say a 385 00:23:49,960 --> 00:23:53,840 Speaker 4: portfolio of products, and so you know that you've got 386 00:23:53,840 --> 00:23:56,680 Speaker 4: a little bit of wiggle room to raise price on 387 00:23:56,680 --> 00:24:00,400 Speaker 4: one skew, let's say, and you can watch and see 388 00:24:00,400 --> 00:24:04,080 Speaker 4: what happens to demand, and if you know, demand starts 389 00:24:04,080 --> 00:24:06,360 Speaker 4: to hit a little bit of a wall, then maybe 390 00:24:06,400 --> 00:24:09,760 Speaker 4: you hold back on that, but maybe there's another product 391 00:24:09,880 --> 00:24:13,040 Speaker 4: in the portfolio that you have scope to raise the 392 00:24:13,080 --> 00:24:15,720 Speaker 4: pricing on. So I think we'll see a lot of 393 00:24:15,720 --> 00:24:20,719 Speaker 4: different ways that that companies are going to adjust. But 394 00:24:20,880 --> 00:24:24,159 Speaker 4: the retail space is one that it's very very tariff 395 00:24:24,240 --> 00:24:27,119 Speaker 4: sensitive and it will have a very big impact on 396 00:24:27,200 --> 00:24:31,560 Speaker 4: EBITDAF for companies as if we are to see these 397 00:24:31,680 --> 00:24:37,280 Speaker 4: go into effect. On the other extreme is pharma and 398 00:24:37,320 --> 00:24:39,119 Speaker 4: that's one where there is more. 399 00:24:39,000 --> 00:24:40,080 Speaker 5: Of a limited impact. 400 00:24:40,920 --> 00:24:43,280 Speaker 4: And you know what people might say is whoa wait 401 00:24:43,320 --> 00:24:45,720 Speaker 4: a minute, you know what about you know the companies 402 00:24:45,720 --> 00:24:48,639 Speaker 4: that are producing in Ireland. You know what's going to 403 00:24:48,680 --> 00:24:52,320 Speaker 4: happen with them. They're going to get tariffed. And the 404 00:24:52,359 --> 00:24:55,000 Speaker 4: response that you know I have from talking with our 405 00:24:55,000 --> 00:24:58,640 Speaker 4: analysts who covers the spaces, you know, yes, there are 406 00:24:58,640 --> 00:25:02,040 Speaker 4: some high value products that are produced in Ireland. It's 407 00:25:02,080 --> 00:25:06,240 Speaker 4: not just about generics. But again everything is the tariff 408 00:25:06,320 --> 00:25:09,680 Speaker 4: is going to be based on cost and so these 409 00:25:09,760 --> 00:25:13,120 Speaker 4: companies are on the opposite extreme where they have very 410 00:25:13,200 --> 00:25:16,920 Speaker 4: high margins compared to what retailers have, and so they 411 00:25:16,960 --> 00:25:20,480 Speaker 4: do have an ability to absorb some of those costs. 412 00:25:21,680 --> 00:25:24,240 Speaker 4: The other part of pharma is, you know, you've got 413 00:25:24,240 --> 00:25:28,280 Speaker 4: the APIs the products that are used to create the pharmaceuticals, 414 00:25:28,320 --> 00:25:32,440 Speaker 4: the things, the inputs required that provide the therapeutic effect, 415 00:25:33,160 --> 00:25:37,000 Speaker 4: and you know those could potentially be tariffed as they 416 00:25:37,040 --> 00:25:40,000 Speaker 4: come into the US. But again, the cost of these 417 00:25:40,160 --> 00:25:45,160 Speaker 4: is small relative to the margins that pharma companies are experiencing. 418 00:25:46,080 --> 00:25:48,920 Speaker 4: And it's interesting and talking with our analyst about this, 419 00:25:49,560 --> 00:25:51,600 Speaker 4: you know what he says is, you know, maybe some 420 00:25:51,720 --> 00:25:56,720 Speaker 4: of the bigger threat to pharma companies comes in two sources. 421 00:25:57,720 --> 00:26:03,359 Speaker 4: The first is what's going on with the pricing negotiations 422 00:26:03,440 --> 00:26:09,159 Speaker 4: on the list of drugs for medicare and medicaid, which 423 00:26:09,600 --> 00:26:12,440 Speaker 4: it started out with ten drugs. Now we're expanding to fifteen, 424 00:26:12,560 --> 00:26:15,440 Speaker 4: so that will have an impact. But the other thing 425 00:26:15,720 --> 00:26:20,720 Speaker 4: is an area which I'm not an expert in, is 426 00:26:20,840 --> 00:26:23,679 Speaker 4: this whole issue of guilty, you know, the foreign tax 427 00:26:23,800 --> 00:26:28,640 Speaker 