1 00:00:05,800 --> 00:00:08,360 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim 2 00:00:08,400 --> 00:00:11,440 Speaker 1: Fox along with my co host Lisa Bramowitz. Each day 3 00:00:11,480 --> 00:00:15,000 Speaker 1: we bring you the most important, noteworthy, and useful interviews 4 00:00:15,040 --> 00:00:17,520 Speaker 1: for you and your money, whether you're at the grocery 5 00:00:17,560 --> 00:00:20,560 Speaker 1: store or the trading floor. Find the Bloomberg p m 6 00:00:20,680 --> 00:00:32,040 Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. 7 00:00:32,080 --> 00:00:34,800 Speaker 1: There was a report late yesterday in the Wall Street 8 00:00:34,880 --> 00:00:38,760 Speaker 1: Journal talking about how JP Morgan, which operates the main 9 00:00:39,080 --> 00:00:42,640 Speaker 1: benchmark that is used to invest in emerging markets debt, 10 00:00:42,760 --> 00:00:46,160 Speaker 1: the JP Morgan may be forced to remove Venezuelan debt 11 00:00:46,320 --> 00:00:50,480 Speaker 1: from its benchmark index as a result of U S sanctions, 12 00:00:50,680 --> 00:00:54,200 Speaker 1: details of which are expected to be announced today. They 13 00:00:54,200 --> 00:00:55,800 Speaker 1: may have already been announced. They want to check that 14 00:00:55,840 --> 00:00:57,480 Speaker 1: because that was supposed to come at eleven. I want 15 00:00:57,480 --> 00:00:59,680 Speaker 1: to bring in Shamila Khan. She is director of Emerging 16 00:00:59,680 --> 00:01:03,720 Speaker 1: Market Debt and Alliance Bernstein in New York. And Shamila, 17 00:01:03,800 --> 00:01:06,800 Speaker 1: I want to start by talking about the market response 18 00:01:06,840 --> 00:01:09,680 Speaker 1: to some of the rumors. I have been very surprised 19 00:01:09,720 --> 00:01:12,360 Speaker 1: to see no market response, and I would think that 20 00:01:12,400 --> 00:01:16,040 Speaker 1: there would be a massive further decline in Venezuela bonds. 21 00:01:16,080 --> 00:01:19,760 Speaker 1: Should there be a removal of this UH, this particular 22 00:01:19,800 --> 00:01:23,120 Speaker 1: type of debt from benchmark indexes. What's going on here? 23 00:01:23,840 --> 00:01:26,200 Speaker 1: So what's going on really is a lot of uncertainty 24 00:01:26,240 --> 00:01:28,880 Speaker 1: in terms of what kind of sanctions are going to 25 00:01:28,959 --> 00:01:32,520 Speaker 1: be announced. To the extent that the U. S. Treasury 26 00:01:32,560 --> 00:01:34,760 Speaker 1: sticks to the kind of sanctions they employed at the 27 00:01:34,800 --> 00:01:38,640 Speaker 1: time of the Russian invasion of Ukraine UH and only 28 00:01:38,760 --> 00:01:42,240 Speaker 1: limit the sanctions to newly issued debt in the future 29 00:01:42,480 --> 00:01:46,200 Speaker 1: of Venezuelan entities, then the impact on the index is 30 00:01:46,240 --> 00:01:48,560 Speaker 1: going to be fairly negligible, which is why you're not 31 00:01:48,680 --> 00:01:54,200 Speaker 1: saying as seeing a tremendous price response UM in the bonds. UH. 32 00:01:54,240 --> 00:01:56,760 Speaker 1: In addition, there have been some humors, rumors in the 33 00:01:56,840 --> 00:02:00,240 Speaker 1: last day or so off you know, Chinese involvement in 34 00:02:01,480 --> 00:02:05,760 Speaker 1: helping the Venezuelan government make its Maartom payments UM, which 35 00:02:05,760 --> 00:02:08,600 Speaker 1: are being negotiated in China by Venezuelan officials that have 36 00:02:08,720 --> 00:02:12,120 Speaker 1: been further supportive of prices. Wow, that's really interesting. I 37 00:02:12,160 --> 00:02:14,360 Speaker 1: just want to bring you some headlines related to this. 38 00:02:14,480 --> 00:02:17,920 Speaker 1: So President Trump has just as we were introducing you, 39 00:02:18,280 --> 00:02:22,040 Speaker 1: Trump signed an executive order on new Venezuela sanctions that 40 00:02:22,080 --> 00:02:26,840 Speaker 1: include UH some ban in dealing in new debt and 41 00:02:26,919 --> 00:02:30,000 Speaker 1: equity from the state run oil company which is trades 42 00:02:30,080 --> 00:02:33,799 Speaker 1: under the tick Peta VESA, as well as Venezuela Venezuela 43 00:02:33,840 --> 00:02:37,920 Speaker 1: government issued debt and equity UM. We had been hearing 44 00:02:38,240 --> 00:02:41,000 Speaker 1: that this could be potentially nuanced so that it wouldn't 45 00:02:41,040 --> 00:02:45,200 Speaker 1: necessarily affect people in the US trading existing bonds between 46 00:02:45,280 --> 00:02:47,680 Speaker 1: each other. But we still need to parse through the 47 00:02:47,720 --> 00:02:49,760 Speaker 1: details and we will bring them to you when we 48 00:02:49,840 --> 00:02:53,480 Speaker 1: get them. But Shamila, what about from your perspective, does 49 00:02:53,480 --> 00:02:58,000 Speaker 1: Alliance Bernstein own Venezuela and debt? Have you been selling 50 00:02:58,240 --> 00:03:01,080 Speaker 1: your holdings of it? And now where do you expect 51 00:03:01,080 --> 00:03:04,560 Speaker 1: to go from here with those holdings? So, Alliance Pornstein 52 00:03:04,639 --> 00:03:07,919 Speaker 1: manages a number of funds that are benchmarked to emerging 53 00:03:07,960 --> 00:03:12,160 Speaker 1: market solvereign in disease that include Venezuela debt. As such, 54 00:03:12,280 --> 00:03:15,160 Speaker 1: we are holders of Venezuela debt. But our stance in 55 00:03:15,240 --> 00:03:19,240 Speaker 1: Venezuela has been very defensive for some time, and the 56 00:03:19,280 --> 00:03:21,960 Speaker 1: way we think about Venezuela is really take a very 57 00:03:22,000 --> 00:03:27,000 Speaker 1: strong fundamental stance with respect to these country's um future 58 00:03:27,639 --> 00:03:30,919 Speaker 1: with respect to ability to pay back its debt um. 59 00:03:30,960 --> 00:03:33,600 Speaker 1: There is no real reason Venezuela should be in the 60 00:03:33,639 --> 00:03:37,400 Speaker 1: economic situation it is in right now. Uh. It has 61 00:03:37,440 --> 00:03:41,840 Speaker 1: a lot of resources and it definitely does not appear 62 00:03:41,880 --> 00:03:44,480 Speaker 1: to us a solvency issue, but rather a liquidity issue 63 00:03:44,720 --> 00:03:46,640 Speaker 1: and the fact that the country does not have a 64 00:03:46,640 --> 00:03:49,600 Speaker 1: credible regime and has not been able to attract investment 65 00:03:49,640 --> 00:03:52,680 Speaker 1: into the country. We do not see the current situation 66 00:03:52,720 --> 00:03:55,480 Speaker 1: as a sustainable situation. We do believe that there will 67 00:03:55,520 --> 00:03:57,720 Speaker 1: be a change in the future which will lead to 68 00:03:57,760 --> 00:04:01,040 Speaker 1: a better economic situation in Venezuela. And when we are 69 00:04:01,120 --> 00:04:04,520 Speaker 1: putting together our exposures, we keep this fundamental view in mind, 70 00:04:04,960 --> 00:04:08,400 Speaker 1: because our investments are always forward looking as far as 71 00:04:08,440 --> 00:04:11,880 Speaker 1: fundamentals are concerned. Well, Shamala, I just want to give 72 00:04:11,920 --> 00:04:13,640 Speaker 1: you the opportunity. I mean, if you're talking about the 73 00:04:13,640 --> 00:04:17,640 Speaker 1: country's ability to repay it stead or potential ability, what 74 00:04:17,720 --> 00:04:20,960 Speaker 1: about the potential ability of the country to restructure itself. 