Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul Swinge you.
Speaker 1: Along with my co host Lisa Brahma Waits. Each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money, whether at the grocery store or
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
Speaker 1: podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. Theresa May is quitting as a
Speaker 1: Prime minister. She is out on June seven, although she
Speaker 1: will be staying for a bit longer to manage the transition.
Speaker 1: Right now, this is being treated as a positive in markets,
Speaker 1: at least for the time being, with the pound gaining.
Speaker 1: Joining us now Danny blanche Flower, Professor of Economics at Dartmouth.
Speaker 1: He is also a former Bank of America, Bank of England. Uh, policymaker,
Speaker 1: excuse me, Professor blanche Flower. We love having you on.
Speaker 1: Why are British assets rallying today? Well? I see you
Speaker 1: in some sense at least a release at the some
Speaker 1: of the and is over, but it's really unclear kind
Speaker 1: of where we're going. So the movement isn't that great.
Speaker 1: And I've been thinking today I think perhaps for the
Speaker 1: market is the most interesting thing is, in all probability
Speaker 1: we're going to see a new chance of the Exchequer.
Speaker 1: Who will be the person appointing the new Governor of
Speaker 1: the Bank of England. And I think that's obviously an
Speaker 1: issue we need to kind of care about. Who knows
Speaker 1: where that's going to go. But the uncertainty going forward
Speaker 1: is basically not just who the leader will be. The
Speaker 1: reality is that this is a leader of a party
Speaker 1: that the minority government. So the question really we should
Speaker 1: ask ourselves is could this person actually govern? Could they
Speaker 1: negotiate anything through the parliament? Is the Halloween deadline is
Speaker 1: going to be pushed back, which I suspect it is,
Speaker 1: And I think the markets have to deal with the
Speaker 1: prospect of perhaps by Christmas there will be a labor
Speaker 1: government headed by Corbin. All those things are on the table.
Speaker 1: So in the short term, market saying Okay, this thing
Speaker 1: at last has happened, But down the road, who the
Speaker 1: heck knows? So, Professor, it appears that bars Johnson is
Speaker 1: the favorite to replace May. What would a Bars Johnson
Speaker 1: leadership look like? Well, it's hard to tell. I mean,
Speaker 1: he was singularly unsuccessful as the Foreign Secretini and ended
Speaker 1: up resigning UM with the reality that we should say
Speaker 1: is that he was the top candidate to get the
Speaker 1: job a loust time around, it didn't get it. I mean,
Speaker 1: the reality is he's not going to be able to
Speaker 1: pull together any cross party kind of consensus. So he's
Speaker 1: a populist. Um he basically is says, I want to
Speaker 1: go back and negotiate some deal or other and it's
Speaker 1: not then we'll use the threat of having um having
Speaker 1: no deal at Halloween. So I think it's not going
Speaker 1: to be a government of consent. That the my suspicion
Speaker 1: is if and when he gets to be Prime Minister,
Speaker 1: my bet would be he won't last the year. Okay,
Speaker 1: So that's perhaps why people aren't counting in the idea
Speaker 1: of a herd Brexit as much as you would think
Speaker 1: based on Boris Johnson's rhetoric this morning. Is that how
Speaker 1: we can interpret that? I think? So, I mean he's
Speaker 1: talked about we can go back to the European Union
Speaker 1: and reading ghost games. UM, Well that you know that's
Speaker 1: cloud cuckoo land, because the European Unions said, well, the
Speaker 1: deal is the deal and a no deal would have
Speaker 1: to resolve the Irish question. And Boris Johnson is very
Speaker 1: good at headline, but not very good at the committy
Speaker 1: gritty of actually negotiating and trying to work out what
Speaker 1: you would do. So there's a lot of other people
Speaker 1: who were in there, but the reality who are in
Speaker 1: this competition, the reality of many of them of brexiteers.
Speaker 1: But um, we we will see whether that actually will
Speaker 1: generate any kind of majority in the House of Commons.
