1
00:00:02,640 --> 00:00:05,320
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you.

2
00:00:05,360 --> 00:00:07,680
Speaker 1: Along with my co host Lisa Brahma Waits. Each day

3
00:00:07,720 --> 00:00:10,240
Speaker 1: we bring you the most noteworthy and useful interviews for

4
00:00:10,280 --> 00:00:12,520
Speaker 1: you and your money, whether at the grocery store or

5
00:00:12,560 --> 00:00:15,480
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple

6
00:00:15,520 --> 00:00:17,959
Speaker 1: podcast or wherever you listen to podcasts, as well as

7
00:00:17,960 --> 00:00:21,560
Speaker 1: at Bloomberg dot com. If you're looking for an exciting

8
00:00:21,720 --> 00:00:24,400
Speaker 1: roller coaster, don't look in markets right now. They have

9
00:00:24,480 --> 00:00:26,920
Speaker 1: been pretty much range bound for a while and not

10
00:00:26,960 --> 00:00:29,680
Speaker 1: really moving much in one direction or another. Despite any

11
00:00:29,680 --> 00:00:33,280
Speaker 1: political drama in Washington, despite concerns about unrest in the

12
00:00:33,320 --> 00:00:36,400
Speaker 1: Middle East, you get a whole host of existential kind

13
00:00:36,400 --> 00:00:39,960
Speaker 1: of concerns that people are simply shrugging off. Joining us

14
00:00:39,960 --> 00:00:42,720
Speaker 1: here to discuss what is the path ahead. Then, Karen

15
00:00:42,760 --> 00:00:45,800
Speaker 1: pay she's head of Equities at Fiduciary Trust Company, joining

16
00:00:45,840 --> 00:00:48,519
Speaker 1: us here in our interactive broker studios. So, Karen, I'm

17
00:00:48,520 --> 00:00:50,760
Speaker 1: wondering you're saying that, you know, a couple of months

18
00:00:50,800 --> 00:00:53,480
Speaker 1: ago you started repositioning client portfolios to be a little

19
00:00:53,479 --> 00:00:56,960
Speaker 1: more defensive. Are you guys doing anything right now? I mean,

20
00:00:57,000 --> 00:00:59,480
Speaker 1: are you sort of taking any any approach to to

21
00:00:59,520 --> 00:01:01,720
Speaker 1: shift things around. You're just sort of watching this and

22
00:01:01,760 --> 00:01:06,559
Speaker 1: saying let's go home early. Right. So, I think that

23
00:01:06,760 --> 00:01:09,199
Speaker 1: you know, we have seen the market in a range

24
00:01:09,200 --> 00:01:12,280
Speaker 1: bound UM situation because you've got low rates that are

25
00:01:12,280 --> 00:01:15,440
Speaker 1: supporting the markets on the downside, but you also have

26
00:01:15,800 --> 00:01:19,360
Speaker 1: UM the potential of any positive changes that could sort

27
00:01:19,360 --> 00:01:22,680
Speaker 1: of maybe perhaps break the market on the upside. UM.

28
00:01:23,160 --> 00:01:25,039
Speaker 1: But you know, when we're looking at the market, we're

29
00:01:25,080 --> 00:01:29,080
Speaker 1: really looking at fundamentals, and what the fundamental tell us

30
00:01:29,319 --> 00:01:32,000
Speaker 1: is that we're in an economy that has been slowing

31
00:01:32,040 --> 00:01:36,039
Speaker 1: down and we've seen earnings UM decelerate in terms of

32
00:01:36,080 --> 00:01:40,160
Speaker 1: growth UM. And therefore, we started repositioning our portfolios a

33
00:01:40,200 --> 00:01:42,320
Speaker 1: couple of months ago to be a little bit more

34
00:01:42,360 --> 00:01:46,200
Speaker 1: defensive from an as allocation standpoint UM, as well as

35
00:01:46,240 --> 00:01:50,680
Speaker 1: kind of within equities, repositioning to UM take some profits

36
00:01:50,680 --> 00:01:54,280
Speaker 1: in the market, recognizing that the s MPs up for

37
00:01:54,320 --> 00:01:59,400
Speaker 1: the year valuations are UM not cheap, they're actually you know,

38
00:01:59,480 --> 00:02:02,800
Speaker 1: relative on the high side, and so you know, we

39
00:02:02,880 --> 00:02:05,680
Speaker 1: just think that it would be prudent and smart to

40
00:02:06,000 --> 00:02:09,440
Speaker 1: just take some profits and we UM have you know,

41
00:02:09,720 --> 00:02:13,400
Speaker 1: really looked at UM quality as a factor in our investing,

42
00:02:14,000 --> 00:02:19,079
Speaker 1: and UM we have you know, looked for more defensive characteristics,

43
00:02:19,080 --> 00:02:23,919
Speaker 1: but that doesn't necessarily mean paying up for bond proxies,

44
00:02:24,240 --> 00:02:27,320
Speaker 1: doesn't necessarily mean that we're going to chase things in

45
00:02:27,360 --> 00:02:29,880
Speaker 1: the market that might be driven by some of the

46
00:02:29,960 --> 00:02:36,120
Speaker 1: macro factors. You know, utilities, for example up for the year. UM.

47
00:02:36,880 --> 00:02:40,520
Speaker 1: Consumer stables also up very nicely, but valuations are very

48
00:02:40,639 --> 00:02:44,040
Speaker 1: rich in those areas. So, Karen, what are some of

49
00:02:44,040 --> 00:02:47,920
Speaker 1: these sectors that you're looking at here, Given that we

50
00:02:47,960 --> 00:02:49,320
Speaker 1: are kind of late in the cycle, we need to

51
00:02:49,320 --> 00:02:52,640
Speaker 1: get a little bit more defensive. Yeah, So, UM, I

52
00:02:52,720 --> 00:02:56,080
Speaker 1: do think that it comes down a lot to UM

53
00:02:56,360 --> 00:03:01,239
Speaker 1: the individual securities and how our managers are also selecting

54
00:03:01,400 --> 00:03:05,400
Speaker 1: UM those securities within portfolios. From a sector standpoint, we're

55
00:03:05,520 --> 00:03:09,440
Speaker 1: mostly neutral at this point. We have been UM. We've

56
00:03:09,480 --> 00:03:12,160
Speaker 1: had a cyclical bias and our portfolios and a growth

57
00:03:12,240 --> 00:03:15,760
Speaker 1: bias and our portfolios for some time. UM. We've seen that,

58
00:03:15,880 --> 00:03:18,520
Speaker 1: you know, we've seen that reward it really well by

59
00:03:18,560 --> 00:03:22,360
Speaker 1: the markets. UM, But at this point, you know, we're

60
00:03:22,440 --> 00:03:25,760
Speaker 1: much more neutral le positioned, and we're taking a notch

61
00:03:25,840 --> 00:03:29,040
Speaker 1: down in terms of the cyclicality and our portfolio. We

62
00:03:29,120 --> 00:03:32,919
Speaker 1: took down, for example, our overweight to technology a couple

63
00:03:32,919 --> 00:03:35,960
Speaker 1: of months ago, just in recognition of you know, the

64
00:03:36,000 --> 00:03:39,200
Speaker 1: strong gains this year and profit taking. Yeah, profit taking.

