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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along

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Speaker 1: with my co host of Bonnie Quinn. Every business day

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Speaker 1: we bring you interviews from CEO, market pros and Bloomberg experts,

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Speaker 1: along with essential market moving news. Find the Bloomberg Markets

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Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,

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Speaker 1: and on Bloomberg dot com. All right, let's spend some

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Speaker 1: time chatting about the credit markets, and let's go out

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Speaker 1: on the risk spectrum a little bit, talking high yield,

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Speaker 1: talking maybe even fallen angels. We can do that with Paul.

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Speaker 1: Benson had a fixed income efficient BETA. The firm is Melon,

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Speaker 1: a B and Y Melon Investment management firm. They have

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Speaker 1: five hundred and fifty eight billion. That's with a B

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Speaker 1: under management located in San Francisco. Paul, thanks so much

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Speaker 1: for joining us here. You know, first of all, I

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Speaker 1: want to talk about risk return. Talk to us a

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Speaker 1: little bit about fallen angels. What is a fallen angel

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Speaker 1: and what kind of activity are we seeing in that market? Yeah, no,

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Speaker 1: this is a great topic for today. Fallen angels have

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Speaker 1: really come onto the marketplace here, uh in in size,

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Speaker 1: in this aftermath of the COVID UH nineteen crisis. So

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Speaker 1: what a fallen angel is is it's just an investment

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Speaker 1: grade bond that has been downgraded. So remember the investment

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Speaker 1: grade sort of ends at the bottom tier at the

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Speaker 1: triple B rating level. Downgraded below triple B, so it's

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Speaker 1: now double B R lower that enters the high yield portion.

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Speaker 1: So really it's just a high yield bond that once

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Speaker 1: was an investment grade bond. And what investors are seeing

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Speaker 1: is that these bonds have really really attractive risk return

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Speaker 1: characteristics and making for a terrific investment in this kind

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Speaker 1: of environment. So give us some examples of some fallen

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Speaker 1: angels that have you know, kind of come to the

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Speaker 1: fore here during the pandemic. So there are actually a ton.

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Speaker 1: So what's exciting about this this pandemic? Uh, you know,

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Speaker 1: if anything can be exciting from an investor perspective, it

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Speaker 1: is that it's an unprecedented delusion of activity and sort

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Speaker 1: of ratings migration perspective, and the markets really are not

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Speaker 1: very efficient on the fixed income side at handling that

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Speaker 1: trans transmission from investment grade investors to high yield investors.

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Speaker 1: So you know, in typical year you might have twenty billion,

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Speaker 1: thirty billion dollars of downgrades across a handful of bonds

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Speaker 1: or or maybe ten or fifteen bonds. In twenty so

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Speaker 1: far we've had we've had almost two hundred billion dollars

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Speaker 1: of following angel downgrades. And this spans, you know, across

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Speaker 1: more than two hundred bonds, two hundred fifty bonds UH.

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Speaker 1: And it's not just one sector, you know, like in

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Speaker 1: in the energy crisis in two thousands sixty and it

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Speaker 1: was predominantly energy bonds. Now this is across everything. This

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Speaker 1: is across consumer cyclicals, This is across banking, this is

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Speaker 1: across capital goods, basic industry. You know, you're basically seeing

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Speaker 1: it all here. And that actually is a real boon

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Speaker 1: for high yield investors because a diversified play is going

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Speaker 1: to allow you a much greater chance of success of

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Speaker 1: harvesting that that patrol risk premium, that discount, rather than

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Speaker 1: you know, some idiosyncratic UH investment. So, Paul, when a

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Speaker 1: bond gets downgraded from investment grade to UH non investment grade,

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Speaker 1: does that mean a lot of owners of that bond

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Speaker 1: have to sell by because of their charter they can't

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Speaker 1: own non investment grade debt? Is that kind of how

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Speaker 1: the play starts exactly exactly. And if you look at

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Speaker 1: the the sort of the the the last ten years,

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Speaker 1: you know, within the i G space investment grade space,

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Speaker 1: you'll see that there's been a very inexorable rise in

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Speaker 1: passive passive managers. So you know, think of not just

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Speaker 1: indexing traditional indexing, the growth of that uh as you

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Speaker 1: know fees have been pushed lower, but also areas like ets.

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Speaker 1: A lot of these et s are very passive in nature.

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Speaker 1: And so you've got two camps. You've got one camp

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Speaker 1: which is traditional for example, pension plans that have strict

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Speaker 1: guidelines and say, you know, thou shalt not invest in

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Speaker 1: junk bonds. And so you know, if if I'm managing

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Speaker 1: and i G portfolio for a client like that, and

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Speaker 1: a bond gets downgraded below investigrade, it becomes a fallen angel.

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Speaker 1: Even if I think it's a very very attractive investment

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Speaker 1: and it's the worst possible time to sell, I don't

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Speaker 1: have a choice. I have to sell it now. That

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Speaker 1: becomes a real benefit for the folks. On the other side,

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Speaker 1: if you're a high yield investor, and especially if you're

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Speaker 1: investor focusing just on fallen angels, you can pick up

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Speaker 1: these bonds at an incredible discount. All right, So Paul,

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Speaker 1: give us a sense of just kind of the the

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Speaker 1: credit quality environment that we find ourselves in. I know,

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Speaker 1: is we kind of entered this pandemic in March April.