Speaker 1: And what we've seen is that it has not been
Speaker 1: able to do that. So being Prime minister at once
Speaker 1: being able to govern is a another and I think
Speaker 1: that's the problem. Um, And we'll see. But I don't
Speaker 1: think much of anything is resolved. It was absolutely clear
Speaker 1: the three times that Theresa May lost that she had
Speaker 1: no consent as across the Parliament, and the fourth time
Speaker 1: was not a charm and so we've really not resolved
Speaker 1: very much. Um, we will see. So, Professor, what is
Speaker 1: the status of a second referendum? Is that still on
Speaker 1: the table in anyway? I absolutely think it is. It
Speaker 1: is on the table a possibility. Many of the people
Speaker 1: in the Tory Party who don't like it, Um, it's
Speaker 1: still on the table. But I think the reason why
Speaker 1: it's gained kind of complicated is unclear what what the
Speaker 1: question would be in that referendum, So would it be
Speaker 1: here's Theresa May's deal against remaining. So so even though
Speaker 1: we people talk about the second referend, if you have
Speaker 1: to resolve what's the question, you can't just say do
Speaker 1: you want brexit or not break it? Because that's the
Speaker 1: devil now, as we know, is in the detail. So
Speaker 1: I think the answered yes, probably, but we have to
Speaker 1: resolve what's in a referendum about so that so obviously
Speaker 1: it's a big problem. But all options are on the
Speaker 1: table um and a general election might well end up
Speaker 1: being where where we'll end up, and I won't resolve
Speaker 1: anything either. So just a real quick here, Danny, I'm wondering,
Speaker 1: looking back at Theresa May's tenure, are we going to
Speaker 1: say that she utterly failed and she could have done
Speaker 1: something different, or that she just was dealt a terrible
Speaker 1: hand of cards. I disagree on the delta terrible hand
Speaker 1: of cards. She means she was delta hand. Perhaps that
Speaker 1: was unexpected, but she made us two fundamental errors. The
Speaker 1: first error she made but she did not reach across
Speaker 1: the aisle to anybody outside the right essentially the right
Speaker 1: wing of a Tory party, and that and that groups
Speaker 1: walked down governments in the past. John Major was brought
Speaker 1: down by by that group. So that so that was
Speaker 1: the first thing. And the second thing she did was
Speaker 1: she triggered Articles fifty in March two thousand and seventeen
Speaker 1: with absolutely no plan whatsoever. So you trigger this thing
Speaker 1: and give yourself a two year dead line with absolutely
Speaker 1: no clue what the plan was going to be and
Speaker 1: no possibility of generating consensus. She to do that, she
Speaker 1: could have triggered this mark of fifty later. Still, she
Speaker 1: just held her self a terrible hand, delt herself apple hand,
Speaker 1: and unfortunately did not make it any better. Danny branch Flower,
Speaker 1: Professor of economics for Dartmouth College, Thank you so much
Speaker 1: for joining us. What has been a very difficult environment
Speaker 1: for bricks and mortar retail. One area that has seen
Speaker 1: growth is music and our next guest has been on
Speaker 1: the forefront of this growth. Ron Japan, Us CEO of
Speaker 1: Guitar Center based in Los Angeles, California. Ron, thanks so
Speaker 1: much for joining us. Just first, I wonder if you
Speaker 1: could just tell us about Guitar Center how big you guys.
Speaker 1: What's the growth been looking like? Yeah, sure, Um, well,
Speaker 1: we're about two point two billion dollars in revenue and
Speaker 1: we go into the market with four different segments. We
Speaker 1: have our arm knee channel segment, which is guitar center,
Speaker 1: so those are our brick and mortar namesake stores that
Speaker 1: we also have the ability to buy online, ship to store,
Speaker 1: buy online, ship to customer. We didn't have a pure
Speaker 1: play brand, which we call Musicians Friend, which is just online.
Speaker 1: And then we have a music and Arts segment which
Speaker 1: is the beginning stages of the musical journeys for children,
Speaker 1: so think of band and orchestra and schools. And then
Speaker 1: our fourth segment is our business solutions, which is our
Speaker 1: business where we're going into other businesses help them do
Speaker 1: conference centers, studios, bars and restaurants and businesses like that.
Speaker 1: So we talk a lot here on the show about
Speaker 1: brick and mortar versus online. How have you seen sort
Speaker 1: of your two businesses when it comes to just how
Speaker 1: you're how you're selling the goods? Uh evolve? Yeah, Well,
Speaker 1: we've um, we have a pretty unique situation is that
Speaker 1: our products are lend themselves to a environment where it
Speaker 1: can really be a lot of fun. So when you
Speaker 1: go to our Guitar Center store, it's really a experience.
