WEBVTT - Treasuries Reflect Doubt About Trump, Fiduciary CIO Says

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<v Speaker 1>Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.

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<v Speaker 1>Along with my co host Lisa Abramowitz. Each day we

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<v Speaker 1>bring you the most important, noteworthy, and useful interviews for

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<v Speaker 1>you and your money, whether you're at the grocery store

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<v Speaker 1>or the trading floor. Find the Bloomberg P M L

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<v Speaker 1>Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. We

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<v Speaker 1>are broadcasting from the Red Hat Summit in Boston and

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<v Speaker 1>joining us now in our New York studio is Peter Anderson.

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<v Speaker 1>He is the chief investment officer of Fiduciary Trust. And Peter,

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<v Speaker 1>thanks for being with us. And I know that it's

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<v Speaker 1>it's what happens. You're based in Boston, you come to

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<v Speaker 1>New York, and you know it's like two ships crossing

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<v Speaker 1>in the night. That's right. So thanks very much for

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<v Speaker 1>being for being with us. Here's here's my question to you.

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<v Speaker 1>Does it make any ends that you can invest in

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<v Speaker 1>a company that's still making money and is one of

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<v Speaker 1>the leaders in its field Ford Motor Company and you're

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<v Speaker 1>gonna get a five and a half percent dividend or

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<v Speaker 1>do you want to lend your money to the US

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<v Speaker 1>government for thirty years? Uh? And get. Well, you're you're

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<v Speaker 1>picking two very different um securities to examine him, right,

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<v Speaker 1>I mean, you've got I'm wondering if you could use

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<v Speaker 1>it as an example for how we've gotten here, Like

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<v Speaker 1>how how is this possible? Well, let's look at the

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<v Speaker 1>U S. Treasury yield, because I think that is more

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<v Speaker 1>telling in its own way than the Ford example you

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<v Speaker 1>gave right now. You know when you look at the

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<v Speaker 1>SMB five hundred also, and that's up about seven percent

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<v Speaker 1>or so a year to date. And then you've got

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<v Speaker 1>the ten uere treasury, which really has stopped tracking the

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<v Speaker 1>anticipated growth that we all thought was going to happen

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<v Speaker 1>post Trump's announcement of his victory. So I think what's

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<v Speaker 1>happening is we're starting to look more carefully at the

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<v Speaker 1>prospect for growth in treasuries, are reflecting that doubt that's

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<v Speaker 1>gradually creeping into our market and forcing us to take

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<v Speaker 1>a second look at the promises of the Trump policies

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<v Speaker 1>and whether or not they will actually come to fruition. Peter,

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<v Speaker 1>is this one of the most boring markets you've ever

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<v Speaker 1>dealt with? Always by far boring, I mean we've got

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<v Speaker 1>if you look at the vix I guess you could

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<v Speaker 1>say that that might be an indication of boredom, but uh,

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<v Speaker 1>in contrary to that, I think that this is one

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<v Speaker 1>of the most unprecedented markets in terms of what's happening.

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<v Speaker 1>If you want to talk on a global perspective, all

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<v Speaker 1>the uncertainty that we're living through right now, and on

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<v Speaker 1>a domestic perspective, so many unanswered questions, totally without a doubt,

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<v Speaker 1>so many unanswered questions and unanswerable questions. Uh. You know,

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<v Speaker 1>we hear a lot about a lack of conviction. We

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<v Speaker 1>heard that Goldman saxes. Uh. David Solomon came out yesterday

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<v Speaker 1>on Bloomberg Television was saying the reason why trading volumes

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<v Speaker 1>and revenues were down so much at Coleman Sects relative

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<v Speaker 1>to the expectations in the first quarter was simply just

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<v Speaker 1>because of a lack of conviction. Do you feel like

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<v Speaker 1>you have conviction? And if so, what is your boldest bet? Okay,

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<v Speaker 1>So here's the way we're thinking of this. Um, if

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<v Speaker 1>you just use what I would call a building block

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<v Speaker 1>approach to US equities, uh, and you assume earnings growth

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<v Speaker 1>is going to be seven percent this year, which is

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<v Speaker 1>fairly typical and then you add on another two percent

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<v Speaker 1>for the dividend. That's nine percent growth for the year

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<v Speaker 1>or nine percent total return. And as you know, so

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<v Speaker 1>we're a third through the year, so we should actually

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<v Speaker 1>be tracking about only three percent up, but instead the

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<v Speaker 1>SMP is tracking north of seven percent. So you've got

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<v Speaker 1>what I would call this four percent UH premium, and

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<v Speaker 1>what is baked into that premium a lot of hope

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<v Speaker 1>that the Trump policies, in our opinion, will be UH materialized.

