WEBVTT - The Market Isn't Correctly Pricing In Climate Risk, Samama Says 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.560 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.160 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well. 0:00:32.200 --> 0:00:34.920 In addition to the meeting of the United Nations General 0:00:34.960 --> 0:00:40.040 Assembly week, there is also something called the Sustainable Investment Form. 0:00:40.080 --> 0:00:43.360 It is scheduled for tomorrow at the Crown Plaza Hotel 0:00:43.479 --> 0:00:46.520 here in New York City, and one of the participants 0:00:46.640 --> 0:00:49.320 is our guest, Fred Samama. He is a deputy Global 0:00:49.360 --> 0:00:52.559 head of Institutional and Sovereign Clients at a Mundi And 0:00:52.600 --> 0:00:54.520 for those that may not be familiar with the Mondy, 0:00:54.520 --> 0:00:58.040 I believe it's the largest publicly traded asset manager in 0:00:58.120 --> 0:01:01.240 Europe and it is as out of the combination of 0:01:01.240 --> 0:01:06.640 the asset management business of credit agricole and go ahead 0:01:06.640 --> 0:01:09.560 and suck and yeah, well, okay, you can tell us more. 0:01:09.600 --> 0:01:12.280 Fred Samana, thanks for being here. The reason I wanted 0:01:12.319 --> 0:01:14.520 people to understand about a Munday just a little bit 0:01:14.600 --> 0:01:18.400 is because they reached they purchased pioneer investments I believe 0:01:18.400 --> 0:01:21.319 from UNI credit and so that has really kind of 0:01:21.400 --> 0:01:25.440 changed the profile of a mundy to something that most 0:01:25.480 --> 0:01:29.000 Americans will will sern Louis know about. So I'm wondering 0:01:29.000 --> 0:01:33.800 if you could explain your company's dedication to sustainable UH 0:01:33.920 --> 0:01:36.560 finance initiatives and what are you going to be talking 0:01:36.600 --> 0:01:39.640 about tomorrow. Yes, good morning, and I'm very glad to 0:01:39.680 --> 0:01:43.759 be with you this morning. Um. Sustainable investment is part 0:01:43.760 --> 0:01:47.400 of our DNA. We strongly believe that when you invest 0:01:47.440 --> 0:01:50.840 over the long run, you must integrate these e G 0:01:51.000 --> 0:01:54.600 criteria in your investment process, not only to have a 0:01:54.640 --> 0:01:58.040 positive sorry what kind of criteria e s G. Tell 0:01:58.080 --> 0:02:01.440 people what that is and ther Montal Social and governance 0:02:02.240 --> 0:02:06.760 criteria not only to have a positive impact on society, 0:02:06.920 --> 0:02:10.280 but to manage long term oriented risk as well, because 0:02:10.320 --> 0:02:14.839 we think that this criteria are helping generate returns over 0:02:14.880 --> 0:02:16.920 the long run. So this is this is a crucial 0:02:16.960 --> 0:02:20.239 point because when people talk about sustainable investing out of 0:02:20.280 --> 0:02:24.639 the goodness of your heart, people in the investing universe, 0:02:24.720 --> 0:02:26.880 they want to feel good about themselves with their eyes 0:02:26.880 --> 0:02:28.840 glaze over because it's not their job. Their job is 0:02:28.880 --> 0:02:31.160 to manage risks and their job is to get returns. 0:02:31.240 --> 0:02:33.880 And so what you're saying is that you are showing 0:02:33.919 --> 0:02:37.320 people how they can hedge against some of the economic 0:02:37.440 --> 0:02:41.240 risks of climate change by investing in certain kinds of companies. 0:02:41.320 --> 0:02:44.960 Can you give us an example of companies that investment 0:02:44.960 --> 0:02:48.680 managers would invest in with an eye toward climate change, 0:02:48.880 --> 0:02:50.840 and can you give us a sense of what returns 0:02:50.880 --> 0:02:53.720 have been like to date. You're absolutely right here, we 0:02:53.760 --> 0:02:59.280 are talking about generating um returns over the long run. Conqutely, 0:02:59.320 --> 0:03:02.919 we have in emted for two large European investors a 0:03:03.080 --> 0:03:08.320 P four on low carbon indexes. These indexes are a 0:03:08.320 --> 0:03:13.200 way to decabonize passive investments instruments. It's a way to 0:03:13.320 --> 0:03:18.480 reduce climate change related risks without changing market returns of 0:03:18.480 --> 0:03:21.959 other short runds. How because we do a screening a 0:03:22.080 --> 0:03:24.560 sector per sector, and we will look at the cabin 0:03:24.639 --> 0:03:27.760 food print or how a company is exposed to climate 0:03:27.800 --> 0:03:31.960 change related risks. Concrete example that speaks to everybody. If 0:03:32.000 --> 0:03:35.160 you take the example of the auto car makers. On 0:03:35.240 --> 0:03:37.960 the one hand, you have a company named volves Wagon 0:03:38.360 --> 0:03:42.360 developing softwares in order to to to lie on climate change. 