WEBVTT - Whistle-Blower Complaint, Climate Change, & Bond Market 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.560 at Bloomberg dot com. If you're looking for an exciting 0:00:21.720 --> 0:00:24.400 roller coaster, don't look in markets right now. They have 0:00:24.480 --> 0:00:26.920 been pretty much range bound for a while and not 0:00:26.960 --> 0:00:29.680 really moving much in one direction or another. Despite any 0:00:29.680 --> 0:00:33.280 political drama in Washington, despite concerns about unrest in the 0:00:33.320 --> 0:00:36.400 Middle East, you get a whole host of existential kind 0:00:36.400 --> 0:00:39.960 of concerns that people are simply shrugging off. Joining us 0:00:39.960 --> 0:00:42.720 here to discuss what is the path ahead. Then, Karen 0:00:42.760 --> 0:00:45.800 pay she's head of Equities at Fiduciary Trust Company, joining 0:00:45.840 --> 0:00:48.519 us here in our interactive broker studios. So, Karen, I'm 0:00:48.520 --> 0:00:50.760 wondering you're saying that, you know, a couple of months 0:00:50.800 --> 0:00:53.480 ago you started repositioning client portfolios to be a little 0:00:53.479 --> 0:00:56.960 more defensive. Are you guys doing anything right now? I mean, 0:00:57.000 --> 0:00:59.480 are you sort of taking any any approach to to 0:00:59.520 --> 0:01:01.720 shift things around. You're just sort of watching this and 0:01:01.760 --> 0:01:06.559 saying let's go home early. Right. So, I think that 0:01:06.760 --> 0:01:09.199 you know, we have seen the market in a range 0:01:09.200 --> 0:01:12.280 bound UM situation because you've got low rates that are 0:01:12.280 --> 0:01:15.440 supporting the markets on the downside, but you also have 0:01:15.800 --> 0:01:19.360 UM the potential of any positive changes that could sort 0:01:19.360 --> 0:01:22.680 of maybe perhaps break the market on the upside. UM. 0:01:23.160 --> 0:01:25.039 But you know, when we're looking at the market, we're 0:01:25.080 --> 0:01:29.080 really looking at fundamentals, and what the fundamental tell us 0:01:29.319 --> 0:01:32.000 is that we're in an economy that has been slowing 0:01:32.040 --> 0:01:36.039 down and we've seen earnings UM decelerate in terms of 0:01:36.080 --> 0:01:40.160 growth UM. And therefore, we started repositioning our portfolios a 0:01:40.200 --> 0:01:42.320 couple of months ago to be a little bit more 0:01:42.360 --> 0:01:46.200 defensive from an as allocation standpoint UM, as well as 0:01:46.240 --> 0:01:50.680 kind of within equities, repositioning to UM take some profits 0:01:50.680 --> 0:01:54.280 in the market, recognizing that the s MPs up for 0:01:54.320 --> 0:01:59.400 the year valuations are UM not cheap, they're actually you know, 0:01:59.480 --> 0:02:02.800 relative on the high side, and so you know, we 0:02:02.880 --> 0:02:05.680 just think that it would be prudent and smart to 0:02:06.000 --> 0:02:09.440 just take some profits and we UM have you know, 0:02:09.720 --> 0:02:13.400 really looked at UM quality as a factor in our investing, 0:02:14.000 --> 0:02:19.079 and UM we have you know, looked for more defensive characteristics, 0:02:19.080 --> 0:02:23.919 but that doesn't necessarily mean paying up for bond proxies, 0:02:24.240 --> 0:02:27.320 doesn't necessarily mean that we're going to chase things in 0:02:27.360 --> 0:02:29.880 the market that might be driven by some of the 0:02:29.960 --> 0:02:36.120 macro factors. You know, utilities, for example up for the year. UM. 0:02:36.880 --> 0:02:40.520 Consumer stables also up very nicely, but valuations are very 0:02:40.639 --> 0:02:44.040 rich in those areas. So, Karen, what are some of 0:02:44.040 --> 0:02:47.920 these sectors that you're looking at here, Given that we 0:02:47.960 --> 0:02:49.320 are kind of late in the cycle, we need to 0:02:49.320 --> 0:02:52.640 get a little bit more defensive. Yeah, So, UM, I 0:02:52.720 --> 0:02:56.080 do think that it comes down a lot to UM 0:02:56.360 --> 0:03:01.239 the individual securities and how our managers are also selecting 0:03:01.400 --> 0:03:05.400 UM those securities within portfolios. From a sector standpoint, we're 0:03:05.520 --> 0:03:09.440 mostly neutral