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Speaker 1: Hello, and welcome to The Credit Edge, a weekly markets podcast.

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Speaker 1: My name is James Crumbie. I'm a senior editor at Bloomberg.

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Speaker 1: This week, we're very pleased to have back on the

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Speaker 1: show Scott Carpenter, who covers structured finance at Bloomberg News

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Speaker 1: in New York. How are you, Scott?

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Speaker 2: A very good James, thanks for having me.

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Speaker 1: Very excited to get your take on the markets. Thanks

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Speaker 1: so much for joining. We're also delighted to welcome back

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Speaker 1: Arnold Kakuda, a credit analyst with Bloomberg Intelligence in New York.

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Speaker 1: And we have a surprise extra guest coming up.

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Speaker 2: CJ.

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Speaker 1: Maloney at Bok Financial. He's an authority on mortgage backed

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Speaker 1: securities markets.

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Speaker 2: So do stay with us.

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Speaker 1: But first, Scott Carpenter with Bloomberg News, you're all over

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Speaker 1: the mortgage bond market at the moment. It's worth about

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Speaker 1: eight trillion dollars. There are a lot of pressure. It's

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Speaker 1: a market meltdown that has significant implications for anyone who

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Speaker 1: owns a house, so we should all be paying a

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Speaker 1: lot more attention to it. But before we get into

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Speaker 1: the current route, just let's talk through what these bonds are. It'scott,

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Speaker 1: how are they, how do they work?

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Speaker 2: What are they sure? A mortgage bond is essentially a

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Speaker 2: big pool of thousands of mortgages. There's a very good

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Speaker 2: chance that if you bought home recently using a mortgage,

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Speaker 2: that your mortgage would end up in one of these bonds,

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Speaker 2: which means that when you make your mortgage payment, that

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Speaker 2: payment is filtered through and ultimately goes to pay the

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Speaker 2: investors who bought the bonds, and they're trading around in

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Speaker 2: financial markets. It's a huge market, as you mentioned, eight

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Speaker 2: trillion dollars, and it's I think it's large. It's it's

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Speaker 2: not as big as the treasury market, but it's one

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Speaker 2: of the biggest, most liquid markets that there is.

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Speaker 1: So essentially these are just the repackaging of family home loans.

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Speaker 2: Is that right? That's it, That's right, That's what there

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Speaker 2: is to it.

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Speaker 3: Yep.

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Speaker 1: So why are they under so much pressure at the moment?

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Speaker 1: There's been a huge sell off of spreads of very wide,

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Speaker 1: I mean the widest since what two thousand and seven.

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Speaker 1: Things are just falling apart very quickly. Why is it happening?

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Speaker 2: No, sounds bad, doesn't it. It's happening now because of

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Speaker 2: what's happening in the treasury market. Treasury yields have gone

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Speaker 2: up a lot. I think they are now by some measures,

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Speaker 2: a highest since two thousand and seven. And the mortgage

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Speaker 2: bond market trades very closely the treasury market. And one

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Speaker 2: thing that the mortgage bond market does not like is volatility.

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Speaker 2: Very sensitive to volatility, and anytime autility goes up, which

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Speaker 2: is exactly what's happened recently, mortgage bonds react accordingly. And

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Speaker 2: they they have an additional risk against treasuries, and that

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Speaker 2: risk has essentially gone up, so they followed treasuries, and

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Speaker 2: then the risk has been a little bit on top

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Speaker 2: of that as well.

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Speaker 1: You know, it's funny we spent most of the summer

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Speaker 1: hearing about soft landing, inflation coming down, and maybe even

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Speaker 1: rate cuts starting soon. That all seems to have been

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Speaker 1: thrown right out the window in the last few days,

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Speaker 1: and now we're hearing big investors and analysts talking about

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Speaker 1: a US tenure yield above six percent, which you know,

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Speaker 1: compares to less than four point eight percent today. You know,

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Speaker 1: even today's level is about where we were in two

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Speaker 1: thousand and seven. So rates going higher, which people expect now,

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Speaker 1: that's got to hurt anything with duration. Does that mean

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Speaker 1: more pain in the mortgage market.

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Speaker 2: Yep, I think it does. I think it does, you know,

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Speaker 2: and things could very well get better from here. But

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Speaker 2: it's funny because for a long time, for the last

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Speaker 2: few last well, you know, weeks, maybe a couple of

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Speaker 2: months now, everybody has been saying, buy mortgage bonds. They're amazing,

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Speaker 2: they're screaming cheap. And they you know, they certainly were.

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Speaker 2: They certainly were screaming cheap. It's just that they seem

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Speaker 2: to have now gotten even cheaper. And you know, the

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Speaker 2: idea was that rates, long term rates would stabilize, and

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Speaker 2: once that happened, volatility would go down and mortgage bonds

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Speaker 2: would turn out to be this amazing investment. And that

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Speaker 2: hasn't happen. It hasn't happened yet. It could still happen,

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Speaker 2: but this latest bout of volatility rising yields has spoiled

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Speaker 2: the party for those.

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Speaker 1: People underlying this market. Though there's a bunch of housing

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Speaker 1: debt people take out alone to buy a home. As

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Speaker 1: we discussed, the debt is cured by a property. Everyone

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Speaker 1: needs somewhere to live. It's the last payment you'll stop

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Speaker 1: when times get tough, so it should be a pretty

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Speaker 1: safe bet, right, I mean, why isn't this doing much better?

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Speaker 1: We don't expect defaults, do we.

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Speaker 2: Yeah, it's a good point. There's two ways there. That

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Speaker 2: One way is that this is a completely safe market.

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Speaker 2: From one perspective. You're if you invest in a mortgage bond,

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Speaker 2: you are going to get your money back, you know,

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Speaker 2: virtually a guarantee on that, and that's because it's guaranted.

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Speaker 2: It's guaranteed by Fannie May and Freddy Mac, which are

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Speaker 2: very closely linked to the governments. Essentially, you've got a

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Speaker 2: guarantee I'm going to get your money back. But there

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Speaker 2: is another kind of risk, which is interest to rate risk.

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Speaker 2: You're going to get your money back, the question is

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Speaker 2: how soon are you going to get your money back?

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Speaker 2: And are you going to miss out on other trades.