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Speaker 1: You know, from a credit perspective, there's really concerns that

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Speaker 1: we're going to see it, just this huge wave of defaults,

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Speaker 1: particularly in the leverage loan business, the high yield market business.

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Speaker 1: How we in fact seen that, you know, that's been

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Speaker 1: the story of the year. It's people tend to panic

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Speaker 1: when when when things when volatility picks up, the first

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Speaker 1: instinct is to panic. And you know exactly what we

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Speaker 1: saw with all the news articles, all the prognostications, even

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Speaker 1: from the major houses, predicting you know, unprecedented uh delusion

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Speaker 1: of defaults and that just has not materialized. And further,

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Speaker 1: you know what really scares us a little bit is

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Speaker 1: when you look under the hood. And that's what we're

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Speaker 1: really good at as a quantity We're a quantitative investment manager,

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Speaker 1: so we really dive into the details. And people are

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Speaker 1: misinterpreting default rates by and large, they're looking at broad

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Speaker 1: you know, Moodies SMP type speculative grade default rates, which

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Speaker 1: have a completely different composition than what investors, institutional investors

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Speaker 1: are actually investing in. You know, these SMP and Moodies

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Speaker 1: default rates include these very small companies. They include floating

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Speaker 1: rate debt, all sorts of stuff. Whereas you know, se

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Speaker 1: of the institutional investors are focused on big, big investible

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Speaker 1: benchmarks such as the Bloomberg Barkley's High Yield Corporate Index

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Speaker 1: or you know, the Bambo Master to Index. These benchmarks

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Speaker 1: have only seen about half of the default rates that

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Speaker 1: that these sort of you know, worst case prognonctiications came

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Speaker 1: out at and so we're looking at numbers like like,

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Speaker 1: you know, sub four percent year to date. You know,

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Speaker 1: this is not this is this is certainly higher than

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Speaker 1: last year, but it's not anything to be overly concerned

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Speaker 1: about as a high yeld investor. Very interesting, Paul, thanks

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Speaker 1: so much for joining us. Share. This is part of

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Speaker 1: the market we don't probably don't spend enough time on,

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Speaker 1: but certainly some opportunities there, the fallen angels, the high

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Speaker 1: yield credit market, the leverage loan uh business. Paul Benson

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Speaker 1: head a fixed income efficient data at Melan, giving us

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Speaker 1: his thoughts again on these fallen angels UH and some

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Speaker 1: of the higher leverage loan sectors of the marketplace. Yes,

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Speaker 1: they've been impacted by the economic downturn resulting from the pandemic,

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Speaker 1: but probably performing better than expected, so some opportunities there

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Speaker 1: more to come. This is Bloomberg Now in terms of

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Speaker 1: a new Biden administrator, a lot of folks from wondering

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Speaker 1: what it means for their industries, what kind of policies

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Speaker 1: will the new administration come up with for for specific industries.

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Speaker 1: One of those industries is technology. Uh, there's obviously a

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Speaker 1: big issue with China. There's a big issue with to

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Speaker 1: what extent does technology in the United States need to

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Speaker 1: be regulated. Victoria Espinal, President, chief executive officer of BSA,

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Speaker 1: the software alliance based on Washington, d C. She joins US. Now, so, Victoria,

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Speaker 1: you know, we think about technology in the United States. Historically,

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Speaker 1: the US has taken a very light hand to regulating technology,

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Speaker 1: and one could argue that's been maybe one of the

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Speaker 1: main catalysts for the growth and development of tech in

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Speaker 1: the U S. Silicon Valley and all of that. How

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Speaker 1: do you expect President elect Joe Biden and his administration

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Speaker 1: to UH to manage technology policy. Well, first of all,

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Speaker 1: I would saying that I don't think it's about no

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Speaker 1: regulation or lots of regulation. I think it's about smart regulation,

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Speaker 1: you know, where it's appropriate. UM. In terms of the

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Speaker 1: Biden administration now, I'm expecting that we're going to see

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Speaker 1: continue to see some increased scrutiny on the technology industry. UM.

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Speaker 1: I think there are some legitimate issues that need to

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Speaker 1: be concerned, that that need to be addressed, and I

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Speaker 1: think the Biden administration will focus on that. You know,

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Speaker 1: I will say, speaking for the enterprise software industry, which

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Speaker 1: is the essay, we're excited to work with the administration

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Speaker 1: on those. We feel like there are a number of

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Speaker 1: places where laws and regulations could be updated and improved

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Speaker 1: and modernized UM, and we are really looking for places

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Speaker 1: where we can find solutions. There are some thorny issues

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Speaker 1: out there, artificial intelligence, privacy, cybersecurity. So we UM you know,

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Speaker 1: as a as an organization, as an industry, we try

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Speaker 1: not to run from challenges but to try to address them.

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Speaker 1: And we're really excited about working with the Biden administration

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Speaker 1: and how to find some long term solutions to some

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Speaker 1: of the real problems that are out there, so Victoria.

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Speaker 1: One of the problems that has really come to the

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Speaker 1: four of the last several years has been UH China

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Speaker 1: and technology transfers between US and China, and there's some

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Speaker 1: concern that there might be a technology cold war developing

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Speaker 1: between let's call it China and just broadly define the West.