at this point. We have been UM. We've 0:03:09.480 --> 0:03:12.160 had a cyclical bias and our portfolios and a growth 0:03:12.240 --> 0:03:15.760 bias and our portfolios for some time. UM. We've seen that, 0:03:15.880 --> 0:03:18.520 you know, we've seen that reward it really well by 0:03:18.560 --> 0:03:22.360 the markets. UM, But at this point, you know, we're 0:03:22.440 --> 0:03:25.760 much more neutral le positioned, and we're taking a notch 0:03:25.840 --> 0:03:29.040 down in terms of the cyclicality and our portfolio. We 0:03:29.120 --> 0:03:32.919 took down, for example, our overweight to technology a couple 0:03:32.919 --> 0:03:35.960 of months ago, just in recognition of you know, the 0:03:36.000 --> 0:03:39.200 strong gains this year and profit taking. Yeah, profit taking. 0:03:39.320 --> 0:03:41.520 So I'm trying to figure out what it would take 0:03:41.880 --> 0:03:44.440 for you to change the allocation to shift things around 0:03:44.440 --> 0:03:47.560 from here. So we do think that if there is 0:03:47.680 --> 0:03:51.400 positive development, a positive deal on trade, that that would 0:03:51.480 --> 0:03:55.080 make us become a little bit more UM encouraged. But 0:03:55.680 --> 0:03:58.840 I think that we do still have this view UM 0:03:58.880 --> 0:04:02.120 that any prog ress on trade would take some time 0:04:02.120 --> 0:04:06.720 to translate into fundamentals. We think that trade uncertainty has 0:04:06.800 --> 0:04:10.920 impacted business confidence. It may you know, at some point 0:04:10.960 --> 0:04:16.360 impact consumer confidence because we've seen some signs of UM 0:04:16.400 --> 0:04:18.919 you know, companies raising prices to offset some of the 0:04:18.960 --> 0:04:22.320 trade costs. So we we do think that UM, if 0:04:22.360 --> 0:04:25.159 we do get some positive news, the markets probably would 0:04:25.640 --> 0:04:28.279 perhaps get a relief rally, but it may not be 0:04:28.360 --> 0:04:31.080 sustainable and we would need to reset. What I'm looking 0:04:31.120 --> 0:04:35.160 for is really much better UM risk reward in the market, 0:04:35.360 --> 0:04:39.440 much more attractive valuations and UM equities. So do you 0:04:39.480 --> 0:04:42.919 think that the next leg is up? Potentially UM in 0:04:43.000 --> 0:04:45.479 the It may occur in a short run, but we're 0:04:45.480 --> 0:04:49.280 not really expecting anything concrete to happen on the trade front. 0:04:49.520 --> 0:04:52.480 We're not making a bed on that. So we would 0:04:52.720 --> 0:04:57.000 UM advise investors at this point to actually position portfolios 0:04:57.040 --> 0:05:00.360 to be a little bit more defensive and cautious, really 0:05:00.400 --> 0:05:03.279 look at managing risk in the portfolios. So on the 0:05:03.320 --> 0:05:06.080 earnings front, there's really not a story there either. Looks 0:05:06.080 --> 0:05:11.200 like earning growth is very flattish in the foreseeable future. UM. 0:05:11.320 --> 0:05:13.480 So I mean, as are there sectors when we talk 0:05:13.480 --> 0:05:16.000 about defensive sectors, I think utilities and reads and things 0:05:16.040 --> 0:05:18.680 like that in consumer stables. But my understanding is they're 0:05:18.680 --> 0:05:22.400 not cheap right right, So that for for that reason, 0:05:22.560 --> 0:05:25.599 we're also finding it very difficult to sort of find 0:05:25.880 --> 0:05:29.599 a lot of attractive things to buy in the marketplace UM. 0:05:29.640 --> 0:05:33.440 And therefore we've actually raised some cash and portfolios UM. 0:05:33.520 --> 0:05:35.960 But what I would say is that from an earning standpoint, 0:05:36.120 --> 0:05:39.080 we don't see a lot of UM earnings growth, and 0:05:39.080 --> 0:05:43.080 fact consensus still has twenty at about plus ten percent growth. 0:05:43.480 --> 0:05:46.760 We are a bit UM more skeptical about that. When 0:05:46.760 --> 0:05:50.200 you look through the earnings, we see that UM companies 0:05:50.200 --> 0:05:53.719 that are more geared to domestic revenues have fair much better. 