WEBVTT - Global Default Rate Hit Could Hit 10% By Year-End: TwentyFour Asset 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.280 we bring you the most noteworthy and useful interviews for 0:00:10.320 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.880 at Bloomberg dot com. Well, we've certainly become accustomed to 0:00:22.000 --> 0:00:25.400 volatility and the financial markets UH and across the fixed 0:00:25.400 --> 0:00:28.440 income markets in particular. Here to get a sense of 0:00:28.480 --> 0:00:30.960 kind of how we should be thinking about investing in 0:00:31.000 --> 0:00:33.640 fixed income markets over the next several quarters, we welcome 0:00:33.680 --> 0:00:36.800 Mark Holman, CEO of twenty four Asset Management with about 0:00:36.800 --> 0:00:40.720 twenty three billion dollars under management. We appreciate Mark joining us. Mark, 0:00:40.720 --> 0:00:42.879 thanks so much for joining us here. So as we 0:00:43.000 --> 0:00:46.120 think about these markets here, I want to start with 0:00:46.240 --> 0:00:50.519 kind of what your backdrop is, what your construct is 0:00:50.720 --> 0:00:54.040 for the economy going forward. Is this a a kind 0:00:54.040 --> 0:00:57.520 of a a V shaped recovery here or should we 0:00:57.600 --> 0:01:03.960 be preparing for lower for longer in terms of economic activity? Yeah, 0:01:03.960 --> 0:01:06.720 I think undoubtedly I'd be going for lower for longer 0:01:06.760 --> 0:01:09.560 in terms of economic activity. I think the the end 0:01:09.560 --> 0:01:12.040 of the last cycle ending with a surprise, as they 0:01:12.040 --> 0:01:14.720 often do, but this surprise was global. When you've got 0:01:14.760 --> 0:01:16.800 a global surprise that h's every part of the globe 0:01:16.800 --> 0:01:19.440 at the same time, I think it the impact is 0:01:19.440 --> 0:01:21.520 just that much more significant, and it's going to hit 0:01:21.520 --> 0:01:25.399 the both the supply side and the demand side, and 0:01:25.440 --> 0:01:27.640 I think it just takes a lot longer to recover. 0:01:28.000 --> 0:01:30.800 These incredible aid programs that we've got around the world, 0:01:31.520 --> 0:01:36.120 whilst enormous in spise, logistically just won't reach everybody, but 0:01:36.200 --> 0:01:39.440 there's there's some long term damage to them on which 0:01:39.440 --> 0:01:41.119 in my view means we're going to be spending probably 0:01:41.200 --> 0:01:43.240 the best part of two years to get ourselves back 0:01:43.280 --> 0:01:48.320 towards a QUE for nineteen type production level. Mark I'm 0:01:48.360 --> 0:01:50.520 struck it and saw a lot of people about the 0:01:50.640 --> 0:01:54.240 disconnect in the slow recovery that a lot of economists 0:01:54.600 --> 0:01:59.080 and analysts are seeing and stock markets, which seem relatively 0:02:00.440 --> 0:02:02.760 unfazed by this whole issue, at least based on the 0:02:02.880 --> 0:02:05.520 rally that we have seen over the past month. This 0:02:05.600 --> 0:02:08.120 morning we have Goldman Sachs coming out and saying that 0:02:08.160 --> 0:02:11.440 at one point these realities are going to converge and 0:02:11.480 --> 0:02:15.000 that stocks are poised to drop about over the next 0:02:15.000 --> 0:02:19.240 three months. Do you agree. I think when you look 0:02:19.240 --> 0:02:22.480 at fundamental you have to agree that the market has 0:02:22.560 --> 0:02:25.040 really really raised ahead and then it's really pricing in. 0:02:25.240 --> 0:02:27.840 It's actually described a somewhat of a V shaped recovery. 