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Speaker 1: How do you expect the Biden administration What would you

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Speaker 1: recommend to the Biden administration as it thinks about technology

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Speaker 1: policy visa each China. I think it's going to be

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Speaker 1: a major issue going forward, you know, in terms of

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Speaker 1: what I would expect to the Biden administration, I think

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Speaker 1: a Biden administration is going to be tough on China.

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Speaker 1: I think, you know, look, there's a whole range of

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Speaker 1: issues beyond the technology issues and the economic issues with China,

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Speaker 1: right human rights, Taiwan, the situation in Hong Kong, um.

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Speaker 1: There have been a number of approaches the Trump administration

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Speaker 1: has taken on the eco comics sides, tariffs and trade

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Speaker 1: and got in the most attention, I would say, but

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Speaker 1: you know, other approaches including export controls, investment restrictions. Of course,

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Speaker 1: in the Biden administration goes in, they're going to do

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Speaker 1: their own assessment of what the issues are and what

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Speaker 1: the approaches are. I think they're going to bring a

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Speaker 1: lot of expertise to that assessment, but I would expect

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Speaker 1: that coming out of that, we're going to see two

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Speaker 1: differences in terms of approach. Broadly speaking, one I think

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Speaker 1: is I think there will be a focus on a

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Speaker 1: broader range of issues, so again not just economic issues,

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Speaker 1: but issues like human rights for example. I expect we'll

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Speaker 1: see more UM focus on that from them Biden administration,

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Speaker 1: and even in the economic issues, I think we will

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Speaker 1: see a focus on trying to come up with long

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Speaker 1: term solutions to those issues. And again it's sort of

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Speaker 1: a broader range of economic issues that we faced with China,

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Speaker 1: including UM in the technology space. The second difference I

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Speaker 1: expect that we will the is working with other countries

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Speaker 1: and building alliances. You know, the United States is not

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Speaker 1: the only country certainly that has concerns with China, and

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Speaker 1: I think the US will address is concerned directly with China,

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Speaker 1: but also I expect um the Biden administration will be

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Speaker 1: looking to build alliances and be doing that in concert

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Speaker 1: with other countries that also share those concerns. UM. The

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Speaker 1: last thing I would say is, you know, the president

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Speaker 1: look by then the major commitment during the campaign in

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Speaker 1: terms of R and D investment in technology, Um, the

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Speaker 1: United States, unlike China, a lot of our investment in

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Speaker 1: the United States comes from the private sector, and I

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Speaker 1: think that's appropriate. But it's also great to see that

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Speaker 1: this administration is going to be focused on putting public sector,

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Speaker 1: significant public sector of funding into basic R and D investment. UM.

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Speaker 1: I think that's the really important part of this interesting so, Victoria.

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Speaker 1: I guess as it relates to China, one of the

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Speaker 1: more immediate things that the incoming Biden administration will need

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Speaker 1: to address is to talk I'm not even sure where

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Speaker 1: we are on the TikTok issue. Can you bring us

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Speaker 1: up to date? Well? Um, you know, in terms of

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Speaker 1: the administration, I think the lot of the administrations speak

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Speaker 1: for yourself, and I think what they've said is that

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Speaker 1: it's too early for them to say what you know.

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Speaker 1: I guess what I would say more generally is I

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Speaker 1: don't think this is an administration where policy is going

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Speaker 1: I think it's going to be an administration that is,

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Speaker 1: as I said, looking to find ways to set global

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Speaker 1: standards and rain in bad actors of all different kinds.

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Speaker 1: Um But I think it's going to be at my

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Speaker 1: about finding that long term, sustainable, durable framework as opposed

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Speaker 1: particular situation. So, Victoria, I guess the other thing is

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Speaker 1: just kind of you know, the big U s technology companies,

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Speaker 1: particularly this social platforms, do you expect them to face

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Speaker 1: continued scrutiny, increased Scrutinyou is this something that's just gonna

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Speaker 1: be a factive life for the facebooks of the world

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Speaker 1: and others. Um? So I'll say this, you know, as

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Speaker 1: my organization doesn't represent Facebook, you know where the enterprise

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Speaker 1: B two B side of the software industry. Um But

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Speaker 1: I think I think it's also fair to say that

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Speaker 1: the tech industry, including the social media platforms, I think

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Speaker 1: will face increasing scrutiny. I think we're going to see

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Speaker 1: that in competition. I think we're going to see that

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Speaker 1: in accountability issues, platform accountability issues generally. I think that, um,

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Speaker 1: you know, that has been true for a while, so

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Speaker 1: that will not be new with a Biden administration, but

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Speaker 1: I think it I anticipate that there will be increased

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Speaker 1: scrutiny and a Biden administration. And again, as I was

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Speaker 1: saying at the beginning, and I think there are some

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Speaker 1: legitimate concerns that need to be addressed, and um, you know,

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Speaker 1: that's something I think that the Biden administration will be

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Speaker 1: focused on as well. Hey, Victoria, thank you so much.

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Speaker 1: We really appreciate your thoughts and insight. Victoria Spinel, president

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Speaker 1: and chief executive officer of b s A, the Software Alliance.