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<v Speaker 1>And if that doesn't, I think that's a big concern,

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<v Speaker 1>and you could be seeing a sell off of anywhere

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<v Speaker 1>from say four to seven percent this year based on

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<v Speaker 1>how these things play out. Peter Anderson, Um, what kind

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<v Speaker 1>of yield would you have to be offered if the

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<v Speaker 1>Treasury Secretary Stephen Manuchin was selling hundred year bonds? Well,

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<v Speaker 1>you know the other thing, when people are starting it's

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<v Speaker 1>a little bit um challenging to present that to the

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<v Speaker 1>general public pain because you've been involves the daunted bond math, right,

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<v Speaker 1>and people tend to think that, well, a hundred year bond,

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<v Speaker 1>you know, its duration or its interest sensitivity is that,

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<v Speaker 1>you know, uh, four times as great as a twenty

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<v Speaker 1>five year bond and UH for those that have done

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<v Speaker 1>the calculation, it doesn't turn out to be that way.

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<v Speaker 1>So people would expect probably a much higher yield just

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<v Speaker 1>subjectively than the math will probably prove out to be.

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<v Speaker 1>So at the current rates, you would have to have.

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<v Speaker 1>Let me, just in practical terms, I think for people

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<v Speaker 1>to be interested, for the retail or non professional investor

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<v Speaker 1>to be interested, the yield that they have in mind

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<v Speaker 1>would probably be not anywhere near what the yield the

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<v Speaker 1>market yield would present, which I would think is below

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<v Speaker 1>easily below five at this point if they were to

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<v Speaker 1>issue it. Right now, let's talk about credit corporate credit.

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<v Speaker 1>We've heard from scottman Or from Guggenheim Partners yesterday at

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<v Speaker 1>the Milk and conference, and he was saying that he's

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<v Speaker 1>recommending his clients steer away from you as credit markets,

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<v Speaker 1>particularly the riskier segments. What's your view. I have a

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<v Speaker 1>long history and love hate relationship with hil bonds, and

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<v Speaker 1>I am currently very supportive of them. I think, just

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<v Speaker 1>in the same vein as you would think of a

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<v Speaker 1>small cap US equity, they tend to be ring fence

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<v Speaker 1>in terms of their revenues. They're more dependent upon their

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<v Speaker 1>domestic economy, which we haven't talked at all about how

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<v Speaker 1>positive we are on the domestic stick economy. We think

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<v Speaker 1>that that's very consistently strong, and so if you're a

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<v Speaker 1>high yield borrower, you probably will be looking very good,

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<v Speaker 1>unless you're an international high yield borrower, which lends more

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<v Speaker 1>complexities to the calculation. But US domestic small cap companies

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<v Speaker 1>that tend to be high yield issuers would look very

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<v Speaker 1>positive to us. So you're also positive on those same

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<v Speaker 1>equities small small cap domestic companies, depending upon how their

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<v Speaker 1>revenue segments are. Yes, because they tend to be smaller,

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<v Speaker 1>they tend to be what I would call unitary focus

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<v Speaker 1>on one or two product lines, simpler to analyze, would

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<v Speaker 1>be somewhat insulated from the whole Brexit conundrum that we're

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<v Speaker 1>we are looking at for the next two years. Much

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<v Speaker 1>simpler strips away those unanswered questions and are much easier

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<v Speaker 1>to analyze from a fundamental mathemata spreadsheet perspective. What about

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<v Speaker 1>emerging market steps? You know, uh, emerging markets, there is

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<v Speaker 1>a place and everybody's portfolio for it. But let's not

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<v Speaker 1>go overboard. I mean we are going overboard, they really

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<v Speaker 1>are and I think it's because of a relationship between

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<v Speaker 1>you look at US and what's going on here, and

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<v Speaker 1>you look at the developed markets, and for some reason,

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<v Speaker 1>people are using a logic saying, well, there aren't as

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<v Speaker 1>many unanswered questions in emerging markets right now, so therefore

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<v Speaker 1>they look less risky. But as we know, that is

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<v Speaker 1>not the right logic to use. I mean, emerging markets

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<v Speaker 1>are the most risky uh. Second to say, frontier markets.