0:02:28.720 --> 0:02:31.640 Um So I think you're fundamentally probably quite hard to 0:02:31.680 --> 0:02:35.200 justify where we are here. However, technically I don't think 0:02:35.240 --> 0:02:38.280 we're getting a full picture. The full picture does include 0:02:38.280 --> 0:02:41.680 the incredible amounts of money poured in by the FED 0:02:41.680 --> 0:02:44.200 and other institutions around the world, and we know they 0:02:44.240 --> 0:02:48.079 find these volumes of cash find their way into financial markets, 0:02:48.840 --> 0:02:51.000 and that these volumes of cash are going to be 0:02:51.040 --> 0:02:54.280 there for the foreseeable I think investors are saying, well, 0:02:54.639 --> 0:02:57.680 the FAD behind us, or the ECBs behind us, sort 0:02:57.680 --> 0:03:00.160 of Bank of Englands behind us, and if it's going 0:03:00.200 --> 0:03:02.000 to be action done in the in the US has 0:03:02.040 --> 0:03:04.880 been has been very very broad. So I think that 0:03:05.000 --> 0:03:06.919 as I've got confidence from that, and I think that 0:03:07.000 --> 0:03:09.639 liquidity in the market is making it a very very 0:03:09.760 --> 0:03:14.240 painful rally. Indeed, it's it's a squeeze so market, you know, 0:03:14.560 --> 0:03:17.520 in terms of the credit markets. Here, we're starting to 0:03:17.600 --> 0:03:22.680 see some bankruptcies and defaults kind of start trickling in 0:03:22.720 --> 0:03:24.880 across the tape here. How do you think this is 0:03:24.880 --> 0:03:26.920 going to play out? As you take a look at 0:03:26.919 --> 0:03:29.760 the credit quality out there in the markets that you 0:03:29.760 --> 0:03:35.000 look at, I mean, credit quality is no doubt going 0:03:35.040 --> 0:03:38.480 to deteriorate pretty much across the board. There'll be very 0:03:38.560 --> 0:03:41.200 very few businesses that will improve their credit quality. And 0:03:41.320 --> 0:03:43.640 while this is going on and now over the last 0:03:43.640 --> 0:03:47.440 decade or so, we've been somewhat immunized from them deteriorating 0:03:47.480 --> 0:03:50.720 credit quality by the by the actions from UH in 0:03:50.720 --> 0:03:54.120 cential banks and government. This h it is just too big. 0:03:54.720 --> 0:03:56.720 I think we're going to see a material spike in 0:03:56.760 --> 0:03:59.680 the default rate. It's very very hard to predict exactly 0:03:59.720 --> 0:04:00.880 what it's going to be in the in the in 0:04:00.880 --> 0:04:03.720 the world of rated securities, we well, we know that 0:04:03.760 --> 0:04:06.200 the individual consumers are going to have problems because they 0:04:06.240 --> 0:04:08.560 won't reach them. Sm evil that problems because they won't 0:04:08.560 --> 0:04:10.920 reach them. And in the end, this does affect the 0:04:11.000 --> 0:04:13.880 larger companies too. It's been quite remarkable how quickly some 0:04:13.920 --> 0:04:16.320 of those companies have run out of money. I mean, 0:04:16.680 --> 0:04:18.240 you know, I'm gonna stick my neck out and say 0:04:18.240 --> 0:04:20.400 I wouldn't be surprised to see at global for thult 0:04:20.440 --> 0:04:26.080 rate by the end of this year approaching ten totally 0:04:26.080 --> 0:04:27.360 two and a half of the end of last year. 0:04:27.360 --> 0:04:29.320 So it's a really quite a big move. Where are 0:04:29.360 --> 0:04:34.000 you hiding mark, where are you investing? Well, it's it's 0:04:34.240 --> 0:04:38.560 tricky in the corporate world. Really, there's a long list 0:04:38.600 --> 0:04:40.599 of sectors I think you really need to try to avoid, 0:04:40.640 --> 0:04:43.080 and you know, whether it be metals, mining, energy, which 0:04:43.080 --> 0:04:45.320 are sort of late cycle names that you don't want 0:04:45.320 --> 0:04:49.080 to on late cycle sectors um. And then there's the 0:04:49.080 --> 0:04:52.000 ones which perhaps more impacted by the current situation, where 0:04:52.040 --> 0:04:56.520 you travel, leisure, retail, of course, an automotive. I think 0:04:56.560 --> 0:04:59.400 that those are the kind of areas to avoid and 0:04:59.720 --> 0:05:02.400 where you can, I think you focus on sectors that 0:05:02.440 --> 0:05:05.640 are more resilient obviously, but you know where the balance 0:05:05.640 --> 0:05:08.360 sheets to the companies are more resilient or regulated, there's 0:05:08.400 --> 0:05:11.680 more visible learning. So I would say, contrary perhaps to 0:05:11.680 --> 0:05:14.760 the to the last recession, let's look at banking, Let's 0:05:14.800 --> 0:05:18.960 look at financial insurance as an incredible way of repricing itself. 