Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 2: I'm Tracy Allaway.
Speaker 3: And I'm Joe Wisenthal.
Speaker 2: Joe, it struck me that we might be at the
Speaker 2: beginning of a new cycle, a new credit side.
Speaker 3: Are you making a call? Are you making a market
Speaker 3: timing call?
Speaker 2: I would never, never, No, I'm trying to frame this episode,
Speaker 2: but we have recently, by the time this episode comes out,
Speaker 2: had a very momentous presumably decision from the Federal Reserve
Speaker 2: where they've been cutting rates or they will have cut
Speaker 2: rates for the first time since I think the summer
Speaker 2: of last year. Oh, sorry, summer of twenty two, I
Speaker 2: can't remember that.
Speaker 3: That's yeah, it's wild. And when ever there is a
Speaker 3: turning point in the raid cycle, people are often you know,
Speaker 3: we've had this regime. Equity markets have done really well,
Speaker 3: credit spreads generally have been pretty tight, and so when
Speaker 3: you're in this sort of new phase of a cycle,
Speaker 3: then it's a natural time to sort of revisit where
Speaker 3: things stand, what kind of assumptions have been baked into markets,
Speaker 3: and of course like what the risks and opportunities are.
Speaker 2: Yeah, and I think the previous couple of years have
Speaker 2: certainly surprised a lot of people who are in credit.
Speaker 2: You know, people thought when rates went up there was
Speaker 2: going to be a spike in defaults, and we haven't
Speaker 2: really seen that. We've seen an increase, but it hasn't
Speaker 2: been disastrous. We've seen spreads, as you mentioned, still at
Speaker 2: kind of multi year lows, which is very surprising, and
Speaker 2: so it kind of begs the question of whether or
Speaker 2: not this dynamic can continue where pockets of stress might emerge.
Speaker 3: That's right, And just to note for listeners, we are
Speaker 3: recording this Monday subtem number sixteenth. We are out in
Speaker 3: Huntington Beach, California. We are at the future Proof Festival
Speaker 3: I think it's called, which is probably one of the coolest,
Speaker 3: most distinct financial market conferences that I can fathom. It's
Speaker 3: literally out on the beach.
Speaker 2: It's entirely that's a nice way of saying, we're at
Speaker 2: a beach three days.
Speaker 3: It's very nice, it's pretty so we love get around here.
Speaker 2: But you know, the other thing I was thinking about
Speaker 2: recently is just the other thing that's happened over the
Speaker 2: past couple of years has just been the explosion in
Speaker 2: different types of credit available to companies, right, Like, if
Speaker 2: you're a company seeking some sort of funding, you basically
Speaker 2: have an option of everything from a syndicated bond or
Speaker 2: loan to maybe doing a private deal. There are just
Speaker 2: all these different types of credit that you could choose.
Speaker 3: Now, everyone, if you're a company, people will find ways
Speaker 3: to give you money. There's all kinds of different opportunities.
Speaker 2: So we need to talk about the credit cycle. We
Speaker 2: need to talk about the big growth in the options
Speaker 2: available to investors and also corporates, and we need to
Speaker 2: talk about what happens now, whether this is a new
Speaker 2: leg in the cycle or the beginning of a new
Speaker 2: cycle in itself.
Speaker 3: Let's do it. I can't wait, all right, we.
Speaker 2: Have the perfect guests to discuss all of this. We
Speaker 2: are speaking with the co portfolio manager of Oak Trees,
Speaker 2: a diversified income fund better known as odd X. Bit
Speaker 2: of a mouthful actually.
Speaker 1: Danielle Paully.
Speaker 2: Danielle, thank you so much for coming on all thoughts.
Speaker 4: Thank you so much for having me. Tracy and Joe.
Speaker 2: Are you enjoying the beach as well?
Speaker 5: Oh, I'm having a great time. I don't think I've
Speaker 5: ever been to a conference quite like this on the beach,
Speaker 5: so many people.
Speaker 2: It's something I've said this before, but all conferences should
Speaker 2: be like this.
Speaker 3: On the beach. But you're base around here. This isn't
Speaker 3: even special for you, like for us coming from New
Speaker 3: York where the weather's starting to turn and everything's like, oh,
Speaker 3: a few more days of amazing weather. This is just
Speaker 3: your life, huh.
Speaker 5: It's true, is a commute down the four h five.
Speaker 5: Anyone that's watched Saturday Night Live and the Californians know
Speaker 5: as though how perilous it can be fair driving on
Speaker 5: LA freeways.
Speaker 2: So I mentioned your CopM of the Diversified Income Fund,
Speaker 2: but you're also a founding member of the investment committee.
Speaker 2: Talk to us a little bit about what you do
Speaker 2: at oak Tree.
Speaker 5: I serve as a portfolio manager for Global Credit at
Speaker 5: oak Tree, and that's our multi asset credit business. So
Speaker 5: back in twenty seventeen, we tried to think about a
Speaker 5: way to bring all of our different credit areas into
Speaker 5: an easily accessible way for our clients. And I get
Speaker 5: to serve as a portfolio manager, a member of our
Speaker 5: investment committee, thinking about relative value and helping with asset
Speaker 5: allocation in the portfolio. Because, as you know, these different
Speaker 5: strategies can be more attractive or not based on what's
Speaker 5: happening with interest rates or dislocation in the market. So
Speaker 5: it's an interesting role to be in.
Speaker 3: In my mind, I think I have some understanding of
Speaker 3: what a portfolio manager does. What does an investment committee
Speaker 3: do at an entity like oak Drink.
Speaker 5: Well, different firms will have committees doing different things, and
Speaker 5: our committee is less of a voting committee and more
Speaker 5: of a thought leadership committee. So we convene all of
Speaker 5: the different portfolio managers at oak Tree that cover different
Speaker 5: asset classes like hil bonds and leverage loans, structured credit,
Speaker 5: emerging market debt, even convertibles, and we meet every other
Speaker 5: week as a group to talk about what's happening in credit.
Speaker 5: So we'll talk about the fundamentals of the companies that
Speaker 5: we're lending to. Are we seeing any cracks, is it
Speaker 5: likely that defaults may pick up? And we talk about
Speaker 5: technical trends, what's happening with issuance. Are there reasons why
Speaker 5: there may be more attractive opportunities in one strategy versus
Speaker 5: the other.
