Speaker 1: Broadcasting live to New York, Bloomberg eleventh to Washington, d C.
Speaker 1: Bloomberg to Boston, Bloomberg twelve, Hundreix to San Francisco, Bloomberg
Speaker 1: nine to the Country Julius Exam General one nineteen and
Speaker 1: around the globe the Bloomberg Radio plus Appen Bloomberg dot Com.
Speaker 1: This is taking stock for the first time ever. Puerto
Speaker 1: Rico is getting ready to default on its constitutionally guaranteed
Speaker 1: debt one billion dollars in payments due on a total
Speaker 1: of about thirteen billion dollars. We're gonna find out what
Speaker 1: this means for investors, what it means for elected officials
Speaker 1: in Puerto Rico and the US, and what it means
Speaker 1: for the market. We're going to be speaking with Seawan
Speaker 1: Burgess from Cumberland Advisors. I'm Kathleen Hayes, my co host,
Speaker 1: Pim Fox is on vacation. And then we're gonna be
Speaker 1: speaking to a formal legal advisor to former UK Prentis
Speaker 1: Prime Minister David Cameron. Actually I shouldn't say former, he
Speaker 1: hasn't stepped down yet, but he's on his way. We're
Speaker 1: going to talk about navigating the post regulatory landscape and
Speaker 1: also what's next for Mr Cameron. Now let's get to
Speaker 1: Catherine Cowdery. She is in the Bloomberg newsroom with a
Speaker 1: Bloomberg Business flash. Thank you, Kathleen Will. Consumer focused companies
Speaker 1: are fueling modest games on Wall Street. The SMP five
Speaker 1: funded is up for a fourth day in a soundtrack
Speaker 1: for its biggest four day rally in nine months. Their
Speaker 1: speculation at central banks will like to limit the falloff
Speaker 1: from the UK's vote to leave the European Union. John Man,
Speaker 1: late chief equity strategis at Wells Fargo Funds Management, says
Speaker 1: investors are still assessing the impact of the Brexit vote
Speaker 1: exactly what form this is going to take, but it's
Speaker 1: very premature to get very negative or very positive on it.
Speaker 1: I think what happens is, uh, the the governments, the
Speaker 1: politicians sort of feel their way along the edge. Market
Speaker 1: provides ample guidance as to what we like and what
Speaker 1: we don't like. We check the markets every fifteen minutes
Speaker 1: throughout the training day. Down Dustrial laborage is eighteen points
Speaker 1: a tenth of a percent trading at seventeen thousand, nine
Speaker 1: hundred forty seven. SMP five founded up nearly three points
Speaker 1: an eighth of a percent at twenty one oh one,
Speaker 1: and Astact is hired by fourteen point three tenths of
Speaker 1: a percent, trading at forty eight fifty seven. West Texas
Speaker 1: Intermediate crude oil up seventy cents a barrel one point
Speaker 1: four percent at forty nine oh one. Spot gold is
Speaker 1: up eighteen dollars seventy cents announced at thirteen thirty nine
Speaker 1: thirty and a tenure treasury is up seven thirty seconds
Speaker 1: with the yield of one point four four percent. Among
Speaker 1: today's top business stories, Harley Davidson shares are rallying. They
Speaker 1: are currently up thirteen and a half percent, trading at
Speaker 1: fifty one dollar forty five cents. There's speculation that KKR
Speaker 1: is preparing a bid for Harley Davidson of sixty five
Speaker 1: dollars a share. And now let's get an update to
Speaker 1: some of the other stories are following. Thank you Catherine
Speaker 1: from the Bloomberg News room. I'm sharing on. Attorney General
Speaker 1: Loretta Lynch says she will follow the recommendations of her
Speaker 1: prosecutors and FBI investigators about whether to bring charges after
Speaker 1: their investigation into Hillary Clinton's personal email server. Concludes. The
Speaker 1: decision comes after news of a private meeting between Lynch
Speaker 1: and former President Bill Clinton raised concern amongst some in
Speaker 1: Washington about perceptions of the impropriety. Lynch discussed why she
Speaker 1: isn't recusing herself completely. Well, recuse me with me that
Speaker 1: I wouldn't even be brief on what the findings were
Speaker 1: or what the actions going forward would be. Um And
Speaker 1: while I don't have a role in those findings and
Speaker 1: coming up with those findings, are making those recommendations as
Speaker 1: to how to go forward, I'll be briefed on it,
Speaker 1: and I will be accept accepting their recommendations. Lynch says
Speaker 1: the questions concerning her meeting with Clinton are fair. The
Speaker 1: FBI is marking the twentieth anniversary of the terrorists bombing
Speaker 1: of the Kobar Towers since Saudi Arabia. The attack killed
Speaker 1: nineteen U S. Air Force personnel. At a ceremony today,
Speaker 1: FBI Director of James Comey spoke to the families of
Speaker 1: those who died that day. I am so sorry for