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Speaker 2: Another important thing to keep in mind here is that

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Speaker 2: you know, we're talking about this kind of blow up

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Speaker 2: recently in mortgage bonds, but this is not like what

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Speaker 2: happened in two thousand and eight. These are generally speaking,

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Speaker 2: you know, prime mortgages or mortgages. These are bonds backed

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Speaker 2: by people who are going to pay their mortgages. There's

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Speaker 2: there's little risk of that. What happened in two thousand

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Speaker 2: and eight was we had subprime mortgages and a lot

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Speaker 2: of people ended up not paying those mortgages, and that

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Speaker 2: caused a genuine crisis for the mortgage bond market. Today,

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Speaker 2: there really is, you know, not much of the old

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Speaker 2: subprime mortgage market left. There's been a lot of regulatory changes,

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Speaker 2: so this is a this is very different market. It's

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Speaker 2: much safer, but there are still risks, and those risks

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Speaker 2: are closely related to interest rates and what's happening in

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Speaker 2: treasury market.

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Speaker 1: But essentially paper losses, you're not actually going to lose principle.

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Speaker 1: I mean it seems like that, you know, if the

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Speaker 1: market goes down, you should just buy some more. Right,

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Speaker 1: means there not a big opportunity for some people.

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Speaker 2: Yeah, there may well be a really big opportunity here.

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Speaker 2: I think that's another thing we have to report on that. Essentially,

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Speaker 2: you know, we've been hearing for a while from people

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Speaker 2: that as soon as volatility stops, as soon as the

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Speaker 2: Federal Reserve stops hiking interest rates, suddenly the outlook is

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Speaker 2: going to change. You know, long term yields will stabilize,

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Speaker 2: spreads will come down and prices of bonds that you

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Speaker 2: bought will go up, and we're going to keep reporting

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Speaker 2: and see what happens.

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Speaker 1: Are we seeing any signs of contagion to other markets,

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Speaker 1: I mean, these other parts of structured finance, will credit

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Speaker 1: getting hit.

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Speaker 2: The other parts of structured finance don't react as quickly

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Speaker 2: to what's happening in treasuries and mortgages, so we're gonna

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Speaker 2: see I mean, I've heard people say that to people

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Speaker 2: in the markets earlier this week, used the word heavy

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Speaker 2: to describe what's happening in asset backed securities markets. In short,

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Speaker 2: I don't think it's anything to worry about. It just yeah,

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Speaker 2: this is the mortgage market is very sensitive, and so

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Speaker 2: that's where we've seen this volatility hit recently.

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Speaker 1: So we're not seeing signs of investors taking losses on

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Speaker 1: their mortgage portfolio and having to sell other assets to

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Speaker 1: cover those losses.

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Speaker 2: Nope, I don't think so. I mean I think that,

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Speaker 2: you know, when we have big changes in rates like this,

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Speaker 2: it does cause some portfolio managers maybe to have to

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Speaker 2: make a few changes, But so far, I don't think

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Speaker 2: that we've seen any anything like that.

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Speaker 1: And for the people out there that want to buy

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Speaker 1: a new home and get a mortgage, you know, rates

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Speaker 1: arolreaty sky high. Does this make things worse for them?

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Speaker 2: Unfortunately? I think it does the more. When you get

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Speaker 2: a mortgage, you're essentially being you know, you're getting it

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Speaker 2: from a company that ultimately is going to fund itself,

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Speaker 2: a company or a bank that's going to have to

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Speaker 2: fund that mortgage by selling it in the market. And

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Speaker 2: if it now has to sell it in the market

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Speaker 2: inside of a bond with higher rates, it's going to

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Speaker 2: have to it's going to have to charge more money

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Speaker 2: to you when you get the mortgage to compensate. So,

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Speaker 2: you know, I think mortgage rates are now the highest

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Speaker 2: since around the year two thousand and eventually that will

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Speaker 2: start to change, but not just yet, and we may

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Speaker 2: have a little bit more room to go for higher

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Speaker 2: mortgage rates yet.

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Speaker 1: So before we talk to other guests, Scott, what else

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Speaker 1: is on your radar? What else should we be looking

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Speaker 1: out for instructed finance right now?

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Speaker 2: Well, we're always looking at what's happening with commercial mortgage

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Speaker 2: backed securities also known as CMBs. One reason why everybody

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Speaker 2: is watching this is because offices are a big office

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Speaker 2: buildings are a big part of CMBs. I think they're

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Speaker 2: if I remember, there's something they can be between twenty

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Speaker 2: five of the typical CMBs. And nobody knows what the

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Speaker 2: future of offices is yet, even you know what was

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Speaker 2: it now? Three two years after the start of pandemic

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Speaker 2: and the work from home revolution that that began, nobody

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Speaker 2: really knows. Nobody's selling offices. They're afraid to sell because

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Speaker 2: nobody knows what the price is. It's definitely lower than

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Speaker 2: what it used to be, but nobody knows where it

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Speaker 2: is yet. And this is causing big questions for commercial

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Speaker 2: mortgage backed securities. So I think there's going to be

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Speaker 2: something happening there soon. But we're we're all just watching

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Speaker 2: very closely.

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Speaker 1: Great stuff it's up into from Bloomberg News. Thank you

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Speaker 1: so much for joining us. Thanks very much. Read all

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Speaker 1: of Scott's scoops on the Bloomberg terminal and of course

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Speaker 1: at Bloomberg dot com. It's a huge developing story real

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Speaker 1: estate debt definitely want to watch, so keep an eye

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Speaker 1: on it now. As I mentioned earlier, we have a

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Speaker 1: very special guest, a former colleague and all round great guy, CJ.

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Speaker 1: Maloney Mortgage strategists at Bok Financial. How are you doing, CJ.

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Speaker 4: I'm doing well, James, Thank you.

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Speaker 1: We are really delighted to have you on the show.

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Speaker 1: And right now there's a big move going on in

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Speaker 1: the mortgage market, so that's why we wanted to get

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Speaker 1: your insight what is going on and why now?

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Speaker 4: Ah, well, right now, what's pushing down mortgage bonds themselves?

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Speaker 4: I think is a confluence of a couple of things.

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Speaker 4: You have rising volatility, which is never favorable to mortgages,

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Speaker 4: and we're in the middle of a bare steepening now

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Speaker 4: those two right now, they're really a function of the

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Speaker 4: Fed's hard stance on getting back to the two percent

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Speaker 4: inflation target. Took Powell and pals a while, but people

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Speaker 4: have finally come around to believe them that when they

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Speaker 4: say they're going to maintain tight policy and they're going

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Speaker 4: to get back to the two percent inflation target, they

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Speaker 4: mean what they say. So if you look at FED

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Speaker 4: funds futures markets, for example, not too long ago, we

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Speaker 4: were pricing in four and a half five rate cuts

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Speaker 4: last year. Now we're pricing in I believe two to

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Speaker 4: three at the most. And the Fed officials have an adamant.