Speaker 1: So what we do is we make sure that when
Speaker 1: you walk into the store, you're greeted by great salespeople
Speaker 1: and you have the opportunity to actually play the instruments.
Speaker 1: So it's a unique experience to be able to walk
Speaker 1: in to one of our stores, take a guitar thousand
Speaker 1: dollar guitar, ten thousand dollar guitar off the wall, be
Speaker 1: able to sit down and play it without anybody um
Speaker 1: bothering you. And we see that as a very unique
Speaker 1: experience because when you go to a mom and pop
Speaker 1: or other stores, they actually have signs on the wall
Speaker 1: that say please do not touch, ask for salespeople. We
Speaker 1: actually have an amp plugged in with a pick ready
Speaker 1: to go, and you can sit down and play the guitar.
Speaker 1: So run. You know, one of the things that Lisa
Speaker 1: and I we hear from a lot of retail executives
Speaker 1: when they come here talking about their business. It's about
Speaker 1: shrinking the footprint of their stores to try to match
Speaker 1: kind of you know, the demand out there, giving them
Speaker 1: more and more sales are going online. You guys are
Speaker 1: actually adding stores. Talk to us about that. Yeah, well,
Speaker 1: so again it's in this omni channel environment for guitest
Speaker 1: Guitar Center brand. So what you see is we're adding
Speaker 1: about six to ten stores a year for a guitar center,
Speaker 1: and we just opened up Hawaii recently and we're going
Speaker 1: to open up Alaska a little bit later on the year.
Speaker 1: So this year we pulled back to six just because
Speaker 1: they're a little bit more complicated. But again we see
Speaker 1: this omni channel experience because of the environment that we have.
Speaker 1: Customers come into our stores and kind of like the
Speaker 1: candy land for our customer, they get to see spectacular guitars.
Speaker 1: It's not unusual to have somebody come sit down, play
Speaker 1: a guitar, play start playing a song, have a drummer
Speaker 1: start um playing the same song, and all of a sudden,
Speaker 1: you've got a song being played in the store by
Speaker 1: just customers. So that environment just keeps adding on. We're
Speaker 1: also adding services into our business, so we have lessons, repairs,
Speaker 1: and rentals. So we're now being able to sell you
Speaker 1: the instrument, We're being able to teach you how to
Speaker 1: use the instrument. We're able to support your gig at
Speaker 1: the bar. If we need to rent some additional products
Speaker 1: that go along with it and then repair the actual
Speaker 1: item when it needs repair. Were just to even be
Speaker 1: re strong. So I'm just wondering going forward, especially as
Speaker 1: you open all of these news stores, how are you
Speaker 1: financing that? We're doing it all on our own. Um,
Speaker 1: we're financially sound and we have the ability to open
Speaker 1: our stores. We've also acquired two companies recently in our
Speaker 1: B two B segment and with as Music and Arts,
Speaker 1: we've actually gone from a hundred and fifty stores and
Speaker 1: we're two hundred and fifteen stores currently and we looked
Speaker 1: open between twenty and thirty stores a year in that
Speaker 1: business segment. But right now I'm looking, Uh, I know
Speaker 1: that the company has a triple C rating and I'm
Speaker 1: just wondering, I mean, that's typically closer to default. How
Speaker 1: do you make sure that you generate enough revenue to
Speaker 1: offset the costs of some of these expenditures. Yeah, we're
Speaker 1: positive cash flow so UM. We manage our debt very
Speaker 1: carefully and we have our A B L which we
Speaker 1: use as our check book to be able to finance
Speaker 1: our operations. And we're well within all the limits that
Speaker 1: we have within that and we just are very prudent
Speaker 1: about all of our expenditures. So, Ron, I know Bain
Speaker 1: Capital acquired you guys, I guess it was ten or
Speaker 1: twelve years ago. What's they're thinking about the investment. That's
Speaker 1: a long time to own portfolio company. Actually, Bain doesn't
Speaker 1: own us anymore. Bain did take us UM private, and
Speaker 1: Aries is now the owner, and Aries has owned us
Speaker 1: since two thousand and fourteen, and they're extremely supportive of
Speaker 1: the direction that we're going in right now. And as
Speaker 1: we continue to improve the business and the profitability of
Speaker 1: the business, then um, I think, you know, we'll have
Speaker 1: some kind of a transaction in the future. But we've
Speaker 1: just finished six positive quarters in a row, and the
Speaker 1: business and all of our strategies continue to do well,
Speaker 1: and so we expect to just continue to move forward
Speaker 1: in the way that we're doing right now for the
Speaker 1: foreseeable future. Ron Japinka, thank you so much for joining us.