0:05:54.120 --> 0:05:57.320 So if you look at second quarter reporter earnings, UM, 0:05:57.520 --> 0:06:00.920 companies that have greater than fifty pc of revenues coming 0:06:00.960 --> 0:06:05.040 from the US actually posted five percent growth, whereas companies 0:06:05.040 --> 0:06:10.400 that had greater than fifty international revenues posted an eleven 0:06:10.440 --> 0:06:14.520 percent decline. So there's the whole trade issue, the whole 0:06:14.560 --> 0:06:17.680 uncertainty issue, which is likely to play out. I think 0:06:17.680 --> 0:06:19.479 if you look at the consensus earnings for the remainder 0:06:19.560 --> 0:06:21.479 of the year. Karen pay thanks so much for joining us. 0:06:21.520 --> 0:06:24.920 Karen's head of equities at Fiduciary Trust Company, joining us 0:06:24.920 --> 0:06:28.039 here in our Bloomberg Interactive Broker Studios. We appreciate her 0:06:28.120 --> 0:06:46.800 thoughts on the equity markets. Time to check in with 0:06:46.800 --> 0:06:50.760 Bloomberg Opinion. We're joined by opinion columnists Noah Feldman. No 0:06:50.800 --> 0:06:54.480 one's a professor of law at Harvard University. He's located 0:06:54.520 --> 0:06:57.520 in Boston, Massachusetts. No, thanks so much for joining us. Well, 0:06:57.960 --> 0:07:01.200 what a day we had yesterday on Capitol Hill with 0:07:01.279 --> 0:07:06.240 the testimony. It appears that the impeachment proceedings will in 0:07:06.279 --> 0:07:08.880 fact proceed. What is your thought on kind of where 0:07:08.920 --> 0:07:13.360 we are right now? We're at an extraordinary moment in 0:07:13.400 --> 0:07:17.480 which we actually know a huge amount about the details 0:07:17.480 --> 0:07:20.360 of the allegations, and in which we have a roadmap 0:07:20.560 --> 0:07:22.640 for what we can still need to know. And I 0:07:22.640 --> 0:07:25.000 think it's a high probability that we will find out 0:07:25.320 --> 0:07:27.240 all of those details. So in a sense, we're in 0:07:27.240 --> 0:07:29.400 a very different position than we were, say when the 0:07:29.440 --> 0:07:32.280 Mulla Report came out, when we had been waiting, waiting, 0:07:32.280 --> 0:07:34.320 waiting for a long long time, and we got a 0:07:34.400 --> 0:07:36.840 multiple hundred page document we had to make sense of it. Here, 0:07:36.840 --> 0:07:40.040 we've got a really brief, four or five page document 0:07:40.200 --> 0:07:42.960 with really clear and specific allegations and a clear roadmap 0:07:43.000 --> 0:07:45.880 of what comes next. Do you expect President Trump to 0:07:45.880 --> 0:07:50.360 get impeached? I think the odds are pretty high right 0:07:50.360 --> 0:07:53.160 now that the House will impeach him, though the odds 0:07:53.240 --> 0:07:56.840 still don't look that high the Senate would remove him. Um, 0:07:56.880 --> 0:08:00.040 you know, the Democrats could still turn back at some 0:08:00.240 --> 0:08:04.120 point if somehow Trump were able to provide some kind 0:08:04.160 --> 0:08:08.320 of innocent explanation beyond what he said thus far for 0:08:08.440 --> 0:08:11.400 his conversation with the President of Ukraine. But unless he can, 0:08:12.000 --> 0:08:14.560 I think essentially all of the Democrats who said they 0:08:14.600 --> 0:08:18.160 support the impeachment inquiry have said that if these allegations 0:08:18.200 --> 0:08:22.280 are true, they represent an abuse of power that merit's impeachment. 0:08:22.480 --> 0:08:25.240 And I think it's very probable that these allegations will 0:08:25.280 --> 0:08:27.160 be seen to be true by Democrats at the end 0:08:27.200 --> 0:08:29.840 of the inquiry. So what's the tipping point for Republicans. 0:08:31.200 --> 0:08:33.720 I think the tipping point for Republicans is whether there 0:08:33.720 --> 0:08:38.679 it is plausible to believe Trump's denials. So far this 0:08:38.720 --> 0:08:42.559 time we have not heard the kind of legalistic justification 0:08:43.000 --> 0:08:45.719 that we heard the last time during the Mother investigation, 0:08:45.760 --> 0:08:48.560 in which the President would say, well, I'm allowed to 0:08:49.640 --> 0:08:52.160 uh say anything I want to a foreign official, including 0:08:52.640 --> 0:08:56.199 attacking my political opponents. Instead, he said, oh, the call 0:08:56.320 --> 0:08:59.680 was created. Was