1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,519 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. President 7 00:00:32,560 --> 00:00:36,320 Speaker 1: Trump has the opportunity to reshape the Federal Reserve. Many 8 00:00:36,360 --> 00:00:41,320 Speaker 1: people are concerned that he will compromise the feds independence. 9 00:00:41,680 --> 00:00:45,080 Speaker 1: Our next guests argue that that independence is a myth. 10 00:00:45,159 --> 00:00:47,720 Speaker 1: To begin with, I want to bring in Sarah bind 11 00:00:47,760 --> 00:00:51,680 Speaker 1: a professor of political silence science at George Washington University, 12 00:00:51,720 --> 00:00:54,840 Speaker 1: as well as Mark Spindell, founder and chief investment officer 13 00:00:54,880 --> 00:00:58,400 Speaker 1: at Potomac River Capital, both based in Washington, d C. 14 00:00:58,680 --> 00:01:02,000 Speaker 1: Co authors of the new book The Myth of Independence, 15 00:01:02,040 --> 00:01:05,200 Speaker 1: How Congress Governs the Federal Reserve. Sarah, I want to 16 00:01:05,240 --> 00:01:08,640 Speaker 1: start with you. Can you just explain why it is 17 00:01:08,720 --> 00:01:11,440 Speaker 1: a myth that the FED is independent and how so 18 00:01:11,480 --> 00:01:15,920 Speaker 1: many people believe this myth? Well, there is thanks for 19 00:01:15,959 --> 00:01:20,280 Speaker 1: having us. It is a widely held notion, certainly outside 20 00:01:20,280 --> 00:01:23,840 Speaker 1: the FED. UH that Congress created the FED and then 21 00:01:23,880 --> 00:01:26,520 Speaker 1: throw away the key it gave it autonomy to set 22 00:01:26,640 --> 00:01:30,959 Speaker 1: interest rates and control monetary policy, and then Congress turns 23 00:01:30,959 --> 00:01:34,479 Speaker 1: the other way. Right. The argument is that in exchange, 24 00:01:34,680 --> 00:01:37,840 Speaker 1: Congress conducts oversight and tries to hold the FED accountable 25 00:01:37,920 --> 00:01:41,880 Speaker 1: for meeting the goals that Congress gives it. We find, though, 26 00:01:41,959 --> 00:01:43,880 Speaker 1: in looking at both the history of the FED and 27 00:01:43,920 --> 00:01:48,800 Speaker 1: contemporary the FED, that there's a relationship between Congress the Boss, 28 00:01:49,160 --> 00:01:52,520 Speaker 1: and the Federal Reserve UH and that both depend on 29 00:01:52,640 --> 00:01:56,280 Speaker 1: each other. Right, we call it interdependence. Congress needs the 30 00:01:56,280 --> 00:01:59,360 Speaker 1: FED to do a good job control the economy and 31 00:01:59,400 --> 00:02:02,760 Speaker 1: to have someone to blame when the economy sours. At 32 00:02:02,800 --> 00:02:06,040 Speaker 1: the same time, the FED needs Congress, right Congress, The 33 00:02:06,040 --> 00:02:09,000 Speaker 1: FED wants to protect its powers, but it needs support. 34 00:02:09,120 --> 00:02:12,080 Speaker 1: It needs political support when it makes tough policy choices. 35 00:02:12,480 --> 00:02:15,880 Speaker 1: Otherwise Congress will reopen the Federal Reserve Act and possibly 36 00:02:16,080 --> 00:02:18,760 Speaker 1: take those powers away or give it more powers that 37 00:02:18,840 --> 00:02:21,760 Speaker 1: the FED might not want to have. Mark, why don't 38 00:02:21,760 --> 00:02:24,040 Speaker 1: you come in on this and offer your thoughts. Obviously 39 00:02:24,200 --> 00:02:27,640 Speaker 1: you must have something that is sympathetic to what Sarah 40 00:02:27,720 --> 00:02:30,799 Speaker 1: is saying. But is there any doubt that this was ever, 41 00:02:30,880 --> 00:02:34,280 Speaker 1: so I think so, and I think that myth was 42 00:02:34,360 --> 00:02:37,520 Speaker 1: really propagated in the markets. Uh. You know, part of 43 00:02:37,520 --> 00:02:42,359 Speaker 1: the genesis for this project stretches back a decade um 44 00:02:42,400 --> 00:02:46,760 Speaker 1: at the time of the Tarp Tarp legislation torpedoing. I 45 00:02:46,760 --> 00:02:49,799 Speaker 1: think Sarah and I began to talk about the possibility 46 00:02:49,840 --> 00:02:54,399 Speaker 1: that Congress would reopen the Act, and I think in that, uh, 47 00:02:54,680 --> 00:02:58,480 Speaker 1: what we discovered a reasonably recurring feature of the Fed's 48 00:02:58,560 --> 00:03:02,520 Speaker 1: relationship with Congress and congresses relationship with the FED that 49 00:03:02,639 --> 00:03:06,960 Speaker 1: had enormous implications for the way that Congress and the 50 00:03:06,960 --> 00:03:09,560 Speaker 1: FED could shape the outlook for markets, the economy, and 51 00:03:09,600 --> 00:03:12,720 Speaker 1: monetary policy. And I think beginning to factor in the 52 00:03:12,800 --> 00:03:15,679 Speaker 1: kinds of political risks that we saw at the heat 53 00:03:15,720 --> 00:03:18,160 Speaker 1: of the crisis, and I think in the in the 54 00:03:18,240 --> 00:03:20,840 Speaker 1: ten years hence has really been a feature of trying 55 00:03:20,840 --> 00:03:24,360 Speaker 1: to understand, uh, the outlook for for the FED, for 56 00:03:24,480 --> 00:03:27,960 Speaker 1: monetary policy, and for markets. Indeed, I'm wondering, Sarah, you know, 57 00:03:28,120 --> 00:03:30,359 Speaker 1: is this something that always has been the case where 58 00:03:30,360 --> 00:03:33,320 Speaker 1: there has been this incredibly political element or has it 59 00:03:33,400 --> 00:03:36,440 Speaker 1: gotten more so as the FED has engaged in all 60 00:03:36,480 --> 00:03:39,720 Speaker 1: of these unconventional policies and taken more control over the economy. 