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Speaker 4: We are not cutting rates anytime soon. We're going to

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Speaker 4: be higher for longer. I believe them for quite some time.

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Speaker 4: And now the investors broadly speaking have come to terms

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Speaker 4: with that, and that's why we're repricing now.

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Speaker 1: Just a quick jugger alertly, you said bearsteepness. Some people

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Speaker 1: might not know what that's is.

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Speaker 5: Can you tell us three?

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Speaker 4: When the yields are rising across the spectrum of the

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Speaker 4: treasury curve, but long end yields are rising faster than

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Speaker 4: short end yields. Now, the curve is still inverted if

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Speaker 4: you look at the two to ten part of the curve,

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Speaker 4: but it's been steepening. It's gone from about it was

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Speaker 4: around eighty to ninety basis points two to three months

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Speaker 4: ago and it's currently around thirty. That's the bear steepener

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Speaker 4: that hurts longer duration assets more than it does shorter

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Speaker 4: duration assets.

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Speaker 1: Basically duration. That's just the sensitivity of the price to

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Speaker 1: the interest rate change, right.

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Speaker 4: That is absolutely correct. The longer your duration of your portfolio,

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Speaker 4: the more sensitive it is to rising rates. Now, I

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Speaker 4: expect this to keep going on. I foresee a treasury

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Speaker 4: ten year yield in the five to five and a

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Speaker 4: quarter percent range by the end of the first quarter,

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Speaker 4: and I expect thirty year lending rates to be in

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Speaker 4: the eight to eight and a half percent range also

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Speaker 4: by the end of the first quarter. That's assuming of

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Speaker 4: us with the Fed holed steady and resists all the

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Speaker 4: political pressure, it undoubtedly will come upon him to begin

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Speaker 4: to ease again. But if you look for the last

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Speaker 4: inflationary episode from nineteen seventy seven to nineteen eighty three,

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Speaker 4: both the two year and the ten year treasuries average

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Speaker 4: yield was about two hundred and twenty five basis points

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Speaker 4: above your year over year CPI run rate. I expect

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Speaker 4: CPI to fought around three point two to three percent

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Speaker 4: by the end of the year, and so the two

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Speaker 4: and ten years should be in the five to five

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Speaker 4: in a quarter excuse me, the ten year should be

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Speaker 4: in the five top five and a quarter percent range

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Speaker 4: by then.

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Speaker 1: So, as I mentioned earlier, you know, we spent a

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Speaker 1: lot of the summer hearing about soft landing, inflation coming down,

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Speaker 1: and maybe even rate cuts starting soon. That all seems

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Speaker 1: to be thrown out the window very very quickly, just

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Speaker 1: over the last few days and weeks.

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Speaker 4: And what changed, Well, again, Marlea. You look at prices

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Speaker 4: across anything, no matter what market you're looking at, and

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Speaker 4: in this case we're talking about securities markets. You ask yourself,

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Speaker 4: what is a price? A price is a reflection of

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Speaker 4: people's opinions. Opinions can change very quickly, and that's what

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Speaker 4: happened with people finally coming to terms with the fact

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Speaker 4: that the Fed means what it says. Now they've increased

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Speaker 4: the FED funds target five hundred and twenty five basis

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Speaker 4: points in about a year and a half at this point,

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Speaker 4: which is a historically aggressive tightening stance. But remember that

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Speaker 4: followed a historically aggressive easing stance, So you know people

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Speaker 4: have finally come to terms with that. But overall, if

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Speaker 4: I look at mortgages right now, mortgages look very cheap

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Speaker 4: on a relative basis, and all investing is a relative

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Speaker 4: value play. They look cheap to investment grade corporates on

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Speaker 4: both a Z spread and an oas basis. And the

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Speaker 4: good thing about mortgages they have absolutely no credit risk

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Speaker 4: to them. So if you're on team recession, you think

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Speaker 4: we're going to see a recession in the next year.

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Speaker 4: If you look back to two thousand and seven, two

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Speaker 4: thousand and eight. During those are the Great Financial Crisis,

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Speaker 4: mortgages handily beat investment grade credits and term of excess return.

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Speaker 4: People looking at the soft landing, they were celebrating it,

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Speaker 4: and I was saying, it was way too early. When

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Speaker 4: you tighten monetary policy, it tends to take between twelve

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Speaker 4: to eighteen months before the tightening really begins to bite.

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Speaker 4: So I didn't understand why people were celebrating the soft

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Speaker 4: landing so quickly. We're still in the very early innings

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Speaker 4: of that game, so to speak. We're arriving at eighteen

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Speaker 4: months since the FED started tightening in March of twenty

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Speaker 4: twenty two. So going forward, starting now, I think we're

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Speaker 4: going to start to see the tightening and policy take effect.

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Speaker 4: If you look at the money supply and all inflation

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Speaker 4: as a monetary phenomenon, m two has dropped year over

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Speaker 4: year for nine reports in a row. It's down about

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Speaker 4: six percent overall the US money supply since it reached

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Speaker 4: a record peak in March a twothy twenty two. That

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Speaker 4: will also put downward pressure on prices. And by prices,

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Speaker 4: I don't mean just consumer prices, I mean price is

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Speaker 4: broadly speaking, in securities markets, too. Now. I think the

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Speaker 4: largest risk right now to both mortgages and markets in

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Speaker 4: general is the chance of a renewed easy monetary policy

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Speaker 4: by the Fed, especially another quantitative easing round. You know,

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Speaker 4: the price distortions from all the quis we've had up

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Speaker 4: to now are bad enough. We don't need more. We

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Speaker 4: need prices to reflect reality, not the hopes and wishes

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Speaker 4: of policy makers. That I consider the largest risk of

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Speaker 4: the market right now. I hope Powell has the political

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Speaker 4: courage to see this thrill like Vulca do.

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Speaker 1: But just going back to the mortgage move we've seen

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Speaker 1: that's got nothing to do with the underlying mortgages then, right,

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Speaker 1: I mean, there isn't a big default wave, there's not

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Speaker 1: a problem with quality, there's not a big meltdown in

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Speaker 1: terms of the underlying loans. It's just the technicals of

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Speaker 1: the treasury move.

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Speaker 4: Well, that's correct, that techno the market. More broadly speaking,

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Speaker 4: with rising yiels, if you look at the mortgage market,

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Speaker 4: the big difference between the latest boom housing boom we've

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Speaker 4: had over the past three years compared to the Great

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Speaker 4: Financial Crisis the lead up to that is back in

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Speaker 4: the earlier part of this millennium leading up to the

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Speaker 4: Great Financial Crisis, anybody who could fog a mirror was

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Speaker 4: given a mortgage. Credit standards deteriorated this go round. Mortgage

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Speaker 4: lenders should be paddled on the back. They tightened credit.

