WEBVTT - Colonial Pipeline Shutdown: What Comes Next For Supply 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.480 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.880 at Bloomberg dot com slash podcast. Well, a lot of 0:00:21.880 --> 0:00:25.200 commodity strategies are telling folks, particularly on the East Coast, 0:00:25.200 --> 0:00:27.600 to get ready to pay more for gas. And it's 0:00:27.600 --> 0:00:29.920 not just because we're going into the summer driving season. 0:00:29.960 --> 0:00:32.520 It's because we're gonna have a supply problem. Here. Colonial 0:00:32.560 --> 0:00:37.040 pipeline shut down and that uh pipeline supplies most of 0:00:37.159 --> 0:00:39.880 the East Coast, and let's get the latest on that. 0:00:40.320 --> 0:00:43.560 We're uh pleased to have Jay Hatfield. He's a founder 0:00:43.560 --> 0:00:46.800 and CEO of Infrastructure Capital Management. Jay, thanks so much 0:00:46.880 --> 0:00:49.120 for joining us here. And again, you look at the 0:00:49.159 --> 0:00:53.360 map of the Colonial pipeline and boy, it just goes 0:00:53.479 --> 0:00:56.960 right up the Eastern seaboard, suggesting that the folks you 0:00:57.000 --> 0:00:58.800 know on the East Coast are really gonna have some 0:00:58.840 --> 0:01:00.920 supply issues. What do you how do you think this 0:01:00.960 --> 0:01:05.280 is going to develop great, well, thanks for having me on. Well, 0:01:05.319 --> 0:01:11.000 one thing that's important to note about UM products pipelines 0:01:11.200 --> 0:01:15.880 is that they can be transported using surface transportation. It's 0:01:15.880 --> 0:01:22.040 in other words, barges, UM rail and truck, So we 0:01:22.120 --> 0:01:25.640 would we were expecting a fairly muted response, which is 0:01:25.760 --> 0:01:28.959 what we're getting so far. So in fact, if you 0:01:28.959 --> 0:01:31.759 want to look on the terminal cr c K, you're 0:01:31.800 --> 0:01:35.960 only seeing about a thirty five cent increase in the 0:01:36.040 --> 0:01:40.720 gasoline crack to New York Harbor, which makes sense because 0:01:40.800 --> 0:01:46.200 of course that can be supplied by European refineries, where 0:01:46.240 --> 0:01:49.280 what we just block us through the crack spread? What 0:01:49.400 --> 0:01:53.240 is that? So it's just it's the profitability of refining 0:01:53.640 --> 0:01:58.720 oil into UM gasoline in this in this case, and 0:01:58.800 --> 0:02:01.680 so what we're not seeing on their screens oils a 0:02:01.680 --> 0:02:04.440 little bit weak, and and our bob or the your 0:02:04.480 --> 0:02:07.520 carber's moving up just a tiny bit. But what you 0:02:07.560 --> 0:02:12.240 can't see on the screens is areas that UM are 0:02:12.320 --> 0:02:15.680 less liquid and there's no trading, but for instance in 0:02:15.720 --> 0:02:20.360 Tennessee and landlocked southeastern states, So there you're likely to 0:02:20.400 --> 0:02:22.360 get some increase, but it's going to be kepped just 0:02:22.440 --> 0:02:27.280 by shipping or transportation cost. So other than maybe a 0:02:27.320 --> 0:02:30.960 few cases of hoarding, we don't expect any significant shortages. 0:02:31.560 --> 0:02:35.000 But I think it does point out the vulnerability and 0:02:35.360 --> 0:02:41.600 of the energy infrastructure, and in particular UM. More sensitive 0:02:41.919 --> 0:02:45.400 systems are obviously electricity and to a lesser degree, natural gas, 0:02:45.440 --> 0:02:49.160 which is what you saw in superstone Urie, where when 0:02:49.200 --> 0:02:52.440 you have the electric market goes out, it tends to 0:02:52.520 --> 0:02:56.200 shut down other things like natural gas production, whereas refined 0:02:56.240 --> 0:03:05.000 products like as I mentioned, can be shipped using alternative methods. Jay, 0:03:05.040 --> 0:03:08.079 what do you think the issue here is, I mean, 0:03:08.200 --> 0:03:10.320 do you have any sense for the duration of the 0:03:10.440 --> 0:03:14.160 shutdown and is there a point where it really does 0:03:14.280 --> 0:03:20.520 become a supply problem? Well, it's it's the key issue 0:03:20.680 --> 0:03:24.040 is UM safety. So it's the extent that the hack 0:03:24.080 --> 0:03:29.200 gets into operational software and you have explosive fuels. It's 0:03:29.200 --> 0:03:32.639 not like just bringing up a regular computer system. So 0:03:33.160 --> 0:03:36.240 it's not exactly clear how long it could go. But 0:03:36.320 --> 0:03:42.040 again it's other than some potential for hoarding, it shouldn't 0:03:42.080 --> 0:03:45.600 be like when the refinery shut down in a hurricane, 0:03:45.960 --> 0:03:48.840 we have an actual supply problem. It's just a logistics issue. 