65
00:03:39,320 --> 00:03:41,520
Speaker 1: So I'm trying to figure out what it would take

66
00:03:41,880 --> 00:03:44,440
Speaker 1: for you to change the allocation to shift things around

67
00:03:44,440 --> 00:03:47,560
Speaker 1: from here. So we do think that if there is

68
00:03:47,680 --> 00:03:51,400
Speaker 1: positive development, a positive deal on trade, that that would

69
00:03:51,480 --> 00:03:55,080
Speaker 1: make us become a little bit more UM encouraged. But

70
00:03:55,680 --> 00:03:58,840
Speaker 1: I think that we do still have this view UM

71
00:03:58,880 --> 00:04:02,120
Speaker 1: that any prog ress on trade would take some time

72
00:04:02,120 --> 00:04:06,720
Speaker 1: to translate into fundamentals. We think that trade uncertainty has

73
00:04:06,800 --> 00:04:10,920
Speaker 1: impacted business confidence. It may you know, at some point

74
00:04:10,960 --> 00:04:16,360
Speaker 1: impact consumer confidence because we've seen some signs of UM

75
00:04:16,400 --> 00:04:18,919
Speaker 1: you know, companies raising prices to offset some of the

76
00:04:18,960 --> 00:04:22,320
Speaker 1: trade costs. So we we do think that UM, if

77
00:04:22,360 --> 00:04:25,159
Speaker 1: we do get some positive news, the markets probably would

78
00:04:25,640 --> 00:04:28,279
Speaker 1: perhaps get a relief rally, but it may not be

79
00:04:28,360 --> 00:04:31,080
Speaker 1: sustainable and we would need to reset. What I'm looking

80
00:04:31,120 --> 00:04:35,160
Speaker 1: for is really much better UM risk reward in the market,

81
00:04:35,360 --> 00:04:39,440
Speaker 1: much more attractive valuations and UM equities. So do you

82
00:04:39,480 --> 00:04:42,919
Speaker 1: think that the next leg is up? Potentially UM in

83
00:04:43,000 --> 00:04:45,479
Speaker 1: the It may occur in a short run, but we're

84
00:04:45,480 --> 00:04:49,280
Speaker 1: not really expecting anything concrete to happen on the trade front.

85
00:04:49,520 --> 00:04:52,480
Speaker 1: We're not making a bed on that. So we would

86
00:04:52,720 --> 00:04:57,000
Speaker 1: UM advise investors at this point to actually position portfolios

87
00:04:57,040 --> 00:05:00,360
Speaker 1: to be a little bit more defensive and cautious, really

88
00:05:00,400 --> 00:05:03,279
Speaker 1: look at managing risk in the portfolios. So on the

89
00:05:03,320 --> 00:05:06,080
Speaker 1: earnings front, there's really not a story there either. Looks

90
00:05:06,080 --> 00:05:11,200
Speaker 1: like earning growth is very flattish in the foreseeable future. UM.

91
00:05:11,320 --> 00:05:13,480
Speaker 1: So I mean, as are there sectors when we talk

92
00:05:13,480 --> 00:05:16,000
Speaker 1: about defensive sectors, I think utilities and reads and things

93
00:05:16,040 --> 00:05:18,680
Speaker 1: like that in consumer stables. But my understanding is they're

94
00:05:18,680 --> 00:05:22,400
Speaker 1: not cheap right right, So that for for that reason,

95
00:05:22,560 --> 00:05:25,599
Speaker 1: we're also finding it very difficult to sort of find

96
00:05:25,880 --> 00:05:29,599
Speaker 1: a lot of attractive things to buy in the marketplace UM.

97
00:05:29,640 --> 00:05:33,440
Speaker 1: And therefore we've actually raised some cash and portfolios UM.

98
00:05:33,520 --> 00:05:35,960
Speaker 1: But what I would say is that from an earning standpoint,

99
00:05:36,120 --> 00:05:39,080
Speaker 1: we don't see a lot of UM earnings growth, and

100
00:05:39,080 --> 00:05:43,080
Speaker 1: fact consensus still has twenty at about plus ten percent growth.

101
00:05:43,480 --> 00:05:46,760
Speaker 1: We are a bit UM more skeptical about that. When

102
00:05:46,760 --> 00:05:50,200
Speaker 1: you look through the earnings, we see that UM companies

103
00:05:50,200 --> 00:05:53,719
Speaker 1: that are more geared to domestic revenues have fair much better.

104
00:05:54,120 --> 00:05:57,320
Speaker 1: So if you look at second quarter reporter earnings, UM,

105
00:05:57,520 --> 00:06:00,920
Speaker 1: companies that have greater than fifty pc of revenues coming

106
00:06:00,960 --> 00:06:05,040
Speaker 1: from the US actually posted five percent growth, whereas companies

107
00:06:05,040 --> 00:06:10,400
Speaker 1: that had greater than fifty international revenues posted an eleven

108
00:06:10,440 --> 00:06:14,520
Speaker 1: percent decline. So there's the whole trade issue, the whole

109
00:06:14,560 --> 00:06:17,680
Speaker 1: uncertainty issue, which is likely to play out. I think

110
00:06:17,680 --> 00:06:19,479
Speaker 1: if you look at the consensus earnings for the remainder

111
00:06:19,560 --> 00:06:21,479
Speaker 1: of the year. Karen pay thanks so much for joining us.

112
00:06:21,520 --> 00:06:24,920
Speaker 1: Karen's head of equities at Fiduciary Trust Company, joining us

113
00:06:24,920 --> 00:06:28,039
Speaker 1: here in our Bloomberg Interactive Broker Studios. We appreciate her

114
00:06:28,120 --> 00:06:46,800
Speaker 1: thoughts on the equity markets. Time to check in with

115
00:06:46,800 --> 00:06:50,760
Speaker 1: Bloomberg Opinion. We're joined by opinion columnists Noah Feldman. No

116
00:06:50,800 --> 00:06:54,480
Speaker 1: one's a professor of law at Harvard University. He's located

117
00:06:54,520 --> 00:06:57,520
Speaker 1: in Boston, Massachusetts. No, thanks so much for joining us. Well,

118
00:06:57,960 --> 00:07:01,200
Speaker 1: what a day we had yesterday on Capitol Hill with

119
00:07:01,279 --> 00:07:06,240
Speaker 1: the testimony. It appears that the impeachment proceedings will in

120
00:07:06,279 --> 00:07:08,880
Speaker 1: fact proceed. What is your thought on kind of where

121
00:07:08,920 --> 00:07:13,360
Speaker 1: we are right now? We're at an extraordinary moment in

122
00:07:13,400 --> 00:07:17,480
Speaker 1: which we actually know a huge amount about the details

123
00:07:17,480 --> 00:07:20,360
Speaker 1: of the allegations, and in which we have a roadmap