61 00:03:39,760 --> 00:03:42,040 Speaker 1: And I just want to add, you know, in previous 62 00:03:42,160 --> 00:03:47,320 Speaker 1: years Obama, for example, former President Obama appointed Ben Burnanki, 63 00:03:47,360 --> 00:03:49,840 Speaker 1: who was originally appointed by George W. Bush. So this 64 00:03:49,920 --> 00:03:53,480 Speaker 1: was a bipartisan type of arrangement and it seemed to 65 00:03:53,480 --> 00:03:56,720 Speaker 1: be an endorsement of just sort of keeping the status quo. 66 00:03:57,360 --> 00:03:59,240 Speaker 1: Now we're seeing something different. Can you weigh in? Have 67 00:03:59,320 --> 00:04:03,040 Speaker 1: we seen a shift? Sure? Well, this relationship, the interdependence 68 00:04:03,040 --> 00:04:04,960 Speaker 1: has been there back to the beginning, back to the 69 00:04:04,960 --> 00:04:08,040 Speaker 1: early nineteen hundreds. But what's changed here is really at 70 00:04:08,120 --> 00:04:11,320 Speaker 1: least twofold. First, the FED as a far more powerful 71 00:04:11,360 --> 00:04:14,760 Speaker 1: institution over over that century because of the powers Congress 72 00:04:14,800 --> 00:04:17,680 Speaker 1: has in repeatedly in the responsibilities Congress has given to 73 00:04:17,720 --> 00:04:20,400 Speaker 1: the FED. So the FED is vastly more important, and 74 00:04:20,440 --> 00:04:23,480 Speaker 1: the US as a global economic power is vastly more 75 00:04:23,520 --> 00:04:26,800 Speaker 1: important than it was a hundred years ago. But partisanship 76 00:04:26,839 --> 00:04:30,839 Speaker 1: in Washington is also far more polarized today than it 77 00:04:30,960 --> 00:04:33,800 Speaker 1: than it has been the last thirty forty years. You 78 00:04:33,880 --> 00:04:35,880 Speaker 1: add that up and what do you get, right, it's 79 00:04:35,920 --> 00:04:40,240 Speaker 1: crystallized in the Trump nominee uh last week. Right, as 80 00:04:40,320 --> 00:04:45,600 Speaker 1: you said, for several several decades, sitting presidents, when faced 81 00:04:45,600 --> 00:04:49,039 Speaker 1: with the opportunity to reappoint the incumbent chair to a 82 00:04:49,080 --> 00:04:52,279 Speaker 1: second term who was appointed by the other party's president, 83 00:04:52,640 --> 00:04:56,359 Speaker 1: has gone ahead and made that essentially bipartisan appointment. That 84 00:04:56,440 --> 00:05:00,440 Speaker 1: was ruptured last week with the Trump nominating a pal 85 00:05:01,080 --> 00:05:03,719 Speaker 1: who's pretty close I think to the current Chair, Jennet 86 00:05:03,800 --> 00:05:06,240 Speaker 1: Yellen in terms of monetary policy, at least in terms 87 00:05:06,240 --> 00:05:10,679 Speaker 1: of their votes. But that appointment really ruptured this image 88 00:05:10,680 --> 00:05:14,760 Speaker 1: of this bipartisan Fed, this technocratic Fed. And now with 89 00:05:14,800 --> 00:05:17,200 Speaker 1: Trump right, he can make up to three, maybe even 90 00:05:17,200 --> 00:05:19,560 Speaker 1: four appointments to the board in addition to the two 91 00:05:19,680 --> 00:05:21,640 Speaker 1: he's the one he's made and one he's about to make. 92 00:05:22,040 --> 00:05:25,400 Speaker 1: Um that that uniformly changes will change the makeup of 93 00:05:25,400 --> 00:05:27,880 Speaker 1: the FED in a way that the framers of the 94 00:05:27,880 --> 00:05:31,200 Speaker 1: FED back in the early nineteen hundreds never envisioned one 95 00:05:31,240 --> 00:05:34,719 Speaker 1: party having that much influence over the makeup of the board. 96 00:05:35,480 --> 00:05:37,560 Speaker 1: I'm just wondering to both of you all see this 97 00:05:37,760 --> 00:05:40,880 Speaker 1: as something that is just specific to the Federal Reserve 98 00:05:41,000 --> 00:05:43,320 Speaker 1: or other government institutions. I think of the U. S. 99 00:05:43,320 --> 00:05:48,000 Speaker 1: Supreme Court, for example, Sarah or whatever you choose, who's 100 00:05:48,040 --> 00:05:50,800 Speaker 1: going to answer that one. It's it's it's certainly the 101 00:05:50,880 --> 00:05:54,520 Speaker 1: case that the FED is not the only political institution 102 00:05:54,920 --> 00:05:59,920 Speaker 1: with norms and statutes that protect independence. I think what's 103 00:06:00,080 --> 00:06:03,200 Speaker 1: unique here is the FED is a unique body here. 104 00:06:03,320 --> 00:06:06,720 Speaker 1: It has far more influence over the economy than any 105 00:06:06,760 --> 00:06:12,200 Speaker 1: other the myriad independent agencies with economic powers. Right, Yeah, 106 00:06:12,279 --> 00:06:17,040 Speaker 1: And I think it's it's important to understand the political similarities, 107 00:06:17,040 --> 00:06:20,919 Speaker 1: but I think the economic differences between the impact that 108 00:06:20,960 --> 00:06:24,520 Speaker 1: the Federal Reserve can have on markets, on on the 109 00:06:24,560 --> 00:06:28,360 Speaker 1: economy versus versus the Court. Although I think PEM it's 110 00:06:28,400 --> 00:06:31,240 Speaker 1: a it's a it's an interesting question and an analog 111 00:06:31,320 --> 00:06:34,720 Speaker 1: that we looked at in trying to understand the nature 112 00:06:34,960 --> 00:06:38,080 Speaker 1: of of the politics, and I think that goes back 113 00:06:38,120 --> 00:06:43,080 Speaker 1: to thinking about monetary politics revealed this myth Mark, I 114 00:06:43,120 --> 00:06:47,120 Speaker 1: want to get your perspective as a long time investment manager. 115 00:06:47,160 --> 00:06:50,000 Speaker 1: I mean, if we are getting a more more polarized 116 00:06:50,080 --> 00:06:53,560 Speaker 1: backdrop to the FED, which is already a political animal 117 00:06:53,600 --> 00:06:56,719 Speaker 1: as you sort of described, I'm wondering, Mark, how that 118 00:06:56,800 --> 00:07:00,960 Speaker 1: affects investments going forward. Does this give or reliability to 119 00:07:01,000 --> 00:07:04,000 Speaker 1: the Fed? Less reliability? I mean, how do you navigate that? 120 00:07:04,600 --> 00:07:08,400 Speaker 1: So I think I think the selection process, which for 121 00:07:08,520 --> 00:07:11,640 Speaker 1: lack of a better word, seemed weird, UM, but did 122 00:07:11,720 --> 00:07:17,560 Speaker 1: result in an institutionalist UH. We we assume a confirmation 123 00:07:17,640 --> 00:07:21,360 Speaker 1: of of J. Powell Chairman. Powell will follow very much 124 00:07:21,360 --> 00:07:25,559 Speaker 1: along the monetary contours that Ben Bernankee and Janet Yellen 125 00:07:25,600 --> 00:07:29,920 Speaker 1: have put in place, and I think motivating yelling UH 126 00:07:29,960 --> 00:07:33,560 Speaker 1: to to institute the balance sheet unwind the kickoff of 127 00:07:33,760 --> 00:07:37,800 Speaker 1: monetary tightening, I