1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul Swinge 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 --> 00:00:24,920 Speaker 1: at Bloomberg dot com. Theresa May is quitting as a 8 00:00:24,920 --> 00:00:27,720 Speaker 1: Prime minister. She is out on June seven, although she 9 00:00:27,760 --> 00:00:31,440 Speaker 1: will be staying for a bit longer to manage the transition. 10 00:00:31,680 --> 00:00:35,639 Speaker 1: Right now, this is being treated as a positive in markets, 11 00:00:35,680 --> 00:00:37,800 Speaker 1: at least for the time being, with the pound gaining. 12 00:00:38,080 --> 00:00:41,479 Speaker 1: Joining us now Danny blanche Flower, Professor of Economics at Dartmouth. 13 00:00:41,479 --> 00:00:45,760 Speaker 1: He is also a former Bank of America, Bank of England. Uh, policymaker, 14 00:00:45,840 --> 00:00:49,000 Speaker 1: excuse me, Professor blanche Flower. We love having you on. 15 00:00:49,880 --> 00:00:54,560 Speaker 1: Why are British assets rallying today? Well? I see you 16 00:00:54,560 --> 00:00:59,120 Speaker 1: in some sense at least a release at the some 17 00:00:59,280 --> 00:01:03,720 Speaker 1: of the and is over, but it's really unclear kind 18 00:01:03,720 --> 00:01:06,560 Speaker 1: of where we're going. So the movement isn't that great. 19 00:01:07,040 --> 00:01:09,120 Speaker 1: And I've been thinking today I think perhaps for the 20 00:01:09,160 --> 00:01:12,000 Speaker 1: market is the most interesting thing is, in all probability 21 00:01:12,040 --> 00:01:14,160 Speaker 1: we're going to see a new chance of the Exchequer. 22 00:01:14,600 --> 00:01:17,679 Speaker 1: Who will be the person appointing the new Governor of 23 00:01:17,720 --> 00:01:20,520 Speaker 1: the Bank of England. And I think that's obviously an 24 00:01:20,560 --> 00:01:23,000 Speaker 1: issue we need to kind of care about. Who knows 25 00:01:23,040 --> 00:01:25,959 Speaker 1: where that's going to go. But the uncertainty going forward 26 00:01:26,760 --> 00:01:30,640 Speaker 1: is basically not just who the leader will be. The 27 00:01:30,760 --> 00:01:33,520 Speaker 1: reality is that this is a leader of a party 28 00:01:33,800 --> 00:01:37,160 Speaker 1: that the minority government. So the question really we should 29 00:01:37,160 --> 00:01:40,520 Speaker 1: ask ourselves is could this person actually govern? Could they 30 00:01:40,640 --> 00:01:45,039 Speaker 1: negotiate anything through the parliament? Is the Halloween deadline is 31 00:01:45,040 --> 00:01:46,960 Speaker 1: going to be pushed back, which I suspect it is, 32 00:01:47,400 --> 00:01:49,480 Speaker 1: And I think the markets have to deal with the 33 00:01:49,560 --> 00:01:52,840 Speaker 1: prospect of perhaps by Christmas there will be a labor 34 00:01:52,920 --> 00:01:56,880 Speaker 1: government headed by Corbin. All those things are on the table. 35 00:01:57,280 --> 00:02:00,240 Speaker 1: So in the short term, market saying Okay, this thing 36 00:02:00,240 --> 00:02:03,480 Speaker 1: at last has happened, But down the road, who the 37 00:02:03,480 --> 00:02:07,600 Speaker 1: heck knows? So, Professor, it appears that bars Johnson is 38 00:02:07,600 --> 00:02:11,680 Speaker 1: the favorite to replace May. What would a Bars Johnson 39 00:02:11,760 --> 00:02:16,280 Speaker 1: leadership look like? Well, it's hard to tell. I mean, 40 00:02:16,320 --> 00:02:21,839 Speaker 1: he was singularly unsuccessful as the Foreign Secretini and ended 41 00:02:21,919 --> 00:02:25,519 Speaker 1: up resigning UM with the reality that we should say 42 00:02:25,560 --> 00:02:27,799 Speaker 1: is that he was the top candidate to get the 43 00:02:27,840 --> 00:02:30,799 Speaker 1: job a loust time around, it didn't get it. I mean, 44 00:02:30,840 --> 00:02:33,000 Speaker 1: the reality is he's not going to be able to 45 00:02:33,040 --> 00:02:37,960 Speaker 1: pull together any cross party kind of consensus. So he's 46 00:02:38,000 --> 00:02:41,880 Speaker 1: a populist. Um he basically is says, I want to 47 00:02:41,880 --> 00:02:44,560 Speaker 1: go back and negotiate some deal or other and it's 48 00:02:44,600 --> 00:02:48,120 Speaker 1: not then we'll use the threat of having um having 49 00:02:48,120 --> 00:02:51,600 Speaker 1: no deal at Halloween. So I think it's not going 50 00:02:51,600 --> 00:02:54,200 Speaker 1: to be a government of consent. That the my suspicion 51 00:02:54,280 --> 00:02:57,320 Speaker 1: is if and when he gets to be Prime Minister, 52 00:02:57,480 --> 00:03:01,160 Speaker 1: my bet would be he won't last the year. Okay, 53 00:03:01,320 --> 00:03:05,960 Speaker 1: So that's perhaps why people aren't counting in the idea 54 00:03:05,960 --> 00:03:07,639 Speaker 1: of a herd Brexit as much as you would think 55 00:03:07,680 --> 00:03:10,000 Speaker 1: based on Boris Johnson's rhetoric this morning. Is that how 56 00:03:10,040 --> 00:03:14,679 Speaker 1: we can interpret that? I think? So, I mean he's 57 00:03:14,720 --> 00:03:17,000 Speaker 1: talked about we can go back to the European Union 58 00:03:17,040 --> 00:03:20,320 Speaker 1: and reading ghost games. UM, Well that you know that's 59 00:03:20,360 --> 00:03:22,720 Speaker 1: cloud cuckoo land, because the European Unions said, well, the 60 00:03:22,760 --> 00:03:25,720 Speaker 1: deal is the deal and a no deal would have 61 00:03:25,800 --> 00:03:31,120 Speaker 1: to resolve the Irish question. And Boris Johnson is very 62 00:03:31,160 --> 00:03:34,800 Speaker 1: good at headline, but not very good at the committy 63 00:03:34,880 --> 00:03:38,400 Speaker 1: gritty of actually negotiating and trying to work out what 64 00:03:38,440 --> 00:03:40,640 Speaker 1: you would do. So there's a lot of other people 65 00:03:40,640 --> 00:03:42,320 Speaker 1: who were in there, but the reality who are in 66 00:03:42,320 --> 00:03:45,880 Speaker 1: this competition, the reality of many of them of brexiteers. 67 00:03:45,960 --> 00:03:49,640 Speaker 1: But um, we we will see whether that actually will 68 00:03:49,720 --> 00:03:53,640 Speaker 1: generate any kind of majority in the House of Commons. 