1 00:00:02,600 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple 6 00:00:15,520 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:23,920 Speaker 1: that Bloomberg dot com. Could there be another UK referendum 8 00:00:24,040 --> 00:00:27,200 Speaker 1: on leaving the European Union? Today we heard from Prime 9 00:00:27,240 --> 00:00:30,640 Speaker 1: Minister Theresa May who seemed to put that squarely back 10 00:00:30,840 --> 00:00:34,720 Speaker 1: on the table, which really raises questions about whether this 11 00:00:34,840 --> 00:00:37,680 Speaker 1: time maybe this is going to happen. To raise Raphael 12 00:00:37,720 --> 00:00:41,120 Speaker 1: Bloomberg Opinion editor, joining us now from London to raise 13 00:00:41,520 --> 00:00:44,639 Speaker 1: what what actually happened today? High They said, well, this 14 00:00:44,720 --> 00:00:47,280 Speaker 1: was May's last roll of the dice, so talks with 15 00:00:47,400 --> 00:00:51,800 Speaker 1: the Labor Party broke down last week. May has promised 16 00:00:52,000 --> 00:00:55,520 Speaker 1: to bring her Withdrawal Agreement Bill, which is the bill 17 00:00:55,560 --> 00:00:58,200 Speaker 1: that implements the Brexit deal, to Parliament next week and 18 00:00:58,320 --> 00:01:02,680 Speaker 1: she needed to do something uh quite dramatic to overcome 19 00:01:02,760 --> 00:01:06,320 Speaker 1: the wall of opposition she has faced in Parliament, which 20 00:01:06,400 --> 00:01:09,399 Speaker 1: is delivered three defeats of her Brexit deal. So what 21 00:01:09,520 --> 00:01:13,760 Speaker 1: she's done is promised a number of measures, some of 22 00:01:13,800 --> 00:01:17,520 Speaker 1: which are not going to be controversial, so environmental protection 23 00:01:17,640 --> 00:01:20,680 Speaker 1: levels maintaining at the same level as the EU, workers 24 00:01:20,800 --> 00:01:24,240 Speaker 1: rights being aligned with the EU. But the the sort 25 00:01:24,280 --> 00:01:27,120 Speaker 1: of headline is that she has given the MPs a 26 00:01:27,280 --> 00:01:30,319 Speaker 1: vote on whether to hold a second referendum and she 27 00:01:30,480 --> 00:01:35,319 Speaker 1: is promising some kind of customs compromised. She didn't tell UH, 28 00:01:35,360 --> 00:01:37,600 Speaker 1: she didn't tell us today what that would be, but 29 00:01:37,680 --> 00:01:40,759 Speaker 1: she has said it will be a temporary customs union 30 00:01:41,400 --> 00:01:44,640 Speaker 1: type compromise rather than the permanent one that the UH 31 00:01:44,840 --> 00:01:48,800 Speaker 1: Labor Party had asked for. But thereas there's a catcher, right, 32 00:01:48,800 --> 00:01:51,520 Speaker 1: I mean, this doesn't something have to happen first before 33 00:01:51,720 --> 00:01:55,360 Speaker 1: this can all occur. Well, there's always a catch with 34 00:01:55,600 --> 00:01:58,639 Speaker 1: with brexit. UH. The withdrawal Bill has to go into 35 00:01:58,920 --> 00:02:02,400 Speaker 1: a second reading, which allows the MPs to make amendments 36 00:02:02,440 --> 00:02:06,040 Speaker 1: to it, so that UH, so that all of these 37 00:02:06,080 --> 00:02:10,120 Speaker 1: different changes that different MPs want UH can be UH 38 00:02:10,280 --> 00:02:13,520 Speaker 1: can be put forth. It has to be approved to 39 00:02:13,639 --> 00:02:16,560 Speaker 1: be put forward to the MPs, which it probably will 40 00:02:16,639 --> 00:02:19,720 Speaker 1: because it's being changed substantially. But you know, I think 41 00:02:19,720 --> 00:02:22,840 Speaker 1: the real question is whether she's overcome enough of the 42 00:02:22,840 --> 00:02:26,399 Speaker 1: opposition from both the Labor Party and from her Conservative 43 00:02:26,520 --> 00:02:31,239 Speaker 1: backbenches to cobble together a majority here. Um, you know, 44 00:02:31,280 --> 00:02:33,480 Speaker 1: we've yet to see the reaction, We've yet to see 45 00:02:33,480 --> 00:02:36,720 Speaker 1: what the exact details are. We don't know how Thursday's 46 00:02:36,720 --> 00:02:40,080 Speaker 1: European Parliamentary elections are going to play out. But just 47 00:02:40,200 --> 00:02:42,919 Speaker 1: looking at it, you know, from a few minutes after 48 00:02:43,000 --> 00:02:45,760 Speaker 1: she's spoken, it's really hard to see how this does enough. 