WEBVTT - Trump, Credit Crunch, Media 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.080 --> 0:00:05.240 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets Podcast called Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.520 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:20.760 --> 0:00:22.320 All right, let's get to the news of the day. 0:00:22.320 --> 0:00:25.920 It comes out of Washington, d C. Of course, former 0:00:25.920 --> 0:00:29.080 President Trump charged over secret documents, and which is a 0:00:29.240 --> 0:00:31.920 first for an ex president. We want to round table 0:00:31.960 --> 0:00:34.199 this thing. We're going to do that today with Bloomberg 0:00:34.320 --> 0:00:36.400 Law host June Garasso. She's going to join us here 0:00:36.400 --> 0:00:39.239 in the studio, and Ann Mary Hordern Bloomberg Washington Carsponey 0:00:39.360 --> 0:00:41.440 usually in DC. Up here in New York at our 0:00:41.440 --> 0:00:45.440 Bloomberg Interactive Broker Studio. We appreciate getting both June and 0:00:45.520 --> 0:00:49.680 Anne Marie here and let's start with you. This feels different. 0:00:49.760 --> 0:00:53.159 I mean, it's federal. Can you put in context what's 0:00:53.200 --> 0:00:54.640 the feeling coming out of Washington, DC? 0:00:55.240 --> 0:00:57.640 Well, this is definitely different. First former US president to 0:00:57.680 --> 0:01:01.480 be tried with committing federal crime. This is a case 0:01:01.520 --> 0:01:04.800 that even Trump's own Attorney General, Bill Barr, has talked 0:01:04.800 --> 0:01:06.640 about for months, really that this is going to be 0:01:06.680 --> 0:01:09.520 the more serious of the case. Also said it was 0:01:09.560 --> 0:01:12.760 almost one of Trump's own making. He said recently on 0:01:12.840 --> 0:01:14.640 CBS this morning. He was there two days ago. He 0:01:14.640 --> 0:01:18.040 said Trump was the one there, his words, jerking around 0:01:18.040 --> 0:01:20.960 the DOJ when he could have just given up these 0:01:21.000 --> 0:01:24.520 documents that the National Archives wanted. And then you look 0:01:24.720 --> 0:01:26.560 at and June definitely will be able to speak to 0:01:26.600 --> 0:01:30.840 this more. The indictment what we're seeing so far, Obviously 0:01:30.840 --> 0:01:33.319 it's under seal that could be made public today, though 0:01:33.920 --> 0:01:37.480 it contains these seven charges, and some of them would 0:01:37.560 --> 0:01:40.240 normally carry I don't think anyone actually thinks that we're 0:01:40.280 --> 0:01:43.000 going to see the president behind bars for a decade, 0:01:43.000 --> 0:01:47.240 but some of them carry potential consequences of ten or 0:01:47.280 --> 0:01:48.559 twenty years behind prison. 0:01:48.920 --> 0:01:50.880 So June, I want to bring you into the conversation 0:01:51.040 --> 0:01:53.720 breakdown more specifically what these charges. 0:01:53.400 --> 0:01:56.320 Are well, and just a reminder that we don't know 0:01:56.360 --> 0:01:59.800 what the charges are specifically. This is all based on sourcing, 0:02:00.080 --> 0:02:03.000 has been under seal and it may not be opened 0:02:03.080 --> 0:02:07.600 until actually until Tuesday, when he reports to the court. 0:02:08.000 --> 0:02:11.200 But it may be open sooner. So there are several 0:02:11.400 --> 0:02:15.200 seven charges. They include wilful retention of national defense information, 0:02:15.639 --> 0:02:21.480 corruptly concealing documents, conspiracy to obstruct justice, and making false statements. 0:02:21.760 --> 0:02:27.200 The conspiracy charge is particularly interesting to me because it 0:02:27.360 --> 0:02:29.920 means that there was someone else. There has to be 0:02:29.960 --> 0:02:33.480 two people involved in a conspiracy, so the prosecutors have 0:02:33.560 --> 0:02:36.040 someone else who they're either going to charge or who 0:02:36.080 --> 0:02:39.320 is going to testify against Trump and one of the 0:02:39.320 --> 0:02:41.920 possible people. When you think about the evidence that they have, 0:02:42.000 --> 0:02:45.520 they don't only have people. They have video and audio evidence. 