0:03:49.360 --> 0:03:53.360 So it kind of it caps the the potential shortage 0:03:54.680 --> 0:03:57.560 by the fact that you can just move the product 0:03:57.560 --> 0:04:01.160 from different refineries, either in the West or overseas, so 0:04:01.200 --> 0:04:05.000 we don't really see this as kept a catastrophe, just 0:04:05.280 --> 0:04:08.720 perha some localized shortages. I've been trying to figure out 0:04:08.760 --> 0:04:11.480 all day in terms of the nature of the commodities market, 0:04:12.040 --> 0:04:15.120 why can't we price in um something like a demand 0:04:15.160 --> 0:04:19.960 shock or a production squeeze ahead of the forecast x 0:04:20.000 --> 0:04:23.280 anti so to speak. It doesn't seem like, you know, 0:04:23.320 --> 0:04:25.120 if we all knew oil was going to be at 0:04:25.160 --> 0:04:27.839 eight by the end of the year, why wouldn't it 0:04:27.839 --> 0:04:32.360 go to eighty now? Well, and what app tends to 0:04:32.400 --> 0:04:35.720 happened with the commodity markets is they develop momentum, either 0:04:35.800 --> 0:04:41.360 downward or upward momentum. We saw the downward momentum last 0:04:41.440 --> 0:04:46.160 year and we had negative forty oil. So usually they 0:04:46.160 --> 0:04:48.480 tend tend to build and they're not going to really 0:04:48.520 --> 0:04:53.599 have that um spike until we really see the demand. Specifically, 0:04:53.600 --> 0:04:59.479 what we're watching is Europe. So Europe is about a 0:04:59.520 --> 0:05:02.960 month find the US in terms of vaccinations, so we're 0:05:03.000 --> 0:05:06.800 really predicting global travel getton if they do catch up 0:05:06.880 --> 0:05:10.560 as we're expecting, and just the nature of commodity markets. 0:05:10.600 --> 0:05:14.240 They don't, they don't. They're not really good at anticipation, 0:05:14.680 --> 0:05:18.360 so it'll sort of happen when it happens. J, real quick, 0:05:18.360 --> 0:05:20.520 thirty seconds kind of what's your call for oil here? 0:05:20.520 --> 0:05:22.360 We've got a w T I crewed here at sixty 0:05:23.040 --> 0:05:24.800 dollars fifty cents. Where do you think it is your 0:05:24.920 --> 0:05:29.080 end um? We think that it'll trade in the seventy 0:05:29.200 --> 0:05:33.039 eight dollar range with the potential for a superspike. And 0:05:33.080 --> 0:05:36.359 the real reason behind that is um where we're calling 0:05:36.360 --> 0:05:40.080 OPEC plus plus, which is constraint of the U S producers, 0:05:40.120 --> 0:05:43.320 mostly due to the capital markets. So we think that 0:05:43.360 --> 0:05:46.479 will drive prices higher than they've been since two thousand fourteen, 0:05:46.960 --> 0:05:49.520 because ever since two thousand fourteen, the US has been 0:05:49.520 --> 0:05:53.440 the swing producer. But now the companies have moved to 0:05:53.480 --> 0:05:56.800 being more value type stocks, so they're not going to 0:05:56.880 --> 0:05:59.880 ramp up production, which gives us chance for prices to 0:06:00.040 --> 0:06:03.640 of higher. With if there is a supply disruption, not 0:06:03.680 --> 0:06:07.279 so much just a transportation disruption, we could see, you know, 0:06:07.480 --> 0:06:12.400 a possibility of a superspike, particularly during the summer. All right, Jay, 0:06:12.440 --> 0:06:14.919 thanks so much for joining us. J Hatfield there, CEO 0:06:15.040 --> 0:06:22.480 and founder of Infrastructure Capital Management. Let's get over right 0:06:22.480 --> 0:06:25.120 now to Will Ride. He's the founder and CEO of 0:06:25.120 --> 0:06:28.120 Grant Shares. They have over one and a