Speaker 2: So at one of your weekly meetings, what would be
Speaker 2: the big talking point during well, presumably during FOMC meeting
Speaker 2: it would be the FED. But what have you been
Speaker 2: talking about lately?
Speaker 5: Well, we're bottom up investors, macro investors, but it's hard
Speaker 5: to ignore the macro outlook when we're at such a
Speaker 5: pivotal point with you know, perhaps a change in FED
Speaker 5: policy that may signal this new expansionary period and credit.
Speaker 5: We've had interest rates so high for so long, and
Speaker 5: really where we're focused on is what has that impact
Speaker 5: ben on borrowers credit worthiness. So we really are trying
Speaker 5: to avoid risk when we're investing in fixed income. We
Speaker 5: like to say it oak tree. If you avoid the losers,
Speaker 5: the winners will take care of themselves. A lot of
Speaker 5: our conversation is avoiding bad outcomes and focusing on that
Speaker 5: lower cohort of borrowers that you may be in trouble
Speaker 5: given these higher rates.
Speaker 3: I love the idea, like this is sort of in
Speaker 3: my mind. When I think of stock investing, it's like
Speaker 3: you want to pick winners, and when I think of
Speaker 3: credit investing, you want to avoid losers. I always sort
Speaker 3: of think of it like cooking a steak, which is
Speaker 3: just like you want to just nail it every time
Speaker 3: in the perfect stake is just like, just avoid the
Speaker 3: bad ones, just stay consistent. I don't know, maybe that's
Speaker 3: a terrible analogy. I always think of stock credittak. Stocks's
Speaker 3: pizza is like, you have the most extraordinary pizza in
Speaker 3: the world. Credit is steak. You just want to not
Speaker 3: missc mess it up, not mess it up, exactly right.
Speaker 3: That's how I think of these things in my head.
Speaker 3: So one of the things that's really surprised me, or
Speaker 3: I think surprised a lot of people. We had this
Speaker 3: really aggressive rate hiking cycle, and credit spreads have been
Speaker 3: really narrow.
Speaker 5: Now.
Speaker 3: The obvious answer there, although it's a little question begging
Speaker 3: I suppose, is like, yeah, well, because we didn't get
Speaker 3: a recession. A lot of people expected a recession or
Speaker 3: some sort of major downturn from the raid hikes. We
Speaker 3: didn't get that, So that's maybe why asset valuations have
Speaker 3: held up. Well, how would you Is there anything more
Speaker 3: to it when you look at just how tight spreads
Speaker 3: generally have remained over this cycle. What's your story that
Speaker 3: you tell for that?
Speaker 5: It's a great question. I mean spreads have been tight.
Speaker 5: I mean typically in high yield we see an average
Speaker 5: spread range of three hundred to five hundred basis points.
Speaker 5: Anything's higher than five hundred, no barrow really wants to
Speaker 5: issue at anything lower than three hundred. You know, no
Speaker 5: investor wants to buy it. And what I think we've
Speaker 5: had to have conversations with our investors about is that
Speaker 5: with yields so high, it's a different environment. You don't
Speaker 5: need spreads to blow out and then compress to get
Speaker 5: your total return when you can get a yield of
Speaker 5: you know, seven percent or so. And so I think
Speaker 5: you're starting to see a shift from being more tactical
Speaker 5: buyer to a strategic buyer. And I think there's reasons
Speaker 5: why that spread is lower in light of what you shared, Joe.
Speaker 5: In the high old bond market, it's over fifty percent
Speaker 5: double be today. It's the highest quality it's been in
Speaker 5: ten years now. You have to contrast that with the
Speaker 5: leverage loan market, where we have seen some degradation and quality,
Speaker 5: and that is a market where we're focused on, you know,
Speaker 5: the lower ten to fifteen percent of borrowers and looking
Speaker 5: at the upcoming maturity schedule and wondering how some of
Speaker 5: those are going to get financed. But generally, like the
Speaker 5: market's okay, and so that lower spread feels more justified
Speaker 5: to us.
Speaker 2: So you mentioned the rate cuts earlier and describe them
Speaker 2: as potentially an expansionary period in credit. I guess I'm
Speaker 2: wondering how much pent up demand is there in terms
Speaker 2: of new issuance, because overall it feels like people have
Speaker 2: termed a lot of stuff out. But I guess there
Speaker 2: is that segment of struggling borrowers who perhaps for them
Speaker 2: rate cuts will be really important and make all the difference.
Speaker 4: It's a really good question.
Speaker 5: I think when rates come down there is just more
Speaker 5: availability of credit. And as you point out, there are
Speaker 5: those barrows that have been struggling with higher rates. This
Speaker 5: will provide some per relief to them, especially those that
Speaker 5: have taken out floating rate debt. And if we look
Speaker 5: at the maturity wall I alluded to this a little
Speaker 5: bit earlier for loans over the next year, there's something
Speaker 5: like forty billion of maturity is coming due. It's all
Speaker 5: in the lowest rated credits, so it's split B triple
Speaker 5: C and even you know for twenty twenty six, twenty
Speaker 5: twenty seven, it's almost seventy percent. So it's this cohortive
Speaker 5: companies that haven't been able to get refinancing and maybe
Speaker 5: you know, lower rates will provide them some relief. They'll
Speaker 5: be a little bit more availability of capital. Some of
Speaker 5: them may not be able to be refinanced in traditional ways,
Speaker 5: they may need more rescue financing or capital solutions. But
Speaker 5: I do think it'll be positive for credit borrowers when you.
Speaker 3: Look at the types of entities that are struggling, fallen out,
Speaker 3: or actually impacted by this rate segar are we talking?
Speaker 3: Is it heavily in real estate? Is that the area
Speaker 3: that would be most exposed or most feeling the pain
Speaker 3: of higher rates? Are like, where do you see these
Speaker 3: pockets that actually are facing some challenges in the financing environment.
Speaker 5: No, it's a great point because we do a lot
Speaker 5: more than just corporate higal bonds leverage. Low real estate
Speaker 5: I think has been ground zero for some of these challenges,
Speaker 5: and a lower interest rate environment should create I think
Speaker 5: a little more optimism about what's ahead for real estate
Speaker 5: valuations and force I think some sales and some liquidity
Speaker 5: in that market. And so we are starting to see
Speaker 5: some positive outcomes in real estate as people get more
Speaker 5: comfortable with the rate environment.