0:02:45.840 --> 0:02:48.840 And part of the video evidence is a man moving 0:02:48.919 --> 0:02:53.720 boxes into a storage boxes of documents into the storage 0:02:53.960 --> 0:02:57.400 space at marra A Lago the day before the prosecutors 0:02:57.400 --> 0:03:01.240 were set to arrive there. So they have lots of evidence. 0:03:01.280 --> 0:03:04.000 They also have what's kind of incredible. They have an 0:03:04.040 --> 0:03:08.960 audio tape of Trump at his Bedminster golf club waving 0:03:08.960 --> 0:03:12.440 a document around and saying that it was a document 0:03:13.120 --> 0:03:17.160 with sensitive military information related to Iran in his possession, 0:03:17.200 --> 0:03:20.800 and he says that he knows, according to a transcript, 0:03:20.880 --> 0:03:23.840 he knows that he doesn't have the authority to show this. 0:03:24.360 --> 0:03:26.680 So they have lots and lots of evidence. 0:03:26.720 --> 0:03:28.560 Hey, June, I just want to we got one little 0:03:28.560 --> 0:03:30.440 piece of news that started and I guess it's just 0:03:30.440 --> 0:03:32.800 going to come out and drips and drabs. But US 0:03:32.960 --> 0:03:37.320 Judge Aileen Cannon has been assigned to the criminal case. 0:03:37.320 --> 0:03:40.240 And I believe she is a Trump appointee. What does 0:03:40.240 --> 0:03:40.840 that mean to you? 0:03:41.360 --> 0:03:44.400 When I was thinking of why they moved the case 0:03:44.440 --> 0:03:46.960 and the pros and cons of moving the case to Florida, 0:03:47.000 --> 0:03:49.840 I thought, Wow, I hope they don't get Judge Eileen 0:03:49.920 --> 0:03:53.040 Cannon because it's not just that she's a Trump appointee. 0:03:53.200 --> 0:03:55.120 It's that she was the one appointed to be a 0:03:55.120 --> 0:03:58.680 special Master to review the material sees from mar A Lago, 0:03:59.200 --> 0:04:03.880 and she gave some I don't know, head scratching decisions 0:04:03.920 --> 0:04:07.120 that people were sort of shocked by, and one of 0:04:07.160 --> 0:04:11.440 them which prevented the FBI from using the c's classified 0:04:11.440 --> 0:04:15.160 documents as part of their investigation until she completed her review, 0:04:15.200 --> 0:04:18.960 which could take months, and that was ultimately thrown out. 0:04:19.040 --> 0:04:21.320 She was reversed by the Eleventh Circuit and there was 0:04:21.360 --> 0:04:24.560 some sharp language in there about her. So she's in 0:04:24.560 --> 0:04:27.400 it for this initial part. If she stays on it, 0:04:27.440 --> 0:04:30.479 I think the Justice Department will have some problems. 0:04:30.640 --> 0:04:33.719 Annriy want to bring you back into this conversation. How 0:04:33.760 --> 0:04:36.919 does all of this end up impacting his campaign? Is 0:04:36.960 --> 0:04:38.840 he's under indictment once again. 0:04:39.000 --> 0:04:41.800 Yeah, it's going to be an even more wild ride, 0:04:41.800 --> 0:04:44.240 it feels like for the twenty twenty four campaign. So 0:04:44.480 --> 0:04:47.680 initially with the former president, anytime he faces a struggle, 0:04:48.160 --> 0:04:51.200 illegal hurdle, his numbers go up in the polls, and 0:04:51.240 --> 0:04:55.000 also his campaign dollars go up. There's a big question 0:04:55.040 --> 0:04:59.280 about this specifically because of how serious these charges are. 0:05:00.000 --> 0:05:03.000 Potentially how the other candidates, now it's much wider field 0:05:03.000 --> 0:05:06.479 in terms of Republican nominations, how they react. What you 0:05:06.520 --> 0:05:09.240 already are seeing is I think one individual only came 0:05:09.279 --> 0:05:13.080 out and said they would pardon the former president, Vivik Ramaswami. 0:05:13.120 --> 0:05:14.760 He came out and said that's what he would do, 0:05:15.040 --> 0:05:19.919 and then others are taking a more moderate tone. Chris Christie, 0:05:20.000 --> 0:05:23.080 we know that he's almost running this race to just 0:05:23.160 --> 0:05:25.799 bash Trump, but he did say let's see the facts. 