think it's very easy baton for for J. 128 00:07:37,920 --> 00:07:42,280 Speaker 1: Powell to pick up that said, um, we we recognize 129 00:07:42,320 --> 00:07:44,640 Speaker 1: that the last two downturns in the US have really 130 00:07:44,680 --> 00:07:50,280 Speaker 1: been financially financially led the certain Certainly the global financial 131 00:07:50,320 --> 00:07:56,160 Speaker 1: crisis revealed a a sort of range of issues regarding 132 00:07:56,240 --> 00:08:00,960 Speaker 1: mac repredential and UH super super supervision and regulatory issues 133 00:08:01,240 --> 00:08:04,080 Speaker 1: where the FED is really the uber regulator UH. And 134 00:08:04,120 --> 00:08:06,760 Speaker 1: I think as we think about not just J. Powell, 135 00:08:06,800 --> 00:08:09,760 Speaker 1: but the whole complexion of the board, I think where 136 00:08:09,800 --> 00:08:13,560 Speaker 1: we are really paying a lot of attention and as 137 00:08:13,560 --> 00:08:17,200 Speaker 1: an investor, the financial sector obviously is is integral? Is 138 00:08:17,240 --> 00:08:19,960 Speaker 1: how that how that shakes out? Thank you very much. 139 00:08:20,280 --> 00:08:24,240 Speaker 1: Mark Spindell is UH a co author along with Sarah Binder, 140 00:08:24,240 --> 00:08:27,760 Speaker 1: professor of George Washington University, of the new book The 141 00:08:27,840 --> 00:08:32,320 Speaker 1: Myth of Independence, How Congress Governs the Federal Reserve. You're 142 00:08:32,360 --> 00:08:47,880 Speaker 1: listening to Bloomberg. Will the Murdoch family break up Fox? 143 00:08:47,960 --> 00:08:52,240 Speaker 1: It's a question that is on every media mobile's mind today. 144 00:08:52,320 --> 00:08:54,959 Speaker 1: And here to help us understand why they might break 145 00:08:55,000 --> 00:08:57,600 Speaker 1: it up and who might purchase it is Porter Bib. 146 00:08:57,960 --> 00:09:00,640 Speaker 1: He is the uh well, I guess, the founder of 147 00:09:00,800 --> 00:09:04,160 Speaker 1: Media Tech Capital Partners, and he joins us now. Port 148 00:09:04,160 --> 00:09:06,280 Speaker 1: are always a pleasure. I think of you as a 149 00:09:06,520 --> 00:09:10,800 Speaker 1: kind of media guru. If someone came to you and said, boy, uh, 150 00:09:11,000 --> 00:09:15,360 Speaker 1: there is a uh, you know, movie production facility and 151 00:09:15,400 --> 00:09:19,200 Speaker 1: television production house that may be up for sale, and 152 00:09:19,240 --> 00:09:23,240 Speaker 1: it's called twenty one century Fox, would that be of 153 00:09:23,320 --> 00:09:25,920 Speaker 1: interest to you? Why would you be interested in perhaps 154 00:09:25,920 --> 00:09:29,400 Speaker 1: buying it? If I be keenly interested in buying it, 155 00:09:29,440 --> 00:09:32,840 Speaker 1: as are a lot of other people in the media business. 156 00:09:32,920 --> 00:09:37,280 Speaker 1: Because Fox has a terrific array of assets that are 157 00:09:37,360 --> 00:09:40,800 Speaker 1: are firing on all cylinders right now, and they have 158 00:09:40,840 --> 00:09:45,840 Speaker 1: a global franchise. But they also are very, very undervalued 159 00:09:45,920 --> 00:09:49,280 Speaker 1: as a public company. So let's talk about this. There 160 00:09:49,360 --> 00:09:54,280 Speaker 1: was reports yesterday that Disney was in talks to acquire 161 00:09:54,440 --> 00:09:57,719 Speaker 1: some of the assets from twenty one century Fox. We're 162 00:09:57,720 --> 00:10:01,480 Speaker 1: getting subsequent reporting showing that those box have ended with 163 00:10:01,640 --> 00:10:05,120 Speaker 1: no deal. But this has opened up the door for 164 00:10:05,400 --> 00:10:09,720 Speaker 1: twenty one century to start selling off pieces of its 165 00:10:09,880 --> 00:10:13,920 Speaker 1: vast network. And I'm wondering which assets, in particular do 166 00:10:13,960 --> 00:10:17,400 Speaker 1: you think are most vulnerable to being sold off or 167 00:10:17,480 --> 00:10:22,160 Speaker 1: the ripest candidates for for being uh for being auctions. Well, 168 00:10:22,559 --> 00:10:27,360 Speaker 1: Disney wanted to buy everything except the Fox News, Fox Business, 169 00:10:27,360 --> 00:10:32,600 Speaker 1: and Fox Sports, leaving uh Mr Murdoch and his sons 170 00:10:32,679 --> 00:10:37,280 Speaker 1: with a news and sports uh empire of some consequence, 171 00:10:37,920 --> 00:10:42,920 Speaker 1: But all of the TV production, the cable networks, the 172 00:10:42,920 --> 00:10:46,160 Speaker 1: the the thirty nine percent interest in be skuy b, 173 00:10:47,320 --> 00:10:51,200 Speaker 1: all of those assets were of vital interest to Disney. 174 00:10:51,520 --> 00:10:56,000 Speaker 1: The problem that that the Disney has is that they're 175 00:10:56,120 --> 00:11:01,359 Speaker 1: they're low ball players. Bob Iger has been very scrupulous 176 00:11:01,360 --> 00:11:06,319 Speaker 1: about never overpaying for any acquisition that he's acquired, and 177 00:11:06,679 --> 00:11:09,320 Speaker 1: Ruper Murhak is on the other side of the table 178 00:11:09,760 --> 00:11:14,880 Speaker 1: and has never ever uh been willing to sell anything 179 00:11:14,920 --> 00:11:18,679 Speaker 1: that he owns at at a bargain basement prices. So 180 00:11:18,720 --> 00:11:21,480 Speaker 1: they're gonna be other people. I think the issue here 181 00:11:21,600 --> 00:11:26,240 Speaker 1: is Disney came to Murdoch um not knowing whether or 182 00:11:26,280 --> 00:11:30,040 Speaker 1: not he was a seller. A lot of UH speculators 183 00:11:30,040 --> 00:11:33,800 Speaker 1: have said that Rupert Murdoch and his son's basically said, 184 00:11:34,320 --> 00:11:38,480 Speaker 1: the scale is too big a hurdle for a Fox, 185 00:11:38,880 --> 00:11:41,600 Speaker 1: So we're gonna start to slim down and keep the 186 00:11:41,600 --> 00:11:45,120 Speaker 1: assets that we want. He needs to have as long 187 00:11:45,160 --> 00:11:48,480 Speaker 1: as Mr Murdoch is co executive chairman of the company, 188 00:11:49,000 --> 00:11:51,920 Speaker 1: the Fox News and Fox Business, those those are his 189 00:11:52,040 --> 00:11:56,080 Speaker 1: key assets. He's politically connected, politically involved. He talks to 190 00:11:56,120 --> 00:12:00,320 Speaker 1: the President almost every day, and he's not about sell 191 00:12:00,400 --> 00:12:03,320 Speaker 1: those assets. That that's the legacy that he wants to 192 00:12:03,400 --> 00:12:07,480 Speaker 1: have um after fifty years of building a media empire. 