75 00:04:21,000 --> 00:04:22,559 Speaker 1: I mean, that doesn't look like it's going to happen, 76 00:04:22,560 --> 00:04:26,040 Speaker 1: at least internally. And uh, have you had any pushback 77 00:04:26,080 --> 00:04:28,599 Speaker 1: from investors who say, you know what, we really don't 78 00:04:28,640 --> 00:04:32,719 Speaker 1: want our money being lent to any entity that is 79 00:04:32,720 --> 00:04:36,640 Speaker 1: supported by such a repressive regime. That's absolutely true, and 80 00:04:36,720 --> 00:04:39,680 Speaker 1: that is something that we don't think is sustainable. We 81 00:04:39,720 --> 00:04:42,760 Speaker 1: do not believe that the repressive regime is a sustainable 82 00:04:42,920 --> 00:04:47,440 Speaker 1: regime in the near future, uh and in the medium term, 83 00:04:47,800 --> 00:04:50,080 Speaker 1: as a result of which we believe that there will 84 00:04:50,120 --> 00:04:52,680 Speaker 1: be a change to a more credible regime which will 85 00:04:52,760 --> 00:04:55,880 Speaker 1: be able to put together policies um and that is 86 00:04:56,040 --> 00:04:58,039 Speaker 1: what we are looking for in order to be less 87 00:04:58,080 --> 00:05:01,000 Speaker 1: defensive in our positioning in when as Allah. The other 88 00:05:01,040 --> 00:05:03,520 Speaker 1: thing to keep in mind is that prices are already 89 00:05:03,560 --> 00:05:06,039 Speaker 1: at very depressed levels. They are at all time lows 90 00:05:06,080 --> 00:05:07,920 Speaker 1: and for many of the bonds, and they are treating 91 00:05:08,360 --> 00:05:11,440 Speaker 1: below what has been historically the recovery rates on emerging 92 00:05:11,480 --> 00:05:15,320 Speaker 1: market sovereigns. So to a great extent, this country is 93 00:05:15,360 --> 00:05:20,080 Speaker 1: already pricing in a restructuring of its external debt, Shamila. So, 94 00:05:20,440 --> 00:05:23,720 Speaker 1: given the fact that we are getting now new sanctions 95 00:05:23,800 --> 00:05:26,880 Speaker 1: by the US on Venezuela debt and equity, do you 96 00:05:27,040 --> 00:05:29,680 Speaker 1: have any sense of how this could affect your day 97 00:05:29,680 --> 00:05:32,960 Speaker 1: to day? Does this change anything about the way you 98 00:05:33,040 --> 00:05:38,320 Speaker 1: approach investing in Venezuela well? We were expecting sanctions from 99 00:05:38,360 --> 00:05:40,400 Speaker 1: the United States, so this is something that we have 100 00:05:40,520 --> 00:05:45,640 Speaker 1: taken into consideration when constructing our own portfolios, and at 101 00:05:45,640 --> 00:05:49,080 Speaker 1: this point as we are really seeing the headlines come 102 00:05:49,120 --> 00:05:52,679 Speaker 1: out as we speak. From what I can understand based 103 00:05:52,720 --> 00:05:54,960 Speaker 1: on what I'm reading right now, it is a ban 104 00:05:55,080 --> 00:05:57,880 Speaker 1: on dealing in new debt, which is debt which will 105 00:05:57,920 --> 00:06:00,520 Speaker 1: be issued in the future, which would not impact any 106 00:06:00,520 --> 00:06:03,520 Speaker 1: of the existing debt. There are some headlines about certain 107 00:06:03,560 --> 00:06:07,400 Speaker 1: bonds possibly getting impacted. It's unclear to me which bonds 108 00:06:07,440 --> 00:06:09,719 Speaker 1: those are, but what we have tried to do is 109 00:06:09,760 --> 00:06:13,559 Speaker 1: limit our holdings to the Venezuelan bonds, which we believe 110 00:06:13,560 --> 00:06:16,640 Speaker 1: will not be controversial with respect to payments and are 111 00:06:16,680 --> 00:06:20,520 Speaker 1: generally accepted by the opposition as legal debt. Thank you 112 00:06:20,600 --> 00:06:22,839 Speaker 1: very much for being with us. Shamaila Khan is the 113 00:06:22,880 --> 00:06:26,440 Speaker 1: director of Emerging Market Debt for Alliance Bernstein And once again, 114 00:06:26,920 --> 00:06:31,080 Speaker 1: President Donald Trump has signed an order that imposes new 115 00:06:31,200 --> 00:06:34,039 Speaker 1: U S sanctions on Venezuela and debt. This is new 116 00:06:34,080 --> 00:06:36,800 Speaker 1: debt from the government as well as from the state 117 00:06:37,120 --> 00:06:52,680 Speaker 1: oil company Petasa. Well, how about ordering your dinner from Amazon. 118 00:06:52,839 --> 00:06:56,200 Speaker 1: It doesn't seem too far of idea, and indeed, with 119 00:06:56,240 --> 00:06:58,560 Speaker 1: the purchase of Whole Foods, it seems like something is 120 00:06:58,600 --> 00:07:00,359 Speaker 1: going to happen at least next week and terms of 121 00:07:00,400 --> 00:07:02,400 Speaker 1: prices here. To tell us more about the effect on 122 00:07:02,400 --> 00:07:06,400 Speaker 1: the grocery store industry is Shira Overday are technology columnists 123 00:07:06,400 --> 00:07:09,920 Speaker 1: are Bloomberg gad Fly. She follows all of this technology 124 00:07:09,960 --> 00:07:13,040 Speaker 1: for our fast commentary section of Bloomberg and you can 125 00:07:13,040 --> 00:07:16,000 Speaker 1: follow her on Twitter at Shira Overday. And also whether 126 00:07:16,040 --> 00:07:19,200 Speaker 1: us we have Sarah Halzac, our retail columnist for Bloomberg 127 00:07:19,240 --> 00:07:21,680 Speaker 1: gad Fly. It's all coming together and you can follow 128 00:07:21,960 --> 00:07:25,640 Speaker 1: Sarah at on Twitter at Sarah Halzack. Um. You know, Sarah, 129 00:07:25,640 --> 00:07:28,280 Speaker 1: maybe we should just start with you, as uh, someone 130 00:07:28,320 --> 00:07:33,520 Speaker 1: that's following retail. What effect do you believe the move 131 00:07:33,600 --> 00:07:35,880 Speaker 1: by Amazon to acquire Whole Foods? What do you think 132 00:07:35,920 --> 00:07:39,200 Speaker 1: it will make the other grocery stores do, because they're 133 00:07:39,200 --> 00:07:41,160 Speaker 1: not going to