124
00:07:20,560 --> 00:07:22,640
Speaker 1: for what we can still need to know. And I

125
00:07:22,640 --> 00:07:25,000
Speaker 1: think it's a high probability that we will find out

126
00:07:25,320 --> 00:07:27,240
Speaker 1: all of those details. So in a sense, we're in

127
00:07:27,240 --> 00:07:29,400
Speaker 1: a very different position than we were, say when the

128
00:07:29,440 --> 00:07:32,280
Speaker 1: Mulla Report came out, when we had been waiting, waiting,

129
00:07:32,280 --> 00:07:34,320
Speaker 1: waiting for a long long time, and we got a

130
00:07:34,400 --> 00:07:36,840
Speaker 1: multiple hundred page document we had to make sense of it. Here,

131
00:07:36,840 --> 00:07:40,040
Speaker 1: we've got a really brief, four or five page document

132
00:07:40,200 --> 00:07:42,960
Speaker 1: with really clear and specific allegations and a clear roadmap

133
00:07:43,000 --> 00:07:45,880
Speaker 1: of what comes next. Do you expect President Trump to

134
00:07:45,880 --> 00:07:50,360
Speaker 1: get impeached? I think the odds are pretty high right

135
00:07:50,360 --> 00:07:53,160
Speaker 1: now that the House will impeach him, though the odds

136
00:07:53,240 --> 00:07:56,840
Speaker 1: still don't look that high the Senate would remove him. Um,

137
00:07:56,880 --> 00:08:00,040
Speaker 1: you know, the Democrats could still turn back at some

138
00:08:00,240 --> 00:08:04,120
Speaker 1: point if somehow Trump were able to provide some kind

139
00:08:04,160 --> 00:08:08,320
Speaker 1: of innocent explanation beyond what he said thus far for

140
00:08:08,440 --> 00:08:11,400
Speaker 1: his conversation with the President of Ukraine. But unless he can,

141
00:08:12,000 --> 00:08:14,560
Speaker 1: I think essentially all of the Democrats who said they

142
00:08:14,600 --> 00:08:18,160
Speaker 1: support the impeachment inquiry have said that if these allegations

143
00:08:18,200 --> 00:08:22,280
Speaker 1: are true, they represent an abuse of power that merit's impeachment.

144
00:08:22,480 --> 00:08:25,240
Speaker 1: And I think it's very probable that these allegations will

145
00:08:25,280 --> 00:08:27,160
Speaker 1: be seen to be true by Democrats at the end

146
00:08:27,200 --> 00:08:29,840
Speaker 1: of the inquiry. So what's the tipping point for Republicans.

147
00:08:31,200 --> 00:08:33,720
Speaker 1: I think the tipping point for Republicans is whether there

148
00:08:33,720 --> 00:08:38,679
Speaker 1: it is plausible to believe Trump's denials. So far this

149
00:08:38,720 --> 00:08:42,559
Speaker 1: time we have not heard the kind of legalistic justification

150
00:08:43,000 --> 00:08:45,719
Speaker 1: that we heard the last time during the Mother investigation,

151
00:08:45,760 --> 00:08:48,560
Speaker 1: in which the President would say, well, I'm allowed to

152
00:08:49,640 --> 00:08:52,160
Speaker 1: uh say anything I want to a foreign official, including

153
00:08:52,640 --> 00:08:56,199
Speaker 1: attacking my political opponents. Instead, he said, oh, the call

154
00:08:56,320 --> 00:08:59,680
Speaker 1: was created. Was business as as normal? You know. The

155
00:08:59,720 --> 00:09:02,880
Speaker 1: question is how plausible will Republicans find that if Republicans

156
00:09:02,880 --> 00:09:05,520
Speaker 1: cross the line and believe they see a quid pro coo,

157
00:09:05,640 --> 00:09:07,320
Speaker 1: I think this is really the tipping point. If there's

158
00:09:07,640 --> 00:09:10,679
Speaker 1: definitive proof that there was a tradeoff that the President

159
00:09:10,760 --> 00:09:14,760
Speaker 1: was offering the president of Ukraine to unfreeze the aid

160
00:09:14,800 --> 00:09:17,600
Speaker 1: that he had just frozen in exchange for investigation of

161
00:09:17,720 --> 00:09:20,320
Speaker 1: Joe Biden and of and of his son, then I

162
00:09:20,360 --> 00:09:23,880
Speaker 1: think that many Republicans would be forced into the other side,

163
00:09:23,920 --> 00:09:26,160
Speaker 1: but it's not at all, though there will be definitive

164
00:09:26,160 --> 00:09:27,760
Speaker 1: proof of that. What there is now is a lot

165
00:09:27,800 --> 00:09:31,720
Speaker 1: of very strong evidence that suggests that, but there's no

166
00:09:31,920 --> 00:09:35,440
Speaker 1: truly smoking gun in the sense that there's no tape

167
00:09:35,480 --> 00:09:41,800
Speaker 1: so far of either Trump or of President Zelinski saying

168
00:09:41,840 --> 00:09:45,960
Speaker 1: explicitly this is a tradeoff. So, Professor, there's calls for

169
00:09:46,200 --> 00:09:50,880
Speaker 1: potentially a special counsel needed to investigate Rudy Giuliani and

170
00:09:52,200 --> 00:09:55,240
Speaker 1: William bar the United States Department of Justice Attorney General.

171
00:09:55,440 --> 00:09:58,160
Speaker 1: What are your thoughts there. I published such a call

172
00:09:58,280 --> 00:10:00,559
Speaker 1: this morning in Bloomberg Opinion, so I'm I'm on board

173
00:10:00,559 --> 00:10:02,720
Speaker 1: with that. I think the bottom line is the whistle

174
00:10:02,760 --> 00:10:07,040
Speaker 1: blowers complaint alleges conduct to interfere with the US election,

175
00:10:07,280 --> 00:10:11,120
Speaker 1: which could well have violated criminal statutes, and Rudi Giuliani

176
00:10:11,160 --> 00:10:14,320
Speaker 1: will not be the target of the investigation by the House.

177
00:10:14,320 --> 00:10:16,680
Speaker 1: They will be investigating properly the President United States. Rudi

178
00:10:16,760 --> 00:10:20,079
Speaker 1: Juglani is a private citizen and there is enough evidence

179
00:10:20,080 --> 00:10:21,760
Speaker 1: in the whistle blower complained to make it credible that

180
00:10:21,800 --> 00:10:24,320
Speaker 1: he may have committed crimes, so he needs to be investigated,

181
00:10:24,679 --> 00:10:26,520
Speaker 1: and the reason it needs to be a special counsel

182
00:10:26,600 --> 00:10:29,240
Speaker 1: is not only that it's an investigation connected to the president,

183
00:10:29,520 --> 00:10:32,480
Speaker 1: but also that the whistle blowers specifically named Attorney General

184
00:10:32,520 --> 00:10:35,679
Speaker 1: William Barr and specifically said that it appears that's the

185
00:10:35,679 --> 00:10:38,559
Speaker 1: whistle blowers language that bar was involved. Now, Bart, to

186
00:10:38,640 --> 00:10:41,520
Speaker 1: be fair, has issued a denial of that. But you

187
00:10:41,600 --> 00:10:44,520
Speaker 1: can't say I'm accused of a crime, but I'm not

188
00:10:44,559 --> 00:10:46,920
Speaker 1: guilty of it, so I'm not recusing myself. That's not

189
00:10:46,960 --> 00:10:50,400
Speaker 1: how recusal works. If you have been incredibly connected by

190
00:10:50,440 --> 00:10:53,280
Speaker 1: the President of the United States. In his call to

191
00:10:53,320 --> 00:10:56,240
Speaker 1: the president of Ukraine, he repeatedly invoked Attorney General bar

192
00:10:56,360 --> 00:10:59,000
Speaker 1: So if you incredibly connected the conduct that may well

193
00:10:59,040 --> 00:11:02,680
Speaker 1: have been criminal, you can't supervise the investigation full stop.