69 00:03:53,760 --> 00:03:55,520 Speaker 1: And what we've seen is that it has not been 70 00:03:55,560 --> 00:03:57,880 Speaker 1: able to do that. So being Prime minister at once 71 00:03:58,480 --> 00:04:01,119 Speaker 1: being able to govern is a another and I think 72 00:04:01,160 --> 00:04:04,760 Speaker 1: that's the problem. Um, And we'll see. But I don't 73 00:04:04,800 --> 00:04:08,400 Speaker 1: think much of anything is resolved. It was absolutely clear 74 00:04:08,480 --> 00:04:11,839 Speaker 1: the three times that Theresa May lost that she had 75 00:04:11,880 --> 00:04:15,280 Speaker 1: no consent as across the Parliament, and the fourth time 76 00:04:15,360 --> 00:04:18,400 Speaker 1: was not a charm and so we've really not resolved 77 00:04:18,520 --> 00:04:23,120 Speaker 1: very much. Um, we will see. So, Professor, what is 78 00:04:23,160 --> 00:04:26,080 Speaker 1: the status of a second referendum? Is that still on 79 00:04:26,120 --> 00:04:29,640 Speaker 1: the table in anyway? I absolutely think it is. It 80 00:04:30,120 --> 00:04:33,159 Speaker 1: is on the table a possibility. Many of the people 81 00:04:33,520 --> 00:04:37,760 Speaker 1: in the Tory Party who don't like it, Um, it's 82 00:04:37,760 --> 00:04:39,960 Speaker 1: still on the table. But I think the reason why 83 00:04:40,000 --> 00:04:44,000 Speaker 1: it's gained kind of complicated is unclear what what the 84 00:04:44,120 --> 00:04:47,120 Speaker 1: question would be in that referendum, So would it be 85 00:04:47,520 --> 00:04:53,000 Speaker 1: here's Theresa May's deal against remaining. So so even though 86 00:04:53,160 --> 00:04:55,599 Speaker 1: we people talk about the second referend, if you have 87 00:04:55,680 --> 00:04:59,240 Speaker 1: to resolve what's the question, you can't just say do 88 00:04:59,240 --> 00:05:01,480 Speaker 1: you want brexit or not break it? Because that's the 89 00:05:02,240 --> 00:05:04,760 Speaker 1: devil now, as we know, is in the detail. So 90 00:05:04,800 --> 00:05:08,080 Speaker 1: I think the answered yes, probably, but we have to 91 00:05:08,120 --> 00:05:15,159 Speaker 1: resolve what's in a referendum about so that so obviously 92 00:05:15,440 --> 00:05:17,880 Speaker 1: it's a big problem. But all options are on the 93 00:05:17,920 --> 00:05:21,600 Speaker 1: table um and a general election might well end up 94 00:05:21,600 --> 00:05:24,159 Speaker 1: being where where we'll end up, and I won't resolve 95 00:05:24,200 --> 00:05:27,920 Speaker 1: anything either. So just a real quick here, Danny, I'm wondering, 96 00:05:27,960 --> 00:05:31,280 Speaker 1: looking back at Theresa May's tenure, are we going to 97 00:05:31,320 --> 00:05:33,760 Speaker 1: say that she utterly failed and she could have done 98 00:05:33,800 --> 00:05:37,080 Speaker 1: something different, or that she just was dealt a terrible 99 00:05:37,120 --> 00:05:41,680 Speaker 1: hand of cards. I disagree on the delta terrible hand 100 00:05:41,720 --> 00:05:44,200 Speaker 1: of cards. She means she was delta hand. Perhaps that 101 00:05:44,320 --> 00:05:49,520 Speaker 1: was unexpected, but she made us two fundamental errors. The 102 00:05:49,560 --> 00:05:52,039 Speaker 1: first error she made but she did not reach across 103 00:05:52,080 --> 00:05:55,880 Speaker 1: the aisle to anybody outside the right essentially the right 104 00:05:55,880 --> 00:05:59,839 Speaker 1: wing of a Tory party, and that and that groups 105 00:06:00,000 --> 00:06:02,719 Speaker 1: walked down governments in the past. John Major was brought 106 00:06:02,760 --> 00:06:05,120 Speaker 1: down by by that group. So that so that was 107 00:06:05,160 --> 00:06:08,039 Speaker 1: the first thing. And the second thing she did was 108 00:06:08,080 --> 00:06:12,200 Speaker 1: she triggered Articles fifty in March two thousand and seventeen 109 00:06:12,720 --> 00:06:16,920 Speaker 1: with absolutely no plan whatsoever. So you trigger this thing 110 00:06:16,960 --> 00:06:19,880 Speaker 1: and give yourself a two year dead line with absolutely 111 00:06:19,880 --> 00:06:22,800 Speaker 1: no clue what the plan was going to be and 112 00:06:22,880 --> 00:06:26,560 Speaker 1: no possibility of generating consensus. She to do that, she 113 00:06:26,600 --> 00:06:29,520 Speaker 1: could have triggered this mark of fifty later. Still, she 114 00:06:29,600 --> 00:06:32,360 Speaker 1: just held her self a terrible hand, delt herself apple hand, 115 00:06:32,360 --> 00:06:35,320 Speaker 1: and unfortunately did not make it any better. Danny branch Flower, 116 00:06:35,360 --> 00:06:37,840 Speaker 1: Professor of economics for Dartmouth College, Thank you so much 117 00:06:37,880 --> 00:06:55,560 Speaker 1: for joining us. What has been a very difficult environment 118 00:06:55,600 --> 00:06:58,120 Speaker 1: for bricks and mortar retail. One area that has seen 119 00:06:58,200 --> 00:07:01,280 Speaker 1: growth is music and our next guest has been on 120 00:07:01,320 --> 00:07:04,479 Speaker 1: the forefront of this growth. Ron Japan, Us CEO of 121 00:07:04,520 --> 00:07:07,320 Speaker 1: Guitar Center based in Los Angeles, California. Ron, thanks so 122 00:07:07,400 --> 00:07:09,400 Speaker 1: much for joining us. Just first, I wonder if you 123 00:07:09,400 --> 00:07:12,640 Speaker 1: could just tell us about Guitar Center how big you guys. 124 00:07:12,720 --> 00:07:16,560 Speaker 1: What's the growth been looking like? Yeah, sure, Um, well, 125 00:07:16,560 --> 00:07:20,560 Speaker 1: we're about two point two billion dollars in revenue and 126 00:07:20,600 --> 00:07:24,240 Speaker 1: we go into the market with four different segments. We 127 00:07:24,360 --> 00:07:27,920 Speaker 1: have our arm knee channel segment, which is guitar center, 128 00:07:28,080 --> 00:07:31,520 Speaker 1: so those are our brick and mortar namesake stores that 129 00:07:31,640 --> 00:07:34,640 Speaker 1: we also have the ability to buy online, ship to store, 130 00:07:34,680 --> 00:07:37,760 Speaker 1: buy online, ship to customer. We didn't have a pure 131 00:07:37,800 --> 00:07:42,360 Speaker 1: play brand, which we call Musicians Friend, which is just online. 