WEBVTT - Why Online Education Should Come With An Online Price 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.320 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.280 at Bloomberg dot com. There's time for us to check 0:00:21.320 --> 0:00:24.120 in with Bloomberg Opinion. Today we're joined by Bloomberg Opinion 0:00:24.160 --> 0:00:27.520 columns Kathy O'Neil. She's some a mathematician and also a 0:00:27.600 --> 0:00:30.360 columnist for Bloomberg Opinion. I want to talk about higher 0:00:30.480 --> 0:00:35.640 education as uh the father of two college age students myself. Uh, Lisa, 0:00:36.000 --> 0:00:37.960 you know it's really an issue here. We're paying full 0:00:38.000 --> 0:00:43.080 tuition yet they're not getting the on campus classroom experience 0:00:43.080 --> 0:00:46.840 and kind of calling it the question the value proposition there. So, Kathy, 0:00:46.920 --> 0:00:49.279 thanks so much for joining us here. What do you 0:00:49.320 --> 0:00:52.280 think is the future, at least in the near term, 0:00:52.320 --> 0:00:54.880 of some of these decisions parents and students and colleges 0:00:54.920 --> 0:00:57.920 need to make about pricing what is a much much 0:00:57.920 --> 0:01:01.480 different experience. Thanks for having me yeah. I mean, I'm 0:01:01.480 --> 0:01:04.280 looking right now at this Chronicle of Higher Education website 0:01:04.360 --> 0:01:07.679 that says that two thirds full two thirds of colleges 0:01:08.120 --> 0:01:10.039 are still claiming that they're going to have in person 0:01:10.120 --> 0:01:12.600 classes in the fall. I just don't think that's realistic. 0:01:13.160 --> 0:01:16.400 I think the ones that have copped to remaining online 0:01:16.440 --> 0:01:18.679 for the fall, which is only at six percent right now, 0:01:18.680 --> 0:01:21.560 are being much more honest with their students and parents, 0:01:22.080 --> 0:01:24.520 And for for now, we're just playing a game of chicken. 0:01:24.880 --> 0:01:28.160 We have parents and students who are strapped for cash. 0:01:28.520 --> 0:01:31.480 We have colleges who desperately, desperately need the tuition money, 0:01:31.920 --> 0:01:34.320 and that first tuition payment, as I'm sure you know, 0:01:34.520 --> 0:01:36.880 is coming due in a month or two, and they're 0:01:36.920 --> 0:01:39.240 just not going to tell us. It feels like I 0:01:39.280 --> 0:01:42.720 also have to college students at home. Um, they feel 0:01:42.760 --> 0:01:43.960 like they're just not going to tell us what the 0:01:44.000 --> 0:01:46.920 actual situation is until they get that tuition payment, which 0:01:46.959 --> 0:01:49.320 doesn't seem like a good deal for us. Well, and 0:01:49.360 --> 0:01:53.360 it seems like increasingly parents are wondering about the value proposition. 0:01:53.400 --> 0:01:56.240 And my kids are younger than college at age. But 0:01:56.320 --> 0:01:58.720 I'm a little bit nervous looking at how quickly the 0:01:58.800 --> 0:02:03.920 inflation has occurred in college price tags. I'm wondering what 0:02:04.160 --> 0:02:08.760 the pandemic and the disruption to in class attendance might 0:02:08.880 --> 0:02:12.160 mean in terms of colleges going out of business if 0:02:12.200 --> 0:02:16.200 parents do decide not to pay the bills, or potentially 0:02:16.320 --> 0:02:20.760 a rejiggering of more kind of technical colleges versus uh 0:02:21.040 --> 0:02:24.960 liberal arts educations. What do you think, well, exactly, And 0:02:25.000 --> 0:02:28.359 I think basically the value proposition has been for the 0:02:28.440 --> 0:02:32.680 last few dozen years that it's not just an education, 0:02:32.880 --> 0:02:36.079 it's a sort of certificate for the middle class or 0:02:36.160 --> 0:02:38.239 for certificate for a better than a middle class job, 0:02:38.480 --> 0:02:41.280 depending on which college you go to. So so parents 0:02:41.280 --> 0:02:44.240 have been shelling out more and more and more and 0:02:44.240 --> 0:02:47.520 and have as have students, not simply for the education, 0:02:47.639 --> 0:02:50.840 but also for the experience, for the socializing, for the 0:02:50.880 --> 0:02:55.040 