4: on IP and that is an area where granted right 428 00:26:28,680 --> 00:26:30,240 Speaker 4: now it's pretty low. I want to say it's a 429 00:26:30,280 --> 00:26:34,280 Speaker 4: little over ten percent. If I'm not mistaken, that may 430 00:26:34,440 --> 00:26:38,560 Speaker 4: increase in twenty six. But you know, if the new 431 00:26:38,600 --> 00:26:43,080 Speaker 4: administration wants to really pressure the pharma companies a little 432 00:26:43,119 --> 00:26:46,119 Speaker 4: bit more, if they are able to get congressional approval, 433 00:26:46,400 --> 00:26:49,239 Speaker 4: they could also raise guilty a little bit more. So 434 00:26:49,600 --> 00:26:52,199 Speaker 4: I just go down that you know, list of different 435 00:26:52,240 --> 00:26:56,280 Speaker 4: things that you know, here's a space in the pharma 436 00:26:56,480 --> 00:26:58,760 Speaker 4: area where tariffs maybe aren't going to have that big 437 00:26:58,760 --> 00:26:59,400 Speaker 4: an impact. 438 00:27:00,480 --> 00:27:02,360 Speaker 5: You've got two other issues. 439 00:27:02,440 --> 00:27:07,120 Speaker 4: You've got taxes, and you've got you know, now renegotiator 440 00:27:07,240 --> 00:27:11,320 Speaker 4: negotiated prices, but the margins are so big that it's 441 00:27:11,359 --> 00:27:13,360 Speaker 4: not likely to have a material impact. 442 00:27:15,240 --> 00:27:20,520 Speaker 2: Before I dig deeper into the healthcare discussion, because I 443 00:27:20,600 --> 00:27:24,000 Speaker 2: am curious on your thoughts about the administration's choices in 444 00:27:24,080 --> 00:27:27,120 Speaker 2: terms of you know, HHS head who may or may 445 00:27:27,119 --> 00:27:31,200 Speaker 2: not be favorable to the pharma space. But beyond that, 446 00:27:31,359 --> 00:27:35,240 Speaker 2: going back to the consumer, something that that was interesting 447 00:27:35,240 --> 00:27:37,800 Speaker 2: that you brought up is you talked about apparel consumers 448 00:27:37,920 --> 00:27:42,240 Speaker 2: or a pair apparel retailing as well as food retailing, 449 00:27:42,600 --> 00:27:45,600 Speaker 2: and the food retailing of course being tremendously sourced from 450 00:27:45,640 --> 00:27:50,359 Speaker 2: Mexico or Canada in some cases, thinking along those lines, 451 00:27:50,400 --> 00:27:53,320 Speaker 2: so I write about restaurants, and obviously restaurants have been 452 00:27:53,359 --> 00:27:56,760 Speaker 2: a little bit more mixed over the past year because 453 00:27:57,359 --> 00:28:00,240 Speaker 2: low income consumers have definitely been pulling back into terms 454 00:28:00,240 --> 00:28:00,920 Speaker 2: of their spending. 455 00:28:02,400 --> 00:28:03,640 Speaker 3: We're already seeing. 456 00:28:03,320 --> 00:28:07,560 Speaker 2: That a lot of retailers, the traditional apparel retailers, are 457 00:28:07,600 --> 00:28:12,080 Speaker 2: being affected by consumers choosing not to spend on discretionary 458 00:28:12,359 --> 00:28:16,320 Speaker 2: spending of goods and rather on services, which is great 459 00:28:16,359 --> 00:28:19,720 Speaker 2: for a lot of my companies. But thinking along those 460 00:28:19,840 --> 00:28:24,960 Speaker 2: lines of you have apparel retailers, a lot of them 461 00:28:25,119 --> 00:28:29,359 Speaker 2: feeling the pressure of consumers not wanting to consume there. 462 00:28:30,119 --> 00:28:32,200 Speaker 2: Then you have restaurants that have already been a little 463 00:28:32,200 --> 00:28:36,639 Speaker 2: bit mixed. Then you throw tariffs into the mix. And Darden, 464 00:28:36,720 --> 00:28:39,640 Speaker 2: of course reported last week they indicated that. 465 00:28:40,840 --> 00:28:42,480 Speaker 3: They're able to absorb a lot of it. 466 00:28:42,600 --> 00:28:46,040 Speaker 2: They do have some concerns, but by and large, you know, 467 00:28:46,120 --> 00:28:50,360 Speaker 2: even from things such as kitchen supplies, they're short of 468 00:28:50,400 --> 00:28:54,360 Speaker 2: anticipating the effects of that. But even so, that's just 469 00:28:54,400 --> 00:28:57,360 Speaker 2: one company and a lot of the other companies might 470 00:28:57,400 --> 00:28:58,480 Speaker 2: be more directly affected. 