132 00:07:43,080 --> 00:07:45,600 Speaker 1: And then we have a music and Arts segment which 133 00:07:45,760 --> 00:07:48,920 Speaker 1: is the beginning stages of the musical journeys for children, 134 00:07:49,280 --> 00:07:52,600 Speaker 1: so think of band and orchestra and schools. And then 135 00:07:52,640 --> 00:07:56,600 Speaker 1: our fourth segment is our business solutions, which is our 136 00:07:56,640 --> 00:08:00,680 Speaker 1: business where we're going into other businesses help them do 137 00:08:00,880 --> 00:08:06,240 Speaker 1: conference centers, studios, bars and restaurants and businesses like that. 138 00:08:07,080 --> 00:08:09,840 Speaker 1: So we talk a lot here on the show about 139 00:08:09,920 --> 00:08:13,080 Speaker 1: brick and mortar versus online. How have you seen sort 140 00:08:13,120 --> 00:08:16,320 Speaker 1: of your two businesses when it comes to just how 141 00:08:16,400 --> 00:08:20,680 Speaker 1: you're how you're selling the goods? Uh evolve? Yeah, Well, 142 00:08:20,680 --> 00:08:24,160 Speaker 1: we've um, we have a pretty unique situation is that 143 00:08:24,240 --> 00:08:28,880 Speaker 1: our products are lend themselves to a environment where it 144 00:08:28,880 --> 00:08:31,440 Speaker 1: can really be a lot of fun. So when you 145 00:08:31,520 --> 00:08:35,360 Speaker 1: go to our Guitar Center store, it's really a experience. 146 00:08:35,760 --> 00:08:37,880 Speaker 1: So what we do is we make sure that when 147 00:08:37,880 --> 00:08:40,880 Speaker 1: you walk into the store, you're greeted by great salespeople 148 00:08:41,120 --> 00:08:44,120 Speaker 1: and you have the opportunity to actually play the instruments. 149 00:08:44,480 --> 00:08:47,040 Speaker 1: So it's a unique experience to be able to walk 150 00:08:47,080 --> 00:08:49,840 Speaker 1: in to one of our stores, take a guitar thousand 151 00:08:49,880 --> 00:08:52,599 Speaker 1: dollar guitar, ten thousand dollar guitar off the wall, be 152 00:08:52,640 --> 00:08:55,360 Speaker 1: able to sit down and play it without anybody um 153 00:08:56,040 --> 00:08:58,480 Speaker 1: bothering you. And we see that as a very unique 154 00:08:58,840 --> 00:09:01,240 Speaker 1: experience because when you go to a mom and pop 155 00:09:01,360 --> 00:09:03,559 Speaker 1: or other stores, they actually have signs on the wall 156 00:09:03,920 --> 00:09:07,160 Speaker 1: that say please do not touch, ask for salespeople. We 157 00:09:07,200 --> 00:09:09,880 Speaker 1: actually have an amp plugged in with a pick ready 158 00:09:09,920 --> 00:09:12,880 Speaker 1: to go, and you can sit down and play the guitar. 159 00:09:13,520 --> 00:09:15,640 Speaker 1: So run. You know, one of the things that Lisa 160 00:09:15,640 --> 00:09:18,600 Speaker 1: and I we hear from a lot of retail executives 161 00:09:18,600 --> 00:09:20,920 Speaker 1: when they come here talking about their business. It's about 162 00:09:21,000 --> 00:09:23,600 Speaker 1: shrinking the footprint of their stores to try to match 163 00:09:23,720 --> 00:09:26,160 Speaker 1: kind of you know, the demand out there, giving them 164 00:09:26,200 --> 00:09:27,960 Speaker 1: more and more sales are going online. You guys are 165 00:09:27,960 --> 00:09:31,920 Speaker 1: actually adding stores. Talk to us about that. Yeah, well, 166 00:09:31,960 --> 00:09:35,640 Speaker 1: so again it's in this omni channel environment for guitest 167 00:09:35,880 --> 00:09:39,000 Speaker 1: Guitar Center brand. So what you see is we're adding 168 00:09:39,000 --> 00:09:42,400 Speaker 1: about six to ten stores a year for a guitar center, 169 00:09:42,880 --> 00:09:45,880 Speaker 1: and we just opened up Hawaii recently and we're going 170 00:09:45,920 --> 00:09:48,439 Speaker 1: to open up Alaska a little bit later on the year. 171 00:09:48,480 --> 00:09:50,200 Speaker 1: So this year we pulled back to six just because 172 00:09:50,240 --> 00:09:53,240 Speaker 1: they're a little bit more complicated. But again we see 173 00:09:53,280 --> 00:09:57,880 Speaker 1: this omni channel experience because of the environment that we have. 174 00:09:58,000 --> 00:10:00,640 Speaker 1: Customers come into our stores and kind of like the 175 00:10:00,720 --> 00:10:05,640 Speaker 1: candy land for our customer, they get to see spectacular guitars. 176 00:10:05,640 --> 00:10:08,480 Speaker 1: It's not unusual to have somebody come sit down, play 177 00:10:08,480 --> 00:10:11,200 Speaker 1: a guitar, play start playing a song, have a drummer 178 00:10:11,280 --> 00:10:14,280 Speaker 1: start um playing the same song, and all of a sudden, 179 00:10:14,920 --> 00:10:16,480 Speaker 1: you've got a song being played in the store by 180 00:10:16,480 --> 00:10:20,600 Speaker 1: just customers. So that environment just keeps adding on. We're 181 00:10:20,600 --> 00:10:25,319 Speaker 1: also adding services into our business, so we have lessons, repairs, 182 00:10:25,400 --> 00:10:28,720 Speaker 1: and rentals. So we're now being able to sell you 183 00:10:28,760 --> 00:10:30,680 Speaker 1: the instrument, We're being able to teach you how to 184 00:10:30,760 --> 00:10:34,400 Speaker 1: use the instrument. We're able to support your gig at 185 00:10:34,400 --> 00:10:36,840 Speaker 1: the bar. If we need to rent some additional products 186 00:10:36,840 --> 00:10:39,120 Speaker 1: that go along with it and then repair the actual 187 00:10:39,160 --> 00:10:41,200 Speaker 1: item when it needs repair. Were just to even be 188 00:10:41,280 --> 00:10:44,839 Speaker 1: re strong. So I'm just wondering going forward, especially as 189 00:10:44,840 --> 00:10:47,360 Speaker 1: you open all of these news stores, how are you 190 00:10:47,400 --> 00:10:50,839 Speaker 1: financing that? We're doing it all on our own. Um, 191 00:10:50,920 --> 00:10:54,440 Speaker 1: we're financially sound and we have the ability to open 192 00:10:54,480 --> 00:10:57,679 Speaker 1: our stores. We've also acquired two