0:03:42.680 --> 0:03:45.760 On the other hand, you have corporates like Toyota or 0:03:45.800 --> 0:03:52.800 Tesla developing cars that are anticipating a shift towards EVS. 0:03:52.840 --> 0:03:55.640 So you can see that for all sectors you actually 0:03:55.680 --> 0:04:00.920 have managements either denying what's happening or autist painting. And 0:04:00.960 --> 0:04:04.160 we strongly believe that it's better to be to be 0:04:04.200 --> 0:04:06.880 invested into the latter ones than in the former ones. 0:04:07.160 --> 0:04:10.720 And the good news is that investors, having started the 0:04:10.840 --> 0:04:16.160 process of using the low carbon indexes, have outperformed before 0:04:16.279 --> 0:04:20.599 a for beating the standout indexes. And now this technology, 0:04:20.880 --> 0:04:25.000 having been developed in Europe, is now spreading around the planet. 0:04:25.440 --> 0:04:29.640 Calster's New York Command Right Tirement Fund, New Zealand Superagnution Fund, 0:04:29.839 --> 0:04:33.920 they're all using this technology in order to reduce their 0:04:33.920 --> 0:04:37.520 climate change related risks, with that impacting their returns or 0:04:37.520 --> 0:04:40.279 the short run. Is that a strategic decision on the 0:04:40.320 --> 0:04:42.880 part of these pension funds that they've decided, I mean, 0:04:42.880 --> 0:04:45.880 as you mentioned, whether it's the New York Common Retirement Fund, 0:04:46.040 --> 0:04:50.440 Unilever's corporate pension fund, is that a strategic position that 0:04:50.560 --> 0:04:53.800 they stake as well that they must pay attention to 0:04:53.880 --> 0:04:57.279 these issues. Absolutely. To take a concrete example, it doesn't 0:04:57.279 --> 0:05:00.120 really even matter whether the money manager believes the this 0:05:00.279 --> 0:05:02.839 is something good to be done out of the goodness 0:05:02.839 --> 0:05:06.400 of everybody's heart. The mandate from the manage, from the 0:05:06.480 --> 0:05:09.840 from the people who actually aren't responsible for the money, 0:05:09.880 --> 0:05:15.440 the pension fund managers. They are telling their potential vendor, Look, 0:05:15.560 --> 0:05:18.440 this is how I want you to invest the money. Correct. 0:05:18.839 --> 0:05:22.279 Concrete example News New Zealand Supernuition Fund and we have 0:05:22.320 --> 0:05:25.160 been speaking to them for four years on this topic. 0:05:25.720 --> 0:05:27.839 They have announced a couple of weeks ago that the 0:05:27.880 --> 0:05:32.000 West switching ten billion dollars of the equity funds towards 0:05:32.080 --> 0:05:34.760 low carbon indexes. So, to make a long story short, 0:05:34.839 --> 0:05:37.440 it's not to look good in an annual report, it's 0:05:37.480 --> 0:05:40.080 not to be on any you know, pictures at the 0:05:40.279 --> 0:05:44.640 UN assemblies. It's really because they believe that here they're 0:05:44.680 --> 0:05:48.680 facing a market figure markets being shot and oriented. They 0:05:48.720 --> 0:05:52.919 don't price correctly the risks associated with climate change, and 0:05:52.920 --> 0:05:56.520 so it becomes their fidusual responsibility to arn aerlie those 0:05:56.680 --> 0:05:59.760 risks and to try to reduce their waitings. It's exactly 0:05:59.800 --> 0:06:02.800 the stage of mc county, the governor of the Bank 0:06:02.839 --> 0:06:06.120 of England says, if you don't integrate climate change rootide 0:06:06.200 --> 0:06:11.120 risks while being a coupled punchion fund manager, you're breaching 0:06:11.200 --> 0:06:16.080 your fidushery responsibility based on worlds. Well, Fred, you know, 