471 00:28:59,120 --> 00:29:00,560 Speaker 3: How are you sort of. 472 00:29:02,200 --> 00:29:05,800 Speaker 2: Looking at it in terms of I guess sub sectors. 473 00:29:06,200 --> 00:29:10,760 Speaker 2: What area within consumer discretionary are you comfortable with or 474 00:29:10,840 --> 00:29:13,280 Speaker 2: are you just saying, you know what, right now it's 475 00:29:13,280 --> 00:29:16,040 Speaker 2: a little uncertain, let's just go into pharma, let's go 476 00:29:16,080 --> 00:29:16,760 Speaker 2: into healthcare. 477 00:29:18,040 --> 00:29:20,640 Speaker 5: Yeah, So it's interesting. 478 00:29:20,680 --> 00:29:22,360 Speaker 4: We don't have a lot to choose from in the 479 00:29:22,400 --> 00:29:26,560 Speaker 4: IG universe. You know, as you'll know, a lot of 480 00:29:26,560 --> 00:29:29,360 Speaker 4: the department stores no longer are investment grade, so we 481 00:29:29,680 --> 00:29:32,000 Speaker 4: don't have them to worry about. I'll leave that to 482 00:29:32,080 --> 00:29:38,240 Speaker 4: my high yield colleagues, and so that's their problem. So 483 00:29:38,800 --> 00:29:41,400 Speaker 4: really for us we have tilted into pharma. We like 484 00:29:41,480 --> 00:29:46,200 Speaker 4: that space. There are still you know, the pharma model 485 00:29:46,240 --> 00:29:47,760 Speaker 4: that has worked well for us. 486 00:29:49,320 --> 00:29:51,719 Speaker 5: Is the company that makes an acquisition. 487 00:29:52,560 --> 00:29:54,320 Speaker 4: And think about it, you know a lot of these 488 00:29:54,440 --> 00:29:57,920 Speaker 4: pharma companies aren't doing us. There are a lot of 489 00:29:57,920 --> 00:30:01,920 Speaker 4: their own R and D and research and eternally they're 490 00:30:02,120 --> 00:30:06,400 Speaker 4: looking for companies that are external and looking for an 491 00:30:06,440 --> 00:30:09,560 Speaker 4: opportunity to buy those. They buy them, they put a 492 00:30:09,560 --> 00:30:11,760 Speaker 4: little bit of leverage on the company, and then they 493 00:30:11,800 --> 00:30:15,720 Speaker 4: go through a deleveraging process. And so we like when 494 00:30:15,760 --> 00:30:18,760 Speaker 4: those opportunities happen where we have confidence that that is 495 00:30:18,800 --> 00:30:24,560 Speaker 4: the management's approach to acquisitions. You make the acquisition, you 496 00:30:24,600 --> 00:30:28,880 Speaker 4: add a little bit of leverage, you then deleverage over time, 497 00:30:29,560 --> 00:30:35,240 Speaker 4: and so in that regard, when those opportunities provide themselves 498 00:30:35,240 --> 00:30:39,080 Speaker 4: to us, we like to invest in those. And we 499 00:30:39,120 --> 00:30:42,000 Speaker 4: still think that there are some companies and well I 500 00:30:42,040 --> 00:30:45,440 Speaker 4: can't name specific companies, but there are some that are 501 00:30:45,480 --> 00:30:48,120 Speaker 4: still in the process of that deleveraging mode. And so 502 00:30:48,160 --> 00:30:51,280 Speaker 4: we like those stories, and we like the stability of pharma, 503 00:30:52,200 --> 00:30:55,720 Speaker 4: notwithstanding some of the challenges that they may be facing, 504 00:30:56,680 --> 00:30:59,360 Speaker 4: as you've highlighted in the coming year. 505 00:31:00,560 --> 00:31:03,200 Speaker 1: Going back to the valuation point where we started, do 506 00:31:03,280 --> 00:31:07,400 Speaker 1: you buy the idea that this is a substantially fundamentally 507 00:31:07,440 --> 00:31:11,200 Speaker 1: different market now than you know where you started your career. 508 00:31:11,200 --> 00:31:13,800 Speaker 1: I mean, that's that's the pitch I'm getting. You know, 509 00:31:13,800 --> 00:31:15,760 Speaker 1: when I ask people about spreads all day long, they say, 510 00:31:15,760 --> 00:31:17,160 Speaker 1: first of all, don't look at the spreads, just look 511 00:31:17,160 --> 00:31:19,160 Speaker 1: at the yield, and we'll buy ig all day long 512 00:31:19,200 --> 00:31:22,280 Speaker 1: at five percent. Secondly, they say, it doesn't really matter 513 00:31:22,320 --> 00:31:24,000 Speaker 1: because you know, it's a different market, it's high quality, 514 00:31:24,040 --> 00:31:26,480 Speaker 1: it's more liquid, you can do these massive portfolio trades. 