0:05:25.920 --> 0:05:28.120 I think all candidates will come out and say they're 0:05:28.120 --> 0:05:33.400 presumed innocent like all defendants. But a big question and 0:05:33.440 --> 0:05:36.640 a litmus test for every nominee. Now, every question they're 0:05:36.680 --> 0:05:38.920 going to get whether they show up in Iowa, New Hampshire, 0:05:38.960 --> 0:05:42.360 South Carolina, is will you pardon the former president? 0:05:42.600 --> 0:05:42.920 Okay? 0:05:43.720 --> 0:05:46.160 And that's going to now shape I think a lot 0:05:46.200 --> 0:05:48.080 of the Republican field. 0:05:48.040 --> 0:05:50.160 June can you give us. I know we haven't even 0:05:50.160 --> 0:05:52.560 seen the indictment, but on these types of cases, a 0:05:52.600 --> 0:05:54.560 sense of timing, how does this play out? And just 0:05:54.600 --> 0:05:58.960 to follow on Ann Mary's comments about the election, is 0:05:59.000 --> 0:06:01.520 this some thing a six month process, a twelve month process, 0:06:01.520 --> 0:06:02.680 a multi year process. 0:06:03.240 --> 0:06:07.080 It's not multi year, And I mean it depends on 0:06:07.279 --> 0:06:11.839 how many motions there are before how I assume the 0:06:11.839 --> 0:06:14.320 Trump team is going to try to slow the process 0:06:14.400 --> 0:06:18.000 down with motions. Now, what's interesting is what the prosecution 0:06:18.240 --> 0:06:21.120 did here. In order to prevent some of the most 0:06:21.200 --> 0:06:24.000 weight emotions, which would be a motion to change venue, 0:06:24.320 --> 0:06:27.280 they decided to go from Washington, d c. Where the 0:06:27.320 --> 0:06:31.520 grand jury was hearing evidence for months, to Florida so 0:06:31.560 --> 0:06:35.720 that the defense wouldn't be able to raise that as 0:06:36.200 --> 0:06:38.880 a reason to slow things down, throw the case out 0:06:39.080 --> 0:06:42.159 and move it somewhere else. But I mean it could 0:06:42.480 --> 0:06:45.560 come before the before the election. There's no doubt that 0:06:45.600 --> 0:06:49.080 it could. There's also the other case in New York, 0:06:49.200 --> 0:06:52.280 which has which is I think supposed to go March. 0:06:52.800 --> 0:06:57.000 But and then you have in July or August. Do 0:06:57.040 --> 0:07:00.440 you have the district attorney in Fulton County going to 0:07:00.480 --> 0:07:03.320 announce possible charges against Trump. So you're going to have 0:07:03.400 --> 0:07:06.680 all these judges, you know, jockeying and trying to figure 0:07:06.680 --> 0:07:09.440 out when they could have a trial. So but it 0:07:09.440 --> 0:07:12.559 could happen before before the election for sure. 0:07:12.960 --> 0:07:15.760 And Marie, any sort of indication from your sources about 0:07:15.800 --> 0:07:18.800 what the chances are for an actual conviction on this, No, 0:07:18.880 --> 0:07:21.240 I don't think we're even closer to that point. 0:07:21.440 --> 0:07:25.200 There's one I think interesting wrinkle and June can definitely 0:07:25.200 --> 0:07:28.240 speak to this is I think everyone going into this 0:07:28.280 --> 0:07:31.360 thought it was going to be in Washington, in Washington, DC, 0:07:31.560 --> 0:07:34.240 And this is almost a coup for the former president 0:07:34.480 --> 0:07:37.200 that it's happening in Florida. This is his home turf. 0:07:37.880 --> 0:07:42.320 He has tremendous amount of support in Florida. He won 0:07:42.400 --> 0:07:44.800 that state. And I think if it was going to 0:07:46.200 --> 0:07:48.200 the trial was going to be and the case was 0:07:48.240 --> 0:07:51.000 going to be conducted of Washington, his team had already 0:07:51.080 --> 0:07:54.080 said they would try to move it to Florida, and 0:07:54.160 --> 0:07:57.800 already they're already it's starting in Florida June. Actually, I 0:07:57.840 --> 0:08:01.600 wonder do you think that them coming out and moving 0:08:01.600 --> 0:08:05.600 it to Florida helps the former president or because they 0:08:05.600 --> 0:08:08.680 wanted to motion to move it, it actually takes one 0:08:08.680 --> 0:08:10.040 of their tools out of the toolbox. 