WEBVTT - Financially-Squeezed Trump Is A National Security Risk: O'Brien 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.160 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.520 along with essential market moving news. Kind the Bloomberg Market 0:00:13.600 --> 0:00:17.000 Podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:20.759 and on Bloomberg dot com. It is time now for 0:00:20.840 --> 0:00:23.919 Bloomberg Opinion. Last night, around six pm, The New York 0:00:23.960 --> 0:00:28.520 Times released a whole cornucopia of stories that detailed as 0:00:28.600 --> 0:00:30.680 much as we know now and even a little bit 0:00:30.680 --> 0:00:34.400 more about President Donald Tomp's tax returns. Tim O'Brien, senior 0:00:34.920 --> 0:00:38.520 columnist for Bloomberg Opinion, writes today that these taxes show 0:00:38.800 --> 0:00:42.080 he's a national security threat. I'm quoting. At best, he's 0:00:42.080 --> 0:00:46.080 a haphazard businessman, human billboard and serial bankruptcy artist who 0:00:46.080 --> 0:00:48.680 gorgees on debt he may have a hard time repaying. 0:00:49.320 --> 0:00:51.839 And I won't say what he is at worst. What 0:00:52.000 --> 0:00:55.720 is he at worst? Him? Well, it works funny, he's 0:00:55.760 --> 0:00:58.280 you know, he's he's a con artist and a grifter 0:00:58.960 --> 0:01:01.640 who I think is purple traded a number of public 0:01:01.640 --> 0:01:06.280 policy frauds on on both his voters in the American 0:01:06.360 --> 0:01:10.280 public during his tenure, because what the tax returns reveal 0:01:11.160 --> 0:01:15.240 is that the person who was a signature force behind 0:01:15.360 --> 0:01:19.360 a major tax overhaul that ben benefited the most affluent 0:01:19.480 --> 0:01:24.120 members of our society, um himself. He paid next to 0:01:24.240 --> 0:01:29.120 no taxes in just seven and fifty dollars and many 0:01:29.200 --> 0:01:33.280 years he paid no taxes at all. Um. I think 0:01:33.560 --> 0:01:36.400 the other thing that's that is substantiated in the Times 0:01:36.440 --> 0:01:38.679 report has been something that's been known about Trump for 0:01:38.720 --> 0:01:43.000 a long time is that, um, he has hundreds of 0:01:43.040 --> 0:01:45.560 millions of dollars in debt. I think he's gotten north 0:01:45.600 --> 0:01:49.400 of a billion, frankly, and uh he may have a 0:01:49.440 --> 0:01:53.240 hard time paying that debt down if his creditors come calling. 0:01:53.560 --> 0:01:57.440 He is his assets are certainly, you know, well in 0:01:57.560 --> 0:02:00.680 excess of his current debts. But the problem is his 0:02:00.720 --> 0:02:04.800 assets aren't liquid and uh so his biggest holdings are 0:02:04.800 --> 0:02:08.160 actually controlled by other people. So he's going to enter 0:02:08.160 --> 0:02:11.040 into a phase right now where he may be financially squeezed. 0:02:11.360 --> 0:02:13.680 It makes him a national security risk because if he 0:02:13.760 --> 0:02:17.320 can't sell his assets to pay back his loans, he's 0:02:17.360 --> 0:02:19.400 gonna go looking for a handout, and that makes him 0:02:19.440 --> 0:02:24.200 vulnerable to foreign influence. So, Tim, you know, when he 0:02:24.240 --> 0:02:27.520 talked about real estate investors and so on, the there's 0:02:27.600 --> 0:02:32.560 so much UM tax sheltering that those types of owners 0:02:32.600 --> 0:02:36.400 and investors can avail themselves to, whether it's depreciating the 0:02:36.520 --> 0:02:39.160 value of a building and accelerating that depreciation, so on 0:02:39.200 --> 0:02:41.839 and so forth, that oftentimes you do see these big 0:02:41.840 --> 0:02:45.000 earners with little to no tax burden. How unusual do 0:02:45.000 --> 0:02:48.120 you think President Trump is here with his returns versus 0:02:48.120 --> 0:02:51.000 some of his peers. That's a good question, paul I. 0:02:51.120 --> 0:02:56.359 You know, Um, over the last two decades, Trump has 0:02:56.520 --> 0:03:01.960 underpaid UH taxes by about four million dollars relative to 0:03:02.120 --> 0:03:05.480 his peers based on the Times data. UM. You know, 0:03:05.560 --> 0:03:09.040 the wealthiest taxpayers in the United States carry the biggest burden. 