companies recently in our 193 00:10:58,200 --> 00:11:00,960 Speaker 1: B two B segment and with as Music and Arts, 194 00:11:01,720 --> 00:11:04,360 Speaker 1: we've actually gone from a hundred and fifty stores and 195 00:11:04,400 --> 00:11:07,160 Speaker 1: we're two hundred and fifteen stores currently and we looked 196 00:11:07,240 --> 00:11:10,360 Speaker 1: open between twenty and thirty stores a year in that 197 00:11:10,440 --> 00:11:13,080 Speaker 1: business segment. But right now I'm looking, Uh, I know 198 00:11:13,160 --> 00:11:15,640 Speaker 1: that the company has a triple C rating and I'm 199 00:11:15,679 --> 00:11:18,800 Speaker 1: just wondering, I mean, that's typically closer to default. How 200 00:11:18,800 --> 00:11:21,040 Speaker 1: do you make sure that you generate enough revenue to 201 00:11:21,080 --> 00:11:24,760 Speaker 1: offset the costs of some of these expenditures. Yeah, we're 202 00:11:24,800 --> 00:11:28,920 Speaker 1: positive cash flow so UM. We manage our debt very 203 00:11:28,920 --> 00:11:31,480 Speaker 1: carefully and we have our A B L which we 204 00:11:31,559 --> 00:11:33,400 Speaker 1: use as our check book to be able to finance 205 00:11:33,440 --> 00:11:36,560 Speaker 1: our operations. And we're well within all the limits that 206 00:11:36,600 --> 00:11:38,920 Speaker 1: we have within that and we just are very prudent 207 00:11:38,920 --> 00:11:42,720 Speaker 1: about all of our expenditures. So, Ron, I know Bain 208 00:11:43,040 --> 00:11:44,719 Speaker 1: Capital acquired you guys, I guess it was ten or 209 00:11:44,760 --> 00:11:48,440 Speaker 1: twelve years ago. What's they're thinking about the investment. That's 210 00:11:48,440 --> 00:11:52,560 Speaker 1: a long time to own portfolio company. Actually, Bain doesn't 211 00:11:52,559 --> 00:11:57,959 Speaker 1: own us anymore. Bain did take us UM private, and 212 00:11:58,200 --> 00:12:01,480 Speaker 1: Aries is now the owner, and Aries has owned us 213 00:12:01,520 --> 00:12:05,560 Speaker 1: since two thousand and fourteen, and they're extremely supportive of 214 00:12:05,640 --> 00:12:07,880 Speaker 1: the direction that we're going in right now. And as 215 00:12:07,920 --> 00:12:10,960 Speaker 1: we continue to improve the business and the profitability of 216 00:12:10,960 --> 00:12:13,080 Speaker 1: the business, then um, I think, you know, we'll have 217 00:12:13,160 --> 00:12:16,360 Speaker 1: some kind of a transaction in the future. But we've 218 00:12:16,400 --> 00:12:20,560 Speaker 1: just finished six positive quarters in a row, and the 219 00:12:20,600 --> 00:12:23,520 Speaker 1: business and all of our strategies continue to do well, 220 00:12:23,559 --> 00:12:26,400 Speaker 1: and so we expect to just continue to move forward 221 00:12:26,440 --> 00:12:27,840 Speaker 1: in the way that we're doing right now for the 222 00:12:27,880 --> 00:12:31,280 Speaker 1: foreseeable future. Ron Japinka, thank you so much for joining us. 223 00:12:31,280 --> 00:12:34,680 Speaker 1: At Ron Japana is chief executive officer of Guitar Center, 224 00:12:34,720 --> 00:12:54,679 Speaker 1: based in Los Angeles. Well. One thing that rising trade 225 00:12:54,679 --> 00:12:57,360 Speaker 1: tensions between the US and China have engendered in financial 226 00:12:57,400 --> 00:13:00,400 Speaker 1: markets is volatility. To get a better I you how 227 00:13:00,440 --> 00:13:02,680 Speaker 1: to best navigate this. We turned to our next guest, 228 00:13:02,960 --> 00:13:06,880 Speaker 1: Doug's yuck Up, chief executive officer and partner for cover 229 00:13:06,920 --> 00:13:09,599 Speaker 1: Our Capital Partners. They're based in Leewood, Kansas. They have 230 00:13:09,600 --> 00:13:13,160 Speaker 1: approximately seven million dollars under management. Doug, thanks so much 231 00:13:13,240 --> 00:13:16,800 Speaker 1: for joining us. How are you guys kind of managing 232 00:13:16,840 --> 00:13:20,040 Speaker 1: the day to day swings in the marketplace that can 233 00:13:20,040 --> 00:13:22,440 Speaker 1: be you know, and you know, just created by a 234 00:13:22,480 --> 00:13:26,120 Speaker 1: tweet here or there. Yeah, you know, it's good actually 235 00:13:26,160 --> 00:13:29,280 Speaker 1: to have volatility back, and we feel like it's presenting 236 00:13:29,320 --> 00:13:32,880 Speaker 1: some opportunities for putting capital work that had not been 237 00:13:32,920 --> 00:13:34,640 Speaker 1: president in the first three or four months of the year. 238 00:13:34,679 --> 00:13:37,080 Speaker 1: And you know, I undeniably do not feel like the 239 00:13:37,120 --> 00:13:40,400 Speaker 1: market is be'm blown off course, but the winds have shifted, right, 240 00:13:40,440 --> 00:13:42,679 Speaker 1: I mean, things that were headwinds coming into the year 241 00:13:42,679 --> 00:13:44,920 Speaker 1: and now tail winds and vice versa. And you know, 242 00:13:45,000 --> 00:13:46,960 Speaker 1: the trade war going into even the month of May, 243 00:13:47,120 --> 00:13:49,280 Speaker 1: felt like there was gonna be a quick and very 244 00:13:49,320 --> 00:13:52,439 Speaker 1: prosperous resolution and that's been completely overturned. Yet at the 245 00:13:52,480 --> 00:13:54,199 Speaker 1: same time, we didn't feel like earnings were going to 246 00:13:54,280 --> 00:13:56,680 Speaker 1: be very strong, and they were considerably stronger than we 247 00:13:56,720 --> 00:13:58,880 Speaker 1: had anticipated. And you know the FED was going to 248 00:13:58,960 --> 00:14:00,520 Speaker 1: be neutral and that was gonna be a headwind. But 249 00:14:00,600 --> 00:14:03,439 Speaker 1: out looks like the Fed And even despite some of 250 00:14:03,480 --> 00:14:05,679 Speaker 1: the comments that we're pretty benign that came out on Wednesday, 251 00:14:06,000 --> 00:14:08,520 Speaker 1: I mean, the FED is doubbish. And I think when capital, 252 00:14:08,559 --> 00:14:11,800 Speaker 1: which is plentiful, starts to be mobilized in the absence 253 00:14:11,800 --> 00:14:13,920 Speaker 1: of a lot of fear that dictated the trade this 254 