194
00:11:02,960 --> 00:11:05,600
Speaker 1: So bar has to recuse himself and a special counsel

195
00:11:05,960 --> 00:11:07,920
Speaker 1: is needed. Left, but not least, there's a question of

196
00:11:07,920 --> 00:11:10,360
Speaker 1: a potential cover up of this phone call in the

197
00:11:10,360 --> 00:11:15,360
Speaker 1: White House. The whistleblower alleges concretely that this transcript of

198
00:11:15,360 --> 00:11:17,760
Speaker 1: this call was suppressed and then it was put into

199
00:11:17,800 --> 00:11:20,200
Speaker 1: a different database and more classified database than it would

200
00:11:20,240 --> 00:11:22,520
Speaker 1: ordinarily have been put into. Those are steps that need

201
00:11:22,559 --> 00:11:24,560
Speaker 1: to be investigated to determine whether they were part of

202
00:11:24,559 --> 00:11:26,960
Speaker 1: a criminal cover up or obstruction of justice, And that

203
00:11:27,040 --> 00:11:29,120
Speaker 1: too will involve an investigation into what was going on

204
00:11:29,240 --> 00:11:32,280
Speaker 1: in the White House, possibly behind by the President's advice,

205
00:11:32,280 --> 00:11:34,640
Speaker 1: possibly not, And a special Council needs to look at

206
00:11:34,640 --> 00:11:36,439
Speaker 1: that too. I just want to add, we don't want

207
00:11:36,440 --> 00:11:38,640
Speaker 1: to wait until the Special Council reports for the House

208
00:11:38,679 --> 00:11:40,240
Speaker 1: to be able to go forward. That would not make sense.

209
00:11:40,280 --> 00:11:43,800
Speaker 1: The House can simultaneously go far with its own inquiry

210
00:11:43,880 --> 00:11:47,199
Speaker 1: into the president's conduct. Is there an historical period to

211
00:11:47,280 --> 00:11:52,400
Speaker 1: which this period is analogous? Not really, because you know,

212
00:11:52,800 --> 00:11:56,000
Speaker 1: during the long slow Mother investigation, I was interested in

213
00:11:56,080 --> 00:11:58,000
Speaker 1: the question of whether the whole thing was more like

214
00:11:58,600 --> 00:12:02,440
Speaker 1: the historical investigation of Richard Nixon or more like the

215
00:12:02,440 --> 00:12:05,480
Speaker 1: investigation of Bill Clinton. In other words, was it studying

216
00:12:05,480 --> 00:12:07,440
Speaker 1: with a real crime at the back of it, or

217
00:12:07,559 --> 00:12:09,960
Speaker 1: was it something that in the end would come up

218
00:12:10,000 --> 00:12:14,480
Speaker 1: with a rather small or or minimalistic allegation. And you know,

219
00:12:14,520 --> 00:12:16,440
Speaker 1: I think it turned out on the whole to be

220
00:12:16,520 --> 00:12:19,240
Speaker 1: slightly more like the Clinton case. But what's going on

221
00:12:19,280 --> 00:12:23,080
Speaker 1: now is, after the long, long slow drum roll of

222
00:12:23,080 --> 00:12:27,240
Speaker 1: the Mother investigation, we suddenly have this short, sharp, you know,

223
00:12:27,320 --> 00:12:32,160
Speaker 1: symbol sound of the allegations around this phone call, and

224
00:12:32,400 --> 00:12:35,599
Speaker 1: we haven't in the past had a kind of aftershock

225
00:12:35,840 --> 00:12:37,840
Speaker 1: of a long investigation in the same way. So that

226
00:12:37,920 --> 00:12:40,800
Speaker 1: we're on we're on uncharted territory here. Noah Feldman, thank

227
00:12:40,840 --> 00:12:43,160
Speaker 1: you so much for being with us. Noah Feldman, Professor

228
00:12:43,200 --> 00:12:46,800
Speaker 1: of Law at Harvard University. Also Bloomberg Opinion Calumness. You

229
00:12:46,840 --> 00:12:49,400
Speaker 1: can find all of his columns and everyone else's who

230
00:12:49,440 --> 00:12:51,920
Speaker 1: writes for a Bloomberg Opinion at O P I N

231
00:12:52,000 --> 00:13:14,760
Speaker 1: GO on the Bloomberg Terminal or Bloomberg dot com slash Opinion. Well,

232
00:13:14,800 --> 00:13:17,840
Speaker 1: as we heard from the Bloomberg Global Business Form this week,

233
00:13:17,960 --> 00:13:20,760
Speaker 1: chief executive officers certainly have plenty on their plate. They

234
00:13:20,800 --> 00:13:25,720
Speaker 1: have trade uncertainty slowing global growth, and then continue geopolitical

235
00:13:26,040 --> 00:13:28,400
Speaker 1: risk in the marketplace. To get a sense of what

236
00:13:28,559 --> 00:13:31,840
Speaker 1: CEOs are thinking about going forward, we welcome Regina Mayor.

237
00:13:31,880 --> 00:13:34,640
Speaker 1: Regina is a global sector head for Energy and Natural

238
00:13:34,679 --> 00:13:39,080
Speaker 1: Resources for KPMG. She joins us on the phone from Houston, Texas. Regina,

239
00:13:39,080 --> 00:13:41,560
Speaker 1: thanks so much for joining us. Well, we're maybe the

240
00:13:41,640 --> 00:13:48,040
Speaker 1: key takeaways from KPMG CEO outlook the key takeaway was

241
00:13:48,120 --> 00:13:51,760
Speaker 1: that CEO's name climate change as the number one risk

242
00:13:51,880 --> 00:13:54,680
Speaker 1: to organizational growth. This is the first time in the

243
00:13:54,760 --> 00:13:57,920
Speaker 1: five year history of doing the survey that climate change

244
00:13:58,040 --> 00:14:01,640
Speaker 1: topped the charts of the risks, ahead of technology, disruption

245
00:14:01,800 --> 00:14:07,120
Speaker 1: or cyber or territorialism. Seventy fully three quarters of them

246
00:14:07,240 --> 00:14:10,520
Speaker 1: say their growth will depend on their ability to navigate

247
00:14:10,559 --> 00:14:14,000
Speaker 1: the shift to a low carbon economy. Are these ceo

248
00:14:14,160 --> 00:14:17,720
Speaker 1: is all industries or are they focused in one specific one.