Speaker 1: At Ron Japana is chief executive officer of Guitar Center,
Speaker 1: based in Los Angeles. Well. One thing that rising trade
Speaker 1: tensions between the US and China have engendered in financial
Speaker 1: markets is volatility. To get a better I you how
Speaker 1: to best navigate this. We turned to our next guest,
Speaker 1: Doug's yuck Up, chief executive officer and partner for cover
Speaker 1: Our Capital Partners. They're based in Leewood, Kansas. They have
Speaker 1: approximately seven million dollars under management. Doug, thanks so much
Speaker 1: for joining us. How are you guys kind of managing
Speaker 1: the day to day swings in the marketplace that can
Speaker 1: be you know, and you know, just created by a
Speaker 1: tweet here or there. Yeah, you know, it's good actually
Speaker 1: to have volatility back, and we feel like it's presenting
Speaker 1: some opportunities for putting capital work that had not been
Speaker 1: president in the first three or four months of the year.
Speaker 1: And you know, I undeniably do not feel like the
Speaker 1: market is be'm blown off course, but the winds have shifted, right,
Speaker 1: I mean, things that were headwinds coming into the year
Speaker 1: and now tail winds and vice versa. And you know,
Speaker 1: the trade war going into even the month of May,
Speaker 1: felt like there was gonna be a quick and very
Speaker 1: prosperous resolution and that's been completely overturned. Yet at the
Speaker 1: same time, we didn't feel like earnings were going to
Speaker 1: be very strong, and they were considerably stronger than we
Speaker 1: had anticipated. And you know the FED was going to
Speaker 1: be neutral and that was gonna be a headwind. But
Speaker 1: out looks like the Fed And even despite some of
Speaker 1: the comments that we're pretty benign that came out on Wednesday,
Speaker 1: I mean, the FED is doubbish. And I think when capital,
Speaker 1: which is plentiful, starts to be mobilized in the absence
Speaker 1: of a lot of fear that dictated the trade this
Speaker 1: this last couple of weeks, I think it's a good
Speaker 1: opportunity for the market to actually have kind of a
Speaker 1: pretty constructive summer, even if it only runs in place. So, Doug,
Speaker 1: where are you finding opportunities? Where are you buying right down? Yeah? Thankfully? So.
Speaker 1: I we like if you look at the sector performance
Speaker 1: this year, it's pretty amazing, right, But as it relates
Speaker 1: to a contrarian buying opportunity in a sector like healthcare, right,
Speaker 1: the smps of what twelve percent are almost year to
Speaker 1: date and healthcare is up just a little bit better
Speaker 1: than three right, And there's certainly there's regulatory knowing noise.
Speaker 1: It's a tendant to this sector. There always is, particularly
Speaker 1: when aspirations and in different campaign promises get to be
Speaker 1: slung around. We're just beginning to see that, and we're
Speaker 1: going to see that intensify over the course of the
Speaker 1: next year. Earnings were solid in Q one, Revenue was
Speaker 1: solid in Q one. Biotech specifically, we think in terms
Speaker 1: maybe immune immunotherapy, genomics, these are revolutionary therapies and technologies
Speaker 1: that we think are underappreciated. And this is a market,
Speaker 1: particularly given the pronounced level of actility we're undergoing right now.