0:06:16.160 --> 0:06:18.120 I'd love to get your sense though, because there's been 0:06:18.200 --> 0:06:20.760 there's been some pushback about e s G funds and 0:06:20.800 --> 0:06:24.200 even carbon neutral funds, basically saying, how do you really 0:06:24.200 --> 0:06:27.080 determine that a lot of companies can kind of manipulate 0:06:27.440 --> 0:06:30.440 how they look, but it doesn't really matter that it's 0:06:30.480 --> 0:06:34.720 not really reducing their carbon footprint all that much. You know, 0:06:34.760 --> 0:06:38.159 on e h G um, it's slightly different from cabin 0:06:38.279 --> 0:06:41.560 e h G is differs from one country to the 0:06:41.560 --> 0:06:44.360 other one. To take a contricrete example, if you talk 0:06:44.440 --> 0:06:47.400 about e s G in Japan, it will be all 0:06:47.440 --> 0:06:50.680 about governance. If you talk about e G in China, 0:06:50.880 --> 0:06:54.000 it will be all about climate change. When I'm trying 0:06:54.000 --> 0:06:59.039 to say here it has this world conveys different meanings 0:06:59.080 --> 0:07:02.240 depending on the country is you're in on climate change 0:07:02.320 --> 0:07:06.440 is different. The cabin food print of a Chinese, Japanese, 0:07:06.480 --> 0:07:10.960 or European or US corporate is either same one. How 0:07:11.160 --> 0:07:15.120 polting you are or are you exposed to strongded assets, 0:07:15.160 --> 0:07:18.040 meaning you have asset that could be kept on the ground, 0:07:18.440 --> 0:07:22.320 So it has no um I would say moral values behind. 0:07:22.360 --> 0:07:25.840 It's all about materality and risks of a long run. 0:07:26.080 --> 0:07:29.880 And then for that we have particular pictures which provide 0:07:29.920 --> 0:07:32.600 us having an allied that for for more than one decade. 0:07:33.440 --> 0:07:35.040 You know. Just just briefly, I just wanted to mention 0:07:35.040 --> 0:07:38.440 because we were talking about the New Zealand Superannuation Fund 0:07:38.880 --> 0:07:42.280 and at the time, I believe was Adrian Or at 0:07:42.320 --> 0:07:44.240 the fund who who said that they are still going 0:07:44.280 --> 0:07:48.160 to invest in fossil fuel uh companies, but that they 0:07:48.160 --> 0:07:50.800 don't feel that they're being adequately rewarded for the risk. 0:07:50.880 --> 0:07:53.680 So to your point, and they said they reduced what 0:07:53.840 --> 0:07:57.600 the billion dollar fund exposure to emissions and reserves by 0:07:57.600 --> 0:08:00.360 around twenty percentage. Yeah. That the point that the point 0:08:00.440 --> 0:08:02.880 is not to get rid of fossil fuel companies. The 0:08:02.920 --> 0:08:06.800 point is not to disinvest. Equation is within each industry, 0:08:07.280 --> 0:08:12.080 which corporates our well positioned facing this this shift of society. Yeah, 0:08:12.560 --> 0:08:14.680 Fred's mama, thank you so much for joining us. I 0:08:14.760 --> 0:08:16.680 we could talk to you all afternoon. This is actually 0:08:16.720 --> 0:08:19.800 fascinating and you're raising a two billion dollars in funds 0:08:19.800 --> 0:08:22.000 to create the largest green bond fund for emerging markets. 0:08:22.000 --> 0:08:24.840 Fred's mama, Deputy Global Head of Institutional and Sovereign Clients. 0:08:24.840 --> 0:08:39.160 For a MUNDI let's turn our attention now to what 0:08:39.280 --> 0:08:42.040 to do with your money and some of the world 0:08:42.080 --> 0:08:44.760 strategies that you might employ. Brad McMillan is the Chief 0:08:44.840 --> 0:08:48.080 Investment Office for Commonwealth Financial Network and he joins us 0:08:48.120 --> 0:08:51.439 here in our eleven three oh studio. Brad, always a pleasure, 0:08:51.440 --> 0:08:54.959 Thanks for being here. I'm wondering if, if maybe you 0:08:55.040 --> 0:09:00.000 can describe the importance of let's say a non style 0:09:00.520 --> 0:09:03.840 or uh not fixed income number. And this has to 0:09:03.880 --> 0:09:06.200 do with household income, because I was reading a note 0:09:06.240 --> 0:09:08.240 that you put out a couple of weeks ago, and 0:09:08.320 --> 0:09:12.000 it had to do with paying attention to median household 0:09:12.080 --> 0:09:15.360 income in the