just sit back and wait for someone 134 00:07:41,200 --> 00:07:44,160 Speaker 1: else to take their market share away. That's exactly right, 135 00:07:44,200 --> 00:07:46,040 Speaker 1: and I think what it's gonna do is really put 136 00:07:46,080 --> 00:07:48,840 Speaker 1: pressure on them to squeeze every bit of pricing they 137 00:07:48,880 --> 00:07:52,320 Speaker 1: can out of what they're offering to customers. You know, 138 00:07:52,440 --> 00:07:54,520 Speaker 1: Whole Foods for a long time now has had this 139 00:07:54,600 --> 00:07:58,400 Speaker 1: reputation as whole paycheck. They really hadn't been competitive on 140 00:07:58,400 --> 00:08:01,280 Speaker 1: a price front. And so as consumer gets more health 141 00:08:01,360 --> 00:08:04,320 Speaker 1: minded and they want these organics, there's been a lot 142 00:08:04,360 --> 00:08:07,640 Speaker 1: of room for other grocers to take share their Kroger, Walmart, 143 00:08:07,680 --> 00:08:10,560 Speaker 1: all the legal they're offering these kinds of products at 144 00:08:10,560 --> 00:08:13,240 Speaker 1: better prices. Now that Amazon is going to make Whole 145 00:08:13,280 --> 00:08:15,920 Speaker 1: Foods get serious about being competitive in that way, it 146 00:08:15,960 --> 00:08:18,520 Speaker 1: really throws down the gauntlet to the rest of the sector. Shira, 147 00:08:18,600 --> 00:08:21,440 Speaker 1: I want to bring you in here from the Amazon perspective. 148 00:08:21,880 --> 00:08:24,560 Speaker 1: It's not that novel of an idea. If you cut prices, 149 00:08:24,560 --> 00:08:26,720 Speaker 1: people will be more interested in something, right, and this 150 00:08:26,760 --> 00:08:29,320 Speaker 1: is sort of it's but it's business model. But I 151 00:08:29,320 --> 00:08:32,440 Speaker 1: imagine that there are reasons that Whole Foods didn't have 152 00:08:32,600 --> 00:08:34,760 Speaker 1: lower prices to begin with. In other words, that cuts 153 00:08:34,760 --> 00:08:37,439 Speaker 1: into their margins and their profit margins. I mean, where 154 00:08:37,640 --> 00:08:41,240 Speaker 1: is the long term goal here for Amazon and how 155 00:08:41,280 --> 00:08:44,160 Speaker 1: profitable is this model? It's a fair quiesh. I mean, 156 00:08:44,200 --> 00:08:48,720 Speaker 1: it's it's worth noting that even a grocer like Whole Foods, 157 00:08:48,760 --> 00:08:52,360 Speaker 1: albeit an expensive grocer like Whole Foods has significantly better 158 00:08:52,400 --> 00:08:55,920 Speaker 1: operating margins than Amazon. Right You're talking five percent in 159 00:08:55,960 --> 00:08:58,400 Speaker 1: the last quarter for Whole Foods, a five percent operating 160 00:08:58,400 --> 00:09:01,240 Speaker 1: margins and two percent operating margins for Amason. So it's 161 00:09:01,240 --> 00:09:03,480 Speaker 1: weird when you acquire a grocer and you're buying a 162 00:09:03,559 --> 00:09:07,720 Speaker 1: higher margin business than the what you already have. But look, 163 00:09:08,000 --> 00:09:10,679 Speaker 1: you saw what Amazon did right away, which is really 164 00:09:10,800 --> 00:09:14,200 Speaker 1: it just shows their ruthless genius, which is they set 165 00:09:14,240 --> 00:09:17,679 Speaker 1: out on day one to change the perception of Whole 166 00:09:17,720 --> 00:09:22,200 Speaker 1: Foods as this expensive place to buy fancy groceries that 167 00:09:22,559 --> 00:09:25,320 Speaker 1: you know, they use the word savings and you know, 168 00:09:25,520 --> 00:09:29,199 Speaker 1: organic foods for everyone, uh several times in their news 169 00:09:29,240 --> 00:09:33,600 Speaker 1: announcement yesterday. And it's really about changing the perception and 170 00:09:33,640 --> 00:09:36,720 Speaker 1: getting more people in the door and starting to steal 171 00:09:36,720 --> 00:09:40,120 Speaker 1: that market share from other grocers. Well, you know these uh, 172 00:09:40,360 --> 00:09:41,920 Speaker 1: this idea that there's going to be let's say, a 173 00:09:41,960 --> 00:09:46,440 Speaker 1: membership program that would morph from Amazon Prime over to 174 00:09:46,520 --> 00:09:49,360 Speaker 1: let's say a point of sales system at Whole Foods, 175 00:09:49,920 --> 00:09:52,959 Speaker 1: is that something shure that you believe is just gonna, 176 00:09:53,120 --> 00:09:56,200 Speaker 1: you know, normally going to happen. I mean they endicate 177 00:09:57,040 --> 00:09:59,400 Speaker 1: I will say it's unclear exactly how that's gonna work, right. 178 00:09:59,440 --> 00:10:03,959 Speaker 1: Amazon's said yesterday that they're going to essentially make Amazon Prime, 179 00:10:04,040 --> 00:10:08,000 Speaker 1: their existing hundred dollar a year shopping club, into the 180 00:10:08,040 --> 00:10:11,240 Speaker 1: sort of loyalty card program for Whole Foods, and we 181 00:10:11,280 --> 00:10:13,240 Speaker 1: didn't get a lot of details, but you can sort 182 00:10:13,240 --> 00:10:16,960 Speaker 1: of imagine that Amazon will try to make it worth 183 00:10:17,320 --> 00:10:20,800 Speaker 1: Prime members time to shop at Whole Foods and not 184 00:10:20,880 --> 00:10:23,839 Speaker 1: at other places. And that's a clever idea. Well, and 185 00:10:24,360 --> 00:10:26,400 Speaker 1: just to follow up the idea about point of sale 186 00:10:26,559 --> 00:10:29,000 Speaker 1: is that maybe you will be in a situation in 187 00:10:29,000 --> 00:10:31,440 Speaker 1: which you will not have to actually give your credit 188 00:10:31,480 --> 00:10:35,800 Speaker 1: card or your cash in order to make a transit 189 00:10:36,240 --> 00:10:39,360 Speaker 1: a purchase at Whole Foods because you're a Prime customer, 190 00:10:39,520 --> 00:10:42,120 Speaker 1: you're logged in, you're done, it goes into your Amazon ACA. 191 00:10:42,240 --> 00:10:44,160 Speaker 1: Maybe I don't. I don't think we're there yet. We 192 00:10:44,280 --> 00:10:47,280 Speaker 1: will see exactly how they integrate the sort of cash 193 00:10:47,320 --> 00:10:50,400 Speaker 1: register system with Prime. But you can sort of imagine 194 00:10:50,520 --> 00:10:52,400 Speaker 1: where you go to check out, if you're a Prime member, 195 00:10:52,640 --> 00:10:56,360 Speaker 1: you get a better discount on those bananas or that 196 00:10:56,480 --> 00:10:58,440 Speaker 1: jar of peanut butter than you would if you're not 197 00:10:58,559 --> 00:11:01,160 Speaker 1: a Prime member. And again, it means that if your 198 00:11:01,240 --> 00:11:04,440 Speaker 1: prime member, and a lot tens of millions of Americans are, 199 00:11:04,920 --> 00:11:06,920 Speaker 1: that gives you an extra incentive to shop at Whole 200 00:11:06,920 --> 00:11:09,240 Speaker 1: Foods and not at the Kroger or whatever down the street. 