Speaker 2: So I'm always curious about tactical decisions when someone is
Speaker 2: controlling like a very big fund that has a lot
Speaker 2: of optionality embedded in it in terms of investments, Like
Speaker 2: there are tons of different things you could invest in
Speaker 2: as CopM of the diversified income fund. I mean, I
Speaker 2: know it's all relative value, but say in a month
Speaker 2: like August when there was a lot of volatility, but
Speaker 2: despite that, credit spreads were kind of stable. They weren't
Speaker 2: really blowing out during the big turmoil. How do you
Speaker 2: judge the opportunities presented to you at a time of
Speaker 2: like uncertainty.
Speaker 5: Like then, we get so excited when there's volatility in
Speaker 5: the markets. It usually means there's some bargains. But as
Speaker 5: you point out, I mean, credit spreads really didn't widen much,
Speaker 5: and I think by the end of that volatile week
Speaker 5: it even tightened or at least made back that movement,
Speaker 5: So there wasn't much for us to do. On the
Speaker 5: corporate credit side, we were starting to get excited about
Speaker 5: convertible bonds, so it's an area that we invest in,
Speaker 5: and for those that maybe are less familiar with convertible bonds,
Speaker 5: I think the easiest way to explain them is it's
Speaker 5: a way to get the safety of a bond with
Speaker 5: some form of income, but you also get to participate
Speaker 5: in some equity upside. We're not converting into equity. We'll
Speaker 5: sell before that event happens, but it is nice to
Speaker 5: have some correlation to equity markets at certain times.
Speaker 3: I don't think we've ever done an episode.
Speaker 4: We haven't actually convertible.
Speaker 3: Bond, so we could just talk about this, but can
Speaker 3: you talk a little bit more about, like how big
Speaker 3: is that market and who are the types of issuers
Speaker 3: typically or is the typical situation in which an issuer
Speaker 3: would go into the convert market.
Speaker 5: Well, if you're going to do a session on that,
Speaker 5: you have to speak with our portfolio managers that only
Speaker 5: focus on convertible.
Speaker 3: I'd love to set that up.
Speaker 5: So the convertible market is small, and it tends to
Speaker 5: be focused more in technology, healthcare, certain sectors, and it
Speaker 5: has more of a correlation, i'd say, to small cap
Speaker 5: stocks as compared to the SMP, even though the SMP
Speaker 5: does have a lot of tech exposure and so it
Speaker 5: tends to follow that more. I mean, for us, our
Speaker 5: approach there is really to find good credit that we
Speaker 5: can underwrite and then participate in the equity.
Speaker 4: As I said, so just.
Speaker 3: To clarify from the issuer perspective, if it's small or
Speaker 3: if it's tech, and so that implies that they're probably
Speaker 3: fast growing. The appeal for them is what exactly There's
Speaker 3: this pool of capital that they want to borrow. But
Speaker 3: this sort of sweetener is that the end investor can
Speaker 3: participate potentially in some of the actual growth of the company.
Speaker 4: Yeah, that's right.
Speaker 5: You don't have to give up outright equity. And then
Speaker 5: also you can issue at a much lower rate than
Speaker 5: prevailing rates in the market. So that can be helpful
Speaker 5: for a company depending on where you are in a cycle.
Speaker 5: But it just ends up being a much smaller, more
Speaker 5: niche market, and you can't avoid the correlation to equities.
Speaker 5: And we're credit investors, so we don't want equities to
Speaker 5: influence too much the performance of our funds.
Speaker 4: Today, we're very.
Speaker 5: Under allocated to converts it's probably the lowest allocation that
Speaker 5: we've had since twenty nineteen heading into COVID, just because
Speaker 5: of the valuations and equities and not finding as many bargains.
Speaker 2: Oh wait, so you said you were getting interested in
Speaker 2: convertibles going into the August selloff.
Speaker 4: But I guess you you changed your because of the volatility.
Speaker 5: Yeah, we felt that maybe we could go in at
Speaker 5: a better entry point, see, because the valuations haven't made
Speaker 5: a lot of sense for us, and we can get
Speaker 5: better potential returns from credit than equities. It's been low,
Speaker 5: but when you get some of these consecutive days in
Speaker 5: the market and there's a sell off, you get excited
Speaker 5: thinking converts are gonna be the first asset class to move.
Speaker 5: And so we started looking though at which converts moved,
Speaker 5: and they didn't really meet our criteria for wanting to
Speaker 5: wander into equities, especially with this rate decision coming up,
Speaker 5: an election coming up, a lot of risk out there.
Speaker 3: But the idea would be in a volatility event as
Speaker 3: credit investors. If I mean that whole volatility event, it
Speaker 3: least about fifteen minutes, really like it was so short,
Speaker 3: but theoretically if it had lasted longer, the first opportunities
Speaker 3: likely would have shown up in converted I.
Speaker 5: Think so, especially when spreads aren't moving totally.
Speaker 3: That makes sense. Can you talk a little bit about
Speaker 3: from a portfolio standpoint? I mean it makes sense when
Speaker 3: you say, okay, volatility is exciting if you're an active manager,
Speaker 3: volatility presents opportunities. How do you position the portfolio such
Speaker 3: that you have the cash or the liquidity to take
Speaker 3: advantage of volatility? Because I joked on the day of
Speaker 3: the big sell off as like, oh, I should sell
Speaker 3: some stocks so I can buy the dip here. Like
Speaker 3: I would have loved to take advantage of that, but
Speaker 3: you know, I don't really like keep a lot of
Speaker 3: like extra cash around. How do you think about that
Speaker 3: from a portfolio standpoint, being invested but also being in
Speaker 3: a position to take advantage of opportunities.
Speaker 4: And it's more of an art than a science.
Speaker 5: I mean, today cash is an ass that it's not
Speaker 5: as delutive as it used to be to hold, so
Speaker 5: you can at least get some decent yield. And we'll
Speaker 5: invest our cash in investment gray kind of short duration
Speaker 5: type paper, so we're getting an even better yield. And
Speaker 5: we do like to have some of that in the
Speaker 5: portfolio as a buffer to use for these.
Speaker 4: Periods of volatility.
Speaker 5: One thing that we did a year or so ago
Speaker 5: as we looked at the portfolio and which were our
Speaker 5: you know, less liquid assets outside of private credit, because
Speaker 5: you really can't sell private credit a selloff. So we said,
Speaker 5: leverage loans, while you can trade them quickly, they take
Speaker 5: a while to settle, and so we have other options.