United States and what that would mean 0:09:15.760 --> 0:09:19.280 for investors. Tell us about it, well, the point of 0:09:19.320 --> 0:09:21.880 the piece was to talk about the We talk about 0:09:21.920 --> 0:09:24.520 the stock market records, but there are underlying records that 0:09:24.559 --> 0:09:27.480 are much more important when we see where the stock 0:09:27.559 --> 0:09:29.920 market is likely to go, and one of the most 0:09:29.960 --> 0:09:33.840 important ones recently has been household income. Media, household income, 0:09:34.160 --> 0:09:37.240 the household income half the people make more, half make less, 0:09:37.640 --> 0:09:39.720 has actually hit a new record for the first time 0:09:39.760 --> 0:09:43.959 since nine Now think about that for a minute. There's 0:09:44.000 --> 0:09:45.839 there's some good news in there, and there's some bad news. 0:09:45.880 --> 0:09:48.360 The bad news is it took almost a full generation 0:09:48.760 --> 0:09:50.960 to hit a new high. The good news is that 0:09:51.000 --> 0:09:53.280 we have hit a new high, and we've done it 0:09:53.320 --> 0:09:56.920 without a ton of economic growth. So that being the case, 0:09:56.960 --> 0:09:59.400 if we look forward, if we see growth accelerating and 0:09:59.440 --> 0:10:02.240 we may ellen the rest of the year, then that 0:10:02.320 --> 0:10:04.400 actually would mean that wage growth could take up, and 0:10:04.679 --> 0:10:08.120 actually income could get even better. People could spend more, 0:10:08.360 --> 0:10:11.040 and we could move into a positive circle. That would 0:10:11.040 --> 0:10:14.360 be great for the market. So, Brad, it sounds like 0:10:14.559 --> 0:10:18.000 you're bullish right now over the short term, I am. 0:10:18.080 --> 0:10:20.199 I think the markets actually going to do pretty well 0:10:20.240 --> 0:10:22.320 through the rest of the year. I think the signs 0:10:22.360 --> 0:10:25.320 for at least at the start of the year very good. 0:10:26.800 --> 0:10:29.360 I guess I was just gonna In that case, do 0:10:29.440 --> 0:10:32.360 you perceive that companies will spend some of the money 0:10:32.360 --> 0:10:36.200 that they have either raised through bond issues or because 0:10:36.200 --> 0:10:40.079 they've just amassed large cash piles. Will they start spending 0:10:40.080 --> 0:10:43.079 that on something other than share buybacks and dividends. Will 0:10:43.120 --> 0:10:45.520 they spend it on wage increases? Will they spend it 0:10:45.559 --> 0:10:49.079 on technology to make their businesses more productive? I think 0:10:49.080 --> 0:10:51.959 they're gonna have to start spending it on wage increases. 0:10:52.120 --> 0:10:55.320 We're already seeing signs are starting to invest more and 0:10:55.400 --> 0:10:59.160 that actually is the key to future income growth, which 0:10:59.240 --> 0:11:01.880 is increasing more or productivity. That's when one of the 0:11:01.920 --> 0:11:04.360 problems companies are running out of bodies to throw with 0:11:04.440 --> 0:11:07.160 the problem. Now they're going to have to start buying equipment, 0:11:07.360 --> 0:11:10.680 and that's going to be another positive for the economy. Brad, 0:11:10.760 --> 0:11:14.000 At what point are we going to start seeing inflation. 0:11:14.120 --> 0:11:16.760 We're gonna start seeing prices rise, We're gonna start seeing, 0:11:17.280 --> 0:11:21.319 as you said, wages increase. That will lead to higher 0:11:21.480 --> 0:11:25.040 benchmark borrowing costs. And Alan Krueger of Princeton was on 0:11:25.080 --> 0:11:28.240 Bloomberg Television earlier and break. He was talking about how 0:11:28.800 --> 0:11:32.400 he could see a ten year treasury yields rising to 0:11:32.480 --> 0:11:35.040 four percent pretty quickly if we start to see that, 0:11:35.200 --> 0:11:37.640 Do you agree and how disruptive would that be? I 0:11:37.679 --> 0:11:40.400 do agree with that, because right now we've had very 0:11:40.400 --> 0:11:42.839 little inflation, and the assumption is what's never going to 0:11:42.920 --> 0:11:44.960 show up I think that when it shows up, it'll 0:11:44.960 --> 0:11:47.079 show up faster than people think, and that could well 