0:03:09.160 --> 0:03:13.640 They're the most affluent members of society, pay more in 0:03:13.720 --> 0:03:19.239 terms of total dollar amounts UH in taxes than anyone else. Um. 0:03:20.720 --> 0:03:24.000 But when you compare Donald Trump to his peers, he's 0:03:24.080 --> 0:03:27.359 well below them. When you compare Donald Trump to an 0:03:27.440 --> 0:03:31.640 average American family, say a family making about seventy five 0:03:31.720 --> 0:03:34.600 THO dollars a year, they're going to play somewhere in 0:03:34.639 --> 0:03:38.600 the neighborhood of fourteen thousand dollars in taxes in the 0:03:38.680 --> 0:03:41.320 year that Donald Trump paid seven hundred and fifty dollars. 0:03:41.440 --> 0:03:43.840 No one looking at that would say that that's equitable. 0:03:44.040 --> 0:03:47.400 So even if the taxes he pays comport with what 0:03:47.480 --> 0:03:49.880 real estate fallowers are allowed to do and has not 0:03:49.960 --> 0:03:52.120 run a file of the tax code, there's a lot 0:03:52.160 --> 0:03:54.920 of inequity built into this. Now, obviously we have to 0:03:54.960 --> 0:03:57.840 remember that this is his self portrayal. Right, these are 0:03:57.920 --> 0:04:01.000 his taxes that were presumibly VET advice accountants and so on. 0:04:01.360 --> 0:04:05.440 But tim, if you represent yourself as being able to 0:04:05.480 --> 0:04:09.440 pay a loan off and you're not able to pay 0:04:09.480 --> 0:04:12.640 that loan off, is that a climb? Well, if you 0:04:12.800 --> 0:04:16.800 misrepresent two investors or two banks the value of your 0:04:16.800 --> 0:04:21.400 assets um, and you knowingly are making false statements as 0:04:21.440 --> 0:04:24.120 a form of fraud, Uh, there's you know, it's on 0:04:24.200 --> 0:04:26.440 the banks and investors to do their own due diligence, 0:04:26.720 --> 0:04:28.920 But no one is allowed to go around and create 0:04:29.080 --> 0:04:33.600 valuations out of whole cloth. Uh and and and try 0:04:33.640 --> 0:04:37.279 to get funding based on that. Uh. Trump. Trump is 0:04:37.320 --> 0:04:41.599 being investigated currently for that very thing VANNI by the 0:04:41.640 --> 0:04:45.080 Manhattan District Attorney's Office. This issue that Michael Cohen raised 0:04:45.480 --> 0:04:49.920 during his his congressional testimony, things that I've raised decades 0:04:49.960 --> 0:04:54.039 ago about how he accounts for his his assets. UH. 0:04:54.200 --> 0:04:57.039 You know, Michael Cohen said that Trump routinely and knowingly 0:04:57.360 --> 0:05:00.400 inflated valuations in order to get loans and in esters, 0:05:00.440 --> 0:05:05.520 and that could be putting him in I think legal 0:05:05.560 --> 0:05:09.120 peril in the in the upcoming year. So Tim, it's 0:05:09.160 --> 0:05:12.640 just an update on what some of those external investigations 0:05:12.640 --> 0:05:15.280 are of the presidents as perhaps it relates to his finances. 0:05:15.760 --> 0:05:18.839 I guess the Southern District of New York. Yeah, the 0:05:18.839 --> 0:05:21.960 southern reside of New York has been looking at at Trump. 0:05:22.080 --> 0:05:24.720 The status of that is unknown. It's complex there because 0:05:24.960 --> 0:05:27.080 the Southern District, which is the U. S. Attorney's office 0:05:27.120 --> 0:05:31.640 there is federal UH. They are under the Attorney General's 0:05:31.760 --> 0:05:35.080 UH guidance from the Attorney generalist, someone who's routinely run 0:05:35.080 --> 0:05:39.000 interference for Trump. UM. The state Attorney general in New 0:05:39.080 --> 0:05:42.680 York is looking at UH has looked at Trump's foundations 0:05:42.760 --> 0:05:44.560 and his charitable activities. In the past, he and his 0:05:45.000 --> 0:05:50.159 children were tossed out of the philanthropic world for um 0:05:50.279 --> 0:05:55.000 defrauding their own charity. I think UM, the A G 0:05:55.120 --> 0:05:57.440 and New York is also looking at Trump's taxes, but 0:05:57.520 --> 0:06:01.080 I think the investigation in the District Attorney's office in 0:06:01.200 --> 0:06:04.200 New York that is looking at Trump's payment of hush 0:06:04.240 --> 0:06:08.000 money to UM women