half billion 0:06:28.200 --> 0:06:31.720 dollars of assets under management. At the end of last 0:06:31.800 --> 0:06:33.880 year they had that, and I'm sure they've been adding 0:06:33.920 --> 0:06:37.440 to them. Will. Um. It's it's a fairly striking move 0:06:37.480 --> 0:06:41.440 that I'm looking at right now in oil because, um, 0:06:41.480 --> 0:06:44.359 you know the latest stories all say oil climbs with 0:06:44.440 --> 0:06:49.080 gasolinea's cyber attack knocks out US pipeline. We know that 0:06:49.160 --> 0:06:52.320 was the hot story of the of the weekend. But 0:06:52.400 --> 0:06:55.080 now all of a sudden, I see Brent crude and 0:06:55.839 --> 0:06:59.080 nim x w T I just coming down hard. I 0:06:59.120 --> 0:07:01.919 mean the move is over a dollar in brand in 0:07:01.960 --> 0:07:07.000 the last half hour along what's going on? Yeah, morning, UM. 0:07:07.000 --> 0:07:09.640 I wouldn't make too much of the use of short 0:07:09.760 --> 0:07:12.880 term moved this morning, because obviously we had a big 0:07:12.920 --> 0:07:16.360 move over the last few days. More broadly, you know 0:07:16.560 --> 0:07:19.400 this year. Um, but I think we could be reacting 0:07:19.440 --> 0:07:21.400 a little bit in terms of an over shoot over 0:07:21.400 --> 0:07:25.400 the news of the pipeline attack. Um, that we saw 0:07:25.800 --> 0:07:30.320 you heading into into the weekend. Alright, So well, I'm 0:07:30.320 --> 0:07:33.480 looking at my on my Bloomberg terminal g l CEO 0:07:33.640 --> 0:07:39.520 Global commodity prices UM. I'm seeing twenty thirty increases when 0:07:39.560 --> 0:07:41.600 I look at ENTER on a year to date basis, 0:07:41.680 --> 0:07:46.280 increases when I look at energy, metals, agricultural. What are 0:07:46.320 --> 0:07:49.000 we seeing here? Is this simply, you know, just the 0:07:49.080 --> 0:07:52.480 bounce back play or is this something more structural in 0:07:52.640 --> 0:07:57.360 commodities going forward? Yeah, I mean I think it's more structural. 0:07:57.400 --> 0:08:00.760 I think that this is a new supercycle UM that 0:08:00.920 --> 0:08:05.360 has started UM but is now in sort of full 0:08:06.240 --> 0:08:09.040 blown mode here. Uh. And and the reason's kind of 0:08:09.040 --> 0:08:12.680 twofold that there's no doubt that there are some bounce 0:08:12.760 --> 0:08:16.360 back plays kind of going on here. I mean, clearly, 0:08:16.400 --> 0:08:20.120 we had, you know, a hugely depressed situation last year 0:08:20.200 --> 0:08:24.600 for commodity demand UM that is obviously coming back as 0:08:24.720 --> 0:08:28.160 the world returns to somewhat of a normal mode, but 0:08:28.240 --> 0:08:32.560 mobility basically increasing. And so we have a record highs 0:08:32.600 --> 0:08:36.120 now and copper, we have iron ore highs, we have 0:08:36.280 --> 0:08:39.440 steel prices on the rise at the all the energy 0:08:39.480 --> 0:08:43.760 complex rising as well, and and that that's understandable because 0:08:43.760 --> 0:08:46.320 that is the same theme as we're seeing with some 0:08:46.440 --> 0:08:50.560 of the pandemic equity stocks that were badly affected last year. 0:08:51.080 --> 0:08:53.880 But I think what's less talked about is, in my 0:08:53.960 --> 0:08:56.600 mind the kind of the the bigger picture here, and 0:08:56.640 --> 0:09:01.079 that is that there's been woful underinvestment in the commodities 0:09:01.120 --> 0:09:04.320 sector for many, many years, and that's because of depressed 0:09:04.400 --> 0:09:08.679 prices UM since the last peak of the last supercycle, 0:09:08.880 --> 0:09:12.040 you know, around two thousand and eight. So with this 0:09:12.160 --> 0:09:16.080 under investment, this under investment is now colliding with this 0:09:16.559 --> 0:09:21.120 huge surgeon demand, causing in my mind, a new supercycle. 