0:11:47.120 --> 0:11:50.000 be in the next eighteen months. Now that that's the case, 0:11:50.480 --> 0:11:53.880 And what kind of inflation? What are we talking about? Energy, food, 0:11:54.240 --> 0:11:57.360 home prices? What kind across the board. One of the 0:11:57.360 --> 0:12:00.240 reasons we've had low inflation is because wage growth has 0:12:00.240 --> 0:12:03.960 been so constrained. Wage growth feeds into everything else. We've 0:12:03.960 --> 0:12:06.480 had a number of things getting cheaper and cheaper. We've 0:12:06.480 --> 0:12:09.760 had cars. Globalization is continuing to work its way. But 0:12:09.800 --> 0:12:12.319 why is that connect? In other words, maybe I'm getting 0:12:12.320 --> 0:12:16.280 the wrong. Wages have not, as you said, waited a 0:12:16.360 --> 0:12:20.400 long time for wages to come back. Wages rise, but 0:12:20.480 --> 0:12:22.520 that doesn't necessarily mean the prices are going to go up. 0:12:22.559 --> 0:12:24.480 I thought inflated. One of the reasons that inflation has 0:12:24.480 --> 0:12:26.720 been held in check is because every time you turn around, 0:12:26.760 --> 0:12:30.199 someone else's vent invented the same thing for less money, 0:12:30.240 --> 0:12:33.600 deliver it to you faster, like an Amazon for example. Well, 0:12:33.640 --> 0:12:35.200 you can look at it a couple of different ways. 0:12:35.200 --> 0:12:36.840 You can look at it as a company and say, 0:12:36.880 --> 0:12:38.640 if I have to pay more wages now, either I'm 0:12:38.640 --> 0:12:41.679 going to make less money or I have to raise prices. 0:12:41.720 --> 0:12:44.079 That's where price increases come from, from a cost in 0:12:44.120 --> 0:12:47.800 the inputs or because there's just not enough capacity. Companies say, 0:12:47.840 --> 0:12:50.160 you know what, I can't make enough to sell all 0:12:50.200 --> 0:12:52.160 I need, so I'm just gonna raise prices and match 0:12:52.280 --> 0:12:55.160 my production with the demand at the higher price. That 0:12:55.240 --> 0:12:57.640 being the case, you can see those dynamics start to 0:12:57.679 --> 0:13:01.880 set up in place, and that's what would generate the inflation. Brad. 0:13:02.360 --> 0:13:05.000 If if you could see ten year treasury yields, which 0:13:05.040 --> 0:13:08.640 are now about twenty basis points over two, rising to 0:13:08.760 --> 0:13:12.360 four percent over the next eighteen months, conceivably, if we 0:13:12.400 --> 0:13:15.800 start to see uh sort of increase in wages and inflation, 0:13:16.320 --> 0:13:19.080 what would that do to stock markets? Well, it would 0:13:19.120 --> 0:13:21.040 do something bad to the economy, and it could do 0:13:21.120 --> 0:13:23.560 something worse to markets. I mean, the one thing that 0:13:23.640 --> 0:13:26.720 really causes a stock market pullback a big one, is 0:13:26.720 --> 0:13:29.560 a recession, and rising rates is one of the key 0:13:29.600 --> 0:13:32.439 indicators of a recession. If you look at all of 0:13:32.480 --> 0:13:34.960 the major indicators. We're fine right now. We're fine for 0:13:35.000 --> 0:13:37.280 the next twelve months or so, but sometime in the 0:13:37.320 --> 0:13:39.559 next couple of years we are going to have a recession, 0:13:39.800 --> 0:13:42.040 and that could be one of the causal factors. So 0:13:42.080 --> 0:13:45.800 in other words, if things accelerate meaningfully more, that will 0:13:45.840 --> 0:13:48.839 put us much closer to a recession. It could. Yes, 0:13:50.200 --> 0:13:53.040 are you calling for one? And what two years? I think? 0:13:53.120 --> 0:13:55.079 I think the next eight to twenty four months. It's 0:13:55.120 --> 0:13:59.240 quite possible. I do a monthly I track significant factors 0:13:59.240 --> 0:14:01.080 on my blog every months. Right now, we're still in 0:14:01.120 --> 0:14:03.880 the green light zone, but you can actually see the 0:14:03.920 --> 0:14:07.760 decay and for example, hiring trends. We're on a downward path. 0:14:07.840 --> 0:14:10.480 Things are slowing down and somewhere in the next year 0:14:10.559 --> 0:14:12.520 or two that can hit The trouble is that is 0:14:12.520 --> 0:14:15.599 that hiring slowing down because it just