0:05:19.000 --> 0:05:22.120 The banks have got very resilient balance sheets thanks to 0:05:22.160 --> 0:05:25.200 the terrific work work done by the authorities or and 0:05:25.520 --> 0:05:28.599 utility you generally regulated much more solid balance sheet in 0:05:28.640 --> 0:05:31.679 each of these industries are all open for business today. 0:05:31.680 --> 0:05:35.039 We're all still paying the bank interest, we're all still 0:05:35.040 --> 0:05:37.960 taking our insurances that we're all still using these utilities. 0:05:37.960 --> 0:05:40.280 So they've they've got the resilient balance sheets and then 0:05:40.279 --> 0:05:42.919 they've got more visible learning. So I think that that 0:05:43.040 --> 0:05:46.719 the list of sex is pretty small, but there's they're 0:05:46.760 --> 0:05:48.480 quite broad. There's quite a few companies that you can 0:05:48.480 --> 0:05:51.520 still invest with there with a lot of confidence. Mark Holeman, 0:05:51.560 --> 0:05:53.640 thank you so much for being with us. Mark Coleman, 0:05:53.680 --> 0:05:57.720 chief executive officer of twenty four Asset Management based in London, 0:05:57.760 --> 0:06:01.039 with twenty three billion dollars of assets under management. And 0:06:01.040 --> 0:06:05.120 I'm struck by the idea that insurance companies and banks 0:06:05.240 --> 0:06:07.520 will be behavens this time around. It just sort of 0:06:07.839 --> 0:06:12.400 highlights how different this particular crisis is than the last one. Paul, Yeah, exactly. 0:06:12.440 --> 0:06:14.000 When you're thinking about the you know, the big money 0:06:14.040 --> 0:06:16.160 center banks and being bailed out and the A I. G. 0:06:16.360 --> 0:06:18.960 S of the world, and so as we've heard, you know, 0:06:19.040 --> 0:06:21.880 time and time again, this is very, very different. This 0:06:21.960 --> 0:06:25.960 is an external shock of pandemic medical issue, healthcare issue, 0:06:26.320 --> 0:06:32.600 not something endemic to the financial system per se. We've 0:06:32.600 --> 0:06:35.320 been talking a lot about the pain in the developing 0:06:35.440 --> 0:06:38.880 world as that area sees a disproportionate hit from the 0:06:38.880 --> 0:06:42.360 removal of financing from the likes of the United States 0:06:42.360 --> 0:06:44.320 and Europe. Here to speak with us, we are so 0:06:44.400 --> 0:06:48.240 pleased to say, is the seminal expert on this area. 0:06:48.320 --> 0:06:51.719 Bill Rhodes, President and chief executive officer of the William 0:06:51.800 --> 0:06:55.680 Our Rhodes Global Advisors, former City Bank chairman, also one 0:06:55.680 --> 0:06:58.760 of the key architects of the restructuring efforts in Latin 0:06:58.800 --> 0:07:02.400 America during the ninth nineties, and the author of the 0:07:02.440 --> 0:07:05.600 book Banker to the World. Bill, thank you so much 0:07:05.640 --> 0:07:08.279 for being back with us. I know that you see 0:07:08.600 --> 0:07:12.560 potentially a crisis in emerging markets that exceeds what we 0:07:12.600 --> 0:07:15.600 have seen in recent history. I want to sort of 0:07:15.640 --> 0:07:18.840 focus in on some of the hotspots, starting with Argentina. 0:07:19.280 --> 0:07:23.640 Argentina on the brink of defaulting once again. Is there 0:07:23.680 --> 0:07:27.360 a threshold for how many times a country kind default 0:07:27.680 --> 0:07:31.360 and what the consequences will be? Anyway, First of all, 0:07:31.400 --> 0:07:35.000 it's great to be on with you, Lisa. Well, Uh, 0:07:35.080 --> 0:07:38.200 I would say in a case of Argentina, they they've 0:07:38.240 --> 0:07:41.440 defaulted eight times in their history. I was structured them 0:07:41.480 --> 0:07:45.000 five times, and they're on the brink of our ninth default. 0:07:46.360 --> 0:07:49.800 They were going to declare default today and they moved 0:07:49.800 --> 0:07:54.720 it off to the two for further discussions with the creditors. 