515 00:31:26,520 --> 00:31:28,640 Speaker 1: You know, it's much much, much more of a value 516 00:31:28,680 --> 00:31:33,160 Speaker 1: you know, there's all this value there that necessitates tighter spreads. 517 00:31:33,200 --> 00:31:33,840 Speaker 1: Do you buy that? 518 00:31:35,040 --> 00:31:37,840 Speaker 4: I think the market has changed even more fundamentally than that. 519 00:31:38,360 --> 00:31:41,000 Speaker 4: So I started my career back in the eighties. It 520 00:31:41,040 --> 00:31:44,520 Speaker 4: was a long time ago, and I think the difference 521 00:31:44,960 --> 00:31:48,440 Speaker 4: is that the environment has changed. And so for much 522 00:31:48,480 --> 00:31:52,480 Speaker 4: of my career, you had periods of time where you 523 00:31:52,600 --> 00:31:57,360 Speaker 4: had an economic cycle, and so you had periods where 524 00:31:58,160 --> 00:32:00,880 Speaker 4: you know, the economy would be growing, companies would be 525 00:32:00,920 --> 00:32:04,600 Speaker 4: putting on leverage, and then you know, they'd become over 526 00:32:04,720 --> 00:32:08,600 Speaker 4: levered and something would happen with the economy and you 527 00:32:08,640 --> 00:32:11,280 Speaker 4: weren't going to necessarily get bailed out by the FED 528 00:32:12,320 --> 00:32:17,160 Speaker 4: or by aggressive fiscal policy, and you'd have these corrections 529 00:32:18,760 --> 00:32:20,800 Speaker 4: which would clear out a lot of the you know, 530 00:32:20,880 --> 00:32:24,440 Speaker 4: the offenders, and in my market, that would mean they 531 00:32:24,440 --> 00:32:27,200 Speaker 4: would get downgraded to high yield. And I think about 532 00:32:27,200 --> 00:32:30,880 Speaker 4: that period of one oh two where you had corporate 533 00:32:30,920 --> 00:32:36,440 Speaker 4: malfeasance which really compounded problems, or you just had you know, 534 00:32:36,480 --> 00:32:39,440 Speaker 4: companies just leveraged up at a period of time where 535 00:32:39,440 --> 00:32:43,280 Speaker 4: the economy fell away and you had a cleansing. And 536 00:32:44,480 --> 00:32:47,680 Speaker 4: you know, now, what I think happens is we don't 537 00:32:47,880 --> 00:32:52,040 Speaker 4: at least an investment grade. Really have that. And you know, 538 00:32:52,120 --> 00:32:56,680 Speaker 4: I think back on when we had COVID hit and 539 00:32:57,240 --> 00:33:01,120 Speaker 4: you had a coupled a couple of companies that were downgraded, 540 00:33:02,760 --> 00:33:06,240 Speaker 4: and that happened before the FED had announced their plan 541 00:33:06,440 --> 00:33:10,040 Speaker 4: to back essentially backs up corporate debt, which then put 542 00:33:10,080 --> 00:33:14,440 Speaker 4: a floor under things. So I feel like there's and 543 00:33:14,480 --> 00:33:16,160 Speaker 4: I hate to say it, there's a put because I 544 00:33:16,200 --> 00:33:19,120 Speaker 4: think it's just an awful way to describe things. But 545 00:33:19,160 --> 00:33:23,479 Speaker 4: I don't think we have, you know, the same market 546 00:33:23,520 --> 00:33:27,960 Speaker 4: where you get these massive moves and spreads because there 547 00:33:28,040 --> 00:33:31,720 Speaker 4: is this risk of widespread downgrades, we seem to have 548 00:33:33,160 --> 00:33:36,400 Speaker 4: some official support that prevents that from happening. 