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Speaker 4: They kept credit standards very, very tight, and if you

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Speaker 4: look now, people who were in their houses deserved to

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Speaker 4: be in their houses. I called this latest housing room

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Speaker 4: boom the rich man's housing boom. So if you look

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Speaker 4: where most of the increase in supply came from, both

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Speaker 4: on the refinance and the purchase side. For mortgages, it

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Speaker 4: was your better quality borrowers could put twenty percent down

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Speaker 4: that high credit ratings, and that's the way the housing

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Speaker 4: market should work. If we learned anything from the Great

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Speaker 4: Financial Crisis, it's that putting people into homes they really

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Speaker 4: can't afford, that's not progressive. It's actually a form of cruelty.

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Speaker 4: They say, there's nothing worse than losing your house the foreclosure.

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Speaker 4: But right now I look at the mortgage market, and

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Speaker 4: in terms of credit standards, I don't see delinquencies rising

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Speaker 4: or spiking so far, knock on wood, It's not something

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Speaker 4: that at the moment is a concern because we kept

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Speaker 4: standards tight throughout the whole boom.

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Speaker 1: Generally, though, when you see a market tank like this

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Speaker 1: for technical reasons but the fundamentals are pretty solid, it

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Speaker 1: is a screaming buy. Is that what you're telling clients again?

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Speaker 4: In terms of your relative All investing has said before

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Speaker 4: is relative value. You know, you can never predict the

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Speaker 4: future with absolute certainty. But if I had to make

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Speaker 4: my choice between various sectors right now, I do like

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Speaker 4: the mortgage market due to its about both the supplied

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Speaker 4: demand fundamentals, the lack of credit risk, and the fact

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Speaker 4: that on a relative value basis, it looks so cheap

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Speaker 4: to its main competitors, which are IG corporates and treasury bonds.

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Speaker 4: If we look within the mortgage sector itself, I've been

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Speaker 4: telling clients to stay short. You have thirty year mortgages

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Speaker 4: or your most popular mortgages, but you also have shorter

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Speaker 4: maturity mortgage. It's a ten year, fifteen year, twenty year.

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Speaker 4: We've been seeing a lot of interest in that paper

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Speaker 4: over the last i'd say three weeks. The fifteen year

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Speaker 4: mortgages are handily outperforming the thirty year mortgages because they

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Speaker 4: have a shorter duration profile. I do like the shorter

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Speaker 4: duration profile of those type of mortgages. I think they

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Speaker 4: make for a good port of storm if you think

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Speaker 4: of recession is near.

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Speaker 1: CJ. Maloney, veteran mortgage stretches from BOK Financial. Thank you

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Speaker 1: so much for joining us.

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Speaker 4: Thank you for having me.

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Speaker 5: James.

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Speaker 4: Good to hear from you.

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Speaker 1: We look forward to seeing you back on the show

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Speaker 1: very soon. I'm delighted to welcome back on the Credit

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Speaker 1: Edge Arnold Kakuda, who covers banks for Bloomberg Intelligence based

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Speaker 1: in New York.

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Speaker 2: How are you, Arnold?

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Speaker 5: I'm doing great. Thanks for having me so.

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Speaker 1: We've talked a lot about financial institutions this year. Our

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Speaker 1: March edition of the Banking Crisis Podcast was very popular.

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Speaker 1: Thanks very much for being there to break it all

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Speaker 1: down for us. At that time, a very large global,

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Speaker 1: systemically important institution, Credit Sweee, went bust and we lost

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Speaker 1: a handful of regional US banks. Since then, we seem

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Speaker 1: to have bounced back. Credit markets have been fairly buoyant.

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Speaker 1: Bank debt has performed well. The eighty one market seems

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Speaker 1: fully recovered. But what's the situation now, Arnold? How robust

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Speaker 1: is the banking sector? There are lots of storm clouds

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Speaker 1: on the horizon, not least a US recession, which Bloomberg

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Speaker 1: Economics expects will happen this year. Should we fear another

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Speaker 1: crisis in banking?

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Speaker 5: That's a great question.

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Speaker 3: You know, the way these risk free rates are going

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Speaker 3: right now with the treasury yields, I think I think

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Speaker 3: the market is definitely concerned. When you know the risk

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Speaker 3: free rate ten year thirty year treasury is going up

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Speaker 3: to five percent ish, right, then what is that? The

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Speaker 3: implications to the rest of the risk world is not good?

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Speaker 3: And if you remember what happened, what worried people in

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Speaker 3: the March, you know, May timeframe, was all these unrealized

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Speaker 3: losses on bank balance sheets and that was from you know,

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Speaker 3: higher rates. And you know over the past few weeks

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Speaker 3: months we've had higher rates.

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Speaker 5: So these these.

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Speaker 3: Unrealized losses will will increase again, and I think that's

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Speaker 3: why you're seeing a bit of a sell off in

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Speaker 3: bank stocks and bonds.

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Speaker 1: So sorry, by unrealized losses, you're talking about the high

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Speaker 1: duration bonds that they have on the balance sheet, Is that, yeah.

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Speaker 5: Or any duration?

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Speaker 3: Right? Like, you know, the the sell off is more

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Speaker 3: pronounced on the longer end, So this would be kind

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Speaker 3: of hell embedded in their health to maturity portfolio, which.

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Speaker 5: It's never marked to market.

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Speaker 3: But you know, the new regulation is for regional banks

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Speaker 3: to start recognizing these unrealized losses and they're available for

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Speaker 3: sale portfolios, which is more on the front end, right

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Speaker 3: like any anywhere from like one to five end, and

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Speaker 3: so altho. Although there's still been a horizon rates in

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Speaker 3: that part of the portfolio, it hasn't been as pronounced

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Speaker 3: in the health and maturity right, but still the marks

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Speaker 3: aren't going to look that great at the end of

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Speaker 3: this quarter, at the end of September, and it's it's

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Speaker 3: gotten even a little bit more worse in the first

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Speaker 3: few days of October.

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Speaker 1: Okay, but let's go back to higher rates. I mean

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Speaker 1: in terms of the impact on balance sheets. Obviously they

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Speaker 1: you know, what they're holding with duration, that suffers, but

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Speaker 1: banks make more money off high rate certainly in the

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Speaker 1: initial phases.

