Speaker 1: This is Bloomberg business Week Inside from the reporters and
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Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Masser and Tim Stenebec from Bloomberg Radio.
Speaker 1: Here in the house, we knew we wanted him to
Speaker 1: weigh in on this week's flurry of activity and calamity,
Speaker 1: So let's get to it. Matt is Bloomberg opinion columnists
Speaker 1: covering finance, former editor deal Breaker, an investment banker, Goldman
Speaker 1: Saxon more. He is here with Katie and myself in
Speaker 1: our Bloomberg Interactive Broker studio. So what's the most important
Speaker 1: conversation to be having right now? Gosh, I don't know.
Speaker 1: I mean, obviously, the worry that people have is how
Speaker 1: far this conpasion will go right. I mean, we've seen
Speaker 1: a couple of bank failures, and obviously there's a lot
Speaker 1: of action and a lot of other bank stocks that
Speaker 1: make it seem like people are not fully convinced throughout
Speaker 1: of the woods. Are we I don't know. I would
Speaker 1: have had on Sunday night that it looked pretty convincing
Speaker 1: that the Fed was kind of step in to kind
Speaker 1: of prevent bank runs or deposit or losses. But I
Speaker 1: think people are still worried about capital at a lot
Speaker 1: of these banks. I think that a lot of them,
Speaker 1: it seems like, are probably under capitalized on a Marketer
Speaker 1: market basis. I might have to raise money and like
Speaker 1: that's spooking shareholders. So on Sunday night, I was thinking,
Speaker 1: who do I want to talk to? Who's the one
Speaker 1: person in the world that I want to talk to
Speaker 1: the most about this? And after Janet Yellen, and then
Speaker 1: after a Jerome Pal, I'd landed on Matt Levison. You
Speaker 1: were third, But I mean, that's that's my triple crown
Speaker 1: right there. Can I just tell you some of the
Speaker 1: narratives that I've heard about this and maybe you can
Speaker 1: mythbus for me. The first one is that basically this
Speaker 1: was the fact that SPB had a lot of long
Speaker 1: dated treasuries that when they got hit with all of
Speaker 1: these you know, withdrawal requests from their depositor base, which
Speaker 1: I understand was mostly you know, private equity backed startups,
Speaker 1: tech bros, etc. That's another narrative that I've heard thrown around.
Speaker 1: Then when they went to sell these that duration risk
Speaker 1: really came back to bite them. Is that the whole
Speaker 1: picture or is that missing some nuance? Oh? I think
Speaker 1: that's most of it. Yeah, I mean I think they
Speaker 1: had a lot of duration risk in in a way
Speaker 1: that was not accounted for market and market day to
Speaker 1: day and their balance sheet. So they looked you know,
Speaker 1: if you just looked at their financial statements, they looked
Speaker 1: pretty solvent. But if you drilled down into the unrealized
Speaker 1: losses on their whole to maturity treasuries, they looked a
Speaker 1: lot less solvent. Someone noticed. Basically, it seems like the
Speaker 1: you know, the tech bro crowd kind of noticed that.
Speaker 1: And it works, right. One person noticed and then they
Speaker 1: go to the slack and you know, they all get
Speaker 1: their money out. So are they on slack? Is that
Speaker 1: like the cool place to be? I don't I'm not
Speaker 1: in the cool slacks, But my understanding is there might
Speaker 1: have been some some slacks. I'm on ib personally. Okay.
Speaker 1: That leads me to my next question, though, why didn't
Speaker 1: they hedge against this risk? Isn't this I don't know.
Speaker 1: I would think that if you run a rank went
Speaker 1: a one part yeah, right, like it was there any
Speaker 1: way to hedge against this at all. Well, they need
Speaker 1: to make money, right. I Mean, the thing that I
Speaker 1: think happened with the Lilicon Valley Bank is they got
Speaker 1: a ton of deposits in very short order over the
Speaker 1: last couple of years because all of their clients were
Speaker 1: just getting you know, huge they say in their financial
Speaker 1: liquidity events. They were doing spacks, they were doing fundraisings,
Speaker 1: they're making it. They're bringing in a lot of money,
Speaker 1: and they're depositing it at SVB. SVB like kind of
Speaker 1: didn't have a place to put it, right, Like, you
Speaker 1: need to take some risk with your money to make
Speaker 1: money to like, you know, continue running your business as
Speaker 1: a bank. Traditionally you take some credit risk. They you know,
Speaker 1: all their clients were flush with cash and didn't really
Speaker 1: need credit, so they ended up taking a lot of
Speaker 1: duration risk. You can't really hedge that in a way
Speaker 1: that you know, they could have been just buying short
Speaker 1: term assets, but then they wouldn't have made any money,
Speaker 1: or they wouldn't have made enough money. Obviously they were
Speaker 1: getting a little rudy and reaching for a little extra money.
Speaker 1: But they took into a straight risk because it's the
Speaker 1: risk they could take. So mat is there a lesson
Speaker 1: already we're thinking that we need either increased oversight that
Speaker 1: beyond the systemically important banks, or is this just a
Speaker 1: case of a bank that was poorly run. Well. I
Speaker 1: think we definitely are going to see calls for increased
Speaker 1: oversight over these non systemically important banks, and I think, like,
Speaker 1: obviously it's because they're systemically important, right, I mean, like
Speaker 1: if you look at their action to SVB, it was
Speaker 1: if we don't, you know, rescue SVBS depositors, there's going
Speaker 1: to be a cascading run on other banks. That threat
Speaker 1: like seems to have been kind of, you know, reasonable,
Speaker 1: Like I mean, seems to be true that there's a
Speaker 1: lot of worries about other banks. And you know, if
Speaker 1: you believe that threat, then the first thing you do
Speaker 1: is you rescue the depositors. And the second thing you
Speaker 1: do is you start applying the same regulation we applied
Speaker 1: to systemically important banks to banks like SVB that have
Speaker 1: always said they're not systemically important but turn out to be.
Speaker 1: I think it's really interesting that even though you did
Speaker 1: have regulators step in with this backstop pretty much what
Speaker 1: everyone expected them to on Sunday night, and yet you
Speaker 1: look across the market right now. I mean, banks are
Speaker 1: being sold off like crazy, especially some of these smaller
Speaker 1: regional banks. I don't know. It seems to me it
Speaker 1: kind of marries with what you were saying about. You know,
Speaker 1: you had all these tech bros in their slack chat
Speaker 1: and it sort of led to group think this like
Speaker 1: herd mindset they all pulled out. It feels like that's
Speaker 1: still happening with some of these regional banks, even though
Speaker 1: theoretically the depositors would be safe. Yeah. Look, I don't know.