who have alleged to have sexual 0:06:08.040 --> 0:06:14.880 encounters with him, as well as possible accounting UH irregularities 0:06:15.000 --> 0:06:18.560 or and or fraud UM at the Trump organization is 0:06:19.440 --> 0:06:21.640 the one that's the most perilous for him. He's got 0:06:21.720 --> 0:06:25.360 no federal sway over that investigation. It's something that's going 0:06:25.400 --> 0:06:27.919 to be waiting for him if he doesn't get reelected 0:06:27.960 --> 0:06:30.800 in November. And I think it's something that's really animated 0:06:31.120 --> 0:06:34.600 a lot of his agitation around these issues because he 0:06:34.640 --> 0:06:37.520 knows he's gonna be facing that next year. Tim, This 0:06:37.560 --> 0:06:40.560 isn't a flip question, but I would like you to 0:06:40.560 --> 0:06:44.600 consider it. So about two hundred million came from the Apprentice, 0:06:45.000 --> 0:06:47.760 a big, big sum. He was getting something like the 0:06:48.680 --> 0:06:52.760 royalties or the the fees for that. Given that it's 0:06:52.800 --> 0:06:56.480 clear he's a money losing businessman. Could the Apprentice or 0:06:56.560 --> 0:06:59.640 Mark Burnett, or you know, somebody on behalf of Consumers 0:06:59.720 --> 0:07:04.560 or view where is sue him for falls advertising? Well, 0:07:04.640 --> 0:07:06.960 I don't you know. I think I think, um, probably 0:07:07.000 --> 0:07:10.560 Mark Burnett could have gotten Donald Trump more cheaply than 0:07:10.600 --> 0:07:12.320 he did. That's one of those things we've realized. And 0:07:12.360 --> 0:07:15.120 all the money he made from that show. Um, you know, 0:07:15.960 --> 0:07:19.240 I don't think, um, I don't see a false advertising 0:07:19.280 --> 0:07:21.520 shoe rising with The Apprentice. I think the usue around 0:07:21.520 --> 0:07:23.920 The Apprentice has always been that Donald Trump was sitting 0:07:23.960 --> 0:07:28.800 in a fake boardroom in these phony scenarios with aspiring entrepreneurs, 0:07:29.160 --> 0:07:33.680 doling out his wisdom as he tried and true dealmaker 0:07:33.840 --> 0:07:36.680 and and in fact, that persona is what helped lifted 0:07:36.760 --> 0:07:39.160 him into the White House. White House. And what we've 0:07:39.200 --> 0:07:43.200 seen time and again is that reality shows that he's 0:07:43.200 --> 0:07:45.760 never been a gifted dealmaker or businessman. That he's been 0:07:46.360 --> 0:07:51.640 uh a routine Um, he's had routine bankruptcies. Another problems 0:07:51.840 --> 0:07:56.160 the tax returns drives home even further. Hey, Tim, thanks 0:07:56.200 --> 0:07:58.520 so much for joining us. Who really appreciate me. You're 0:07:58.560 --> 0:08:02.040 busy today Tim O'Brien, senior columnist for Bloomberg Opinion, giving 0:08:02.080 --> 0:08:05.680 us his thoughts on this explosive story from The New 0:08:05.760 --> 0:08:09.000 York Times over the weekend. Of course, you know, Tim 0:08:09.240 --> 0:08:12.680 wrote in authorized biography of Trump years ago, was sued 0:08:12.800 --> 0:08:18.120 by Trump for that before he was president. Tim won 0:08:18.200 --> 0:08:21.040 that lawsuit, so he's had a lot of experience with 0:08:21.200 --> 0:08:27.920 then real estate investor Donald Trump. Let's bring back Bill Rhodes, 0:08:28.240 --> 0:08:31.560 advisor to the world really and banker to the world. 0:08:31.960 --> 0:08:33.800 We were talking a little bit about China in our 0:08:33.880 --> 0:08:36.480 last block, and now we want to move to Latin America. 0:08:36.559 --> 0:08:40.400 We'd just begun on that Bill. There is some very 0:08:40.400 --> 0:08:44.280 you know, specific cases in Latin America. Obviously Venezuela is 0:08:44.320 --> 0:08:47.680 one of them. But the countries that had been sort 0:08:47.720 --> 0:08:51.360 of skirting the worst of you know, of the fallout 0:08:51.360 --> 0:08:53.280 from the coronavirus now seemed to be right bang in 0:08:53.280 --> 0:08:55.640 the center of it. So Mexico, for example, and some 0:08:55.720 --> 0:08:58.839 of the other countries. How bad will it get over 0:08:58.880 --> 0:09:01.880 the next two to three order is for Latin America. Well, 0:09:01.880 --> 0:09:04.680 I think Latin