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Speaker 3: Yes, you know, it seems like the asset repricing has

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Speaker 3: has already happened. Or in terms of some of the

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Speaker 3: commercial loans which are are are you know the levers

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Speaker 3: loan market, right, so they they go to a front

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Speaker 3: end so for plus rate. So so that part of

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Speaker 3: the market has largely stabilized, right, given maybe we'll have

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Speaker 3: one more hike or or rate hikes have largely ended.

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Speaker 3: But but now now it seems like the it's the

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Speaker 3: deposit costs that are really rising a lot. That that's

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Speaker 3: really it happens on a lag. So, you know, it

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Speaker 3: seems like a lot of the the assets asset yield

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Speaker 3: positive benefits have already passed through and then now now

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Speaker 3: they're really uh coping with the liabilities the deposits.

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Speaker 5: Banks need to pay up to retain these.

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Speaker 3: Deposits, and and so that interest income still good, but

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Speaker 3: not as good as you know the past few quarters.

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Speaker 1: Okay, got it. So I've been reading your research on

437
00:24:51,640 --> 00:24:54,600
Speaker 1: the terminal. You do a lot on the impact of

438
00:24:54,680 --> 00:24:58,440
Speaker 1: Basil three. For those not familiar, can you just tell

439
00:24:58,480 --> 00:25:00,640
Speaker 1: us in simple terms what that's is and what matter

440
00:25:00,760 --> 00:25:01,040
Speaker 1: is now?

441
00:25:02,280 --> 00:25:07,400
Speaker 3: Okay, So BASIL and the Financial Stability Board that they're

442
00:25:07,640 --> 00:25:10,600
Speaker 3: they're kind of like the global regulators, and they put

443
00:25:10,600 --> 00:25:14,480
Speaker 3: out these standards and Basil three endgame is is the

444
00:25:14,600 --> 00:25:20,840
Speaker 3: US implementation of these Basil equity or capital requirements. And

445
00:25:20,920 --> 00:25:22,879
Speaker 3: the US has been kind of a bit delayed in

446
00:25:22,960 --> 00:25:24,240
Speaker 3: terms of laying this all out.

447
00:25:24,359 --> 00:25:25,400
Speaker 5: So it's it's a.

448
00:25:25,320 --> 00:25:28,600
Speaker 3: Bit ironic where we had a banking crisis this year

449
00:25:28,640 --> 00:25:33,199
Speaker 3: and the biggest uh, you know, globally systemically important US banks,

450
00:25:33,560 --> 00:25:37,199
Speaker 3: they did phenomenally well during this regional bank crisis, and

451
00:25:37,280 --> 00:25:40,400
Speaker 3: yet this new regulation hits, which is this basal three

452
00:25:40,520 --> 00:25:43,800
Speaker 3: end game and lo and behold, it's the biggest US

453
00:25:43,880 --> 00:25:46,920
Speaker 3: banks that need to hold a lot more capital or equity.

454
00:25:47,000 --> 00:25:49,640
Speaker 3: So a lot of people are scratching their heads. And

455
00:25:49,840 --> 00:25:53,240
Speaker 3: not only that, the federal serve has gold plated, which

456
00:25:53,280 --> 00:25:57,960
Speaker 3: means kind of implementing standards even above what this global

457
00:25:58,000 --> 00:26:02,159
Speaker 3: regulator has implemented. So you know, a lot of people

458
00:26:02,200 --> 00:26:06,879
Speaker 3: in the industry are pushing back a bit against some

459
00:26:06,920 --> 00:26:09,800
Speaker 3: of these regulations that will come into play, and you know,

460
00:26:10,000 --> 00:26:12,520
Speaker 3: they might have a decent chance of rolling back some

461
00:26:12,560 --> 00:26:15,760
Speaker 3: of this stuff because even the regulators, they didn't unanimously

462
00:26:15,880 --> 00:26:19,199
Speaker 3: vote this stuff through on the proposal. So you know,

463
00:26:19,480 --> 00:26:23,080
Speaker 3: I think usually I'm a stickler for you know, you know,

464
00:26:23,160 --> 00:26:25,119
Speaker 3: higher regulation and this and that, but I think in

465
00:26:25,160 --> 00:26:28,080
Speaker 3: this case, I actually do have to side with the

466
00:26:28,400 --> 00:26:31,640
Speaker 3: banking industry a bit where things seem to have gone

467
00:26:31,640 --> 00:26:33,919
Speaker 3: a little bit overboard, at least so far.

468
00:26:33,960 --> 00:26:36,639
Speaker 1: In the p but in really simple terms though, on

469
00:26:37,800 --> 00:26:41,239
Speaker 1: the basil three end game, I mean it sounds like

470
00:26:41,280 --> 00:26:44,120
Speaker 1: a I don't know that Donald Schwartz a niggive film.

471
00:26:44,160 --> 00:26:48,240
Speaker 1: But what does it mean? In real terms? It means

472
00:26:48,280 --> 00:26:50,760
Speaker 1: like the banks just have to hold more cash to

473
00:26:51,160 --> 00:26:54,399
Speaker 1: to to whether the storm. If there is a storm, well.

474
00:26:54,200 --> 00:26:54,920
Speaker 5: It's it's more.

475
00:26:55,000 --> 00:26:58,679
Speaker 3: Yeah, banks need to hold more equity, and basically that

476
00:26:58,760 --> 00:27:02,440
Speaker 3: means for water activity that they already do. Let's say

477
00:27:02,440 --> 00:27:05,680
Speaker 3: take a JP Morgan based on the current requirements that

478
00:27:05,800 --> 00:27:08,760
Speaker 3: it seems like they have they have thirty billion, about

479
00:27:08,760 --> 00:27:13,159
Speaker 3: thirty billion of extra equity above what they need, but

480
00:27:13,200 --> 00:27:16,280
Speaker 3: then with the basil endgame, it would look like they

481
00:27:16,280 --> 00:27:19,840
Speaker 3: have a thirty billion deficit. So basically that means banks

482
00:27:19,840 --> 00:27:23,560
Speaker 3: need to hold more equity. Banks always try to target

483
00:27:23,640 --> 00:27:28,760
Speaker 3: a return on equity above ten percent. So if you're

484
00:27:28,800 --> 00:27:34,320
Speaker 3: taxing whatever activity or you know, trading activity or loans more,

485
00:27:35,040 --> 00:27:38,600
Speaker 3: that means the banks either have to raise prices or

486
00:27:38,720 --> 00:27:42,280
Speaker 3: they get out of certain businesses right if they become

487
00:27:42,400 --> 00:27:45,399
Speaker 3: just too onerous to be in if they can't earn

488
00:27:45,440 --> 00:27:47,840
Speaker 3: that return on equity above ten percent.