0:07:54.760 --> 0:07:57.840 But they need to make a five million dollar payment 0:07:58.480 --> 0:08:03.120 on their eight six million billion dollars of debt that 0:08:03.240 --> 0:08:05.760 they have in addition to the eighties six billion dollars 0:08:05.840 --> 0:08:08.480 of of of of normal debt in the sense of 0:08:08.760 --> 0:08:14.440 sovereign debt UH two creditors. They also have an outstanding 0:08:15.400 --> 0:08:19.280 of somewhere depending on how you look at the disbursements 0:08:19.320 --> 0:08:23.960 between forty seven and fifty billion with the International Monetary Fund. 0:08:24.600 --> 0:08:28.920 So they are they are basically UH the case that's UH, 0:08:28.960 --> 0:08:32.880 I think right at the lands point of what's going 0:08:32.920 --> 0:08:36.240 on in the American emerging markets. So, Bill, I know 0:08:36.320 --> 0:08:38.960 you've you've educated us UH in the past about how 0:08:39.000 --> 0:08:41.120 this is a little bit different this time in that 0:08:41.640 --> 0:08:45.480 the private sector owns a lot of this debt. Here 0:08:46.120 --> 0:08:50.280 is there any indication that the private sector that I 0:08:50.320 --> 0:08:52.560 mean the public sector will hold off on debt collection. 0:08:52.640 --> 0:08:55.439 Here some of these hedge funds and and and investors, 0:08:56.480 --> 0:08:59.320 I think the only ones who've agreed to hold off 0:08:59.360 --> 0:09:03.800 of a sovereign which in the in the Group of 0:09:03.840 --> 0:09:06.439 twenties said they would hold off to the poorest countries 0:09:07.120 --> 0:09:09.839 until the end of the year, but of course it's 0:09:09.880 --> 0:09:14.000 not even clear uh what that'll be after the end 0:09:14.040 --> 0:09:15.760 of the year. They haven't come up with a plan. 0:09:16.360 --> 0:09:18.320 And on the private sector, there are all sorts of 0:09:18.320 --> 0:09:21.120 discussions going on how the private sector and the public 0:09:21.120 --> 0:09:24.760 sector can work together, but at the up up to now, 0:09:24.960 --> 0:09:27.800 there's been nothing on the on the private sector. And 0:09:27.920 --> 0:09:30.760 as you point out, there's a lot of private sector 0:09:30.840 --> 0:09:34.440 debt out there, uh, not only to the sovereign, but 0:09:34.640 --> 0:09:39.000 two companies uh in uh in these various countries. So 0:09:39.120 --> 0:09:44.280 it's it's sort of a perfect storm type situation. It's 0:09:44.280 --> 0:09:49.160 the worst, I would say that situation I've ever seen 0:09:49.200 --> 0:09:52.800 in my lifetime. And everyone's grappling with how to handle 0:09:52.840 --> 0:09:58.040 it because you have this COVID nineteen problem which even 0:09:58.080 --> 0:10:01.400 the experts are not sure how to resolve it other 0:10:01.440 --> 0:10:03.439 than getting a vaccine, which it doesn't look like we're 0:10:03.440 --> 0:10:06.360 going to have until next year. Just to give you 0:10:06.400 --> 0:10:08.760 some perspective as to how deep the pain is. Just 0:10:08.800 --> 0:10:11.040 to give you a sense of the nations that have 0:10:11.120 --> 0:10:15.560 dollar bonds UH that are trading at distress levels. It 0:10:15.559 --> 0:10:20.920 includes Venezuela, Argentina, Lebanon, Ecuador, Zambia, Zambia, Surinam, going all 0:10:20.920 --> 0:10:25.160 the way through it to Nigeria and El Salvador and 0:10:25.160 --> 0:10:28.800 and a host of others. I'm just wondering what you think, bill, 0:10:28.880 --> 0:10:32.319 based on your experience, should be done for this at 0:10:32.320 --> 0:10:34.760 a time when some of these emerging markets are actually 0:10:34.800 --> 0:10:38.160 trying what developed markets are doing and printing money, they're 0:10:38.160 --> 0:10:43.240 just doing quewie, risking more inflation and further capital flight. Right, 0:10:43.280 --> 0:10:46.200 and you're talking about just dollar denominated debt, because you 0:10:46.280 --> 0:10:49.480 have two other phenomena out there. None of these countries, 0:10:49.520 --> 0:10:52.760 particularly Eastern Europe and elsewhere, and some in Africa have 0:10:52.880 --> 0:10:56.800 your dead also so um and a lot of people 0:10:56.840 --> 0:10:59.640 tend not to factor that in. And then of course 0:10:59.679 --> 0:11:03.840 you have a one belt, one road UH Chinese lending 0:11:04.360 --> 0:11:08.840 policies that are outstandings of anywhere, because they're you know, 0:11:08.880 --> 0:11:12.840 it's very obscure as to