00:14:13,920 --> 00:14:15,640 Speaker 1: this last couple of weeks, I think it's a good 255 00:14:15,640 --> 00:14:17,719 Speaker 1: opportunity for the market to actually have kind of a 256 00:14:17,720 --> 00:14:20,800 Speaker 1: pretty constructive summer, even if it only runs in place. So, Doug, 257 00:14:20,880 --> 00:14:24,920 Speaker 1: where are you finding opportunities? Where are you buying right down? Yeah? Thankfully? So. 258 00:14:24,960 --> 00:14:27,480 Speaker 1: I we like if you look at the sector performance 259 00:14:27,520 --> 00:14:30,080 Speaker 1: this year, it's pretty amazing, right, But as it relates 260 00:14:30,120 --> 00:14:34,000 Speaker 1: to a contrarian buying opportunity in a sector like healthcare, right, 261 00:14:34,080 --> 00:14:37,280 Speaker 1: the smps of what twelve percent are almost year to 262 00:14:37,320 --> 00:14:38,760 Speaker 1: date and healthcare is up just a little bit better 263 00:14:38,760 --> 00:14:42,680 Speaker 1: than three right, And there's certainly there's regulatory knowing noise. 264 00:14:42,720 --> 00:14:45,000 Speaker 1: It's a tendant to this sector. There always is, particularly 265 00:14:45,000 --> 00:14:48,840 Speaker 1: when aspirations and in different campaign promises get to be 266 00:14:48,840 --> 00:14:51,320 Speaker 1: slung around. We're just beginning to see that, and we're 267 00:14:51,360 --> 00:14:53,000 Speaker 1: going to see that intensify over the course of the 268 00:14:53,040 --> 00:14:56,480 Speaker 1: next year. Earnings were solid in Q one, Revenue was 269 00:14:56,560 --> 00:14:59,960 Speaker 1: solid in Q one. Biotech specifically, we think in terms 270 00:15:00,160 --> 00:15:05,880 Speaker 1: maybe immune immunotherapy, genomics, these are revolutionary therapies and technologies 271 00:15:05,920 --> 00:15:08,880 Speaker 1: that we think are underappreciated. And this is a market, 272 00:15:08,920 --> 00:15:13,160 Speaker 1: particularly given the pronounced level of actility we're undergoing right now. 273 00:15:13,520 --> 00:15:18,080 Speaker 1: There's valuing substantive and substantial organic growth and high margin businesses, 274 00:15:18,120 --> 00:15:21,360 Speaker 1: and those are plentiful in the healthcare sector right now. Well, Doug, 275 00:15:21,360 --> 00:15:22,600 Speaker 1: how about in the you know, one of the things 276 00:15:22,640 --> 00:15:25,600 Speaker 1: we've seen in these uh rising trade tensions between the 277 00:15:25,680 --> 00:15:27,680 Speaker 1: US and China and what the Huahwei news is the 278 00:15:27,720 --> 00:15:30,560 Speaker 1: tech sectors kind of gotten whipped around here, the semiconductor 279 00:15:30,640 --> 00:15:33,840 Speaker 1: stocks taking a beating. Are you taking this as an 280 00:15:33,840 --> 00:15:36,840 Speaker 1: opportunity to maybe take another look at tech or does 281 00:15:36,880 --> 00:15:38,640 Speaker 1: this just too big of a risk to kind of 282 00:15:38,680 --> 00:15:40,920 Speaker 1: bite off. No, we don't think it's to be a 283 00:15:41,000 --> 00:15:42,680 Speaker 1: risk at all. Paul. You know, it's amazing. You know, 284 00:15:42,800 --> 00:15:45,040 Speaker 1: if you guys follow beast book on Twitter, they put 285 00:15:44,920 --> 00:15:49,160 Speaker 1: a phenomenal valuation compared and comparison chart out last night 286 00:15:49,640 --> 00:15:53,000 Speaker 1: that the value H the P on tech and utilities 287 00:15:53,440 --> 00:15:56,240 Speaker 1: are almost paired off right The U the P I 288 00:15:56,400 --> 00:15:59,440 Speaker 1: utilities right now are twenty point one in tech twenty 289 00:15:59,440 --> 00:16:02,920 Speaker 1: point five. We think there's some very interesting opportunities, particularly 290 00:16:02,960 --> 00:16:05,520 Speaker 1: if you consider where we are in the economic cycle, 291 00:16:05,520 --> 00:16:09,080 Speaker 1: which is undenidably late. We've seen enhancement of productivity and 292 00:16:09,120 --> 00:16:12,280 Speaker 1: the aforementioned plentiful capital that's sitting on company balance sheets 293 00:16:12,480 --> 00:16:14,920 Speaker 1: gets deployed in the fashion that's going to elevate that 294 00:16:14,960 --> 00:16:17,600 Speaker 1: productivity to take the profitability into the future. We think 295 00:16:17,640 --> 00:16:20,360 Speaker 1: tech has some very interesting opportunities right now, and I 296 00:16:21,000 --> 00:16:24,240 Speaker 1: think the Uahwei thing, as it gets thrown around, is 297 00:16:24,240 --> 00:16:26,200 Speaker 1: going to be a catalyst to really offer some of 298 00:16:26,200 --> 00:16:29,520 Speaker 1: those interesting and attractive entry points. Interesting I'm looking right now, 299 00:16:29,560 --> 00:16:31,720 Speaker 1: of course, though it yields, and I do have to 300 00:16:31,760 --> 00:16:35,840 Speaker 1: wonder whether they're sending a more bearished signal uh than equities, 301 00:16:35,960 --> 00:16:39,440 Speaker 1: especially with tenure yields hovering around the lowest since twenty seventeen. 302 00:16:40,480 --> 00:16:43,040 Speaker 1: Do you think that that that we can sort of 303 00:16:43,080 --> 00:16:45,080 Speaker 1: take some kind of bearished signal here or do you 304 00:16:45,080 --> 00:16:47,640 Speaker 1: think that there's just a different story priced in having 305 00:16:47,680 --> 00:16:52,120 Speaker 1: to do with Central Bank doublish policies. Yeah, there's always 306 00:16:52,160 --> 00:16:54,960 Speaker 1: a message in the bond market, Riley. So we always 307 00:16:54,960 --> 00:16:57,320 Speaker 1: say the bond market is more cold, hard and calculating 308 00:16:57,320 --> 00:16:59,800 Speaker 1: in the stock markets, more that of the kind of 309 00:16:59,320 --> 00:17:03,320 Speaker 1: the realm of the temperamental child. And it certainly is 310 00:17:03,360 --> 00:17:07,320 Speaker 1: telling us that inflation is not an issue. It's likely 311 00:17:07,400 --> 00:17:11,400 Speaker 1: telling us that growth rates may moderate. It is certainly 312 00:17:11,480 --> 00:17:16,160 Speaker 1: embedding some sort of an elongation of the