201 00:11:09,400 --> 00:11:11,600 Speaker 1: And I just want to point out that Amazon shares 202 00:11:11,600 --> 00:11:15,319 Speaker 1: have actually been down for a third consecutive day, so 203 00:11:15,360 --> 00:11:18,480 Speaker 1: even though yes, Kroger shares and other grocery store shares 204 00:11:18,520 --> 00:11:21,880 Speaker 1: have gone down, although Kroger's bouncing back a little bit today, Uh, 205 00:11:21,920 --> 00:11:25,200 Speaker 1: you know, Amazon's down too with the question of profit margins. 206 00:11:25,520 --> 00:11:27,280 Speaker 1: But Sarah, I want to bring you back in here. 207 00:11:27,320 --> 00:11:31,960 Speaker 1: Amazon one in the retail war or is winning because 208 00:11:32,160 --> 00:11:36,680 Speaker 1: not just on lowering prices, they also found a way 209 00:11:36,679 --> 00:11:41,000 Speaker 1: to distribute goods efficiently and quickly as well as often cheap, 210 00:11:41,080 --> 00:11:43,480 Speaker 1: more cheaply but not always. Um, I want to give 211 00:11:43,520 --> 00:11:47,080 Speaker 1: you a chance to sort of argue the case for 212 00:11:47,400 --> 00:11:51,040 Speaker 1: why this may not work in the grocery industry. In 213 00:11:51,080 --> 00:11:53,880 Speaker 1: other words, does Amazon have to compete on a level 214 00:11:53,920 --> 00:11:57,319 Speaker 1: that goes beyond just lowering prices? And what is the 215 00:11:57,360 --> 00:12:00,640 Speaker 1: barrier to entry there? Yeah, so put some plea. A 216 00:12:00,720 --> 00:12:03,840 Speaker 1: perishable supply chain is just a whole different ball game 217 00:12:04,080 --> 00:12:06,319 Speaker 1: than the kind of supply chain the Amazon has built 218 00:12:06,320 --> 00:12:09,800 Speaker 1: already for selling US laundry detergent and selling US sweaters 219 00:12:09,840 --> 00:12:12,000 Speaker 1: and all that kind of stuff. Right, So, someone in 220 00:12:12,040 --> 00:12:14,000 Speaker 1: the grocery business once told me, for example, when you're 221 00:12:14,040 --> 00:12:17,000 Speaker 1: thinking about grocery delivery, you have to consider things like 222 00:12:17,040 --> 00:12:20,920 Speaker 1: that when bananas ripen, they emit something that makes apples 223 00:12:21,000 --> 00:12:23,560 Speaker 1: ripen at a different pace than if they were not 224 00:12:23,720 --> 00:12:26,520 Speaker 1: next to that banana. Right. This is supply chain no 225 00:12:26,640 --> 00:12:30,240 Speaker 1: how that the Walmarts and the Trader Joe's and Krogers 226 00:12:30,240 --> 00:12:32,920 Speaker 1: of the world had been building for a really long time. 227 00:12:33,320 --> 00:12:36,840 Speaker 1: The Amazon simply doesn't have. And so Whole Food certainly 228 00:12:36,880 --> 00:12:39,160 Speaker 1: has some of that know how, But it'll be interesting 229 00:12:39,160 --> 00:12:42,320 Speaker 1: to see how Amazon is able to kind of leverage 230 00:12:42,360 --> 00:12:46,840 Speaker 1: that and expand it more widely. Sarah, I beg your pardon. No, 231 00:12:46,920 --> 00:12:48,559 Speaker 1: I was just gonna say that. I mean, Sarah makes 232 00:12:48,559 --> 00:12:50,400 Speaker 1: a good point, which is that Amazon has been in 233 00:12:50,400 --> 00:12:54,840 Speaker 1: the grocery business for ten years. So they've had Amazon Fresh, 234 00:12:54,920 --> 00:12:57,640 Speaker 1: which is their grocery delivery service, up and running starting 235 00:12:57,640 --> 00:13:02,120 Speaker 1: in Seattle and in other market now to um for 236 00:13:02,200 --> 00:13:04,480 Speaker 1: ten years and it really hasn't made much of a 237 00:13:04,559 --> 00:13:07,240 Speaker 1: dent in the grocery industry, and that points to some 238 00:13:07,280 --> 00:13:10,000 Speaker 1: of the issues that Sarah pointed out, that they haven't 239 00:13:10,040 --> 00:13:14,760 Speaker 1: necessarily figured out the sort of logistical dynamics of the 240 00:13:14,760 --> 00:13:17,800 Speaker 1: grocery business quite yet. You know, they're smart people, they 241 00:13:17,840 --> 00:13:20,160 Speaker 1: can figure it out, but you know, ten years of 242 00:13:20,200 --> 00:13:23,240 Speaker 1: experience has shown that they haven't necessarily cracked it yet. Well, 243 00:13:23,400 --> 00:13:25,679 Speaker 1: and to your point, I just want to apply that 244 00:13:25,720 --> 00:13:28,600 Speaker 1: to whole foods, because, you know, Sarah, it looks as 245 00:13:28,600 --> 00:13:34,000 Speaker 1: though what the sales are perishable foods at whole foods, right, 246 00:13:34,040 --> 00:13:38,679 Speaker 1: nonperishable items they fare pretty poorly at whole foods, they do. 247 00:13:38,920 --> 00:13:40,640 Speaker 1: And I think that that sort of gets to this 248 00:13:40,720 --> 00:13:43,600 Speaker 1: idea that you know, people are willing to spend a 249 00:13:43,600 --> 00:13:45,719 Speaker 1: little bit more for the things they're putting inside their 250 00:13:45,720 --> 00:13:48,560 Speaker 1: bodies for feeling like they're having grass fed beef and 251 00:13:48,800 --> 00:13:52,360 Speaker 1: you know, chicken that's not treated with antibiotics. They're willing 252 00:13:52,400 --> 00:13:55,120 Speaker 1: to plunk down more money for those kinds of things. 253 00:13:55,280 --> 00:13:57,760 Speaker 1: The man for toilet paper, they're just not willing to 254 00:13:57,800 --> 00:14:01,040 Speaker 1: pay a premium, and so that that's one challenging thing 255 00:14:01,040 --> 00:14:02,559 Speaker 1: they'll have to contend with. You know, I think it's 256 00:14:02,559 --> 00:14:05,440 Speaker 1: really interesting to note that back in two thousand nine, 257 00:14:05,480 --> 00:14:08,880 Speaker 1: when Whole Foods had only two d seventy three stores. Uh. 258 00:14:09,000 --> 00:14:12,520 Speaker 1: Some research from canter Retail shows that seven percent of 259 00:14:12,559 --> 00:14:15,320 Speaker 1: shoppers said during that time period they visited Whole Foods 260 00:14:15,360 --> 00:14:18,880 Speaker 1: on a monthly basis. Now they have over four hundred stores. 