Speaker 1: There's valuing substantive and substantial organic growth and high margin businesses,
Speaker 1: and those are plentiful in the healthcare sector right now. Well, Doug,
Speaker 1: how about in the you know, one of the things
Speaker 1: we've seen in these uh rising trade tensions between the
Speaker 1: US and China and what the Huahwei news is the
Speaker 1: tech sectors kind of gotten whipped around here, the semiconductor
Speaker 1: stocks taking a beating. Are you taking this as an
Speaker 1: opportunity to maybe take another look at tech or does
Speaker 1: this just too big of a risk to kind of
Speaker 1: bite off. No, we don't think it's to be a
Speaker 1: risk at all. Paul. You know, it's amazing. You know,
Speaker 1: if you guys follow beast book on Twitter, they put
Speaker 1: a phenomenal valuation compared and comparison chart out last night
Speaker 1: that the value H the P on tech and utilities
Speaker 1: are almost paired off right The U the P I
Speaker 1: utilities right now are twenty point one in tech twenty
Speaker 1: point five. We think there's some very interesting opportunities, particularly
Speaker 1: if you consider where we are in the economic cycle,
Speaker 1: which is undenidably late. We've seen enhancement of productivity and
Speaker 1: the aforementioned plentiful capital that's sitting on company balance sheets
Speaker 1: gets deployed in the fashion that's going to elevate that
Speaker 1: productivity to take the profitability into the future. We think
Speaker 1: tech has some very interesting opportunities right now, and I
Speaker 1: think the Uahwei thing, as it gets thrown around, is
Speaker 1: going to be a catalyst to really offer some of
Speaker 1: those interesting and attractive entry points. Interesting I'm looking right now,
Speaker 1: of course, though it yields, and I do have to
Speaker 1: wonder whether they're sending a more bearished signal uh than equities,
Speaker 1: especially with tenure yields hovering around the lowest since twenty seventeen.
Speaker 1: Do you think that that that we can sort of
Speaker 1: take some kind of bearished signal here or do you
Speaker 1: think that there's just a different story priced in having
Speaker 1: to do with Central Bank doublish policies. Yeah, there's always
Speaker 1: a message in the bond market, Riley. So we always
Speaker 1: say the bond market is more cold, hard and calculating
Speaker 1: in the stock markets, more that of the kind of
Speaker 1: the realm of the temperamental child. And it certainly is
Speaker 1: telling us that inflation is not an issue. It's likely
Speaker 1: telling us that growth rates may moderate. It is certainly
Speaker 1: embedding some sort of an elongation of the trade tariffs
Speaker 1: and foreign and domestic politics. If you think about like
Speaker 1: the two axes upon which markets pivot. You have access
Speaker 1: to capital and you have confidence, and the bond market
Speaker 1: is a proxy for both, and it's kind of splitting
Speaker 1: its time right now. Capital is plentiful, but confidence is
Speaker 1: absolutely waning. So people are kind of look for a signal,
Speaker 1: and not likely that would be embedded in a backup
Speaker 1: and yields, because even though yields will come down over
Speaker 1: the course last three months, the curve has steepens. You've
Speaker 1: had it's bull stepening trade that's been in place. That
Speaker 1: does give us an indication that if things do tend normalize,
Speaker 1: that can make a very productive contribution to the markets
Speaker 1: continuing forward. But the message of the bond market should
Speaker 1: never be ignored. So, Doug, are you part of what
Speaker 1: I guess I would call the kid census. Uh that
Speaker 1: it looks like the FED will cut rates at least
Speaker 1: once before the end of the year. I don't know, Paul,
Speaker 1: that is such a tough prediction to make. Means certainly
Speaker 1: like the Bloomberg the w I r P screed is
Speaker 1: giving what a my favorite Thank yeah, I love it
Speaker 1: as well. And in the market is in the market,
Speaker 1: and w I r P has always been a little
Speaker 1: bit detached from the Fed. I really don't know that
Speaker 1: the Fed needs to cut rates clearly if they don't
Speaker 1: feel like the economy is running, you know, so weaker,
Speaker 1: and what do you want to look at the GDP
Speaker 1: now from the Atlanta Fed or other um underlying sort
Speaker 1: of data points. I don't feel like they need the
Speaker 1: stimulus now if you could get something that kind of
Speaker 1: runs and buttresses the monetary policy, like something for us
Speaker 1: to productive about a fiscal policy, and who knows, maybe
Speaker 1: we get some kind of a breakthrough announcement with capital
Speaker 1: spending and infrastructure and that kind of thing. I don't
Speaker 1: think the FED once to cut I hope the FED
Speaker 1: does not cut. It is interesting to me that the
Speaker 1: market is obviously a far more pessimistic than the set
Speaker 1: is communicating or the economic data is demonstrating. No, I
Speaker 1: am not in a camp that they will doug. I'm
Speaker 1: struck by sort of this dissonance here. There's some people
Speaker 1: who say that the trade concerns are really what's weighing
Speaker 1: on equities and what's certainly creating a bid for bonds.
Speaker 1: Other people saying that that's actually the peripheral story and
Speaker 1: it really has to do with slowing growth globally. Where
Speaker 1: do you come in on this, I think the the former.