0:09:21.240 --> 0:09:23.800 I think if the supercycle is not going to affect 0:09:23.840 --> 0:09:28.040 all commodities uniformly UM, but as we transition as a 0:09:28.040 --> 0:09:32.360 world to a green energy infrastructure, we're moving away from 0:09:32.400 --> 0:09:36.120 hydrocarbons and we're moving to a green energy, sustainable future 0:09:36.160 --> 0:09:40.240 that is creating and will create supercycle in many commodities 0:09:40.679 --> 0:09:45.240 UM that are stands benefit most from this energy transition. Well, 0:09:45.679 --> 0:09:49.480 I mean, it's not hard to to to believe that. 0:09:49.600 --> 0:09:52.760 And frankly, we were hearing I've heard similar things from 0:09:52.800 --> 0:09:54.640 others in the market. I was talking to Jeff Curry 0:09:54.640 --> 0:09:56.800 to day from Goldman sachs Um and I think he 0:09:56.840 --> 0:10:00.400 would agree what I don't really get is why, what's it? 0:10:00.440 --> 0:10:02.600 What is it about the commodity market that means you 0:10:02.640 --> 0:10:05.520 can't price in a demand shock and that kind of 0:10:05.559 --> 0:10:09.560 under investment x anti Why why can't UM investors really 0:10:09.559 --> 0:10:14.720 get ahead of these things? You know? Very early? Well, 0:10:14.760 --> 0:10:17.920 I think that investors can get ahead of it. I mean, 0:10:17.920 --> 0:10:21.040 it's it's one of these things where you know, right now, 0:10:21.120 --> 0:10:24.560 you have in my mind a very um you know, 0:10:24.640 --> 0:10:29.240 interesting phenomenal where commodities are out casting equities. So when 0:10:29.280 --> 0:10:34.760 you have commodities outperforming stocks, that's typically, at least historically, 0:10:34.760 --> 0:10:39.280 that's a harbinger of you know, higher inflation. That's not 0:10:39.360 --> 0:10:43.160 necessarily good news for stocks. UM. We've add an environment 0:10:43.160 --> 0:10:47.360 where commodities of underperformed equities for pretty much since the 0:10:47.480 --> 0:10:51.199 last to the peak of two thousand and eight peak. UM. 0:10:51.240 --> 0:10:53.480 So in my mind, this is, you know, something that 0:10:53.600 --> 0:10:56.199 is real m for and a lot of investors hold 0:10:56.240 --> 0:11:01.640 commodities strategically in the portfolio anyway for diversify reasons UM, 0:11:01.800 --> 0:11:04.880 and so in this particular environment, I think people are 0:11:05.200 --> 0:11:07.640 moving into commodities in a way that I certainly haven't 0:11:07.640 --> 0:11:10.360 seen for a number of years to try and hedge 0:11:10.400 --> 0:11:14.680 themselves against these inflationary risks that we're seeing. Will Ryan, 0:11:14.720 --> 0:11:17.240 thank you so much for joining us. We always appreciate 0:11:17.240 --> 0:11:20.000 getting your thoughts. Will Ryan. He's a founder and CEO 0:11:20.040 --> 0:11:24.600 of Grantit Shares, giving us thoughts here about commodities. You know, again, 0:11:24.640 --> 0:11:27.160 the question for a lot of folks is, uh, you know, 0:11:27.360 --> 0:11:29.880 is this transitory? Are we seeing some of these gains 0:11:29.880 --> 0:11:33.520 in commodity prices and therefore inflation as something that the 0:11:33.520 --> 0:11:37.520 Photo Reserve would like to argue our transitory issues maybe 0:11:37.600 --> 0:11:39.440 you know, going to the base effect where you're going 0:11:39.520 --> 0:11:42.600 off a very very easy comps. Or is there something 0:11:42.840 --> 0:11:45.719 more to this in terms of maybe as Will was 0:11:45.800 --> 0:11:50.240 suggesting a supercycle in commodity prices which may bring some 0:11:50.320 --> 0:11:54.120 troubling inflation back into the economy. So investors across our 0:11:54.160 --> 0:11:59.720 border certainly paying attention to the commodity markets. Now, let's 0:11:59.720 --> 0:12:04.679 talk about getting access to private companies. There is a 0:12:05.000 --> 0:12:09.320 trading platform called Forge that allows investors to access private 0:12:09.360 --> 0:12:14.040 markets UH and allows shareholders and investors in privately held 0:12:14.040 --> 0:12:16.320 firms to liquidated a portion of their shares ahead of 0:12:16.920 --> 0:12:20.880 I P O S or you know, spack um combinations. 