261 00:14:19,320 --> 00:14:21,640 Speaker 1: The sheriff shoppers that visit them on a monthly basis 262 00:14:21,720 --> 00:14:25,520 Speaker 1: is virtually unchanged. So they're really having trouble growing the 263 00:14:25,600 --> 00:14:28,960 Speaker 1: base of customers who are interested in their product. And 264 00:14:29,000 --> 00:14:33,240 Speaker 1: I think that that package dry goods uh price issue 265 00:14:33,360 --> 00:14:35,480 Speaker 1: is a big one. Thank you so much for joining 266 00:14:35,520 --> 00:14:38,080 Speaker 1: us great insight. Sarah how Zac and Shara over Day, 267 00:14:38,320 --> 00:14:42,240 Speaker 1: both Godfly columnists, they don't jointly wrote a column on 268 00:14:42,320 --> 00:14:45,680 Speaker 1: this issue that's fabulous. Check it out Bloomberg dot com 269 00:14:45,840 --> 00:14:49,480 Speaker 1: slash god Fly, also on the Bloomberg at NI space 270 00:14:49,640 --> 00:15:06,000 Speaker 1: god Fly. The National Hurricane Center says that the storm 271 00:15:06,360 --> 00:15:10,200 Speaker 1: Hurricane Harvey has maximum sustained winds of a hundred and 272 00:15:10,240 --> 00:15:13,120 Speaker 1: ten miles per hour and it is just below the 273 00:15:13,160 --> 00:15:16,480 Speaker 1: category three level four A storm. Forecasters say the storm 274 00:15:16,520 --> 00:15:19,440 Speaker 1: is expected to reach that mark before making landfall late 275 00:15:19,480 --> 00:15:23,280 Speaker 1: today and early Saturday in Texas. And here to tell 276 00:15:23,400 --> 00:15:26,120 Speaker 1: us more about this is Shenando Bassu. He is a 277 00:15:26,160 --> 00:15:30,040 Speaker 1: meteorologist and gas analyst for Bloomberg New Energy Finance, and 278 00:15:30,080 --> 00:15:32,640 Speaker 1: he joins us here in our studio. Shenando, thanks very 279 00:15:32,720 --> 00:15:35,080 Speaker 1: much for being with us. Maybe just give everyone a 280 00:15:35,200 --> 00:15:37,840 Speaker 1: detailed over you know, view of what what we can 281 00:15:37,880 --> 00:15:41,640 Speaker 1: expect over the next let's says hey, Pam. Yeah, thanks 282 00:15:41,640 --> 00:15:43,920 Speaker 1: so much for having me here. So of course we 283 00:15:44,040 --> 00:15:46,680 Speaker 1: know that right now Hurricane Harvey is going to be 284 00:15:46,720 --> 00:15:49,600 Speaker 1: strengthening up to a category three. But what's unusual about 285 00:15:49,600 --> 00:15:52,640 Speaker 1: the storm really is how quickly it has intensified. It's 286 00:15:52,920 --> 00:15:57,280 Speaker 1: intensified so rapidly over the last forty eight hours UM 287 00:15:57,320 --> 00:15:59,600 Speaker 1: as of this morning, the central pressure down to about 288 00:15:59,640 --> 00:16:01,960 Speaker 1: nine and seendy millibars, and of course those wind speeds 289 00:16:01,960 --> 00:16:05,080 Speaker 1: making it up there to about ten. And the other 290 00:16:05,160 --> 00:16:07,800 Speaker 1: big piece of this is the duration and the amount 291 00:16:07,840 --> 00:16:10,320 Speaker 1: of rain that we're going to be getting. Um we're 292 00:16:10,320 --> 00:16:13,200 Speaker 1: looking at up to thirty or even over thirty inches 293 00:16:13,240 --> 00:16:16,920 Speaker 1: of rain in parts of the coastal part of Texas 294 00:16:17,000 --> 00:16:19,600 Speaker 1: as a result of the storm and the trajectory it's 295 00:16:19,600 --> 00:16:22,000 Speaker 1: expected to take, I mean even as late as next 296 00:16:22,080 --> 00:16:26,400 Speaker 1: Monday or Tuesday, that storm, Hurricane Harvey just still kind 297 00:16:26,400 --> 00:16:30,000 Speaker 1: of hovering over um the central and eastern part of 298 00:16:30,480 --> 00:16:33,240 Speaker 1: coastal Texas there. Yeah, people have talked about how it's 299 00:16:33,240 --> 00:16:36,040 Speaker 1: going to stall out over Texas and it's going to 300 00:16:36,120 --> 00:16:39,960 Speaker 1: be stalling out over populated areas of the state. What 301 00:16:40,160 --> 00:16:43,120 Speaker 1: have the evacuation order has been like and what is 302 00:16:43,160 --> 00:16:46,480 Speaker 1: the expected damage supposed to be? Yeah, I mean the 303 00:16:46,600 --> 00:16:48,840 Speaker 1: damage of course is a big part of this, certainly 304 00:16:48,920 --> 00:16:53,080 Speaker 1: to coastal oil and gas infrastructure. We've already been seeing 305 00:16:53,280 --> 00:16:56,440 Speaker 1: offshore platforms being evacuated on you know, all the major 306 00:16:56,520 --> 00:16:58,720 Speaker 1: oil companies and all their smaller e nps as well 307 00:16:58,840 --> 00:17:03,800 Speaker 1: evacuating their their oil platforms and UM as far as 308 00:17:04,080 --> 00:17:06,680 Speaker 1: you know, the gas gas infrastructure is a little bit 309 00:17:06,680 --> 00:17:08,879 Speaker 1: different though, because you know, we haven't seen that much 310 00:17:08,920 --> 00:17:11,720 Speaker 1: of a price movement yet in gas, and that's because 311 00:17:11,720 --> 00:17:14,359 Speaker 1: you know, ever since um, you know, two thousand and 312 00:17:14,400 --> 00:17:16,280 Speaker 1: eight with Gustav and Ike, you know, a lot of 313 00:17:16,320 --> 00:17:19,720 Speaker 1: that infrastructure has been beefed up, and also the gas 314 00:17:19,760 --> 00:17:23,280 Speaker 1: production environment has changed substantially, with a lot of that 315 00:17:23,320 --> 00:17:27,440 Speaker 1: production shifting over to the northeast. So as a result, 316 00:17:27,480 --> 00:17:29,399 Speaker 1: you know, we're not going to be seeing a whole 317 00:17:29,440 --> 00:17:32,560 Speaker 1: lot of movement in the gas markets from the supply side. Now, 318 00:17:32,840 --> 00:17:34,879 Speaker 1: going back to your point about the effects and the 319 00:17:35,080 --> 00:17:38,560 Speaker 1: demand is really the big story here. With um effects 320 00:17:38,640 --> 00:17:41,440 Speaker 1: of course of the power markets with multiple power outages 321 00:17:41,440 --> 00:17:44,359 Speaker 1: and that kind of thing, flooding impacting a lot of 322 00:17:44,400 --> 00:17:47,960 Speaker 1: the power assets down there, and also the wind farms 323 00:17:47,960 --> 00:17:51,000 Speaker 1: with the high winds that are expected tell us about 324 00:17:51,040 --> 00:17:54,280 Speaker 1: how the demand will go down number one, because it's 325 00:17:54,280 --> 00:17:57,240 Speaker 1: going to be a weekend and also you have the 326 00:17:57,280 --> 00:18:00,639 Speaker 1: situation it's just gonna be less use of electricity, yeah, 327 00:18:00,720 --> 00:18:03,880 Speaker 1: for sure, um. You know, with people evacuating the area, 328 00:18:03,920 --> 00:18:06,240 Speaker 1: and of course also industry shutting down. You know a 329 00:18:06,280 --> 00:18:08,720 Speaker 1: lot of the plants and and factories and so on 330 00:18:08,720 --> 00:18:10,960 Speaker 1: and so far in that area shutting down. You know, 331 00:18:11,000 --> 00:18:16,040 Speaker 1: we're expecting uh, just industrial demand alone to account for 332 00:18:16,040 --> 00:18:19,440 Speaker 1: about two to mc f of gas per day um. 333 00:18:19,520 --> 00:18:21,680 Speaker 1: So that that piece of it shutting down. Also, we 334 00:18:21,760 --> 00:18:25,199 Speaker 1: have a major nuclear plant, South Texas Nuclear that is 335 00:18:25,560 --> 00:18:30,040 Speaker 1: probably going to be shutting down maybe today or early tomorrow, um. 336 00:18:30,040 --> 00:18:32,920 Speaker 1: And that going offline accounts for about two gig lots 337 00:18:32,960 --> 00:18:35,399 Speaker 1: of power right there, so you know, and in the 338 00:18:35,440 --> 00:18:39,280 Speaker 1: aftermath of the storm, you know, gas generation will have 339 00:18:39,359 --> 00:18:41,640 Speaker 1: to fill in for that missing nuclear piece right there. 