0:08:10.120 --> 0:08:13.120 Well it's sort of a double edged sword because it 0:08:13.240 --> 0:08:15.600 takes one of the tools out of their toolbox, which 0:08:15.640 --> 0:08:18.200 would slow things down, But at the same time, it 0:08:18.280 --> 0:08:21.840 puts him in a really favorable venue. You know, as 0:08:21.840 --> 0:08:25.840 you said, Floridians voted for voted for Trump, and you 0:08:25.880 --> 0:08:28.080 know he but he will not be able to say 0:08:28.080 --> 0:08:30.640 the things he said about the New York jury during 0:08:30.640 --> 0:08:33.040 the Eugene Carroll trial, how they were all against him, 0:08:33.040 --> 0:08:35.920 and he'll take that, will take his that talking point away. 0:08:35.960 --> 0:08:38.440 But yeah, I think it's I think it was a 0:08:38.520 --> 0:08:41.200 calculated move by the prosecutors. They want to move the 0:08:41.240 --> 0:08:44.360 case along, so they want to avoid that venue challenge, 0:08:44.400 --> 0:08:46.600 but at the same time, the jury pool is not 0:08:46.720 --> 0:08:49.080 going to be as favorable to them, I think, although 0:08:49.080 --> 0:08:50.439 they are in Miami. 0:08:50.160 --> 0:08:53.120 So but it could potentially move to West Pump. 0:08:52.880 --> 0:08:55.200 Each Yes, it could, it could. This is all up 0:08:55.200 --> 0:08:58.400 in the air. Who decides that, Well, there might be 0:08:58.480 --> 0:09:03.400 motions by the defense to move it. And right now 0:09:03.840 --> 0:09:07.040 I'm not too sure where the judge Cannon is. 0:09:07.640 --> 0:09:08.199 I'm not sure. 0:09:08.280 --> 0:09:10.160 I'm not sure because we just found out about her 0:09:10.200 --> 0:09:14.160 a few minutes ago. So this is moving so quickly. 0:09:14.360 --> 0:09:16.320 But you know, there could be a motion to move it, 0:09:16.480 --> 0:09:18.600 or they could just decide that that's the better venue 0:09:18.640 --> 0:09:20.720 for it because that's where mar A Lago is. 0:09:20.880 --> 0:09:24.880 So so, Henriy, what have we heard, if anything, from 0:09:24.960 --> 0:09:27.679 the Biden administration. What do we expect to hear from 0:09:27.679 --> 0:09:29.960 the Biden administration? How do we think they're going to 0:09:30.000 --> 0:09:30.800 play this whole thing? 0:09:31.120 --> 0:09:33.200 So Biden was asked about this yesterday he was giving 0:09:33.200 --> 0:09:35.640 a press conference with Richie Suneck of the UK, and 0:09:35.720 --> 0:09:38.560 of course reporters always want to ask about the hot 0:09:38.600 --> 0:09:41.920 story of the day, and he dismissed any of these 0:09:41.960 --> 0:09:46.520 suggestions that a potential indictment of the former president would 0:09:46.520 --> 0:09:49.920 potentially be politically motivated, because that's what the Republicans are 0:09:49.960 --> 0:09:52.920 really going to want to coalesce around this message. And 0:09:52.960 --> 0:09:57.320 you already seen some conservative networks of news saying it's 0:09:57.400 --> 0:10:01.920 Biden's doj going after the former president. So Biden said, 0:10:02.080 --> 0:10:04.880 you'll notice I have never once, one single time, suggested 0:10:04.880 --> 0:10:07.440 the Justice Department what they should do or not do 0:10:07.520 --> 0:10:10.040 relative to bring in charge or not bring a charge. 0:10:10.120 --> 0:10:13.640 He said, I'm honest. We also need to remember the 0:10:13.640 --> 0:10:18.480 current president is also facing a special counsel inquiry into 0:10:18.720 --> 0:10:23.199 his documents that's still pending. But Vice President Mike Penn's 0:10:23.200 --> 0:10:27.319 former vice president his was actually concluded, there's very different 0:10:27.640 --> 0:10:29.719 You could draw a lot of parallels because everyone has 0:10:29.760 --> 0:10:32.480 these documents at home, but there's very different cases. I 0:10:32.480 --> 0:10:34.880 think Biden and Pence really wanted to get rid of them, 0:10:34.920 --> 0:10:36.880 while many were saying Trump. 