489
00:27:48,680 --> 00:27:50,800
Speaker 1: So, as you say, the big banks were very resilient.

490
00:27:50,800 --> 00:27:53,600
Speaker 1: They may be even benefited from the regional banking crisis,

491
00:27:53,640 --> 00:27:56,120
Speaker 1: But why are they being pushed hardest in this latest

492
00:27:56,920 --> 00:27:57,840
Speaker 1: regulatory round.

493
00:27:58,359 --> 00:28:02,960
Speaker 3: Yeah, it seems like the I think a good quote

494
00:28:03,040 --> 00:28:07,480
Speaker 3: came from Jamie Diamond, where you know, it's all the

495
00:28:07,480 --> 00:28:10,399
Speaker 3: the non bank financing that that that's gonna win. It's

496
00:28:10,440 --> 00:28:14,000
Speaker 3: all these alternative or private credit. If the regulators are

497
00:28:14,040 --> 00:28:18,119
Speaker 3: looking to push out, you know, lending activity out of

498
00:28:18,119 --> 00:28:20,399
Speaker 3: the banking system, they've done a great job. So I

499
00:28:20,720 --> 00:28:25,439
Speaker 3: think it's it's a bit you know, perhaps short sighted

500
00:28:25,800 --> 00:28:29,000
Speaker 3: where you're you're taxing. I guess the regulators are trying

501
00:28:29,000 --> 00:28:31,800
Speaker 3: to account for the riskiness of loans and kind of

502
00:28:31,800 --> 00:28:35,840
Speaker 3: standardize it across the globe to have the same risk

503
00:28:35,880 --> 00:28:41,720
Speaker 3: weight standards. But if it becomes so expensive or owners

504
00:28:41,720 --> 00:28:44,520
Speaker 3: for banks to make certain kinds of loans, that will

505
00:28:44,600 --> 00:28:47,800
Speaker 3: shift out of the banking system which is regulated, towards

506
00:28:47,880 --> 00:28:53,240
Speaker 3: the non regulated private credit sector, which is ballooning right.

507
00:28:53,440 --> 00:28:57,640
Speaker 3: And so I think he does have some merit when

508
00:28:57,640 --> 00:29:00,640
Speaker 3: he talks about oh KKR and the Blackstone are dancing

509
00:29:00,640 --> 00:29:04,160
Speaker 3: in the streets without all this regulation. So I think

510
00:29:04,360 --> 00:29:06,920
Speaker 3: the intentions are good on the regulators to try to

511
00:29:06,920 --> 00:29:11,480
Speaker 3: make the banking system safe. But if it becomes so unprofitable,

512
00:29:11,600 --> 00:29:15,080
Speaker 3: or if the banks can earn an appropriate return, then

513
00:29:15,280 --> 00:29:18,160
Speaker 3: they'll either get out of it that business, or do

514
00:29:18,280 --> 00:29:21,240
Speaker 3: less of it, or raise prices in that business.

515
00:29:21,360 --> 00:29:21,520
Speaker 5: Right.

516
00:29:21,560 --> 00:29:24,200
Speaker 3: And and really the winners I think are this these

517
00:29:24,240 --> 00:29:28,200
Speaker 3: alternative credit firms, which which are saying, oh great, you know,

518
00:29:28,600 --> 00:29:31,560
Speaker 3: more business coming our way because it's getting more owners

519
00:29:31,640 --> 00:29:34,200
Speaker 3: for the banks to do certain kinds of activity.

520
00:29:34,680 --> 00:29:36,840
Speaker 1: Yeah, we're definitely seeing a ton of interest in private

521
00:29:37,120 --> 00:29:39,479
Speaker 1: debt across the board, and everyone's very excited about that,

522
00:29:39,880 --> 00:29:41,560
Speaker 1: although a ton of dry powder and you know, not

523
00:29:41,800 --> 00:29:44,520
Speaker 1: a huge amount of deals yet. I just want to

524
00:29:44,560 --> 00:29:46,720
Speaker 1: ask you also about investment banking. You know, we've seen

525
00:29:46,880 --> 00:29:50,200
Speaker 1: debt and equity issues pretty slow this year, as you know,

526
00:29:50,320 --> 00:29:53,760
Speaker 1: has been deal making. But are there any green shoots there?

527
00:29:54,840 --> 00:29:55,440
Speaker 5: Absolutely?

528
00:29:55,480 --> 00:29:58,960
Speaker 3: I mean, well, maybe you know before the path that

529
00:29:59,000 --> 00:30:02,400
Speaker 3: the rapid rate, high rate, long end rates over the

530
00:30:02,400 --> 00:30:05,000
Speaker 3: past few weeks, but we have started to see, you know,

531
00:30:05,040 --> 00:30:09,920
Speaker 3: some commentary saying, oh we are starting to see green shoots.

532
00:30:10,040 --> 00:30:13,840
Speaker 3: You know, we had some IPOs happen right over the

533
00:30:13,880 --> 00:30:15,960
Speaker 3: past few weeks, although and then the day one pop.

534
00:30:16,400 --> 00:30:18,880
Speaker 3: But but inevitably with with higher and higher rates. I

535
00:30:18,920 --> 00:30:21,720
Speaker 3: think you see some of these drop below IPO prices,

536
00:30:21,720 --> 00:30:24,360
Speaker 3: but you know, after after it's it's a positive sign

537
00:30:24,440 --> 00:30:26,680
Speaker 3: in terms of you know, some of these you know,

538
00:30:26,720 --> 00:30:28,720
Speaker 3: equity just issuances going through.

539
00:30:28,840 --> 00:30:30,160
Speaker 5: That's great leverage.

540
00:30:30,200 --> 00:30:33,640
Speaker 3: Loan market, as you know, has been pretty good, pretty

541
00:30:33,680 --> 00:30:37,760
Speaker 3: decent right after after some lull. Although you know, I

542
00:30:37,760 --> 00:30:40,680
Speaker 3: think things start coming off the table. When when when

543
00:30:40,680 --> 00:30:44,760
Speaker 3: the ten year, thirty year just starts rapidly rising with

544
00:30:44,760 --> 00:30:47,320
Speaker 3: with kind of almost no end in sight in terms

545
00:30:47,360 --> 00:30:50,560
Speaker 3: of you know, so I think that's the near term worry.