340 00:18:41,720 --> 00:18:44,320 Speaker 1: You know, it's interesting we were talking about this right 341 00:18:44,359 --> 00:18:47,440 Speaker 1: before the segment when we were talking about how gasoline 342 00:18:47,520 --> 00:18:51,280 Speaker 1: prices have increased. That's probably where you've seen the biggest 343 00:18:51,720 --> 00:18:56,240 Speaker 1: effect of this impending hurricane, with prices at one point 344 00:18:56,359 --> 00:19:00,280 Speaker 1: rising to the highest levels since November. Yet this will 345 00:19:00,280 --> 00:19:04,000 Speaker 1: not translate to higher prices that people end up paying 346 00:19:04,040 --> 00:19:07,760 Speaker 1: at the gas station simply because of the production. You 347 00:19:07,840 --> 00:19:10,080 Speaker 1: sort of touched on this, but can you give us 348 00:19:10,080 --> 00:19:13,560 Speaker 1: a sense of how much production has moved away, frankly 349 00:19:13,640 --> 00:19:16,720 Speaker 1: from this region in Texas and more up north to 350 00:19:16,920 --> 00:19:20,040 Speaker 1: say North Dakota and the shell production. Yeah, yeah, sure, 351 00:19:20,119 --> 00:19:22,119 Speaker 1: So I think there are a couple of pieces to that. 352 00:19:22,200 --> 00:19:24,439 Speaker 1: So the first is, of course, with the number of 353 00:19:24,480 --> 00:19:27,480 Speaker 1: refineries that have gone down just today, I think we're 354 00:19:27,560 --> 00:19:30,800 Speaker 1: just in just around the eight mark that has gone offline, 355 00:19:30,840 --> 00:19:32,960 Speaker 1: which is certainly higher than what you would see on 356 00:19:33,000 --> 00:19:34,760 Speaker 1: a you know, on a day to day kind of basis. 357 00:19:34,760 --> 00:19:38,200 Speaker 1: So that's what's taking a shot at the supply side 358 00:19:38,200 --> 00:19:40,840 Speaker 1: of gasoline. That's why we're seeing a rise in the 359 00:19:40,880 --> 00:19:44,800 Speaker 1: price there. As far as natural gas, however, um, because 360 00:19:44,840 --> 00:19:47,159 Speaker 1: now we're seeing so much more production in in in 361 00:19:47,359 --> 00:19:50,480 Speaker 1: the Marcellus regions up in Pennsylvania, and you know, the 362 00:19:50,520 --> 00:19:55,879 Speaker 1: northeastern general Gulf production has declined significantly over the last 363 00:19:56,200 --> 00:19:59,880 Speaker 1: you know, five to eight years, and so that air 364 00:20:00,040 --> 00:20:02,480 Speaker 1: yet that region as a you know, production region, the 365 00:20:02,520 --> 00:20:05,320 Speaker 1: importance of that has gone down real quick. Almost the 366 00:20:05,400 --> 00:20:07,560 Speaker 1: last time that we saw a storm of this magnitude 367 00:20:07,640 --> 00:20:12,560 Speaker 1: actually hit landfall in the US, UM in the US 368 00:20:12,720 --> 00:20:15,840 Speaker 1: in Texas two thousand and eight. Was that was the 369 00:20:15,920 --> 00:20:18,960 Speaker 1: last time we had a hurricane ike And was this 370 00:20:19,080 --> 00:20:21,280 Speaker 1: Is this going to be more or is this gonna 371 00:20:21,320 --> 00:20:23,520 Speaker 1: be weaker or stronger than I It's going to be 372 00:20:23,600 --> 00:20:26,680 Speaker 1: about the same or a little bit stronger. Yeah, especially 373 00:20:26,920 --> 00:20:31,200 Speaker 1: um with the precipitation in the rain. Yeah, definitely important 374 00:20:31,200 --> 00:20:33,600 Speaker 1: to watch and anyone who's listening, who is in that area, 375 00:20:33,720 --> 00:20:36,480 Speaker 1: please be safe. I am very concerned. It sounds like 376 00:20:36,480 --> 00:20:37,680 Speaker 1: it's going to be a lot of rain and a 377 00:20:37,760 --> 00:20:40,560 Speaker 1: lot of flooding and certainly very messy at the best 378 00:20:40,720 --> 00:20:44,440 Speaker 1: and uh and potentially life threatening it worse. Shenando Basso, 379 00:20:44,520 --> 00:20:46,679 Speaker 1: thank you so much for joining us. He's meteorologist and 380 00:20:46,720 --> 00:21:02,240 Speaker 1: gas analysts for Bloomberg New Energy Finance. Talking about Hurricane Harvey. 381 00:21:04,040 --> 00:21:07,040 Speaker 1: If you've noticed over the past couple of months, we've 382 00:21:07,080 --> 00:21:10,960 Speaker 1: been talking a lot about range bound markets, sleepy markets, 383 00:21:11,080 --> 00:21:15,359 Speaker 1: lack of volatility, lack of volumes, lack of impetus to sell, 384 00:21:15,640 --> 00:21:18,480 Speaker 1: but bullish and here to explain whether we're gonna see 385 00:21:18,480 --> 00:21:19,840 Speaker 1: anything that's going to break us out of this one 386 00:21:19,840 --> 00:21:22,840 Speaker 1: way or another is David Ader. He's chief macro strategistic 387 00:21:22,880 --> 00:21:26,600 Speaker 1: inform of financial intelligence. He is also a writer for 388 00:21:26,680 --> 00:21:30,240 Speaker 1: our Bloomberg Profits UH section that's part of Bloomberg View 389 00:21:30,280 --> 00:21:32,840 Speaker 1: and he also was the number one ranked US government 390 00:21:33,000 --> 00:21:38,200 Speaker 1: bonds strategist by Institutional Investor magazine for ten years. David, 391 00:21:38,240 --> 00:21:40,840 Speaker 1: thank you so much for joining us. You know I'd 392 00:21:40,840 --> 00:21:43,879 Speaker 1: love to get your sins Right now. We are seeing 393 00:21:44,480 --> 00:21:48,000 Speaker 1: treasury yields dip lower yet again, even as we see 394 00:21:48,200 --> 00:21:51,679 Speaker 1: UH markets rally, stock markets rally, I'm looking at a 395 00:21:51,760 --> 00:21:54,560 Speaker 1: ten year treasury yield UH that is lower than two 396 00:21:54,560 --> 00:21:57,400 Speaker 1: point two percent. Where do you think we're headed with 397 00:21:57,440 --> 00:22:01,240 Speaker 1: this treasury yield by the end of this year? Oh? 398 00:22:01,440 --> 00:22:04,760 Speaker 1: I I think that