quickly because the technology, 0:14:15.679 --> 0:14:17.839 or not just because of the economy, just because we're 0:14:17.880 --> 0:14:20.760 running out of people. All right, that's the simple part. 0:14:20.800 --> 0:14:23.520 We don't have enough workers. Brad McMillan, thank you so 0:14:23.600 --> 0:14:26.600 much for joining us. Brid mcbillan, chief Investment Officer for 0:14:26.720 --> 0:14:30.680 Commonwealth Financial Network, overseeing ussets of a hundred and fourteen 0:14:30.880 --> 0:14:35.480 billion dollars and based in Waltham, Massachusetts. Uh. This is 0:14:35.600 --> 0:14:38.240 this is a very important issue and you raise an 0:14:38.280 --> 0:14:41.840 incredibly interesting point. Even though investors have pretty much dismissed 0:14:41.840 --> 0:14:44.920 the idea of higher rates. Some are still saying they 0:14:44.960 --> 0:14:59.000 are near. We want to focus now on the aftermath 0:14:59.040 --> 0:15:03.640 the economic sequences of natural disasters such as Hurricane Irma 0:15:03.800 --> 0:15:07.440 Hurricane Harvey. Joining us Brian Eger, a senior Gaming and 0:15:07.480 --> 0:15:11.440 lodging analyst for Bloomberg Intelligence. Brian, thanks for joining us. 0:15:11.440 --> 0:15:14.840 Here's our studio. UM. I understand that if Florida had 0:15:14.960 --> 0:15:18.600 the hospitality and tourism industry in Florida is worth about 0:15:18.800 --> 0:15:24.080 ninety billion dollars UH, and the storm took a direct 0:15:24.160 --> 0:15:26.840 hit on that, and I'm wondering if you could tell 0:15:26.920 --> 0:15:32.640 us the effects, but also how outsized are the ramifications. 0:15:32.720 --> 0:15:36.200 Is it unusual because we know hurricane season exists and 0:15:36.240 --> 0:15:38.520 we know that you know, many businesses try to prepare 0:15:38.560 --> 0:15:41.920 for it. So Florida is about the twelfth largest hotel 0:15:41.960 --> 0:15:44.120 market in the US in terms of room supply. It's 0:15:44.160 --> 0:15:47.920 also a very big cruise deployment market, as you might 0:15:47.960 --> 0:15:50.680 expect about about a annywhere from a third to a 0:15:50.680 --> 0:15:54.280 half of these cruise lines capacity is deployed in the Caribbeans. 0:15:54.320 --> 0:15:57.760 So the potential for disruption exists. Fortunately, I would say 0:15:57.800 --> 0:16:00.480 with respect to Irma, UH, this storm could have been 0:16:00.480 --> 0:16:03.680 far worse in terms of its lingering impact. You know, 0:16:03.720 --> 0:16:05.800 I have to wonder just in general though, with the 0:16:05.880 --> 0:16:09.400 clean up, with this unpredictability, with this feeling that one 0:16:09.520 --> 0:16:12.760 hurricane after another just keep slamming in the same area, 0:16:13.280 --> 0:16:16.520 is there going to be a long term dampening effect 0:16:16.960 --> 0:16:20.320 on demand for some of these cruise lines as well 0:16:20.320 --> 0:16:23.280 as frankly some of the hotels that are in on 0:16:23.360 --> 0:16:25.320 the coast in Florida. Well, I think for cruise lines 0:16:25.320 --> 0:16:29.200 you have to pass between disruption of cruises versus damage 0:16:29.280 --> 0:16:34.120 to cruise ports. Because cruise ships are are maneuverable assets. 0:16:34.160 --> 0:16:37.000 You can redeploy them. So you know, the twenty five 0:16:37.120 --> 0:16:41.000 or so kore imports resssessments I've seen, or about a 0:16:41.040 --> 0:16:43.560 dozen or open, some other half dozen or closed. The 0:16:43.600 --> 0:16:47.600 rest are pending reassessments. Now, there were a number of cancelations. 0:16:47.600 --> 0:16:51.520 By some estimates, about ten cruises were canceled, ten were 0:16:51.840 --> 0:16:54.640 delayed as a result of this, and that does result 0:16:54.680 --> 0:16:58.160 in some uh necessary maneuving on maneuvering on the part 0:16:58.200 --> 0:17:01.000 of cruise lines. But you know, the difference you have 0:17:01.040 --> 0:17:03.320 to pass between is what happens with the ports now, 0:17:03.400 --> 0:17:09.480 for um, for cruises in the Caribbean, once possible beneficiary 0:17:09.520 --> 0:17:12.199 in a in a perverse sense might be Mexico, the 0:17:12.240 --> 0:17:16.080 Mexican Yucatan Peninsula. There