0:10:36.600 --> 0:10:40.120 Wanted to keep them. And as she said, what the 0:10:40.200 --> 0:10:42.840 Trump people have been saying, what Trump has been saying, 0:10:42.920 --> 0:10:46.600 this prosecution is by the Biden administration. All these different 0:10:46.600 --> 0:10:50.960 things about the witch hunt that's going to play. That's 0:10:50.960 --> 0:10:53.040 for the court of public opinion, that's for the jury 0:10:53.040 --> 0:10:55.200 pool that's out there, but that is not going to 0:10:55.240 --> 0:10:58.760 happen in court. As we've seen case after case, those 0:10:58.840 --> 0:11:01.360 kinds of discussions just don't take place and don't have 0:11:01.400 --> 0:11:01.840 an effect. 0:11:02.120 --> 0:11:04.160 We're going to be talking to you, Drewne. A lot 0:11:04.200 --> 0:11:06.600 I think are the coming days, weeks, and months. All right, 0:11:06.640 --> 0:11:09.560 I want to thank Bloomberg Law host June Grasso and 0:11:09.600 --> 0:11:12.679 Bloomberg Watching correspondent Ann Marie Hordern, both here in our 0:11:12.720 --> 0:11:16.200 studios starting to get some initial analysis on what is 0:11:16.240 --> 0:11:18.600 going to be a very complex case. 0:11:18.640 --> 0:11:22.760 Here, you're listening to the team Ken's are live program 0:11:22.840 --> 0:11:26.840 Bloomberg Markets weekdays at ten am eastering on Bloomberg dot com, 0:11:26.880 --> 0:11:30.040 the iHeartRadio app and the Bloomberg Business app, or listen 0:11:30.120 --> 0:11:32.400 on demand wherever you get your podcasts. 0:11:34.040 --> 0:11:35.640 Let's just go right to the bond market. And why not, 0:11:35.679 --> 0:11:38.600 because again I've been saying you can after twenty twenty two, 0:11:38.720 --> 0:11:42.360 just when you got crushing equities, crush bonds. Four point 0:11:42.480 --> 0:11:45.199 six percent in a two year bond seems pretty good 0:11:45.200 --> 0:11:46.319 to me for the treasury market. 0:11:46.360 --> 0:11:48.720 It definitely is, especially after the pain last year and 0:11:48.760 --> 0:11:50.840 looking ahead to next week's FED meeting. Look at these 0:11:50.840 --> 0:11:53.720 swap traders pricing in a roughly one third chance that 0:11:53.760 --> 0:11:55.960 we're going to see a FED hike next Yeah. 0:11:55.960 --> 0:11:58.240 Absolutely, so that'll be top of mine next week and 0:11:58.280 --> 0:12:00.960 we'll have full coverage of that. Let's check with Natalie Trevithik, 0:12:01.040 --> 0:12:05.480 She's head of investment grade credit strategy at paid and regal. So, Natalie, 0:12:05.480 --> 0:12:06.760 what do you think about my trade. I'm just going 0:12:06.840 --> 0:12:09.200 to go put some money in a two year Treasury note. 0:12:10.320 --> 0:12:12.920 I think that's a great trade, Paul, But I advise 0:12:13.000 --> 0:12:14.800 even going into corporate bond you get five and a 0:12:14.840 --> 0:12:18.320 half percent, so it's worth that minimal incremental risk to 0:12:18.360 --> 0:12:19.120 go into corporates. 0:12:19.400 --> 0:12:22.280 So, Natalie, what is the bond market telling us about 0:12:22.440 --> 0:12:24.600 the direction of the economy at this point in what 0:12:24.600 --> 0:12:26.160 it can mean for the FED decision next week. 0:12:27.559 --> 0:12:29.520 I think it's telling us that we're in pretty good shape. 0:12:29.559 --> 0:12:31.920 We've seen a pretty big rally in corporate bonds or 0:12:31.920 --> 0:12:34.040 almost back to the levels they were at the beginning 0:12:34.040 --> 0:12:36.480 of the year pre the banking crisis, and we've seen 0:12:36.520 --> 0:12:40.280 a big recovery in both banking spreads and equities, particularly 0:12:40.600 --> 0:12:42.959 among the regionals. That gives us some confidence. 