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<v Speaker 1>So while you want to have exposure, we're advocating UH

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<v Speaker 1>anywhere from save three to five percent in a portfolio,

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<v Speaker 1>not double that, which is what I've been reading recently.

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<v Speaker 1>Well and has that changed to the three to five No,

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<v Speaker 1>we tend to stay fairly constant with these UH with

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<v Speaker 1>these asset locations, because we think moving or trimming or

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<v Speaker 1>rebalancing more frequently than a year as a fool's errand

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<v Speaker 1>because you need at least a years of data, and

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<v Speaker 1>right now there is as you mentioned, you know, is

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<v Speaker 1>this the most boring market. No, I would say it's

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<v Speaker 1>the most unstable market in terms of information. And until

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<v Speaker 1>we get new clarity, fact based clarity, especially in the US,

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<v Speaker 1>we just have to wait and see how these things

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<v Speaker 1>are going to develop fact based clarity. We all are

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<v Speaker 1>praying for that. Peter Anderson, chief investment officer and vice

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<v Speaker 1>president at Fiduciary Trust in Boston, but he's in New York.

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<v Speaker 1>We're in Boston. Makes sense of that. We can't at least.

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<v Speaker 1>Abramy was here with Pim Fox and we're broadcasting live

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<v Speaker 1>from red Hat Summit. We're broadcasting from the Red Hat

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<v Speaker 1>Summit and the Boston I'm Pim Fox Long Lisa brahm Witz.

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<v Speaker 1>And you know, we understand what the word infrastructure means

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<v Speaker 1>when we talk about bridges or roads or even airports.

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<v Speaker 1>But technology infrastructure that exists withincorporations has also various lifespans

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<v Speaker 1>and various histories. And here to understand help us understand

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<v Speaker 1>how to knit these things together in a more efficient way,

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<v Speaker 1>is Joe Fitzgerald. He is the vice president Management Business

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<v Speaker 1>Unit for Red Hat. Joe, thanks for for being here, um,

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<v Speaker 1>and thanks for having us. Is that a reasonable? Uh?

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<v Speaker 1>Analogy that I a picture that I painted? Yes, I

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<v Speaker 1>mean the world started off simple. Things were physical, you

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<v Speaker 1>could touch them, you know, they sort of stayed where

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<v Speaker 1>you left them, and then over time they become virtual

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<v Speaker 1>right where you know, you can have many more virtual

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<v Speaker 1>machines running on physical servers than there really are there.

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<v Speaker 1>And then the world evolved sort of into different cloud

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<v Speaker 1>architectures which are even more abstracted and virtual. So it's

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<v Speaker 1>getting very complicated. Well, Joe, you have a vision for

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<v Speaker 1>automated enterprise and this UH is sort of represented in

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<v Speaker 1>the answable technology by red Hat and I am. We

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<v Speaker 1>were just talking offline about the idea that, for example,

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<v Speaker 1>there are all these small automated parts of everyday items

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<v Speaker 1>that we use and it's up to us to update

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<v Speaker 1>our system or prevent you know, security threats and press

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<v Speaker 1>okay and know what depress and what not to press.

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<v Speaker 1>But this is basically a way to do that for

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<v Speaker 1>you and have some kind of UH intermediary to like

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<v Speaker 1>remove anything that a human actually has to do. Yeah,

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<v Speaker 1>So we have this vision of an automated enterprise, and

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<v Speaker 1>the irony is at enterprises have dozens of automation tools.

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<v Speaker 1>And if you think about automation and other areas, like

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<v Speaker 1>your car, you have automation for cruise control or for

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<v Speaker 1>you know, different things that help the driver. Well, what

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<v Speaker 1>we need to get to is the point where the

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<v Speaker 1>thing can talk across these different silos of automation and

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<v Speaker 1>be able to automate much higher level functions in a car.

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<v Speaker 1>We've we've hit that with the cell driving car, which

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<v Speaker 1>takes all these inputs, for example, and and coordinates them

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<v Speaker 1>in a very sophisticated way. Enterprises don't have that yet.