how the outstanding, what the 0:11:12.840 --> 0:11:16.880 outstandings are, and what the collection arrangements are the credit 0:11:16.960 --> 0:11:20.240 arrangements any the estimate there is anywhere from two hundred 0:11:20.320 --> 0:11:25.120 and forty billion to to five billion. And so I 0:11:25.160 --> 0:11:27.559 think what needs to be done here is the I 0:11:27.679 --> 0:11:30.240 m F and the World Bank have to sit down 0:11:30.760 --> 0:11:33.800 with a group of twenty and try and work out 0:11:34.080 --> 0:11:38.400 some sort of a plan UH, starting on the sovereign side, 0:11:38.720 --> 0:11:41.679 but also try and see if you can get an 0:11:41.679 --> 0:11:45.079 inner link with the private sector, as we did with 0:11:45.160 --> 0:11:49.640 the Brady bonds in the late nineteen eighties in the 0:11:49.720 --> 0:11:53.480 early nineties UH. And the situation here is much much 0:11:53.520 --> 0:11:58.200 worse because there it was an economic debt crisis, but 0:11:58.320 --> 0:12:01.200 you didn't have a health crisis, and so many of 0:12:01.200 --> 0:12:04.360 these countries in the emerging markets don't have decent health systems. 0:12:04.520 --> 0:12:08.480 And then in Latin America exacerbated, you have five million 0:12:09.120 --> 0:12:13.439 Venezuelan refugees UH in Latin America, and that puts at 0:12:13.520 --> 0:12:19.280 risk countries like Colombia, Ecuador, through some of the islands 0:12:19.320 --> 0:12:23.760 in the Caribbean and UH and also northern Brazil UH. 0:12:23.800 --> 0:12:26.000 And I would just say on Brazil is going through 0:12:26.400 --> 0:12:29.679 probably one of the worst periods it's had because they 0:12:29.720 --> 0:12:31.959 just got out of recession. And now they're going to 0:12:32.040 --> 0:12:36.040 go back into recession with five percent negative growth this 0:12:36.120 --> 0:12:38.800 year with the president who doesn't want to recognize that 0:12:38.880 --> 0:12:42.480 COVID nineteen is a problem. So, Bill, you mentioned that 0:12:42.600 --> 0:12:44.480 China a little bit. In China, I know that during 0:12:44.520 --> 0:12:46.959 the last financial crisis two thousand eight, two thousand nine, 0:12:47.080 --> 0:12:50.439 China was there, uh pumped a bunch of money into 0:12:50.520 --> 0:12:54.040 the world economy. Is that still the case now? Can 0:12:54.080 --> 0:12:58.280 some of these emerging markets depend upon liquidity coming from China? Well, 0:12:58.280 --> 0:13:01.240 the reason I mentioned China was you have a phenomenon 0:13:01.280 --> 0:13:03.280 that didn't exist in OH eight and O nine, which 0:13:03.320 --> 0:13:06.240 is one Belt, one road, and all of those outstandings 0:13:06.240 --> 0:13:09.439 are already there. So uh, I think China is in 0:13:09.440 --> 0:13:12.280 a much more difficult position. Plus, their debt has been 0:13:12.320 --> 0:13:16.320 allowed as a starting with their bailout, I would say 0:13:16.400 --> 0:13:18.720 of the world in two thousand and eight two thousand nine, 0:13:18.720 --> 0:13:22.679 where they put into infrastructure and brought commodities from a 0:13:22.720 --> 0:13:26.280 lot of these developing countries to the tune of eight 0:13:26.320 --> 0:13:30.400 hundred billion dollars almost a trillion dollars. And they are 0:13:30.400 --> 0:13:32.960 not going to be a factor today because their own 0:13:33.440 --> 0:13:35.880 as they were then, because of their own Uh. You 0:13:35.920 --> 0:13:38.360 know debt load that they have, and they're going to 0:13:38.440 --> 0:13:41.320 be fighting just to keep the Chinese economy in a 0:13:41.360 --> 0:13:45.160 positive growth mode this year. So the answer to your 0:13:45.240 --> 0:13:48.200 question is they will be important, but they are not 0:13:48.240 --> 0:13:50.000 going to bail us out this time, and they have 0:13:50.280 --> 0:13:53.120 their own problems with the emerging markets, which raises a 0:13:53.240 --> 0:13:56.640 question who's going to take leadership in helping the developing 0:13:56.720 --> 0:14:00.480 world get out of this mess? Well, suppose of league 0:14:01.280 --> 0:14:03.960 people think that the G twenty will get their act together, 0:14:04.000 --> 0:14:06.520 But as you know, they're very fractured. And one of 0:14:06.520 --> 0:14:09.360 the things I give credit to my old friend Gordon 0:14:09.400 --> 0:14:13.240 Brown was when he put everyone together at the London 0:14:13.559 --> 0:14:16.960 conference at the time in two thousand nine, at the 0:14:17.000 --> 0:14:20.640 time of the Great Financial Crisis, everyone agreed to work together. 