249
00:14:18,080 --> 00:14:23,000
Speaker 1: It was O s across eleven industries, so quite striking

250
00:14:23,280 --> 00:14:26,120
Speaker 1: for a climate change to be the number one for

251
00:14:26,200 --> 00:14:27,920
Speaker 1: the first time in the history of our survey. I

252
00:14:27,920 --> 00:14:30,640
Speaker 1: mean it's been climbing steadily. Has it like been close

253
00:14:30,760 --> 00:14:32,520
Speaker 1: number two for a long time and it's just sort

254
00:14:32,520 --> 00:14:35,200
Speaker 1: of edged ahead, or has there been a notable upsurge

255
00:14:35,600 --> 00:14:38,680
Speaker 1: in the amount of concern around climate change. It's a

256
00:14:38,800 --> 00:14:42,120
Speaker 1: notable up surge. It was four last year and it

257
00:14:42,200 --> 00:14:45,360
Speaker 1: vaulted from four to number one. I think it's consistent

258
00:14:45,400 --> 00:14:47,400
Speaker 1: with what you've seen in New York around the UN

259
00:14:47,480 --> 00:14:51,480
Speaker 1: Climate Summit and the level of energy and enthusiasm that's building.

260
00:14:51,560 --> 00:14:54,480
Speaker 1: It's not a nice to have, it's a requirement now.

261
00:14:55,160 --> 00:14:57,600
Speaker 1: So Regina, is this perceived, Is this really focusing on

262
00:14:57,880 --> 00:15:02,200
Speaker 1: energy carbon footprint? What are some the underpinnings of their uh,

263
00:15:02,240 --> 00:15:05,560
Speaker 1: the issues about climate change. I think there's quite a

264
00:15:05,720 --> 00:15:07,200
Speaker 1: quite a few things that are going on. Number One,

265
00:15:07,240 --> 00:15:11,040
Speaker 1: they're getting a lot of pressure externally, their communities, their employees,

266
00:15:11,040 --> 00:15:14,520
Speaker 1: their investors, the E s G component of the investment

267
00:15:15,360 --> 00:15:18,040
Speaker 1: proportion is driving a lot of this need for change.

268
00:15:18,240 --> 00:15:22,280
Speaker 1: But they're also saying, I think there's not a lot

269
00:15:22,360 --> 00:15:26,680
Speaker 1: of climate science deniers anymore, particularly even in the energy space.

270
00:15:27,080 --> 00:15:29,720
Speaker 1: While we do realize we need fossil fuels to continue

271
00:15:29,720 --> 00:15:32,960
Speaker 1: to drive the wealth that we have globally, we also

272
00:15:33,000 --> 00:15:35,120
Speaker 1: know we have a dual challenge in that we have

273
00:15:35,280 --> 00:15:37,640
Speaker 1: to figure out how to reduce the carbon footprint. They're

274
00:15:37,640 --> 00:15:41,360
Speaker 1: seeing multiple strategies. Some are focusing more on renewables and

275
00:15:41,400 --> 00:15:44,960
Speaker 1: a totally green footprint. Others are focusing on carbon capture

276
00:15:44,960 --> 00:15:47,160
Speaker 1: and how do we capture and remove the carbon that's

277
00:15:47,200 --> 00:15:50,280
Speaker 1: in the atmosphere today. But everyone's talking about the need

278
00:15:50,360 --> 00:15:52,920
Speaker 1: to do something. So let's shift gears a little bit

279
00:15:52,960 --> 00:15:55,760
Speaker 1: to just sort of business climate and sentiment. Part of

280
00:15:55,760 --> 00:16:00,680
Speaker 1: the survey showed that of energy CEOs are confident about

281
00:16:00,680 --> 00:16:04,320
Speaker 1: their businesses growth prospects, but sixty feel the same about

282
00:16:04,360 --> 00:16:08,400
Speaker 1: the global economy. Is that sort of consistent uh feeling

283
00:16:08,520 --> 00:16:11,960
Speaker 1: across the sectors or is that isolated to energy. No,

284
00:16:12,080 --> 00:16:14,800
Speaker 1: it's consistent feeling across the sectors. But I do think

285
00:16:14,800 --> 00:16:17,960
Speaker 1: it's a stark disconnect because last year's survey showed that

286
00:16:17,960 --> 00:16:20,720
Speaker 1: that number was a lot closer together. We were exuberant

287
00:16:20,760 --> 00:16:25,320
Speaker 1: about the global economy and exuberant about our own company's prospects.

288
00:16:25,360 --> 00:16:28,840
Speaker 1: So there is either this sense of the growing unease

289
00:16:28,920 --> 00:16:32,440
Speaker 1: about what's happening geo politically, that folks worry about the

290
00:16:32,800 --> 00:16:36,120
Speaker 1: strength of the global economy, but they still I mean,

291
00:16:36,120 --> 00:16:39,640
Speaker 1: that's a that's this amazing percentage to feel really confident

292
00:16:39,680 --> 00:16:43,680
Speaker 1: about your own company's growth. So either there's more fundamental

293
00:16:43,800 --> 00:16:48,320
Speaker 1: strength in the global economy underpinned by these uh these sentiments,

294
00:16:48,440 --> 00:16:50,640
Speaker 1: or it could be made perhaps a little bit of

295
00:16:50,680 --> 00:16:54,600
Speaker 1: irrational exuberance on the part of the individual CEO. So Regina,

296
00:16:54,640 --> 00:16:56,720
Speaker 1: one of the things that Lisa and I hear often

297
00:16:56,720 --> 00:16:59,400
Speaker 1: as we speak to corporate executives is the need to

298
00:16:59,480 --> 00:17:04,040
Speaker 1: find there and the challenge to finding properly trained employees.

299
00:17:04,280 --> 00:17:09,040
Speaker 1: As economy continues to become more technical and more digital. Um,

300
00:17:09,080 --> 00:17:12,240
Speaker 1: what is your survey telling you on that front? Yeah,

301
00:17:12,240 --> 00:17:14,320
Speaker 1: thanks for that. I think one of the stark points

302
00:17:14,400 --> 00:17:17,600
Speaker 1: for me too is that of the energy CEO of

303
00:17:17,680 --> 00:17:24,000
Speaker 1: now taking this life slowly, leading their own technology strategy

304
00:17:24,040 --> 00:17:28,879
Speaker 1: for their organization and plan to upscale their employees and

305
00:17:28,920 --> 00:17:32,760
Speaker 1: new digital capabilities. So there is this belief that it's

306
00:17:32,800 --> 00:17:35,919
Speaker 1: not just about finding new employees, it's about reskilling the

307
00:17:35,920 --> 00:17:38,440
Speaker 1: base that you have because the world around them is

308
00:17:38,520 --> 00:17:41,639
Speaker 1: changing and it's at all levels. It's a multi generational push.