connections if you will to good jobs afterwards, and if 0:02:55.080 --> 0:02:57.480 it's online, you clearly don't have all of that, you 0:02:57.520 --> 0:03:00.560 don't have the on campus experience, etcetera. And to be clear, 0:03:00.639 --> 0:03:04.240 colleges have been cashing in on this holistic approach to 0:03:04.320 --> 0:03:06.760 what they're offering just as much as parents have been 0:03:06.760 --> 0:03:10.680 buying into it. So it's it's just simply not about 0:03:10.840 --> 0:03:13.600 education and I and I hesitate to say this because 0:03:13.600 --> 0:03:15.760 I have many, many friends who are professors who are 0:03:15.760 --> 0:03:19.280 working their tails off in order to deliver as good 0:03:19.280 --> 0:03:21.960 an education as they possibly can in the context of 0:03:22.040 --> 0:03:24.640 online And it's not not to say that they're not 0:03:24.680 --> 0:03:27.440 doing a really good job, but that's really not the 0:03:27.480 --> 0:03:29.680 only thing we're paying for when we pay for college. 0:03:30.240 --> 0:03:32.120 And so the question is what will happen next. And 0:03:32.160 --> 0:03:34.880 I really do think if it becomes online, then people 0:03:34.880 --> 0:03:37.280 will say, wait, if it's just about education, I'm simply 0:03:37.280 --> 0:03:40.480 not willing to pay this. So, Kathy, I mean, it's 0:03:40.520 --> 0:03:43.040 interesting you mentioned tuition, how the colleges really need tuition, 0:03:43.040 --> 0:03:46.200 and I think that's so much about the really big universities, 0:03:46.240 --> 0:03:48.760 well known universities that have big endowments and that can 0:03:48.840 --> 0:03:50.920 perhaps weather the storm a little bit. I'm thinking about 0:03:50.920 --> 0:03:53.760 that this may be the second and third tier colleges 0:03:53.760 --> 0:03:56.440 and universities that really don't have those endowments and therefore 0:03:56.560 --> 0:04:00.320 really rely on funding their operating budget with two ocian 0:04:00.840 --> 0:04:03.400 What are those schools going to do? I think there's 0:04:03.400 --> 0:04:06.040 gonna be a lot of liberal arts schools, the ones 0:04:06.120 --> 0:04:09.400 that really like remate, like sort of rely heavily on 0:04:09.400 --> 0:04:12.800 this in local parentis concept um that we're going to be, 0:04:12.840 --> 0:04:15.240 you know, there for your kids, and it's going to 0:04:15.280 --> 0:04:18.880 be a full pledged liberal arts education. Those schools that 0:04:18.920 --> 0:04:21.279 rely that don't have a huge endowment are going to 0:04:21.320 --> 0:04:23.160 go out of business. I expect to see a whole 0:04:23.200 --> 0:04:26.320 a huge slew of colleges just closing shop in the 0:04:26.360 --> 0:04:29.919 next couple of years because of this disruption. Kathy, have 0:04:30.080 --> 0:04:32.640 you heard any of Scott Galloway's comments, the n y 0:04:32.720 --> 0:04:35.359 U professor who's been going on the airwaves and saying 0:04:35.920 --> 0:04:39.080 that basically a lot of colleges should go out of business, 0:04:39.080 --> 0:04:42.240 that they're overpriced, and that finishing schools essentially are the 0:04:42.279 --> 0:04:45.800 IVY Leagues will continue because they are sort of artificially 0:04:45.839 --> 0:04:47.920 propping up their value. I mean, you basically was comparing 0:04:47.960 --> 0:04:50.480 them to Gucci scarves. But I'm wondering, I mean, are 0:04:50.520 --> 0:04:54.400 you going to see this increasing bifurcation among the IVY 0:04:54.480 --> 0:04:57.920 League and everyone else as everyone else tries to justify 0:04:58.040 --> 0:05:01.200 the finishing school aspect of their business as sort of 0:05:01.240 --> 0:05:05.080 as you describe the holistic experience. Yeah, I mean I 0:05:05.120 --> 0:05:07.680 hope so. And and what what I really hope is 0:05:07.720 --> 0:05:11.680 that whatever we replace this with is less expensive, um 0:05:11.720 --> 0:05:16.679 and less like arduous for me and for their parents 0:05:16.720 --> 0:05:18.440 and I you know, like, look, there has to be 0:05:18.520 --> 0:05:21.240 some way to decide what job who gets right. It's 0:05:21.240 --> 0:05:26.000 a sorting mechanism, but it's just an unbelievably expensive sorting mechanisms. 