America is facing the greatest challenge it 0:09:04.720 --> 0:09:08.360 has an over a century. Uh. First of all, you 0:09:08.440 --> 0:09:13.880 have the COVID UH nineteen situation, a pandemic which has 0:09:13.960 --> 0:09:19.240 really hit uh Latin America harder than anywhere else. Um. 0:09:19.320 --> 0:09:24.200 The latest figures that I've seen show that of the 0:09:24.320 --> 0:09:27.640 COVID deaths UH so far in the world, and these 0:09:27.640 --> 0:09:29.920 are figures as of June. I haven't seen anything since 0:09:30.960 --> 0:09:36.120 coming from Latin America with only eight percent of the population, 0:09:37.280 --> 0:09:40.680 So they are getting hit big time. And the latest 0:09:40.720 --> 0:09:43.200 predictions that you find from the various banks, Bank of 0:09:43.240 --> 0:09:47.400 America elsewhere is that this year there will be a 0:09:47.440 --> 0:09:51.360 decline of over eight percent eight point two percent, although 0:09:51.480 --> 0:09:53.520 the World Bank and the i m F in June 0:09:53.520 --> 0:09:57.640 had talked about possibility of ten percent. Allow it Alo, 0:09:57.720 --> 0:10:01.200 We'll just have to see. But it is hitting Latin 0:10:01.240 --> 0:10:05.520 America much worse in the Middle East, Africa or Emerging Asia. Uh. 0:10:05.520 --> 0:10:09.360 And as you pointed out, I think Mexico Brazil have 0:10:09.480 --> 0:10:14.720 been hit particularly hard. Mexico is on the way, according 0:10:14.760 --> 0:10:18.120 to the day's statistics put out by the Central Bank, 0:10:18.160 --> 0:10:21.760 the Bank of Mexico, to a drop of GDP of 0:10:21.840 --> 0:10:27.719 between eight and uh eight percent and twelve percent uh 0:10:27.760 --> 0:10:30.760 and it's only being helped keep the float by the 0:10:30.760 --> 0:10:35.040 flow of remittances from the United States. Um. That's number one, 0:10:35.559 --> 0:10:37.920 you know, is the COVID thing. Second of all, a 0:10:38.000 --> 0:10:40.440 lot of these countries, as you point out, had already 0:10:40.440 --> 0:10:45.760 been in trouble before. Argentina Ecuador, Venezuela had all been 0:10:46.200 --> 0:10:50.079 in recession, some of them pretty steep before COVID hit. 0:10:50.800 --> 0:10:53.080 And the third thing, which is most people forget but 0:10:53.160 --> 0:10:56.840 we've we've discussed it here on your program, is the 0:10:56.920 --> 0:11:02.320 greatest refugee problem America's ever faced in its history. Over 0:11:02.400 --> 0:11:07.960 five million venezue oilans circulating around Latin South America, and 0:11:09.280 --> 0:11:11.240 the country that's been hit the most with him is 0:11:11.440 --> 0:11:15.280 Columbia with a million and a half. But these are like, 0:11:16.040 --> 0:11:18.760 you know, uh, three horsemen. Of course, there were four 0:11:18.800 --> 0:11:20.960 horsemen of the apocalypse, but I would say if you 0:11:21.040 --> 0:11:23.520 had one less horse, it would be three horses of 0:11:23.600 --> 0:11:28.880 the apocalypse hitting Latin America all at one time. So, Bill, 0:11:29.000 --> 0:11:33.640 it just seems overwhelming the challenges in Latin America because 0:11:33.679 --> 0:11:37.320 so many of the issues that you highlighted are deep seated. 0:11:37.360 --> 0:11:40.120 We're there before the pandemic. Now they're just being exacerbated 0:11:40.120 --> 0:11:44.200 by the effects of the pandemic. What are some possible solutions, 0:11:44.800 --> 0:11:48.160 um for this part of the world. Well, going back 0:11:48.200 --> 0:11:53.079 to China, um there's an expression in Chinese Mandarin called 0:11:53.160 --> 0:11:59.800 wai ti, which means crisis opportunity, and um luis Alberto Moreno, 0:11:59.840 --> 0:12:02.720 who ran the Inter American Development Bank predicted ten years 0:12:02.760 --> 0:12:04.640 ago that this is going to be the decade for 0:12:05.000 --> 0:12:08.800 Latin America because they were going to institute UH reforms, 0:12:08.880 --> 0:12:12.160 which they didn't do. So this is an opportunity, I 0:12:12.200 --> 0:12:16.280 think for them to institute major reforms in the area 0:12:16.320 --> 0:12:20.320 of education, health care services, the rule of law, and 0:12:20.360 --> 