are three cruise ports there which 0:17:16.080 --> 0:17:19.159 are likely to see more arrivals because a lot of 0:17:19.280 --> 0:17:22.800 Eastern Caribbean cruises which might be canceled they're disrupted, might 0:17:22.840 --> 0:17:28.720 get redeployed there because considerably less damage in places like Cosmo. Well, 0:17:28.760 --> 0:17:32.400 I understand that the tourism officials in the Caribbean are 0:17:32.560 --> 0:17:36.960 still trying to assess the damage that you've certainly got 0:17:37.040 --> 0:17:40.239 situation where Royal Caribbean said the future sailings aren't even 0:17:40.280 --> 0:17:42.600 going to stop at the ports in Saint Martin, St. 0:17:42.600 --> 0:17:46.720 Thomas or Key West until the islands have recovered. That's 0:17:46.720 --> 0:17:49.600 exactly it is. As you know, of the or so 0:17:49.640 --> 0:17:53.480 odd some odd ports in the Caribbean, um as I said, 0:17:53.600 --> 0:17:55.760 about half are open, but the rest and they're in 0:17:55.880 --> 0:18:01.600 some transitional state of reevaluation and UH and damage assessment 0:18:01.720 --> 0:18:05.080 or actually being closed. And that does UH push a 0:18:05.119 --> 0:18:06.800 lot of that traffic that might have gone to the 0:18:06.800 --> 0:18:10.280 Eastern Caribbean to the Western Caribbean, some very desirable destinations 0:18:10.280 --> 0:18:12.600 they are, no doubt, but that is a source of 0:18:12.640 --> 0:18:14.960 disruption and if you're on one of those cruises that 0:18:15.040 --> 0:18:17.960 got canceled because of the last hurricane UH, you would 0:18:17.960 --> 0:18:21.000 get a full refund and a partial credit towards the 0:18:21.040 --> 0:18:23.960 future cruise. So there are some ways that cruise lines 0:18:24.000 --> 0:18:26.359 try to make it up to affect the passengers in 0:18:26.480 --> 0:18:29.240 terms of their policies. Have we already gotten any guidance 0:18:29.320 --> 0:18:32.800 from Carnival, Royal Caribbean, Norwegian Cruise Line about how much 0:18:32.800 --> 0:18:35.240 of a hit this will cause UH to their third 0:18:35.280 --> 0:18:37.919 quarter earnings? We have not yet, although Carnival will like 0:18:38.119 --> 0:18:40.840 report their earnings within in the next two weeks, perhaps 0:18:40.880 --> 0:18:43.920 next week, because they just finished their August quarter. UM. 0:18:43.960 --> 0:18:46.800 You know, very often in some past storms that disruption 0:18:46.800 --> 0:18:49.440 in terms of an earnings per share impact has been 0:18:49.480 --> 0:18:52.399 relatively manageable. I mean, when Hurricane Sandy came about in 0:18:53.720 --> 0:18:57.840 it affected um UH annual earnings per share for companies 0:18:57.880 --> 0:19:00.119 like Royal Caribbean by about two cents per shares. So 0:19:00.359 --> 0:19:02.359 there might very well be some impact in terms of 0:19:03.000 --> 0:19:07.080 UH cost of issuing vouchers or some disruption or operational costs, 0:19:07.480 --> 0:19:10.119 but historically pretty manageable. Well, but you know, there's a 0:19:10.119 --> 0:19:14.520 difference between the immediate costs and say the cost of 0:19:14.840 --> 0:19:16.879 not really being able to land at a port, and 0:19:16.960 --> 0:19:20.600 we're not really having clients that want to passengers that 0:19:20.680 --> 0:19:23.320 want to go to an island that has been decimated 0:19:23.359 --> 0:19:26.000 by a hurricane and doesn't even have lodging or things 0:19:26.040 --> 0:19:28.120 to see, right, I mean, and is there some kind 0:19:28.119 --> 0:19:30.720 of sense of what that impact could be. We don't 0:19:30.720 --> 0:19:33.399 know yet. I mean, certainly for Eastern Caribbean ports, for 0:19:33.440 --> 0:19:36.200 the US Vision Islands, for Martin's Islands like Save Martin, 0:19:36.280 --> 0:19:39.919 which are popular cruise destinations. We have the reality of 0:19:40.000 --> 0:19:44.320 ongoing economic and infrastructure damage and damage to ports. Uh 0:19:44.640 --> 0:19:47.280 and I said, just as some of the Chinese cruises 0:19:47.280 --> 0:19:50.919 were rerouted from South Korea to Japan, so some of 0:19:50.920 --> 0:19:53.359 these Caribbean cruises might have been rerouted from the