0:12:43.960 --> 0:12:44.520 So in the. 0:12:44.400 --> 0:12:47.600 Investment grade space, Natalie, kind of how are you thinking 0:12:47.600 --> 0:12:50.040 about things? Are you going sector bi sector? Are you 0:12:50.080 --> 0:12:54.320 focusing more on duration? How are you guys approaching the 0:12:54.360 --> 0:12:55.720 investment grade space these days? 0:12:57.080 --> 0:13:00.120 Yeah, it's a number of items. Definitely duration. We're seeing 0:13:00.160 --> 0:13:02.040 more demand for the long end of the curve. Even 0:13:02.080 --> 0:13:04.679 though those the front end, as you mentioned, is very attractive, 0:13:04.920 --> 0:13:06.560 we aren't sure how long it's going to last for 0:13:06.679 --> 0:13:08.960 so investors really want to lock in these ten and 0:13:09.040 --> 0:13:11.960 thirty year yields at these higher levels, and with corporate 0:13:11.960 --> 0:13:14.880 bond you're getting close to six percent there. Among the 0:13:15.000 --> 0:13:19.439 sectors we do like communications technology. We think banking has 0:13:19.440 --> 0:13:21.839 a little bit more to run, particularly in some of 0:13:21.880 --> 0:13:24.360 the regionals, and those are most attractive in the front 0:13:24.440 --> 0:13:26.080 end of the curve. 0:13:26.840 --> 0:13:28.920 What are you hearing from clients at this point as 0:13:28.960 --> 0:13:31.640 far as what their concerns are, and maybe concerns maybe 0:13:31.640 --> 0:13:32.920 they had at the beginning of the year, not so 0:13:33.040 --> 0:13:33.840 much at this point. 0:13:35.440 --> 0:13:37.600 Yeah, the concerns at the beginning of the year was 0:13:37.640 --> 0:13:40.319 the recession, and they were already pricing in FED cuts 0:13:40.679 --> 0:13:42.600 and that's not going to be the case. We don't 0:13:42.640 --> 0:13:46.000 think right now. They're concerned about all of this treasury supply. 0:13:46.040 --> 0:13:49.720 We're likely to get posts to debt sealing resolution. People 0:13:49.720 --> 0:13:52.440 are talking anywhere from five hundred billion to a trillion 0:13:52.480 --> 0:13:54.720 of T bill supply this summer, and they're worried that 0:13:54.800 --> 0:13:58.160 mini crowd out investments in other places, such as corporate bonds. 0:13:58.960 --> 0:14:03.040 So Natalie. One of the challenges for investors is trying 0:14:03.080 --> 0:14:05.680 to get a sense of where this economy really is going. 0:14:05.760 --> 0:14:08.640 So you know, when your analysts come to you or 0:14:08.640 --> 0:14:11.400 your pms come to you with an idea, do you 0:14:11.480 --> 0:14:14.560 ask them, Hey, have you run your recession model? And 0:14:14.600 --> 0:14:17.120 if so, how does this credit fair? Are Is that 0:14:18.160 --> 0:14:19.240 top of mind for you guys? 0:14:20.520 --> 0:14:23.320 Exactly? Even though recession may still be you know, six 0:14:23.360 --> 0:14:26.120 months to a year out, if it does come, we 0:14:26.200 --> 0:14:29.040 are definitely running our recession models. How are these companies 0:14:29.080 --> 0:14:32.640 going to do? Fortunately, most companies have been well prepared. 0:14:32.680 --> 0:14:36.400 This is the most well telegraphed recession potentially coming, so 0:14:36.440 --> 0:14:39.200 they have started already to cut their cappex or cut 0:14:39.240 --> 0:14:42.840 dividends or share buybacks where necessary. So many companies are 0:14:42.840 --> 0:14:46.000 defensively positioned. We've actually seen a number of upgrades back 0:14:46.040 --> 0:14:48.440 to investment grade from high yield this year, such as 0:14:48.480 --> 0:14:50.120 Occidental Petroleum recently. 