0:12:24.160 also to build up their institutions so that they can 0:12:24.200 --> 0:12:27.080 come out of this with some sort of a base 0:12:27.440 --> 0:12:30.320 going forward. Also, there's an opportunity on the trade side 0:12:32.280 --> 0:12:36.320 because you have two major trading blocks in Latin America 0:12:36.400 --> 0:12:41.400 Mircos serp which is Brazil, Argentina, Paraguay, Uruguay, and then 0:12:41.440 --> 0:12:44.200 you have the Pacific Alliance, which are all those countries 0:12:44.320 --> 0:12:49.520 in South America from Chilean up through Mexico, which formed, 0:12:49.880 --> 0:12:52.400 as I said, to Pacific Alliance. And there's been talk 0:12:52.480 --> 0:12:55.400 about merging the two of those so that you would have, 0:12:56.480 --> 0:12:58.840 you know, one of the largest trading blocks in the world. 0:12:58.880 --> 0:13:02.560 And if that could ever tie itself up to the 0:13:02.679 --> 0:13:06.120 modern version of NAFTA, which was the idea that George 0:13:06.120 --> 0:13:09.320 Bush Sr. And Bill Clinton had of a trade zone 0:13:09.320 --> 0:13:12.400 of the Americas. So sometimes when you get in the 0:13:12.480 --> 0:13:17.160 depth of despair, Uh, you can build on it. And 0:13:17.200 --> 0:13:20.240 the question is, uh, is there the will on the 0:13:20.320 --> 0:13:23.080 part of governments to do so? And will there be 0:13:23.160 --> 0:13:27.760 the financial backing from international financial institutions and the private 0:13:27.800 --> 0:13:30.280 sector to do so? And that will depend on the 0:13:30.320 --> 0:13:35.080 governments in these individual countries uh taking the steps they 0:13:35.200 --> 0:13:38.440 need to reform the economies and to try and and 0:13:38.600 --> 0:13:41.560 uh get away from some of the corrupt practices that 0:13:41.600 --> 0:13:44.000 we've seen over the last few years. Well, it sounds 0:13:44.000 --> 0:13:48.199 like a big asks me and and and and a long, long, long, 0:13:48.280 --> 0:13:51.760 long process. Um. You know, how hopeful are you that 0:13:51.800 --> 0:13:53.800 we we see some kind of reform in the next 0:13:53.840 --> 0:13:58.120 ten years. Well, you know, I'm an optimist in the 0:13:58.280 --> 0:14:01.600 sense that I saw Latin America to come out of 0:14:01.000 --> 0:14:04.480 the decade, the so called outlook, the decade of the 0:14:04.559 --> 0:14:08.720 eighties and reformed itself, but they never continued on with it. 0:14:09.160 --> 0:14:13.920 And so I think this time they really have to 0:14:13.960 --> 0:14:17.040 move themselves, that they're going to fall away behind uh 0:14:17.280 --> 0:14:21.760 Emerging Asia, even Africa, uh, you know, which is taking 0:14:21.800 --> 0:14:25.520 steps on COVID. So my hope here is that the 0:14:25.600 --> 0:14:28.520 governments will respond. The I m F, the World Bank, 0:14:28.600 --> 0:14:32.400 inter American Development Bank will provide help but very important 0:14:32.440 --> 0:14:34.600 here and maybe we end on this point I don't 0:14:34.600 --> 0:14:38.000 know in timing, is the local private sectors have to 0:14:38.040 --> 0:14:43.440 be uh willing, uh and optimistic about investing in their 0:14:43.480 --> 0:14:46.760 own country because so often in Latin America the local 0:14:46.800 --> 0:14:51.200 private sector moves its money out, and you can't expect 0:14:51.880 --> 0:14:54.360 foreign investment to come in if they see the local 0:14:54.440 --> 0:14:57.720 private sector moving their money out. So I think there's 0:14:57.840 --> 0:15:01.480 there's work here for governments, the private sector, and the 0:15:01.520 --> 0:15:06.080 international financial institutions to try and take advantage of this 0:15:06.280 --> 0:15:10.240 terrible situation to put in reforms that they've been holding 0:15:10.240 --> 0:15:14.080 off on doing for some time. Bill, thanks once again 0:15:14.360 --> 0:15:16.600 for joining us. We we we appreciate it always. Bill Rhodes, 0:15:16.640 --> 0:15:19.720 president and CEO of the William R. Rhodes Global Advisor's 0:15:19.720 --> 0:15:22.440 former chairman at City Bank. A tour the Forced Vannie 0:15:22.480 --> 0:15:26.640 of all things global markets from China