0:05:26.080 --> 0:05:28.839 So my hope would be that we really do figure 0:05:28.880 --> 0:05:32.440 out a way, um that that works. Um. You know, 0:05:32.440 --> 0:05:34.440 look at the German model with an enormous amount of 0:05:34.440 --> 0:05:37.760 apprenticeships for example, where there aren't that many uh, sort 0:05:37.760 --> 0:05:41.680 of university educated students um relative to the number of 0:05:41.720 --> 0:05:44.960 students that take sort of apprenticeships after call after high school. 0:05:45.279 --> 0:05:47.919 There's nothing wrong with that model, except we don't do 0:05:47.960 --> 0:05:51.000 it whatsoever. Um. So if we could find a reasonable 0:05:51.440 --> 0:05:54.800 system that isn't nearly as expensive, that gets people um 0:05:55.000 --> 0:05:58.440 jobs sooner and less long term student debt, that would 0:05:58.440 --> 0:06:01.560 be fantastic. Kat the O'Neill, thank you so much, and 0:06:01.680 --> 0:06:04.200 uh from your lips to the higher education's ears ahead 0:06:04.240 --> 0:06:06.680 of my children having to go to college. Cathy O'Neill, 0:06:06.880 --> 0:06:10.120 a Bloomberg opinion columnist, a mathematician who has been a 0:06:10.120 --> 0:06:13.280 professor as well as a hedge fund analysts and data 0:06:13.320 --> 0:06:17.520 scientists and author of Weapons of Math Destruction. Definitely something 0:06:17.560 --> 0:06:20.160 on the forefront of our minds the price of college education, 0:06:20.160 --> 0:06:24.080 which is absolutely skyrocketed in relation to everything else, raising 0:06:24.120 --> 0:06:27.359 a lot of questions, especially given the student debt load 0:06:27.480 --> 0:06:30.839 right now that we're seeing come into the focus. Paul, Yeah, 0:06:30.839 --> 0:06:34.200 it's really interesting. And again, those fall semester payments are 0:06:34.200 --> 0:06:35.600 coming up, and I wonder if there's gonna be any 0:06:35.640 --> 0:06:38.480 pricing adjustment here for what is a very different product 0:06:38.560 --> 0:06:44.840 that we're getting now versus what we initially signed up for. Well, 0:06:44.880 --> 0:06:47.240 the up and down relationship between the US and China 0:06:47.360 --> 0:06:51.560 seems to be approaching another low, this time due to 0:06:51.800 --> 0:06:55.760 the new security laws that China has imposed on Hong Kong, 0:06:55.760 --> 0:06:58.600 and a response from the U s has not been positive, 0:06:58.600 --> 0:07:01.679 to say the least. Michael Herson, practice head at China 0:07:01.760 --> 0:07:04.719 and at Northwest Asia for the Eurasia Group, joins us. Michael, 0:07:04.760 --> 0:07:06.680 thanks so much for your time here one of for 0:07:06.760 --> 0:07:09.600 our listeners, if you could just summarize what these new 0:07:09.640 --> 0:07:12.600 security laws are in Hong Kong and maybe why China 0:07:12.720 --> 0:07:18.440 is doing it now. Sure so, China announced on Friday 0:07:18.640 --> 0:07:23.960 that it's legislature the National People's Congress will implement this 0:07:24.080 --> 0:07:28.760 law rather than go through Hong Kong's own legislature. And 0:07:28.840 --> 0:07:32.320 this has been a long, decades long sticking point. In fact, 0:07:33.040 --> 0:07:36.640 Hong Kong establishing a national security law and Beijing had 0:07:36.760 --> 0:07:39.960 left that to Hong Kong to take care of but 0:07:40.040 --> 0:07:43.040 basically ran out of patients. And there have been waves 0:07:43.080 --> 0:07:47.760 of protest over the last year and even earlier over 0:07:48.640 --> 0:07:52.280 Hong Kong um proposing this legislation on its own. So 0:07:52.400 --> 0:07:56.040 essentially Beijing said time is up. We're going to do 0:07:56.080 --> 0:07:59.600 this for you under its own interpretation of the law 0:08:00.040 --> 0:08:04.040 that governs China's mainland China's relationship with Hong Kong. Now, 0:08:04.040 --> 0:08:06.880 what the law actually does is well, first off, I 0:08:06.880 --> 0:08:09.680 should say we won't know the details because the law 0:08:09.760 --> 0:08:12.280 has not been drafted yet, and that will