Eastern 0:19:53.359 --> 0:19:56.239 Caribbean to the Western Caribbean. It's not ideal, um, it 0:19:56.280 --> 0:19:58.959 happens every year. I think part of the issue will be, 0:19:59.400 --> 0:20:01.080 or what we're watch is whether or not there will 0:20:01.119 --> 0:20:04.120 be more hurricanes for the remainder of this season, which 0:20:04.160 --> 0:20:07.600 could further either disrupt cruises or cause damage. But at 0:20:07.640 --> 0:20:10.080 least for this storm, as bad as it was, things 0:20:10.080 --> 0:20:12.320 could have been far worse. Brian just to get trying 0:20:12.320 --> 0:20:15.240 to get an update the Keys, the Florida Keys Monroe 0:20:15.320 --> 0:20:19.439 County UH, saying that there's no fuel, no electricity, no 0:20:19.600 --> 0:20:23.440 running water, no cell service, general aviation at key West 0:20:23.440 --> 0:20:28.359 International as well as Florida Keys Marathon International they're closed. UH. 0:20:28.400 --> 0:20:30.600 Any estimates how long it's going to be before this 0:20:30.680 --> 0:20:32.760 is up and running really don't know. I will tell 0:20:32.800 --> 0:20:34.479 you that if you look at a one week impact, 0:20:34.560 --> 0:20:37.240 for example, that the hotel industry centered or not Miami, 0:20:37.640 --> 0:20:40.000 there was indeed an effect. If you look at aupans 0:20:40.200 --> 0:20:43.520 rates or revenue per available room, those metrics are down 0:20:43.560 --> 0:20:46.359 thirty to thirty five percent year of a year for 0:20:46.400 --> 0:20:50.199 the weekended um UH September ninth. Now, of course if 0:20:50.240 --> 0:20:52.439 you roll out over a four week period, things are 0:20:52.440 --> 0:20:56.120 pretty flat, but certainly the hotel industry there no doubt 0:20:56.200 --> 0:20:58.879 took a hit. Brianger, thank you so much for joining us. 0:20:58.880 --> 0:21:02.639 Brian Eger, a senior game and lodging analysts for Bloomberg Intelligence, 0:21:02.680 --> 0:21:05.800 joining us here in our Bloomberg eleven three oh studios, 0:21:05.800 --> 0:21:08.239 and we have seen a hit to those shares of 0:21:08.400 --> 0:21:10.920 cruise liners, and there's a question of whether they will 0:21:10.960 --> 0:21:25.480 rebound as people reassess there is a growing chorus that 0:21:25.560 --> 0:21:28.000 perhaps markets are too sanguine about this. I want to 0:21:28.000 --> 0:21:30.080 bring in Jack Ablin to weigh in on this. Jack 0:21:30.119 --> 0:21:33.640 Avelin as chief investment Officer of BEMO Private Bank overseeing 0:21:33.640 --> 0:21:37.520 about sixty eight billion dollars of assets from Chicago. Jack, 0:21:37.560 --> 0:21:40.360 thank you so much for joining us earlier in the program. 0:21:40.359 --> 0:21:43.359 Brad McMillan of Commonwealth Financial Network, so that there was 0:21:43.400 --> 0:21:48.720 a real likelihood that benchmark treasury yields could rise substantially 0:21:48.760 --> 0:21:53.280 over the next eighteen months to two years and spur recession. 0:21:54.080 --> 0:21:58.960 Do you agree, Um, You know, we are in that 0:21:59.040 --> 0:22:01.800 point of the business cycle where we're kind of reaching 0:22:01.840 --> 0:22:07.919 that full capacity, and so perhaps moving toward a higher 0:22:08.000 --> 0:22:13.160 rates slower growth in the future is certainly a possibility. Jack. 0:22:13.640 --> 0:22:16.320 Can I just turn your attention to obviously, this ongoing 0:22:16.840 --> 0:22:20.960 issue of North Korea. It's nuclear ambitions and test firing 0:22:21.000 --> 0:22:25.000 of these ballistic missiles. I understand it's terrible, and you know, 0:22:25.560 --> 0:22:28.200 world leaders are spending their time trying to figure out 0:22:28.240 --> 0:22:32.080 what to do about it. If something untoward were to happen, 0:22:32.720 --> 0:22:35.399 Why would that be such a direct connection to what 0:22:35.520 --> 0:22:39.040 happens to the stock market, Well, you know, it's interesting. 0:22:39.080 --> 0:22:42.000 I did write a note about North Korea this morning, Pim, 0:22:42.040 --> 0:22:45.080 and my focus is, let's not worry or now, let's 0:22:45.119 --> 0:22:48.720 not focus so much on Kim June un. Let's let's 0:22:48.720 --> 0:22:52.040