549 00:33:36,960 --> 00:33:38,600 Speaker 1: And how much of it do you think comes from 550 00:33:38,640 --> 00:33:40,880 Speaker 1: the lack of supply? You know, net new supply, There's 551 00:33:40,880 --> 00:33:43,479 Speaker 1: not much of it. There's no deal making. Also, you know, 552 00:33:43,680 --> 00:33:45,720 Speaker 1: the private credit guys have got their eyes on IG 553 00:33:45,760 --> 00:33:47,520 Speaker 1: as well, So you know, potentially you've got all the 554 00:33:47,520 --> 00:33:50,360 Speaker 1: supply being siphoned off and demand remains steady. Maybe it 555 00:33:50,400 --> 00:33:52,640 Speaker 1: drops off a bit, but that just squeezes the spread, 556 00:33:52,640 --> 00:33:53,360 Speaker 1: doesn't it. 557 00:33:53,360 --> 00:33:56,719 Speaker 4: It does bear in mind it's interesting just the size 558 00:33:56,720 --> 00:34:00,200 Speaker 4: of our market. Also, we're talking about this today. So 559 00:34:00,240 --> 00:34:02,680 Speaker 4: the size of our market has been growing and growing, 560 00:34:02,760 --> 00:34:05,720 Speaker 4: and think back to twenty twenty, where we had so 561 00:34:05,840 --> 00:34:10,080 Speaker 4: much issuance that was going on, and now we're in 562 00:34:10,120 --> 00:34:12,960 Speaker 4: a period where five years later, a lot of that 563 00:34:13,080 --> 00:34:17,719 Speaker 4: issuance is now maturing and is getting rolled over. And 564 00:34:17,800 --> 00:34:22,520 Speaker 4: so just to stay invested, you have to just keep buying. 565 00:34:23,040 --> 00:34:25,640 Speaker 4: So it's not just you know, the private credit people 566 00:34:25,760 --> 00:34:28,680 Speaker 4: might be circling for ig Although I hear a lot 567 00:34:28,680 --> 00:34:30,799 Speaker 4: about it, I still I'm not quite sure how it's 568 00:34:30,800 --> 00:34:33,839 Speaker 4: all going to work. But you hear a lot about that, 569 00:34:34,280 --> 00:34:37,279 Speaker 4: and you have you know, more diversified buyer bases and like. 570 00:34:37,320 --> 00:34:39,800 Speaker 4: But I just think the reinvestment of the size of 571 00:34:39,840 --> 00:34:43,360 Speaker 4: our market is very large and creates a natural demand. 572 00:34:43,800 --> 00:34:46,560 Speaker 1: Been a kind of you know, perception at least. And 573 00:34:46,600 --> 00:34:48,440 Speaker 1: I'm interested in your thoughts and how real it is 574 00:34:48,960 --> 00:34:52,400 Speaker 1: that you know, maybe people need to diversify out of 575 00:34:52,400 --> 00:34:55,600 Speaker 1: the US, given you know, the volatility, given the changes 576 00:34:55,640 --> 00:34:58,320 Speaker 1: that are happening very very quickly in the political side. 577 00:34:59,239 --> 00:35:00,759 Speaker 1: To what extent you seeing that, to what e's scent? 578 00:35:00,880 --> 00:35:02,239 Speaker 1: Is it real? And what are the limits to that? 579 00:35:02,600 --> 00:35:06,719 Speaker 4: Yeah, I think there was an amazing opportunity within the 580 00:35:06,760 --> 00:35:10,640 Speaker 4: past several months to be able to invest in European 581 00:35:10,800 --> 00:35:14,759 Speaker 4: credit relative to US credit. And I remember we were 582 00:35:15,160 --> 00:35:17,760 Speaker 4: looking at some things in one of our strategy meetings 583 00:35:18,360 --> 00:35:22,200 Speaker 4: and it was just so striking the differentials between the 584 00:35:22,239 --> 00:35:27,400 Speaker 4: two and it just seemed to make sense that, you know, 585 00:35:27,560 --> 00:35:31,480 Speaker 4: even for US companies that were that had Euro denominated debt, 586 00:35:31,920 --> 00:35:35,520 Speaker 4: the spreads, even adjusting for swap spread differentials, just were 587 00:35:35,560 --> 00:35:39,520 Speaker 4: that much cheaper. So that to US was a really 588 00:35:39,560 --> 00:35:45,360 Speaker 4: great opportunity. Now what we've seen is that differential really compressed, 589 00:35:45,360 --> 00:35:48,400 Speaker 4: so the two markets are now essentially on a government 590 00:35:48,480 --> 00:35:53,520 Speaker 4: bond spread basis, or spread over government bonds trading on 591 00:35:53,560 --> 00:35:57,520 Speaker 4: top of each other. So you know, maybe that opportunity 592 00:35:57,560 --> 00:36:01,320 Speaker 4: has waned for a little bit, but we did see 593 00:36:02,560 --> 00:36:04,640 Speaker 4: over the past several weeks a little bit of US 594 00:36:04,760 --> 00:36:07,920 Speaker 4: under performance. So one of the things you can do 595 00:36:08,080 --> 00:36:11,000 Speaker 4: is say, well, maybe there are some very rich European bonds, 596 00:36:11,280 --> 00:36:14,160 Speaker 4: we can now swap those back into US. So I 597 00:36:14,160 --> 00:36:18,880 Speaker 4: think there's great opportunities to rotate between the two markets. 