trade tariffs 313 00:17:16,200 --> 00:17:19,879 Speaker 1: and foreign and domestic politics. If you think about like 314 00:17:19,960 --> 00:17:23,760 Speaker 1: the two axes upon which markets pivot. You have access 315 00:17:23,800 --> 00:17:26,679 Speaker 1: to capital and you have confidence, and the bond market 316 00:17:26,720 --> 00:17:29,119 Speaker 1: is a proxy for both, and it's kind of splitting 317 00:17:29,160 --> 00:17:32,720 Speaker 1: its time right now. Capital is plentiful, but confidence is 318 00:17:32,840 --> 00:17:36,760 Speaker 1: absolutely waning. So people are kind of look for a signal, 319 00:17:37,160 --> 00:17:39,520 Speaker 1: and not likely that would be embedded in a backup 320 00:17:39,560 --> 00:17:41,760 Speaker 1: and yields, because even though yields will come down over 321 00:17:41,800 --> 00:17:44,920 Speaker 1: the course last three months, the curve has steepens. You've 322 00:17:44,920 --> 00:17:47,399 Speaker 1: had it's bull stepening trade that's been in place. That 323 00:17:47,520 --> 00:17:50,240 Speaker 1: does give us an indication that if things do tend normalize, 324 00:17:50,280 --> 00:17:52,840 Speaker 1: that can make a very productive contribution to the markets 325 00:17:52,840 --> 00:17:55,720 Speaker 1: continuing forward. But the message of the bond market should 326 00:17:55,760 --> 00:17:58,119 Speaker 1: never be ignored. So, Doug, are you part of what 327 00:17:58,240 --> 00:18:00,960 Speaker 1: I guess I would call the kid census. Uh that 328 00:18:01,040 --> 00:18:03,760 Speaker 1: it looks like the FED will cut rates at least 329 00:18:03,840 --> 00:18:07,880 Speaker 1: once before the end of the year. I don't know, Paul, 330 00:18:07,880 --> 00:18:10,640 Speaker 1: that is such a tough prediction to make. Means certainly 331 00:18:11,000 --> 00:18:13,359 Speaker 1: like the Bloomberg the w I r P screed is 332 00:18:13,400 --> 00:18:17,000 Speaker 1: giving what a my favorite Thank yeah, I love it 333 00:18:17,040 --> 00:18:19,280 Speaker 1: as well. And in the market is in the market, 334 00:18:19,280 --> 00:18:20,840 Speaker 1: and w I r P has always been a little 335 00:18:20,840 --> 00:18:23,679 Speaker 1: bit detached from the Fed. I really don't know that 336 00:18:23,760 --> 00:18:27,800 Speaker 1: the Fed needs to cut rates clearly if they don't 337 00:18:27,880 --> 00:18:31,840 Speaker 1: feel like the economy is running, you know, so weaker, 338 00:18:31,880 --> 00:18:33,000 Speaker 1: and what do you want to look at the GDP 339 00:18:33,080 --> 00:18:36,840 Speaker 1: now from the Atlanta Fed or other um underlying sort 340 00:18:36,880 --> 00:18:39,439 Speaker 1: of data points. I don't feel like they need the 341 00:18:39,520 --> 00:18:42,520 Speaker 1: stimulus now if you could get something that kind of 342 00:18:42,640 --> 00:18:46,240 Speaker 1: runs and buttresses the monetary policy, like something for us 343 00:18:46,000 --> 00:18:48,240 Speaker 1: to productive about a fiscal policy, and who knows, maybe 344 00:18:48,240 --> 00:18:50,760 Speaker 1: we get some kind of a breakthrough announcement with capital 345 00:18:50,840 --> 00:18:53,280 Speaker 1: spending and infrastructure and that kind of thing. I don't 346 00:18:53,320 --> 00:18:56,080 Speaker 1: think the FED once to cut I hope the FED 347 00:18:56,200 --> 00:18:58,080 Speaker 1: does not cut. It is interesting to me that the 348 00:18:58,119 --> 00:19:00,480 Speaker 1: market is obviously a far more pessimistic than the set 349 00:19:00,560 --> 00:19:03,720 Speaker 1: is communicating or the economic data is demonstrating. No, I 350 00:19:03,720 --> 00:19:05,760 Speaker 1: am not in a camp that they will doug. I'm 351 00:19:05,800 --> 00:19:08,760 Speaker 1: struck by sort of this dissonance here. There's some people 352 00:19:08,800 --> 00:19:11,600 Speaker 1: who say that the trade concerns are really what's weighing 353 00:19:11,800 --> 00:19:15,399 Speaker 1: on equities and what's certainly creating a bid for bonds. 354 00:19:15,400 --> 00:19:18,439 Speaker 1: Other people saying that that's actually the peripheral story and 355 00:19:18,480 --> 00:19:20,960 Speaker 1: it really has to do with slowing growth globally. Where 356 00:19:20,960 --> 00:19:24,520 Speaker 1: do you come in on this, I think the the former. 357 00:19:24,920 --> 00:19:28,679 Speaker 1: I've not seen any slowing growth globally. I think we 358 00:19:28,760 --> 00:19:31,200 Speaker 1: have a fear of slowing growth globally. That goes back 359 00:19:31,240 --> 00:19:33,200 Speaker 1: to the message of the bond market. Have not seen 360 00:19:33,280 --> 00:19:36,440 Speaker 1: the data that would support that, other than in some 361 00:19:36,520 --> 00:19:41,680 Speaker 1: anticipatory impact of the trade tariffs and it's it's contractionary 362 00:19:41,800 --> 00:19:45,120 Speaker 1: capacity or it's play itself out. I've just not seen 363 00:19:45,160 --> 00:19:47,960 Speaker 1: it yet least. I think it's more just consternation and fear, 364 00:19:48,400 --> 00:19:51,720 Speaker 1: and that's being pulled forward, not unlike the optimism and 365 00:19:51,800 --> 00:19:53,880 Speaker 1: the greed had been pulled forward in the first three 366 00:19:53,920 --> 00:19:56,760 Speaker 1: or four months of this year just real quickly ten seconds, 367 00:19:56,760 --> 00:19:58,760 Speaker 1: is or anything. You're just staying away from any equity 368 00:19:58,840 --> 00:20:02,800 Speaker 1: sector there really is not. I mean, I think when 369 00:20:02,840 --> 00:20:04,520 Speaker 1: you look at some of the valuations in the most 370 00:20:04,560 --> 00:20:07,680 Speaker 1: defensive sectors like utilities in real estate and to think 371 00:20:07,680 --> 00:20:10,919 Speaker 1: that they're up and growing it two or three percent 372 00:20:11,080 --> 00:20:14,200 Speaker 1: with a P, I think you have to be really 373 00:20:14,240 --> 00:20:17,399 Speaker 1: cautious there and selective. But as kind of wholesale basis, No, 374 00:20:17,560 --> 00:20:20,120 Speaker 1: we're kind of consider everything on