546
00:30:50,600 --> 00:30:53,880
Speaker 3: But but twenty twenty four, I think, yeah, we are

547
00:30:53,920 --> 00:30:56,600
Speaker 3: starting to see some some green shoots. Is at least

548
00:30:56,600 --> 00:30:59,280
Speaker 3: that's what the commentary is. But but I think it

549
00:30:59,360 --> 00:31:02,200
Speaker 3: is predicated on kind of a bit of a rate

550
00:31:02,280 --> 00:31:06,600
Speaker 3: stabilization kind of all across the curve, if not stabilization

551
00:31:06,880 --> 00:31:09,560
Speaker 3: or a bit lower, right, not not a continued hike

552
00:31:10,320 --> 00:31:12,920
Speaker 3: above five percent or to up to seven percent, as

553
00:31:13,200 --> 00:31:14,400
Speaker 3: Jamie Diamond says.

554
00:31:14,640 --> 00:31:19,000
Speaker 1: Okay, the other question on my mind, it's a lot

555
00:31:19,040 --> 00:31:21,120
Speaker 1: of people saying that the US market. I mean, this

556
00:31:21,160 --> 00:31:22,480
Speaker 1: is something I heard in Europe when I was there

557
00:31:22,480 --> 00:31:27,000
Speaker 1: recently is massively over banked, way too many financial institutions

558
00:31:27,000 --> 00:31:28,920
Speaker 1: that there are literally hundreds of banks, you know, whereas

559
00:31:28,960 --> 00:31:31,240
Speaker 1: you're compared to Canada with about six or seven or

560
00:31:31,280 --> 00:31:34,480
Speaker 1: the UK with you know, very few. Should we expect

561
00:31:34,480 --> 00:31:36,240
Speaker 1: more consolidation anytime soon?

562
00:31:37,000 --> 00:31:40,160
Speaker 3: Well, I think it depends on the tier. But right

563
00:31:40,200 --> 00:31:45,040
Speaker 3: now in the near term, I'd say not really. Given

564
00:31:46,320 --> 00:31:50,000
Speaker 3: you know, when when these regional banks failed, it took

565
00:31:50,040 --> 00:31:52,200
Speaker 3: some time. You know, I think the regulators would have wanted,

566
00:31:52,600 --> 00:31:55,120
Speaker 3: you know, close on Friday, open up as another bank,

567
00:31:55,440 --> 00:31:57,480
Speaker 3: you know, as bigger, as a part of a bigger,

568
00:31:57,480 --> 00:32:00,719
Speaker 3: stronger bank on Monday. But these took time because of

569
00:32:00,760 --> 00:32:05,200
Speaker 3: all these embedded unrealized losses on the balance sheets, right

570
00:32:05,240 --> 00:32:09,880
Speaker 3: and in an mn A scenario, those need to be

571
00:32:09,960 --> 00:32:12,960
Speaker 3: marked to market and so the acquire would have to

572
00:32:13,800 --> 00:32:17,720
Speaker 3: you know, uh really take take a big loss to

573
00:32:17,800 --> 00:32:21,120
Speaker 3: take on anything right now with all these unbedded, embedded

574
00:32:21,200 --> 00:32:25,560
Speaker 3: unrealized losses. So uh, until the rate situation stabilizes, these

575
00:32:25,640 --> 00:32:29,200
Speaker 3: unrealized losses shrink, I think, and you know, in a

576
00:32:29,360 --> 00:32:31,240
Speaker 3: high rate world, that is a.

577
00:32:31,200 --> 00:32:33,080
Speaker 5: Headwind to m n A.

578
00:32:33,280 --> 00:32:35,920
Speaker 3: But as you mentioned, over the mid to longer term,

579
00:32:35,960 --> 00:32:38,840
Speaker 3: and I think you know, the regulatory environment also matters,

580
00:32:38,920 --> 00:32:41,959
Speaker 3: because under certain regimes.

581
00:32:41,600 --> 00:32:43,960
Speaker 5: You know, m and A is frowned upon, whereas others

582
00:32:44,160 --> 00:32:44,720
Speaker 5: it might not be.

583
00:32:44,840 --> 00:32:48,120
Speaker 3: So maybe that's the Democrat, you know, Republican difference, where

584
00:32:48,200 --> 00:32:51,640
Speaker 3: you know, maybe under a republican regime that then it

585
00:32:51,720 --> 00:32:54,200
Speaker 3: might be more industry friendly and and hence you know

586
00:32:54,240 --> 00:32:57,520
Speaker 3: that mn A could commence. But what we had seen

587
00:32:58,320 --> 00:33:01,520
Speaker 3: some MNA approvals a long time to happen. But but

588
00:33:01,560 --> 00:33:04,840
Speaker 3: in terms of the broader question of will there be consolidation,

589
00:33:05,360 --> 00:33:09,320
Speaker 3: I think yes, due to you know, these higher regulatory

590
00:33:09,360 --> 00:33:12,840
Speaker 3: requirements that have been put in place for regional banks,

591
00:33:13,080 --> 00:33:14,680
Speaker 3: right and I think a lot of that will happen

592
00:33:14,960 --> 00:33:18,520
Speaker 3: below maybe the one hundred billion mark, where the requirements

593
00:33:19,040 --> 00:33:22,200
Speaker 3: do step up a lot for these regional banks. So

594
00:33:22,240 --> 00:33:25,280
Speaker 3: maybe some of these guys below a hundred billion consolidating

595
00:33:25,880 --> 00:33:28,960
Speaker 3: or you know, and then once the ones that are

596
00:33:29,000 --> 00:33:32,000
Speaker 3: above a hundred billion comfortably above, they might you know,

597
00:33:32,080 --> 00:33:34,280
Speaker 3: acquire some of these other smaller players as well.

598
00:33:34,800 --> 00:33:37,320
Speaker 1: Okay, we'll watch out for that. So before we wrap

599
00:33:37,360 --> 00:33:40,920
Speaker 1: things up, Arnold, I wanted to ask you about opportunities

600
00:33:40,960 --> 00:33:43,000
Speaker 1: for fixed income investors right now, A lot of people

601
00:33:43,640 --> 00:33:46,120
Speaker 1: still seem to like bank debt, but how is it

602
00:33:46,120 --> 00:33:48,640
Speaker 1: looking compared to other sectors and within that what looks

603
00:33:48,640 --> 00:33:49,320
Speaker 1: interesting to you?

604
00:33:50,160 --> 00:33:54,760
Speaker 5: Yeah, it, you know, compared I think you know you.

605
00:33:54,680 --> 00:33:59,760
Speaker 3: Had mentioned over valued right in terms of various asset classes.