likely be 0:08:13.440 --> 0:08:15.880 something that happens over the course of the summer. But 0:08:16.000 --> 0:08:22.320 essentially it gives likely some fairly broad powers for Beijing 0:08:22.440 --> 0:08:25.880 to extend its authority over Hong Kong in areas that 0:08:25.920 --> 0:08:32.760 it regards as anti government uh and treasonous activity. A 0:08:32.800 --> 0:08:35.439 lot of people are saying that the US should and 0:08:35.559 --> 0:08:39.280 will step in. We've seen Congress come out and threatened 0:08:39.280 --> 0:08:44.320 to take action, including potentially provoking the special trading status 0:08:44.360 --> 0:08:48.120 that the US has with Hong Kong. What does China 0:08:48.320 --> 0:08:51.680 stand to lose if Hong Kong loses some of its 0:08:51.720 --> 0:08:57.920 special status with respect to its reputation financially around the world. Well, 0:08:57.960 --> 0:09:01.400 I think for China, the economic importance of Hong Kong 0:09:01.520 --> 0:09:04.880 has diminished quite a bit relative to the size of 0:09:04.960 --> 0:09:08.960 China's economy, So I think the biggest threat for China 0:09:09.040 --> 0:09:12.240 at this point would be if these actions create fundamental 0:09:12.320 --> 0:09:16.160 financial instability in Hong Kong. That would be bad and 0:09:16.160 --> 0:09:20.040 could have ripple effects for China's economy and financial system. 0:09:20.160 --> 0:09:24.720 But generally speaking, losing Hong Kong's vitality as a global 0:09:24.800 --> 0:09:29.600 business hub is not positive for China, but it doesn't 0:09:29.640 --> 0:09:32.200 represent any kind of systemic risk. I think it's fair 0:09:32.240 --> 0:09:35.120 to say that mainland China has has moved on beyond that. 0:09:36.200 --> 0:09:40.680 So Michael does realistically, does Hong Kong have any recourse here? 0:09:43.679 --> 0:09:47.320 Hong Kong, I think to be blunt, No, not really, 0:09:47.520 --> 0:09:50.400 And of course Hong Kong's government is at this point 0:09:50.520 --> 0:09:54.880 the the administration of Carrie Lamb is moving essentially in 0:09:55.000 --> 0:09:58.520 lockstep with Beijing. So really the question mark at this 0:09:58.600 --> 0:10:02.040 point is not so much whether or not Hong Kong 0:10:02.080 --> 0:10:05.200 has recourse, but as you suggested, what the US responses. 0:10:06.080 --> 0:10:09.280 There's also a question about other power graphs that China 0:10:09.440 --> 0:10:11.560 is making right now. There was a one point for 0:10:11.640 --> 0:10:16.840 a trillion dollar investment program in its technological infrastructure that 0:10:16.880 --> 0:10:20.959 they announced. They've been trying to get a vaccine through 0:10:21.400 --> 0:10:24.960 faster than the United States. What's behind this at this 0:10:25.040 --> 0:10:29.079 point and is China getting the upper hand? Well, I 0:10:29.120 --> 0:10:31.360 think there are some areas that you can call this 0:10:31.559 --> 0:10:33.960 a power graph, but there are other areas where China 0:10:34.160 --> 0:10:37.800 is just behaving opportunistically. The world is in crisis, China 0:10:37.960 --> 0:10:40.080 is more stable than a lot of other countries, and 0:10:40.120 --> 0:10:42.480 so it's it's looking to gain an edge, and I 0:10:42.520 --> 0:10:45.320 think that's the case with the stimulus program, in the 0:10:45.400 --> 0:10:48.320 investment and a lot of these strategically important sectors that 0:10:48.400 --> 0:10:52.400 you mentioned. UM. Generally speaking, China is trying to use 0:10:52.440 --> 0:10:56.240 the crisis to expand its influence, uh. And it would 0:10:56.240 --> 0:10:59.839 do that through vaccine diplomacy, through the assistance that it's 0:10:59.840 --> 0:11:05.040 all already offered to countries um for medical supplies. And yes, 0:11:05.120 --> 0:11:07.160 I think it's fair to say that China see this 0:11:07.320 --> 0:11:10.600 as an opening, especially at the time when when China's 0:11:10.600 --> 0:11:13.720 economy is recovering earlier than most other large economies, to 0:11:13.760 --> 0:11:17.400 really expand its influence. So I wonder if you can 0:11:17.440 --> 0:11:20.120 just give