193 00:12:07,920 --> 00:12:11,560 Speaker 1: But the other assets are really valuable, and they're going 194 00:12:11,600 --> 00:12:16,360 Speaker 1: to be a lot of people beyond Disney who come knocking. Well, Porter, 195 00:12:16,679 --> 00:12:21,000 Speaker 1: I was looking at the numbers right and Century Fox 196 00:12:21,040 --> 00:12:24,000 Speaker 1: stock was a thirty two dollars a share that was 197 00:12:24,600 --> 00:12:27,600 Speaker 1: less spring Now it's at twenty eight dollars. It's got 198 00:12:27,679 --> 00:12:31,760 Speaker 1: a fifty one billion dollar market cap. Have you been 199 00:12:31,760 --> 00:12:33,439 Speaker 1: able to do with some of the parts, I mean, 200 00:12:33,520 --> 00:12:36,600 Speaker 1: you know, what are the division's worth twenties century Fox Film, 201 00:12:36,640 --> 00:12:39,240 Speaker 1: You've got the television business and so on. What do 202 00:12:39,240 --> 00:12:42,880 Speaker 1: you think is a is a going price for this? Well, 203 00:12:43,080 --> 00:12:46,439 Speaker 1: we's it's not just a going price, it's what people 204 00:12:46,440 --> 00:12:49,120 Speaker 1: are willing to pay. UM. One of one of the 205 00:12:49,160 --> 00:12:52,480 Speaker 1: most interesting buyers standing in the wings right now is 206 00:12:53,040 --> 00:12:56,240 Speaker 1: A T and T. Their deal with Time Warner and 207 00:12:57,080 --> 00:13:01,520 Speaker 1: billion dollar deal looks like it may not happen right now. 208 00:13:01,720 --> 00:13:06,319 Speaker 1: They the rub is that the President and CNN or 209 00:13:06,360 --> 00:13:10,880 Speaker 1: at daggers drawn and President Trump has asked the Justice 210 00:13:10,880 --> 00:13:15,720 Speaker 1: Department to do a new review of that transaction of Fox. 211 00:13:16,320 --> 00:13:19,160 Speaker 1: The assets that Disney wanted to buy from Fox and 212 00:13:19,200 --> 00:13:22,520 Speaker 1: that Ruper Murdoch was willing to sell would be exactly 213 00:13:22,720 --> 00:13:26,280 Speaker 1: what a T and T could use. And and in 214 00:13:26,360 --> 00:13:30,000 Speaker 1: terms of evaluation, UH, Fox does not break out all 215 00:13:30,080 --> 00:13:33,480 Speaker 1: of the numbers of the different entities that are under 216 00:13:33,520 --> 00:13:36,520 Speaker 1: twenty first century Fox. But I think you're looking at 217 00:13:36,559 --> 00:13:41,880 Speaker 1: it somewhere in the same valuation UH as as the 218 00:13:41,600 --> 00:13:44,719 Speaker 1: the Time Warner deal would be for a T and T, 219 00:13:45,120 --> 00:13:49,920 Speaker 1: somewhere in the in the eight million dollar billion dollar range. 220 00:13:50,679 --> 00:13:55,319 Speaker 1: Porter I'm wondering what this UH, these discussions mean for 221 00:13:55,600 --> 00:14:00,599 Speaker 1: Foxes proposed acquisition of Sky Networks. I knew that European 222 00:14:01,240 --> 00:14:05,480 Speaker 1: British regulators just so reviewing that transaction, and it seems 223 00:14:05,559 --> 00:14:10,199 Speaker 1: as though Rupert Murdoch was willing to ditch that deal 224 00:14:10,320 --> 00:14:13,240 Speaker 1: in order to sell most of the assets to Disney. 225 00:14:13,280 --> 00:14:16,520 Speaker 1: Does that mean that he's rethinking this deal or that 226 00:14:16,679 --> 00:14:19,840 Speaker 1: it's on shake your ground at this point? I think 227 00:14:20,480 --> 00:14:24,640 Speaker 1: the latter is what what really caused Rupert to sit 228 00:14:24,680 --> 00:14:28,840 Speaker 1: down and talk to Disney about selling Fox assets. UH. 229 00:14:29,560 --> 00:14:33,320 Speaker 1: Just in the last several weeks, the British regulators have 230 00:14:33,600 --> 00:14:37,720 Speaker 1: decided that they have to take another look at at 231 00:14:38,720 --> 00:14:44,080 Speaker 1: at Fox's attempt to buy the majority interest that they 232 00:14:44,080 --> 00:14:47,720 Speaker 1: don't now own in Best Guy B. And it is 233 00:14:47,760 --> 00:14:50,120 Speaker 1: not a question of whether there would be too much 234 00:14:50,160 --> 00:14:53,320 Speaker 1: consolidation of power in one media company. Really was an 235 00:14:53,360 --> 00:14:58,440 Speaker 1: issue of whether or not in the British vernacular, Fox 236 00:14:58,560 --> 00:15:01,400 Speaker 1: is a fit and proper purse and to control a 237 00:15:01,480 --> 00:15:07,360 Speaker 1: media asset like the skuy B and the the most 238 00:15:07,440 --> 00:15:11,800 Speaker 1: recent problems that they've had with the on the sexual 239 00:15:11,800 --> 00:15:15,240 Speaker 1: molestation the issue UH and and and a lot of 240 00:15:15,280 --> 00:15:19,320 Speaker 1: that is still ongoing there. There's litigation in the UK 241 00:15:19,520 --> 00:15:23,760 Speaker 1: as well as in the US that caused the government 242 00:15:24,560 --> 00:15:26,360 Speaker 1: in London to say, we have to look at this 243 00:15:26,440 --> 00:15:29,760 Speaker 1: all again and there's a major long term review that 244 00:15:29,920 --> 00:15:32,960 Speaker 1: probably is going to come out negative against the box. 245 00:15:33,000 --> 00:15:37,200 Speaker 1: So Rupert said, let's start to bail out. Well, we 246 00:15:37,240 --> 00:15:39,320 Speaker 1: will be following this. Porter Bib thank you so much 247 00:15:39,400 --> 00:15:42,600 Speaker 1: as always for joining us. Porter Bib is managing partner 248 00:15:42,680 --> 00:15:45,280 Speaker 1: of Media Tech Capital Partners in New York, also the 249 00:15:45,320 --> 00:16:04,160 Speaker 1: first publisher of Rolling Stone magazine This is Blue. When 250 00:16:04,200 --> 00:16:08,920 Speaker 1: I think of debt negotiations, I don't think of a cartel, 251 00:16:09,080 --> 00:16:12,480 Speaker 1: a drug cartel. I think of office rooms where people 252 00:16:12,680 --> 00:16:15,640 Speaker 1: in ties or people who are wearing you know, suits, 253 00:16:15,640 --> 00:16:18,320 Speaker 1: sit around and talk about how to restructure debt. That 254 00:16:18,480 --> 00:16:22,320 Speaker 1: is perhaps not going to be the case in Venezuela, because, uh, 255 00:16:22,400 --> 00:16:25,520 Speaker 1: the President of Venezuela just appointed a drug kingpen to 256 00:16:25,880 --> 00:16:29,360 Speaker 1: lead the renegotiation of the nation's debt, which is sort 257 00:16:29,360 --> 00:16:31,520 Speaker 1: of a mystery as to exactly how much there is anyway, 258 00:16:31,920 --> 00:16:35,440 Speaker 1: but here to understand exactly what this means for the 259 00:16:35,480 --> 00:16:38,200 Speaker 1: negotiations that affect a lot of big money managers in 260 00:16:38,240 --> 00:16:41,760 Speaker 1: the United States is Damien Sassaur. He's fixed income strategist 261 00:16:41,880 --> 00:16:46,200 Speaker 1: for Bloomberg Intelligence with a deep knowledge of emerging markets 262 00:16:46,240 --> 00:16:52,640 Speaker 1: over time, Damien, What was Nicholas Maduro, the head of Venezuela, 263 00:16:52,680 --> 00:16:55,200 Speaker 1: thinking with this appointment. Yeah, and Nicholas was thinking about 264 00:16:55,520 --> 00:16:58,480 Speaker 1: getting reelected next year. So I mean effectively what what 265 00:16:58,560 --> 00:17:01,640 Speaker 1: he did by by now saying that the negotiations would 266 00:17:01,720 --> 00:17:05,760 Speaker 1: be run by Alisami, who is the drug the drug 267 00:17:05,840 --> 00:17:08,240 Speaker 1: kingman you're alluding to. He's no fact, Memories been sanctioned 268 00:17:08,280 --> 00:17:11,520 Speaker 1: by the government. Technically, US creditors cannot negotiate with him, 269 00:17:11,520 --> 00:17:16,840 Speaker 1: it's legal. So what he's effectively doing is forcing UM, 270 00:17:17,040 --> 00:17:22,119 Speaker 1: forcing effectively creditors to basically they're going to go into default. 271 00:17:22,160 --> 00:17:24,520 Speaker 1: It's a it's a given now because you can't talk 272 00:17:24,520 --> 00:17:26,119 Speaker 1: to somebody like that, you can't deal with them. And 273 00:17:26,119 --> 00:17:30,760 Speaker 1: more importantly, he's doing this because the bonds UM that 274 00:17:30,800 --> 00:17:34,320 Speaker 1: are held by US creditors are you know, they're effectively 275 00:17:34,520 --> 00:17:36,359 Speaker 1: you know down here at twenty cents on the dollar. 276 00:17:36,480 --> 00:17:38,080 Speaker 1: They could go as low as ten cents on the dollar. 277 00:17:38,119 --> 00:17:40,320 Speaker 1: He really doesn't care. He's just basically trying to solidify 278 00:17:40,359 --> 00:17:44,400 Speaker 1: his power base ahead of next year. So I'm so okay, 279 00:17:44,520 --> 00:17:47,680 Speaker 1: let's back up. Let's talk about the fact that many, 280 00:17:47,720 --> 00:17:50,919 Speaker 1: many money managers, the biggest ones in the United States 281 00:17:50,920 --> 00:17:54,399 Speaker 1: own Venezuela debt. It accounts for nearly two percent of 282 00:17:54,440 --> 00:17:57,600 Speaker 1: the benchmark broad emerging markets. Well not anymore. It actually 283 00:17:57,640 --> 00:17:59,879 Speaker 1: only accounts for ninety basis points of the bench markt 284 00:18:00,119 --> 00:18:01,639 Speaker 1: X and that's but you're right. Yesterday it was one 285 00:18:01,680 --> 00:18:04,120 Speaker 1: point four percent. On Friday was two percent. So they're plummeting. 286 00:18:04,359 --> 00:18:06,520 Speaker 1: The market value of these bonds are definitely plummeting. I 287 00:18:06,520 --> 00:18:09,560 Speaker 1: mean the yield, the average yield for Venezuela debt went 288 00:18:09,560 --> 00:18:12,399 Speaker 1: from something like thirty on Friday close a business to 289 00:18:12,560 --> 00:18:15,879 Speaker 1: over I think last night was the last time I checked. 290 00:18:15,880 --> 00:18:18,680 Speaker 1: So the numbers are just off the charts. So who's 291 00:18:18,680 --> 00:18:21,680 Speaker 1: solidifying their losses right now? So, you know, in terms 292 00:18:21,680 --> 00:18:24,160 Speaker 1: of fund UH, I mean, look, we can only capture 293 00:18:24,200 --> 00:18:26,280 Speaker 1: FUN filings right so they're a little bit dated. You know, 294 00:18:26,280 --> 00:18:28,200 Speaker 1: we're looking at stuff, you know, in arrears. But for 295 00:18:28,240 --> 00:18:32,200 Speaker 1: the most part, FUN holdings in Venezuela and Petivisa debt, 296 00:18:32,200 --> 00:18:34,760 Speaker 1: which is the the oil and gas company that is 297 00:18:34,800 --> 00:18:37,680 Speaker 1: effectively a quasi sermonant, is effectively an extension of the government. 298 00:18:37,960 --> 00:18:42,640 Speaker 1: You're talking about um black Rock, Goldman, sachs Ashmore, Tiro 299 00:18:42,760 --> 00:18:46,040 Speaker 1: price GMO. Those are the big fund families that are 300 00:18:46,040 --> 00:18:49,359 Speaker 1: holding that debt um and you know, effectively in the 301 00:18:49,359 --> 00:18:52,320 Speaker 1: case of black Rock, you know, passive investors like the 302 00:18:52,359 --> 00:18:55,359 Speaker 1: black Rock I share et F. It's really it's not 303 00:18:55,440 --> 00:18:58,720 Speaker 1: a very big position within the index. But and the 304 00:18:58,720 --> 00:19:00,320 Speaker 1: index is up I think, I'm sorry, the et F 305 00:19:00,359 --> 00:19:01,840 Speaker 1: is up something on the order of nine percent year 306 00:19:01,880 --> 00:19:04,720 Speaker 1: to date, and I think negative attribution for venezuel alone 307 00:19:04,800 --> 00:19:06,280 Speaker 1: is something on the order of a hundred and forty 308 00:19:06,280 --> 00:19:08,000 Speaker 1: basis points of that. So yeah, I know it's had 309 00:19:08,040 --> 00:19:12,040 Speaker 1: an impact, but it's now at what if it's only 310 00:19:12,119 --> 00:19:15,560 Speaker 1: ninety basis points of the index, that's your floor. You 311 00:19:15,560 --> 00:19:18,919 Speaker 1: can't really lose any more than that technically, right, So 312 00:19:18,920 --> 00:19:21,440 Speaker 1: so the impact on broader emerging markets is going to 313 00:19:21,520 --> 00:19:26,960 Speaker 1: be constrained to that point. Damian Venezuela is already overdue 314 00:19:26,960 --> 00:19:37,360 Speaker 1: on interest payments for debt that is due in twenty six, right, 315 00:19:37,400 --> 00:19:41,160 Speaker 1: I mean, they've they've got foreign currency reserves, but it's 316 00:19:41,240 --> 00:19:44,320 Speaker 1: like what about ten billion dollars and I understand that 317 00:19:44,359 --> 00:19:47,879 Speaker 1: most of that is in gold. Um, well, you know, 318 00:19:47,920 --> 00:19:50,840 Speaker 1: we don't actually know what the Central Bank of Venezuela 319 00:19:50,840 --> 00:19:53,080 Speaker 1: is doing when they're calculating their reserves, to be completely 320 00:19:53,080 --> 00:19:55,399 Speaker 1: honest with you, But the reality is you're absolutely right. 