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<v Speaker 1>So what has been the main blockade? Why hasn't this

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<v Speaker 1>already been created? What's been the obstacle? So it's a

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<v Speaker 1>couple of things. First of all, it's complexity. A lot

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<v Speaker 1>of the automation tools are really programming languages or scripting languages,

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<v Speaker 1>which means that you have to find really smart people

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<v Speaker 1>who are effectively developers to go write automation. And I

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<v Speaker 1>think one of the things we see an answerable finally

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<v Speaker 1>there's a human readable automation language which sort of democratize

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<v Speaker 1>his automation. More people can do it, they can understand it,

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<v Speaker 1>they can participate, So it really changes the whole dynamic.

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<v Speaker 1>Can you give us an example of an industry that

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<v Speaker 1>you see in the future that doesn't use this approach

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<v Speaker 1>but will and will adopt it. Well, So it's interesting.

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<v Speaker 1>So you know, we acquired Ansball about a year and

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<v Speaker 1>a half ago, and so you know, red hats Global company.

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<v Speaker 1>So I've traveled the world talking to customers UM in

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<v Speaker 1>many countries and in many different industries. The answerable sort

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<v Speaker 1>of technology uptake is viral. It's across almost every industry now,

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<v Speaker 1>from government agencies to financial services, healthcare, manufacturing. It's stunning

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<v Speaker 1>how many industries have self selected that technology. And then

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<v Speaker 1>the use cases range from traditional I've got to rule

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<v Speaker 1>out some physical servers to I've got to put my

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<v Speaker 1>Alexa application out so that I can you know, deploy

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<v Speaker 1>my new services for financial services. So if I said

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<v Speaker 1>within the airlines, how would answer will be used? What

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<v Speaker 1>would they be bringing together? So what they would be

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<v Speaker 1>using answall for is things like devloped practices where they

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<v Speaker 1>can move their applications much faster from development to production

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<v Speaker 1>to get them online, to be able to deploy new

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<v Speaker 1>environments so their developers can be instantly productive. UM to

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<v Speaker 1>track and manage the process of getting effectively new business

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<v Speaker 1>services out. There is there a risk when we start

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<v Speaker 1>automating the automation, when we start creating, you know, systems

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<v Speaker 1>to sort of oversee the systems. I mean this is

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<v Speaker 1>like the tech version of c d O squared. I mean,

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<v Speaker 1>at what point if there's a if there's some kind

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<v Speaker 1>of hits or some kind of problem glitch in in

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<v Speaker 1>one of these areas will have become a catastrophe. Yeah,

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<v Speaker 1>automation gone wrong can can do some very you know,

0:13:11.440 --> 0:13:14.360
<v Speaker 1>damaging things. But I think back to my science fiction roots. Yes,

0:13:14.880 --> 0:13:16.720
<v Speaker 1>but one of the things I think that you know,

0:13:16.960 --> 0:13:20.760
<v Speaker 1>helps eliminate that is simplicity. If you've got very complex

0:13:20.800 --> 0:13:23.520
<v Speaker 1>programming that has you know, one line of programming that's

0:13:23.559 --> 0:13:27.160
<v Speaker 1>wrong right, or something that wasn't considered, then that the

0:13:27.160 --> 0:13:30.800
<v Speaker 1>automation can go crazy. When you have a simpler um

0:13:30.880 --> 0:13:34.559
<v Speaker 1>automation language where people can read it. Okay, well, so

0:13:34.559 --> 0:13:40.040
<v Speaker 1>so is this simple language something like, uh, please take

0:13:40.520 --> 0:13:43.439
<v Speaker 1>this system, put it with this system, make sure it's

0:13:43.520 --> 0:13:48.840
<v Speaker 1>updated and safe. Thanks, I mean with yeah, yeah, So effectively,

0:13:48.880 --> 0:13:52.600
<v Speaker 1>you can put a recipe or or um a simple

0:13:52.679 --> 0:13:55.160
<v Speaker 1>way of defining a system, and if you run that

0:13:55.320 --> 0:13:58.400
<v Speaker 1>same recipe or that same you know, automation a thousand times,

0:13:58.440 --> 0:14:01.120
<v Speaker 1>you're gonna get exactly the same result a thousand times.