0:12:20.960 --> 0:12:24.760 Kelley Rodriguez joins us the CEO of Forge, Kelly, tell 0:12:24.840 --> 0:12:29.400 us about your company, your platform and UM what kind 0:12:29.440 --> 0:12:32.240 of growth you've seen in in this year of so 0:12:32.320 --> 0:12:36.600 much activity. Yeah, sure, thank you guys for having me 0:12:36.679 --> 0:12:40.320 on UM. This has been a very big year post 0:12:41.360 --> 0:12:45.400 peak of the pandemic. We've seen the numbers expand dramatically. 0:12:45.440 --> 0:12:50.120 We reported that we've just concluded the third record quarter 0:12:50.240 --> 0:12:54.000 in a row in terms of liquidity and volume on 0:12:54.640 --> 0:12:58.040 on Forge. I think we have also seen recently that 0:12:58.080 --> 0:13:01.880 we closed the acquisition of our large as competitor, shares Post, 0:13:01.920 --> 0:13:06.640 and that created really a central ecosystem player and Forge 0:13:06.720 --> 0:13:10.600 for anybody that wants to buy or sell UM, that 0:13:10.760 --> 0:13:13.720 wants data or who wants to custody their assets. So 0:13:13.720 --> 0:13:16.120 we're really trying to create something for the broad market, 0:13:17.320 --> 0:13:20.280 all right. Kelly talked to us about spacks. That's you know, 0:13:20.280 --> 0:13:22.360 I've been in the investment business for over thirty years 0:13:22.360 --> 0:13:24.640 and SPACs is the growth of SPACs over the past 0:13:24.679 --> 0:13:27.920 twelve eight months has really got my attention. It's just exploded. 0:13:27.960 --> 0:13:29.880 It's always kind of been out there, but it's just 0:13:29.920 --> 0:13:32.719 really exploded over the last twelve months or so. How 0:13:32.720 --> 0:13:36.680 has that impacted the liquidity event for a lot of 0:13:36.679 --> 0:13:40.040 investors who might have typically used your platform to sell 0:13:40.080 --> 0:13:43.840 stock and get some liquidity. Well, so two things. Interestingly, 0:13:43.880 --> 0:13:47.160 the spacts are creating additional liquidity on Forge. So if 0:13:47.160 --> 0:13:51.240 the company has announced such as Pioneer UH, you can 0:13:51.280 --> 0:13:55.480 find buy and sell that spacking company before it's despact 0:13:56.120 --> 0:14:00.840 on Ford. So it is bringing a hole another level 0:14:01.000 --> 0:14:04.120 of liquidity for companies that aren't as big as the 0:14:04.240 --> 0:14:07.760 previous sort of trend in pre i p O unicorns. 0:14:08.240 --> 0:14:09.640 You know, if you take a look at the companies 0:14:09.640 --> 0:14:12.240 that have been going public through direct listings or through 0:14:12.240 --> 0:14:14.320 a conventional light PIO the last couple of years, these 0:14:14.320 --> 0:14:18.280 companies are between nine and a hundred billion dollar valuation 0:14:18.320 --> 0:14:21.920 companies in the private markets about six and twenty unicorns. 0:14:21.960 --> 0:14:25.400 But the SPACs are coming out and filling a market 0:14:25.480 --> 0:14:29.200 interest in the sort of low single digit billions, and 0:14:29.280 --> 0:14:32.920 so really it just looks like UM an alternative form 0:14:32.960 --> 0:14:35.280 of going public. I do think there's been a lot 0:14:35.280 --> 0:14:37.120 of hype around this to last year, and you're gonna 0:14:37.120 --> 0:14:39.360 start to see it settled down and more of a 0:14:39.400 --> 0:14:43.480 move to quality. Would have been the most popular shares 0:14:43.560 --> 0:14:46.520 traded on your platform, I mean pre I p O 0:14:46.800 --> 0:14:51.800 you know private companies that I guess employees um have 0:14:52.000 --> 0:14:54.080 have shares in and need liquidity, so they put them 0:14:54.080 --> 0:14:55.720 out there. What do you where do you see the 0:14:55.720 --> 0:14:59.480 most action? I mean, we have about four hundred companies 0:14:59.480 --> 0:15:02.320 that have trade there on the platform, But the most 0:15:02.360 --> 0:15:05.680 action isn't a company that's a large cap private that's 0:15:05.760 --> 0:15:08.200 going to be public in the next day. So I 0:15:08.280 --> 0:15:11.640 think Talentier back in Q three we did about five 0:15:11.760 --> 0:15:17.400 hundred million dollars of Palenteer volume alone a sauna. Uh, 0:15:17.560 --> 0:15:19.440 if you look at any of the companies that have 0:15:19.520 --> 0:15:24.000 gone out Airbnb, just before they go, everybody