business as as normal? You know. The 0:08:59.720 --> 0:09:02.880 question is how plausible will Republicans find that if Republicans 0:09:02.880 --> 0:09:05.520 cross the line and believe they see a quid pro coo, 0:09:05.640 --> 0:09:07.320 I think this is really the tipping point. If there's 0:09:07.640 --> 0:09:10.679 definitive proof that there was a tradeoff that the President 0:09:10.760 --> 0:09:14.760 was offering the president of Ukraine to unfreeze the aid 0:09:14.800 --> 0:09:17.600 that he had just frozen in exchange for investigation of 0:09:17.720 --> 0:09:20.320 Joe Biden and of and of his son, then I 0:09:20.360 --> 0:09:23.880 think that many Republicans would be forced into the other side, 0:09:23.920 --> 0:09:26.160 but it's not at all, though there will be definitive 0:09:26.160 --> 0:09:27.760 proof of that. What there is now is a lot 0:09:27.800 --> 0:09:31.720 of very strong evidence that suggests that, but there's no 0:09:31.920 --> 0:09:35.440 truly smoking gun in the sense that there's no tape 0:09:35.480 --> 0:09:41.800 so far of either Trump or of President Zelinski saying 0:09:41.840 --> 0:09:45.960 explicitly this is a tradeoff. So, Professor, there's calls for 0:09:46.200 --> 0:09:50.880 potentially a special counsel needed to investigate Rudy Giuliani and 0:09:52.200 --> 0:09:55.240 William bar the United States Department of Justice Attorney General. 0:09:55.440 --> 0:09:58.160 What are your thoughts there. I published such a call 0:09:58.280 --> 0:10:00.559 this morning in Bloomberg Opinion, so I'm I'm on board 0:10:00.559 --> 0:10:02.720 with that. I think the bottom line is the whistle 0:10:02.760 --> 0:10:07.040 blowers complaint alleges conduct to interfere with the US election, 0:10:07.280 --> 0:10:11.120 which could well have violated criminal statutes, and Rudi Giuliani 0:10:11.160 --> 0:10:14.320 will not be the target of the investigation by the House. 0:10:14.320 --> 0:10:16.680 They will be investigating properly the President United States. Rudi 0:10:16.760 --> 0:10:20.079 Juglani is a private citizen and there is enough evidence 0:10:20.080 --> 0:10:21.760 in the whistle blower complained to make it credible that 0:10:21.800 --> 0:10:24.320 he may have committed crimes, so he needs to be investigated, 0:10:24.679 --> 0:10:26.520 and the reason it needs to be a special counsel 0:10:26.600 --> 0:10:29.240 is not only that it's an investigation connected to the president, 0:10:29.520 --> 0:10:32.480 but also that the whistle blowers specifically named Attorney General 0:10:32.520 --> 0:10:35.679 William Barr and specifically said that it appears that's the 0:10:35.679 --> 0:10:38.559 whistle blowers language that bar was involved. Now, Bart, to 0:10:38.640 --> 0:10:41.520 be fair, has issued a denial of that. But you 0:10:41.600 --> 0:10:44.520 can't say I'm accused of a crime, but I'm not 0:10:44.559 --> 0:10:46.920 guilty of it, so I'm not recusing myself. That's not 0:10:46.960 --> 0:10:50.400 how recusal works. If you have been incredibly connected by 0:10:50.440 --> 0:10:53.280 the President of the United States. In his call to 0:10:53.320 --> 0:10:56.240 the president of Ukraine, he repeatedly invoked Attorney General bar 0:10:56.360 --> 0:10:59.000 So if you incredibly connected the conduct that may well 0:10:59.040 --> 0:11:02.680 have been criminal, you can't supervise the investigation full stop. 0:11:02.960 --> 0:11:05.600 So bar has to recuse himself and a special counsel 0:11:05.960 --> 0:11:07.920 is needed. Left, but not least, there's a question of 0:11:07.920 --> 0:11:10.360 a potential cover up of this phone call in the 0:11:10.360 --> 0:11:15.360 White House. The whistleblower alleges concretely that this transcript of 0:11:15.360 --> 0:11:17.760 this call was suppressed and then it was put into 0:11:17.800 --> 0:11:20.200 a different database and more classified database than it would 0:11:20.240 --> 0:11:22.520 ordinarily have been put into. Those are steps that need 0:11:22.559 --> 0:11:24.560 to be investigated to determine whether they were part of 0:11:24.559 --> 0:11:26.960 a criminal cover up or obstruction of justice, And that 0:11:27.040 --> 0:11:29.120 too will involve an investigation into what was going on 0:11:29.240 --> 0:11:32.280 in the White House, possibly behind by the President's advice, 0:11:32.280 --> 0:11:34.640 possibly not, And a special Council needs to look at 0:11:34.640 --> 0:11:36.439 that too. I just want to add, we don't want 0:11:36.440 --> 0:11:38.640 to wait until the Special Council reports for the House 0:11:38.679 --> 0:11:40.240 to be able to go forward. That would not make sense. 