0:14:01.440 --> 0:14:03.360
<v Speaker 1>So it makes it very predictable and reliable to be

0:14:03.400 --> 0:14:05.760
<v Speaker 1>able to generate those things. So if you're depointing new

0:14:05.800 --> 0:14:08.000
<v Speaker 1>systems in the cloud or you're deploying a new you

0:14:08.040 --> 0:14:11.720
<v Speaker 1>know again, bank or airline application or healthcare application. That

0:14:11.720 --> 0:14:13.319
<v Speaker 1>thing is going to be the same every time. It's

0:14:13.320 --> 0:14:15.360
<v Speaker 1>gonna be reliable, so you don't get those errors that

0:14:15.440 --> 0:14:20.120
<v Speaker 1>people make or complexity you know causes. No. It's an

0:14:20.120 --> 0:14:24.760
<v Speaker 1>interesting topic because it really does pull together the legacy systems,

0:14:24.800 --> 0:14:28.240
<v Speaker 1>the older systems that many companies still use. Can you

0:14:28.760 --> 0:14:31.960
<v Speaker 1>in your travels, what was the oldest system you came into.

0:14:32.400 --> 0:14:34.680
<v Speaker 1>Did you ever go to go to a company and think, wow,

0:14:34.720 --> 0:14:37.240
<v Speaker 1>I can't believe they're even running this. There are people

0:14:37.320 --> 0:14:41.680
<v Speaker 1>using automation tools that are fifteen plus years old, okay,

0:14:41.680 --> 0:14:44.160
<v Speaker 1>that you know deploy some of their their systems. They're

0:14:44.160 --> 0:14:47.320
<v Speaker 1>afraid to touch it, right, And the companies that originally

0:14:47.360 --> 0:14:49.960
<v Speaker 1>sold it to them have been acquired three times right,

0:14:50.040 --> 0:14:52.560
<v Speaker 1>and you know, the original people aren't there um, but

0:14:52.600 --> 0:14:54.600
<v Speaker 1>they don't want to change it because it's so fragile.

0:14:55.240 --> 0:14:57.400
<v Speaker 1>So one of the challenges here is really getting to

0:14:57.440 --> 0:15:00.600
<v Speaker 1>this newer age of automation. Any company that us an automate,

0:15:00.640 --> 0:15:02.400
<v Speaker 1>it's not gonna be able to keep up with all

0:15:02.400 --> 0:15:04.560
<v Speaker 1>the digital transformation that they have to do. It's just

0:15:04.600 --> 0:15:08.120
<v Speaker 1>not going to be possible. I unfortunately can relate having

0:15:08.160 --> 0:15:10.040
<v Speaker 1>a really old thing being like, just don't touch it

0:15:10.080 --> 0:15:12.280
<v Speaker 1>and it'll be okay. Joe Fitzgerald, thank you so much

0:15:12.280 --> 0:15:14.920
<v Speaker 1>for joining us. Joe FitzGeralds as vice president of the

0:15:14.960 --> 0:15:18.080
<v Speaker 1>Management Business Unit at red Hat, and we are here

0:15:19.160 --> 0:15:23.760
<v Speaker 1>red Hat Summit in Boston talking about all things cloud

0:15:24.000 --> 0:15:27.720
<v Speaker 1>and open source and the future of our world. Frankly,

0:15:36.360 --> 0:15:37.880
<v Speaker 1>we want to take a moment to let you know

0:15:37.920 --> 0:15:40.840
<v Speaker 1>about something new from Bloomberg. Starting right now, you can

0:15:40.920 --> 0:15:43.800
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0:15:47.480 --> 0:15:50.320
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0:15:50.360 --> 0:15:52.960
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0:15:53.240 --> 0:15:55.160
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0:15:57.960 --> 0:16:01.000
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0:16:01.080 --> 0:16:03.240
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0:16:03.280 --> 0:16:06.360
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0:16:15.000 --> 0:16:18.960
<v Speaker 1>We're broadcasting from the seventeen red Hat Summit in Boston,

0:16:19.440 --> 0:16:21.840
<v Speaker 1>and UH I want to cast our attention now to

0:16:22.040 --> 0:16:26.400
<v Speaker 1>Puerto Rico. UH, the Commonwealth of Puerto Rico is now