309
00:17:42,040 --> 00:17:43,760
Speaker 1: You know, those of us that are that are older

310
00:17:43,760 --> 00:17:45,919
Speaker 1: and perhaps less tech savvy, we have to figure out

311
00:17:46,000 --> 00:17:48,200
Speaker 1: how to use these new tools to make our jobs

312
00:17:48,200 --> 00:17:51,320
Speaker 1: more effective and the company more effective, as well as

313
00:17:51,359 --> 00:17:54,119
Speaker 1: being relative to the digital natives that are entering the

314
00:17:54,119 --> 00:17:57,320
Speaker 1: workforce in droves Regina. I want to just take a

315
00:17:57,320 --> 00:17:59,879
Speaker 1: step back, taking a look at the entire report and

316
00:18:00,119 --> 00:18:02,960
Speaker 1: mood that you sort of felt being created by all

317
00:18:03,000 --> 00:18:07,240
Speaker 1: of these chief executive officers right now in markets, every

318
00:18:07,280 --> 00:18:10,360
Speaker 1: investor comes in here or most of them anyway, say

319
00:18:10,440 --> 00:18:13,120
Speaker 1: it's clear global growth is slowing, the U S economy

320
00:18:13,200 --> 00:18:17,840
Speaker 1: is slowing down. We're getting cautious is that cautious feeling

321
00:18:18,080 --> 00:18:21,920
Speaker 1: being reflected by the actual plans of these CEOs. I mean,

322
00:18:22,000 --> 00:18:25,720
Speaker 1: is this something that can be confirmed in corporate America,

323
00:18:26,040 --> 00:18:30,199
Speaker 1: you are seeing more judicious capital allocation and budget management

324
00:18:30,960 --> 00:18:33,520
Speaker 1: as a as a result and as a response. And

325
00:18:33,560 --> 00:18:35,200
Speaker 1: then one of the other themes that I think came

326
00:18:35,240 --> 00:18:39,240
Speaker 1: across was the need to be agile because the global

327
00:18:39,280 --> 00:18:42,560
Speaker 1: signals are changing so rapidly and from one day to

328
00:18:42,600 --> 00:18:45,240
Speaker 1: the next, we're not entirely sure what our commodity price

329
00:18:45,320 --> 00:18:47,080
Speaker 1: environments are going to look like, what our share price

330
00:18:47,119 --> 00:18:50,880
Speaker 1: looks like, what our investors and employees need from us.

331
00:18:50,960 --> 00:18:53,879
Speaker 1: So we're need to be agile to make different decisions

332
00:18:53,880 --> 00:18:56,760
Speaker 1: and to respond to the signals as they're rapidly changing.

333
00:18:57,080 --> 00:18:59,480
Speaker 1: I think that was the key that came out in

334
00:18:59,560 --> 00:19:02,840
Speaker 1: response to the environment that you just described, um that

335
00:19:02,880 --> 00:19:04,640
Speaker 1: you need to be agile because you have to change

336
00:19:04,680 --> 00:19:08,040
Speaker 1: your responses pretty quickly in today's world. So, Regina, one

337
00:19:08,080 --> 00:19:11,200
Speaker 1: of the things that's really driving financial markets really over

338
00:19:11,240 --> 00:19:14,000
Speaker 1: the last year plus has been the ups and downs

339
00:19:14,040 --> 00:19:17,960
Speaker 1: of any uncertainty surrounding global trade and trade tensions dween

340
00:19:18,000 --> 00:19:20,800
Speaker 1: the US and China. Any feedback from your survey about

341
00:19:20,800 --> 00:19:25,360
Speaker 1: how CEOs are thinking about that risk. It's definitely a

342
00:19:25,480 --> 00:19:28,199
Speaker 1: very strong risk that's playing in and for our sector

343
00:19:28,240 --> 00:19:31,119
Speaker 1: and energy. It has a major impact, right. It is

344
00:19:31,119 --> 00:19:34,959
Speaker 1: showing that there is concerned globally about demand UH in

345
00:19:35,000 --> 00:19:38,199
Speaker 1: particular from India and China, and the geopolitics with the

346
00:19:38,240 --> 00:19:41,000
Speaker 1: tariffs and the trade war do not help that. So

347
00:19:41,280 --> 00:19:44,080
Speaker 1: you know, my clients focus a lot on the commodity price,

348
00:19:44,240 --> 00:19:47,640
Speaker 1: and the commodity price is depressed because of a lot

349
00:19:47,680 --> 00:19:50,639
Speaker 1: of the concerns about future demand and future growth prospects.

350
00:19:51,040 --> 00:19:54,080
Speaker 1: That's where we see in our industry the trade wars,

351
00:19:54,240 --> 00:19:58,800
Speaker 1: the uncertainty on tariff having a very real and immediate impact.

352
00:19:59,359 --> 00:20:01,920
Speaker 1: Regina Ma, thank you so much for joining us today.

353
00:20:01,960 --> 00:20:05,040
Speaker 1: Regina Mayor's Global sector headed for Energy and Natural Resources

354
00:20:05,080 --> 00:20:10,920
Speaker 1: at KPMG. Talking about that CEO outlook showing that climate

355
00:20:11,000 --> 00:20:30,040
Speaker 1: change topped all concerns for the first time in history.

356
00:20:31,320 --> 00:20:34,119
Speaker 1: Let's shift gears and focus on the credit markets, because

357
00:20:34,119 --> 00:20:37,199
Speaker 1: what we'd have seen this month a rally. It's been

358
00:20:37,200 --> 00:20:39,800
Speaker 1: the first week since August we've actually seen HIL bonds

359
00:20:39,920 --> 00:20:43,680
Speaker 1: lose value and you are seeing investors becoming more discerning.

360
00:20:43,760 --> 00:20:46,920
Speaker 1: Joining us now, Michael Temple, director of corporate credit focused

361
00:20:46,920 --> 00:20:50,760
Speaker 1: on the US for a MOONDI pioneer. Uh, Michael, thank

362
00:20:50,760 --> 00:20:52,840
Speaker 1: you so much for being with us. I want to

363
00:20:52,840 --> 00:20:56,480
Speaker 1: just start there. We are seeing some pushback by investors.

364
00:20:56,880 --> 00:21:01,760
Speaker 1: What's your takeaway from that, high, Lisa UM, Well, you know,

365
00:21:02,320 --> 00:21:05,480
Speaker 1: this is sort of typical types of signs that you

366
00:21:05,520 --> 00:21:07,800
Speaker 1: get when you're sort of reaching the end of the

367
00:21:07,840 --> 00:21:10,240
Speaker 1: credit cycle. UM. And we don't know how long the

368
00:21:10,320 --> 00:21:13,080
Speaker 1: credit cycle is going to continue to last, but you know,

369
00:21:13,560 --> 00:21:17,520
Speaker 1: some of these companies, particularly the triple C rated companies

370
00:21:17,520 --> 00:21:19,520
Speaker 1: that are trying to get access to the capital markets

371
00:21:19,520 --> 00:21:23,520
Speaker 1: and refinance UM are finding it's a little tough going.