0:11:40.280 --> 0:11:43.800 The House can simultaneously go far with its own inquiry 0:11:43.880 --> 0:11:47.199 into the president's conduct. Is there an historical period to 0:11:47.280 --> 0:11:52.400 which this period is analogous? Not really, because you know, 0:11:52.800 --> 0:11:56.000 during the long slow Mother investigation, I was interested in 0:11:56.080 --> 0:11:58.000 the question of whether the whole thing was more like 0:11:58.600 --> 0:12:02.440 the historical investigation of Richard Nixon or more like the 0:12:02.440 --> 0:12:05.480 investigation of Bill Clinton. In other words, was it studying 0:12:05.480 --> 0:12:07.440 with a real crime at the back of it, or 0:12:07.559 --> 0:12:09.960 was it something that in the end would come up 0:12:10.000 --> 0:12:14.480 with a rather small or or minimalistic allegation. And you know, 0:12:14.520 --> 0:12:16.440 I think it turned out on the whole to be 0:12:16.520 --> 0:12:19.240 slightly more like the Clinton case. But what's going on 0:12:19.280 --> 0:12:23.080 now is, after the long, long slow drum roll of 0:12:23.080 --> 0:12:27.240 the Mother investigation, we suddenly have this short, sharp, you know, 0:12:27.320 --> 0:12:32.160 symbol sound of the allegations around this phone call, and 0:12:32.400 --> 0:12:35.599 we haven't in the past had a kind of aftershock 0:12:35.840 --> 0:12:37.840 of a long investigation in the same way. So that 0:12:37.920 --> 0:12:40.800 we're on we're on uncharted territory here. Noah Feldman, thank 0:12:40.840 --> 0:12:43.160 you so much for being with us. Noah Feldman, Professor 0:12:43.200 --> 0:12:46.800 of Law at Harvard University. Also Bloomberg Opinion Calumness. You 0:12:46.840 --> 0:12:49.400 can find all of his columns and everyone else's who 0:12:49.440 --> 0:12:51.920 writes for a Bloomberg Opinion at O P I N 0:12:52.000 --> 0:13:14.760 GO on the Bloomberg Terminal or Bloomberg dot com slash Opinion. Well, 0:13:14.800 --> 0:13:17.840 as we heard from the Bloomberg Global Business Form this week, 0:13:17.960 --> 0:13:20.760 chief executive officers certainly have plenty on their plate. They 0:13:20.800 --> 0:13:25.720 have trade uncertainty slowing global growth, and then continue geopolitical 0:13:26.040 --> 0:13:28.400 risk in the marketplace. To get a sense of what 0:13:28.559 --> 0:13:31.840 CEOs are thinking about going forward, we welcome Regina Mayor. 0:13:31.880 --> 0:13:34.640 Regina is a global sector head for Energy and Natural 0:13:34.679 --> 0:13:39.080 Resources for KPMG. She joins us on the phone from Houston, Texas. Regina, 0:13:39.080 --> 0:13:41.560 thanks so much for joining us. Well, we're maybe the 0:13:41.640 --> 0:13:48.040 key takeaways from KPMG CEO outlook the key takeaway was 0:13:48.120 --> 0:13:51.760 that CEO's name climate change as the number one risk 0:13:51.880 --> 0:13:54.680 to organizational growth. This is the first time in the 0:13:54.760 --> 0:13:57.920 five year history of doing the survey that climate change 0:13:58.040 --> 0:14:01.640 topped the charts of the risks, ahead of technology, disruption 0:14:01.800 --> 0:14:07.120 or cyber or territorialism. Seventy fully three quarters of them 0:14:07.240 --> 0:14:10.520 say their growth will depend on their ability to navigate 0:14:10.559 --> 0:14:14.000 the shift to a low carbon economy. Are these ceo 0:14:14.160 --> 0:14:17.720 is all industries or are they focused in one specific one. 0:14:18.080 --> 0:14:23.000 It was O s across eleven industries, so quite striking 0:14:23.280 --> 0:14:26.120 for a climate change to be the number one for 0:14:26.200 --> 0:14:27.920 the first time in the history of our survey. I 0:14:27.920 --> 0:14:30.640 mean it's been climbing steadily. Has it like been close 0:14:30.760 --> 0:14:32.520 number two for a long time and it's just sort 0:14:32.520 --> 0:14:35.200 of edged ahead, or has there been a notable upsurge 0:14:35.600 --> 0:14:38.680 in the amount of concern around climate change. It's a 0:14:38.800 --> 0:14:42.120 notable up surge. It was four last year and it 0:14:42.200 --> 0:14:45.360 vaulted from four to number one. I think it's consistent 0:14:45.400 --> 0:14:47.400 with what you've seen in New York around the UN 0:14:47.480 --> 0:14:51.480 Climate Summit and the level of energy and enthusiasm that's building. 