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Speaker 1: They're based in Washington, d C. Giving us some thoughts

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Speaker 1: about how the incoming Biden administration may think about policy

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Speaker 1: as it relates to technology, particularly the software companies. And again,

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Speaker 1: probably issue number one on day one will be the

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Speaker 1: relationship of U with the U S and China as

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Speaker 1: it relates to technology. We are waiting for a discussion

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Speaker 1: on Bloomberg Television between Bowing CEO Dave Calhoun and Rhiner

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Speaker 1: CEO Michael O'Leary. Uh. They announced the deal today for

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Speaker 1: some planes to be acquired by Ryan Air. Let's chat

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Speaker 1: with George Ferguson, Senior Aerospace, Defense and Airlines analyst for

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Speaker 1: Bloomberg Intelligence on what we might hear. So George talked

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Speaker 1: to us a little bit about this deal for Boeing,

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Speaker 1: uh with Ryan Air. It seems like really good news

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Speaker 1: for Boeing here. Yeah, thanks Paul. I think it's absolute

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Speaker 1: endorsement here for the Bowing Max and the sixes that

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Speaker 1: have taken place, and it's where, you know, where Ryan

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Speaker 1: Air sees that whole process. They must feel pretty comfortable

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Speaker 1: of the airplane's viability. We've been saying it's a viable

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Speaker 1: So I think they feel pretty comfortable and they're and

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Speaker 1: they're coming in for a nice size order seventy five.

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Speaker 1: I actually thought it might have been larger, and I

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Speaker 1: think it's not larger. Maybe a testament to the fact

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Speaker 1: that we heard the Bowing CEO Calhoun say they're not

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Speaker 1: going to buy themselves back into the market or something

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Speaker 1: like that. Not an exact quote, but I think maybe

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Speaker 1: a testament. You know, we knew Ryan Air was sort

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Speaker 1: of sniffing around looking for order actually for I think

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Speaker 1: it's been at least a year or so. They love

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Speaker 1: to buy airplanes cheap. I guess is that maybe um oh,

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Speaker 1: Larry didn't get quite the prices he wanted and sort

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Speaker 1: of stepped in for seventy. But looks a good endorsement,

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Speaker 1: good endorsement to the airplane, good news for Bowling, and

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Speaker 1: tell me good news for Ryan Air too. Yeah, so

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Speaker 1: George talked us about this seventh three of Max. You know,

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Speaker 1: I just speaking for myself, you know, if I were to,

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Speaker 1: you know, actually take a flight, which is a huge

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Speaker 1: if here in this pandemic world, and I walked up

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Speaker 1: to the gate and I looked out the window and

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Speaker 1: I saw seven three seven Max parked at my gate,

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Speaker 1: I'd have no problems getting on the plane, am I?

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Speaker 1: Am I the exception or how do you think this

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Speaker 1: plane is going to be uh kind of embraced by

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Speaker 1: the airlines as well as in the passengers. Yeah, you know,

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Speaker 1: I think that, Um, I think that the public has

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Speaker 1: sort of a short memory on some of these things,

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Speaker 1: and I think there are some people that would be

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Speaker 1: concerned about flying the Max given the history. I think that,

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Speaker 1: you know, really some of their concerns you put to

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Speaker 1: bed by the fact that the f a A and

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Speaker 1: European regulators have really poured over the airplane to make

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Speaker 1: sure it's safe. They really don't want egg in their

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Speaker 1: face with it with another problem with the airplane, and

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Speaker 1: we're now going to have simulator training for the pilots

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Speaker 1: transitioning from the seven three seven eight to the max

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Speaker 1: which I think should also give people comfort. I think

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Speaker 1: you'll see advertising campaign around some of those you know,

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Speaker 1: some of that training. Um. And look again, I think

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Speaker 1: that there there'll be a short memory and you know,

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Speaker 1: sort of Brian Air buying here and have this airplane

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Speaker 1: feathered into their fleet out in one Americans starts to fly.

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Speaker 1: I think at the end of the year here, you know,

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Speaker 1: given the news around the pandemic, I think it'll get

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Speaker 1: lost and I think there won't be as much reticence

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Speaker 1: to fly the airplane had there not been sort of

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Speaker 1: the backdrop of a lot more bigger news stories right

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Speaker 1: right now. So, George, I think the last time we chatted,

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Speaker 1: one of the discussion points was China. UM, it's really important,

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Speaker 1: uh that China certify the seven three seven max A.

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Speaker 1: It's a huge market. B Uh, it's an economy that's

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Speaker 1: actually growing. They're they're out of their lockdown and there

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Speaker 1: people are beginning to travel. Any sense of when we'll

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Speaker 1: get the green light from China as relates to the

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Speaker 1: seven three seven Max. Yeah, I mean I'm hearing that

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Speaker 1: the you know, potentially we could see something like that

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Speaker 1: in the new year. I mean I think that Bill

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Speaker 1: the Chinese will want to find a way to do

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Speaker 1: the write word is embrace the Biden administration as they

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Speaker 1: come in. They'd love to be, I think, in the

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Speaker 1: good graces of the Biden administrations to change a tone

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Speaker 1: hopefully from the Trump administration for the Chinese when it

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Speaker 1: comes to trade. And I think you'll see it closer