us a sense of the the health and 0:11:20.160 --> 0:11:24.120 the strength of the presidency of President g given the 0:11:24.640 --> 0:11:28.520 COVID christ pandemic, given the impact to the Chinese economy, 0:11:28.559 --> 0:11:33.000 given that some you know, international condemnation, perhaps China was 0:11:33.080 --> 0:11:37.480 somehow involved in the origination of this pandemic. What's the 0:11:37.520 --> 0:11:41.600 standing of the president right now? I think right now 0:11:41.760 --> 0:11:44.680 his footing is quite secure. In fact, you can even 0:11:44.679 --> 0:11:47.600 make the case that for now she emerges stronger from this, 0:11:47.840 --> 0:11:51.640 and it's because of China's ability to contain the virus 0:11:52.320 --> 0:11:55.160 and to recast the narrative at home by showing that 0:11:55.200 --> 0:11:58.520 the party has been successful, his leadership has been successful, 0:11:58.960 --> 0:12:00.880 whereas the U. S and West has had a far 0:12:01.000 --> 0:12:04.200 more fumbling response to the pandemic. Now, I don't think 0:12:04.240 --> 0:12:06.920 that means he's out of the woods. Unemployment is rising 0:12:06.920 --> 0:12:08.800 in China. I think it's going to be a quite 0:12:08.840 --> 0:12:12.640 gradual recovery. But what it means is that to strengthen himself, 0:12:12.679 --> 0:12:16.400 she will continue to ramp up patriotic sentiment at home 0:12:17.000 --> 0:12:20.080 and and portray China success whereas others have failed. And 0:12:20.160 --> 0:12:23.319 that is going to mean that these issues like Hong Kong, 0:12:23.920 --> 0:12:27.760 like disputes with the US over Taiwan, over the South China, see, 0:12:27.800 --> 0:12:29.320 all of these I think are going to stay at 0:12:29.400 --> 0:12:32.400 quite a high temperature, and it means real risks for 0:12:32.440 --> 0:12:35.840 the relationship now through the election. This is when I 0:12:35.920 --> 0:12:38.840 don't really understand. It seems like mark markets are shrugging 0:12:38.920 --> 0:12:42.720 off the prospect of an escalating, escalating trade war or 0:12:42.760 --> 0:12:45.800 cold war between the US and China, and yet it 0:12:45.880 --> 0:12:50.280 seems like things are escalating. What's the tipping point at 0:12:50.280 --> 0:12:53.800 which it really will bleed over into the global economic recovery. 0:12:55.000 --> 0:12:57.080 I think it's a very good point. I think markets 0:12:57.120 --> 0:13:01.040 tend to focus on the issue of tariffs because those 0:13:01.160 --> 0:13:04.080 are the most visible and easy to quantify in terms 0:13:04.120 --> 0:13:07.880 of tensions and argue at this point, and it's not 0:13:07.960 --> 0:13:10.520 a it's not a firm conviction, but we think that 0:13:10.640 --> 0:13:13.520 the Phase one deal will last through this year because 0:13:13.520 --> 0:13:16.920 neither side has the incentive to to re escalate on trade. 0:13:17.400 --> 0:13:20.600 We put that at about so I think the markets 0:13:20.600 --> 0:13:23.000 should be aware that there's a risk of breaking down. 0:13:23.080 --> 0:13:25.720 But they also need to keep in mind that non 0:13:25.800 --> 0:13:29.040 tariff measures that are harder to price in are I 0:13:29.080 --> 0:13:31.760 think having a very significant impact. I mean things like 0:13:32.600 --> 0:13:36.320 US restrictions against Wally, new US restrictions against a further 0:13:36.440 --> 0:13:40.640 set of Chinese technology companies, the tensions that we're seeing 0:13:40.640 --> 0:13:44.040 in Hong Kong. These do have significant impacts on the 0:13:44.080 --> 0:13:47.360 global economy. They just harder to price in, and I 0:13:47.360 --> 0:13:50.520 think markets may be missing that. Michael Herson, thank you 0:13:50.520 --> 0:13:53.320 so much for being with us. Michael Herson practice ahead 0:13:53.360 --> 0:13:56.480 of the China and Northeast Asian regions for eur Asia 0:13:56.480 --> 0:13:59.680 Group joining US based in New York. Definitely in the 0:13:59.679 --> 0:14:04.760 four front as these escalating tensions, yet markets just don't care. Paul, Now, 0:14:04.840 --> 0:14:07.920 the market, it disappears, as we've been discussing this morning, Lisa, 0:14:08.000 --> 0:14:10.800 really focusing on the pandemic. What stage are we in 0:14:10.840 --> 0:14:13.720 the pandemic? And I think the markets obviously looking forward 0:14:13.760 --> 0:14:16.440 a little bit and seeing some gradual reopening around the globe, 0:14:16.480 --> 0:14:18.559 including here in the United States, and that's where the 0:14:18.600 --> 0:14:21.880 bed is. Yeah, people are hoping for a world that 0:14:21.960 --> 0:14:26.160 returns to something more normal than what we've all been experiencing. 