Speaker 1: I think that Um, I don't know that there are
Speaker 1: runs on these banks, but we know their stocks have
Speaker 1: gone down, right, And like there are a number of
Speaker 1: possible reasons for that. One is that this is a
Speaker 1: problem that people were not focused on a week ago,
Speaker 1: and now the drama of this weekend has sort of
Speaker 1: brought focus to this problem, and so people who are
Speaker 1: maybe a little behind are saying, I'm going to sell
Speaker 1: my bank stocks. I do think also, like there could
Speaker 1: be ways this goes poorly for equity holders, even if
Speaker 1: the depositors are totally fine, with one obvious one being
Speaker 1: that if these banks are kind of less solvent than
Speaker 1: they look, and if regulation is coming to basically make
Speaker 1: them be more solvent, and that's going to mean a
Speaker 1: lot of equity raising and a lot of dilution for
Speaker 1: existing shareholders. So that's one possibility. But I agree, I'm
Speaker 1: a little perplexed by the price action because, like I would,
Speaker 1: I would not have expected big runs on all these
Speaker 1: banks after a weekend of the FED saying kind of
Speaker 1: we're going to do everything it takes to make sure
Speaker 1: that these deposits are fun. But without that online chatter,
Speaker 1: you do wonder, and there's been a lot written about
Speaker 1: this that if without that, would we be in this situation.
Speaker 1: Because SVB sold rights and assets, they did what they
Speaker 1: needed to do to kind of shore up art. You
Speaker 1: don't buy that, well, I kind of do. I mean
Speaker 1: it's a bank run, right, I mean, like the problem
Speaker 1: with a bank run is you have all these assets
Speaker 1: that will eventually pay off and you have to sell
Speaker 1: them now, and you don't have enough money if you
Speaker 1: sell them now, right, I mean, if if there had
Speaker 1: not been a run, you know, they were they were
Speaker 1: sort of generally aware of this problem. They were rolling
Speaker 1: off these long duration securities. They were like reinvesting it
Speaker 1: like they were you know, they would have been fine
Speaker 1: if they hadn't lost forty billion dollars of deposits in
Speaker 1: a day. Um, I mean maybe right, I mean, like
Speaker 1: it's not it's not great to be balance sheet in
Speaker 1: solvent as a bank, but it's something that's happened before
Speaker 1: and the banks survived. But when you notice it, when
Speaker 1: there's a when there's a big fast run, then like
Speaker 1: there's not a lot you can do about it. So
Speaker 1: if I were in charge of a regional bank right now,
Speaker 1: if I were managing a portfolio and say, I don't know,
Speaker 1: I had a lot of duration risk, what should I do? Like,
Speaker 1: how should I go about managing that risk? Is that change? Now?
Speaker 1: Would the answer be different than it was a week ago.
Speaker 1: A week ago, a week ago, I would have said,
Speaker 1: raised a lot of equity, okay for sure, Now that
Speaker 1: seems look, I don't know. I mean my answer to
Speaker 1: your question is I might sit very very very still.
Speaker 1: I don't no one notices me, because there's a lot
Speaker 1: of ton you could do, right, I mean, like the
Speaker 1: problems that a lot of these banks that they're health
Speaker 1: in healthy maturity accounting, where if you sell it like
Speaker 1: you trigger, like the losses become more visible, right, they'll
Speaker 1: get to account for the losses. So you don't exactly
Speaker 1: want to do that right now. You probably could use
Speaker 1: more equity, but you don't want to go out and
Speaker 1: raise equity right now because like arguably that's what triggered
Speaker 1: the run an SVB is doing a you know, attempting
Speaker 1: an equity raise. So I mean your best bet is
Speaker 1: probably what you're already trying to do, which is to
Speaker 1: like let that duration risk roll down and reinvest the
Speaker 1: money elsewhere and try not to do it again. But
Speaker 1: you know, like if someone notices either could be a problem,
Speaker 1: I'm glad that I only hypothetically run a regional bank
Speaker 1: I had TVD given a few years. The other thing
Speaker 1: I would do is like, you know, call up the
Speaker 1: FED and make sure all of like the you know,
Speaker 1: make sure I understand the program and be ready to
Speaker 1: borrow from the FED. You know, like, you know, being
Speaker 1: able to show up your liquidity with all these new
Speaker 1: liquidity you know provisions is probably that seems helpful. Roth
Speaker 1: Slowstone have ever Core was on TV earlier and he
Speaker 1: reminded us of worn buffets. One of his famous it's
Speaker 1: only when the tide goes out to you learn who
Speaker 1: has been swimming naked, and we're increasingly learning that are
Speaker 1: we likely because of this unusual low rate environment that
Speaker 1: we've been in for so long, there's going to be
Speaker 1: more that more exposure of some problems. Yeah, I guess.
Speaker 1: I mean, like, like all all you know, there are
Speaker 1: a lot of banks who are in roughly similar situations.
Speaker 1: I also think that, like it feels like this is
Speaker 1: a one time transition from that low rate environment to
Speaker 1: a normal environment, like when rates go from like zero
Speaker 1: to to like four percent, like this gets exposed the
Speaker 1: next move. I think you're going to see less of
Speaker 1: this because like this, the problem is you had to
Speaker 1: really reach for a lot of duration risk when like
Speaker 1: you know, treasury bills are paying zero and your deposits
Speaker 1: were paying zero. But now if treasury bills are paying
Speaker 1: like four percent and your deposits are paying one percent,
Speaker 1: there's a lot more ways to make money as a
Speaker 1: bank without reaching for duration risk. Just got thirty seconds.
Speaker 1: What about like commercial real estate exposure? Is that could
Speaker 1: be that another shoe, Thanks could always lose money on credit.
Speaker 1: I don't know. I mean, it doesn't doesn't have the
Speaker 1: same sort of like it doesn't feel to me like
Speaker 1: being is sort of like hidden and surprising to people
Speaker 1: as this as the durationists that these ranks about. This
Speaker 1: was great. This was the best eight minutes of my
Speaker 1: day so far. See. I mean, it's been a bad day,
Speaker 1: but this is definitely the highlight. Imagine if Jellen this
Speaker 1: is pretty though. This is a pretty good third place.