all the way 0:15:26.680 --> 0:15:29.280 to Latin American and his Bill points out why the 0:15:29.440 --> 0:15:31.600 challenges in front of that region of the world in 0:15:31.720 --> 0:15:34.480 Latin America just seems so so steep. I'm not sure 0:15:34.920 --> 0:15:37.800 who can lead them out of those challenges well, and 0:15:37.880 --> 0:15:41.640 particularly now during coronavirus which is ravaging this house as well. 0:15:41.760 --> 0:15:43.440 You sort of get the impression that everyone would just 0:15:43.480 --> 0:15:46.080 listen to Bill everything would be okay. He has so 0:15:46.160 --> 0:15:49.120 much experience in all of this, but unfortunately and sometimes 0:15:49.120 --> 0:15:51.880 governments have their own opinions on things. Yeah, but hopefully 0:15:51.880 --> 0:15:55.200 this can be a catalyst for these countries to come together. 0:15:57.640 --> 0:16:00.720 Despite the volatility and financial markets stemming large part from 0:16:00.760 --> 0:16:04.120 the pandemic, one area of the financial markets has seen 0:16:04.240 --> 0:16:08.360 extraordinary robust new issuance, and that is corporate credit investment 0:16:08.400 --> 0:16:11.400 great credit. Just record months we've seen as companies take 0:16:11.400 --> 0:16:14.720 advantage of historically low interest rates. Together some more color 0:16:14.840 --> 0:16:17.840 on that, we welcome Steve Kellner. He's head of Corporates 0:16:17.880 --> 0:16:20.720 for p JIM Fixed Income. They have over eight hundred 0:16:20.720 --> 0:16:23.960 billion firm wide and fixed income assets, so they know 0:16:24.000 --> 0:16:25.920 what they're talking about. Steve, Thanks so much for joining 0:16:25.960 --> 0:16:29.120 us here. We've seen so much new issuance in the 0:16:29.200 --> 0:16:31.960 corporate credit market. My question is is this company has 0:16:32.000 --> 0:16:35.920 taken on additional debt to fuel growth or is it 0:16:36.000 --> 0:16:38.840 simply refinancing their existing debt and is trying to take 0:16:38.840 --> 0:16:43.120 advantage here of these historically low rates. First off, thanks 0:16:43.120 --> 0:16:45.640 for having me. This morning's pleasure to be here. I'd 0:16:45.640 --> 0:16:49.960 say it's probably UM. It's probably both that companies in 0:16:49.960 --> 0:16:53.920 the short term are increasing their leverage through the increase 0:16:54.040 --> 0:16:57.120 in in gross debt UM. But at the same time, 0:16:57.200 --> 0:17:00.640 companies have been refinancing a lot about standing debt and 0:17:00.880 --> 0:17:04.160 a lot of this has been built around increasing liquidity. 0:17:04.240 --> 0:17:06.199 And we think as we move into two thousand and 0:17:06.240 --> 0:17:08.560 twenty one, a lot of those companies are going to 0:17:08.640 --> 0:17:11.840 start buying back their debt or paying off maturing debt, 0:17:12.000 --> 0:17:16.360 especially in the triple bespect So what kinds of decisions 0:17:16.400 --> 0:17:19.960 do you have to make on a daily basis, UM, 0:17:20.000 --> 0:17:22.320 I think we want to actually look at say macro 0:17:22.480 --> 0:17:25.359 type of indicators. Um, you know, which way is the 0:17:25.359 --> 0:17:28.600 economy going, certainly which ways interest rates and the FED 0:17:29.000 --> 0:17:31.440 going to go in here, and then from there it's 0:17:31.480 --> 0:17:34.639 a lot of bottoms up analysis and working at different 0:17:34.640 --> 0:17:38.119 industries and different companies, ripping apart their balance sheets and 0:17:38.160 --> 0:17:41.680 income statements, and then actually seeing what their use of 0:17:41.720 --> 0:17:43.960 their free cash flow as they start to generate it 0:17:44.080 --> 0:17:46.560 is going to be, and which companies out there will 0:17:46.600 --> 0:17:49.920 be improving their credit profile going forward. So I'd say 0:17:49.920 --> 0:17:54.240 it's it's a combination of a top down um macro 0:17:54.400 --> 0:17:56.560 view of the economy and with different industries that are 0:17:56.600 --> 0:17:58.520 affected and are going to be affected in the future, 0:17:58.960 --> 0:18:01.199 coupled with a lot of in depth analysis of the 0:18:01.240 --> 0:18:04.640 companies in the industries themselves. Hey, sty what are you 0:18:04.720 --> 0:18:08.120 and your team seeing in terms of credit quality? Out 0:18:08.160 --> 0:18:11.920 there were six seven months into this pandemic. There's really 0:18:11.960 --> 0:18:14.359 some concern here that the economic damage is going to 0:18:14.440 --> 0:18:19.560 be widespread, continued to be widespread, and perhaps last for longer. 