0:14:51.080 --> 0:14:53.880 When it comes to this concern about how the US 0:14:54.080 --> 0:14:58.520 debt deal would potentially trigger this one trillion dollar liquidity crunch, 0:14:58.600 --> 0:15:00.720 especially when we're looking at what's happening in bond market, 0:15:00.840 --> 0:15:01.720 what's your take on that. 0:15:03.120 --> 0:15:06.800 I think it may be overblown because globally, investors are 0:15:06.840 --> 0:15:09.480 still flush with cash. We see that in the corporate market, 0:15:09.680 --> 0:15:12.840 where deals are like five times subscribed. Yesterday we had 0:15:12.960 --> 0:15:14.600 US Bank Corporate in the market with three and a 0:15:14.600 --> 0:15:18.200 half billion, and they actually had eighteen billion of demand 0:15:18.240 --> 0:15:20.440 for that deal. So it seems like the market will 0:15:20.440 --> 0:15:23.160 be able to absorb all of this T bill issuance. 0:15:23.560 --> 0:15:25.400 Yeah, that's kind of where I wanted to go. Natalie's 0:15:25.440 --> 0:15:27.480 kind of the new issue market. As a former banker myself, 0:15:27.520 --> 0:15:30.440 I always like to see deals, the deal flow and 0:15:30.600 --> 0:15:32.800 who's coming to market and what kind of pricing they're getting, So, 0:15:33.880 --> 0:15:36.040 you know, even the rates are higher, it seems like 0:15:36.080 --> 0:15:39.320 new issuance is still pretty active. Is your phone ringing 0:15:39.320 --> 0:15:40.840 off the hook from our friends on Wall Street? 0:15:41.920 --> 0:15:45.040 Yeah? Absolutely, The new issue market has been very active. First, 0:15:45.080 --> 0:15:47.400 there was a surge of issuance trying to get ahead 0:15:47.400 --> 0:15:49.800 of the debt ceiling, and the banks were kind of 0:15:49.840 --> 0:15:51.960 locked out of the market for a little while there 0:15:52.200 --> 0:15:55.280 in March and April. Now that the debt ceiling is over, 0:15:55.320 --> 0:15:58.080 we've seen banks come back with huge issuance twenty seven 0:15:58.160 --> 0:16:01.200 billion this week, though there's still about forty percent under 0:16:01.200 --> 0:16:03.520 the rate of issuance they had in twenty twenty two, 0:16:03.680 --> 0:16:05.840 so we still expect to see a lot more supply, 0:16:05.960 --> 0:16:07.920 But now that regionals have been able to access to 0:16:07.920 --> 0:16:11.080 the markets this week, we think smaller regionals will start 0:16:11.080 --> 0:16:11.440 to come. 0:16:12.080 --> 0:16:13.880 And how about that when you see some of these 0:16:13.920 --> 0:16:17.240 new deals, are they investor friendly in a sense that 0:16:17.240 --> 0:16:19.720 that some strong covenants in there or do you get 0:16:19.760 --> 0:16:22.680 a sense that it's more the leverage is on a 0:16:22.720 --> 0:16:24.120 part of the issue. Where are we in the market 0:16:24.200 --> 0:16:24.600 right now? 0:16:25.440 --> 0:16:28.480 Yeah, an investment grade, there's generally not that strong covenants, 0:16:28.520 --> 0:16:30.720 but we are seeing investors push back on the high 0:16:30.800 --> 0:16:32.920 yield market to make sure the covenants are a little 0:16:32.920 --> 0:16:33.600 bit stronger. 0:16:33.640 --> 0:16:33.920 Here. 0:16:34.120 --> 0:16:36.960 We are seeing better concessions though in terms of pricing, 0:16:37.200 --> 0:16:38.960 and they're leaving a little bit on the table so 0:16:39.000 --> 0:16:41.200 that these deals perform in the secondary market. 0:16:41.680 --> 0:16:44.520 I have to ask you about the yield curve. What 0:16:44.560 --> 0:16:46.640 do you think this is telling us about the economy. 0:16:47.920 --> 0:16:50.760 Yeah, it's not a good sign. It's definitely a recession indicator, 0:16:50.800 --> 0:16:52.720 even though we aren't as inverted as we were in 0:16:52.760 --> 0:16:57.960 two tens previously. But I also think you know that 0:16:58.040 --> 0:17:00.640 the Fed's going to leave rates higher for longer, probably 0:17:00.680 --> 0:17:04.280 until twenty twenty four, and there's always the risk that 0:17:04.359 --> 0:17:06.600 the FED may have broken something, and we really haven't 0:17:06.640 --> 0:17:09.080 had a long enough of a timeline to see all 0:17:09.119 --> 0:17:13.400 of these factions take place in the marketplace. The Silicon 0:17:13.480 --> 0:17:16.400 Valley Bank failure was definitely one indication that the FED 0:17:16.480 --> 0:17:17.520 may have gone too far. 0:17:18.440 --> 0:17:20.719 Now, do you guys invest solely in the US or 0:17:21.080 --> 0:17:22.520 do you go outside of the US as well? 0:17:23.320 --> 0:17:25.800 No, we invest globally, lots of emerging markets. We have 0:17:25.840 --> 0:17:27.440 a very dedicated team here on that. 0:17:28.359 --> 0:17:31.840 All right, so let's go there a little bit. When 0:17:31.880 --> 0:17:33.760 you think outside of the US borders, kind of how 0:17:33.760 --> 0:17:36.520 do you kind of prioritize where you guys are looking. 