606
00:34:00,960 --> 00:34:03,920
Speaker 3: And then but the one thing that is cheap compared

607
00:34:03,960 --> 00:34:06,760
Speaker 3: to the beginning of the year is regional banks, right,

608
00:34:06,880 --> 00:34:09,560
Speaker 3: so yeah, you know, which makes sense given given all

609
00:34:09,600 --> 00:34:11,960
Speaker 3: that they've been through. So you know, we have started

610
00:34:12,000 --> 00:34:18,839
Speaker 3: to change our views on the regional banks. A good

611
00:34:18,840 --> 00:34:23,040
Speaker 3: thing on the regulatory side is they will start needing

612
00:34:23,080 --> 00:34:28,040
Speaker 3: to incorporate unrealized losses from they're available for sale securities

613
00:34:28,120 --> 00:34:30,680
Speaker 3: into their capital levels, but that that's down the line,

614
00:34:30,719 --> 00:34:33,919
Speaker 3: so we know that equity levels will be rising. They're

615
00:34:34,000 --> 00:34:38,080
Speaker 3: more conservative on those shareholder returns. Uh. And then also

616
00:34:38,160 --> 00:34:41,239
Speaker 3: positively on the debt side, we've been concerned about debt

617
00:34:41,280 --> 00:34:45,160
Speaker 3: requirements being very onerous and requiring these regionals to really

618
00:34:45,160 --> 00:34:48,400
Speaker 3: tap the debt markets quite often. But what we actually

619
00:34:48,440 --> 00:34:52,160
Speaker 3: got was something very industry friendly where a lot of

620
00:34:52,200 --> 00:34:57,120
Speaker 3: the legacy operating company debt was grandfathered as as bill

621
00:34:57,200 --> 00:35:00,439
Speaker 3: and eligible and then and any new operating company, any

622
00:35:00,520 --> 00:35:02,279
Speaker 3: new bail and debt would have to come from the

623
00:35:02,280 --> 00:35:07,239
Speaker 3: holding company, but all the existing operating company was was Grandfathers.

624
00:35:07,320 --> 00:35:10,160
Speaker 3: That means basically a lot of these large regionals like

625
00:35:10,239 --> 00:35:13,200
Speaker 3: the P and cs, the U S Bank Corps and Truists,

626
00:35:13,440 --> 00:35:17,520
Speaker 3: which we had expected maybe you know, you know, dozens

627
00:35:17,560 --> 00:35:21,960
Speaker 3: of dollars of bonds coming to market. They're actually fine

628
00:35:22,120 --> 00:35:24,239
Speaker 3: right now, you know, with all the huff and buff

629
00:35:24,280 --> 00:35:27,840
Speaker 3: about debt requirements and so, you know, the the technical

630
00:35:27,880 --> 00:35:30,960
Speaker 3: there isn't is really not as bad as we expected.

631
00:35:31,360 --> 00:35:34,960
Speaker 3: So you know, out of that bunch, we think the

632
00:35:35,080 --> 00:35:37,920
Speaker 3: US bank Corps used to trade tightest of of everybody,

633
00:35:37,960 --> 00:35:41,000
Speaker 3: even even the largest US banks. They've really lost their

634
00:35:41,040 --> 00:35:44,960
Speaker 3: perch a top of kind of the banking space. That

635
00:35:44,960 --> 00:35:46,279
Speaker 3: that might be a name that that might be a

636
00:35:46,320 --> 00:35:51,600
Speaker 3: little bit interesting. You know, if things settle down, they

637
00:35:51,680 --> 00:35:54,120
Speaker 3: still trade water than P and C, and then trade

638
00:35:54,160 --> 00:35:55,879
Speaker 3: water than the big six US banks, but they.

639
00:35:55,840 --> 00:35:58,840
Speaker 5: Used to trade US Bank Corp. Used to trade tightest

640
00:35:58,960 --> 00:35:59,600
Speaker 5: of everybody.

641
00:36:01,400 --> 00:36:02,840
Speaker 3: If we get to a bit of a more and

642
00:36:02,840 --> 00:36:05,719
Speaker 3: more normalized or steady state environment, that that might be

643
00:36:05,719 --> 00:36:06,560
Speaker 3: an interesting.

644
00:36:06,880 --> 00:36:09,640
Speaker 1: So more demand than supply basically.

645
00:36:10,719 --> 00:36:12,920
Speaker 3: Well right, all right, I don't know if there's really

646
00:36:13,000 --> 00:36:18,359
Speaker 3: demand for except for cash. But yeah, I think eventually

647
00:36:18,920 --> 00:36:22,960
Speaker 3: if the banking stuff settles down the regional banks, the

648
00:36:23,400 --> 00:36:29,000
Speaker 3: regulatory requirements there are basically hold more equity. Dead footprint

649
00:36:29,040 --> 00:36:32,560
Speaker 3: is largely good, so I think it's positive for bond holders.

650
00:36:32,760 --> 00:36:35,640
Speaker 3: So we think that could be a theme for twenty

651
00:36:35,680 --> 00:36:37,399
Speaker 3: twenty four as maybe you know.

652
00:36:37,440 --> 00:36:41,000
Speaker 5: Regionals strike back or return of the Regionals.

653
00:36:42,239 --> 00:36:45,239
Speaker 1: Thanks very much, Arnold Kakudo Bloomberg Intelligence. You can read

654
00:36:45,239 --> 00:36:47,920
Speaker 1: all of his great analysis on the Bloomberg Terminal. Do

655
00:36:48,080 --> 00:36:49,239
Speaker 1: check it out, and I hope to see you back

656
00:36:49,239 --> 00:36:49,799
Speaker 1: on the show soon.

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Speaker 5: Donold great, thanks a lot, Thanks for having me again.

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00:36:53,080 --> 00:36:55,959
Speaker 1: And thanks again to Scott Carpenter from Bloomberg News. Read

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00:36:55,960 --> 00:36:58,239
Speaker 1: all of his great scoops on the Terminal and at

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00:36:58,280 --> 00:37:02,200
Speaker 1: Bloomberg dot com. We're also very grateful for the insight

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Speaker 1: from CJ. Maloney at bok Financial and please do subscribe

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00:37:07,360 --> 00:37:10,840
Speaker 1: wherever you get your podcasts. We're on Apple, Google and Spotify.

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00:37:11,239 --> 00:37:13,759
Speaker 1: Give us a review, tell your friends, or email me

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Speaker 1: directly at Jcrombieight at Bloomberg dot net.

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Speaker 2: That's J.

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Speaker 1: C R O M B I E as in my

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Speaker 1: surname and the number eight at Bloomberg dot Net. I'm

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Speaker 1: James Crombie. It's been a pleasure having you join us

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Speaker 1: again next week on the Credit Edge