0:14:51.560 --> 0:14:54.480 It's not a nice to have, it's a requirement now. 0:14:55.160 --> 0:14:57.600 So Regina, is this perceived, Is this really focusing on 0:14:57.880 --> 0:15:02.200 energy carbon footprint? What are some the underpinnings of their uh, 0:15:02.240 --> 0:15:05.560 the issues about climate change. I think there's quite a 0:15:05.720 --> 0:15:07.200 quite a few things that are going on. Number One, 0:15:07.240 --> 0:15:11.040 they're getting a lot of pressure externally, their communities, their employees, 0:15:11.040 --> 0:15:14.520 their investors, the E s G component of the investment 0:15:15.360 --> 0:15:18.040 proportion is driving a lot of this need for change. 0:15:18.240 --> 0:15:22.280 But they're also saying, I think there's not a lot 0:15:22.360 --> 0:15:26.680 of climate science deniers anymore, particularly even in the energy space. 0:15:27.080 --> 0:15:29.720 While we do realize we need fossil fuels to continue 0:15:29.720 --> 0:15:32.960 to drive the wealth that we have globally, we also 0:15:33.000 --> 0:15:35.120 know we have a dual challenge in that we have 0:15:35.280 --> 0:15:37.640 to figure out how to reduce the carbon footprint. They're 0:15:37.640 --> 0:15:41.360 seeing multiple strategies. Some are focusing more on renewables and 0:15:41.400 --> 0:15:44.960 a totally green footprint. Others are focusing on carbon capture 0:15:44.960 --> 0:15:47.160 and how do we capture and remove the carbon that's 0:15:47.200 --> 0:15:50.280 in the atmosphere today. But everyone's talking about the need 0:15:50.360 --> 0:15:52.920 to do something. So let's shift gears a little bit 0:15:52.960 --> 0:15:55.760 to just sort of business climate and sentiment. Part of 0:15:55.760 --> 0:16:00.680 the survey showed that of energy CEOs are confident about 0:16:00.680 --> 0:16:04.320 their businesses growth prospects, but sixty feel the same about 0:16:04.360 --> 0:16:08.400 the global economy. Is that sort of consistent uh feeling 0:16:08.520 --> 0:16:11.960 across the sectors or is that isolated to energy. No, 0:16:12.080 --> 0:16:14.800 it's consistent feeling across the sectors. But I do think 0:16:14.800 --> 0:16:17.960 it's a stark disconnect because last year's survey showed that 0:16:17.960 --> 0:16:20.720 that number was a lot closer together. We were exuberant 0:16:20.760 --> 0:16:25.320 about the global economy and exuberant about our own company's prospects. 0:16:25.360 --> 0:16:28.840 So there is either this sense of the growing unease 0:16:28.920 --> 0:16:32.440 about what's happening geo politically, that folks worry about the 0:16:32.800 --> 0:16:36.120 strength of the global economy, but they still I mean, 0:16:36.120 --> 0:16:39.640 that's a that's this amazing percentage to feel really confident 0:16:39.680 --> 0:16:43.680 about your own company's growth. So either there's more fundamental 0:16:43.800 --> 0:16:48.320 strength in the global economy underpinned by these uh these sentiments, 0:16:48.440 --> 0:16:50.640 or it could be made perhaps a little bit of 0:16:50.680 --> 0:16:54.600 irrational exuberance on the part of the individual CEO. So Regina, 0:16:54.640 --> 0:16:56.720 one of the things that Lisa and I hear often 0:16:56.720 --> 0:16:59.400 as we speak to corporate executives is the need to 0:16:59.480 --> 0:17:04.040 find there and the challenge to finding properly trained employees. 