wants a 0:15:24.040 --> 0:15:27.720 piece of that that pre I p O company because 0:15:27.720 --> 0:15:29.720 they know what's gonna be liquid it's just a matter 0:15:29.760 --> 0:15:32.000 of the next sort of six ninety days to get 0:15:32.000 --> 0:15:35.200 through their process. Ll give us a sense of how 0:15:35.280 --> 0:15:40.000 the VC and private equity world has, you know, kind 0:15:40.000 --> 0:15:42.160 of evolved over the past fourteen months as we dealt 0:15:42.160 --> 0:15:45.600 with this pandemic, because ultimately, you know, those investors come 0:15:45.640 --> 0:15:47.480 to you to get liquidity. What have you seen in 0:15:47.600 --> 0:15:51.520 terms of you know, kind of that that VC market. Well, 0:15:51.520 --> 0:15:53.840 I'm glad you're asking that question. We brought something to 0:15:53.920 --> 0:15:58.000 market a little bit earlier last quarter that was called 0:15:58.040 --> 0:16:02.160 Forge Company Solutions, and this really is meant to primarily 0:16:02.320 --> 0:16:07.400 serve and put the control back into the company and 0:16:07.480 --> 0:16:11.840 the vcs that backed them around how they're raising primary 0:16:11.960 --> 0:16:15.320 or secondary capital. And this is a really important thing 0:16:15.360 --> 0:16:18.480 because these companies are now staying private for so long 0:16:18.680 --> 0:16:22.600 the employee basis and the venture capital funds who have 0:16:22.760 --> 0:16:27.480 seven to ten year lives are extending beyond the life 0:16:27.600 --> 0:16:30.880 of their funds and beyond the vesting schedule of their employees. 0:16:30.880 --> 0:16:34.920 So they need liquidity. They need capital, uh, to last 0:16:35.000 --> 0:16:37.640 and to go ten to fifteen years. I think Palanteer 0:16:37.760 --> 0:16:40.560 was a fifteen to seventeen year old company when it 0:16:40.600 --> 0:16:43.840 finally went. So they're embracing this because look, it's an 0:16:43.880 --> 0:16:46.680 employee benefit. You're gonna work for a company for ten 0:16:46.760 --> 0:16:49.600 years privately, and you need liquidity to pay for a 0:16:49.640 --> 0:16:52.360 house or send your kids to college. I think Forge 0:16:52.400 --> 0:16:54.840 is the platform that puts that company in that DC 0:16:54.920 --> 0:17:00.880 in control to manage that. So, um, when you look 0:17:01.000 --> 0:17:06.200 at the public markets, Um, what difference do you think 0:17:06.200 --> 0:17:08.439 of Forge makes in terms of the way the public 0:17:08.480 --> 0:17:14.200 markets then evolve. Well, it's interesting, there's some definite blurring 0:17:14.200 --> 0:17:16.240 of the lines in the last few years of a 0:17:16.320 --> 0:17:19.800 company can stay private longer and raise the kind of 0:17:19.880 --> 0:17:23.320 capital that you're seeing now happening. You're sitting rounds in 0:17:23.400 --> 0:17:26.679 the several hundred million rounds that are the size of 0:17:26.680 --> 0:17:28.560 what an I t O used to look like ten 0:17:28.680 --> 0:17:33.160 fifteen years ago. A company can stay private longer and 0:17:33.280 --> 0:17:37.480 really set a different path in terms of strategic investing 0:17:38.040 --> 0:17:42.560 longer term value. And so the dynamic of being public 0:17:42.680 --> 0:17:46.879 really creates a different shorter term quarterly dynamic around the 0:17:46.920 --> 0:17:50.160 shareholding UH and the objectives of the company. And many 0:17:50.200 --> 0:17:54.560 managers and CEOs of private companies, myself included, want to 0:17:54.640 --> 0:17:58.200 have the ability to invest long term, and if you've 0:17:58.240 --> 0:18:00.439 got capital available to you in the private markets, you're 0:18:00.440 --> 0:18:03.640 gonna stay private longer. Kelly Rodriguez, thank you so much 0:18:03.680 --> 0:18:07.080 for joining us. We always appreciate chattingthew Kelly Rodriguez, he's 0:18:07.080 --> 0:18:10.000 a CEO of FOURD You giving a sense of how 0:18:10.440 --> 0:18:13.919 you know, in private investors are looking for liquidity, and 0:18:13.960 --> 0:18:16.840 some of these venture backed and private equity backed firms, 0:18:16.880 --> 0:18:20.480 as they wait longer and longer to go public, they're 0:18:20.520 --> 0:18:23.679 able to trade their shares or private chairs on the 0:18:23.720 --> 0:18:30.119 private market and Forge does that. This is Bloomberg. Now 0:18:30.119 --> 0:18:32.040 I want to bring in George Bailey right now. He's 0:18:32.040 --> 0:18:36.080 a portfolio manager of I G Credit at Aviva Investors. 