372
00:21:24,800 --> 00:21:28,080
Speaker 1: So why is that just simply because again where we

373
00:21:28,119 --> 00:21:31,439
Speaker 1: are in the cycle, or is there something specific in

374
00:21:32,320 --> 00:21:35,920
Speaker 1: the bond market per se? No, I think it's it's

375
00:21:36,040 --> 00:21:38,040
Speaker 1: it's more about the cycle. I mean, if you look

376
00:21:38,080 --> 00:21:42,720
Speaker 1: at high yield and even investment grade corporate credit performance

377
00:21:42,760 --> 00:21:45,000
Speaker 1: this year, it's actually been very strong. But what's been

378
00:21:45,040 --> 00:21:49,640
Speaker 1: interesting is that UM, the strongest part of that return,

379
00:21:49,880 --> 00:21:52,480
Speaker 1: particularly in high yield, has been in the higher quality

380
00:21:52,920 --> 00:21:54,720
Speaker 1: parts of the market, so the double B parts of

381
00:21:54,720 --> 00:21:57,200
Speaker 1: the market. Now, part of that is because you've seen

382
00:21:57,200 --> 00:22:01,960
Speaker 1: this dramatic rally in the underlying UM part of the structure,

383
00:22:02,000 --> 00:22:06,520
Speaker 1: that is the treasury structure. But corporate credit spreads in

384
00:22:06,600 --> 00:22:09,040
Speaker 1: the higher quality part of the hyal market have done

385
00:22:09,560 --> 00:22:12,000
Speaker 1: really really well. And and the the areas of the

386
00:22:12,040 --> 00:22:15,440
Speaker 1: market that have been struggling struggling a little bit more

387
00:22:15,520 --> 00:22:18,760
Speaker 1: has been the lower quality parts of the credit market

388
00:22:19,320 --> 00:22:22,280
Speaker 1: UM and in particular areas in the energy market. And

389
00:22:22,320 --> 00:22:24,959
Speaker 1: so from that standpoint, I think what we're seeing is

390
00:22:25,040 --> 00:22:29,639
Speaker 1: despite the fact that um uh, you know, overall yields

391
00:22:29,680 --> 00:22:34,240
Speaker 1: have compressed, the really lower credit quality parts of the

392
00:22:34,240 --> 00:22:37,200
Speaker 1: market are kind of struggling to get access to capital.

393
00:22:38,119 --> 00:22:40,840
Speaker 1: So at this point in the credit cycle, and given

394
00:22:40,840 --> 00:22:43,080
Speaker 1: the fact that we have seen the performance of higher

395
00:22:43,160 --> 00:22:49,119
Speaker 1: rated credit, are you positioning for that to continue well?

396
00:22:49,160 --> 00:22:51,600
Speaker 1: At this stage, we think there's a lot of values

397
00:22:51,640 --> 00:22:54,200
Speaker 1: still in the kind of single B part of the market,

398
00:22:54,240 --> 00:22:56,200
Speaker 1: so we would call it kind of the middle tier

399
00:22:56,280 --> 00:22:59,600
Speaker 1: part of the market. UM, we are very underweight the

400
00:22:59,600 --> 00:23:02,320
Speaker 1: triple see side of the market right now. I think

401
00:23:02,359 --> 00:23:07,240
Speaker 1: we're um concerned about um, you know, the potential for

402
00:23:07,840 --> 00:23:11,560
Speaker 1: ID syncratic credit risk exposure. We're not yet seeing it

403
00:23:11,600 --> 00:23:14,800
Speaker 1: on a total sectoral basis other than an energy as

404
00:23:14,800 --> 00:23:18,760
Speaker 1: I mentioned UM, but yes, we're sort of continuing to

405
00:23:19,160 --> 00:23:21,240
Speaker 1: focus on the double B and single B part of

406
00:23:21,280 --> 00:23:24,280
Speaker 1: the hyl market right now. So, Michael, given that we are,

407
00:23:24,400 --> 00:23:27,440
Speaker 1: you know, late into a cycle, you know, ten plus

408
00:23:27,560 --> 00:23:31,120
Speaker 1: years into this economic cycle, what's this what's your take

409
00:23:31,160 --> 00:23:33,480
Speaker 1: on credit quality out there? Are you're seeing any real

410
00:23:33,600 --> 00:23:38,560
Speaker 1: pressures or strains in your portfolio in terms of credit quality? Well,

411
00:23:38,680 --> 00:23:40,960
Speaker 1: you know, it's interesting, about six months ago, everybody was

412
00:23:41,000 --> 00:23:44,840
Speaker 1: talking about the significant increase in the amount of triple

413
00:23:44,880 --> 00:23:50,200
Speaker 1: B credit UH exposure in the index UM, and there

414
00:23:50,280 --> 00:23:55,040
Speaker 1: was the view, I believe that UM, particularly triple B

415
00:23:55,359 --> 00:23:58,120
Speaker 1: issued creditors, we're going to have to really pay attention

416
00:23:58,160 --> 00:24:02,120
Speaker 1: to their overall credit quality and begin to reduce debt

417
00:24:02,200 --> 00:24:05,600
Speaker 1: because of the concerns and the warnings that people were

418
00:24:05,640 --> 00:24:08,760
Speaker 1: putting out about this significant bulbs, and the concern was

419
00:24:08,960 --> 00:24:11,200
Speaker 1: you're going to see a lot of these credits fall

420
00:24:11,240 --> 00:24:13,720
Speaker 1: down into high yield. Well six months later, you really

421
00:24:13,760 --> 00:24:16,360
Speaker 1: haven't seen it, and I think the fears of that

422
00:24:16,440 --> 00:24:19,800
Speaker 1: have really receded. But the reality is is that these

423
00:24:19,840 --> 00:24:23,040
Speaker 1: companies by and large really haven't delivered. They have not

424
00:24:23,160 --> 00:24:28,520
Speaker 1: reduced any of the UH there is, the risk associated

425
00:24:28,560 --> 00:24:32,080
Speaker 1: with these credits really hasn't reduced anymore, UM, and I

426
00:24:32,080 --> 00:24:35,520
Speaker 1: think at some point UM people investors are once more

427
00:24:35,520 --> 00:24:37,639
Speaker 1: going to start to focus on that area of the market.

428
00:24:37,680 --> 00:24:40,280
Speaker 1: So we're being very selective in the in the triple

429
00:24:40,359 --> 00:24:43,840
Speaker 1: BE part of the market, UM, avoiding those areas where

430
00:24:43,880 --> 00:24:47,760
Speaker 1: we think there may be some specul pressure. UM. Beverage

431
00:24:47,800 --> 00:24:50,679
Speaker 1: kind of comes to mind. UM. In the high yield market,

432
00:24:50,880 --> 00:24:54,560
Speaker 1: we're actually seeing an increase in overall credit quality as

433
00:24:54,600 --> 00:24:56,800
Speaker 1: more and more investors and issuers are sort of focusing

434
00:24:56,800 --> 00:24:59,440
Speaker 1: on the double B part of the market. So here's

435
00:24:59,440 --> 00:25:02,359
Speaker 1: the thing gonna make a sort of contrary argument, Michael.