321 00:19:55,440 --> 00:19:58,679 Speaker 1: I mean, you know, they've got UM roughly sixty billion 322 00:19:58,720 --> 00:20:01,680 Speaker 1: plus in loans that they received from the China Development 323 00:20:01,680 --> 00:20:03,600 Speaker 1: Bank in China x him and we looked at that 324 00:20:03,680 --> 00:20:07,080 Speaker 1: because that's where I wanted you to go. Those Russia 325 00:20:07,200 --> 00:20:10,320 Speaker 1: and Russia and roseen aft right. So so first, starting 326 00:20:10,359 --> 00:20:13,919 Speaker 1: with China, the big government agencies, the big government lenders 327 00:20:14,000 --> 00:20:16,199 Speaker 1: lend sixty billion over the better part since two thousands 328 00:20:16,600 --> 00:20:20,440 Speaker 1: whatever called the mid two thousands to Venezuela, and those 329 00:20:20,520 --> 00:20:22,400 Speaker 1: loans are outstanding. We don't know how much of those 330 00:20:22,440 --> 00:20:24,520 Speaker 1: loads are outstanding. We don't know what assets were pledged 331 00:20:24,560 --> 00:20:27,280 Speaker 1: against those loans. We don't really know much about them, 332 00:20:27,520 --> 00:20:29,960 Speaker 1: and we don't know their seniority. And I think creditors 333 00:20:29,960 --> 00:20:32,159 Speaker 1: don't know where they stack uh you know where they 334 00:20:32,160 --> 00:20:36,600 Speaker 1: stack up relative to China. So here's what I don't understand. Okay, 335 00:20:36,600 --> 00:20:39,679 Speaker 1: So basically Venezuela is all but guaranteeing itself a default. 336 00:20:39,720 --> 00:20:43,399 Speaker 1: At this point, why has this been something that Muduro 337 00:20:43,520 --> 00:20:45,800 Speaker 1: has avoided for so long? And when people were saying 338 00:20:45,800 --> 00:20:47,720 Speaker 1: this could lead to regime change, and now it's not 339 00:20:47,960 --> 00:20:49,880 Speaker 1: been There's been a lot of speculation on that. You've 340 00:20:49,880 --> 00:20:51,520 Speaker 1: just hit the nail on the head. I mean, everyone 341 00:20:51,560 --> 00:20:54,720 Speaker 1: had kind of been playing this game where the next 342 00:20:54,760 --> 00:20:56,800 Speaker 1: the next principle, you know, the next bond that was 343 00:20:56,800 --> 00:20:58,560 Speaker 1: set to mature. You know, you want to you know, 344 00:20:59,320 --> 00:21:01,119 Speaker 1: you're hoping that they gonna make payment on that. If 345 00:21:01,119 --> 00:21:03,240 Speaker 1: they do, it's a home run. If they don't, we're 346 00:21:03,280 --> 00:21:06,040 Speaker 1: in this situation we are now. And many people felt 347 00:21:06,080 --> 00:21:08,480 Speaker 1: that Maduro was paying back the people that helped him 348 00:21:08,600 --> 00:21:11,640 Speaker 1: secure his power base initially by telling them to get 349 00:21:11,720 --> 00:21:15,000 Speaker 1: along those bonds effectively, and I'm gonna make you whole. 350 00:21:15,040 --> 00:21:16,200 Speaker 1: That's the way I'm gonna be able to pay it 351 00:21:16,200 --> 00:21:18,119 Speaker 1: back because I quite frankly can't pay back any other 352 00:21:18,119 --> 00:21:20,600 Speaker 1: way because I'm sanctioned by everybody else. And so that's 353 00:21:20,640 --> 00:21:22,560 Speaker 1: the speculation that's been out there. There's no way to 354 00:21:22,600 --> 00:21:25,680 Speaker 1: prove it, but certainly that's that's that's been kind of 355 00:21:25,760 --> 00:21:28,639 Speaker 1: you know what we've been like focused on, um. But yeah, no, 356 00:21:28,680 --> 00:21:31,200 Speaker 1: I mean China, Russia, I mean you just again, creditors 357 00:21:31,200 --> 00:21:33,359 Speaker 1: don't really know where they stack up, and that's the mystery. 358 00:21:33,480 --> 00:21:36,000 Speaker 1: Thanks very much for helping to dispel at least some 359 00:21:36,040 --> 00:21:52,280 Speaker 1: of that mystery. Damian Sassaur, fixed income strategist for Bloomberg Intelligence, Well, 360 00:21:52,320 --> 00:21:54,960 Speaker 1: we're going to have a focus on fixed income, which 361 00:21:54,960 --> 00:21:57,359 Speaker 1: has brought to you by PIMCO for investors who demand 362 00:21:57,520 --> 00:22:00,840 Speaker 1: more than the markets deliver. All investments contain risk and 363 00:22:00,840 --> 00:22:05,080 Speaker 1: may lose value. Consult your investment professional before investing. And 364 00:22:05,119 --> 00:22:08,960 Speaker 1: if you want to invest in the European bond markets, 365 00:22:09,000 --> 00:22:12,000 Speaker 1: and it's important to listen. It's to what Simon Ballard 366 00:22:12,040 --> 00:22:15,480 Speaker 1: has to say. He's our global credit strategist for Bloomberg 367 00:22:15,520 --> 00:22:17,800 Speaker 1: and he comes to us from London. Simon, you know 368 00:22:17,920 --> 00:22:23,520 Speaker 1: today I'm watching the gap in yields between Italian tenure 369 00:22:23,800 --> 00:22:27,040 Speaker 1: and German ten year government bonds. It is shrunk to 370 00:22:27,080 --> 00:22:31,160 Speaker 1: the narrowest this year. Why is Italy so much better 371 00:22:31,200 --> 00:22:34,000 Speaker 1: in terms of economic outlook? I mean still their banking 372 00:22:34,040 --> 00:22:36,879 Speaker 1: system has some challenges. Can you explain the dynamic right 373 00:22:36,920 --> 00:22:40,000 Speaker 1: now that's sort of driving this? Yeah, no, absolutely, so 374 00:22:40,080 --> 00:22:42,080 Speaker 1: good afternoon. It's a it's a great question. But yes, 375 00:22:42,119 --> 00:22:43,800 Speaker 1: that is one of the one of the trends that 376 00:22:43,800 --> 00:22:46,199 Speaker 1: we've seen, not only with Italy but with with peripheral 377 00:22:46,240 --> 00:22:48,840 Speaker 1: with higher yielding risk generally over the course of the 378 00:22:48,880 --> 00:22:51,879 Speaker 1: last couple of years has been the compression towards the 379 00:22:52,240 --> 00:22:56,080 Speaker 1: core risk towards Germany um as as investors have chased 380 00:22:56,160 --> 00:22:59,320 Speaker 1: yield um in what is still a very low interest 381 00:22:59,400 --> 00:23:01,560 Speaker 1: rate environment what will remain a low interest rate environment. 