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Speaker 1: to Joe Biden present elect Biden coming into power. But

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Speaker 1: so I would expect it sometime earlier next year. And

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Speaker 1: it's it is a core market, super important for about

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Speaker 1: talk to us, George, you know about boweing here, maybe

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Speaker 1: a little bit of a post mortem here, we've got

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Speaker 1: the a little bit of a hindsight here. It just

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Speaker 1: it feels like they didn't manage the process. Well I'm

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Speaker 1: not sure you know what else they could have done,

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Speaker 1: but it just feels like they didn't manage the process. Well,

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Speaker 1: what's the what's the feeling among you know, you aviation

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Speaker 1: geeks that you know look at the stuff all the time. Yes,

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Speaker 1: So I do think they I do think you know,

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Speaker 1: perhaps a little bit of Hubris took over at Boeing,

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Speaker 1: a little bit of marketing uh and managing financial statements

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Speaker 1: private was prioritized over engineering. And you know, I think

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Speaker 1: Calhoun's job is really to make sure that he resets

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Speaker 1: that um, you know, resets that uh. You know that

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Speaker 1: environment at Boeing where the focuses on solid engineering. You

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Speaker 1: try to keep the Hubris down UM. And so you know,

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Speaker 1: it feels like as they've moved the airplane through the

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Speaker 1: recertification process, it feels like they're getting that back in order.

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Speaker 1: You know. Look, I think it's a constant challenge. They

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Speaker 1: are one of the pre eminent airplane builders in the world,

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Speaker 1: you know, one of the two compared to air MUTH

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Speaker 1: and I think they really have to manage that that

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Speaker 1: culture going forward. So it feels like it's gotten better

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Speaker 1: and it looks like they've really got a good job

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Speaker 1: in re certification. I think Calhoun and his success are

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Speaker 1: really need to think about keeping that engineering culture forefront

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Speaker 1: at the company. And I think they got to start

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Speaker 1: thinking about their next product, you know, and that's another

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Speaker 1: engineering challenge, so I know, and the other again aviation geek,

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Speaker 1: you guys take your yearly pilgrimage to either you know,

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Speaker 1: London or Paris for the annual air shows, which is,

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Speaker 1: you know, just a scam in and of itself in

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Speaker 1: my opinion, But you guys do it every year. What

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Speaker 1: happens at the next time, when post pandemic you guys

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Speaker 1: meet in Paris and or London. What's Boeing's position going

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Speaker 1: to be in terms of, you know, selling the seven

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Speaker 1: thirty seven Max. Are they going to be able to

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Speaker 1: successfully uh put some more these planes into the fleet? Well?

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Speaker 1: So I think today was again, you know, a big

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Speaker 1: endorsement there for their delay to sell the airplane. Um,

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Speaker 1: I don't know anything about a scam, but it's a

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Speaker 1: big cocktail party, is what I think. Look, there's still

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Speaker 1: there's still a heck of a lot of orders in

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Speaker 1: the backlog, and I think really their job is to

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Speaker 1: go out and touch those customers and and get them

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Speaker 1: happy about the airplane and wanting to take those orders

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Speaker 1: in the backlog, because the beauty is they don't have

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Speaker 1: to sell the plane. It's already sold. You've got a

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Speaker 1: good death back, all right, George, thanks so much. We

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Speaker 1: appreciate it. As always, I look forward to you making

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Speaker 1: your pilgrimage over to London and Paris. George Ferguson's senior Aerospace,

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Speaker 1: Defense and Airlines Animals for Bloomberg Intelligence. It is time

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Speaker 1: for Bloomberg Opinion. We're joined today by Near case Or,

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Speaker 1: founder of Unison Advisors and a Bloomberg Opinion columnists. Near

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Speaker 1: thanks so much for joining us. I know you and

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Speaker 1: Tim O'Brien and Bloomberg Opinion out with a column today

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Speaker 1: where you're you're talking about what Congress should consider as

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Speaker 1: it does move forward slowly on a fourth round of

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Speaker 1: physical stimulus. What are some of your key takeaways that

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Speaker 1: you think Congress really needs to think about here? Well, um,

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Speaker 1: good morning, Paul, thanks for having me. Um. We're um.

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Speaker 1: You know, we think that more stimulus is probably necessary.

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Speaker 1: You know, the economy is improving, markets are up. It

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Speaker 1: looks like there's light at the end of the tunnel,

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Speaker 1: so to speak, with a vaccine coming, but there's still

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Speaker 1: a lot of suffering and it's not clear what the

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Speaker 1: timing around that is going to be. So more similar,

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Speaker 1: more stimulus is probably appropriate and probably and around the

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Speaker 1: size that they're thinking about, but there's an it's another

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Speaker 1: opportunity to sort of step back and ask what is

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Speaker 1: the point of the stimulus? What are we trying to accomplish?