598 00:36:20,239 --> 00:36:23,360 Speaker 4: And I do think, you know, as I was saying before, 599 00:36:23,920 --> 00:36:28,440 Speaker 4: what's going on with Europe is really pretty incredible, and 600 00:36:28,520 --> 00:36:31,080 Speaker 4: I think you will see companies that are that are 601 00:36:31,080 --> 00:36:35,160 Speaker 4: going to benefit, whether that's in the transport space. I 602 00:36:35,239 --> 00:36:38,200 Speaker 4: mentioned the camp Good space. I think banks in Europe 603 00:36:38,200 --> 00:36:41,400 Speaker 4: are going to benefit from what's happening there. So I 604 00:36:41,400 --> 00:36:44,000 Speaker 4: think we just have to watch when the valuations lean 605 00:36:44,120 --> 00:36:46,839 Speaker 4: more into that area to take advantage of those. 606 00:36:47,160 --> 00:36:50,560 Speaker 1: Is there any risks all the defense spending the government 607 00:36:50,640 --> 00:36:52,680 Speaker 1: level crowding out some of this corporations, do you think 608 00:36:52,680 --> 00:36:53,759 Speaker 1: in terms of the demand for it. 609 00:36:55,280 --> 00:36:57,879 Speaker 4: You know, that's a good question, right because you can 610 00:36:57,920 --> 00:37:03,000 Speaker 4: look at, you know, some of the government agency type debt. 611 00:37:03,040 --> 00:37:08,120 Speaker 4: If we start getting the kind of Eurozone collective debt issuance, 612 00:37:08,239 --> 00:37:10,440 Speaker 4: it may for some of the higher quality parts of 613 00:37:10,480 --> 00:37:14,160 Speaker 4: the market, I could probably see that. But I think 614 00:37:14,200 --> 00:37:18,359 Speaker 4: there's enough in single A and triple B debt and 615 00:37:18,560 --> 00:37:21,360 Speaker 4: probably enough spread that it should still be able to 616 00:37:21,440 --> 00:37:24,120 Speaker 4: attract investors and list. 617 00:37:24,160 --> 00:37:28,640 Speaker 2: So if we think about beyond corporate ig I mean 618 00:37:28,840 --> 00:37:32,920 Speaker 2: for the areas in which you can occasionally dip into 619 00:37:32,920 --> 00:37:34,880 Speaker 2: other markets, are you looking at that, are you just 620 00:37:35,040 --> 00:37:38,279 Speaker 2: really sticking to your bread and butter and are you 621 00:37:38,440 --> 00:37:41,239 Speaker 2: considering it from you know, you talked about it being 622 00:37:41,360 --> 00:37:44,240 Speaker 2: very much a carry trade these days. Are you seeing 623 00:37:44,239 --> 00:37:48,200 Speaker 2: any sort of benefit. I mean, it sounds like Europe 624 00:37:48,239 --> 00:37:50,520 Speaker 2: and US it's now just a wash at this point. 625 00:37:50,600 --> 00:37:58,120 Speaker 4: But yeah, so you know, it's interesting. I we have 626 00:37:58,200 --> 00:38:01,680 Speaker 4: the flexibility in many of our stresses to go into 627 00:38:01,719 --> 00:38:05,760 Speaker 4: high yield and kind of a natural a natural place 628 00:38:05,800 --> 00:38:10,560 Speaker 4: for someone managing an investment grade strategy is to look 629 00:38:10,600 --> 00:38:14,840 Speaker 4: at double B, look for rising stars, look for opportunities there. 630 00:38:15,680 --> 00:38:18,840 Speaker 4: And you know what happened, and up until just recently 631 00:38:19,000 --> 00:38:22,200 Speaker 4: where the spreads have shifted a bit, but that relationship 632 00:38:22,280 --> 00:38:26,680 Speaker 4: between triple B and double B spreads became very, very compressed. 633 00:38:27,760 --> 00:38:32,279 Speaker 4: And what we found to offer better value was going 634 00:38:32,360 --> 00:38:35,080 Speaker 4: back to those hybrid securities that I was talking about, 635 00:38:35,880 --> 00:38:38,760 Speaker 4: or some of the bank securities, where for the same 636 00:38:39,040 --> 00:38:42,280 Speaker 4: type of spread that you would receive on a double 637 00:38:42,360 --> 00:38:48,480 Speaker 4: B rated company spawns you could actually buy something issued 638 00:38:48,480 --> 00:38:51,839 Speaker 4: by an investment grade company, but you were coming down 639 00:38:51,880 --> 00:38:55,520 Speaker 4: in the capital structure, and we felt that that offered 640 00:38:55,560 --> 00:39:00,840 Speaker 4: a more compelling story and you know, in some cases 641 00:39:02,040 --> 00:39:06,880 Speaker 4: a better volatility profile. Now, when some of the utility 642 00:39:06,960 --> 00:39:10,480 Speaker 4: hybrids were first getting started, we're starting to see some issuance. 