0:18:19.600 --> 0:18:22.440 What are you seeing in terms of credit quality? Yeah, 0:18:22.440 --> 0:18:25.720 it's probably more of a k type of environment where 0:18:25.760 --> 0:18:28.679 you've got the companies that are actually in the sweet 0:18:28.720 --> 0:18:31.560 spot and benefiting from the work at home and other 0:18:31.800 --> 0:18:37.080 technology oriented or consumer oriented um effects, and then you've 0:18:37.119 --> 0:18:39.359 got the companies that got caught in the headminds of 0:18:39.440 --> 0:18:43.080 covid um, and those companies themselves is probably where the 0:18:43.119 --> 0:18:45.960 opportunity is as you look forward, in the sense that 0:18:46.000 --> 0:18:50.600 those managements now are really really focusing on cutting expenses. 0:18:51.119 --> 0:18:54.399 They've actually stopped their share buybacks in most cases, have 0:18:54.440 --> 0:18:59.520 stopped their dividends. They're focusing on improving their cash flow 0:19:00.040 --> 0:19:02.639 and using that cash flow to shore up their balance sheets. 0:19:02.960 --> 0:19:05.159 So this is one of the rare times in the 0:19:05.200 --> 0:19:09.919 economic cycle that the manager's behavior are closely aligned with 0:19:10.000 --> 0:19:13.399 bond holders. And again that's probably more in the industries 0:19:13.400 --> 0:19:16.400 that have been caught UM in the down draft of COVID, 0:19:16.760 --> 0:19:18.480 and again most of those would be in the trip 0:19:18.480 --> 0:19:22.760 will be ratings category. What would your advice be for 0:19:23.200 --> 0:19:27.160 non sophisticated investors, because obviously, you know there are different 0:19:27.200 --> 0:19:30.360 levels of investors, and there are certain of those who 0:19:30.400 --> 0:19:32.280 don't want to be in the stock market right now. 0:19:32.640 --> 0:19:35.000 Is there any way they could play in your market 0:19:36.720 --> 0:19:39.959 the our market themselves. Since we tend to deal in 0:19:40.080 --> 0:19:44.000 corporate bonds and it's taxable, it really lends itself much 0:19:44.040 --> 0:19:48.240 more to institutional investing and pension plans where the where 0:19:48.240 --> 0:19:52.040 they're non taxable or the taxes are deferred UM. But 0:19:52.160 --> 0:19:55.360 the way to actually do would be through mutual funds 0:19:55.720 --> 0:19:59.320 and some of the more perhaps UM core plus or 0:19:59.359 --> 0:20:02.440 broad market strategy funds which look to take advantage of 0:20:02.920 --> 0:20:07.080 corporates but also selective high yield and selective emerging markets, 0:20:07.320 --> 0:20:11.080 and those are typically referred to as total return bond funds, 0:20:11.160 --> 0:20:13.960 and that's probably the best vehicle that way an investor 0:20:14.040 --> 0:20:20.240 can get active management as well as diversification. Steve, how 0:20:20.240 --> 0:20:23.320 are you guys from the corporate credit perspective, handicapping the 0:20:23.400 --> 0:20:28.640 upcoming elections, both the presidential election as well as Senate. Yeah, 0:20:28.680 --> 0:20:32.080 I think this is a pretty gamy time right now. Um. 0:20:32.200 --> 0:20:35.879 And and you know, it's it's not as much probably 0:20:36.000 --> 0:20:39.920 about who wins the presidency as much as it is 0:20:40.000 --> 0:20:42.920 about how how long it takes to determine who the 0:20:43.440 --> 0:20:46.199 who that winner is um in here. But we do 0:20:46.280 --> 0:20:49.119 think that, you know, we are an environment where the 0:20:49.160 --> 0:20:51.639 markets are going to stay very volatile until we actually 0:20:51.680 --> 0:20:54.000 get to the election. And it looks like as though 0:20:54.040 --> 0:20:56.080 we've actually been able to figure out who that winner 0:20:56.160 --> 