kind of an individual 375 00:20:20,200 --> 00:20:23,399 Speaker 1: fundamental assessment basis. Doug Cioca, thank you so much for 376 00:20:23,440 --> 00:20:26,000 Speaker 1: being with us. Doug Cioca, chief executive officer and partner 377 00:20:26,080 --> 00:20:30,919 Speaker 1: at uh Cover Capital Partners from Leewood, Kansas. Interesting to 378 00:20:31,000 --> 00:20:33,280 Speaker 1: see that he's seeing opportunities and he does think that 379 00:20:33,320 --> 00:20:35,320 Speaker 1: this is more a story about trade concerns that it 380 00:20:35,400 --> 00:20:53,760 Speaker 1: is slowing global growth. Talking about municipal bonds, we have 381 00:20:53,800 --> 00:20:56,199 Speaker 1: to talk about the tremendous rally that we've seen in 382 00:20:56,240 --> 00:20:59,760 Speaker 1: the debt, where we've seen prices on the debt rising 383 00:20:59,760 --> 00:21:03,000 Speaker 1: to record highs relative to treasuries. Were very lucky to 384 00:21:03,000 --> 00:21:05,879 Speaker 1: have with us here. Amanda al Rite, municipal bond reporter 385 00:21:05,960 --> 00:21:10,159 Speaker 1: for Bloomberg News. In our interactive broker studios in New York. So, Amanda, 386 00:21:10,280 --> 00:21:12,880 Speaker 1: there are a number of analysts coming out from big 387 00:21:12,920 --> 00:21:16,440 Speaker 1: banks saying, Okay, this has gotten a little ahead of itself. 388 00:21:17,040 --> 00:21:20,080 Speaker 1: There is going to be a pullback. What's the argument, right? 389 00:21:20,119 --> 00:21:22,439 Speaker 1: So I talked to some portfolio managers this week that 390 00:21:22,560 --> 00:21:25,080 Speaker 1: kind of made the case that with Muni's UM, whenever 391 00:21:25,119 --> 00:21:28,199 Speaker 1: you see a sustained period of really big inflows like 392 00:21:28,200 --> 00:21:30,639 Speaker 1: what we're seeing now, um, you're just kind of waiting 393 00:21:30,640 --> 00:21:32,760 Speaker 1: for the other shoot to drop. UM. I think what's 394 00:21:32,760 --> 00:21:35,600 Speaker 1: really interesting about this moment is that investors don't really 395 00:21:35,600 --> 00:21:37,440 Speaker 1: know what that will be. So some people have even 396 00:21:37,480 --> 00:21:40,639 Speaker 1: talked about the election is being something that could trigger 397 00:21:40,680 --> 00:21:43,520 Speaker 1: that or something even more soon if people start to 398 00:21:43,560 --> 00:21:45,720 Speaker 1: realize that they're kind of paying a lot to own 399 00:21:45,760 --> 00:21:48,480 Speaker 1: munis right now, and maybe they're not being compensated for 400 00:21:48,520 --> 00:21:51,320 Speaker 1: the risks, or maybe they're better off buying treasuries or 401 00:21:51,359 --> 00:21:54,359 Speaker 1: corporate bonds instead. So, Amanda, we've seen really have the 402 00:21:54,440 --> 00:21:58,000 Speaker 1: less several months, if not more, just this tremendous inflows 403 00:21:58,000 --> 00:22:01,040 Speaker 1: into the municipal bond market. Um, are we seeing a 404 00:22:01,119 --> 00:22:05,600 Speaker 1: kind of commensurate new issuance by municipality? Saying boy, this 405 00:22:05,680 --> 00:22:07,720 Speaker 1: market's great. I better just go out and raise the 406 00:22:07,720 --> 00:22:10,359 Speaker 1: money while I can. UM. Absolutely not UM. So the 407 00:22:10,440 --> 00:22:14,920 Speaker 1: last time i'd not so much. So when I checked 408 00:22:14,960 --> 00:22:18,320 Speaker 1: this morning UM on NBM, which shows UM the scheduled 409 00:22:18,320 --> 00:22:20,800 Speaker 1: bond sales versus the amount of bonds maturing and being 410 00:22:20,800 --> 00:22:23,480 Speaker 1: called away, I think it outweighs it by over twenty 411 00:22:23,480 --> 00:22:25,960 Speaker 1: billion right now. And so we're entering this period where 412 00:22:26,000 --> 00:22:28,960 Speaker 1: bond sales are really really light UM. You know, finance 413 00:22:29,000 --> 00:22:32,240 Speaker 1: officials are on vacation just like everyone else UM. And 414 00:22:32,440 --> 00:22:34,000 Speaker 1: but we're having all this money pulled out of the 415 00:22:34,040 --> 00:22:37,199 Speaker 1: market and it's looking to get reinvested. So investors are 416 00:22:37,200 --> 00:22:39,639 Speaker 1: looking to that as another kind of UM supporter of 417 00:22:39,680 --> 00:22:42,679 Speaker 1: performance UM. But it's also kind of a frustration to 418 00:22:42,720 --> 00:22:44,560 Speaker 1: them because they have all this money to put to work, 419 00:22:44,560 --> 00:22:46,119 Speaker 1: but they don't really have a place to put it. 420 00:22:46,280 --> 00:22:48,000 Speaker 1: They have a place to put it, they're just not 421 00:22:48,400 --> 00:22:51,080 Speaker 1: doing it right. I mean, we're talking about infrastructure spending, 422 00:22:51,400 --> 00:22:53,360 Speaker 1: and we've been talking about the two trillion dollar plan 423 00:22:53,440 --> 00:22:57,560 Speaker 1: that won't or wasn't or has not been UM. Why 424 00:22:57,640 --> 00:23:01,640 Speaker 1: aren't some of these localities just doing it themselves. So 425 00:23:01,960 --> 00:23:04,760 Speaker 1: I think this is a really interesting conundrum. Dallas fort 426 00:23:04,800 --> 00:23:07,320 Speaker 1: Worth said this week that they are doing a three 427 00:23:07,359 --> 00:23:10,760 Speaker 1: point five billion dollar expansion UM. So that's an example of, 428 00:23:10,840 --> 00:23:13,280 Speaker 1: you know, a place that's going at it alone. UM. 429 00:23:13,280 --> 00:23:15,800 Speaker 1: But I think that, you know, whether it's smart or not, 430 00:23:15,920 --> 00:23:18,760 Speaker 1: I think mayors and governors in some ways they're holding 431 00:23:18,760 --> 00:23:20,880 Speaker 1: out a little bit of hope for the federal government. 