0:14:21.160 --> 0:14:24.000 We don't even have an arrangement where these G twenty 0:14:24.040 --> 0:14:26.520 countries have agreed to work together on trying to find 0:14:26.840 --> 0:14:30.840 anti virals in a vaccine. So, unfortunately, we're going into 0:14:30.840 --> 0:14:34.560 a period with a very fractured leadership situation in the 0:14:34.600 --> 0:14:38.160 so called developed world and real problems with leadership in 0:14:38.160 --> 0:14:41.480 the developing world. We're speaking with Bill Rhodes, President and 0:14:41.520 --> 0:14:44.960 CEO of William R. Rhodes Global Advisors, former City Bank 0:14:45.040 --> 0:14:47.960 chairman Bill. You know, as we think about you know 0:14:48.520 --> 0:14:51.400 kind of how the the arc of how this virus 0:14:51.480 --> 0:14:54.960 has spread from China to Europe to the US. Um 0:14:55.080 --> 0:14:58.640 you know, there's varying levels of healthcare systems there. But 0:14:58.760 --> 0:15:02.280 me think about in American emerging markets in general, the 0:15:02.320 --> 0:15:06.560 health care systems in most places are just not as 0:15:06.680 --> 0:15:09.000 robust as we've seen in kind of some of the 0:15:09.000 --> 0:15:12.000 Western economies. How bad do you think it's really going 0:15:12.040 --> 0:15:15.240 to get in and just just take Latin America for example, 0:15:16.080 --> 0:15:18.480 I think it could get very bad. I think Brazil 0:15:18.560 --> 0:15:21.360 is an example because they haven't put the money in 0:15:21.360 --> 0:15:24.840 the health system. Argentina is better off in that sense. 0:15:24.840 --> 0:15:29.640 In Chile, Prue is all right to a certain point. 0:15:29.680 --> 0:15:33.120 But what's added to all of this is he's Venezuelan 0:15:33.200 --> 0:15:36.840 refugees that have been forced out of their country. So 0:15:36.960 --> 0:15:40.360 it's it's really the perfect storm that we're looking at here, 0:15:40.920 --> 0:15:43.640 and I think it's going to be very, very difficult. 0:15:44.080 --> 0:15:46.640 And then when you want to look at the COVID situation, 0:15:46.680 --> 0:15:49.680 as you already have mentioned, I think on a prior 0:15:50.440 --> 0:15:53.720 segment here is that you're starting to see new cases 0:15:53.760 --> 0:15:56.280 again in places like South Korea, which thought they had 0:15:56.280 --> 0:16:00.160 gotten rid of it, Singapore. Uh, even some case is 0:16:00.200 --> 0:16:03.960 now reappearing in China. And this is not even taking 0:16:04.000 --> 0:16:06.840 to account the so called famous second wave, which is 0:16:06.840 --> 0:16:09.760 supposed to hit us in the fall, because we won't 0:16:09.800 --> 0:16:11.560 have a vaccine by then, and it will be it's 0:16:11.560 --> 0:16:15.240 not clear if we'll have an anti viral either by then. 0:16:15.920 --> 0:16:18.560 Uh and so uh. If you want to pattern this 0:16:18.680 --> 0:16:21.400 somewhat on the Spanish flu, it was the second wave 0:16:21.480 --> 0:16:24.800 that was the most destructive, more so than the first wave. 0:16:25.360 --> 0:16:28.760 And I think that's part of the problem, the fractured leadership, 0:16:29.560 --> 0:16:34.200 even on an issue like COVID nineteen bill. We've talked 0:16:34.240 --> 0:16:37.960 a lot about how the amount of emerging market debt 0:16:38.560 --> 0:16:42.760 has tripled by some counts in the past decade or so, 0:16:42.840 --> 0:16:45.200 and I'm just wondering who's going to bear the brunt 0:16:45.200 --> 0:16:48.720 of the losses if there is a mass for structuring 0:16:49.520 --> 0:16:51.600 like the one that you're calling for an order to 0:16:51.640 --> 0:16:56.800 remedy the situation. Well, I think for governments who