Speaker 1: I gotta say it's not too bad to be in
Speaker 1: those top three. Um, Matt Levine, thank you so much,
Speaker 1: really appreciate it. Columnist with Bloomberg Opinion. Check him out
Speaker 1: on the Bloomberg terminal. Of course, at Bloomberg dot com,
Speaker 1: you're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the Ion Radio app, and the Bloomberg
Speaker 1: Business App, or watch us live on YouTube. Well. Our
Speaker 1: coverage and focus on banking continues and where and how
Speaker 1: we might find additional problems spots. Our in house analyst
Speaker 1: on regional banks back with us, Herman Chan. He is
Speaker 1: seen your alas for US regional banks with our Bloomberg
Speaker 1: Intelligence team. He joins Katie and myself here in our
Speaker 1: Bloomberg Interactor Broker's studio and then on Zoom in Chicago
Speaker 1: and a Koy Partner national financial services leader at whip Fly.
Speaker 1: It's a global accounting, tax and consulting firm that's been
Speaker 1: around for nearly a century. So curious to see what
Speaker 1: if any of our banking clients are saying. But let's
Speaker 1: start with Herman, Herman, where are we? What's the latest here?
Speaker 1: What do you think it needs to be top of
Speaker 1: mind for our investor audience? Sure? So where are we?
Speaker 1: We are in a market that is very dubious about
Speaker 1: regional banks. When we first chatted last week, our view
Speaker 1: was that the SVB situation would be a bit contained
Speaker 1: because SVB is a very unique atlier type bank that
Speaker 1: took a lot of interest rate risk in their investment
Speaker 1: securities portfolio and was also seeing some deposit outflow from
Speaker 1: their startup clients. There's no other bank of size in
Speaker 1: the United States that does that kind of business, that
Speaker 1: structured their balance sheet in that way. We know that,
Speaker 1: we know that for effect, But the market is extrapolating
Speaker 1: from what happened with SVB and taking a very dim
Speaker 1: view of banks that operated either tangentially or had the
Speaker 1: same sort of geographic focus or product focus, and so
Speaker 1: banks like Signature have been felled by this. Banks like
Speaker 1: First Republic and Western Alliance today are being pressured because
Speaker 1: they operate in similar markets and customers. Well that's the thing.
Speaker 1: When I was reading my email last night, I mean
Speaker 1: I read it all day, it was kind of a
Speaker 1: double whammy. First, we got a headline that said the
Speaker 1: US as SPB depositors will have access to all money Monday.
Speaker 1: That's good. The next headline that I read was that
Speaker 1: USS Signature bank closed today by state authority. So, I
Speaker 1: mean it makes sense that even though to your point,
Speaker 1: I mean we sort of had an isolated case here,
Speaker 1: it does feel like there is this concern over who's
Speaker 1: going to be the next Signature, What's going to be
Speaker 1: the next surprising headline? You mentioned First Republic. I mean,
Speaker 1: nothing has been announced about them, But is that a
Speaker 1: name that we should be keeping an eye on the
Speaker 1: market's telling you it's a name we have to keep
Speaker 1: an eye on for a better or for worse. I
Speaker 1: think it's a bit unfounded. The bank itself is a
Speaker 1: very conservative institution that caters to high networth clients, doesn't
Speaker 1: down fifty trading. That's amazing. I mean, and it has
Speaker 1: had the best one of the best credit quality type
Speaker 1: stories over the history of the company. Wow, And I
Speaker 1: want to bring you into the conversation. You know, remind
Speaker 1: all of us, you know, what you guys do and
Speaker 1: in terms of the types of clients you have and
Speaker 1: what you're seeing in connection with this. I don't know
Speaker 1: whether to call it crisis, but certainly concern and worry
Speaker 1: in the banking site sector. Yeah, absolutely so. Whipfully is
Speaker 1: a top twenty financial um works with top twenty accounting
Speaker 1: firms that works with financial institutions anywhere is up to
Speaker 1: about fifteen billion dollars, so your regional size financial institutions,
Speaker 1: and you know we help them from compliance and regulatory
Speaker 1: as well as you know, consulting around digital and other ways.
Speaker 1: So how are those clients. What's the conversation you guys
Speaker 1: are all having with those types of clients. You know,
Speaker 1: it's it's been around liquidity since the fall, and right
Speaker 1: now it's it's risk. What's on their balance sheet? How
Speaker 1: do they manage the risk and how do they not
Speaker 1: be the tansgential um ones that go down like you
Speaker 1: saw with the signature or the discussions are our first Republic.
Speaker 1: Well Herman way in on that thought managing liquidity risk.
Speaker 1: We were just talking with Leaving about managing duration risk.
Speaker 1: If you run one of these regional banks, how do
Speaker 1: you do that? Well, the new FED facility helped you
Speaker 1: manage liquidity is the whole issue in my view is
Speaker 1: that the announcements last night with the regulators backstopping the
Speaker 1: deposit tours of both SVB and Signature and also coming
Speaker 1: out with this new liquidity facility should give the market
Speaker 1: confidence that the banking sector can manage this liquidity risk
Speaker 1: because the banks can use their existing assets and pledge
Speaker 1: it to the FED and then get get liquidity out
Speaker 1: to help support their their depositors if they want to
Speaker 1: take their deposits out of the bank. That's the whole
Speaker 1: point of this. It seems like it's fallen on deaf
Speaker 1: ears that the market doesn't feel like the liquidity risk
Speaker 1: issue has been taken off to take Yeah, I do
Speaker 1: feel like officials I mean at a command back, I
Speaker 1: mean doesn't do those banking clients that you guys have
Speaker 1: and customers feel like the government is going to be
Speaker 1: there to backstop whatever they need. Yeah, I think the
Speaker 1: banks feel that way. I think the risk that we're
Speaker 1: seeing is a risk that maybe many didn't have top
Speaker 1: of mind before now. And that's social media risk. I mean,
Speaker 1: it's going around like like wildfire, whether it's Twitter, Facebook, Instagram,
Speaker 1: you name it, and so how do you manage against that,
Speaker 1: even though it's a very conservative bank that they're talking about.
Speaker 1: That's the thing. I feel like I've seen so many
Speaker 1: tiktoks even on this, which is not necessarily a social
Speaker 1: media channel, that you would expect this to be penetrating.
Speaker 1: But I mean, anna to that point, I know that
Speaker 1: this is impossible to quantify. It's sort of a thought exercise,
Speaker 1: but how much did this sort of heard think that
Speaker 1: we've heard around what happened at SPB. How much was
Speaker 1: social media do you think actually a contributing factor here?