there's a great chance we'll see 399 00:22:04,840 --> 00:22:10,679 Speaker 1: two eleven. How's that for a traumatic call. I'm blown away, 400 00:22:11,320 --> 00:22:13,440 Speaker 1: isn't it isn't it. I mean for the balance of 401 00:22:13,520 --> 00:22:16,240 Speaker 1: the year, you know, I mean, I would like to think, 402 00:22:16,840 --> 00:22:20,280 Speaker 1: um that we will get a little more activity other 403 00:22:20,320 --> 00:22:24,119 Speaker 1: than these sort of six basis point weekly ranges. And 404 00:22:24,160 --> 00:22:26,480 Speaker 1: if I you know, with a bit of a bias, 405 00:22:26,560 --> 00:22:28,640 Speaker 1: I think that you know, we are going to say 406 00:22:28,840 --> 00:22:31,200 Speaker 1: I hate to say this term uncertainty is going into 407 00:22:31,280 --> 00:22:32,919 Speaker 1: the end of the year, as we get around the 408 00:22:32,960 --> 00:22:36,719 Speaker 1: dead ceiling, as we get around the possibility the likelihood 409 00:22:36,760 --> 00:22:40,080 Speaker 1: of a new FED chairman. And I think we're going 410 00:22:40,080 --> 00:22:42,600 Speaker 1: to continue with low inflation. So I think that there's 411 00:22:42,640 --> 00:22:45,600 Speaker 1: a risk that we could actually um take tens a 412 00:22:45,680 --> 00:22:49,679 Speaker 1: little bit below two percent. But I would not get 413 00:22:49,720 --> 00:22:52,960 Speaker 1: overly excited. I do not think the there's going to 414 00:22:53,000 --> 00:22:57,080 Speaker 1: be a big directional play in in yields for for 415 00:22:57,119 --> 00:23:00,280 Speaker 1: the balance of this year and and you know, very 416 00:23:00,320 --> 00:23:02,640 Speaker 1: possibly into next year, which raises a whole new set 417 00:23:02,640 --> 00:23:05,720 Speaker 1: of questions. Well, we've been getting a lot of warnings. 418 00:23:05,760 --> 00:23:09,080 Speaker 1: I guess whatever things feel like they're getting stagnant, we 419 00:23:09,080 --> 00:23:11,320 Speaker 1: start to get a lot of warnings of terrible things 420 00:23:11,359 --> 00:23:13,000 Speaker 1: to come. And we've gotten quite a few of them 421 00:23:13,400 --> 00:23:16,719 Speaker 1: from some pretty big investment managers that you know, the 422 00:23:16,800 --> 00:23:18,880 Speaker 1: end is ny and that markets are going to collapse 423 00:23:18,920 --> 00:23:21,960 Speaker 1: and that you know we're going to have a real correction. Um, 424 00:23:22,800 --> 00:23:25,720 Speaker 1: do you agree that there is something that's imminent and 425 00:23:25,720 --> 00:23:30,000 Speaker 1: and sort of uh bad, that's percolating under the surface. 426 00:23:30,040 --> 00:23:32,760 Speaker 1: And if so, where is where are we most at 427 00:23:32,840 --> 00:23:37,480 Speaker 1: risk of seeing some kind of problem? Where? Oh, I 428 00:23:37,520 --> 00:23:39,679 Speaker 1: think there is. I think that there's a big, huge 429 00:23:39,720 --> 00:23:42,040 Speaker 1: thing under the surface. I just don't know whether it's 430 00:23:42,080 --> 00:23:44,720 Speaker 1: going to prove bullish or bearish for interest great, And 431 00:23:44,760 --> 00:23:48,600 Speaker 1: I don't know what it is. I mean, um, the 432 00:23:48,680 --> 00:23:52,520 Speaker 1: economy is, it doesn't seem to be accelerating, it doesn't 433 00:23:52,520 --> 00:23:55,560 Speaker 1: seem to be decelerating. We're dealing with sort of this 434 00:23:55,640 --> 00:23:58,320 Speaker 1: muddling that we've dealt with for a very long time. 435 00:23:58,880 --> 00:24:03,560 Speaker 1: The maschinations out of Washington, the antics between the White 436 00:24:03,560 --> 00:24:06,320 Speaker 1: House and the Congress, I mean, have have no I 437 00:24:06,320 --> 00:24:07,840 Speaker 1: don't know if I want to use the term jump 438 00:24:07,880 --> 00:24:12,000 Speaker 1: the shark. But I think finally, the risk markets, the 439 00:24:12,200 --> 00:24:15,800 Speaker 1: risk markets are are losing their patients. So whether it's 440 00:24:15,800 --> 00:24:19,040 Speaker 1: about some physical stimulus or whether it's about tax reform, 441 00:24:19,080 --> 00:24:22,560 Speaker 1: and we start putting that off into um into next year, 442 00:24:22,560 --> 00:24:26,960 Speaker 1: with the potential of a default certainly over the debt 443 00:24:27,040 --> 00:24:30,199 Speaker 1: ceiling I think likely to reside with us, you know, 444 00:24:30,400 --> 00:24:34,639 Speaker 1: through October UM. And then the question about what is 445 00:24:35,000 --> 00:24:37,800 Speaker 1: what is the balanty reduction going to look like? And 446 00:24:37,840 --> 00:24:39,720 Speaker 1: I think all those things are going to put more 447 00:24:39,720 --> 00:24:43,440 Speaker 1: stressed on risk assets than on the treasury market. So 448 00:24:43,480 --> 00:24:47,239 Speaker 1: I would say that's where, um, that's where the risk is. 449 00:24:47,320 --> 00:24:50,560 Speaker 1: I mean valuations of course, are high credit spreads for example, 450 00:24:51,000 --> 00:24:54,720 Speaker 1: are type buy backs have slowed down? So that is 451 00:24:54,760 --> 00:24:57,960 Speaker 1: where I think we're going to we would feel it. Well, David, 452 00:24:58,040 --> 00:25:01,520 Speaker 1: what are you recommending that clients do that? Oh? Do what? 453 00:25:02,320 --> 00:25:05,879 Speaker 1: Cash under your mattress? Just you know, freeze, dride food 454 00:25:06,000 --> 00:25:09,240 Speaker 1: for cash and hunker down. Wait wait, wait, wait, wait, 455 00:25:09,280 --> 00:25:11,680 Speaker 1: hold on a second. How much cash? And when did 456 00:25:11,720 --> 00:25:15,240 Speaker 1: you start? How much? And how much free drive and 457 00:25:15,560 --> 00:25:18,800 Speaker 1: cans or packages that you know, but are you have 458 00:25:18,840 --> 00:25:21,160 Speaker 1: you been recommending over the past few weeks that people 459 00:25:21,200 --> 00:25:25,240 Speaker 1: build their cash stashes or is it over the past year? 460 00:25:25,680 --> 00:25:28,680 Speaker 1: Or and and how much? No? And and and realistically 461 00:25:28,760 --> 00:25:30,879 Speaker 1: I think that from a from a portfolio, from a 462 00:25:30,920 --> 00:25:34,320 Speaker 1: fixed income now we're talking on the fixed income side, UM, 463 00:25:34,359 --> 00:25:38,040 Speaker 1: I think I would you retain a fairly good front 464 00:25:38,160 --> 00:25:40,800 Speaker 1: end cash position, and then I would have a barbelled 465 00:25:40,800 --> 00:25:43,840 Speaker 1: portfolio with exposure at the long end. Again because I 466 00:25:43,880 --> 00:25:47,359 Speaker 1: don't