Speaker 5: Maybe we should create some liquidity by taking some money
Speaker 5: out of leverage loans. And what we did is we
Speaker 5: basically took every dollar we took out of leverage loans,
Speaker 5: we put fifty cents into cash and fifty cents into colos.
Speaker 5: So it's a barbell strategy because colos are really levered instruments.
Speaker 5: You're getting a higher yield, but they don't take time
Speaker 5: to settle, and then the cash, you know, that's available
Speaker 5: to us.
Speaker 4: So we created liquidity and we.
Speaker 5: Didn't really change the overall yield profile of the fund.
Speaker 2: You mentioned private credit. Just then, what has the growth
Speaker 2: of the private credit market meant for the more syndicated stuff, so,
Speaker 2: you know, leverage loans, publicly issued bonds, that sort of thing.
Speaker 5: I think Tricy, you said it so eloquently earlier on
Speaker 5: borrow is have more options, right, they have different ways
Speaker 5: to get financing, whether it's through the syndicated market working
Speaker 5: with a private lender. I think for us it's provided
Speaker 5: really attractive opportunities to step in when markets have been frozen.
Speaker 5: So I look back maybe to the end of twenty
Speaker 5: twenty two when banks were hung with what forty billion
Speaker 5: on their balance sheets, and that was an opportunity to
Speaker 5: step in and dictate terms and say, well, lend and
Speaker 5: in scale, but we want covenants, we want protections.
Speaker 3: Well, sorry, explain that more. What were the assets that
Speaker 3: were frozen or weren't moving, what types of assets were those,
Speaker 3: and then what was this sort of what was your
Speaker 3: package or what was your pitch to them?
Speaker 5: Yeah, so it was banks that had pre agreed to
Speaker 5: syndicate loans, and because interest rates had moved so quickly,
Speaker 5: those banks were going to take significant losses taking those
Speaker 5: loans to market, and so those opportunities they needed private
Speaker 5: lenders to step in to speak for those deals. And
Speaker 5: so what we were able to do is we were
Speaker 5: able to command better terms in the form of pricing,
Speaker 5: so higher spreads got it, and the negotiate covenants that
Speaker 5: you wouldn't see in the public markets. That's been the
Speaker 5: big issue on loans. You've had no covenants or protections
Speaker 5: in the levered loan market, whereas with private credit when
Speaker 5: we're directly originating loans, especially on the non sponsor side,
Speaker 5: we can actually protect ourselves in terms of structure and
Speaker 5: get covenants in there that are going to protect us.
Speaker 2: This is one thing I always wondered. But in the
Speaker 2: private market, when you're an entity like oak Tree, who
Speaker 2: initiates the conversations. Is it the bank come to you
Speaker 2: and say, hey, we have a hung loan we need
Speaker 2: to get rid of it. Is it the company looking
Speaker 2: for options? Do you approach potential borrowers? How does that work?
Speaker 5: It depends, But we do have a sourcing and origination
Speaker 5: team that oak Tree that speaks for the entirety of
Speaker 5: our firm. I think it's a competitive advantage for us
Speaker 5: because they are facing off with companies with sponsors, with
Speaker 5: the banks. It's like having a sophisticated capital markets team
Speaker 5: within an alternative asset manager, and it allows us to
Speaker 5: have conversations more from the point of what do you need,
Speaker 5: what's your problem?
Speaker 4: What type of financing?
Speaker 5: And then they will come back to us at oak
Speaker 5: Tree and say, this is what we need to do.
Speaker 5: Where does this fit across the firm? Let's create something
Speaker 5: that really is tailored to that entity. And so that's
Speaker 5: kind of how we see a lot of different things.
Speaker 5: We're also a first call in terms of these types
Speaker 5: of opportunities given our roots and distressed debt, investing, special
Speaker 5: situations and rescue finance.
Speaker 3: I mean, we've talked a lot on the show now
Speaker 3: about the growth of private credit. How much has private
Speaker 3: credit grown within oak Tree?
Speaker 4: It's grown a lot.
Speaker 5: When I joined the firm back in twenty fourteen, I
Speaker 5: want to say, at that time, just the private credit
Speaker 5: industry was maybe five hundred billion. It's grown to one
Speaker 5: point seven trillion. I think today. The unique thing about
Speaker 5: oak Tree is we've been doing private credit for a
Speaker 5: long time. Back in two thousand, the firm launched a
Speaker 5: mezzanine kind of middle market fund, and that's grown into
Speaker 5: direct lending. It's really taken on all sorts of forms.
Speaker 5: But I think we're still doing the same type of
Speaker 5: lending that.
Speaker 4: We were historically.
Speaker 5: It's just now become much more popular and mainstream.
Speaker 2: So on that note, how competitive is that market at
Speaker 2: the moment, Because I think back to you were talking
Speaker 2: about covenants earlier. One of the driving forces behind the
Speaker 2: rise of CoV light sort of posts two thousand and
Speaker 2: eight was well, there was so much money chasing yield
Speaker 2: that it was a race to the bottom, and if
Speaker 2: one investor wanted protections built into their investment or their
Speaker 2: loan that the company didn't want, then someone else would
Speaker 2: step in and basically offer to do it on better
Speaker 2: terms in the company's perspective. Do you feel that kind
Speaker 2: of competitive pressure now in the private market.
Speaker 5: I think we still have some of that today and
Speaker 5: we will going forward, just given how much demand there
Speaker 5: is for private credit. But I do segment the market,
Speaker 5: so I feel like that's most acute in the direct
Speaker 5: lending LBO finance sponsor backed transactions, where you know, we
Speaker 5: try and play, though it's a smaller opportunity set, it's
Speaker 5: more episodic, is directly originating debt non sponsor, and there
Speaker 5: you don't have the competition, and so you're able to
Speaker 5: set terms and you're the sole lender or maybe one
Speaker 5: of two lenders, and there's just a lot less competition
Speaker 5: because when you manage a very large private credit fund,
Speaker 5: you've got to put a lot of capital to work,
Speaker 5: and there are just more LBO sponsor backed opportunities available.
Speaker 5: So if you are able to be nimble or manage
Speaker 5: private credit in a multi asset portfolio like I do,
Speaker 5: where you don't have to constantly be deploying in private credit.
Speaker 5: You have other tools in your toolkit. We can be
Speaker 5: selective and try and overweight those non sponsor opportunities.