0:18:36.320 --> 0:18:39.879 And George, let's let's start just by talking about the issuance. 0:18:40.040 --> 0:18:42.959 It's been insane. I think I read a little bit 0:18:42.960 --> 0:18:46.439 earlier that issuance at this point in the year is 0:18:46.440 --> 0:18:49.160 the second highest we've seen it since two thousand ten. 0:18:50.000 --> 0:18:52.320 Um Is this just companies that want to get out 0:18:52.400 --> 0:18:54.560 and get some money in the low rate environment? Do 0:18:54.640 --> 0:18:59.080 they see it rising soon? Yeah? I think that is 0:18:59.080 --> 0:19:02.680 a big pot of I mean, we're twenty seventh cent 0:19:02.800 --> 0:19:06.160 behind the place we saw last year, but yeah, you're right, 0:19:06.160 --> 0:19:09.240 if you go back to previous years, we're about almost 0:19:09.840 --> 0:19:13.119 ahead of the ten pace. So I think that is 0:19:13.160 --> 0:19:15.560 a big part of it. If if you're a corporation 0:19:15.640 --> 0:19:19.280 and you expect high yields going forward, it makes sense. 0:19:19.320 --> 0:19:22.720 Just the issue debt today, especially if you're trying to refinance, 0:19:22.760 --> 0:19:25.000 trying to end debt rolling off and an issue longer 0:19:25.080 --> 0:19:28.600 term debt, that just makes more sense. George, What do 0:19:28.640 --> 0:19:31.639 you make of it when a company like Amazon announces 0:19:32.440 --> 0:19:34.959 a bond offering today and we don't know the amount yet, 0:19:35.000 --> 0:19:37.159 that's not been disclosed, but you know they've got a 0:19:37.359 --> 0:19:41.400 jillion dollars of cash on the bounty. They spew incredible 0:19:41.400 --> 0:19:44.200 amounts of free cash flow. They have no real use 0:19:44.320 --> 0:19:47.320 for the proceeds. What's it tell you when and Amazon 0:19:47.840 --> 0:19:51.800 dot Com comes to your market. We've seen a few 0:19:51.840 --> 0:19:54.800 deals this year and even last year actually after the 0:19:55.080 --> 0:19:57.720 you know, after the pandemic in sort of April May 0:19:57.800 --> 0:20:00.000 sort of time, um where you do see a big 0:20:00.040 --> 0:20:03.399 corporations that don't necessarily need to issue debt. They have 0:20:03.520 --> 0:20:06.240 the cash on their balance sheet, but they do it because, 0:20:06.240 --> 0:20:09.200 like you said, it's just cheap financing for them. Um. 0:20:09.280 --> 0:20:11.680 So if they can raise the money via the debt markets, 0:20:11.880 --> 0:20:13.919 then it just makes sense and have that cash as 0:20:13.960 --> 0:20:16.639 a buffer on the balance sheet. Now no, now that 0:20:16.720 --> 0:20:19.480 being said, that is part of what we're looking at. 0:20:19.600 --> 0:20:22.159 So when they issue debt and you raise cash in 0:20:22.200 --> 0:20:24.800 your balance sheet, it's it's as a credit investor, you're 0:20:24.800 --> 0:20:27.399 really asking what are they doing with that cash? Are 0:20:27.400 --> 0:20:29.879 they giving it back to the shareholders? Are they engaging 0:20:29.920 --> 0:20:32.120 the m and A? So really that is the focus 0:20:32.119 --> 0:20:35.679 going forward. What are you doing as a credit investor? 