0:16:26.440 --> 0:16:31.200
<v Speaker 1>going to face a series of bondholder lawsuits. In addition,

0:16:31.880 --> 0:16:37.200
<v Speaker 1>Puerto Rico is also experiencing an outflow of people as

0:16:37.240 --> 0:16:41.600
<v Speaker 1>well as a real missed opportunity when it comes to

0:16:41.640 --> 0:16:45.520
<v Speaker 1>a refinancing its debt. Here to tell us More's Michelle

0:16:45.560 --> 0:16:49.240
<v Speaker 1>Caski of Bloomberg News. Michelle, thanks for being with us,

0:16:49.680 --> 0:16:54.000
<v Speaker 1>give us an update on what has happened and maybe

0:16:54.040 --> 0:16:56.040
<v Speaker 1>put it into the context of what it's like to

0:16:56.120 --> 0:17:01.280
<v Speaker 1>be in Puerto Rico now well in in in response

0:17:01.280 --> 0:17:03.200
<v Speaker 1>to your question what it's like to be in Puerto Rico,

0:17:03.240 --> 0:17:06.080
<v Speaker 1>there's a lot of protests going on UM regarding some

0:17:06.119 --> 0:17:10.320
<v Speaker 1>of the changes of spending cuts that the governors is proposing.

0:17:10.640 --> 0:17:13.800
<v Speaker 1>But what has happened with their lawsuits recently is a

0:17:14.359 --> 0:17:17.919
<v Speaker 1>legal stay expired Monday night and last night, and that

0:17:18.400 --> 0:17:23.120
<v Speaker 1>had safeguarded Puerto Rico from creditor lawsuits. That has lifted,

0:17:23.240 --> 0:17:27.320
<v Speaker 1>so now UM investors are free to UM to sue

0:17:27.600 --> 0:17:30.240
<v Speaker 1>the commonwealth. And what has happened is we have a

0:17:30.320 --> 0:17:33.880
<v Speaker 1>suit from both UM and Back Financial Group, which ensures

0:17:34.080 --> 0:17:36.840
<v Speaker 1>UM some of Puerto Rico's debt, and also a group

0:17:36.920 --> 0:17:41.240
<v Speaker 1>of hedge funds holding senior sales tax bombs. Well, Michelle,

0:17:41.320 --> 0:17:43.159
<v Speaker 1>and this is just the opening salvo I mean, right,

0:17:43.160 --> 0:17:46.080
<v Speaker 1>I mean the deadline for when puert Rico is somewhat

0:17:46.119 --> 0:17:50.560
<v Speaker 1>immune from litigation expired at midnight. These lawsuits come today,

0:17:50.840 --> 0:17:53.760
<v Speaker 1>we can only begin to imagine that this is really

0:17:54.440 --> 0:17:56.920
<v Speaker 1>just the tip of the iceberg. Now, I would think

0:17:56.920 --> 0:17:59.560
<v Speaker 1>that there would be more suits coming. And also remember

0:17:59.560 --> 0:18:02.760
<v Speaker 1>there there are already existing lawsuits that had have been filed,

0:18:02.760 --> 0:18:05.840
<v Speaker 1>and so again with the STA being lifted, those lawsuits

0:18:05.840 --> 0:18:08.679
<v Speaker 1>can move forward. Maybe we might see some rulings in

0:18:08.680 --> 0:18:11.840
<v Speaker 1>the next few weeks or so on those suits and

0:18:12.200 --> 0:18:16.320
<v Speaker 1>um and of course UM one way that can one

0:18:16.320 --> 0:18:18.920
<v Speaker 1>thing that Puerto rican can do to stop this is

0:18:19.359 --> 0:18:23.320
<v Speaker 1>the Federal Control Board could pursue Title three, which is

0:18:23.359 --> 0:18:29.240
<v Speaker 1>this provision in the Federal Promisa law, UM, that rescue

0:18:29.320 --> 0:18:32.840
<v Speaker 1>law for Puerto Rico, that that that allows Puerto Rico

0:18:32.920 --> 0:18:36.520
<v Speaker 1>to use a bankruptcy like process to force creditors to

0:18:36.520 --> 0:18:41.080
<v Speaker 1>to take losses. Well, so why wouldn't they invoke Title three?