Speaker 3: So I've been talking about the credit markets from the
Speaker 3: borrower perspective. You mentioned in the beginning that in the
Speaker 3: current rate environment, or at least the recent rate environment,
Speaker 3: credit has also had a really big yield component as
Speaker 3: part of the value proposition. And with raised as high
Speaker 3: as they are, credit spreads okay, maybe a little narrower,
Speaker 3: but all in, investors are getting a decent amount of income.
Speaker 3: How have you seen the demands of investors evolve? What
Speaker 3: are people looking for in terms of an income product
Speaker 3: or a credit product? And how has that changed over
Speaker 3: the last few years with the you know, the you know,
Speaker 3: the worst inflation in forty years and the aggressive rate
Speaker 3: hikes as such, what have you seen on this sort
Speaker 3: of like the investor.
Speaker 5: End, I think investors have wanted more diversification, exposure to
Speaker 5: a mix of fixed and floating rate so that they
Speaker 5: aren't so susceptible to what's happening in the interest rate regime.
Speaker 4: Of the FED.
Speaker 5: Like fixed rate ig and high old only portfolios got
Speaker 5: pretty beaten up as rates were rising, and you saw
Speaker 5: a lot of interest and more floating rate leverage, loan,
Speaker 5: private credit products that could continue to offer higher income.
Speaker 4: But now where we are, they want.
Speaker 5: To toggle back, right because the fixed rate is really
Speaker 5: what's going to benefit the most from a rate cut,
Speaker 5: and so having portfolios set up that can tactically access
Speaker 5: both of those opportunity sets, I think that's really what we're.
Speaker 4: Hearing a lot of demand for. Wait, so talk to
Speaker 4: us a little bit more.
Speaker 2: You know, earlier we were discussing credit spreads and the
Speaker 2: fact that they've remained fairly low, but as you say,
Speaker 2: maybe because of yield, they look a little bit more
Speaker 2: attractive in the higher rate environment. But what does like
Speaker 2: a good entry point into credit actually look like right now?
Speaker 2: Like what should investors be looking for if they want
Speaker 2: to kind of flip the switch on higher exposure.
Speaker 5: Well, I think today in the high yield market, you
Speaker 5: can get good income from a high quality bond. You're
Speaker 5: looking probably around a seven percent yield, and that's attractive
Speaker 5: for some. I mean I work with a lot of
Speaker 5: institutions as well, pension plans, endowments. Oftentimes they're trying to
Speaker 5: solve for seven percent, they no longer need to allocate
Speaker 5: to equities to get that type of return. Has the
Speaker 5: yield been higher, sure, I mean it was as high
Speaker 5: as ten percent, you know, not so long ago, which
Speaker 5: is more of an equity like return. If you think
Speaker 5: about the SMP the last one hundred years, it's probably
Speaker 5: given you around ten percent. I mean, if you're getting
Speaker 5: ten percent, it feels somewhat like a free lunch to
Speaker 5: go into credit, and so I'd say, like, that's an
Speaker 5: entry point you don't want to miss. But today you're
Speaker 5: still getting you know, seven percent, it's pretty good.
Speaker 2: That's the old joke Joe, where like if you liked
Speaker 2: high yield at seven percent, you love it at ten.
Speaker 3: Except no one actually does. Yeah, okay, So it was
Speaker 3: very logical. As rates were rising, suddenly interest in floating
Speaker 3: rate debt goes up. Then the interest rates turned around,
Speaker 3: and suddenly, oh, people want the fixed rate debt for
Speaker 3: obvious reasons. You know, one thing I wander about, and
Speaker 3: it comes up in many interviews. Does the memory though
Speaker 3: of twenty twenty two persist? And do you see that
Speaker 3: over the next decade, the fact that you can have
Speaker 3: these very sudden, sharp spikes in inflation and therefore rates
Speaker 3: do you see that leaving a fingerprint on investor profiles,
Speaker 3: are on investor risk management for years to come, even
Speaker 3: setting aside this cycle, that memory of that experience.
Speaker 4: I'm a little skeptical.
Speaker 5: I think many just have this low rate, zero interest
Speaker 5: environment stuck in their heads and they think that we're
Speaker 5: going back down there and we're staying there. And what
Speaker 5: you raise is a concern of mine, like if inflation
Speaker 5: rears its ugly head again and at the same time
Speaker 5: the economy is slowing like stagflation, not something that many
Speaker 5: investors for investing today have seen.
Speaker 3: Well, then that actually brings to mind another question, which
Speaker 3: is that one of the extraordinary aspects I would say,
Speaker 3: you know, starting in March twenty twenty two is through policy,
Speaker 3: through fiscal policy and aggressive FED action. You know, we
Speaker 3: knocked out the recession in like three months, those the
Speaker 3: shortest recession ever, and we sort of proved through policy
Speaker 3: that we can always fight recessions, that they don't really
Speaker 3: have to happen, but we know they'll happen again. But
Speaker 3: it also makes me wonder, and then we didn't have
Speaker 3: a recession in twenty twenty two or twenty twenty three
Speaker 3: when everyone expected it. And so I'm curious from the
Speaker 3: other side, like are people anxious about recession or is
Speaker 3: there a view that's settled in that, like we don't
Speaker 3: have to have recessions and they could be kind of
Speaker 3: a thing of the past.
Speaker 5: I mean, it feels like the latter in the market,
Speaker 5: right the Fed just took this big bazooka and yeah,
Speaker 5: really kind of shot the economy and got things going.
Speaker 5: And they're also in a pretty good place right now
Speaker 5: with rates so high to be able to aggressively cut
Speaker 5: rates if something does happen.
Speaker 4: So I agree with you.
Speaker 5: I think a lot of people are thinking will we
Speaker 5: ever have recessions again? Now At oak Tree, yes, we
Speaker 5: think we will. You know, we're very much a believer
Speaker 5: of cycles. So maybe one you know, theory that we
Speaker 5: have is because the recession was so talked about, this
Speaker 5: upcoming recession that CFOs got in front of it. And
Speaker 5: you did see that right with the wave of refinancings
Speaker 5: that occurred, and frankly, you know, COVID, the reopening was
Speaker 5: pretty good for companies. Like higher inflation has hurt consumers,
Speaker 5: but it didn't hurt companies who saw their revenues increase,
Speaker 5: so they're in a better cash position kind of coming
Speaker 5: into this period too.