0:20:35.680 --> 0:20:38.040 I mean, what what moves can you make right now 0:20:38.040 --> 0:20:40.520 with fresh money? Can you can you find value out 0:20:40.560 --> 0:20:44.320 there or can you only hope to I guess preserve 0:20:44.359 --> 0:20:50.040 your capital. Yeah, evaluation doesn't matter what asset class. Year. 0:20:50.040 --> 0:20:53.520 In a moment, it seems evaluations are tough to come by. 0:20:53.440 --> 0:20:57.400 There are pockets of investment grade we like, so banking 0:20:57.400 --> 0:21:00.359 in particular, they've just got done a lot of supply 0:21:00.400 --> 0:21:02.480 and we've got that out of the way, so so 0:21:02.560 --> 0:21:05.400 that's nice. And also telecom to so with those big 0:21:05.440 --> 0:21:07.800 supply overhangs out the way, we do see value their 0:21:07.840 --> 0:21:10.800 further out the curve um. But yeah, also in high 0:21:10.880 --> 0:21:13.679 yield aswell. If you look at triple bees, so the 0:21:13.760 --> 0:21:17.560 lower part of investment great quality versus say double bees, 0:21:17.960 --> 0:21:20.760 the higher quality part of the high yield market, we 0:21:20.800 --> 0:21:22.960 do see value there in the front. And where you're 0:21:23.040 --> 0:21:25.639 you're picking yield, is it's worth it for a similar 0:21:25.720 --> 0:21:29.200 risk profile, similar fundamentals, just dipping down into that high 0:21:29.240 --> 0:21:32.840 yield space. George talked to us about credit quality. Here. 0:21:32.840 --> 0:21:35.920 We're fourteen months into this pandemic and the economic shock 0:21:36.040 --> 0:21:39.879 that it it caused. Are you seeing material deterioration in 0:21:40.560 --> 0:21:46.359 certain parts of the portfolio. Not really. The fundamentals are 0:21:46.400 --> 0:21:48.240 holding up, and I think that will be the case 0:21:48.320 --> 0:21:51.000 going forward, at least over the near future, while the 0:21:51.320 --> 0:21:54.800 macro backdrop remains strong. Um So, while we have all 0:21:54.840 --> 0:21:58.199 the doubst duo with yelling and power and then just 0:21:58.240 --> 0:22:00.840 the macro factors coming through. We have a few prints 0:22:00.880 --> 0:22:04.879 coming this week with retail sales and other points. I 0:22:04.880 --> 0:22:06.919 think if if the macro back that it should just 0:22:06.960 --> 0:22:09.639 stay strong. I don't think we'll see many cracks in 0:22:09.680 --> 0:22:12.119 the fundamentals. The other big part of it as well 0:22:12.160 --> 0:22:14.520 as the markets will just remain open. I mean what 0:22:14.560 --> 0:22:16.639 you've been talking about, their just the amount of supply 0:22:16.720 --> 0:22:19.720 we've seen this year. If the markets remain open and 0:22:19.760 --> 0:22:22.080 corporations can do that, then that really just keeps the 0:22:22.119 --> 0:22:25.720 fundamentals strong. So it's no really cracks to speak of 0:22:25.800 --> 0:22:29.560 our moment. And default rates also remain pretty manageable. I 0:22:29.600 --> 0:22:35.640 guess visibility is good as long as vaccinations continue to increase, right, 0:22:35.680 --> 0:22:39.239 that's got to be the key, the keystone of the 0:22:39.280 --> 0:22:43.600 economic recovering. Yeah, and we've seen a lot of credit 0:22:43.640 --> 0:22:46.320 strategists points of those sort of data points. Now, it's 0:22:46.359 --> 0:22:49.320 not it's not just looking at the fundamentals or corporations. 0:22:49.320 --> 0:22:52.080 It's okay, let's look at the vaccine rollout, let's look 0:22:52.080 --> 0:22:55.040 at the cases, let's look at hospital beds. Um. So 0:22:55.119 --> 0:22:58.360 it's all different data points now, isn't just the fundamentals 0:22:58.400 --> 0:23:03.200 of a corporation? All right, George? The FED has signaled 0:23:03.359 --> 0:23:07.120 lower for longer, yet there are some inflation pressures. What 0:23:07.160 --> 0:23:12.639 are you baking into your base cases to the FEDS moves. Yeah, 0:23:13.080 --> 0:23:14.960 We're started to see that come through a bit in 0:23:15.000 --> 0:23:17.880 the data, these inflationary pressure pressures. And you only need 0:23:17.880 --> 0:23:20.760 to look at the commodity prices over the last six 0:23:20.800 --> 0:23:24.680 months or so, they've doubled, two quadrupled in some places. 0:23:24.760 --> 0:23:26.520 We've seen that come through there, and then we started 0:23:26.520 --> 0:23:29.480 to see it a bit on Friday's non farm payrolls report, 0:23:30.160 --> 0:23:34.360 some wage inflation coming through. So yeah, it's definitely a concern. 0:23:34.480 --> 0:23:37.280 I think if it stays around sort of the three 0:23:37.359 --> 0:23:40.160 percent level where the FED wants to see inflation growth 0:23:40.200 --> 0:23:42.679