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Speaker 1: You know, if if you just pull them back the

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Speaker 1: lens a bit, uh, you know, we will have spent

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Speaker 1: If if this package is roughly a trillion dollars, we

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Speaker 1: will have already spent uh, you know, roughly two point

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Speaker 1: seven trillion with the Cares Act for a total of

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Speaker 1: roughly four trillion dollars. And four trillion dollars could do

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Speaker 1: a lot of things. I mean, you could build infrastructure,

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Speaker 1: it could bolster education and public health, um, and and

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Speaker 1: we're suggesting that we just take a step back and

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Speaker 1: maybe give some bigger thought to the impact that that

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Speaker 1: kind of money could have on the entire economy, not

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Speaker 1: just certain segments of it. So it's interesting here, I

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Speaker 1: think you know, some of the issues here, the concerns

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Speaker 1: here that discussion points here are how much should go

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Speaker 1: to individuals versus how much should go to maybe industries

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Speaker 1: and companies to support employment and growth, how much should

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Speaker 1: go to states and municipalities. How do you think Congress

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Speaker 1: is thinking about this? And where where where do you

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Speaker 1: think they will allocate some of uh this upcoming stimulus? Well,

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Speaker 1: you know, based on what they've said, UM, it sounds

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Speaker 1: like this. UM. We'll see what the final details are,

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Speaker 1: but it sounds like this latest round and relief is

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Speaker 1: going to be UM and gets going to go to

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Speaker 1: supplemental unemployment insurance for unemployed American It will go to

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Speaker 1: small business, state and local governments that are obviously badly hurting. UM.

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Speaker 1: And then and then some money sprinkled around for various

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Speaker 1: things including public health and some other and some other initiatives,

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00:23:32,640 --> 00:23:35,240
Speaker 1: UM and UM, which is all fine, but it sort

431
00:23:35,240 --> 00:23:38,399
Speaker 1: of continues this UM, this sort of uh, you know,

432
00:23:38,480 --> 00:23:40,880
Speaker 1: crisis relief approach that we've had really since the two

433
00:23:40,880 --> 00:23:43,679
Speaker 1: thousand and eight financial crisis, where we're just really sticking

434
00:23:43,680 --> 00:23:46,280
Speaker 1: fingers in a damn and just plugging whatever holes are there.

435
00:23:46,880 --> 00:23:50,760
Speaker 1: And while that is necessary to some extent, UM, it

436
00:23:50,800 --> 00:23:53,640
Speaker 1: does put us in a situation where we have various

437
00:23:53,680 --> 00:23:56,800
Speaker 1: groups with you know, within the economy that are fighting

438
00:23:56,800 --> 00:23:59,200
Speaker 1: over over money. You know, in two thousand and eight,

439
00:23:59,280 --> 00:24:01,840
Speaker 1: it was mostly Wall Street and corporate America that got

440
00:24:01,840 --> 00:24:04,119
Speaker 1: the money, and you know, we're living with the ramifications

441
00:24:04,160 --> 00:24:06,640
Speaker 1: of that to some extent today. UM. You know, today,

442
00:24:06,680 --> 00:24:09,639
Speaker 1: appropriately more of the money should go to individuals that

443
00:24:09,680 --> 00:24:12,359
Speaker 1: are suffering from this pandemic at small business that are

444
00:24:12,400 --> 00:24:15,200
Speaker 1: also suffering. But but what they really ought to think

445
00:24:15,240 --> 00:24:16,880
Speaker 1: about is is there a way to spend this money

446
00:24:16,880 --> 00:24:20,280
Speaker 1: in a way that improves the entire economy as a whole.

447
00:24:20,760 --> 00:24:22,399
Speaker 1: And you know what, some of the some of the

448
00:24:22,480 --> 00:24:24,960
Speaker 1: data that we cite in the piece is instructive. I

449
00:24:24,960 --> 00:24:26,520
Speaker 1: think if you, if you take a look at this

450
00:24:26,560 --> 00:24:29,760
Speaker 1: economy from a longer, longer term perspective, what you see

451
00:24:29,800 --> 00:24:32,760
Speaker 1: is that for for decades we've had lower economic growth.

452
00:24:33,080 --> 00:24:35,000
Speaker 1: We have a situation where a half of households in

453
00:24:35,040 --> 00:24:37,840
Speaker 1: America don't make a living wage. We have, roughly, by

454
00:24:37,840 --> 00:24:41,000
Speaker 1: credible westments forty five million Americans that are food and secure,

455
00:24:41,520 --> 00:24:44,600
Speaker 1: and that speaks not only to the problems with the pandemic,

456
00:24:44,640 --> 00:24:47,800
Speaker 1: it speaks to a larger systematic problem of this functioning

457
00:24:47,800 --> 00:24:50,119
Speaker 1: of the economy. And what we're saying is what we

458
00:24:50,200 --> 00:24:54,520
Speaker 1: need is robust investment in education and infrastructure and public health,

459
00:24:54,840 --> 00:24:57,119
Speaker 1: and that kind of money we believe will will go

460
00:24:57,160 --> 00:24:59,800
Speaker 1: to the benefit of everyone, both business, big and s

461
00:25:00,000 --> 00:25:03,240
Speaker 1: all an individual. So near it's you know, you talk

462
00:25:03,280 --> 00:25:05,040
Speaker 1: about the food and insecure I'm glad you brought that

463
00:25:05,119 --> 00:25:07,520
Speaker 1: up because you know, we still have you know, roughly

464
00:25:07,600 --> 00:25:10,720
Speaker 1: ten million workers that have yet to recover their jobs

465
00:25:10,760 --> 00:25:12,720
Speaker 1: that were lost during the pandemic. We've got. We see