0:17:04.280 --> 0:17:09.040 As economy continues to become more technical and more digital. Um, 0:17:09.080 --> 0:17:12.240 what is your survey telling you on that front? Yeah, 0:17:12.240 --> 0:17:14.320 thanks for that. I think one of the stark points 0:17:14.400 --> 0:17:17.600 for me too is that of the energy CEO of 0:17:17.680 --> 0:17:24.000 now taking this life slowly, leading their own technology strategy 0:17:24.040 --> 0:17:28.879 for their organization and plan to upscale their employees and 0:17:28.920 --> 0:17:32.760 new digital capabilities. So there is this belief that it's 0:17:32.800 --> 0:17:35.919 not just about finding new employees, it's about reskilling the 0:17:35.920 --> 0:17:38.440 base that you have because the world around them is 0:17:38.520 --> 0:17:41.639 changing and it's at all levels. It's a multi generational push. 0:17:42.040 --> 0:17:43.760 You know, those of us that are that are older 0:17:43.760 --> 0:17:45.919 and perhaps less tech savvy, we have to figure out 0:17:46.000 --> 0:17:48.200 how to use these new tools to make our jobs 0:17:48.200 --> 0:17:51.320 more effective and the company more effective, as well as 0:17:51.359 --> 0:17:54.119 being relative to the digital natives that are entering the 0:17:54.119 --> 0:17:57.320 workforce in droves Regina. I want to just take a 0:17:57.320 --> 0:17:59.879 step back, taking a look at the entire report and 0:18:00.119 --> 0:18:02.960 mood that you sort of felt being created by all 0:18:03.000 --> 0:18:07.240 of these chief executive officers right now in markets, every 0:18:07.280 --> 0:18:10.360 investor comes in here or most of them anyway, say 0:18:10.440 --> 0:18:13.120 it's clear global growth is slowing, the U S economy 0:18:13.200 --> 0:18:17.840 is slowing down. We're getting cautious is that cautious feeling 0:18:18.080 --> 0:18:21.920 being reflected by the actual plans of these CEOs. I mean, 0:18:22.000 --> 0:18:25.720 is this something that can be confirmed in corporate America, 0:18:26.040 --> 0:18:30.199 you are seeing more judicious capital allocation and budget management 0:18:30.960 --> 0:18:33.520 as a as a result and as a response. And 0:18:33.560 --> 0:18:35.200 then one of the other themes that I think came 0:18:35.240 --> 0:18:39.240 across was the need to be agile because the global 0:18:39.280 --> 0:18:42.560 signals are changing so rapidly and from one day to 0:18:42.600 --> 0:18:45.240 the next, we're not entirely sure what our commodity price 0:18:45.320 --> 0:18:47.080 environments are going to look like, what our share price 0:18:47.119 --> 0:18:50.880 looks like, what our investors and employees need from us. 0:18:50.960 --> 0:18:53.879 So we're need to be agile to make different decisions 0:18:53.880 --> 0:18:56.760 and to respond to the signals as they're rapidly changing. 0:18:57.080 --> 0:18:59.480 I think that was the key that came out in 0:18:59.560 --> 0:19:02.840 response to the environment that you just described, um that 0:19:02.880 --> 0:19:04.640 you need to be agile because you have to change 0:19:04.680 --> 0:19:08.040 your responses pretty quickly in today's world. So, Regina, one 0:19:08.080 --> 0:19:11.200 of the things that's really driving financial markets really over 0:19:11.240 --> 0:19:14.000 the last year plus has been the ups and downs 0:19:14.040 --> 0:19:17.960 of any uncertainty surrounding global trade and trade tensions dween 0:19:18.000 --> 0:19:20.800 the US and China. Any feedback from your survey about 0:19:20.800 --> 0:19:25.360 how CEOs are thinking about that risk. It's definitely a 0:19:25.480 --> 0:19:28.199 very strong risk that's playing in and for our sector 0:19:28.240 --> 0:19:31.119 and energy. It has a major impact, right. It is 0:19:31.119 --> 0:19:34.959 showing that there is concerned globally about demand UH in 0:19:35.000 --> 0:19:38.199 particular from India and China, and the geopolitics with the 0:19:38.240 --> 0:19:41.000 tariffs and the trade war do not help that. So 0:19:41.280 --> 0:19:44.080 you know, my clients focus a lot on the commodity price, 0:19:44.240 --> 0:19:47.640 and the commodity price is depressed because of a lot 0:19:47.680 --> 0:19:50.639 of the concerns about future demand and future growth prospects. 