0:14:30.280 --> 0:14:32.440 One of the big stories over the past few months 0:14:32.440 --> 0:14:35.880 has been an unprecedented surge in borrowing, and that's from 0:14:35.960 --> 0:14:40.400 investment grade companies that have sold a record more than 0:14:40.440 --> 0:14:43.800 a trillion dollars of bonds so far year to date. 0:14:43.880 --> 0:14:46.520 This just raises all sorts of questions to me. Yes, 0:14:46.560 --> 0:14:49.800 their investment grade, but yes, they are adding leverage in 0:14:49.840 --> 0:14:52.040 a quest to just get as much cash onto their 0:14:52.040 --> 0:14:55.040 belt to survive through this next period. Joining us now 0:14:55.240 --> 0:14:57.560 as someone who buys some of that debt, Josh Lomier, 0:14:57.840 --> 0:15:01.160 head of North American investment grade credited Viva Investors, which 0:15:01.160 --> 0:15:04.400 oversees four hundred and thirty eight billion dollars firm wide, 0:15:04.840 --> 0:15:08.360 enjoyces from Chicago. Josh, have you been out there seeing 0:15:08.400 --> 0:15:11.480 opportunities and some of this new issuance at a time 0:15:11.640 --> 0:15:16.680 of so much uncertainty? Yeah, we really have. I mean 0:15:16.840 --> 0:15:21.160 you mentioned that over a trillion dollars of new issuance 0:15:21.240 --> 0:15:24.560 during a period of unprecedented volatility. There will always be 0:15:25.440 --> 0:15:29.520 opportunities to find value in that kind of environment. So 0:15:29.600 --> 0:15:32.040 Josh kind of give us a sense here, you know, 0:15:32.120 --> 0:15:34.800 given where we are in the credit in the economic cycle, 0:15:35.080 --> 0:15:37.400 are you concerned that risk assets have gotten a little 0:15:37.400 --> 0:15:40.080 bit ahead of themselves. I mean, it's sure to have 0:15:40.240 --> 0:15:45.480 just more and more economic pain to come across the economy. Yeah, 0:15:45.680 --> 0:15:47.600 I think you're right, And I think you know, if 0:15:47.680 --> 0:15:51.480 if we just think briefly back to the last recession, 0:15:51.480 --> 0:15:54.840 the global financial crisis, you had the first iteration of 0:15:55.440 --> 0:15:58.320 you know, wobbling of volatility around Bear Bear Stearns in 0:15:58.360 --> 0:16:00.600 the first quarter of tow that O than eight, and 0:16:00.640 --> 0:16:03.520 then you know Lehman Brothers in the in the majority 0:16:03.560 --> 0:16:05.880 of the volatility we didn't feel till the fourth quarter 0:16:05.960 --> 0:16:08.560 of two thous eight. And so I think any recession 0:16:08.720 --> 0:16:11.120 or recessionary environment is going to feel a lot more 0:16:11.160 --> 0:16:14.440 like a roller coaster. Maybe that first hills the biggest 0:16:15.000 --> 0:16:17.880 and the most scarier, perhaps, and then we we hit 0:16:18.040 --> 0:16:20.200 different peaks and valleys throughout. But I think I think 0:16:20.200 --> 0:16:23.600 we are at the early stages of this recession, and 0:16:23.640 --> 0:16:25.960 it's going to take some time to really figure out 0:16:25.960 --> 0:16:28.840 how deep the damage is done and how quickly we 0:16:28.880 --> 0:16:31.560 can recover. Well, how worried are you about the fact 0:16:31.560 --> 0:16:35.320 that companies that are worried about their futures, worried about 0:16:35.320 --> 0:16:40.240 future revenues, have started odd leverage have started to reduce, uh, 0:16:40.280 --> 0:16:43.640 this sort of emphasis on deleveraging and shoring up their 0:16:43.680 --> 0:16:47.720 balance sheets. Right now, has that affected what you decide 0:16:47.760 --> 0:16:52.000 to buy? It really does. And if you think about 