Speaker 1: your loss. The older I get, the more I've come
Speaker 1: to believe the closure is a myth, the notion that
Speaker 1: the whole in your heart heels is nonsense. It feels,
Speaker 1: as the General said, I'm sure to you like it
Speaker 1: was yesterday. The remembrance included a brief laying ceremony. Assemblyman
Speaker 1: Keith Ryant has considered to state Senator Adriano Espaillanti in
Speaker 1: the Democratic primary. He takes over the Harlem seat held
Speaker 1: by Congressman Charlie Wrangell. Global News twenty four hours a
Speaker 1: D eight powered by more than twenty six hundred journalists
Speaker 1: and analysts more than a hundred and twenty countries from
Speaker 1: the Bloomberg News room. I'm Sherry Anne, this is Bloomberg, Catherine,
Speaker 1: thank you, and now let's get a quick update of
Speaker 1: those benchmarks. Down Industrial leverages up twelve points at seventeen thousand,
Speaker 1: ninety two, smp F I founded up two points one,
Speaker 1: naszac Hire by thirteen at forty eight fifty five. And
Speaker 1: that's a Bloomberg Business flash. This is taking stock with
Speaker 1: Kathleen Hayes and Pim Fox on Bloomberg Radio. A debt
Speaker 1: default in slow motion. For months, Puerto Rico has been
Speaker 1: negotiating with creditors. It's been lobbying the US Congress and
Speaker 1: the White House to do something to help it avoid default.
Speaker 1: Help it restructure thirteen billion dollars worth of debt, and
Speaker 1: actually not all of that debt, but certainly key parts
Speaker 1: of it. And here we are today, Puerto Rico is
Speaker 1: ready to default on about one billion dollars worth of
Speaker 1: its general obligation bonds. Those are bonds that the Constitution
Speaker 1: said must be paid before other items. That's why they
Speaker 1: are in the passing such an ironclad guarantee to investors.
Speaker 1: But if it's a choice between keeping kids in school,
Speaker 1: keeping government hospitals open, uh, the President has helped in
Speaker 1: the Congress now to help Puerto Rico take this step
Speaker 1: that will keep it in flow it while it resolves
Speaker 1: its debt problem. At least that's the hope. Let's talk
Speaker 1: now to someone who's been following us very closely, Shawn
Speaker 1: Burge's portfolio manager and analysts for fixed income at Cumberland Advisors,
Speaker 1: joining us from Sara Sota. So, Sean, this is quite
Speaker 1: a day for Puerto Rico. Yeah, I love Kathleen, So
Speaker 1: it's quite a day. A little bit of been following
Speaker 1: poor to go over the last you know, however long,
Speaker 1: it's it's been a big day in a big week.
Speaker 1: So it's uh, if you're looking at about UM a
Speaker 1: billion of two billion in debt service due today actually
Speaker 1: getting paid with the General Obligation UM debt getting shafted
Speaker 1: for the most part. So it's a bad day if
Speaker 1: you own uninsured commonwealth debt. What is in the plan
Speaker 1: now that has been agreed on in Washington for Puerto
Speaker 1: Rico to move ahead? What must they do? What can
Speaker 1: they do? What kind of help are they going to get?
Speaker 1: We know just from the outline of Premissa, which ended
Speaker 1: up passing the House and the Senate and being signed
Speaker 1: off by the President, and you know, very much uh
Speaker 1: bipartisan support across the board, which was actually kind of
Speaker 1: a rarity to see nowadays in politics. Um, that was
Speaker 1: kind of reassuring to see that the federal government here
Speaker 1: is now going to step in and really provide some
Speaker 1: clarity and some erection for the commonwealth, because it seemed like,
Speaker 1: you know, they were just kind of and a boat
Speaker 1: afloat with no means to do anything. And what Promiser
Speaker 1: really does is that establishes a seven member control board
Speaker 1: which will oversee their budget and they're spending and allow
Speaker 1: them the ability to restructure some of their debt. And
Speaker 1: that's really where what is key and this it gives
Speaker 1: them um the ability to look at their debt and
Speaker 1: to be able to pay you know, hopefully what they
Speaker 1: can afford to, and you'll see cuts across the board,
Speaker 1: but it should hopefully put them in a better position
Speaker 1: going forward. And that's why you know, we're pretty optimistic
Speaker 1: to see this. Well, I'm glad to hear that you're optimistic,
Speaker 1: because I still in a nutshell when I think of
Speaker 1: three and a half million people with thirteen billion dollars
Speaker 1: with a debt, I think, how in the world did
Speaker 1: investors ever keep buying bonds from Puerto Rico seeing how
Speaker 1: this was piling up on and what was basically a
Speaker 1: poor country that was already in bad shape. I mean,
Speaker 1: where's your optimism? Where it's what's what's doing rating it?