466
00:25:12,720 --> 00:25:16,119
Speaker 1: every night on the news these incredibly long lines of

467
00:25:16,200 --> 00:25:19,960
Speaker 1: cars going to food banks and so on. So it

468
00:25:19,960 --> 00:25:23,960
Speaker 1: seems like the near term immediate need is so pronounced

469
00:25:24,440 --> 00:25:26,840
Speaker 1: that it might be tough to kind of think about

470
00:25:26,880 --> 00:25:30,760
Speaker 1: some of those longer term investment areas, whether it's education

471
00:25:31,119 --> 00:25:33,399
Speaker 1: or skills and things like that. How do you again,

472
00:25:33,520 --> 00:25:35,000
Speaker 1: how do you try to How do you think Congress

473
00:25:35,040 --> 00:25:39,000
Speaker 1: is thinking about that balance? Well, that's fair, and I

474
00:25:39,080 --> 00:25:41,000
Speaker 1: think the way that they are thinking about it again

475
00:25:41,160 --> 00:25:44,920
Speaker 1: is just let's take care of the immediate problem. But

476
00:25:44,920 --> 00:25:48,199
Speaker 1: but I would suggest that it's helpful to try to

477
00:25:48,240 --> 00:25:50,760
Speaker 1: connect the dots. It's not clear to me, and I

478
00:25:50,800 --> 00:25:53,040
Speaker 1: don't think we should take for granted that once this

479
00:25:53,160 --> 00:25:56,080
Speaker 1: pandemic passes that these problems that we're seeing, that all

480
00:25:56,200 --> 00:25:58,879
Speaker 1: these ten million jobs um will will be back, and

481
00:25:58,920 --> 00:26:02,400
Speaker 1: that food and security will will will improve. It's possible

482
00:26:02,440 --> 00:26:05,640
Speaker 1: that this pandemic has caused sort of longer lasting systemic

483
00:26:05,680 --> 00:26:08,439
Speaker 1: problems to the economy, the roots of which were already

484
00:26:08,480 --> 00:26:11,000
Speaker 1: in place before the pandemic came. The pandemic just just

485
00:26:11,040 --> 00:26:12,960
Speaker 1: sort of brought them to the floor, right, And if

486
00:26:12,960 --> 00:26:14,600
Speaker 1: that's the case, I don't think it's gonna be enough

487
00:26:14,640 --> 00:26:17,840
Speaker 1: to spend a trillion dollars on supplemental un employment insurance

488
00:26:17,880 --> 00:26:20,240
Speaker 1: and and help uh too, small business and the like.

489
00:26:20,600 --> 00:26:22,800
Speaker 1: I think the question is going to be how do

490
00:26:22,840 --> 00:26:25,359
Speaker 1: we get more jobs? How do we get how do

491
00:26:25,400 --> 00:26:28,320
Speaker 1: we improve training for workers, how do we um how

492
00:26:28,359 --> 00:26:31,800
Speaker 1: do we improve the wages of of of working American?

493
00:26:32,280 --> 00:26:33,880
Speaker 1: And it seems to me that that's going to take

494
00:26:33,920 --> 00:26:36,359
Speaker 1: a sort of a longer term vision and a longer

495
00:26:36,480 --> 00:26:40,680
Speaker 1: term investment in things like education, infrastructure. So near give

496
00:26:40,720 --> 00:26:42,440
Speaker 1: us a sense of kind of how this timing might

497
00:26:42,440 --> 00:26:44,920
Speaker 1: play out. I know we're in this lame duck session here.

498
00:26:44,960 --> 00:26:47,480
Speaker 1: Do we expect something to come out of this lame

499
00:26:47,600 --> 00:26:52,240
Speaker 1: duck Congress now? And then after President Elect Biden is

500
00:26:52,240 --> 00:26:55,440
Speaker 1: sworn in on January with a new Congress that there

501
00:26:55,440 --> 00:27:00,800
Speaker 1: may be something bigger, broader that maybe you're you're thinking about. Well,

502
00:27:00,840 --> 00:27:03,720
Speaker 1: I think they understand that it's going to have to

503
00:27:03,760 --> 00:27:05,840
Speaker 1: be soon. It's probably gonna have to be this year

504
00:27:05,880 --> 00:27:08,439
Speaker 1: if they want to have something passed um and if

505
00:27:08,440 --> 00:27:10,040
Speaker 1: they don't get it done, then it's probably gonna get

506
00:27:10,119 --> 00:27:12,440
Speaker 1: kicked into the next administration. In terms of what can

507
00:27:12,480 --> 00:27:15,240
Speaker 1: happen and under a Biden administration, I think it really

508
00:27:15,320 --> 00:27:18,000
Speaker 1: depends on what happens in Georgia. Um. You know, if

509
00:27:18,040 --> 00:27:20,600
Speaker 1: the Republican hold the Senate, then I think you're looking

510
00:27:20,640 --> 00:27:22,640
Speaker 1: at a stimulus package to the extent you ever get

511
00:27:22,680 --> 00:27:25,080
Speaker 1: one um that looks roughly like the one we're talking

512
00:27:25,119 --> 00:27:27,600
Speaker 1: about today. On the other hand, if the Democrats take

513
00:27:27,600 --> 00:27:29,720
Speaker 1: a Senate um and they you know, they hold the

514
00:27:29,720 --> 00:27:32,360
Speaker 1: White House and Congress, then I think it opens up.