Speaker 2: We talk a little bit more about that. I find
Speaker 2: that interesting the idea that because everyone was talking about
Speaker 2: potential recession, maybe a bunch of corporate treasurers decided to
Speaker 2: term out their maturities and that's maybe why we didn't
Speaker 2: have the big maturity wall disaster that everyone thought we would.
Speaker 5: Yeah, maybe I'm giving them too much credit. Right, Look,
Speaker 5: I think another thing that happened was COVID, and you
Speaker 5: could argue that that was a recession, a mini recession,
Speaker 5: and maybe it's just like the something, it was something, right,
Speaker 5: I mean, we did see default spike, and what's happened
Speaker 5: there is some of the worst companies kind of fell
Speaker 5: out of the index and that's where you get that
Speaker 5: better quality, right that I.
Speaker 4: Was alluding to.
Speaker 5: And so maybe you just had this kind of cleaning
Speaker 5: event that happened. And because the market is of higher
Speaker 5: cour quality, market participants see that, and so they're not
Speaker 5: as concerned about having as big of an issue going forward.
Speaker 3: Can you talk about this whenever I hear like my
Speaker 3: credit colleagues and Tracy talk about like, oh, like high
Speaker 3: yield that environment just fundamentally doesn't look like the high
Speaker 3: yield environment of past or I hear people talk about
Speaker 3: like fallen angels or all these different things that are
Speaker 3: a little bit outside of my own comfort zone. What
Speaker 3: is this sort of I guess the credit profile of
Speaker 3: the market look like, how has it changed over the
Speaker 3: last I don't know, five years, ten years, et cetera.
Speaker 3: So when we talk about high old today versus highyield
Speaker 3: five years ago or high yeld fifteen years ago, like,
Speaker 3: how have these markets changed?
Speaker 5: Well, credit rating agencies will issue their ratings, and you know,
Speaker 5: if they were right all the time, we wouldn't have
Speaker 5: a job.
Speaker 4: We'd like to say that, but assume they are.
Speaker 5: And what you've seen is that these markets have tended
Speaker 5: to skew to lower ratings because they are sub investment
Speaker 5: grade credit and there's inherently more risk than investment grade.
Speaker 5: But it's a higher quality market today because some of
Speaker 5: those companies prior to COVID, you know, we're in the market,
Speaker 5: and then during COVID they defaulted on their debt, and
Speaker 5: so it's more of a technical thing. Right, the market
Speaker 5: looks better because you got rid of some of the
Speaker 5: worst companies from the indices. At the same time than that,
Speaker 5: some of the investment grade rated companies fell into the
Speaker 5: index or the fallen angels that you mentioned. So it's
Speaker 5: changed the composition of what's available out there. And then
Speaker 5: in terms of just you know, what kind of companies
Speaker 5: look like today versus the past.
Speaker 4: Leverage has stayed like pretty steady.
Speaker 5: It's actually come down a little bit in high yield,
Speaker 5: which is interesting. Even in price credit, you know, you're
Speaker 5: looking at maybe five turns of leverage. It's not excessive,
Speaker 5: and so the fundamentals are okay, I think for credit,
Speaker 5: and then you kind of overlay that with an economy
Speaker 5: where you're not seeing cracks in the labor market in
Speaker 5: any significant way. Like, sure, there are things that we
Speaker 5: are focused on an oak tree, like student debt, picking
Speaker 5: up delinquencies in auto payments, other indicators that you know
Speaker 5: show some stress, but like generally things feel.
Speaker 4: Okay, and the same for the borrowers.
Speaker 2: It is true, Joe. I don't know if you remember,
Speaker 2: but there was a moment pre COVID and sort of
Speaker 2: post COVID where everyone was worried about the triple B
Speaker 2: bubble involves. Do you remember that there's the idea that like,
Speaker 2: so triple B is the lowest rung of investment grade,
Speaker 2: and it was like the fastest growing cohort of the
Speaker 2: IG market, and so everyone was like, oh god, the
Speaker 2: quality of the overall corporate BALLB market is deteriorating. Everything's
Speaker 2: triple B now, bublah blah blah blah, and it's going
Speaker 2: to burst one day. And instead what we've seen over
Speaker 2: the past year or so is the triple B bubble
Speaker 2: kind of burst. But because everyone got upgraded. Yeah, so
Speaker 2: like no downgrade, it's now falling down into high old status,
Speaker 2: but everything getting upgraded to speak to the quality point. Okay,
Speaker 2: since we have you, Danielle, one thing I've been wondering about,
Speaker 2: and I feel kind of bad because I've used this
Speaker 2: term in previous conversations, but we've never really flushed out
Speaker 2: what it actually means. Creditor on credit or violence. It's
Speaker 2: a very popular talking point.
Speaker 3: But what do we mean exciting?
Speaker 2: Yeah, it does, right, it sounds active at least, what
Speaker 2: do we mean when we're talking about that?
Speaker 5: You know, it's it's funny, it's nothing new, It's happened
Speaker 5: for a long time. But I think the dollars at
Speaker 5: play are a lot bigger given the growth of these markets.
Speaker 5: And it's what we talked about earlier that a lot
Speaker 5: of the deals that got done over the last few
Speaker 5: years have no covenants in the leverage loan market. And
Speaker 5: so what that does is it just there's holes in
Speaker 5: these deals and it allows for sometimes nefarious activities.
Speaker 3: Explain that further covenance and holes for someone like myself
Speaker 3: who is not doesn't have a concrete idea of what
Speaker 3: this means, like, is what talk to us a little
Speaker 3: bit about how that plays.
Speaker 4: Yeah.
Speaker 5: Sure, so ideally when we're structuring alone with a company,
Speaker 5: we want to find ways to protect ourselves, especially if
Speaker 5: they are going to miss an interest payment or default
Speaker 5: on the entirety of their loan. We want to ensure
Speaker 5: things like we're first lean and the capital structure, meaning
Speaker 5: that we're going to get paid back first in a bankruptcy.
Speaker 5: We may want to tie our loan to certain assets
Speaker 5: that the company has so that those assets can be
Speaker 5: used to pay the proceeds of the bankruptcy. And so
Speaker 5: you put these covenants or terms into the bond indenture,
Speaker 5: the loan document so that you're protecting yourselves. But because
Speaker 5: there's been such competition to invest in these deals, and
Speaker 5: there's been this low interest rate environment and just a
Speaker 5: lot of capital, it's been harder to get these types
Speaker 5: of protections into the documents.