382 00:23:01,600 --> 00:23:04,719 Speaker 1: So yes, you know there has been a compression in 383 00:23:04,920 --> 00:23:09,439 Speaker 1: Italian spreads over Germany. Has the fundamental picture in Italy 384 00:23:09,520 --> 00:23:11,840 Speaker 1: improved to that extent, No, it has not. It as 385 00:23:11,840 --> 00:23:14,439 Speaker 1: a function of the underlying liquidity in the market, and 386 00:23:14,480 --> 00:23:16,920 Speaker 1: there in lies probably one of the risks for investors 387 00:23:16,920 --> 00:23:21,120 Speaker 1: going forward that as that spread compression continues and yields 388 00:23:21,160 --> 00:23:24,480 Speaker 1: continue to to to fall, investors are increasingly sort of 389 00:23:24,640 --> 00:23:27,040 Speaker 1: not being compensated we say, for the risk they're taking 390 00:23:27,040 --> 00:23:29,040 Speaker 1: on board, but they are obliged, for want of a 391 00:23:29,080 --> 00:23:32,040 Speaker 1: better term, to to to buy into high yielding in 392 00:23:32,040 --> 00:23:36,720 Speaker 1: inverted commas risk the lower quality issuance in order to 393 00:23:36,720 --> 00:23:38,600 Speaker 1: just get a little bit of incremental yield over Germany. 394 00:23:38,600 --> 00:23:40,840 Speaker 1: So yes, you've seen a compression with with with Italy. 395 00:23:41,560 --> 00:23:45,080 Speaker 1: You've seen a compression with with with Spain, and with Portugal, 396 00:23:45,119 --> 00:23:47,119 Speaker 1: and to a certain extent with Greece, although probably more 397 00:23:47,160 --> 00:23:50,360 Speaker 1: question marks with Greece going forward. Um so yes, it's 398 00:23:50,440 --> 00:23:54,879 Speaker 1: it's not a story about improving or dramatically improving fundamental 399 00:23:54,920 --> 00:23:58,680 Speaker 1: stories within Italy. It's more the chase for yield exacerbated 400 00:23:58,720 --> 00:24:02,119 Speaker 1: by the e CBS as it purchased program. Well, well, Simon, 401 00:24:02,160 --> 00:24:03,720 Speaker 1: I wonder if you could just help me out here 402 00:24:03,720 --> 00:24:06,239 Speaker 1: to understand that. You know, it seems as though we 403 00:24:06,400 --> 00:24:09,640 Speaker 1: use a lot of this information to describe what happens 404 00:24:09,680 --> 00:24:12,480 Speaker 1: to a constituency that, as you just use this word, 405 00:24:13,000 --> 00:24:16,760 Speaker 1: is obligated, is obliged to buy. So if you have 406 00:24:17,000 --> 00:24:20,880 Speaker 1: captive buyers, what's the difference, what the prices? And if 407 00:24:20,920 --> 00:24:24,200 Speaker 1: you have a ready audience and you know that there 408 00:24:24,320 --> 00:24:27,680 Speaker 1: is a backstop, well, if you're the issuer, of course 409 00:24:27,720 --> 00:24:30,119 Speaker 1: you don't wanna uh, you don't want to pay, You 410 00:24:30,119 --> 00:24:33,240 Speaker 1: don't want to end up having your debts, uh, you know, 411 00:24:33,280 --> 00:24:37,040 Speaker 1: paid in higher interest paper. So it seems as if 412 00:24:37,040 --> 00:24:41,240 Speaker 1: you have this obligated buyer, then all of the information 413 00:24:41,320 --> 00:24:44,280 Speaker 1: is window dressing because they've got to spend the money 414 00:24:44,280 --> 00:24:48,480 Speaker 1: on these specific kinds of bonds. Well, to a certain extent, 415 00:24:48,560 --> 00:24:50,720 Speaker 1: that's correct, and that's been one of the reasons why 416 00:24:50,800 --> 00:24:54,480 Speaker 1: you've seen, you know, such a dramatic compression trade in 417 00:24:54,280 --> 00:24:57,080 Speaker 1: in yields and spreads within the fixed income market over 418 00:24:57,119 --> 00:25:00,320 Speaker 1: the last couple of years because investors have increased single 419 00:25:00,560 --> 00:25:03,160 Speaker 1: sort of wanted to replicate what the central banks are doing, 420 00:25:03,160 --> 00:25:05,199 Speaker 1: and the FED has been doing the asset purchased program 421 00:25:05,200 --> 00:25:06,840 Speaker 1: on your side of the Atlantic at the same time, 422 00:25:06,840 --> 00:25:08,640 Speaker 1: of course, and they want to be on the same 423 00:25:08,680 --> 00:25:10,320 Speaker 1: side of the traders central banks. That is one of 424 00:25:10,359 --> 00:25:13,120 Speaker 1: the reasons why liquidity within the secondary market is poor, 425 00:25:13,160 --> 00:25:16,480 Speaker 1: because investors do not want to sell their existing holdings 426 00:25:16,520 --> 00:25:18,680 Speaker 1: in order to try and buy you know, new issues 427 00:25:19,040 --> 00:25:22,680 Speaker 1: or or new bond deal should I say, because they'll 428 00:25:22,680 --> 00:25:25,600 Speaker 1: probably get crowded out and won't get completely reinvested. And 429 00:25:25,640 --> 00:25:28,840 Speaker 1: that just again pushes yields and spreads, you know, further 430 00:25:28,920 --> 00:25:32,440 Speaker 1: and further into into towards negative territory. Simon, there is 431 00:25:32,440 --> 00:25:34,399 Speaker 1: a calm in the Financial Times today that cut my 432 00:25:34,480 --> 00:25:38,480 Speaker 1: attention because you you mentioned the European Central Bank as 433 00:25:38,520 --> 00:25:43,320 Speaker 1: it purchased program. In the past nine months, the European 434 00:25:43,400 --> 00:25:47,560 Speaker 1: Central Bank has actually purchased a disproportionate amount of French 435 00:25:47,640 --> 00:25:51,200 Speaker 1: and Italian bonds, and I just wander from a political standpoint, 436 00:25:51,800 --> 00:25:54,480 Speaker 1: this comes at the expense of German bonds. This alone 437 00:25:54,480 --> 00:25:57,040 Speaker 1: could be withth driving the dynamic of the trade of 438 00:25:57,080 --> 00:26:02,520 Speaker 1: the tightening yield gap with peripheral debt versus German government boons. 