have lent, uh, 0:16:56.880 --> 0:16:59.720 it's much easier to a SOB, But for the private sectors, 0:16:59.760 --> 0:17:02.120 lent is going to be very, very difficult. You're gonna 0:17:02.160 --> 0:17:04.560 have a lot of bankruptcies. I think there would be 0:17:04.640 --> 0:17:09.760 some real hits uh to various institutions that have taken 0:17:09.760 --> 0:17:13.000 on all this that and you too remember, well, I've 0:17:13.000 --> 0:17:16.880 been on your show for years wondering, you know, wondering 0:17:16.920 --> 0:17:18.840 when this was going to hit because of the reach 0:17:18.920 --> 0:17:22.520 and search for yield that we've seen, and so there's 0:17:22.520 --> 0:17:25.879 so much exposure out there, uh, and a lot of 0:17:25.880 --> 0:17:27.560 this is going to come home to roots. So I 0:17:27.560 --> 0:17:29.600 think it's we're in a very difficult period. So my 0:17:29.720 --> 0:17:32.679 hope is that the G twenty can get its act together, 0:17:33.280 --> 0:17:37.120 both on a financial basis and on a health basis. Uh. 0:17:37.160 --> 0:17:39.440 And that's what I think we desperately need, or we're 0:17:39.440 --> 0:17:41.960 going to go through a very very difficult period over 0:17:42.000 --> 0:17:44.840 the next two years. Bill, thanks so much for joining us. 0:17:44.840 --> 0:17:47.560 We really appreciate your perspective. As always, when we talk 0:17:47.640 --> 0:17:51.680 about the emerging markets and some of the credit challenges arising, 0:17:51.680 --> 0:17:53.840 there's no one better to speak to than Bill Rhodes, 0:17:53.880 --> 0:17:57.680 President CE of William R. Rhodes Global Advisors, former chairman 0:17:57.800 --> 0:18:00.680 of City Bank, with tons of X variance years of 0:18:00.720 --> 0:18:04.679 experience dealing with emerging markets Latin America in particular and 0:18:04.800 --> 0:18:08.320 some of their fiscal challenges over the years. So at leasta, 0:18:08.320 --> 0:18:11.960 it just sounds like there's much more pain for the 0:18:12.040 --> 0:18:15.760 emerging markets, the company, the countries themselves, the people as 0:18:15.800 --> 0:18:18.679 well as the investors in those markets. Yeah, and just 0:18:18.760 --> 0:18:22.800 to sort of highlight how much debt these companies, companies 0:18:22.800 --> 0:18:26.000 and countries have, you know, hundreds of billions of dollars 0:18:26.040 --> 0:18:29.000 that they have incurred over recent years, and there's a 0:18:29.080 --> 0:18:32.320 question who's going to bear the losses? And some people saying, well, 0:18:32.359 --> 0:18:34.880 you know, it's time to reinvest in some of these 0:18:34.920 --> 0:18:37.919 areas because of the yields being offered. Yet you have 0:18:38.000 --> 0:18:40.280 to wonder what the capital flight will be like as 0:18:40.280 --> 0:18:46.160 the defaults really pick up lesa. You know, I grew 0:18:46.240 --> 0:18:49.879 up within a household where my parents were children of 0:18:50.080 --> 0:18:52.919 the depression, and it really impacted even you know, all 0:18:52.920 --> 0:18:55.800 through my childhood kind of how they viewed life in 0:18:55.920 --> 0:19:00.119 terms of money and you know, food security and all 0:19:00.160 --> 0:19:01.840 these things. And I think, you know, it was such 0:19:01.840 --> 0:19:05.440 a such a significant impact on their lives that really, 0:19:05.440 --> 0:19:07.879 I think impact of them their entire lives. And some 0:19:07.920 --> 0:19:12.440 folks are questioning whether this pandemic will have a similar 0:19:12.520 --> 0:19:14.760 effect on some of the young folks today and what 0:19:14.800 --> 0:19:18.400 it means for consumer behavior and will the consumer actually 0:19:18.480 --> 0:19:22.040 come back and and spend an act uh, coming out 0:19:22.040 --> 0:19:24.240 of the pandemic as they did going into the pandemic. 