think that we're seeing any inflation problems. So the 467 00:25:47,440 --> 00:25:50,760 Speaker 1: barbelled portfolio would allow me to if we, for example, 468 00:25:50,800 --> 00:25:53,040 Speaker 1: were to see if that High court, if we were 469 00:25:53,080 --> 00:25:55,199 Speaker 1: to see opportunities I want to hunk. I want to 470 00:25:55,200 --> 00:25:57,359 Speaker 1: have some cash on hand to take advantage of it 471 00:25:57,800 --> 00:26:00,560 Speaker 1: um in other asset classes. So I think that the 472 00:26:00,560 --> 00:26:03,359 Speaker 1: Barbel portfolio for now is the one I would like. 473 00:26:03,440 --> 00:26:06,560 Speaker 1: And I think also, um, you know, I don't think 474 00:26:06,560 --> 00:26:08,879 Speaker 1: the Fed's going to hike this year, and I'm you know, 475 00:26:08,960 --> 00:26:11,199 Speaker 1: next year we'll get I think we'll get a new 476 00:26:11,240 --> 00:26:15,680 Speaker 1: FED chairman. Presumably there will be umdabish Trump like slow 477 00:26:15,760 --> 00:26:19,600 Speaker 1: interest rates and I but I do think that there 478 00:26:19,720 --> 00:26:21,600 Speaker 1: is still some risk at the front end. Is going 479 00:26:21,600 --> 00:26:24,520 Speaker 1: to get UM a little bit nervous about the feed 480 00:26:24,600 --> 00:26:26,480 Speaker 1: as we approached next year and we get past the 481 00:26:26,520 --> 00:26:30,760 Speaker 1: debt ceiling situation. So I think the Barbel portfolio is 482 00:26:30,800 --> 00:26:32,280 Speaker 1: the one that makes the most sense to me. And 483 00:26:32,320 --> 00:26:35,720 Speaker 1: in terms of a duration exposure to a benchmark, I 484 00:26:35,760 --> 00:26:38,000 Speaker 1: would be a little bit long duration. Now, well, David, 485 00:26:38,000 --> 00:26:39,840 Speaker 1: when do you throw in the towel. I mean, I 486 00:26:39,920 --> 00:26:41,800 Speaker 1: want to know because you know you'll be the last 487 00:26:41,800 --> 00:26:47,280 Speaker 1: bear standing when I throw in the towel. Um. You know, 488 00:26:47,359 --> 00:26:49,960 Speaker 1: I think in these in these coming weeks, in these 489 00:26:50,000 --> 00:26:54,400 Speaker 1: coming months, you know, we will get obviously more information 490 00:26:54,560 --> 00:26:57,520 Speaker 1: on inflation. The FET has always talked about that that 491 00:26:57,680 --> 00:27:02,000 Speaker 1: that there has been talking that ultimately they'll reach their targets. 492 00:27:02,080 --> 00:27:04,400 Speaker 1: I do not care about the dot pots. I don't 493 00:27:04,400 --> 00:27:07,800 Speaker 1: really care about their their own expectations. I want to 494 00:27:07,840 --> 00:27:11,520 Speaker 1: see what the data is going to look like, you know, David, 495 00:27:11,800 --> 00:27:14,000 Speaker 1: I have to wonder. You know, people lament that this 496 00:27:14,080 --> 00:27:17,600 Speaker 1: market has been newter, either by financial regulation or by 497 00:27:17,640 --> 00:27:21,760 Speaker 1: so many years of Federal Reserve interference. But are we 498 00:27:21,840 --> 00:27:24,960 Speaker 1: just seeing a market that's a normal, that's moving back 499 00:27:25,320 --> 00:27:27,320 Speaker 1: to a model where people actually have to look at 500 00:27:27,400 --> 00:27:29,479 Speaker 1: data and actually look at the companies and not just 501 00:27:29,520 --> 00:27:33,040 Speaker 1: wait for what comes out of the lips of central bankers. 502 00:27:34,040 --> 00:27:36,639 Speaker 1: You know, I know we always look at it, and 503 00:27:36,680 --> 00:27:39,119 Speaker 1: if you're an economist or you're a strategist, you know 504 00:27:39,160 --> 00:27:42,919 Speaker 1: you historically and academically we rely on the data. But 505 00:27:43,080 --> 00:27:45,480 Speaker 1: you know, we've we've had data up, we've had it down, 506 00:27:45,520 --> 00:27:50,160 Speaker 1: and the treasury market. Generally, the yields are staying in arrange, 507 00:27:50,640 --> 00:27:53,520 Speaker 1: so we will get back to it. We still need 508 00:27:53,560 --> 00:27:56,560 Speaker 1: to look at those factors because it will impact central 509 00:27:56,560 --> 00:28:00,600 Speaker 1: bank policy here and around the world. But um, the 510 00:28:00,600 --> 00:28:05,399 Speaker 1: the the quantitative easy that's still going on elsewhere, the 511 00:28:05,480 --> 00:28:09,160 Speaker 1: continuing reinvestment which the FED is doing, even if they're 512 00:28:09,200 --> 00:28:12,359 Speaker 1: going to be in tapering. I do think he's put um, 513 00:28:12,520 --> 00:28:16,200 Speaker 1: you know, put restrictions on the volatility that you would 514 00:28:16,200 --> 00:28:20,560 Speaker 1: otherwise be seeing in in in the fixed income markets 515 00:28:20,600 --> 00:28:25,200 Speaker 1: that slowly, gradually, glacially is coming off. So I don't 516 00:28:25,200 --> 00:28:27,760 Speaker 1: see drama, but I do think, you know, in a 517 00:28:27,800 --> 00:28:30,520 Speaker 1: few years, will probably get ourselves back to a more 518 00:28:30,560 --> 00:28:34,600 Speaker 1: normal environment. Having said that, I still think that that 519 00:28:34,760 --> 00:28:37,399 Speaker 1: there's a generational issue that interest rates are going to 520 00:28:37,440 --> 00:28:41,720 Speaker 1: be lower than we might otherwise have seen, just because 521 00:28:41,800 --> 00:28:44,480 Speaker 1: we are in a sort of a muddling growth mode. 522 00:28:44,920 --> 00:28:46,600 Speaker 1: I want to thank you very much for joining us. 523 00:28:46,640 --> 00:28:49,680 Speaker 1: David Adder is the chief macro strategist for Inform of 524 00:28:49,760 --> 00:28:54,200 Speaker 1: Financial Intelligence. He is also a Bloomberg profit. Bloomberg profits 525 00:28:54,200 --> 00:28:58,520 Speaker 1: are professionals who offer actionable insights on markets, the economy, 526 00:28:58,560 --> 00:29:02,360 Speaker 1: and monetary policy, and Bloomberg profits may actually have a 527 00:29:02,400 --> 00:29:07,640 Speaker 1: steak in the areas in which they write about. Thanks 528 00:29:07,640 --> 00:29:10,280 Speaker 1: for listening to the Bloomberg P and L podcast. You 529 00:29:10,320 --> 00:29:14,080 Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud, 530 00:29:14,200 --> 00:29:17,680 Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm 531 00:29:17,720 --> 00:29:21,240 Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa 532 00:29:21,280 --> 00:29:24,440 Speaker 1: abramoids One before the podcast, you can always catch us 533 00:29:24,480 --> 00:29:26,040 Speaker 1: worldwide on Bloomberg Radio.