439 00:26:02,680 --> 00:26:06,560 Speaker 1: I'm just wondering politically, how does this fly? Well, politically, 440 00:26:06,600 --> 00:26:09,000 Speaker 1: you know, the e CBS asset purchase program there is 441 00:26:09,040 --> 00:26:11,760 Speaker 1: there to stand behind the Eurozone economy and trying to 442 00:26:11,800 --> 00:26:16,000 Speaker 1: inject recovery into the economic growth dynamics, and to a 443 00:26:16,000 --> 00:26:18,400 Speaker 1: certain extent that it has done that at at some cost. 444 00:26:18,480 --> 00:26:20,480 Speaker 1: Whom one might add over the over the last year 445 00:26:20,560 --> 00:26:23,080 Speaker 1: or so since the since the corporate bond program was 446 00:26:23,080 --> 00:26:26,280 Speaker 1: was initiated in June two thousand and sixteen, Yes, they've 447 00:26:26,320 --> 00:26:30,840 Speaker 1: been buying disproportionately. Perhaps um I haven't haven't got access 448 00:26:30,840 --> 00:26:33,560 Speaker 1: of course to Financial Times is analysis. But from what 449 00:26:33,640 --> 00:26:36,320 Speaker 1: we see, you know, the the utility sector is the 450 00:26:36,440 --> 00:26:40,360 Speaker 1: largest sector of holdings within the CBS purchase program. They've 451 00:26:40,359 --> 00:26:42,520 Speaker 1: got about two hundred and seventy two utilities deals, but 452 00:26:42,520 --> 00:26:45,919 Speaker 1: those are spread broadly across the Eurozone. But you know, 453 00:26:45,960 --> 00:26:48,240 Speaker 1: the ECB will be buying the areas of the market 454 00:26:48,280 --> 00:26:51,320 Speaker 1: where it believes it needs to one add support and 455 00:26:51,359 --> 00:26:54,160 Speaker 1: more importantly, where it can find liquid assets to purchase, 456 00:26:54,240 --> 00:26:56,680 Speaker 1: because of course the more it buys, the more investors 457 00:26:56,760 --> 00:26:58,119 Speaker 1: chase the CB and want to be on the same 458 00:26:58,160 --> 00:27:00,280 Speaker 1: side as the trade. The few of the ones there 459 00:27:00,320 --> 00:27:03,440 Speaker 1: are too for everybody to buy, so that they're they're 460 00:27:03,480 --> 00:27:06,040 Speaker 1: chasing liquidity, but also chasing the volition of what they're 461 00:27:06,119 --> 00:27:08,359 Speaker 1: what they've set out to do um with the program 462 00:27:08,359 --> 00:27:11,280 Speaker 1: in the first instance. So yes, disproportionately, probably looking at prooferles. 463 00:27:11,320 --> 00:27:13,200 Speaker 1: But that's not to say that they're not buying core 464 00:27:13,840 --> 00:27:16,879 Speaker 1: Eurozone bonds as well. Assignment I confess I don't know 465 00:27:16,880 --> 00:27:19,720 Speaker 1: whether there's the same term in the UK or in Europe, 466 00:27:19,720 --> 00:27:21,440 Speaker 1: but we have this term. It's called the open book 467 00:27:21,480 --> 00:27:24,359 Speaker 1: test right where you're basically you're given the answers to 468 00:27:24,400 --> 00:27:26,639 Speaker 1: whatever the test is, whatever the test questions are, and 469 00:27:26,680 --> 00:27:28,119 Speaker 1: you just have to go out and find the answers 470 00:27:28,119 --> 00:27:31,040 Speaker 1: because it's available to everyone. That's kind of way it 471 00:27:31,119 --> 00:27:34,400 Speaker 1: sounds in terms of this marketplace. If it's if If 472 00:27:34,440 --> 00:27:37,520 Speaker 1: that's true, then don't you see a lot more American 473 00:27:37,560 --> 00:27:41,760 Speaker 1: companies like I don't know, Worldpool, for example, borrowing in 474 00:27:41,800 --> 00:27:44,640 Speaker 1: the European markets because they can take advantage of your 475 00:27:44,760 --> 00:27:48,000 Speaker 1: version of the open book test. Absolutely, the open book 476 00:27:48,040 --> 00:27:49,920 Speaker 1: test of my my, my time living in the States, 477 00:27:49,960 --> 00:27:51,880 Speaker 1: I'm very familiar with UM. But yes, you know, from 478 00:27:51,880 --> 00:27:53,960 Speaker 1: a certain to a certain extent, it is an issue 479 00:27:53,960 --> 00:27:56,360 Speaker 1: that's paradise at these sort of levels, particularly in Europe. 480 00:27:56,520 --> 00:27:59,600 Speaker 1: We had the UK today issuing bonds at a minus 481 00:27:59,640 --> 00:28:02,679 Speaker 1: one point five percent yield. The investors buying that obviously 482 00:28:02,720 --> 00:28:04,920 Speaker 1: have to have a conviction about the need for capital preservation. 483 00:28:04,960 --> 00:28:08,320 Speaker 1: But from a general issue as perspective, yes, in Europe, 484 00:28:08,320 --> 00:28:10,640 Speaker 1: but these sort of yields, it is a funding boon 485 00:28:10,760 --> 00:28:13,240 Speaker 1: at the momentum, and I'm sure we'll continue to see 486 00:28:13,320 --> 00:28:15,879 Speaker 1: more overseas issues coming to the European market over the 487 00:28:15,920 --> 00:28:18,960 Speaker 1: coming months. Thank you very much. Simon Ballard are global 488 00:28:19,000 --> 00:28:25,399 Speaker 1: credit strategist for Bloomberg, joining us from London. Thanks for 489 00:28:25,440 --> 00:28:28,120 Speaker 1: listening to the Bloomberg p m L podcast. You can 490 00:28:28,119 --> 00:28:31,960 Speaker 1: subscribe and listen to interviews at Apple Podcasts, SoundCloud or 491 00:28:32,000 --> 00:28:35,479 Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm on 492 00:28:35,520 --> 00:28:39,400 Speaker 1: Twitter at pim Fox. I'm on Twitter at Lisa Abramo. 493 00:28:39,480 --> 00:28:42,080 Speaker 1: It's one before the podcast. You can always catch us 494 00:28:42,120 --> 00:28:43,720 Speaker 1: worldwide on Bloomberg Radio.