Speaker 1: I think it was significant, and I think we're seeing
Speaker 1: it still with First Republic. Seems to be top of
Speaker 1: mind and at the tip of everyone's tongues right now,
Speaker 1: whether it's founded or not. Well, and this is where
Speaker 1: going back to you, Herman. You know, you guys have
Speaker 1: to do the fundamental and critical research, look at the
Speaker 1: balance sheets and understand it. So is there is there?
Speaker 1: From what you are seeing a true disconnect between the
Speaker 1: social conversations and the social narrative versus what the reality
Speaker 1: is on a lot of these regional banks balance sheets. Right,
Speaker 1: I want to pull it back to what Matt had
Speaker 1: talked about in his prior segment with you guys. Yeah,
Speaker 1: and he mentioned the duration risk of the securities book
Speaker 1: at at SBB signature, and to a much greater extent.
Speaker 1: First Republic has duration risk and its loan portfolio because
Speaker 1: they are mostly loan to high net worth customers and
Speaker 1: residential mortgages or home equity of type loans, so the
Speaker 1: duration of those loans are about ten years, and so
Speaker 1: those books are going to sit on the bank's balance
Speaker 1: sheets at fairly low rates because a lot of the
Speaker 1: mortgage activity that happened, as you probably recall, happened during
Speaker 1: the pandemic period when rates were zero, and so when
Speaker 1: the bank did all these originations at that time, they
Speaker 1: were at very low levels. And so you have the
Speaker 1: same sort of duration risk, but in the loan book
Speaker 1: and not the securities book. I mean, Anna, my head
Speaker 1: is spinning a little bit. And right now I have
Speaker 1: to say, especially after being plugged in for like four
Speaker 1: days straight, what do you expect the next two weeks
Speaker 1: two months of conversations to look like with you in
Speaker 1: between the banking clients that you do work with. Yeah,
Speaker 1: I think you're going to see a lot of folks
Speaker 1: going back to the basics and really looking at risk
Speaker 1: on their balance sheet, better understanding, you know, where they
Speaker 1: have current risks and truly trying to manage what that's
Speaker 1: going to look like in the future. And so a
Speaker 1: lot of talk around not just liquidity but overall enterprise
Speaker 1: risk management and you know, truly getting back to the
Speaker 1: basics of what they were as a financial institution. Hey,
Speaker 1: Herman just got about thirty forty seconds to we even
Speaker 1: understanding of kind of maybe a window and time frame,
Speaker 1: like to understand when all the fallout should happen as
Speaker 1: a result of this. Wow, that's that's a tough one
Speaker 1: to answer. Um, I think we're Yeah, you'd be living
Speaker 1: on an island in the Caribbean. I get it if
Speaker 1: you knew that, if I did. Yes, I think hopefully
Speaker 1: the market is being very forceful with what they're trying
Speaker 1: to tell tell the story in terms of First Republic
Speaker 1: and some banks like Western Alliance pack West, Um, they say, hey,
Speaker 1: here's the reality of it. We're okay or there's something
Speaker 1: is going to have to happen. So either way, I
Speaker 1: would expect it to something to happen in a very
Speaker 1: short order. All Right, it's gonna be fun, I know.
Speaker 1: Strip yourself in. Everybody, get ready for the ride. Herman,
Speaker 1: thank you so much. Herman Chan, he's senior analysts for
Speaker 1: US regional banks at Bloomer Intelligence. Not getting any sleep
Speaker 1: right now because there's so much going on here in
Speaker 1: our interactive broker studio. And Anna Choi, thank you so much. Partner,
Speaker 1: a national financial services leader at whip Fly. Joining us
Speaker 1: via zoom from Chicago, you're listening to the Bloomberg Business
Speaker 1: Week podcast. Catch us live weekday afternoons from three to
Speaker 1: six Eastern on Bloomberg Radio, the Bloomberg Business App, and YouTube.
Speaker 1: You can also listen live on Amazon Alexa from our
Speaker 1: flagship New York station, Jo Say Alexa play Bloomberg eleven thirty.
Speaker 1: All right, everybody, as you know, Saint Patti's day coming up.
Speaker 1: I've heard that on Friday. We can all use a
Speaker 1: stiff drink. Right, there's a lot going on right now.
Speaker 1: We also do know that we are front and center
Speaker 1: on what's going on with banks here in the United States.
Speaker 1: We did see though exposure and activity overnight European equities
Speaker 1: they tumble the most in mid December. They extended Friday's decline.
Speaker 1: Concerns from the banking center lingering to bite measures by
Speaker 1: regulators to limit the fallout from Silicon Valley banks collapse.
Speaker 1: The world once again, Katie, looking at the global banking system,
Speaker 1: so we have a lot to talk about with a
Speaker 1: global perspective. Is Mary Buckley. She is the Interim CEO
Speaker 1: of IDA Ireland. It's the Irish government's agency to attract
Speaker 1: inward investment. She joins us here in a Bloomberg Interactive
Speaker 1: broker's studio. Mary, as you know, a lot going on. Welcome, welcome,
Speaker 1: Nice to have you here with us. How are you.
Speaker 1: I'm very well, thank you, and good evening everybody. Good
Speaker 1: to have you here. Let's start though, there's a lot
Speaker 1: to talk about, and I know you're doing an event
Speaker 1: here with Bloomberg also overseas, but I want to start
Speaker 1: with the global perspective. The world once again looking at
Speaker 1: our global banking system, looking for cracks. How do you
Speaker 1: see it and what do you think is the constructive
Speaker 1: conversation that we need to be having and that you
Speaker 1: might be having with your colleagues there at your agency. Well,
Speaker 1: I think it's very early days yet for us. We're
Speaker 1: absolutely staying very close to companies in Ireland and we're
Speaker 1: assessing the situation. But at this point in time, I
Speaker 1: think from an Ireland perspective perspective, there will be limited
Speaker 1: fallout from it, So not seeing any kind of tightening
Speaker 1: as of yet or financial strains. Much too early to
Speaker 1: say at this point. What about sort of the psychological damage,
Speaker 1: if you will, because I mean we've talked a lot
Speaker 1: about how this will affect Silicon Valley in the US
Speaker 1: in terms of the tech scene. When you think about
Speaker 1: the global tech scene the partnerships to be made there,
Speaker 1: do you think that this will have an impact. We
Speaker 1: have a lot of tech companies in Ireland and they
Speaker 1: are operating very steadily there, and many of the largest
Speaker 1: players globally are based in Ireland. And I think that
Speaker 1: it's safe to say as well that Ireland would be
Speaker 1: seen as one of the most innovative economies in the EU.