Speaker 1: I've not seen any slowing growth globally. I think we
Speaker 1: have a fear of slowing growth globally. That goes back
Speaker 1: to the message of the bond market. Have not seen
Speaker 1: the data that would support that, other than in some
Speaker 1: anticipatory impact of the trade tariffs and it's it's contractionary
Speaker 1: capacity or it's play itself out. I've just not seen
Speaker 1: it yet least. I think it's more just consternation and fear,
Speaker 1: and that's being pulled forward, not unlike the optimism and
Speaker 1: the greed had been pulled forward in the first three
Speaker 1: or four months of this year just real quickly ten seconds,
Speaker 1: is or anything. You're just staying away from any equity
Speaker 1: sector there really is not. I mean, I think when
Speaker 1: you look at some of the valuations in the most
Speaker 1: defensive sectors like utilities in real estate and to think
Speaker 1: that they're up and growing it two or three percent
Speaker 1: with a P, I think you have to be really
Speaker 1: cautious there and selective. But as kind of wholesale basis, No,
Speaker 1: we're kind of consider everything on kind of an individual
Speaker 1: fundamental assessment basis. Doug Cioca, thank you so much for
Speaker 1: being with us. Doug Cioca, chief executive officer and partner
Speaker 1: at uh Cover Capital Partners from Leewood, Kansas. Interesting to
Speaker 1: see that he's seeing opportunities and he does think that
Speaker 1: this is more a story about trade concerns that it
Speaker 1: is slowing global growth. Talking about municipal bonds, we have
Speaker 1: to talk about the tremendous rally that we've seen in
Speaker 1: the debt, where we've seen prices on the debt rising
Speaker 1: to record highs relative to treasuries. Were very lucky to
Speaker 1: have with us here. Amanda al Rite, municipal bond reporter
Speaker 1: for Bloomberg News. In our interactive broker studios in New York. So, Amanda,
Speaker 1: there are a number of analysts coming out from big
Speaker 1: banks saying, Okay, this has gotten a little ahead of itself.
Speaker 1: There is going to be a pullback. What's the argument, right?
Speaker 1: So I talked to some portfolio managers this week that
Speaker 1: kind of made the case that with Muni's UM, whenever
Speaker 1: you see a sustained period of really big inflows like
Speaker 1: what we're seeing now, um, you're just kind of waiting
Speaker 1: for the other shoot to drop. UM. I think what's
Speaker 1: really interesting about this moment is that investors don't really
Speaker 1: know what that will be. So some people have even
Speaker 1: talked about the election is being something that could trigger
Speaker 1: that or something even more soon if people start to
Speaker 1: realize that they're kind of paying a lot to own
Speaker 1: munis right now, and maybe they're not being compensated for
Speaker 1: the risks, or maybe they're better off buying treasuries or
Speaker 1: corporate bonds instead. So, Amanda, we've seen really have the
Speaker 1: less several months, if not more, just this tremendous inflows
Speaker 1: into the municipal bond market. Um, are we seeing a
Speaker 1: kind of commensurate new issuance by municipality? Saying boy, this
Speaker 1: market's great. I better just go out and raise the
Speaker 1: money while I can. UM. Absolutely not UM. So the
Speaker 1: last time i'd not so much. So when I checked
Speaker 1: this morning UM on NBM, which shows UM the scheduled
Speaker 1: bond sales versus the amount of bonds maturing and being
Speaker 1: called away, I think it outweighs it by over twenty
Speaker 1: billion right now. And so we're entering this period where
Speaker 1: bond sales are really really light UM. You know, finance
Speaker 1: officials are on vacation just like everyone else UM. And
Speaker 1: but we're having all this money pulled out of the
Speaker 1: market and it's looking to get reinvested. So investors are
Speaker 1: looking to that as another kind of UM supporter of
Speaker 1: performance UM. But it's also kind of a frustration to
Speaker 1: them because they have all this money to put to work,
Speaker 1: but they don't really have a place to put it.
Speaker 1: They have a place to put it, they're just not
Speaker 1: doing it right. I mean, we're talking about infrastructure spending,
Speaker 1: and we've been talking about the two trillion dollar plan
Speaker 1: that won't or wasn't or has not been UM. Why
Speaker 1: aren't some of these localities just doing it themselves. So
Speaker 1: I think this is a really interesting conundrum. Dallas fort
Speaker 1: Worth said this week that they are doing a three
Speaker 1: point five billion dollar expansion UM. So that's an example of,
Speaker 1: you know, a place that's going at it alone. UM.