432 00:23:20,920 --> 00:23:23,639 Speaker 1: We have seen, you know, some gas tax proposals. Some 433 00:23:23,720 --> 00:23:25,920 Speaker 1: of those have been UM successful, and some of those 434 00:23:25,920 --> 00:23:28,800 Speaker 1: are kind of tied up in political stuff right now. 435 00:23:29,040 --> 00:23:31,960 Speaker 1: Michigan is still considering their's UM. But in terms of 436 00:23:32,000 --> 00:23:33,920 Speaker 1: like the super local level, I feel like there's still 437 00:23:33,920 --> 00:23:35,480 Speaker 1: a little bit of reluctance and a little bit of 438 00:23:35,480 --> 00:23:37,919 Speaker 1: fear about taking on debt. Still, let's look at the 439 00:23:37,960 --> 00:23:39,560 Speaker 1: other side of the equation a little bit, like when 440 00:23:39,600 --> 00:23:43,480 Speaker 1: I think about chronic fiscal woes at the state level 441 00:23:43,520 --> 00:23:47,280 Speaker 1: and municipal level, I think Illinois, but the bonds are 442 00:23:47,320 --> 00:23:50,000 Speaker 1: doing really well. What's going on there? Yeah, So the 443 00:23:50,040 --> 00:23:53,520 Speaker 1: situation for Illinois UM investors have gotten more optimistic about 444 00:23:53,560 --> 00:23:56,960 Speaker 1: it under UM JB. Pritzker, who's the new Democratic governor UM. 445 00:23:57,000 --> 00:24:00,000 Speaker 1: So you have one party rule in Illinois now UM, 446 00:24:00,000 --> 00:24:02,639 Speaker 1: and the state is getting closer to enacting a progressive 447 00:24:02,640 --> 00:24:05,720 Speaker 1: income tax structure, which will help them you know, raise 448 00:24:05,760 --> 00:24:08,800 Speaker 1: more revenue from wealthier earners in the state. Um. So 449 00:24:08,840 --> 00:24:11,320 Speaker 1: that's caused the bonds to rally, and you know investors 450 00:24:11,320 --> 00:24:15,439 Speaker 1: are really looking to as potentially you know, being a 451 00:24:15,480 --> 00:24:18,080 Speaker 1: further boon to the state's bonds. But again, that's kind 452 00:24:18,080 --> 00:24:20,560 Speaker 1: of making a big bet on what residents will do 453 00:24:20,640 --> 00:24:22,440 Speaker 1: when that's up for a vote. And we've started to 454 00:24:22,440 --> 00:24:25,040 Speaker 1: see a lot more money moved towards Puerto Rico again, right, 455 00:24:25,400 --> 00:24:27,879 Speaker 1: that's true. We've seen um, you know, high yield funds, 456 00:24:27,880 --> 00:24:30,320 Speaker 1: they keep attracting cash. We've seen some high yield deals 457 00:24:30,320 --> 00:24:32,639 Speaker 1: on the calendar this week, um that my colleague Joe 458 00:24:32,680 --> 00:24:34,760 Speaker 1: Meisac has been writing about. Um, you know those are 459 00:24:34,760 --> 00:24:38,040 Speaker 1: getting um strong market access still and again this is 460 00:24:38,040 --> 00:24:40,040 Speaker 1: a time when we're seeing you know, even Wall Street 461 00:24:40,040 --> 00:24:42,320 Speaker 1: analysts saying, hey, like maybe now isn't the best time 462 00:24:42,359 --> 00:24:46,359 Speaker 1: to be buying these is. I don't know, how does 463 00:24:46,440 --> 00:24:49,680 Speaker 1: a musicable market look at Puerto Rico now? Has it 464 00:24:49,760 --> 00:24:53,879 Speaker 1: been you know, permanently negatively impacted or is it a 465 00:24:53,920 --> 00:24:57,400 Speaker 1: temporary thing? And once it becomes clear that they've got 466 00:24:57,440 --> 00:25:00,280 Speaker 1: their duck scenario that the investors will come back. UM. 467 00:25:00,320 --> 00:25:02,879 Speaker 1: It's really this is like the key Muni market debate 468 00:25:03,000 --> 00:25:04,720 Speaker 1: right now. So you can talk to some folks that 469 00:25:04,760 --> 00:25:07,280 Speaker 1: are really optimistic on Puerto Rico, UM, you know, especially 470 00:25:07,280 --> 00:25:10,040 Speaker 1: after the hurricane and all the federal money um expected 471 00:25:10,040 --> 00:25:12,160 Speaker 1: to come in. That's a positive. But if you talk 472 00:25:12,200 --> 00:25:14,560 Speaker 1: to other folks, UM, you know, they've kind of been 473 00:25:14,600 --> 00:25:17,200 Speaker 1: burned before and they're seeing that the underlying issues in 474 00:25:17,240 --> 00:25:20,000 Speaker 1: Puerto Rico with its economy, you know, still exist and 475 00:25:20,080 --> 00:25:22,080 Speaker 1: maybe haven't been fully addressed. So it really depends on 476 00:25:22,080 --> 00:25:25,440 Speaker 1: who you ask. Is there any sign of any pullback 477 00:25:25,720 --> 00:25:29,320 Speaker 1: by investors or at least a softening in demand as 478 00:25:29,320 --> 00:25:32,159 Speaker 1: a growing number of analysts say, you know what, guys, 479 00:25:32,359 --> 00:25:36,000 Speaker 1: maybe just temper your enthusiasm. UM. I haven't seen any 480 00:25:36,000 --> 00:25:38,720 Speaker 1: signs of that yet, but it wouldn't surprise me there 481 00:25:38,760 --> 00:25:41,640 Speaker 1: there have been none. I think most people are kind 482 00:25:41,640 --> 00:25:44,679 Speaker 1: of um, they're not hesitating to, you know, complain to 483 00:25:44,680 --> 00:25:47,640 Speaker 1: me about how how high prices are. UM. So it's 484 00:25:47,640 --> 00:25:50,399 Speaker 1: just a matter of when portfolio managers decide, you know, 485 00:25:50,440 --> 00:25:52,520 Speaker 1: to kind of step off completely. That was that was 486 00:25:52,640 --> 00:25:56,520 Speaker 1: so diplomatic. They're not hesitating to complain. I just picture 487 00:25:56,560 --> 00:25:58,840 Speaker 1: the phone calls that you get from people saying, oh 488 00:25:58,920 --> 00:26:03,320 Speaker 1: my gosh, too, Darna, I'm not buying him. Amanda Albright, 489 00:26:03,359 --> 00:26:06,280 Speaker 1: thank you so much. Amanda's Umenissa Bond, reporter for Bloomberg News, 490 00:26:06,320 --> 00:26:09,320 Speaker 1: joining us here on our interactive broker studio. Thanks for 491 00:26:09,359 --> 00:26:12,080 Speaker 1: listening to the Bloomberg pen L podcast. You can subscribe 492 00:26:12,080 --> 00:26:14,920 Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast 493 00:26:14,920 --> 00:26:18,440 Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. 494 00:26:18,520 --> 00:26:21,000 Speaker 1: I'm Lisa Abram Woyds. I'm on Twitter at Lisa Abram 495 00:26:21,000 --> 00:26:24,320 Speaker 1: wits one. Before the podcast, you can always catch us worldwide. 496 00:26:24,320 --> 00:26:25,280 Speaker 1: I'm Bloomberg Radio