0:18:41.200 --> 0:18:44.480
<v Speaker 1>Why would they allow these lawsuits to continue in a

0:18:44.560 --> 0:18:47.040
<v Speaker 1>variety of jurisdictions, right, I mean, this won't necessarily be

0:18:47.080 --> 0:18:51.600
<v Speaker 1>a controlled kind of uh process of litigation without Title three. Correct,

0:18:52.359 --> 0:18:55.120
<v Speaker 1>well it yes, and no, I mean why why they're

0:18:55.160 --> 0:18:57.560
<v Speaker 1>not filing Title three so far is because, I mean

0:18:57.600 --> 0:19:00.360
<v Speaker 1>it's a very serious step. There's no going back. It's

0:19:00.400 --> 0:19:03.720
<v Speaker 1>the equivalent of filing bankruptcy. And and so Puerto Rico

0:19:03.840 --> 0:19:08.320
<v Speaker 1>really wants to UM consider that heavily before they do it. UM.

0:19:08.440 --> 0:19:10.719
<v Speaker 1>It would also turn over more control, a bit more

0:19:10.720 --> 0:19:14.119
<v Speaker 1>control over to the Federal Oversight Board. UM. So of

0:19:14.160 --> 0:19:19.359
<v Speaker 1>course politicians on island UM would prefer that UM that

0:19:19.680 --> 0:19:23.639
<v Speaker 1>they don't pursue Title three, although they may not, it

0:19:23.720 --> 0:19:25.399
<v Speaker 1>may have to be the path that they need to

0:19:25.440 --> 0:19:29.080
<v Speaker 1>go down to resolve this UM. But also in terms

0:19:29.080 --> 0:19:31.480
<v Speaker 1>of you know, one one thing that helps out with

0:19:31.520 --> 0:19:35.080
<v Speaker 1>these lawsuits is there's one judge, federal judge on the island.

0:19:35.119 --> 0:19:37.679
<v Speaker 1>His last name is Judge Bestosa, and he had so

0:19:37.760 --> 0:19:40.800
<v Speaker 1>far as been overseeing many of these cases. So in

0:19:40.840 --> 0:19:45.040
<v Speaker 1>some ways that helps corral all these different suits. Michelle,

0:19:45.880 --> 0:19:52.160
<v Speaker 1>I understand that the recent demonstrations and strikes UH took

0:19:52.160 --> 0:19:55.480
<v Speaker 1>place in front of what's the Sea Borne Airlines World

0:19:55.520 --> 0:19:58.760
<v Speaker 1>Plaza building. This is where the Fiscal Control Board is

0:19:58.800 --> 0:20:03.919
<v Speaker 1>located us UH. There are also the Golden Mile area

0:20:04.560 --> 0:20:07.959
<v Speaker 1>how bad does the violence have to get or the

0:20:07.960 --> 0:20:12.000
<v Speaker 1>protests have to get before this becomes a real political

0:20:12.040 --> 0:20:14.960
<v Speaker 1>issue as much as it is an economic and financial

0:20:14.960 --> 0:20:18.040
<v Speaker 1>issue right now. Sure it's such a political issue. I

0:20:18.080 --> 0:20:23.359
<v Speaker 1>mean it's UM this this has happened before on Puerto Rico. UM,

0:20:24.280 --> 0:20:26.800
<v Speaker 1>the the residents really do take to the streets when

0:20:27.080 --> 0:20:30.640
<v Speaker 1>UM the politicians announced that they're going to cut back

0:20:30.680 --> 0:20:33.760
<v Speaker 1>on spending and cut back on programs that help people.

0:20:34.240 --> 0:20:38.720
<v Speaker 1>And we see it on the campuses down there as well. UM,

0:20:38.840 --> 0:20:42.359
<v Speaker 1>some of the campuses get shut down and UM, but

0:20:42.480 --> 0:20:46.680
<v Speaker 1>it has turned more violent and the governor has UM

0:20:46.680 --> 0:20:50.280
<v Speaker 1>spoken out about this and and has urged people UM

0:20:50.320 --> 0:20:54.520
<v Speaker 1>to protest responsibly. You know, what are some deadlines that

0:20:54.560 --> 0:20:56.680
<v Speaker 1>we really should be focusing on because this has obviously