0:19:24.280 --> 0:19:27.080 Christopher Condent, he's a Federal Reserve reporter for Bloomberg News 0:19:27.560 --> 0:19:30.320 joining US Washington, d C. Christopher, thanks so much. I 0:19:30.359 --> 0:19:33.520 know you kind of had a really interesting story Scarred 0:19:33.560 --> 0:19:37.639 and Scared the reshaping of American consumer begins. This is really, uh, 0:19:37.800 --> 0:19:42.520 I think fascinating story. What did you find out? Thank you, Paul. Yeah, 0:19:42.520 --> 0:19:47.520 you know, um, I think we're compared to any expectations 0:19:47.560 --> 0:19:52.080 for a quick return of the American consumer, there's not 0:19:52.200 --> 0:19:54.480 a lot of evidence to support that that would be 0:19:54.520 --> 0:19:58.040 the case, simply because the consumer is getting hit on 0:19:58.160 --> 0:20:02.800 really multiple levels. This story that I wrote about addresses 0:20:03.400 --> 0:20:06.520 three levels, where first of all, the most obvious is 0:20:06.560 --> 0:20:10.000 that a lot of people are losing their income, so 0:20:10.080 --> 0:20:13.080 it's not about their willingness to spend, but their ability 0:20:13.119 --> 0:20:15.879 to spend, and that's going to be severely damaged and 0:20:16.000 --> 0:20:19.960 probably in many cases for quite a while. But then 0:20:20.040 --> 0:20:22.960 moving even beyond that, we know from past experience, and 0:20:23.000 --> 0:20:26.560 you brought up the great depression, which I also talked 0:20:26.600 --> 0:20:30.680 about in that story. Um, there is a knock on effect. 0:20:30.760 --> 0:20:34.080 It's not just for those people that lose their job 0:20:34.160 --> 0:20:36.920 and lose income, but when you see neighbors and friends 0:20:36.960 --> 0:20:41.480 and family members affected. It also we know from the 0:20:41.520 --> 0:20:46.080 past experience can affect people's spending habits. They get a 0:20:46.080 --> 0:20:49.200 little bit more cautious. Uh. And and you know what 0:20:49.320 --> 0:20:52.359 I thought was really interesting. The economists that I spoke 0:20:52.440 --> 0:20:55.800 to brought up again and again that this is the 0:20:55.840 --> 0:20:58.800 second time in the space of about twelve years where 0:20:58.800 --> 0:21:02.240 we're hearing this is the worst the session since the 0:21:02.280 --> 0:21:05.840 Great Depression, and that really can begin We don't know. 0:21:05.960 --> 0:21:09.959 This is a bit speculative, but that can really affect 0:21:10.040 --> 0:21:14.800 the psyche of people as workers, as consumers for a 0:21:14.920 --> 0:21:18.200 very long time, just as you talked about your parents. 0:21:18.240 --> 0:21:21.240 And then finally, just the other obvious thing about this, 0:21:21.600 --> 0:21:25.120 it's not just about economics for the consumer, it's about 0:21:25.160 --> 0:21:29.800 their own health. This contagion can affect you. Obviously, it 0:21:29.880 --> 0:21:35.800 can kill people, so that adds another elements of fear. Um, 0:21:35.840 --> 0:21:39.200 again we're being speculative here. We don't know how long 0:21:39.240 --> 0:21:42.600 it's gonna last. But when you talk about risks like this. 0:21:43.400 --> 0:21:48.359 It brings in the emotional side of decision making for consumers, 0:21:48.400 --> 0:21:52.280 and economists that have studied that say it's very difficult 0:21:52.480 --> 0:21:55.679 to overcome. It doesn't mean everybody's gonna stop shopping, but 0:21:55.920 --> 0:21:58.960 even at the margin, if many millions of people are 0:21:59.040 --> 0:22:01.960 affected by the US for a long period of time, 0:22:02.000 --> 0:22:05.200 that will have a great drag on our economy, Chris. 0:22:05.240 --> 0:22:07.600 Some people say that the consumer is in much better 0:22:07.640 --> 0:22:10.240 situation now than it was getting into the two thousand 0:22:10.280 --> 0:22:14.080 and eight crisis, and that the US government has supplied 0:22:14.160 --> 0:22:17.720 a big enough stimulus to offset a good deal of 0:22:17.760 --> 0:22:21.359 the mispay for a larger proportion of the US population. 0:22:21.400 --> 0:22:24.520 They point to that as one of the reasons why 0:22:24.600 --> 0:22:28.040 consumer spending may be more resilient. On the other side 0:22:28.040 --> 0:22:30.320 of this, did any of the economists you spoke with 0:22:30.400 --> 0:22:33.560 address that, Yeah, well, there's a couple of things to 0:22:33.600 --> 0:22:36.440