0:16:52.040 --> 0:16:54.800 it right now, and this is the whole market is 0:16:54.880 --> 0:16:59.680 really just focused on ken things survive. A lot of 0:16:59.720 --> 0:17:03.160 this reaction function of just adding as much dead as 0:17:03.200 --> 0:17:05.680 they can to preserve liquidity is a is a survival 0:17:05.720 --> 0:17:08.080 technique and I just want to get through the next 0:17:08.119 --> 0:17:12.040 couple of quarters, and that's fine. But the reality is 0:17:12.040 --> 0:17:14.399 is when you do start to recover, when economies do 0:17:14.560 --> 0:17:16.800 start to open back up. Now, what we have, what 0:17:16.840 --> 0:17:18.960 we will have to worry about then is what are 0:17:19.000 --> 0:17:22.119 the second derivative impacts of all of this Because now, 0:17:22.920 --> 0:17:26.680 best case scenario, we enter a shallow recession. And when 0:17:26.720 --> 0:17:29.640 you enter a shallow recession and companies are a half 0:17:29.680 --> 0:17:32.879 a turn one turn two turned higher leverage into that 0:17:33.000 --> 0:17:36.840 slower growth shallow recession, if you start to have to 0:17:36.840 --> 0:17:39.480 worry about their ability to earn their way out of 0:17:39.520 --> 0:17:43.159 that larger hole, if you will. So, what are you 0:17:43.200 --> 0:17:46.440 are you seeing in terms of credit quality across your portfolio? 0:17:46.440 --> 0:17:49.200 We've seen a couple of bankruptcies just over the last 0:17:49.320 --> 0:17:51.480 several weeks gives a snapshot of kind of that where 0:17:51.520 --> 0:17:55.760 you think the credit quality is in the space you 0:17:55.760 --> 0:17:59.119 look at. Yeah, so there's you know, there's gonna be 0:17:59.320 --> 0:18:01.520 a lot of fit stuations where you know, we all 0:18:01.640 --> 0:18:05.640 we all can see, you know, real estate, retail sectors 0:18:05.640 --> 0:18:07.640 are some of the biggest you know, on the very 0:18:07.640 --> 0:18:11.159 front lines of this, and other sectors like telecom and 0:18:11.280 --> 0:18:15.440 cable um and certain areas of healthcare and even packaged 0:18:15.480 --> 0:18:17.880 goods where you're not really as an impact because you're 0:18:17.920 --> 0:18:20.480 actually getting some tail winds from this environment. And so 0:18:20.840 --> 0:18:24.760 what we're really thinking through is who does have who 0:18:24.840 --> 0:18:28.480 who is less impacted, who is the most impacted? And 0:18:28.560 --> 0:18:30.959 for the ones that are the most impacted, you know, 0:18:31.080 --> 0:18:33.960 you can start to steal how big of a drop 0:18:34.000 --> 0:18:35.720 in their ratings are they going to have as you 0:18:35.760 --> 0:18:40.800 start to project out significantly reduced earnings and revenues relative 0:18:40.920 --> 0:18:43.479 to these higher debt metrics. And that's kind of all 0:18:43.520 --> 0:18:45.639 the hard credit work that needs to go into making 0:18:45.680 --> 0:18:49.240 decisions in over the next two quarters. So let's talk 0:18:49.320 --> 0:18:52.120 about where you're seeing opportunities. What have you actually been 0:18:52.119 --> 0:18:54.000 buying recently? You don't I know, you don't want to 0:18:54.040 --> 0:18:57.160 talk specific securities, but if you could talk sectors, types 0:18:57.200 --> 0:19:00.560 of ratings, etcetera, that would be awesome. Yeah. I think 0:19:00.640 --> 0:19:03.720 one one important strategy we've deployed over the last couple 0:19:03.720 --> 0:19:07.520 of months is really to go down in quality into 0:19:07.600 --> 0:19:10.600 some of the sectors that we feel have been least impacted, 0:19:10.680 --> 0:19:14.480 and I mentioned some telecommon cable as as an area 0:19:14.600 --> 0:19:18.119 where that that can work, including some healthcare, and then 0:19:18.200 --> 0:19:20.480 going up in quality in some of the sectors that 0:19:20.520 --> 0:19:23.840 are most impacted, i e. In the energy space, focusing 0:19:23.840 --> 0:19:26.800 more on the high up and quality integrated companies or 0:19:27.280 --> 0:19:31.000 the stronger midstream credits where you have much more forward 0:19:31.040 --> 0:19:33.480 looking or they have more levers