0:19:51.040 --> 0:19:54.080 That's where we see in our industry the trade wars, 0:19:54.240 --> 0:19:58.800 the uncertainty on tariff having a very real and immediate impact. 0:19:59.359 --> 0:20:01.920 Regina Ma, thank you so much for joining us today. 0:20:01.960 --> 0:20:05.040 Regina Mayor's Global sector headed for Energy and Natural Resources 0:20:05.080 --> 0:20:10.920 at KPMG. Talking about that CEO outlook showing that climate 0:20:11.000 --> 0:20:30.040 change topped all concerns for the first time in history. 0:20:31.320 --> 0:20:34.119 Let's shift gears and focus on the credit markets, because 0:20:34.119 --> 0:20:37.199 what we'd have seen this month a rally. It's been 0:20:37.200 --> 0:20:39.800 the first week since August we've actually seen HIL bonds 0:20:39.920 --> 0:20:43.680 lose value and you are seeing investors becoming more discerning. 0:20:43.760 --> 0:20:46.920 Joining us now, Michael Temple, director of corporate credit focused 0:20:46.920 --> 0:20:50.760 on the US for a MOONDI pioneer. Uh, Michael, thank 0:20:50.760 --> 0:20:52.840 you so much for being with us. I want to 0:20:52.840 --> 0:20:56.480 just start there. We are seeing some pushback by investors. 0:20:56.880 --> 0:21:01.760 What's your takeaway from that, high, Lisa UM, Well, you know, 0:21:02.320 --> 0:21:05.480 this is sort of typical types of signs that you 0:21:05.520 --> 0:21:07.800 get when you're sort of reaching the end of the 0:21:07.840 --> 0:21:10.240 credit cycle. UM. And we don't know how long the 0:21:10.320 --> 0:21:13.080 credit cycle is going to continue to last, but you know, 0:21:13.560 --> 0:21:17.520 some of these companies, particularly the triple C rated companies 0:21:17.520 --> 0:21:19.520 that are trying to get access to the capital markets 0:21:19.520 --> 0:21:23.520 and refinance UM are finding it's a little tough going. 0:21:24.800 --> 0:21:28.080 So why is that just simply because again where we 0:21:28.119 --> 0:21:31.439 are in the cycle, or is there something specific in 0:21:32.320 --> 0:21:35.920 the bond market per se? No, I think it's it's 0:21:36.040 --> 0:21:38.040 it's more about the cycle. I mean, if you look 0:21:38.080 --> 0:21:42.720 at high yield and even investment grade corporate credit performance 0:21:42.760 --> 0:21:45.000 this year, it's actually been very strong. But what's been 0:21:45.040 --> 0:21:49.640 interesting is that UM, the strongest part of that return, 0:21:49.880 --> 0:21:52.480 particularly in high yield, has been in the higher quality 0:21:52.920 --> 0:21:54.720 parts of the market, so the double B parts of 0:21:54.720 --> 0:21:57.200 the market. Now, part of that is because you've seen 0:21:57.200 --> 0:22:01.960 this dramatic rally in the underlying UM part of the structure, 0:22:02.000 --> 0:22:06.520 that is the treasury structure. But corporate credit spreads in 0:22:06.600 --> 0:22:09.040 the higher quality part of the hyal market have done 0:22:09.560 --> 0:22:12.000 really really well. And and the the areas of the 0:22:12.040 --> 0:22:15.440 market that have been struggling struggling a little bit more 0:22:15.520 --> 0:22:18.760 has been the lower quality parts of the credit market 0:22:19.320 --> 0:22:22.280 UM and in particular areas in the energy market. And 0:22:22.320 --> 0:22:24.959 so from that standpoint, I think what we're seeing is 0:22:25.040 --> 0:22:29.639 despite the fact that um uh, you know, overall yields 0:22:29.680 --> 0:22:34.240 have compressed, the really lower credit quality parts of the 0:22:34.240 --> 0:22:37.200 market are kind of struggling to get access to capital. 0:22:38.119 --> 0:22:40.840 So at this point in the credit cycle, and given 0:22:40.840 --> 0:22:43.080 the fact that we have seen the performance of higher 0:22:43.160 --> 0:22:49.119 rated credit, are you positioning for that to continue well? 0:22:49.160 --> 0:22:51.600 At this stage, we think there's a lot of values 0:22:51.640 --> 0:22:54.200 still in the kind of single B part of the market, 0:22:54.240 --> 0:22:56.200 so we would call it kind of the middle tier 0:22:56.280 --> 0:22:59.600 part of the market. UM, we are very underweight the 0:22:59.600 --> 0:23:02.320 triple see side of the market right now. I think 0:23:02.359 --> 0:23:07.240