515
00:27:33,240 --> 00:27:35,000
Speaker 1: I think it opens it up to to a much

516
00:27:35,119 --> 00:27:37,480
Speaker 1: broader initiative to the except that they want to do

517
00:27:37,520 --> 00:27:40,480
Speaker 1: it something that's more new deal left, you know. But

518
00:27:40,560 --> 00:27:43,520
Speaker 1: it really depends on whether they'll have the votes exactly. So,

519
00:27:43,600 --> 00:27:46,560
Speaker 1: I mean, you know, infrastructure, there seems to be something

520
00:27:46,640 --> 00:27:49,840
Speaker 1: that is bipartisan that seems to be the party line

521
00:27:49,840 --> 00:27:53,520
Speaker 1: here that infrastructure is in fact bipartisan. Is that money

522
00:27:53,640 --> 00:27:55,840
Speaker 1: well spent? Do you think if we can move down

523
00:27:56,000 --> 00:27:59,360
Speaker 1: that road and maybe get my you know, gateway project

524
00:27:59,359 --> 00:28:00,960
Speaker 1: done so I can take to train into the city

525
00:28:00,960 --> 00:28:04,080
Speaker 1: and a with a safe tunnel that would be nice wood.

526
00:28:04,080 --> 00:28:06,560
Speaker 1: And then yeah, I mean infrastructure I think is one

527
00:28:06,600 --> 00:28:09,199
Speaker 1: of those things that that everyone can benefit from. Obviously,

528
00:28:09,240 --> 00:28:12,720
Speaker 1: we need infrastructure and at various realms, um, you know,

529
00:28:12,760 --> 00:28:15,320
Speaker 1: in order to to sort of lay the foundation for

530
00:28:15,359 --> 00:28:17,840
Speaker 1: business and for commerce and all for all that obviously,

531
00:28:18,000 --> 00:28:21,120
Speaker 1: but also infrastructures jobs program as well. So I mean,

532
00:28:21,200 --> 00:28:23,440
Speaker 1: you have ten million Americans right now that have lost

533
00:28:23,480 --> 00:28:25,840
Speaker 1: their jobs, are looking for work, and um. You know,

534
00:28:25,840 --> 00:28:28,920
Speaker 1: in a big, ambitious infrastructure project from the federal government

535
00:28:29,359 --> 00:28:33,320
Speaker 1: is a high is hiring opportunity for millions of Americans UM.

536
00:28:33,400 --> 00:28:36,040
Speaker 1: And potentially to to to to provide them not only

537
00:28:36,040 --> 00:28:38,520
Speaker 1: with training, but good paying jobs, um. And and not

538
00:28:38,600 --> 00:28:40,720
Speaker 1: to mention all the knock on effects from having improved

539
00:28:40,760 --> 00:28:44,120
Speaker 1: infrastructure and transportation in WiFi, and you know, we can

540
00:28:44,160 --> 00:28:47,440
Speaker 1: think of many applications. So infrastructures is a great example

541
00:28:47,600 --> 00:28:50,080
Speaker 1: of a program where the money that you spend is

542
00:28:50,120 --> 00:28:53,239
Speaker 1: not so much relief as it is investment UM. And

543
00:28:53,280 --> 00:28:55,240
Speaker 1: that investment, you know, we can we can look back

544
00:28:55,280 --> 00:28:58,240
Speaker 1: to the nineties, thirties and nineteen forty for ambitious, big

545
00:28:58,240 --> 00:29:02,080
Speaker 1: government projects that paved the way for the prosperity UM.

546
00:29:02,160 --> 00:29:05,520
Speaker 1: That all Americans have joined the fifties sixties UM in

547
00:29:05,560 --> 00:29:08,680
Speaker 1: early nineteen seventies, and we can have that again. Hey Near,

548
00:29:08,720 --> 00:29:11,120
Speaker 1: thanks so much for joining us. We appreciate it as always.

549
00:29:11,240 --> 00:29:15,200
Speaker 1: Neil Case, our founder of Unison Advisors. Any Bloomberg Opinion comms.

550
00:29:15,240 --> 00:29:18,000
Speaker 1: You can read all of Near's at work on Bloomberg

551
00:29:18,040 --> 00:29:21,000
Speaker 1: dot com, slash Opinion or O P I N go

552
00:29:21,360 --> 00:29:24,280
Speaker 1: on the terminal. We'll have more coming up. This is

553
00:29:24,280 --> 00:29:30,400
Speaker 1: Bloomberg Markets. Thanks for listening to Bloomberg Markets podcast. You

554
00:29:30,440 --> 00:29:33,960
Speaker 1: can subscribe and listen to interviews at Apple Podcasts or

555
00:29:34,040 --> 00:29:37,520
Speaker 1: whatever podcast platform you prefer. I'm Bonnie Quinn. I'm on

556
00:29:37,560 --> 00:29:40,080
Speaker 1: Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm on

557
00:29:40,120 --> 00:29:43,040
Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always

558
00:29:43,080 --> 00:29:44,960
Speaker 1: catch us worldwide at Bloomberg Radio