0:17:38.080 --> 0:17:41.680 We're looking at countries with stable governments. We're also looking 0:17:41.720 --> 0:17:47.280 at oil importers versus oil exporters. We're following the election 0:17:47.400 --> 0:17:49.879 cycle which is going on, so it's really bifurcated across 0:17:49.920 --> 0:17:50.919 from markets and. 0:17:50.960 --> 0:17:54.480 We're talking about exporters versus importers for crude and things 0:17:54.480 --> 0:17:56.920 like that. Is it obviously that correlation with what we've seen, 0:17:57.040 --> 0:18:00.920 especially with oil prices in the US around when you're 0:18:00.920 --> 0:18:04.280 thinking about that sort of seventy dollars threshold there and 0:18:04.440 --> 0:18:06.760 what that could mean for the opportunities in those particular 0:18:06.760 --> 0:18:09.280 emerging markets exactly. 0:18:09.320 --> 0:18:11.760 And we do think seventy dollars is close to a floor, 0:18:11.800 --> 0:18:14.439 so we aren't foreseeing a crash in oil, so we 0:18:14.520 --> 0:18:18.800 think the man is likely going to hold up fairly well. 0:18:18.840 --> 0:18:21.280 But it also depends on the depth of the recession 0:18:21.280 --> 0:18:22.640 if we get one. 0:18:22.960 --> 0:18:26.040 So when you think about emerging markets, I'm not sure. 0:18:26.040 --> 0:18:30.960 And this is equities, it's credit, it's you know, you 0:18:31.000 --> 0:18:33.280 think about China. It's such a big part of the MSCI, 0:18:33.520 --> 0:18:36.080 I mean, is there How do you think about emerging markets? 0:18:36.080 --> 0:18:38.800 Where where do you find opportunities? Do you even think 0:18:38.840 --> 0:18:41.160 about China or do you kind of stay a little 0:18:41.200 --> 0:18:42.520 bit more close to home. 0:18:43.720 --> 0:18:46.520 Yeah, China's a pretty bifurcated market because there's a very 0:18:46.560 --> 0:18:49.040 high quality end of the spectrum where you have such 0:18:49.080 --> 0:18:52.320 as the Ali Baba's and ten Cent good investment grade credits, 0:18:52.720 --> 0:18:55.080 and then you have the Chinese property market, which we're 0:18:55.080 --> 0:18:57.119 still a little bit cautious on. So it really starts 0:18:57.119 --> 0:18:59.560 to get down to a name by name basis even 0:18:59.600 --> 0:19:01.399 within these emerging markets. 0:19:01.400 --> 0:19:03.800 Something I wanted to get your take on because we're 0:19:03.840 --> 0:19:06.240 going to get another update on the CFTC data this 0:19:06.320 --> 0:19:09.240 afternoon around three point thirty, and I noticed, particularly in 0:19:09.280 --> 0:19:11.400 the bond market, when it comes to the shorting that's 0:19:11.400 --> 0:19:14.440 happening on the US ten year, it's at a very 0:19:14.480 --> 0:19:17.280 extreme positioning. Usually that happens when investors are thinking that 0:19:17.920 --> 0:19:20.840 yields potentially betting that they would go higher. But such 0:19:20.920 --> 0:19:23.320 extreme positioning, when I've talked to some sources, think that 0:19:23.400 --> 0:19:26.080 might have the opposite effect, ended up pushing yields lower 0:19:26.119 --> 0:19:29.040 and then maybe supporting more equity prices. Why do you 0:19:29.040 --> 0:19:31.560 think we're seeing such extreme shorting happening on the ten 0:19:31.640 --> 0:19:32.240 year right now? 0:19:33.480 --> 0:19:35.240 Yeah, it's a bit of a mystery. I think there's 0:19:35.280 --> 0:19:37.920 all this positioning and jockeying ahead of the FED meeting, 0:19:37.960 --> 0:19:40.639