Speaker 3: It sort of sounds like when everyone was buying homes
Speaker 3: a few years ago and no one did the inspect
Speaker 3: They like awave the inspections just because you just like
Speaker 3: and that was like one of it. It's like, no,
Speaker 3: if you want an inspection, someone's going to buy it
Speaker 3: before you. It's like the same basic principle.
Speaker 5: Yeah. And so when it comes to lender on lender violence, then,
Speaker 5: as you were saying, Tracy, these companies are struggling from
Speaker 5: higher rates, right, they may not be able to make
Speaker 5: their interest payments. And so what's happening is you have
Speaker 5: certain creditors and sponsors looking at, well, how are we
Speaker 5: going to remedy this situation. We need fresh capital for
Speaker 5: this company to kick the can down the road, if
Speaker 5: you will. And so what you're seeing is different techniques
Speaker 5: applied taking advantage of there being no covenants. So a
Speaker 5: classic example of this is stripping assets from a collateral package,
Speaker 5: dropping them out.
Speaker 4: It's called a drop down.
Speaker 5: So you might see that they might go to a
Speaker 5: new entity and unrestricted entity that can then take out debt.
Speaker 5: That will just lessen the amount of assets that investors
Speaker 5: can have to pay back their claims. You also have
Speaker 5: the ability to have new capital come in so effectively
Speaker 5: priming first lean investors. You go to bed thinking your
Speaker 5: first lean, and then you wake up the next day
Speaker 5: second lean surprise. That's challenging and oftentimes really the company
Speaker 5: can work with the majority of creditors to do this
Speaker 5: really quickly, and not all creditors may be involved, and
Speaker 5: it can be really violent, I guess if you will,
Speaker 5: which is why the term is used.
Speaker 2: So one of the things I've been thinking about recently.
Speaker 2: We started this conversation talking about the credit cycle and
Speaker 2: the idea of well, maybe we're at the start of
Speaker 2: a new credit cycle or a new stage of the
Speaker 2: current credit cycle. It does feel like the cycles have
Speaker 2: kind of become a little bit muddled, right, I guess
Speaker 2: as we were discussing, there are all these new options
Speaker 2: for borrowers. So if they can't get a loan in
Speaker 2: the syndicated market, maybe they talk to someone in the
Speaker 2: private market, and so there's I guess additional pressure valves.
Speaker 2: Does it feel to you like maybe the credit cycle
Speaker 2: has changed in some either fundamental or permanent way.
Speaker 5: Here. Now, what you raise I think is important because
Speaker 5: in some ways it may have extended the credit cycle
Speaker 5: because there are different avenues for companies to access capital.
Speaker 5: You know, well, I think it creates a lasting impact.
Speaker 5: I think we'll have to wait and see, but probably
Speaker 5: the answer is yes, especially as private credit grows and
Speaker 5: morphs from more of an industry that was focused on
Speaker 5: sponsor backed direct lending to areas like non sponsor directly
Speaker 5: originated loans, which I had mentioned, and then other things
Speaker 5: like asset back to finance. I think they'll just continue
Speaker 5: to be an evolution of the market over time.
Speaker 3: I'm curious about industry sectors, and we've talked about it
Speaker 3: a little bit. We talked about where companies issue preferreds.
Speaker 3: We talked a little bit about the sensitivity of real
Speaker 3: estate to the interest rate cycle. One of the other
Speaker 3: big macro themes that we talk a lot about the
Speaker 3: show is like this incredible boom into certain types of capex,
Speaker 3: things like data centers, things like infrastructure, things like new energy.
Speaker 3: All the different factories and plants that have come out
Speaker 3: thanks to the Chips Act and the Inflation Reduction Act.
Speaker 3: How do some of these big economy wide trends play
Speaker 3: out in the credit space, and have there been new
Speaker 3: areas of borrowing that you see due to things like
Speaker 3: some of these secular trends in the nature of the economy.
Speaker 5: Yeah, you know, we have seen secular trends over time.
Speaker 5: And most of the activity that was in M and
Speaker 5: A and LBOs of the last however many years, was
Speaker 5: in tech in particular.
Speaker 4: And now tech is.
Speaker 5: Such a large part of the leverage loan market. And
Speaker 5: now today as you point out new areas of investment
Speaker 5: AI chips, I think it's growing that area. But I mean,
Speaker 5: the market has a beautiful way of adjusting itself, right,
Speaker 5: Like we loved investing in data centers last year, but
Speaker 5: then everyone else did too, and so the yields have
Speaker 5: really compressed. So there is somewhat I think of a
Speaker 5: resetting of return expectations and some of those hot sectors.
Speaker 5: And then you really have to shift to say, wow,
Speaker 5: so much of this was issued. Are these really quality
Speaker 5: loans that were made? Is this going to be ground
Speaker 5: zero for defaults? And then it becomes more of a problem,
Speaker 5: right Like what's hot then becomes the area of concern.
Speaker 2: So one thing I was wondering about an event like
Speaker 2: this future Proof. It bills itself as a wealth festival.
Speaker 2: The predominant audience member seems to be rias. So I'm
Speaker 2: curious when someone like you comes to an event like this,
Speaker 2: what are you talking about with all the people here?
Speaker 2: Are you like pitching those specific funds or like, what
Speaker 2: are those client conversations or potential client conversations actually looking like.
Speaker 5: I mean, if you're an RIA, you have so much
Speaker 5: to consider in terms of asset allocation outside of alternatives.
Speaker 5: But even with alternatives, you've got VC, private equity, all
Speaker 5: these different areas to consider. So I think a lot
Speaker 5: of my conversations are around why credit is a compelling
Speaker 5: investment opportunity today, getting those high yields and income. I
Speaker 5: do think credit could potentially outperform equities, and you know,
Speaker 5: having them think about it as a steady allocation in
Speaker 5: their portfolios of their clients so that their clients can
Speaker 5: do other things. I mean, why not have fixed income
Speaker 5: credit be that steady core allocation that hopefully, you know,
Speaker 5: they can then use to fund other areas. So a
Speaker 5: lot of my conversations are educational it's also about talking
Speaker 5: about the different types of private credit that's out there
Speaker 5: and the different types of vehicles that they can access to.