Speaker 1: That's it's a very valid point because when you look
Speaker 1: at it, about half the islands below the poppy line,
Speaker 1: and you know, investors for decades and and the island
Speaker 1: itself is at fault as well, because what you know,
Speaker 1: what they didn't do with that money was really look
Speaker 1: at improving their infrastructure, their you know, accounting techniques, or
Speaker 1: they're really any of their internal mechanisms. They just kept borrowing,
Speaker 1: and investors for decades just kept wanting the money. You know,
Speaker 1: it's triple tax exempt, kept putting the funds and and
Speaker 1: everywhere else, and it offered higher yields and typically what
Speaker 1: you can find. So, you know, investors just or kind
Speaker 1: of you know, let's fault here as well. Well. I
Speaker 1: guess maybe they thought that government would step in as
Speaker 1: it has. But of course, as you point out, the
Speaker 1: owners of the general obligation bonds are not getting paid up.
Speaker 1: A question from a listener who's a financial advisor and
Speaker 1: advises his clients to buy various kinds of bonds. Is
Speaker 1: it true that these bonds are held by hedge funds,
Speaker 1: in which some are related to New York City teacher
Speaker 1: pension funds. Uh, well, we know Puerto Rico has held
Speaker 1: really across the board. Um A large person then is
Speaker 1: actually held by island residents and and on island banks,
Speaker 1: large percentages are held by mutual funds. I mean, you
Speaker 1: can find Puerto Rico to really places that you really
Speaker 1: wouldn't think you could. For instance, you know not that
Speaker 1: not a pull any fund under the mud, but Rochester
Speaker 1: is fund. Uh, Rochester Fund actually held a large percentage
Speaker 1: of Puerto Rico and it for a long time and
Speaker 1: it's really once it really all this came to light
Speaker 1: with Puertoco, really people start to take a look. But
Speaker 1: you can find Puerto Rico and you know all kinds
Speaker 1: of well places and portfolios. So for investors, uh they
Speaker 1: you're are you do you would you say to people
Speaker 1: be aware of the general obligation bonds you buy now? Uh,
Speaker 1: don't buy Puerto Rico. Are there some deals now in
Speaker 1: Puerto Rico because they hit bottom and people have hope
Speaker 1: this will be resolved? What are you what are you
Speaker 1: buying for your clients? What do you advising clients at Cumberland. Yeah,
Speaker 1: our our stance has always been to avoid uninsured general
Speaker 1: uninsured Puerto Rico dead, just because there was so much
Speaker 1: murderiness and there still is. Um promissa you know, really
Speaker 1: clear up the situation. It just provides the map forward.
Speaker 1: So we still have to see where we're structurings end up,
Speaker 1: what kind of haircuts certain credits get. So in our
Speaker 1: view and what we do at Cumberland is we focus
Speaker 1: on the opportunities and insured Puerto Rico debt, Puerto Rican debt,
Speaker 1: so We've always maintained that I'm insured that is really
Speaker 1: carries a high um degree of risk with it, so
Speaker 1: we've avoided that area of the market and really focus
Speaker 1: more on the insurers and the opportunities in there. So
Speaker 1: that's where our work was really concentrated. Well, thank you
Speaker 1: so much, Sean. It's a complicated situation, but definitely a landmark,
Speaker 1: I guess, a milestone for Puerto Rico. Well look forward
Speaker 1: to having you back as the next phase of Puerto
Speaker 1: Rico's debt saga, that's the word saga continues. I'm Kathleen
Speaker 1: Hayes taking sock and this is Bloomberg. This Hampton's Commuter
Speaker 1: Minute is brought to you by Landrover. When towers seem
Speaker 1: like trees and roads become rivers, the Rangrover of Oak
Speaker 1: is there to guide you through the twist and turns
Speaker 1: of the urban jungle. Visit your tri state area Landrover
Speaker 1: retailer for special offers. Land Over, Above and Beyond