Speaker 1: So I think from the perspective of that from the
Speaker 1: government focus on innovation and indeed moving on then to
Speaker 1: look at the very strong ecosystem that there is an Ireland.
Speaker 1: Hence we have the tech companies here. I think that
Speaker 1: Ireland is going to be fine and it'll be still
Speaker 1: remain a great location for tech companies. Mary, it's interesting too,
Speaker 1: like you've been with IDA for a while, right have indeed, yes,
Speaker 1: so you've seen a lot of market cycles. No. I
Speaker 1: love folks like yourself who have seen different market cycles,
Speaker 1: different market environments. So if I think about the Internet
Speaker 1: bubble or the Great Financial Crisis, how does what we're
Speaker 1: going through here feel like what we've gone through in
Speaker 1: some really severe times in the past. Yeah, And look,
Speaker 1: I think that's very clear, just to put some context
Speaker 1: on it, that we have over eighteen hundred overseas companies
Speaker 1: located in Ireland, and in tandem with that, there are
Speaker 1: about nine hundred and fifty American operations in Ireland, so
Speaker 1: very strong US relationships. And I think it's very safe
Speaker 1: to say that, you know, Ireland is seen as a
Speaker 1: very steady location and a very secure location, and from
Speaker 1: that perspective, I can see that there is a huge
Speaker 1: amount of activity taking place in Ireland that is very
Speaker 1: very positive and the tech base of companies that we've
Speaker 1: seen lately, if you're to comment even on just in
Speaker 1: more recent times, some of the losses that we've seen
Speaker 1: in the tech base. You know, overall it's about one
Speaker 1: one point four percent of the tech employment in Ireland.
Speaker 1: And as you rightly said, Carl, we do have you know,
Speaker 1: just gone through Brexit, we've just come through COVID, and
Speaker 1: I think one of the things that it's very clear
Speaker 1: to see is that we're a very resilient economy and
Speaker 1: that the FDI base in Ireland is really strong. So
Speaker 1: if you look at even last year, so investment for
Speaker 1: indirect investments still coming in. Oh absolutely, last year alone
Speaker 1: we want two hundred and forty two investments and just
Speaker 1: as part of that, one hundred and sixty seven of
Speaker 1: those investments came from the United States. But of the
Speaker 1: two four two one hundred and three were brand new,
Speaker 1: first time investments. So I think it really demonstrates the
Speaker 1: value proposition for Ireland is strong, and in tandem with that,
Speaker 1: there is huge confidence in our existing base of companies
Speaker 1: as well. So I think from an Ireland perspective, from
Speaker 1: an FDI perspective, it's hugely important to the Irish economy,
Speaker 1: but it will remain strong. And just to make sure
Speaker 1: I got those numbers right, So one hundred and three
Speaker 1: of those were new investments, right, Yes, So what is
Speaker 1: the outlook for twenty twenty three. Look, it seems like
Speaker 1: the book comes from the US, but beyond the US,
Speaker 1: I mean, where is the most opportunity. Well, the bulk
Speaker 1: of the investments do come from the United States. And
Speaker 1: you know, we've just talked about technology, but I think
Speaker 1: it's spared to say that Ireland is very well diversified.
Speaker 1: So we have life sciences companies, both pharmaceutical and medical technologies.
Speaker 1: We also have financial services companies and we have engineering
Speaker 1: and other types of companies as well. So I think
Speaker 1: across the board we're seeing a lot of investments. And
Speaker 1: while it might be a little quieter this year because
Speaker 1: of the global environment that we're operating in, that will
Speaker 1: be the case right across the globe FDI investments there
Speaker 1: will be you know, slower this year. Well that's what
Speaker 1: I would ask Mary, Like, you know, while I'll worry,
Speaker 1: like there's things that we think about, and whether it's
Speaker 1: concerns about geopolitics right or now we're worried about maybe
Speaker 1: what's going on with banks at this point. Other things
Speaker 1: we're worried about, just a global slowdown, global recession. If
Speaker 1: you had to kind of pick one big macro event
Speaker 1: that you say you're strong right now but that is
Speaker 1: really top on your radar, what would you say it
Speaker 1: would be, Well, there's so many things happening, you know,
Speaker 1: across the globe at the moment, it's quite difficult to
Speaker 1: pick any any particular one. We're certainly seeing. You know, obviously,
Speaker 1: for client companies, the environment in Ireland has been really
Speaker 1: really strong, but they have just like many other companies,
Speaker 1: they are coming through the challenges of inflation of interest
Speaker 1: rates and indeed the challenges of energy crisis and energy prices,
Speaker 1: all on the back of the conflict between you and
Speaker 1: Russia and indeed because of COVID. And I think again,
Speaker 1: you know, last year was our best year ever in
Speaker 1: FDI employment. So again, I think it does demonstrate that
Speaker 1: resilience that I refer to and the stability of Ireland
Speaker 1: and the pro business environment that's there. So I think that,
Speaker 1: you know, regardless of the challenges and there are many currently,
Speaker 1: you know, it's referred to as a poly crisis, I
Speaker 1: think you know, if you look at Ireland, we have
Speaker 1: really been very, very industrious and certainly from an investment perspective,
Speaker 1: Ireland is a great place in which to invest and
Speaker 1: I think that's what our investors and our clients are seeing.
Speaker 1: Many of our clients are in Ireland, you know, fifty
Speaker 1: years and longer, and I think again demonstrating again the
Speaker 1: innovation that takes place within the country has been hugely
Speaker 1: important to Ireland's success as well. Mary. It's funny how
Speaker 1: narratives shift so quickly, because if this was a week
Speaker 1: ago at one of the first things I would have
Speaker 1: asked you probably would have been about a and we
Speaker 1: only have about a minute left with you. But when
Speaker 1: you think about, you know, bringing innovation to Ireland, where
Speaker 1: does AI rank on that list? Well, AI ranks exceptionally
Speaker 1: highly and we have many companies that have come to Ireland,
Speaker 1: particularly to be involved in AI, and particularly from the US,
Speaker 1: and we have a significant number of STEM graduates in Ireland.
Speaker 1: In fact, from the perspective of AI and STEM, the
Speaker 1: graduate work for graduate graduate from Ireland is very strong.
Speaker 1: It's the strongest in the EU on a per capita
Speaker 1: basis between the young graduates, between the ages of twenty
Speaker 1: and twenty nine, so right across the board, AI is
Speaker 1: really part of not just technology but life sciences, financial services,
Speaker 1: and many of the companies that are in Ireland are
Speaker 1: actually focused on AI. And the education system in Ireland
Speaker 1: is really really strong for bringing through that cohort of
Speaker 1: graduates to have the skills that are needed for a
Speaker 1: focus on artificial intelligence, which is really really strong. I
Speaker 1: do want to point out that Bloomberg is going to
Speaker 1: be hosting it's inaugural European New Economy Gateway in Ireland
Speaker 1: in April and partnership with IDA Ireland, and I'm guessing
Speaker 1: they're going to be talking a lot about AI and innovation.
Speaker 1: So it's interesting a longer term perspective, which is what
Speaker 1: New Economy does with its partners and kind of gets
Speaker 1: above the daily and talks about long term. Mary, thank
Speaker 1: you so much, but in my pleasure, thank you, our pleasure,
Speaker 1: Mary Buckley. She's interim CEO of IDA Ireland. Here at Bloomberg,
Speaker 1: you're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the Ion radio app, and the Bloomberg
Speaker 1: Business app or watch us live on YouTube. We continue
Speaker 1: to watch what's going on in the banking sector, and
Speaker 1: we continue to watch what's going on in the startup world,
Speaker 1: and just trying to assess the impact of the collapse
Speaker 1: of Silicon Valley Bank. The tech community, though, Joel, as
Speaker 1: you know, continuing with some of its major initiatives, such
Speaker 1: as the uberization of the freight industry, which this story
Speaker 1: is in the upcoming new issue of Bloomberg Business Week.
Speaker 1: It's on newsstands later this week, already online at Bloomberg
Speaker 1: dot com, slash business Week on the Bloomberg Joel is
Speaker 1: still with us, but let's bring in also into the
Speaker 1: conversation on the reporter who wrote this story Bloomberg News
Speaker 1: Technology Report to Austin car on zoom in Boston. It's
Speaker 1: a great reminder, Joel, that things are moving on despite
Speaker 1: some of the day to day gyrations. Okay, so that, yeah,
Speaker 1: there's like, you know, the big banking story, and then
Speaker 1: there's Austin's charming little story from from Europe which does
Speaker 1: relate to some bigger, you know, innovation stories here. So
Speaker 1: we're going to attempt to have this conversation not bring
Speaker 1: up Silicon Valley Bank. But you know, I have not
Speaker 1: done my due dealings there, hopefully Austin has. If there's
Speaker 1: any exposure we should to SBB here, Austin, we should
Speaker 1: disclose that sooner rather than later to your knowledge. Is
Speaker 1: there any not that? Okay? All right, good now, let's
Speaker 1: just talk about Cinder who. I had never heard of
Speaker 1: this company until Austin was like, you should probably read
Speaker 1: about Sender. What is sender up to Austin. Yeah, so
Speaker 1: Sender is a digital freight for it or you might
Speaker 1: not know what that means, but it's essentially a part
Speaker 1: of this sort of growing batch of tech startups out
Speaker 1: there that are trying to uberize the trucking industry. If
Speaker 1: you look around you right now, probably anything on your desk,
Speaker 1: your phone, it's likely been on a truck, maybe like
Speaker 1: three to five to ten times to get to where
Speaker 1: it is right now. We're talking about groceries, electronics, everything,
Speaker 1: and yet the industry is the most inefficiently run thing.
Speaker 1: It's absolutely insane. I spent time in Europe with the
Speaker 1: startups and truckers and you just have no idea how
Speaker 1: much of it's still run on paper and pen and email.
Speaker 1: And phone calls, and so this is the europe this
Speaker 1: European company called Sender, which has really done some work
Speaker 1: to consolidate the market. They actually bought Uber's European freight
Speaker 1: unit in twenty twenty, they bought one of Send, one
Speaker 1: of France's hottest startups, and a few others to sort
Speaker 1: of grow out this net work of sort of streamlined
Speaker 1: automated trucking apps to make sure things are a little
Speaker 1: bit more streamlined than they used to be when they
Speaker 1: were still run on fax machines. And believe it or not,
Speaker 1: things really haven't been changed much since then, despite the
Speaker 1: fact that the amazons the world exists. Okay, you wrote
Speaker 1: in the first paragraph about what I had never heard
Speaker 1: this before. It's a sad joke for this industry that,
Speaker 1: more than anything, what is getting shipped is nothing. Talk
Speaker 1: to us about empty miles. Yeah, empty miles. Is this
Speaker 1: really tragic phenomenon in the business where essentially, most of
Speaker 1: the time, you know, because we have shipment's going from
Speaker 1: A to B, but not necessarily back from B to A,
Speaker 1: a lot of the times, the trucks you see on
Speaker 1: the highway or empty. You know, we just have this
Speaker 1: assumption that goods are in the back of these big,
Speaker 1: big rigs rolling around expressways, but twenty percent of the
Speaker 1: miles at least in Europe or what are called empty miles,
Speaker 1: and that's part of the reason is just because they're
Speaker 1: not off demise too well, they're not loads aren't bundled,
Speaker 1: so you have again trips going forward as well as
Speaker 1: for the back hall. So that's one of the things
Speaker 1: that these this batch of tech startups out there like
Speaker 1: Sender in Europe, Convoy and Uber in the US, and
Speaker 1: full Truck Alliance and China are trying to work on.
Speaker 1: They're trying to essentially use machine learning analytics to make
Speaker 1: sure they can piece together a map of different chipment
Speaker 1: to reduce empty miles, which can really lower the amount
Speaker 1: of emissions out there and also just make costs of
Speaker 1: goods go down because there's not so much inefficiencies in
Speaker 1: the market. Okay, so how is how is Sender doing
Speaker 1: that or how did they set out to do that
Speaker 1: and how are they doing it now? Well, it was
Speaker 1: pretty difficult, you know, they started a couple of years
Speaker 1: ago really trying to break into the market, just expecting
Speaker 1: things would be able to be uberized, you know, we
Speaker 1: build an app, you'd expect truckers to use it, But
Speaker 1: what they ran into was just this crazy old world,
Speaker 1: antiquated dynamic where truckers did not want to use these products.
Speaker 1: They were so used to doing things the old school
Speaker 1: way by sort of phoning in orders, by calling to
Speaker 1: say that they've arrived at a truck depot. Sender tried
Speaker 1: to send them out phones so they can track them
Speaker 1: via GPS, but the truckers really didn't like it, so
Speaker 1: they just took out the simcard or the battery from
Speaker 1: the phone. They had all these ways to upload documentation
Speaker 1: for delivery documents that you could automate the payments process,
Speaker 1: and truckers would just mail them in. So what they
Speaker 1: were up against was really the status quo of just
Speaker 1: a way of business being done a certain way by
Speaker 1: drivers who were perhaps a bit older dispatchers that didn't
Speaker 1: want to change the way they were doing things. And
Speaker 1: that's essentially why this industry hasn't been digitized. And even
Speaker 1: the biggest players out there in Europe like dB Shanker
Speaker 1: or Coolnaga that they've really been slow to adapt these
Speaker 1: technology standards just because the industry for so long has
Speaker 1: been operated by phone, email, and paper Austin. You know,
Speaker 1: it's interesting though, you know, I think about I spent
Speaker 1: a lot of time with UPS here in the United States.
Speaker 1: I mean, they are totally into technology and tracking every
Speaker 1: move that their drivers do in picking up and then
Speaker 1: dropping off. So is it similar to you know, kind
Speaker 1: of that data dump of just kind of trying to
Speaker 1: figure out a better way. Is that what they're trying
Speaker 1: to do, is it's similar to something that a UPS
Speaker 1: is already doing. It's all what all these companies like
Speaker 1: a UPS or DHL are trying to do. In Europe,
Speaker 1: It's a it's a bit more complicated because seventy percent
Speaker 1: of the trucks out there are owned by firms with
Speaker 1: fewer than ten trucks. So this market is like super fragmented.
Speaker 1: It's not the case that you have these massive trucking
Speaker 1: firms who own fleets of thousands and tens of thousands
Speaker 1: of trucks. Most of the time they're subcontracing out, subcontrac
Speaker 1: contracting out to smaller family run operations. And these are
Speaker 1: the types of firm senders trying to go after. It's
Speaker 1: trying to say hey to this mom and pop, a
Speaker 1: trucking operation. We can connect you with the Coca Colas
Speaker 1: or ab in beds of the world and and sort
Speaker 1: of bridge that that that gap of capacity to sort
Speaker 1: of bring those mom and pop truckers to work with
Speaker 1: larger enterprise players through this technology. But it's it's really
Speaker 1: not easy. I mean again, these are people who are
Speaker 1: very tech agnostic, who don't like using apps, and who
Speaker 1: have a lot of skepticism about what automation can mean
Speaker 1: from this industry, whether it comes for driverless cars or
Speaker 1: automated paperwork. There's a lot of skepticism. So it's it's
Speaker 1: not quite as easy as what UPS is perhaps doing
Speaker 1: with their in house network of trucks. How profitable is
Speaker 1: it to be a digital matchmaker of sorts? Then? Not
Speaker 1: very profitable. That's the other thing is traditionally this business
Speaker 1: is operated with margins and let's say the two percent
Speaker 1: to five percent range. I actually ought talked to the
Speaker 1: former CEO of DHL Global Forwardings Freight Division, and he
Speaker 1: was just saying that, you know, when I was there,
Speaker 1: when I was running things, if I sneezed, the trucking
Speaker 1: ministry would lose all its profits. I mean, you just
Speaker 1: couldn't make a mistake in this industry, and that's one
Speaker 1: of the other reasons why they were hesitant to make
Speaker 1: this huge risk and change all their technology, because if
Speaker 1: you did make one mistake, that could lead to huge
Speaker 1: write downs, as actually did happen when DHL in twenty
Speaker 1: fifteen tried to overall all their tech infrastructure and introduce apps.
Speaker 1: People just didn't want to use them. And all their
Speaker 1: partners this this sort of interconnected mesh network. They were
Speaker 1: really hesitant to adopt this technology and that's why it's
Speaker 1: stayed So I guess stagnant for so long. Yeah, but
Speaker 1: you know Europe known for great tech companies. Um, so
Speaker 1: you know this is what you get. But I am
Speaker 1: I do think it's it's interesting. It's like they found
Speaker 1: this little market and like, let's see if they can
Speaker 1: make it work. Yeah, right, so good could be one
Speaker 1: of the bigger players, I mean the biggest players in
Speaker 1: the market. In the market Europe still only have a
Speaker 1: two percent, three percent, four percent market share. So it
Speaker 1: is an insanely fragmented industry. It's not going to be
Speaker 1: one winner takes all sort of winner. It's going to
Speaker 1: be a fragmented, conditional players though all right, Austin Carr,
Speaker 1: tech reporter at Bloomberg News via zoom from Boston or
Speaker 1: thanks to Joe Weber, editor a Bloomberg Business Week, you're
Speaker 1: listening to the Bloomberg Business Week podcast. Catch us live
Speaker 1: week afternoons from three to six Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business App, and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty. I'm bromcl a
Speaker 1: journal now. But you let me drive? Oh no, no,
Speaker 1: no no, who's going to drive? Honey? Please, I'll do
Speaker 1: the riding gravels. I'm want to drive. Good question. This
Speaker 1: is the Drive to the Clothes coming well up on
Speaker 1: Bloomberg Radio. All right, everybody, just got about seventeen and
Speaker 1: a half minutes left in today's trading session. Carol Master
Speaker 1: Long Katie Gray Felt live in our Bloomberg Interactive Broker Studio,
Speaker 1: Stooming on YouTube and of course on Bloomberg Originals. So
Speaker 1: let's get to it with Liz Young. She's head of
Speaker 1: investment strategy at the online personal finance company and bank
Speaker 1: we're talking about so far. She enjoyed us on zoom
Speaker 1: in New York City. Hey, Liz, good to have you
Speaker 1: here on this fun day. A lot going on, kind
Speaker 1: of the understatement of the day. So if I also
Speaker 1: a bank, you guys are a platform, I'm just curious
Speaker 1: what you are all seeing in terms of changes when
Speaker 1: it comes to volatility, signs of stress, changes in user
Speaker 1: behavior on the platform. What's going on. Well, Look, nobody
Speaker 1: likes to go through a weekend like we just saw,
Speaker 1: and no consumer or business likes to hear the term
Speaker 1: bank run. So obviously there's been a little bit of
Speaker 1: a shaken sentiment across markets, equity markets, bond markets, banking customers,
Speaker 1: everything that we've seen. However, we do offer a savings
Speaker 1: account with a pretty high yield if you're a direct
Speaker 1: deposit customer, so that has helped our deposit trends to
Speaker 1: remain strong. We also offer yield offer yield on our
Speaker 1: checking account so in this era, so nobody's yanking. We
Speaker 1: have we have not seen meaningful withdrawals. So right now
Speaker 1: things are looking pretty stable, and I think given the
Speaker 1: news that we heard last night out of the government,
Speaker 1: I think they've done a decent job of really stemming,
Speaker 1: you know, and stopping the bleeding that could have happened
Speaker 1: if everything opened today still with no backstop. So you know,
Speaker 1: I'm not going to go as far to say that
Speaker 1: this was an isolated incident. I do not think necessarily
Speaker 1: that this was something that we should ignore or that,
Speaker 1: you know, we've solved all the problems and we can
Speaker 1: all continue on our merry way. However, this is a
Speaker 1: time of really really heightened competition for deposits and obviously consumers.
Speaker 1: I mean, I tweeted this today about basically the mentions
Speaker 1: of risk free rates and treasuries. There are consumers all
Speaker 1: over the streets talking about treasury yields and that's not
Speaker 1: something that the average American has ever really had in
Speaker 1: their in their daily conversation. So there's a ton of
Speaker 1: competition for deposits across the industry. Obviously, last year was
Speaker 1: a really tough year for the bond market. I don't
Speaker 1: think that SVB was the only bank that would have
Speaker 1: been affected. I think that, unfortunately, it was the first
Speaker 1: big one that made the headlines. But I do think
Speaker 1: it's important that we prevented this from becoming a bigger crisis.
Speaker 1: And Liz, I mean, it's interesting to hear you say,
Speaker 1: this isn't something that we should ignore. But then you
Speaker 1: look at the stock market. I mean I see the
Speaker 1: SMP five hundred, it's up three tenths of percent. Then
Speaker 1: you look at what's happening in the bond market, and
Speaker 1: you had the two year treasure yield down by the
Speaker 1: most since nineteen eighty seven at one point. So there's
Speaker 1: a lot of drama in bonds, not a lot of
Speaker 1: drama when it comes to stocks, at least for today.
Speaker 1: How sustainable is that dynamic. I don't think the move
Speaker 1: inequities is sustainable, and I'll be very honest about that.
Speaker 1: I think that valuations are still pretty rich here given
Speaker 1: what's going on in the environment. I think that today
Speaker 1: we probably avoided the biggest fear, right the catastrophic fear
Speaker 1: that could have occurred if there were more bank runs.
Speaker 1: But if you look at just what's happened in the
Speaker 1: treasury market and serve take that as a signal of
Speaker 1: how stable things are, you don't typically see this size
Speaker 1: of moves twenty thirty basis point moves, fifty basis point
Speaker 1: moves in things like a two year treasury bond. So
Speaker 1: it's really important to watch that type of signal and
Speaker 1: look at things like the fact that we hit a
Speaker 1: curve and version between the twos and tens last week
Speaker 1: of over one hundred basis points. The VIX is now
Speaker 1: back up to twenty six. I don't think that an
Speaker 1: equity market can chug along with a VIX at twenty
Speaker 1: six or higher. Treasury market seeing volatility like it is
Speaker 1: right now. CPI coming out tomorrow, we have a slew
Speaker 1: of other data that we will get towards the end
Speaker 1: of the week. So this is not a time where again,
Speaker 1: and I think I said this already, this is not
Speaker 1: a time where I would declare victory and say we're
Speaker 1: out of the woods. Everything is going to be fine.
Speaker 1: I think that this is a really fragile environment right now,
Speaker 1: and we're waiting to see what the FED is going
Speaker 1: to do in the March meeting, and there continues to
Speaker 1: be a ton of uncertainty around that that fragile market.
Speaker 1: That fragility takes what kind of forms possibly in the
Speaker 1: next I don't know, six to twelve months. Well, when
Speaker 1: the market is fragile and poised for indecisiveness, it doesn't
Speaker 1: take much to send it in one direction or another.
Speaker 1: What I would say right now is I think the
Speaker 1: risk is more to the downside because of where valuations are.
Speaker 1: I also think that there's risk in the investment grade
Speaker 1: and height particularly high yield credit market, because we have
Speaker 1: not seen spreads move like they normally would in a
Speaker 1: stressful environment. So I think that over the next six
Speaker 1: to twelve months. You know, if you look out long term,
Speaker 1: let's say we hit some sort of big draw down
Speaker 1: that occurs in the next three months, and chances are
Speaker 1: in the next twelve months the market has recovered a
Speaker 1: bit of that. You probably also in that time frame
Speaker 1: see the FED back off, if not cut rates, we
Speaker 1: probably have economic data that has gotten worse, and you know,
Speaker 1: we're either well on our way or maybe even in
Speaker 1: twelve months through some sort of contraction. So twelve months
Speaker 1: out right now seems like a really, really long period
Speaker 1: to wait. But I would say for a time when
Speaker 1: the market is fragile and not sure which direction to go,
Speaker 1: it does not take much to push it over the edge.
Speaker 1: And you brought up a high yield credit And something
Speaker 1: I've been thinking about is if you look at ETFs
Speaker 1: in particular HyG it's the biggest junk bond fund out
Speaker 1: there short interest is something like fifty five percent. Then
Speaker 1: you think about what we're seeing in the arc ETFs.
Speaker 1: On the flagship fund, you're also short interest is near
Speaker 1: a record. It's the same thing if you look at
Speaker 1: some of black Rosth's emerging market bond ETFs. Just broadly,
Speaker 1: it feels like there's this appetite for investors to begin shorting.
Speaker 1: Have you seen that? Do you understand that impulse? Yeah,
Speaker 1: I mean I've been talking about it, so you know,
Speaker 1: if you're shorting a high yield ETF. Obviously the expectation
Speaker 1: is in line with what mine is that I would
Speaker 1: expect spreads to blow out. I would expect there to
Speaker 1: be some stress in those markets. The challenging part is
Speaker 1: that it hasn't happened yet. There has not been a
Speaker 1: big credit event to tell the market that spreads need
Speaker 1: to be wider than they are. I think that there
Speaker 1: probably is something lurking out there, and we're going to
Speaker 1: hear about that as time goes on. I don't know
Speaker 1: where it is. I don't have a prediction about where
Speaker 1: it's going to come from. But I don't think this
Speaker 1: was it. I don't think that this SVB situation Number
Speaker 1: one it wasn't a credit event. Number two. I don't
Speaker 1: think this was the big thing that is going to
Speaker 1: put stress on the corporate bond market. So I do
Speaker 1: understand absolutely the impulse to expect things to get worse
Speaker 1: there before they get better. I just don't know work
Speaker 1: can actually send a that direction. Great comments and great analysis.
Speaker 1: Let's come back soon, Lucia, head of Investment Strategy. It's
Speaker 1: so far. Joining us be zoom in New York City.
Speaker 1: This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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