436
00:25:02,400 --> 00:25:05,800
Speaker 1: I mean, for let's say triple seas to outperform going forward,

437
00:25:06,040 --> 00:25:08,800
Speaker 1: everyone's saying they're so cautious, and everyone's saying that we're

438
00:25:08,800 --> 00:25:10,600
Speaker 1: getting towards the end of the cycle, and so it's

439
00:25:10,640 --> 00:25:14,159
Speaker 1: important to move up in corporate credit UH credit worthiness.

440
00:25:14,280 --> 00:25:17,280
Speaker 1: And yet there's a wall of cash coming from overseas

441
00:25:17,800 --> 00:25:20,920
Speaker 1: in the face of negative yields, and that is continuing

442
00:25:21,000 --> 00:25:24,000
Speaker 1: and in some ways accelerating, and you have to wonder

443
00:25:24,040 --> 00:25:28,000
Speaker 1: at what point that just outweighs the fundamentals especially because

444
00:25:28,000 --> 00:25:31,199
Speaker 1: that will keep companies going for longer perhaps than they

445
00:25:31,200 --> 00:25:35,480
Speaker 1: should and avoid the sort of downdraft. That is a

446
00:25:35,600 --> 00:25:38,680
Speaker 1: great question, at least in a very interesting observation. UM,

447
00:25:38,720 --> 00:25:41,560
Speaker 1: we've thought about that as well, and so the question

448
00:25:41,600 --> 00:25:45,600
Speaker 1: really is, in a nutshell, do technicals end up trumping

449
00:25:45,640 --> 00:25:51,520
Speaker 1: fundamentals UM and much better? Yeah, well, and I do

450
00:25:51,600 --> 00:25:54,280
Speaker 1: think that there is a chance that that that that

451
00:25:54,280 --> 00:25:58,280
Speaker 1: that that does occur. So in particular, we're seeing significant

452
00:25:58,320 --> 00:26:03,199
Speaker 1: inflows UH into to UH investment grade corporates UH and

453
00:26:03,480 --> 00:26:07,560
Speaker 1: into in in less of a way, but we're still

454
00:26:07,560 --> 00:26:10,160
Speaker 1: seeing it as well into the highal market from investors

455
00:26:10,160 --> 00:26:13,600
Speaker 1: overseas who are just gasping for yield UM. And so

456
00:26:13,680 --> 00:26:17,160
Speaker 1: from that standpoint, I think, UM, we definitely could see

457
00:26:17,160 --> 00:26:20,040
Speaker 1: as we see further spread compression in double bees and

458
00:26:20,119 --> 00:26:24,520
Speaker 1: single bees, we could see um uh spread compression among

459
00:26:24,560 --> 00:26:27,159
Speaker 1: triple cs, which would then give access to some of

460
00:26:27,200 --> 00:26:31,679
Speaker 1: these triple C rated companies to refinance themselves. The alternative

461
00:26:31,720 --> 00:26:34,320
Speaker 1: view is though, that you get a bifurcation in the market,

462
00:26:34,359 --> 00:26:37,280
Speaker 1: and I think that's kind of what we're seeing. Despite

463
00:26:37,359 --> 00:26:40,640
Speaker 1: the quote unquote wall of money that we're seeing from

464
00:26:40,680 --> 00:26:43,800
Speaker 1: overseas we're still seeing some of these what we would

465
00:26:43,800 --> 00:26:49,000
Speaker 1: describe as um uh, you know, questionable business models actually

466
00:26:49,160 --> 00:26:52,720
Speaker 1: struggling to get funded. Uh. And so from that standpoint,

467
00:26:52,800 --> 00:26:55,719
Speaker 1: I think the jury still out. So Michael, I need

468
00:26:55,720 --> 00:26:57,760
Speaker 1: to duce my portfolio a little bit here as we

469
00:26:57,800 --> 00:27:01,560
Speaker 1: get towards your end. What sector should I be looking at? Well, again,

470
00:27:01,640 --> 00:27:04,480
Speaker 1: we think the the single B area of the corporate

471
00:27:04,520 --> 00:27:08,399
Speaker 1: credit market is still relatively attractive. And I say relatively

472
00:27:08,760 --> 00:27:12,719
Speaker 1: uh in in air quotes, because um, everything is is

473
00:27:12,760 --> 00:27:16,360
Speaker 1: trading rich right now on a historical basis. But if

474
00:27:16,359 --> 00:27:18,119
Speaker 1: you look at UM the single B part of the

475
00:27:18,160 --> 00:27:20,919
Speaker 1: HIGHL market, I think it's it's really sort of the

476
00:27:20,960 --> 00:27:25,320
Speaker 1: goldilocks right now for most investors. UM. You can avoid

477
00:27:25,400 --> 00:27:28,000
Speaker 1: certain sectors that you think might be under secular pressure.

478
00:27:28,640 --> 00:27:31,720
Speaker 1: UM and in general, many of these companies have been

479
00:27:31,880 --> 00:27:35,919
Speaker 1: spending a number of years upgrading the overall credit quality.

480
00:27:35,960 --> 00:27:40,120
Speaker 1: The average credit statistics in the HIEL market have continued

481
00:27:40,200 --> 00:27:45,560
Speaker 1: to improve. UM. This isn't direct contradiction to the investment

482
00:27:45,600 --> 00:27:47,920
Speaker 1: grade market. And some of course are more concerned about

483
00:27:47,920 --> 00:27:50,879
Speaker 1: the bank loan market on the deterioration of credit quality

484
00:27:50,920 --> 00:27:53,880
Speaker 1: that we're seeing there. But again, our view is um.

485
00:27:53,920 --> 00:27:56,160
Speaker 1: This is probably a as good a place as any

486
00:27:56,280 --> 00:27:59,640
Speaker 1: start putting your money. Michael Temple, thank you so much

487
00:27:59,680 --> 00:28:02,000
Speaker 1: for warning us. Michael's a director of corporate credit for

488
00:28:02,160 --> 00:28:04,800
Speaker 1: US and for the US and portfolio manager for a

489
00:28:04,920 --> 00:28:07,879
Speaker 1: Mundy Pioneer joining us on the phone. We appreciate his

490
00:28:07,960 --> 00:28:10,720
Speaker 1: thoughts on the credit markets. Thanks for listening to the

491
00:28:10,760 --> 00:28:13,360
Speaker 1: Bloomberg P and L podcast. You can subscribe and listen

492
00:28:13,400 --> 00:28:16,760
Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.

493
00:28:16,960 --> 00:28:19,600
Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm

494
00:28:19,640 --> 00:28:22,320
Speaker 1: Lisa Abram Woyds. I'm on Twitter at Lisa Abram Woyds.

495
00:28:22,400 --> 00:28:25,240
Speaker 1: One Before the podcast, you can always catch us worldwide.

496
00:28:25,280 --> 00:28:26,240
Speaker 1: I'm Bloomberg Radio