Speaker 1: But I think that, you know, whether it's smart or not,
Speaker 1: I think mayors and governors in some ways they're holding
Speaker 1: out a little bit of hope for the federal government.
Speaker 1: We have seen, you know, some gas tax proposals. Some
Speaker 1: of those have been UM successful, and some of those
Speaker 1: are kind of tied up in political stuff right now.
Speaker 1: Michigan is still considering their's UM. But in terms of
Speaker 1: like the super local level, I feel like there's still
Speaker 1: a little bit of reluctance and a little bit of
Speaker 1: fear about taking on debt. Still, let's look at the
Speaker 1: other side of the equation a little bit, like when
Speaker 1: I think about chronic fiscal woes at the state level
Speaker 1: and municipal level, I think Illinois, but the bonds are
Speaker 1: doing really well. What's going on there? Yeah, So the
Speaker 1: situation for Illinois UM investors have gotten more optimistic about
Speaker 1: it under UM JB. Pritzker, who's the new Democratic governor UM.
Speaker 1: So you have one party rule in Illinois now UM,
Speaker 1: and the state is getting closer to enacting a progressive
Speaker 1: income tax structure, which will help them you know, raise
Speaker 1: more revenue from wealthier earners in the state. Um. So
Speaker 1: that's caused the bonds to rally, and you know investors
Speaker 1: are really looking to as potentially you know, being a
Speaker 1: further boon to the state's bonds. But again, that's kind
Speaker 1: of making a big bet on what residents will do
Speaker 1: when that's up for a vote. And we've started to
Speaker 1: see a lot more money moved towards Puerto Rico again, right,
Speaker 1: that's true. We've seen um, you know, high yield funds,
Speaker 1: they keep attracting cash. We've seen some high yield deals
Speaker 1: on the calendar this week, um that my colleague Joe
Speaker 1: Meisac has been writing about. Um, you know those are
Speaker 1: getting um strong market access still and again this is
Speaker 1: a time when we're seeing you know, even Wall Street
Speaker 1: analysts saying, hey, like maybe now isn't the best time
Speaker 1: to be buying these is. I don't know, how does
Speaker 1: a musicable market look at Puerto Rico now? Has it
Speaker 1: been you know, permanently negatively impacted or is it a
Speaker 1: temporary thing? And once it becomes clear that they've got
Speaker 1: their duck scenario that the investors will come back. UM.
Speaker 1: It's really this is like the key Muni market debate
Speaker 1: right now. So you can talk to some folks that
Speaker 1: are really optimistic on Puerto Rico, UM, you know, especially
Speaker 1: after the hurricane and all the federal money um expected
Speaker 1: to come in. That's a positive. But if you talk
Speaker 1: to other folks, UM, you know, they've kind of been
Speaker 1: burned before and they're seeing that the underlying issues in
Speaker 1: Puerto Rico with its economy, you know, still exist and
Speaker 1: maybe haven't been fully addressed. So it really depends on
Speaker 1: who you ask. Is there any sign of any pullback
Speaker 1: by investors or at least a softening in demand as
Speaker 1: a growing number of analysts say, you know what, guys,
Speaker 1: maybe just temper your enthusiasm. UM. I haven't seen any
Speaker 1: signs of that yet, but it wouldn't surprise me there
Speaker 1: there have been none. I think most people are kind
Speaker 1: of um, they're not hesitating to, you know, complain to
Speaker 1: me about how how high prices are. UM. So it's
Speaker 1: just a matter of when portfolio managers decide, you know,
Speaker 1: to kind of step off completely. That was that was
Speaker 1: so diplomatic. They're not hesitating to complain. I just picture
Speaker 1: the phone calls that you get from people saying, oh
Speaker 1: my gosh, too, Darna, I'm not buying him. Amanda Albright,
Speaker 1: thank you so much. Amanda's Umenissa Bond, reporter for Bloomberg News,
Speaker 1: joining us here on our interactive broker studio. Thanks for
Speaker 1: listening to the Bloomberg pen L podcast. You can subscribe
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Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney.
Speaker 1: I'm Lisa Abram Woyds. I'm on Twitter at Lisa Abram
Speaker 1: wits one. Before the podcast, you can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio