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Speaker 1: This is Bloomberg business Week inside from the reporters and

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Speaker 1: editors who bring you America's most trusted business magazine, plus

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Speaker 1: global business, finance and tech news. The Bloomberg Business Week

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Speaker 1: Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio.

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Speaker 1: We've been talking about Ali Baba, certainly a name that

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Speaker 1: is front and center today. It's up about fourteen percent

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Speaker 1: as we speak, jumping. I think it's the biggest intra

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Speaker 1: day climbed since January. It all has to do with

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Speaker 1: plans to split into six units. So we want to

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Speaker 1: get to the news and the impact it's having on

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Speaker 1: the overall Chinese names at trade here in the United States.

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Speaker 1: With more on the news, let's bring in Bloomberg News

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Speaker 1: Equities reporter that follows the Chinese ADRs. The trade in

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Speaker 1: the US is chen is here in our Bluemberg interactive

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Speaker 1: broker studio. Ishan tell us about the news. First of all,

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Speaker 1: I feel like it's interesting that Jack Mak comes back

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Speaker 1: after missing for a year. That was yesterday and then

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Speaker 1: we get this news today. So walk us through the

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Speaker 1: news and maybe the significance of it. Yeah, great, great. First,

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Speaker 1: thanks for having me today and you know, it's definitely

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Speaker 1: a very interesting week for Ali Baba. Today. The news

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Speaker 1: is showing it like a radical restructure and plan for

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Speaker 1: Ali Blabba because and now it's going to split the

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Speaker 1: whole business unit Empire into six individeo units including e commerce,

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Speaker 1: cloud and also media, and it potentially pays the road

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Speaker 1: for them to raise funds and eventually explore the IPOs

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Speaker 1: of individeo units. So unlock's value that investors sees potentially right,

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Speaker 1: and I think it's more than a lock value because

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Speaker 1: you know what analysts and investors are telling me, they

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Speaker 1: see it as a wing wing situation for Ali Baba

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Speaker 1: and Beijing. So first of all, it's for sure like

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Speaker 1: a lock value for investors if you look at do

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Speaker 1: like a mass on the you know, some of parts

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Speaker 1: of each individ units is treating like it should be

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Speaker 1: way higher than currently where it is trading now. But

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Speaker 1: also thinking about from the regulatory perspective, as we all

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Speaker 1: know that Beijing over the past two years have been

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Speaker 1: having this sweeping crackdown on the tag industry and the

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Speaker 1: main concern was that, you know, the concentrated power of

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Speaker 1: Ali Baba and many tag firms is not helpful or

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Speaker 1: healthy in terms of competition or innovation in the industry.

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Speaker 1: So now that Ali blahbla what is doing is to

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Speaker 1: break the big empire into pieces, so in a way

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Speaker 1: that should potentially is the concern from Beijing from the regulators,

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Speaker 1: and this is a move also should you know, get

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Speaker 1: the blessing from them. And it's great to have you

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Speaker 1: hear each and because obviously you're one of our star

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Speaker 1: reporters on the Equis team, but I also know this

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Speaker 1: is a rare move right when you're thinking about technology

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Speaker 1: companies specifically based in China. So what do you think

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Speaker 1: this means for the industry and could potentially be template

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Speaker 1: for other companies to follow. Yeah, that's a great question. Actually,

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Speaker 1: I have seen analysts and investors saying this as a

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Speaker 1: game changer for the industry going forward, and it could

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Speaker 1: serve as a blueprint for other firms such as like

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Speaker 1: JD dot Com, Tenson or bay Do to explore a

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Speaker 1: similar paths. And Tenson could be a most most reasonable

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Speaker 1: candidate here for a breakup because it has huge influence

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Speaker 1: just as bah Bah, and it has different business lines. Actually,

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Speaker 1: I already started to divestis some of the units, but

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Speaker 1: still there are romantic entities could become standard long segments.

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Speaker 1: Hen would Jack might have done this without the Chinese

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Speaker 1: government kind of putting pressure on the internet sector. And

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Speaker 1: I'm wondering if this if Ali Baba was in the

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Speaker 1: United States, would US regulators you think, similarly been saying

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Speaker 1: we've got to push for a breakup. I'm curious what

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Speaker 1: analysts how they're weighing in on that, if they are,

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Speaker 1: I'm I haven't seen enough reporting there, but it's a

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Speaker 1: very good question. And I was saying, you brought up

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Speaker 1: Jack Mah. I think it's interesting because this news today

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Speaker 1: also callincidized with the news we saw yesterday that Jack

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Speaker 1: mar was spotted back in China again after a year

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Speaker 1: more than a year of like traveling or staying abroad.

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Speaker 1: Right um, the market of course took that also as

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Speaker 1: a very positive sign because Beijing right now is pushing

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Speaker 1: and saying that it wanted to support private enterprise to

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Speaker 1: revive its economy, but it really needs to gain the

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Speaker 1: confidence from the companies and investors after you know, a

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Speaker 1: series of crackdowns of different industries. So now that Jack

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Speaker 1: Mall is coming back and then with this split plan

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Speaker 1: appeared to you know, pay road for you know, the

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Speaker 1: company's future. These are all like a turning the sentiment

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Speaker 1: of Ali blah blah, but also Chinese ado US in general. Yeah,

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Speaker 1: they were all up today, right, or a lot of

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Speaker 1: them were. And I know you've also covered different calls,

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Speaker 1: say like with Marco Kolonovic over at JP Mortgage, he

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Speaker 1: was talking about buying the dip on Chinese equities in

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Speaker 1: this particular back even during right in early October, during

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Speaker 1: that whole reopening type trade, and some of that had

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Speaker 1: paid off. But are you seeing any other analysts kind

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Speaker 1: of still calling for maybe still continuing to buy this

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Speaker 1: or do you think it's run its course? Because it's

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Speaker 1: interesting if you're looking at the right as far as

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Speaker 1: how they've performed so far this year more probably kind

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Speaker 1: of flat, not not really obviously so the big rally

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Speaker 1: in the fil quarter right because on the JPM call

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Speaker 1: we walked together on a story jazz and at that

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Speaker 1: time I think the call the mancisis is about the reopening.

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Speaker 1: But remember that reopened rally we have staying froll November

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Speaker 1: last year, have fizzle outs a bit, especially after a

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Speaker 1: quarter of you know, like Earning's prey. There's quite a

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Speaker 1: bounce off of that low right, casino stocks in hotels, yeah,

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Speaker 1: also like a travel related names, but it has already

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Speaker 1: played out, so investors now at the point of they

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Speaker 1: wanted to see, all what is the fundamental value of

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Speaker 1: these companies. They are focused on the regulatories, certainty and certainty,

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Speaker 1: but this news definitely help in terms of, you know,

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Speaker 1: the regulatory perspect that's what I want to escation because

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Speaker 1: I do feel like depending on I felt like we

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Speaker 1: went through a period of even we start with the pandemic,

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Speaker 1: you know, shut down, open up, like it was just

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Speaker 1: kind of startling. And even with the tech sector, China

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Speaker 1: has been very clear about wanting to be performing in

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Speaker 1: the global economy on a higher tech level, like this

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Speaker 1: is important to the global growth and the growth in

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Speaker 1: China specifically, but there's a lot of oversight about privacy

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Speaker 1: and data gathering. And I do wonder does a move

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Speaker 1: like this come tech entrepreneurs in China and investors when

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Speaker 1: it comes to investing in these names, or is it

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Speaker 1: a reminder that China and Chinese officials could at any

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Speaker 1: moment be like, you know what, I still don't like

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Speaker 1: how big this company is or the impact it is

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Speaker 1: and that they could move in. I'm just wondering if

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Speaker 1: things are settling down in terms of that, right, I

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Speaker 1: think that's a very good question. And back to the

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Speaker 1: news here. I think one question investors are asking on

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Speaker 1: today's news is where are like this potential in the

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Speaker 1: video units or Spain offs of Ali Babago into a

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Speaker 1: list in Hong Kong or in China the domester market

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Speaker 1: because ever since you know, did the IPO debacle in

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Speaker 1: New York, right, Beijing has been calling for the so

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Speaker 1: called homecoming listing of Chinese companies. So these are reasonable

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Speaker 1: speculations that even they break up and eventually list some

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Speaker 1: of the units, maybe they offer the shares or it

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Speaker 1: should the shares closer to home. So if they do that,

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Speaker 1: what regulation absolutely say? What kind of message does that sense? Right?

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Speaker 1: I think it's in line with where Beijing is pushing

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Speaker 1: for more regulations in terms of the listing share offering,

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Speaker 1: and they also wanted to give access to domestic investors

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Speaker 1: to all them trade and all these you know national

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Speaker 1: bit like bit tech firms. So maybe no listings in

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Speaker 1: the US potential, Yeah, that's no. I just think it's

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Speaker 1: really interesting in terms of the sector and how it's

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Speaker 1: been playing out. Rye No, definitely, so really we don't

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Speaker 1: have a ton of details yet right as well as

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Speaker 1: the timetable could be moving forward on this because I'm

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Speaker 1: sure investors are eaching to know. Yeah, yeah, I like

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Speaker 1: today's I think the first step in terms of splitting

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Speaker 1: up and couldn't potentially paved the road for a wave

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Speaker 1: of IPOs, But we haven't seen any details in terms

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Speaker 1: of timeline or you know what, what is the IPO

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Speaker 1: plans for the individual units and still doing cost cutting

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Speaker 1: to share up the bottom line, so that that's business

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Speaker 1: as usual. Um, thank you so much. It's an important

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Speaker 1: sector and I love talking about those Chinese names that

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Speaker 1: trade here in the United States. Ishanshen, thank you so much.

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Speaker 1: She's Bloomberg News Equities reporter. She follows the Chinese ADRs

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Speaker 1: that trade in the US. Jenning us here in our

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Speaker 1: Bloomberg Interactive broke or studio looking at shares of Ali

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Speaker 1: Baba right now, still higher on the day, just off

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Speaker 1: their best levels of the session again of about thirteen

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Speaker 1: point eight percent. And we did talk earlier about the

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Speaker 1: Nasdack Golden Dragon. That index also higher on the day,

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Speaker 1: largely because of the moves that we saw in Ali Baba,

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Speaker 1: that index is up about three point four percent. Just

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Speaker 1: so definitely that whole sector, as we talked about earlier,

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Speaker 1: definitely some outperformance. It's definitely for sure and something that

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Speaker 1: investors are definitely going to keep their eyes on, especially

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Speaker 1: like we're talking about as far as when it comes

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Speaker 1: to even with these Chinese listed US stocks in the US,

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Speaker 1: how they've been outperforming at last quarter but obviously underperforming

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Speaker 1: this year. You're listening to the Bloomberg Business Week podcast.

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Speaker 1: Catch US live weekday afternoons from three to six Eastern

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Speaker 1: Listen on Bloomberg dot com, the Ion Radio app, and

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Speaker 1: the Bloomberg Business or watch US live on YouTube. Jess,

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Speaker 1: here's the startling statistics about one profession. For those in it,

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Speaker 1: some forty six percent would not recommend it as a career.

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Speaker 1: Only thirty three percent feel fairly compensated. Ninety three percent

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Speaker 1: think the shortage in their field will only get worse.

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Speaker 1: So those are pretty rough numbers. They are. And when

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Speaker 1: I know what profession you're about to talk about, and

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Speaker 1: this is something that was pivotal, especially it always is pivotal,

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Speaker 1: but especially in the wake of the pandemic. Absolutely, we're

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Speaker 1: talking about nursing, which, as you said, we were reminded

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Speaker 1: was so crucial to get us through the COVID pandemic.

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Speaker 1: So let's get more on the state of nursing. Great

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Speaker 1: to have back with us, Doctor aman Abuse. She's CEO

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Speaker 1: and co founder at Incredible Health. Her company connects hospitals

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Speaker 1: with nurses and other healthcare workers. She joins us via

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Speaker 1: zoom from Austin, Texas. Doctor Abuse, Nice to be checking

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Speaker 1: in with you again. How are you. I'm good. Thank

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Speaker 1: you so much for having me. Hey, so listen, I

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Speaker 1: shared with our audience and viewers some of us totistics.

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Speaker 1: Tell us about your State of the Nursing Report, which

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Speaker 1: I believe was just released today. Yeah, I was released

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Speaker 1: to date. It's our fourth annual report, and we use

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Speaker 1: hiring data from over seven hundred thousand nurses in our

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Speaker 1: in our network on the Incredible Health platform, and then

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Speaker 1: we surveyed an additional three thousand two So as far

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Speaker 1: as just the main findings, I'd love to start off

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Speaker 1: with some good news. Actually, there's been some improvements since

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Speaker 1: last year. So eighty percent of nurses plan to stay

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Speaker 1: in the in their field until retirement, which is a

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Speaker 1: big increase. It was only at fifty five percent last year.

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Speaker 1: And then there's also been a ten percent degrease in

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Speaker 1: the number of nurses who are planning to leave their

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Speaker 1: current roles this year. So that's that means that turnover

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Speaker 1: will hopefully be improving in the next twelve months too.

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Speaker 1: Can we can we ask you why that good news?

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Speaker 1: Why do you think those numbers have improved, because I

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Speaker 1: know they were pretty dismal when we were talking to

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Speaker 1: you before they were think, I think the main reason

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Speaker 1: is that the pandemic and the intensity of it has

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Speaker 1: subsided a bit. And then we're also through the tridemic.

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Speaker 1: You know, there was r RSB flu time period two,

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Speaker 1: so you know they're looking their nurses are a little

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Speaker 1: more optimistic about the long term in the future, their

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Speaker 1: future careers. It was a nurse in my neighborhood, m

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Speaker 1: a neighbor who she was like, I'm done, I'm done,

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Speaker 1: wouldn't go like just because it was just too much

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Speaker 1: UM coming at her. So I can totally relate. UM

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Speaker 1: walk us through some of the numbers though that weren't

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Speaker 1: so great. Yeah, I know. So now having said that,

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Speaker 1: even with that, some of that good news that's a

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Speaker 1: little bit more longer term looking that they want to

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Speaker 1: stay in their careers in the long term, there there's

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Speaker 1: still a lot of frustration about what's going on currently

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Speaker 1: with understaffing, would burnout and with pay. So, you know,

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Speaker 1: more than sixty two percent of the nurses say they're

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Speaker 1: not hopeful for the next generation of nurses and forty

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Speaker 1: six percent would actually not recommend a career in nursing. Um.

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Speaker 1: When asked about, you know, staffing shortages, ninety three percent

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Speaker 1: of the respondent said that they expect they are experiencing

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Speaker 1: the nursing shortage getting even worse and so and they

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Speaker 1: have all set over seventy percent have pointed to inadequate

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Speaker 1: staffing being one of their top concerns. What I'm wondering about, Oh,

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Speaker 1: I was curious about as far as what could be

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Speaker 1: done to help healthcare workers feel more supported. Yeah, there's

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Speaker 1: there's quite a bit that all of us can that

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Speaker 1: all of us can do for for the hospital executives

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Speaker 1: in particular, they can definitely invest more in career advancement,

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Speaker 1: that more training opportunities for nurses so they're encouraged to

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Speaker 1: stay in their health system. There's also quite a bit

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Speaker 1: more work that needs to happen with providing more flexible scheduling,

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Speaker 1: so allowing nurses to pick pick not just full time roles,

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Speaker 1: but also part time roles, and not only twelve hour

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Speaker 1: shifts but also four hours and eight hour shifts and

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Speaker 1: weekend shift options, just so they can fit work into

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Speaker 1: their into their into their lives a little easier. And

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Speaker 1: then you know there of course, like the other big

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Speaker 1: trend that we're seeing is with wages. You know, wages

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Speaker 1: has increased overall. We're seeing a fourteen percent increase in

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Speaker 1: sign on bonuses, in the use of sign on bonuses overall,

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Speaker 1: and the actual amount of sign on bonuses has also

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Speaker 1: was that ever a thing. Years ago. I had a

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Speaker 1: sister who was a nurse. I don't remember her. I

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Speaker 1: we're talking about a sign on bonus. It wasn't a

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Speaker 1: thing at all. We've also seen the actual hourly rate increase.

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Speaker 1: I think the reason it's become a thing is because,

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Speaker 1: you know, there's a huge supply shortage here right There's

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Speaker 1: a huge demands supply demand and balance, and as a result,

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Speaker 1: because we don't have enough workers, wages will go up.

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Speaker 1: So as far as kind of piecing all of this together.

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Speaker 1: Are there more nurses that are planning now to actually

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Speaker 1: stay in this rule a year from now versus obviously before,

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Speaker 1: because you were explaining all those statistics now, So if

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Speaker 1: they are planning to stay, does that potentially bode well, Yeah,

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Speaker 1: it bodes well that they're more likely to stay. Now,

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Speaker 1: keep in mind the turnover still high, right, the turnover

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Speaker 1: annually is at twenty two percent, but thankfully much smaller

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Speaker 1: percentage of nurses are looking to leave the field altogether.

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Speaker 1: You know, one of the things that I remember, doctor

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Speaker 1: obvious Dade from I think we talked last time, what's

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Speaker 1: the average I hate that word, what's the average nurse make?

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Speaker 1: But what's the average salary in nursing? It's about ninety

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Speaker 1: three thousand naturally okay, natural average obviously varies dramatically by state. Yeah, no,

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Speaker 1: I right, lots of variations. And I know we've talked about,

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Speaker 1: as you said, there's not necessarily a lot of people

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Speaker 1: coming into this profession. Once again, is it, you know,

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Speaker 1: opening up immigration and I know we've talked about this

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Speaker 1: in the past. Is that the fix? What's the fix

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Speaker 1: in terms of encouraging people to enter and I often

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Speaker 1: find that it's a lot of people from other countries

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Speaker 1: that are nursing. So there's two keyball nucks that are

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Speaker 1: happening in the US. Number one is that nursing school.

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Speaker 1: So there's there's tens of thousands of Americans on wait

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Speaker 1: lists to get into nursing schools, but the nursing schools

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Speaker 1: cannot handle more capacity, and so we need to expand

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Speaker 1: nursing full capacity in this country and train more nurses.

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Speaker 1: And then there's another ball in that happening right after

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Speaker 1: nursing school. And then there's not enough programs at hospitals

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Speaker 1: and other other employers that train nurses to become more specialized.

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Speaker 1: And so both of those are the two huge ball

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Speaker 1: in next that we have just got about thirty seconds.

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Speaker 1: We've talked with you about this before. Any progress that

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Speaker 1: we're making on this, Are you seeing it? Not? Honestly,

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Speaker 1: not yet not it's not showing up in the data yet.

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Speaker 1: But I know, I know that many nursing leaders and

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Speaker 1: HR leaders and nursing education leaders are actively working on it.

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Speaker 1: They have to be stressed out because if you think

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Speaker 1: about an aging population, we're all going to just need

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Speaker 1: more of certainly healthcare services overall, but definitely nursing in particular. Eman,

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Speaker 1: good to check in with you again. Doctor iman Abu's age.

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Speaker 1: She's co founder and chief executive officer at Incredible Health

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Speaker 1: JOININGSVA Zoom from Austin, Texas. Yeah, I mean, I think

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Speaker 1: about it, right. We just know that an aging population

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Speaker 1: is just going to need a lot of healthcare going

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Speaker 1: foe and you do wonder whether the doctors will be there,

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Speaker 1: the nurses will be there, absolutely, but then hearing about

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Speaker 1: the wage gains signing bonuses, will that be enough to

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Speaker 1: continue to get workers in that field as long as

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Speaker 1: the pool of workers right there? All right, you're listening

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Speaker 1: and watching Bloomberg Business Week. This is Bloomberg Radio. You're

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Speaker 1: listening to the Bloomberg Business Week podcast. Catch us live

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Speaker 1: weekday afternoons from three to six Eastern on Bloomberg Radio,

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Speaker 1: the Bloomberg Business app, and YouTube. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station

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Speaker 1: Just Say Alexa playing Bloomberg eleven thirty. Okay, I'm just

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Speaker 1: gonna say it. This is one of my favorite stories

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Speaker 1: of the day. It's one that will be in the

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Speaker 1: new issue of Bloomberg BusinessWeek on newstands later on this week,

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Speaker 1: already online at Bloomberg dot com Sash Business Week, and

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Speaker 1: it's of course on the Bloomberg terminal. It's about how

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Speaker 1: China has become the lender of last resort for developing countries.

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Speaker 1: Why you should care because it has lots of implications

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Speaker 1: geopolitically and more. With more, let's head to Washington, DC.

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Speaker 1: That's where we find Sean don And is Bloomberg News

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Speaker 1: senior economics writer. He is on zoom and then in

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Speaker 1: our Bloomberg a director broker studio, we have Bloomberg Business

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Speaker 1: wee get or Joel Webber. Joel. I feel like China's

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Speaker 1: involvement around the globe, especially in the developing world, has

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Speaker 1: grown a lot. We know a lot of it by

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Speaker 1: way of its Belt and Road initiative. This story by

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Speaker 1: Sean now takes it up a notch. Yeah, and it

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Speaker 1: actually looks at sort of the soft power and you're

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Speaker 1: right about this epic project building spree that China has

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Speaker 1: been been on. This is a little different and it

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Speaker 1: actually shows that basically China has been in a quiet

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Speaker 1: little fight with IMF and and the amount of money

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Speaker 1: here is really the crazy part. So, Sean, what how

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Speaker 1: did you find this story and what stands out to

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Speaker 1: about these numbers. Yeah, look, this is really the results

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Speaker 1: of some really great work by some economists at an

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Speaker 1: outfit called AID Data, which is at William and Mary

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Speaker 1: in Virginia, the World Bank, the Keel Institute in Germany,

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Speaker 1: and Carmen Reinhardt up at Harvard, who is one of

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Speaker 1: the world's leading experts on the kind of history and

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Speaker 1: politics of debt and their impact on crises. They did

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Speaker 1: this amazing work where they dived into really central bank

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Speaker 1: records and other records around the world and identified this

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Speaker 1: two hundred and forty billion dollars that had been loaned

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Speaker 1: out by China over the last twenty years to twenty

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Speaker 1: two countries. And these are twenty two countries in the

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Speaker 1: developing world. And this is a different kind of lending

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Speaker 1: from China in that what we've grown used to is

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Speaker 1: China financing big infrastructure projects like ports in the developing world.

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Speaker 1: This is actually what we would call rescue lending. These

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Speaker 1: are bailouts to countries that have gotten into trouble, to

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Speaker 1: their central banks to try and help them ride out crises.

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Speaker 1: And that takes China into a whole different area of

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Speaker 1: lending and, as you say, starts to establish it in

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Speaker 1: its central bank as a lender of last resort in

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Speaker 1: the global economy and the potential rival to institutions that

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Speaker 1: have been around for since the end of World War two,

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Speaker 1: really like the International Monetary Fund and that have become

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Speaker 1: the normal way that we respond to crises. So you

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Speaker 1: write that exact comparisons are difficult, but China's one hundred

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Speaker 1: and eighty five billions surpassed one hundred and forty four

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Speaker 1: billion dispersed by the IMF over this same period. What

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Speaker 1: period are we talking in? Why is it so difficult

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Speaker 1: to compare? Yeah, So, look, the IMF gives out concessional

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Speaker 1: emergency loans with a lot of conditions attached, requiring reforms.

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Speaker 1: The type of lending that we're talking about in this period,

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Speaker 1: which is between two thy sixteen and twenty twenty one,

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Speaker 1: which catches the lead up too in the first couple

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Speaker 1: of years pandemic and some of the economic turmoil that

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Speaker 1: we've seen since then. The type of lending you get

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Speaker 1: from the People's Bank of China comes via these swaps

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Speaker 1: to central bank reserves and it sometimes comes from state

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Speaker 1: owned banks with higher interest rates and different ten years.

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Speaker 1: The kind of terms of lending are difficult to compare,

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Speaker 1: and that's what we're talking about there. But the total

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Speaker 1: sum that we're talking about there, and this is the

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Speaker 1: amount that's drawn down on credit lines rather than the

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Speaker 1: amount that's committed by either China or the IMF, means

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Speaker 1: that the one hundred and eighty five billion dollars that

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Speaker 1: China sent out over that period these just these twenty

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Speaker 1: two countries, remember, is comparable to the one hundred and

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Speaker 1: forty four billion dollars that the IMF sent out dispersed

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Speaker 1: to member countries that we're dealing with various economic crises

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Speaker 1: in the same period. Okay, Sean, So what kind of

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Speaker 1: countries are we talking about here and what do we

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Speaker 1: know about why they've needed it? And turned to China. Yeah,

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Speaker 1: so look, we're talking about countries like Pakistan, We're talking

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Speaker 1: about countries like Argentina, Sri Lanka. We're talking largely about

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Speaker 1: the poorer countries in the world and countries that have

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Speaker 1: run into debt problems over the years. Some critics would

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Speaker 1: charge that a lot of those debt problems have come

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Speaker 1: as a result of Chinese lending. In fact, that's what

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Speaker 1: the Biden administration and previous administrations would claim. This kind

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Speaker 1: of this this incredible flow of funds that's come out

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Speaker 1: through the Belton Road Initiative into the developing world to

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Speaker 1: help build infrastructures, sometimes at terms that were, in hindsight,

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Speaker 1: maybe too generous or irresponsible. This is and these are

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Speaker 1: debts that have built up and as we hit the pandemic,

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Speaker 1: As we hit the term, a lot of countries ran

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Speaker 1: into trouble and they want to bolster their foreign exchange reserves.

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Speaker 1: They need to bolster their government budgets to try and

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Speaker 1: ride the stuff in the past. These are things that

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Speaker 1: they would go to the IMF for or other land.

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Speaker 1: How much of it, too, is about the Chinese currency,

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Speaker 1: because we know that the Chinese would love for the

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Speaker 1: Chinese currency to be the world reserve currency and not

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Speaker 1: the US dollar, and they've tried to kind of put

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Speaker 1: it out there. This is all about influence, right and

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Speaker 1: currency is out there are are about influence as well.

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Speaker 1: This is about a great geopolitical battle. A lot of

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Speaker 1: these swap lines that were set up by the PBOC

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Speaker 1: over the last twenty years were set up with the

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Speaker 1: idea of financing trade and getting the world to use

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Speaker 1: the Chinese currency, the rand named a lot more. But

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Speaker 1: in what we've seen in this case, and what they

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Speaker 1: really document in the study, is that these swap lines

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Speaker 1: that were set up for that purpose in fact ended

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Speaker 1: up being used for kind of emergency rescues and in

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Speaker 1: some cases, you know, ended up as as dollar funds

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Speaker 1: going into the foreign reserves are being transferred into dollars

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Speaker 1: and kind of you know, bolstering the dollar system in

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Speaker 1: a way and in a funny way. But the whole,

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Speaker 1: the whole game here is really you know, when we

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Speaker 1: talk about the US and China and growing rivalries and

432
00:24:21,880 --> 00:24:24,040
Speaker 1: in this Cold War, we often focus on the trade

433
00:24:24,080 --> 00:24:28,800
Speaker 1: wars or the battles over technology and things like semiconductors. Well,

434
00:24:28,800 --> 00:24:30,880
Speaker 1: this is a whole other side that we really need

435
00:24:30,920 --> 00:24:32,960
Speaker 1: to start paying it to more attention to. And that's

436
00:24:33,160 --> 00:24:35,240
Speaker 1: debt and what is happening in the world where a

437
00:24:35,280 --> 00:24:38,080
Speaker 1: lot of poor countries are getting into increasing problems and

438
00:24:38,119 --> 00:24:41,480
Speaker 1: they need rescues. And here's China riding to the rescue

439
00:24:41,640 --> 00:24:44,600
Speaker 1: alongside the International Monetary Fund and some of those US

440
00:24:44,720 --> 00:24:47,919
Speaker 1: led or US backed institutions that have been the tradition,

441
00:24:48,080 --> 00:24:51,679
Speaker 1: the traditional responders and sean when you're talking about these

442
00:24:51,720 --> 00:24:54,080
Speaker 1: swap lines. Obviously, when we think about the Federal Reserve,

443
00:24:54,119 --> 00:24:56,600
Speaker 1: it's so crucial when they have this to obviously prevent

444
00:24:56,680 --> 00:24:59,280
Speaker 1: liquidity problems, and they've done some measures in the last

445
00:24:59,320 --> 00:25:02,200
Speaker 1: few weeks with other central banks to expand the frequency

446
00:25:02,200 --> 00:25:05,240
Speaker 1: of that. But when we're talking about China's currency swap

447
00:25:05,240 --> 00:25:08,280
Speaker 1: agreements kind of set this up, and how exactly could

448
00:25:08,320 --> 00:25:11,159
Speaker 1: all of this play out, and what's different about this

449
00:25:11,320 --> 00:25:15,800
Speaker 1: compared with when you're looking at these other global central banks, right, So,

450
00:25:15,840 --> 00:25:19,200
Speaker 1: I mean, the FED swap lines are with fairly they've

451
00:25:19,240 --> 00:25:23,120
Speaker 1: become this crisis responsible since the two thousand and seven

452
00:25:23,160 --> 00:25:26,440
Speaker 1: eight global financial crisis, but there was a pretty limited

453
00:25:26,680 --> 00:25:31,080
Speaker 1: set of central banks. These are largely rich world central banks,

454
00:25:31,080 --> 00:25:33,679
Speaker 1: the European Central Bank, the Bank of England and the

455
00:25:33,720 --> 00:25:37,840
Speaker 1: Bank of Japan and so on, and they're really about,

456
00:25:38,880 --> 00:25:42,480
Speaker 1: you know, getting emergency liquidity into the dollar system. They're

457
00:25:42,480 --> 00:25:44,520
Speaker 1: always be incredibly transparent. You can go out to the

458
00:25:44,560 --> 00:25:47,840
Speaker 1: New York Federal Reserves website and you can look at

459
00:25:47,920 --> 00:25:51,960
Speaker 1: individual transactions and who has drawn down and the tenor

460
00:25:52,000 --> 00:25:55,800
Speaker 1: of those transactions, the interest rate that's that's being paid.

461
00:25:56,000 --> 00:26:00,200
Speaker 1: The Chinese here are doing something different. They're using these

462
00:26:00,240 --> 00:26:05,960
Speaker 1: swap lines as more traditional or different kind of rescue loans.

463
00:26:06,080 --> 00:26:08,840
Speaker 1: And look, their defenders say, and they're doing something that's

464
00:26:08,920 --> 00:26:11,240
Speaker 1: needed in the world, and that they're helping out these

465
00:26:11,240 --> 00:26:16,120
Speaker 1: central banks in developing countries. These are banks that central

466
00:26:16,160 --> 00:26:18,600
Speaker 1: banks that don't have access to the FED swap lines,

467
00:26:18,840 --> 00:26:20,720
Speaker 1: and they're helping them at times when they really need

468
00:26:20,720 --> 00:26:25,480
Speaker 1: to help. Hey, Sean, is this, though, in essence, perhaps

469
00:26:25,600 --> 00:26:30,960
Speaker 1: really a Chinese bank bailout? Well, that's the suspicion of

470
00:26:31,000 --> 00:26:34,120
Speaker 1: the authors, and Carmen reinharden I had this fascinating interview

471
00:26:34,119 --> 00:26:37,880
Speaker 1: and when she says, look, I think part of this

472
00:26:38,440 --> 00:26:44,000
Speaker 1: is the PBOC bailing out Chinese banks that got into

473
00:26:44,040 --> 00:26:47,480
Speaker 1: trouble as a result of Shijianpings Belt and Road initiative

474
00:26:47,560 --> 00:26:50,040
Speaker 1: that ended up with these bad loans and developing countries.

475
00:26:50,080 --> 00:26:53,320
Speaker 1: And if you look, there's a correlation between where these

476
00:26:53,560 --> 00:26:57,800
Speaker 1: these swap lines are being drawn down and the bad

477
00:26:57,840 --> 00:27:00,679
Speaker 1: debts that are out there for China um or the

478
00:27:00,760 --> 00:27:05,560
Speaker 1: high levels of indebtedness to China. But she also says

479
00:27:05,640 --> 00:27:08,400
Speaker 1: she can't prove that. Then again she also says it

480
00:27:08,440 --> 00:27:11,680
Speaker 1: doesn't matter because money is fungible, and if you get

481
00:27:11,720 --> 00:27:14,639
Speaker 1: money in central bank reserves that frees up money elsewhere

482
00:27:15,600 --> 00:27:19,679
Speaker 1: on government balance sheets. It can help. Uh, you know,

483
00:27:20,640 --> 00:27:25,120
Speaker 1: governments use her bolster budgets and uh. And the overall

484
00:27:25,160 --> 00:27:29,479
Speaker 1: economic position in a country to the US, I amf

485
00:27:29,520 --> 00:27:35,400
Speaker 1: looking at this. Suddenly there number two or distant more

486
00:27:35,400 --> 00:27:38,280
Speaker 1: distant than that. How do how does this play out? John?

487
00:27:39,920 --> 00:27:43,160
Speaker 1: I think from we got to watch. Uh, it's hard

488
00:27:43,200 --> 00:27:45,560
Speaker 1: to watch because it's opaque. This is you know, again,

489
00:27:45,800 --> 00:27:48,639
Speaker 1: the genius of this study is that they've they've told

490
00:27:48,720 --> 00:27:50,919
Speaker 1: us about this, they've documented these something. These are not

491
00:27:51,119 --> 00:27:55,119
Speaker 1: things that we can look at easily on the PBOC website. Um.

492
00:27:55,320 --> 00:27:57,920
Speaker 1: And so we really needed to watch and see where

493
00:27:58,080 --> 00:28:03,200
Speaker 1: where China established itself in the world and where it

494
00:28:03,840 --> 00:28:07,320
Speaker 1: sends this money, whether it is just to bail out

495
00:28:07,440 --> 00:28:09,879
Speaker 1: Chinese banks, in which case that's going to be something

496
00:28:09,920 --> 00:28:12,119
Speaker 1: that wraps up in just a couple of years, or

497
00:28:12,119 --> 00:28:16,879
Speaker 1: whether they're establishing themselves as a longer term beneficent power

498
00:28:17,119 --> 00:28:20,520
Speaker 1: that comes in to help rescue the world's poorer countries

499
00:28:20,560 --> 00:28:24,199
Speaker 1: and does so for generations to come. Well, it is

500
00:28:24,240 --> 00:28:26,720
Speaker 1: kind of interesting and I just think it just shows

501
00:28:26,720 --> 00:28:29,240
Speaker 1: you how China is just playing on a very very

502
00:28:29,280 --> 00:28:34,360
Speaker 1: different level here Sean. You know, in terms of these markets,

503
00:28:34,400 --> 00:28:36,439
Speaker 1: many of them that they're playing into in the emerging world,

504
00:28:36,520 --> 00:28:39,440
Speaker 1: I mean, they have things that China wants to tap into,

505
00:28:39,520 --> 00:28:43,400
Speaker 1: whether it's raw materials, raw minerals, if you will. And

506
00:28:43,440 --> 00:28:49,520
Speaker 1: I just feel like the relationship becomes much more intertwined. Absolutely. Look,

507
00:28:49,880 --> 00:28:54,040
Speaker 1: as we said earlier, this is all about influence in geopolitics,

508
00:28:55,680 --> 00:28:58,480
Speaker 1: and we're going to be watching this for many years

509
00:28:58,520 --> 00:29:02,160
Speaker 1: to come. We talked about how this could potentially help

510
00:29:02,160 --> 00:29:05,760
Speaker 1: out these poorer economies, but what would be the consequences

511
00:29:05,760 --> 00:29:08,760
Speaker 1: for the global economy with this? Give it the nature

512
00:29:08,800 --> 00:29:13,880
Speaker 1: of it. Yeah, look, it's there is You know, Carmen

513
00:29:13,920 --> 00:29:16,840
Speaker 1: Reinhardt is among the skeptics when when she talks about

514
00:29:16,840 --> 00:29:21,600
Speaker 1: helping out these poorer economies. You're providing money. But in

515
00:29:21,640 --> 00:29:24,080
Speaker 1: some ways, one of the things we've seen with China

516
00:29:24,160 --> 00:29:29,000
Speaker 1: is that they've been reluctant to restructure aircats on debts

517
00:29:29,160 --> 00:29:32,160
Speaker 1: to really ease the debt burden on a lot of

518
00:29:32,200 --> 00:29:35,840
Speaker 1: poor countries. And we could get into a cycle where

519
00:29:36,320 --> 00:29:41,280
Speaker 1: some of these countries just get stuck in debt traps,

520
00:29:41,480 --> 00:29:45,240
Speaker 1: and that the Chinese while they're they're funneling this money,

521
00:29:45,240 --> 00:29:49,160
Speaker 1: they're they're keeping things ticking along. These these countries maybe

522
00:29:49,200 --> 00:29:52,360
Speaker 1: paying the bills day in and day out, but they

523
00:29:52,400 --> 00:29:55,360
Speaker 1: may not be getting out from under these debt piles,

524
00:29:55,400 --> 00:30:00,840
Speaker 1: which drags on their economies, which has social consequences for

525
00:30:00,880 --> 00:30:03,640
Speaker 1: their people, and they have consequences for people in the

526
00:30:03,760 --> 00:30:06,720
Speaker 1: rich world as well as we see you know, we've

527
00:30:06,760 --> 00:30:08,560
Speaker 1: we've seen this at our southern border here in the

528
00:30:08,640 --> 00:30:13,440
Speaker 1: United States, people from troubled economies in Central America coming

529
00:30:13,480 --> 00:30:17,040
Speaker 1: north and you could pay out of Africa and other

530
00:30:17,080 --> 00:30:22,200
Speaker 1: parts of you know, you mentioned economic problems. You mentioned

531
00:30:22,200 --> 00:30:26,160
Speaker 1: Sri Lanka there, and that also exact exact example of that,

532
00:30:26,240 --> 00:30:30,000
Speaker 1: where you have a stable country, stable economy, and all

533
00:30:30,040 --> 00:30:32,440
Speaker 1: of a sudden it finds itself with you know, just

534
00:30:32,920 --> 00:30:37,320
Speaker 1: astronomical amounts of debt that's also linked to China. Um

535
00:30:38,000 --> 00:30:40,040
Speaker 1: When you think through some of those other names that

536
00:30:40,040 --> 00:30:42,880
Speaker 1: we've rattled through here, genre there any other ones that

537
00:30:43,000 --> 00:30:44,880
Speaker 1: jump out to you that we'll be talking about who

538
00:30:44,880 --> 00:30:47,960
Speaker 1: are linked in the same research. Look, when it comes

539
00:30:48,000 --> 00:30:49,840
Speaker 1: to debt problems that are very live and the people

540
00:30:49,840 --> 00:30:52,800
Speaker 1: are looking at right now. It's Sri Lanka, it's Zambia

541
00:30:52,880 --> 00:30:55,640
Speaker 1: and Africa. It's Ghana, where debt restructuring talks were just

542
00:30:55,680 --> 00:30:59,320
Speaker 1: getting started. And then there's the one that gives a

543
00:30:59,360 --> 00:31:02,280
Speaker 1: lot of people. That is Pakistan, which obviously is a

544
00:31:02,720 --> 00:31:07,240
Speaker 1: nuclear power, and it also has some incredible debt problems

545
00:31:07,360 --> 00:31:10,960
Speaker 1: and some big Chinese debt problems that it needs to

546
00:31:10,960 --> 00:31:12,600
Speaker 1: sort out in the years to come. Hence what we

547
00:31:12,600 --> 00:31:15,560
Speaker 1: said at the beginning, some you know, potentially this all

548
00:31:15,600 --> 00:31:19,480
Speaker 1: has implications when it comes to geopolitics. Sean, great story

549
00:31:20,200 --> 00:31:23,480
Speaker 1: and I'm must read. Sean Donnan is senior economics writer

550
00:31:23,600 --> 00:31:26,760
Speaker 1: at Bloomberg News via zoom from Washington, d see our

551
00:31:26,840 --> 00:31:29,280
Speaker 1: thanks to him as well as Jill Webber, editor of

552
00:31:29,320 --> 00:31:31,680
Speaker 1: Bloomberg Business Week. He's in our studio this story. By

553
00:31:31,720 --> 00:31:33,480
Speaker 1: the way, it's going to be the upcoming new issue

554
00:31:33,520 --> 00:31:36,320
Speaker 1: of Bloomberg Business Week. It'll be out on newstands on Thursday.

555
00:31:36,640 --> 00:31:38,920
Speaker 1: Already on the Bloomberg terminal, but you can also find

556
00:31:38,960 --> 00:31:42,840
Speaker 1: it at Bloomberg dot com slash business Week. Really really

557
00:31:42,920 --> 00:31:45,920
Speaker 1: important and certainly sign of our times, definitely, and especially

558
00:31:45,920 --> 00:31:49,360
Speaker 1: when we're talking about these currency swap agreements, specifically with

559
00:31:49,520 --> 00:31:51,600
Speaker 1: China and how that differs when you're thinking about these

560
00:31:51,640 --> 00:31:55,040
Speaker 1: other central banks globally. It's really fascinating to see potentially

561
00:31:55,040 --> 00:31:56,800
Speaker 1: how this plays out, as well as when we talked

562
00:31:56,800 --> 00:32:00,080
Speaker 1: about these poorer economies that potentially need this help, and

563
00:32:00,120 --> 00:32:02,560
Speaker 1: then also the potential consequences there. I love how it's

564
00:32:02,720 --> 00:32:05,040
Speaker 1: kind of like a sly way to get everybody to

565
00:32:05,160 --> 00:32:08,520
Speaker 1: use the Chinese currency. Rachelburn just you know, hey, look

566
00:32:08,520 --> 00:32:10,200
Speaker 1: at this. Look at this. We have a we have

567
00:32:10,240 --> 00:32:14,760
Speaker 1: an app for that too. How did that happen? You're

568
00:32:14,800 --> 00:32:18,400
Speaker 1: listening to the Bloomberg Business Week podcast. Catch us live

569
00:32:18,480 --> 00:32:22,120
Speaker 1: weekday afternoons from three to six Eastern Listen on Bloomberg

570
00:32:22,200 --> 00:32:25,600
Speaker 1: dot com, the iHeart Radio app, and the Bloomberg Business app,

571
00:32:25,880 --> 00:32:35,160
Speaker 1: or watch us live on YouTube. I'm rum journal. But

572
00:32:35,320 --> 00:32:37,440
Speaker 1: you let me drive? Oh no, no, no, no, who's

573
00:32:37,480 --> 00:32:42,760
Speaker 1: going home? Honey? Please? I'll do the riding gravels. I

574
00:32:42,960 --> 00:32:51,600
Speaker 1: want to drive. It's good question. This is the drive

575
00:32:51,680 --> 00:32:56,800
Speaker 1: to the clothes than well, jog down on Bloomberg Radio.

576
00:32:57,080 --> 00:32:59,240
Speaker 1: All right, everybody, let's get to it. You've got about

577
00:32:59,240 --> 00:33:03,240
Speaker 1: eighteen minutes left today's trading session, getting ready to wrap

578
00:33:03,360 --> 00:33:06,080
Speaker 1: up the trading day. Thank you lower that, Thank you

579
00:33:06,160 --> 00:33:09,800
Speaker 1: very much. All Right, equities bouncing around. We're definitely off

580
00:33:09,800 --> 00:33:12,520
Speaker 1: our best levels of the session, a little bit lower

581
00:33:12,760 --> 00:33:14,800
Speaker 1: on each of those major equity averages, as you just

582
00:33:14,840 --> 00:33:18,520
Speaker 1: heard from Charlie Tech the most down on a percentage

583
00:33:18,520 --> 00:33:21,959
Speaker 1: basis among those big three indexes. As for the two

584
00:33:22,000 --> 00:33:25,000
Speaker 1: year note, we're looking at it at four point zero three.

585
00:33:25,080 --> 00:33:28,040
Speaker 1: Sustain above that four percent marker, right at it. Let's

586
00:33:28,040 --> 00:33:29,120
Speaker 1: get to it. We want to talk a little bit

587
00:33:29,120 --> 00:33:31,400
Speaker 1: about the fixed income world. Brian Allen is director of

588
00:33:31,440 --> 00:33:35,720
Speaker 1: fixed income at the institutional investment manager cs McKey Asset Management.

589
00:33:35,720 --> 00:33:38,400
Speaker 1: They've got over seven point nine billion dollars in assets

590
00:33:38,400 --> 00:33:41,240
Speaker 1: as of the end of last year, based in Pittsburgh,

591
00:33:41,360 --> 00:33:44,640
Speaker 1: and he joins us via zoom from Jacksonville, Florida. Hey, Brian,

592
00:33:44,720 --> 00:33:46,520
Speaker 1: good to have you here with us, right person to

593
00:33:46,560 --> 00:33:49,280
Speaker 1: have Considering what's been going on in the financial markets,

594
00:33:50,520 --> 00:33:52,920
Speaker 1: what do you make of the environment and your expectations

595
00:33:52,920 --> 00:33:54,720
Speaker 1: for the fixed income world over the next six to

596
00:33:54,760 --> 00:33:57,040
Speaker 1: twelve months. Do you have clarity, first of all, or

597
00:33:57,080 --> 00:34:02,200
Speaker 1: transparency in terms of what comes next? Frankly, no real clarity.

598
00:34:02,240 --> 00:34:04,200
Speaker 1: It was certainly the events of the last few weeks

599
00:34:04,280 --> 00:34:07,719
Speaker 1: pointed out that we've come a long way with respect

600
00:34:07,720 --> 00:34:11,160
Speaker 1: the FED funds and general market interest rates frankly a

601
00:34:11,200 --> 00:34:14,000
Speaker 1: little too high. The concern was always the Fed would

602
00:34:14,040 --> 00:34:17,160
Speaker 1: raise rates until something broke, and it seems we've reached

603
00:34:17,200 --> 00:34:22,160
Speaker 1: that threshold. We had quickest moved down in rates over

604
00:34:22,280 --> 00:34:25,040
Speaker 1: a short term time frame that we've seen in at

605
00:34:25,080 --> 00:34:28,640
Speaker 1: least since nineteen eighty seven. So I think going forward

606
00:34:29,280 --> 00:34:31,279
Speaker 1: we may see one more rate high from the Fed,

607
00:34:31,360 --> 00:34:33,640
Speaker 1: and I don't expect to see the three or four

608
00:34:33,760 --> 00:34:37,080
Speaker 1: rate cuts the markets discounting, but I think it's safe

609
00:34:37,080 --> 00:34:39,839
Speaker 1: to say that the Fed will be done after another

610
00:34:39,920 --> 00:34:42,040
Speaker 1: rate high pick and we'll wait to see what the

611
00:34:42,120 --> 00:34:46,000
Speaker 1: ripple effects of the banking Not crisis, but concerns we

612
00:34:46,120 --> 00:34:51,799
Speaker 1: have right now how they play out. Not a crisis, Yeah,

613
00:34:52,440 --> 00:34:59,040
Speaker 1: okay TBD Brian. With all of this uncertainty that's swirling around,

614
00:34:59,239 --> 00:35:02,040
Speaker 1: how are you advis clients to position in this type

615
00:35:02,080 --> 00:35:07,319
Speaker 1: of environment. For our clients in particular, we are very

616
00:35:07,360 --> 00:35:10,799
Speaker 1: much quality and liquidity focus that certainly will serve them well.

617
00:35:10,880 --> 00:35:14,520
Speaker 1: Now we have concerns about the rising odds of a

618
00:35:14,600 --> 00:35:18,279
Speaker 1: ridge session and what that may do to credit, not

619
00:35:18,320 --> 00:35:22,000
Speaker 1: only to the consumer, the borrowers. But the performance of

620
00:35:22,239 --> 00:35:27,759
Speaker 1: corporate credit for our investments. One thing one I guess

621
00:35:27,760 --> 00:35:31,040
Speaker 1: blessing in disguise from the spike and volatility we've seen

622
00:35:31,239 --> 00:35:35,560
Speaker 1: as a deep discount and very attractive spread levels on

623
00:35:35,760 --> 00:35:42,080
Speaker 1: agency issues that frankly now are yielding comparable to investment

624
00:35:42,120 --> 00:35:46,239
Speaker 1: great treasuries without the same economic cyclicality exposure that our

625
00:35:46,280 --> 00:35:53,200
Speaker 1: corporate credit has the same type of risk. There well,

626
00:35:53,200 --> 00:35:55,839
Speaker 1: you certainly have exposure to volatility, and a little more

627
00:35:55,920 --> 00:36:00,040
Speaker 1: so than you find in corporate credit when you're just

628
00:36:00,160 --> 00:36:03,319
Speaker 1: focused on market volatility. We've seen such a spight, though

629
00:36:03,320 --> 00:36:06,120
Speaker 1: we've now gone back. We've exceeded the levels seen during

630
00:36:06,200 --> 00:36:09,080
Speaker 1: the first quarter of twenty and twenty with COVID, and

631
00:36:09,239 --> 00:36:11,480
Speaker 1: we were on par with the worst levels. The highest

632
00:36:11,520 --> 00:36:13,719
Speaker 1: levels in volatility is seen in two thousand and eight,

633
00:36:14,080 --> 00:36:16,719
Speaker 1: So that really has chief in those securities and made

634
00:36:16,719 --> 00:36:19,239
Speaker 1: them very attractive. And the one thing you can bet

635
00:36:19,560 --> 00:36:23,600
Speaker 1: the beds obviously desire is to bring inflation under control,

636
00:36:24,040 --> 00:36:28,719
Speaker 1: but to certainly do their part to establish liquidity in

637
00:36:28,760 --> 00:36:31,759
Speaker 1: the markets and market function, and therefore we think it's

638
00:36:31,800 --> 00:36:34,040
Speaker 1: a safe bet that market volatility won't stay at these

639
00:36:34,120 --> 00:36:37,759
Speaker 1: unusually elevated levels for too long. Hey what about real estate?

640
00:36:37,760 --> 00:36:40,560
Speaker 1: And I bring it up something just crossed on Twitter.

641
00:36:40,880 --> 00:36:42,759
Speaker 1: This is from the Real Deal, which follows the real

642
00:36:42,880 --> 00:36:46,319
Speaker 1: estate sector, but they talk specifically about dead on Blackstone

643
00:36:46,360 --> 00:36:49,040
Speaker 1: buildings forty seven percent more than the portfolio's worth. This

644
00:36:49,120 --> 00:36:51,759
Speaker 1: is coming from Moodies. The rating agency downgrades the debt,

645
00:36:51,760 --> 00:36:56,000
Speaker 1: setting eleven properties quote declining performance. And they're just talking

646
00:36:56,000 --> 00:36:59,239
Speaker 1: about a couple of months after Blackstone secured a two

647
00:36:59,360 --> 00:37:02,760
Speaker 1: hundred and seventy million dollars loan secured by eleven Manhattan

648
00:37:02,800 --> 00:37:07,920
Speaker 1: multi family buildings went to special servicing. So Moody's downgraded

649
00:37:07,920 --> 00:37:10,560
Speaker 1: the CMBs debt, citing cash flow that wouldn't cover the

650
00:37:10,560 --> 00:37:14,120
Speaker 1: debt service. How are you looking at real estate specifically,

651
00:37:14,120 --> 00:37:18,279
Speaker 1: which we all keep wondering post pandemic, certainly here in

652
00:37:18,280 --> 00:37:20,320
Speaker 1: the United States, a lot of people are still working

653
00:37:20,360 --> 00:37:22,480
Speaker 1: from home. I look at a major city like New

654
00:37:22,560 --> 00:37:24,400
Speaker 1: York and there are still a lot of empty buildings.

655
00:37:24,719 --> 00:37:31,360
Speaker 1: How are you looking at commercial real estate specifically? A

656
00:37:31,520 --> 00:37:33,840
Speaker 1: very small portion of the universal the securities that we

657
00:37:33,880 --> 00:37:36,280
Speaker 1: look at and in years past, certainly post two thousand

658
00:37:36,280 --> 00:37:39,279
Speaker 1: and eight, we're very heavily invested in the evaluations were

659
00:37:39,640 --> 00:37:42,120
Speaker 1: rock bottom at that point in time. I do have

660
00:37:42,200 --> 00:37:45,080
Speaker 1: concern now about the elevated prices. One of the benefits

661
00:37:45,080 --> 00:37:48,640
Speaker 1: are now risks that came from unusually historically low interest

662
00:37:48,719 --> 00:37:52,000
Speaker 1: rates for so long. And the real concern, frankly, is

663
00:37:52,040 --> 00:37:58,000
Speaker 1: not only but downrays that have occurred to funds like

664
00:37:58,080 --> 00:38:01,040
Speaker 1: black Rock, but the refire risk when these bonds come,

665
00:38:01,480 --> 00:38:04,759
Speaker 1: when loans come due, whether they can underwrite them at

666
00:38:04,760 --> 00:38:07,480
Speaker 1: anywhere near the same value they have before. Certainly the

667
00:38:07,880 --> 00:38:10,400
Speaker 1: terms won't be as attractive, and we certainly know the

668
00:38:10,440 --> 00:38:13,239
Speaker 1: interest rate levels are much higher than they have been

669
00:38:13,560 --> 00:38:16,600
Speaker 1: the last three or four years. So it's a challenge.

670
00:38:16,640 --> 00:38:19,080
Speaker 1: In the office space historically was one that you could

671
00:38:19,120 --> 00:38:22,239
Speaker 1: bet on. Frank they had concerns about twenty twenty. It

672
00:38:22,360 --> 00:38:25,279
Speaker 1: was really a hotel space, then a man travel and

673
00:38:25,360 --> 00:38:28,600
Speaker 1: leisure related but now long term effects. Certainly one of

674
00:38:28,640 --> 00:38:32,600
Speaker 1: the largest subcomponents of the commercial real estate market is

675
00:38:32,640 --> 00:38:35,240
Speaker 1: office space, and it's I think you'd be very selective

676
00:38:35,280 --> 00:38:39,440
Speaker 1: and look more towards suburban and sunbelt properties then in

677
00:38:39,640 --> 00:38:42,719
Speaker 1: downtown New York Chicago, some of the old Brian can

678
00:38:42,760 --> 00:38:45,000
Speaker 1: I just ask you, is it a manageable problem in

679
00:38:45,120 --> 00:38:49,919
Speaker 1: your view or maybe not, but I think it'll take

680
00:38:50,440 --> 00:38:54,399
Speaker 1: equity infusion. Certainly. I think the properties continue to come

681
00:38:54,480 --> 00:38:57,080
Speaker 1: back over time. I think places like New York do

682
00:38:57,320 --> 00:39:00,640
Speaker 1: have a sort of migration problem, if you will, certainly

683
00:39:00,680 --> 00:39:04,520
Speaker 1: seen a number of Wall Street firms and locates on

684
00:39:04,600 --> 00:39:08,120
Speaker 1: the back office in Florida and Texas. And then of

685
00:39:08,200 --> 00:39:10,920
Speaker 1: the years have gone by the last two years joined

686
00:39:10,960 --> 00:39:15,319
Speaker 1: by more of the sales side trading side moving out

687
00:39:15,360 --> 00:39:19,120
Speaker 1: of New York, either again for tax reasons, why the reasons, certainly,

688
00:39:19,800 --> 00:39:23,040
Speaker 1: and evaluations in New York and in Chicago, I think

689
00:39:23,080 --> 00:39:25,799
Speaker 1: will continue to be pressured. And there's only I think

690
00:39:25,880 --> 00:39:28,759
Speaker 1: only so much conversion they con from office space into

691
00:39:28,800 --> 00:39:31,920
Speaker 1: residential and the sort of teenat in Pittsburgh. But at

692
00:39:32,000 --> 00:39:35,040
Speaker 1: some point they saturated the market with respect to new

693
00:39:35,120 --> 00:39:39,759
Speaker 1: residential modifications to old office space. Brian, we only have

694
00:39:39,840 --> 00:39:41,680
Speaker 1: about a minute left, but I want to ask you

695
00:39:41,800 --> 00:39:45,440
Speaker 1: do you think the FED should raizor rates, pause or

696
00:39:45,480 --> 00:39:50,680
Speaker 1: cut rates at its next meeting in May about fifty fifty.

697
00:39:50,760 --> 00:39:52,680
Speaker 1: I frankly think they want to send a message of

698
00:39:52,800 --> 00:39:56,120
Speaker 1: inflation really is their first concern. They have to be

699
00:39:56,239 --> 00:39:57,960
Speaker 1: in the offs are aware of what's going on. In

700
00:39:58,000 --> 00:40:02,160
Speaker 1: the banking world. I do think that ultimately, whether they

701
00:40:02,239 --> 00:40:06,400
Speaker 1: do or don't, the message will be relatively clear that

702
00:40:06,480 --> 00:40:09,520
Speaker 1: they're done or at least on pause after the May meeting.

703
00:40:09,840 --> 00:40:13,040
Speaker 1: And again, I do think that the financial conditions industries

704
00:40:13,080 --> 00:40:16,480
Speaker 1: they pay attention to, they've seen now. Credit card balances

705
00:40:16,520 --> 00:40:20,080
Speaker 1: have gone up, loan delinquencies have certainly be under rise,

706
00:40:20,920 --> 00:40:25,000
Speaker 1: debt to income ratios on mortgages. There is definite signs

707
00:40:25,040 --> 00:40:28,239
Speaker 1: of the consumer is tapped out and have really worked

708
00:40:28,280 --> 00:40:31,960
Speaker 1: through the majority of not all, of the excess income. Yeah,

709
00:40:32,840 --> 00:40:37,839
Speaker 1: well feels like a sober or sober in tone. Brian,

710
00:40:37,960 --> 00:40:40,200
Speaker 1: great to check in week you. Brian Allen, the director

711
00:40:40,200 --> 00:40:43,880
Speaker 1: of fixed Income at Csukey Asset Management based in Pittsburgh,

712
00:40:43,920 --> 00:40:47,880
Speaker 1: were joining SPASO from Jacksonville, Florida. These is the Bloomberg

713
00:40:48,000 --> 00:40:52,279
Speaker 1: Business Week podcast, available on Apple, Spotify, and anywhere else

714
00:40:52,320 --> 00:40:56,319
Speaker 1: you get your podcast. Listen live week afternoons from three

715
00:40:56,360 --> 00:41:00,000
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716
00:41:00,239 --> 00:41:02,799
Speaker 1: Tune In, and The Bloomberg Business and you can also

717
00:41:02,880 --> 00:41:06,239
Speaker 1: watch us live every weekday on YouTube and always on

718
00:41:06,320 --> 00:41:07,360
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