643 00:39:12,280 --> 00:39:15,400 Speaker 4: They traded with a little bit more volatility than you 644 00:39:15,480 --> 00:39:20,000 Speaker 4: might find in traditional double B high yield. But I 645 00:39:20,000 --> 00:39:22,600 Speaker 4: think over time is that market has begun to fill 646 00:39:22,640 --> 00:39:26,680 Speaker 4: out and more participants have come in. The volatility has 647 00:39:26,760 --> 00:39:27,719 Speaker 4: really started. 648 00:39:27,440 --> 00:39:28,080 Speaker 5: To come down. 649 00:39:28,880 --> 00:39:33,560 Speaker 4: So for me, I would prefer owning an investment grade 650 00:39:33,560 --> 00:39:38,799 Speaker 4: company coming down in cap structure then necessarily buying a 651 00:39:38,840 --> 00:39:42,880 Speaker 4: double B rated company where the spreads had been pretty tight. 652 00:39:43,280 --> 00:39:47,680 Speaker 4: Now we have seen some underperformance of high yield, and 653 00:39:47,760 --> 00:39:50,040 Speaker 4: I'm a little bit more interested to look there. But 654 00:39:50,560 --> 00:39:54,520 Speaker 4: I think that market is still pretty well bid, and 655 00:39:54,640 --> 00:39:57,279 Speaker 4: so you know, I think I think I'll stick to 656 00:39:57,320 --> 00:40:00,359 Speaker 4: my hybrids and my bank capital for the time being. 657 00:40:00,960 --> 00:40:02,520 Speaker 1: Is that where the best value is right now in 658 00:40:02,640 --> 00:40:05,720 Speaker 1: terms of your global portfolio, where would you pinpoint relative 659 00:40:05,760 --> 00:40:08,640 Speaker 1: value for the next let's say, twelve or eighteen months. 660 00:40:08,760 --> 00:40:12,279 Speaker 4: So if we think about the top ideas that we 661 00:40:12,440 --> 00:40:16,560 Speaker 4: have right now in portfolios, we've done a bit more 662 00:40:16,600 --> 00:40:21,239 Speaker 4: of an up and quality trade in ig We think that, 663 00:40:21,360 --> 00:40:23,800 Speaker 4: you know, there's a lot of very interesting single A 664 00:40:24,200 --> 00:40:28,440 Speaker 4: companies that we think should do well. We've decided to 665 00:40:28,520 --> 00:40:32,520 Speaker 4: lean into financials. We like the banks, and then to 666 00:40:32,600 --> 00:40:35,320 Speaker 4: spice up our portfolios. It's a little bit of a barbell. 667 00:40:35,400 --> 00:40:38,879 Speaker 4: Maybe you will look at a little bit of at 668 00:40:39,080 --> 00:40:42,560 Speaker 4: one because we still think that story in Europe is 669 00:40:42,680 --> 00:40:46,520 Speaker 4: very compelling, and we'll look at the hybrid securities. 670 00:40:48,719 --> 00:40:52,080 Speaker 2: And Lisa, I kind of crack up about the hybrid conversation, 671 00:40:52,200 --> 00:40:54,480 Speaker 2: only because in my prior life though, it was something 672 00:40:54,520 --> 00:40:57,400 Speaker 2: that I did a lot of, well, the fixed to floats, 673 00:40:57,480 --> 00:41:01,280 Speaker 2: a lot of the preferred, the twenty five dollars par bonds, 674 00:41:01,320 --> 00:41:04,360 Speaker 2: all that fun stuff. So it really does feel like 675 00:41:04,400 --> 00:41:08,200 Speaker 2: it's coming full circle now. One thing that I do wonder, 676 00:41:08,400 --> 00:41:10,200 Speaker 2: and you talked a little bit or a lot bit 677 00:41:10,239 --> 00:41:14,080 Speaker 2: about tariffs, but beyond that, what keeps you up at 678 00:41:14,160 --> 00:41:17,000 Speaker 2: night in everything that's going on. I mean, there's so 679 00:41:17,160 --> 00:41:20,560 Speaker 2: much happening, but what's really the factor that's keeping up 680 00:41:20,560 --> 00:41:22,480 Speaker 2: at night these days? 681 00:41:23,480 --> 00:41:29,200 Speaker 5: That's a great question, you know. I think I think 682 00:41:29,280 --> 00:41:30,000 Speaker 5: we are. 