0:20:56.720 --> 0:20:59.879
<v Speaker 1>been ongoing for a long time. The pressure is getting

0:21:00.000 --> 0:21:03.399
<v Speaker 1>matched it up with this stay being lifted. We know

0:21:03.480 --> 0:21:06.879
<v Speaker 1>that Puerto Rico did try to offer a deal to

0:21:07.119 --> 0:21:10.560
<v Speaker 1>bondholders and bondholders rejected it. Both parties seem to think

0:21:10.920 --> 0:21:14.560
<v Speaker 1>that they're going to fare better in court. What deadlines

0:21:14.560 --> 0:21:17.280
<v Speaker 1>coming up could force Puerto Rico's hand and force them

0:21:17.320 --> 0:21:21.800
<v Speaker 1>to UH invoke Title three M. I would think UM

0:21:22.000 --> 0:21:24.000
<v Speaker 1>as we see over the next few weeks, if we

0:21:24.080 --> 0:21:27.560
<v Speaker 1>see UM a lot more lawsuits come in, a lot

0:21:27.600 --> 0:21:31.080
<v Speaker 1>more lawsuits filed, that might really push the Federal Control

0:21:31.080 --> 0:21:35.000
<v Speaker 1>Board's hand. Also, if there's any adverse rulings UM where

0:21:35.040 --> 0:21:39.760
<v Speaker 1>Puerto Rico is unable to UM skip bond payments or

0:21:39.880 --> 0:21:43.199
<v Speaker 1>is unable to shuffle around money in different revenue streams,

0:21:43.240 --> 0:21:45.720
<v Speaker 1>than that might force the Control Board to have to

0:21:45.960 --> 0:21:48.760
<v Speaker 1>pursue Title three. Yeah, and it's also become a political

0:21:48.760 --> 0:21:51.440
<v Speaker 1>issue here in the US. We know that that was

0:21:51.480 --> 0:21:54.359
<v Speaker 1>one of the issues with getting a budget crafted in

0:21:54.480 --> 0:21:57.719
<v Speaker 1>Congress in the US, where people were some Republicans were

0:21:57.720 --> 0:22:01.160
<v Speaker 1>saying that Democrats wanted to put in a Medicaid allocation

0:22:01.280 --> 0:22:03.600
<v Speaker 1>for Puerto Rico, which ended up did getting included in

0:22:03.640 --> 0:22:08.480
<v Speaker 1>the bill. Uh and and uh Republicans, some Republicans, including

0:22:08.600 --> 0:22:11.280
<v Speaker 1>President Trump, didn't want that. So I'm sure this will

0:22:11.320 --> 0:22:13.879
<v Speaker 1>be in the news going forward. And there is seventy

0:22:13.920 --> 0:22:16.159
<v Speaker 1>billion dollars of debt at stake. A lot of it

0:22:16.200 --> 0:22:17.959
<v Speaker 1>is held on the island, but a lot of it

0:22:18.000 --> 0:22:20.600
<v Speaker 1>is also held not only by Hedgeman's but also by

0:22:21.160 --> 0:22:23.960
<v Speaker 1>mutual funds in the US that HOLDMUNI bond. So there

0:22:24.040 --> 0:22:26.800
<v Speaker 1>is a great deal of import on a much broader

0:22:26.840 --> 0:22:30.040
<v Speaker 1>scale than just this Commonwealth, but in and of itself,

0:22:30.119 --> 0:22:36.320
<v Speaker 1>is is becoming human humanitarian issue as well. Thanks for

0:22:36.359 --> 0:22:39.000
<v Speaker 1>listening to the Bloomberg p m L podcast. You can

0:22:39.040 --> 0:22:42.879
<v Speaker 1>subscribe and listen to interviews at Apple Podcasts, SoundCloud, or

0:22:42.920 --> 0:22:46.399
<v Speaker 1>whatever podcast platform you prefer. I'm pim Fox. I'm on

0:22:46.440 --> 0:22:50.280
<v Speaker 1>Twitter at pim Fox. I'm on Twitter at Lisa Abramo

0:22:50.280 --> 0:22:53.000
<v Speaker 1>wits one. Before the podcast, you can always catch us

0:22:53.040 --> 0:23:01.080
<v Speaker 1>worldwide on Bloomberg Radio k