0:21:00.080 is going to be if you look forward to next here, um. 0:21:00.080 --> 0:21:04.520 Obviously the Democrats are talking about raising taxes. Um. Those 0:21:04.560 --> 0:21:08.439 tax increases for corporate America, if they occur, should be 0:21:08.440 --> 0:21:12.879 pretty modest, perhaps one to something like maybe on the 0:21:12.920 --> 0:21:16.199 tax rate. But remember, even if the Democrats get in, 0:21:16.640 --> 0:21:19.280 their primary focus next year is probably going to be 0:21:19.359 --> 0:21:22.280 to continue to fix the economy. Um. And that's going 0:21:22.320 --> 0:21:25.400 to be difficult to do if you start increasing taxes 0:21:25.400 --> 0:21:30.280 on corporations. Just briefly, how much in fallen angels are 0:21:30.280 --> 0:21:34.520 you expecting in the next you know, six twelve months. Yeah, 0:21:34.640 --> 0:21:38.239 the we've had, we've had a drop off in the 0:21:38.359 --> 0:21:41.480 rate of fallen angels recently. There's only been a few 0:21:41.600 --> 0:21:45.000 in the last few months. UM. The rating agencies, while 0:21:45.000 --> 0:21:48.600 they have a lot of these companies negative outlook, they're 0:21:48.640 --> 0:21:51.679 giving them time, um to get the benefit of the 0:21:51.760 --> 0:21:56.040 turn in the economy when when the economy fully reopens, 0:21:56.600 --> 0:21:58.840 um and I think that we think that the fallen 0:21:58.880 --> 0:22:03.400 angels are going to be relatively modished over the next 0:22:03.400 --> 0:22:06.159 twelve months. We've had we had about a hundred and 0:22:06.240 --> 0:22:09.640 sixty billion so far this year, and we would expect 0:22:09.640 --> 0:22:12.440 to be well under that over the next twelve month. Steve, 0:22:12.520 --> 0:22:14.439 thank you so much for all the details. Steve Kellner 0:22:14.600 --> 0:22:17.720 is head of Corporates at p JIM Fixed Income and 0:22:18.000 --> 0:22:20.359 what an interesting job it must be these days with 0:22:20.800 --> 0:22:23.520 practically every corporate and the market at the moment, it's 0:22:23.520 --> 0:22:28.280 really just such a fascinating market. It is time now 0:22:28.320 --> 0:22:32.920 to talk healthcare. Huge, huge policy and market driver these 0:22:32.960 --> 0:22:35.719 next few weeks. Let's bring in Brian Rye, senior healthcare 0:22:35.760 --> 0:22:39.719 policy analyst for Bloomberg Intelligence. Brian, obviously we have the 0:22:39.880 --> 0:22:44.440 Scotus nominee and the potential outcome there. We have Democrats 0:22:44.920 --> 0:22:48.720 saying that, you know, if Amy Coney Barrett is confirmed, 0:22:49.119 --> 0:22:51.960 that there's the great potential of us strikedown of the 0:22:51.960 --> 0:22:54.840 A C A in its entirety, and there are many 0:22:54.880 --> 0:22:57.640 other things to discuss as well. Let's start there, though, 0:22:58.040 --> 0:23:02.119 if Amy Coney Barrett, as we assume does get is 0:23:02.200 --> 0:23:05.960 nominated now and does get confirmed, is that automatically a 0:23:06.000 --> 0:23:09.119 strikedown of the C A. Well, Hi, Vanni, thanks for 0:23:09.160 --> 0:23:11.240 having me, And I would start by saying that, no, 0:23:11.400 --> 0:23:13.159 I don't think it's a certainty that the A C 0:23:13.320 --> 0:23:17.000 A and its entirety um would be rendered on constitutionally 0:23:17.119 --> 0:23:20.240 struck down. I think what's probably more likely to happen 0:23:20.359 --> 0:23:23.480 is that you would see the so called individual mandate 0:23:24.119 --> 0:23:28.320 probably struck down. That's not a huge deal because, frankly, 0:23:28.359 --> 0:23:32.240 because the tax law that Republicans passed zero and out 0:23:32.280 --> 0:23:35.720 the penalty for that, so in all effects, the mandates 0:23:35.760 --> 0:23:39.080 already been rendered um noll and void. I think what 0:23:39.119 --> 0:23:42.000 could happen is some uncertainty about, okay, if you strike 0:23:42.080 --> 0:23:44.879 down the mandate, are there other previsions of the A 0:23:45.040 --> 0:23:48.240 C A, such as community rating guaranteed issue the so 0:23:48.359 --> 0:23:51.560 called pre existing conditions concerned them you've we've heard a 0:23:51.600 --> 0:23:54.280