683 00:41:31,680 --> 00:41:36,239 Speaker 4: Embarking on a very different approach to the role of 684 00:41:36,280 --> 00:41:38,440 Speaker 4: the US and how the US is going to be 685 00:41:38,560 --> 00:41:43,520 Speaker 4: run from an economic perspective, from a political perspective, and 686 00:41:43,600 --> 00:41:47,279 Speaker 4: it's a lot of change very quickly, and so in 687 00:41:47,360 --> 00:41:49,960 Speaker 4: my mind this is not meant to be political at all. 688 00:41:50,040 --> 00:41:53,400 Speaker 4: But when you start to see very big shifts in 689 00:41:53,520 --> 00:41:59,320 Speaker 4: terms of you know, philosophy of how things should be done. 690 00:42:01,160 --> 00:42:06,200 Speaker 4: When you're making change very quickly, sometimes things can unintentionally 691 00:42:06,280 --> 00:42:09,279 Speaker 4: break and so that worries me is I try to 692 00:42:09,320 --> 00:42:12,080 Speaker 4: figure out what is it that we're going too quickly 693 00:42:12,160 --> 00:42:15,319 Speaker 4: on Where could we fall short? You know, right now 694 00:42:15,320 --> 00:42:18,120 Speaker 4: we're talking about tariffs. The next thing we're going to 695 00:42:18,120 --> 00:42:18,879 Speaker 4: be talking. 696 00:42:18,600 --> 00:42:20,880 Speaker 5: About is the budget. 697 00:42:22,840 --> 00:42:26,880 Speaker 4: You know, we've got t c JA coming up. This 698 00:42:26,880 --> 00:42:31,520 Speaker 4: this rollover. You know, what is the environment going to 699 00:42:31,520 --> 00:42:34,279 Speaker 4: be like for companies? There are there's a school of 700 00:42:34,320 --> 00:42:37,080 Speaker 4: thought that you know, maybe this isn't going to be 701 00:42:37,800 --> 00:42:42,760 Speaker 4: quite as accommodating an environment for companies as was thought. 702 00:42:43,040 --> 00:42:46,080 Speaker 4: You know, back toward the end of last year, you know, 703 00:42:46,160 --> 00:42:49,239 Speaker 4: you hear about some things being floated that could have 704 00:42:50,680 --> 00:42:53,759 Speaker 4: a negative impact on companies. You know, you you hear 705 00:42:53,800 --> 00:42:57,160 Speaker 4: about business or corporate salt that's worth a lot of 706 00:42:57,200 --> 00:43:00,560 Speaker 4: money to companies. So that's something that may have to 707 00:43:00,600 --> 00:43:01,120 Speaker 4: adjust to. 708 00:43:02,000 --> 00:43:05,600 Speaker 1: Great stuff. Lisa Coleman, head of Global Investment Grade Corporate 709 00:43:05,640 --> 00:43:08,400 Speaker 1: Credit at JP Morgan Asset Management, It's been a pleasure 710 00:43:08,600 --> 00:43:11,239 Speaker 1: having you on the credit edge. Many thanks, and of 711 00:43:11,280 --> 00:43:14,440 Speaker 1: course we're very grateful to Jody Luri from Bloomberg Intelligence 712 00:43:14,719 --> 00:43:18,520 Speaker 1: thanks for joining us today, Jody. For more Credit Analysis, 713 00:43:18,560 --> 00:43:20,920 Speaker 1: read all of Jody's great work on the Bloomberg Terminal. 714 00:43:20,920 --> 00:43:23,680 Speaker 1: Bloomberg Intelligence is part of our research department, with five 715 00:43:23,760 --> 00:43:27,400 Speaker 1: hundred analysts and strategists working across all markets. Coverage includes 716 00:43:27,440 --> 00:43:30,359 Speaker 1: over two thousand equities and credits and outlooks on more 717 00:43:30,400 --> 00:43:34,879 Speaker 1: than ninety industries and one hundred market industries, currencies, and commodities. 718 00:43:35,360 --> 00:43:38,000 Speaker 1: Please do subscribe to the Credit Edge wherever you get 719 00:43:38,000 --> 00:43:41,359 Speaker 1: your podcasts. We're on Apple, Spotify, and all other good 720 00:43:41,440 --> 00:43:46,120 Speaker 1: podcast providers, including the Bloomberg Terminal at bpod Go. Give 721 00:43:46,200 --> 00:43:48,800 Speaker 1: us a review, tell your friends, or email me directly 722 00:43:48,880 --> 00:43:53,080 Speaker 1: at jcromb eight at Bloomberg dot net. I'm James Cromby. 723 00:43:53,160 --> 00:43:55,439 Speaker 1: It's been a pleasure having you join us again next 724 00:43:55,440 --> 00:44:13,320 Speaker 1: week on the Credit Edge.