they can pull to 0:19:33.560 --> 0:19:36.520 reduce leverage, as well as a bit clearer cash flow 0:19:36.520 --> 0:19:39.520 guidance in the current environment for commodity prices and so 0:19:40.040 --> 0:19:42.560 kind of barbelling your risk in that regard is a 0:19:42.600 --> 0:19:47.639 way to keep some beta in your portfolio while avoiding 0:19:47.680 --> 0:19:50.320 the lowest echelons of quality and some of the most 0:19:50.440 --> 0:19:55.440 impacted sectors. What kind of returns are you looking for 0:19:55.640 --> 0:19:58.320 given the pretty significant returns that we've seen. It just 0:19:58.400 --> 0:20:03.240 gives people a perspective. So far in May investment grade 0:20:03.280 --> 0:20:06.240 bonds in the United States have returned to ten point 0:20:06.440 --> 0:20:09.960 eight percent. I mean, it's been a dramatic increase, and 0:20:10.000 --> 0:20:11.919 it's been both on the right side as well as 0:20:11.960 --> 0:20:15.399 on the credit spread size side. Is it basically a 0:20:15.480 --> 0:20:20.200 coupon clipping exercise from here? I think so. I think 0:20:20.240 --> 0:20:22.119 we've you know, if you just looked at the credit 0:20:22.160 --> 0:20:25.440 spreads on the market as a whole, it's still wider 0:20:25.480 --> 0:20:29.600 than you know, um the types we've seen even year today, 0:20:29.440 --> 0:20:32.760 by a pretty meaningful amount. And so as the market 0:20:32.800 --> 0:20:37.080 recovers longer term, you can still see value in the 0:20:37.119 --> 0:20:39.920 compression of spreads. I think rates have come down a ton, 0:20:40.359 --> 0:20:42.240 so you probably won't get as much of a kicker 0:20:42.240 --> 0:20:45.400 from a rally, and just broad interest rates and spreads 0:20:45.400 --> 0:20:48.000 are still wide, but I think spreads are more fairly 0:20:48.040 --> 0:20:51.960 and accurately reflecting the risks we still have in front 0:20:51.960 --> 0:20:54.119 of us, and so there's not going to be easy 0:20:54.200 --> 0:20:56.520 money left on the table, per se, from a spread 0:20:56.600 --> 0:21:00.320 compression perspective or a yield drop perspective. And so now 0:21:00.680 --> 0:21:02.800 we're back in that period where things might be fair 0:21:02.920 --> 0:21:07.440 more fairly valued with lots of uncertainty, and the expectation 0:21:07.520 --> 0:21:09.680 is we're going to see some more volatility here over 0:21:09.720 --> 0:21:12.240 the next coming quarters. So, Josh, I know, again you 0:21:12.240 --> 0:21:15.280 don't want to talk about individuals individual securities, but Macy's 0:21:15.400 --> 0:21:17.960 is just out with some news does they're gonna try 0:21:17.960 --> 0:21:20.280 to tap the markets for one point one billion dollars 0:21:20.280 --> 0:21:23.200 and they're going to use their real estate as collateral. 0:21:23.240 --> 0:21:25.639 What do you think of that structure? Is that is 0:21:25.680 --> 0:21:28.119 that something that's common for the retail space or is 0:21:28.119 --> 0:21:33.080 this something unique reflecting very unique times. I think it's 0:21:33.200 --> 0:21:37.200 unique because it might not be that uncommon for high 0:21:37.240 --> 0:21:40.760 yield or leveraged credits, but for investment grade credits, it's 0:21:40.840 --> 0:21:43.240 clearly a lot less common. And I think this is 0:21:43.320 --> 0:21:46.159 kind of back to that point we talked about earlier 0:21:46.160 --> 0:21:49.320 around companies in survival mode, and one of the biggest 0:21:49.440 --> 0:21:53.480 risks to unsecured deadholders, which are most of the investment 0:21:53.520 --> 0:21:56.760 grade bonds out there, are the ability of credits when 0:21:56.800 --> 0:22:00.280 they do see periods of stress to prime your debt, 0:22:00.600 --> 0:22:02.919 which what what that means is put secured debt in 0:22:02.960 --> 0:22:05.879 front of your unsecured debt. And so what that means 0:22:06.000 --> 0:22:08.360 is if this, if this works, if this ends up 0:22:08.359 --> 0:22:10.920 working out for someone like Maze's, it gets them through 0:22:10.960 --> 0:22:14.080 this crisis so that they can grow at some point 0:22:14.080 --> 0:22:16.639