Speaker 5: So we've seen interval funds, BDC's, these types of funds
Speaker 5: become more mainstream and really excited to just kind of
Speaker 5: have those conversations about how individuals can access what institutions
Speaker 5: have for so long.
Speaker 2: What type of questions do arias have about private debt, Like,
Speaker 2: I'm curious to hear their concerns and how much they
Speaker 2: overlap with the stuff you see in the headlines about
Speaker 2: you know, private debt bubble or a creditor on creditor
Speaker 2: or violence, which we kind of already discussed.
Speaker 5: So I think aria is the questions that we get
Speaker 5: surprisingly relate more to the macro environment and less about
Speaker 5: the fundamentals of credit. I think they're really wanting to
Speaker 5: understand what rate cuts will do to private credit because
Speaker 5: it will lower the yield, and the yield is really
Speaker 5: important in private credit for them, and so we've had
Speaker 5: some conversations around that. I think think less so the
Speaker 5: conversation has been focused on the quality of private credit
Speaker 5: and whether you know, a type of bubble is brewing
Speaker 5: at this point, though, maybe the focus should kind of
Speaker 5: turn there at some point soon. I do think that
Speaker 5: active management in the space is so important, and you
Speaker 5: are starting to see some products, you know now being
Speaker 5: recently announced like ETFs that may be passive, and I
Speaker 5: think we have to figure out, like what is that
Speaker 5: going to mean? What does that look like? Those are
Speaker 5: questions that our as should be asking.
Speaker 2: All right, daniel Paully, thank you so much for joining us.
Speaker 2: That was really fun.
Speaker 3: That's fantastic. Thank you so much.
Speaker 2: Thank you so much, Joe, that was a good episode.
Speaker 2: I felt to record after the conversation with dan Ives.
Speaker 3: Yeah, it was great.
Speaker 2: Dovetailed. So one of the things that is standing out
Speaker 2: to me after all these discussions with bond market participants
Speaker 2: on the West Coast is the yield versus spread. Yes, yeah,
Speaker 2: so everyone's been complaint. Not everyone, but a lot of
Speaker 2: people have been pointing out that spreads are still very,
Speaker 2: very low and so it's difficult to find entry points
Speaker 2: into credit. But on the other hand, as Danielle pointed out,
Speaker 2: like at seven percent yields, that might be very attractive.
Speaker 3: I think a seven percent yield will double your portfolio
Speaker 3: in about ten years, so it's not bad like you
Speaker 3: just like if you could just like lock in that
Speaker 3: seven percent yield.
Speaker 2: Just avoid messing up that credit sta Yeah.
Speaker 3: Just avoid over cooking the steak. Get all your money
Speaker 3: in a seven percent yield, and then ten years from
Speaker 3: now you've doubled your wealth. Like that's not bad.
Speaker 4: Yeah.
Speaker 2: The other thing that stood out to me was, you know,
Speaker 2: she was talking about I guess quality trends within the
Speaker 2: index itself, and I do think it's so funny how
Speaker 2: much hand ringing there was about the triple B yeah,
Speaker 2: bursting eventually and like causing this big wave of like
Speaker 2: downgrades and defaults in the credit market. But instead of
Speaker 2: the downgrades, it basically has ended or started to reverse
Speaker 2: with upgrades. You know.
Speaker 3: I think one of the reasons my brain, like when
Speaker 3: I first got interested in markets is through stocks. And
Speaker 3: stocks are really nice because it's like there's one Microsoft,
Speaker 3: there's one Google, you know, and then when you look
Speaker 3: at credit and there's just like this like endless proliferation
Speaker 3: of new terms and like interval funds. I don't know
Speaker 3: what that is.
Speaker 2: What's it?
Speaker 3: Do you know what an interval fund is?
Speaker 5: I did.
Speaker 3: We got to learn what interval funds and business development
Speaker 3: core just like all of these new things and preferreds
Speaker 3: and stuff, and so you know, there's just this sort
Speaker 3: of endless how do you mentioned in the beginning, just
Speaker 3: like this endless buffet of credit products, and it's sort
Speaker 3: of always interesting. And then the fact that like you
Speaker 3: talk about like investment grade, but that does not mean
Speaker 3: the same thing in twenty twenty two. Is it means
Speaker 3: in twenty twenty one or twenty twenty five or twenty
Speaker 3: nineteen or same with high yield? Just this endless buffet,
Speaker 3: And then you understand why you sort of have these
Speaker 3: entities like ratings agencies that can sort of segment at
Speaker 3: risk in a sort of useful way, because it's just
Speaker 3: so sprawling.
Speaker 2: Yeah, this is why I always like asking the process
Speaker 2: questions of like how do options actually get in front
Speaker 2: of someone like Danielle or dan Ivison? And then how
Speaker 2: do you choose from? Like there must be dozens.
Speaker 3: If not hundreds, endless permutation.
Speaker 2: Like investment categories within credit like not talking about single
Speaker 2: loans or investments or direct loans that sort of thing,
Speaker 2: but just like the actual categories must be in the dozens.
Speaker 3: Let's do it, by the way, let's do a creditor
Speaker 3: on creditor violence episode, like, let's just find one, like
Speaker 3: maybe a specific incident in like dissecting, because I just
Speaker 3: want to get that in a headline because I think
Speaker 3: people would download it. But that also just sounds like
Speaker 3: it's very It's like the thought that like you could
Speaker 3: have like the first lean debt and then the next
Speaker 3: morning somehow you don't, or that the idea that a
Speaker 3: company could move assets that are sort of like a
Speaker 3: collateral into some other vehicle and then the creditors can't
Speaker 3: get access to them to liquidate them or pay the debt, Like,
Speaker 3: let's talk about that more.
Speaker 2: I always think an episode about creditor on creditor violence
Speaker 2: sounds almost like a PSA, like have you been hurt
Speaker 2: by creditor on creditor violince?
Speaker 3: Well, let's do one, all right?
Speaker 2: Shall we leave it there?
Speaker 3: Let's leave it there.
Speaker 2: This has been another episode of the Authoughts podcast. I'm
Speaker 2: Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 3: And I'm Jill Wisenthal. You can follow me at the Stalwart.
Speaker 3: Follow our producers Carmen Rodriguez at, Carmen Arman, dash Ol
Speaker 3: Bennett at Dashbot, and kil Brooks at Kelbrooks. Thank you
Speaker 3: to our producer Moses. On more odd Laws content, go
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