49 00:02:46,320 --> 00:02:50,520 Speaker 1: My one caveat is it depends on fear. How much 50 00:02:50,560 --> 00:02:53,640 Speaker 1: do MPs fear no deal? How much do they fear 51 00:02:53,680 --> 00:02:56,800 Speaker 1: a Jeremy Corbin leadership. If you're a conservative voter, how 52 00:02:56,919 --> 00:02:59,880 Speaker 1: much do they fear Nigel Farage is Brexit party, which 53 00:02:59,919 --> 00:03:02,520 Speaker 1: is been rising in the polls. If there's enough fear, 54 00:03:02,840 --> 00:03:05,040 Speaker 1: maybe she has a chance. It's interesting when you talk 55 00:03:05,080 --> 00:03:07,200 Speaker 1: about the reaction. I'm looking at the pound and the 56 00:03:07,240 --> 00:03:10,360 Speaker 1: initial reaction just that the concept of a second referendum 57 00:03:10,880 --> 00:03:13,799 Speaker 1: was incredible. It was a spike in the pound versus 58 00:03:13,800 --> 00:03:17,680 Speaker 1: the dollar. Uh that has since retreated almost entirely as 59 00:03:17,680 --> 00:03:20,000 Speaker 1: people look through the fine print and see that, you 60 00:03:20,040 --> 00:03:22,239 Speaker 1: know what this is just a carriage try to get 61 00:03:22,280 --> 00:03:25,239 Speaker 1: some MPs through this process to at least not totally 62 00:03:25,280 --> 00:03:29,519 Speaker 1: snubbed their nose on voting. Yet again, does this make 63 00:03:29,680 --> 00:03:32,720 Speaker 1: does what happened today and Theresa May's proposal make it 64 00:03:32,800 --> 00:03:35,280 Speaker 1: more likely that there will be a second referendum or 65 00:03:35,360 --> 00:03:38,160 Speaker 1: is it just basically paying lip service and trying to 66 00:03:38,160 --> 00:03:40,760 Speaker 1: throw a bone enough to get this thing through. Well, 67 00:03:40,800 --> 00:03:44,120 Speaker 1: I would say a second referendum has become marginally more likely, 68 00:03:45,200 --> 00:03:47,840 Speaker 1: both after her speech but even before that, because a 69 00:03:47,840 --> 00:03:50,480 Speaker 1: a new Tory leader. She has said she will step down. 70 00:03:50,840 --> 00:03:54,280 Speaker 1: There is a reasonable presumption that a hard Brexit or 71 00:03:54,320 --> 00:03:56,760 Speaker 1: someone who wants a hard no deal exit will take 72 00:03:56,760 --> 00:03:59,720 Speaker 1: her place if that happens. If we get to October 73 00:03:59,760 --> 00:04:04,240 Speaker 1: three first, if Parliament somehow refuses to allow a no Deal, 74 00:04:04,360 --> 00:04:07,120 Speaker 1: there's still a likelihood that this could go to another 75 00:04:07,240 --> 00:04:10,040 Speaker 1: vote before it goes to a general election, which both 76 00:04:10,040 --> 00:04:12,320 Speaker 1: parties want to avoid. Now, so I think the chances 77 00:04:12,360 --> 00:04:14,960 Speaker 1: of a second referendum are getting a little bit stronger. 78 00:04:15,640 --> 00:04:19,000 Speaker 1: So Theresa, what is the future of Theresa May right now? 79 00:04:19,040 --> 00:04:21,360 Speaker 1: How long does she have left? Would you guess? Well, 80 00:04:21,400 --> 00:04:24,520 Speaker 1: she has very little time left. She will probably announce 81 00:04:24,560 --> 00:04:29,240 Speaker 1: her a timetable for her departure once this vote happens, 82 00:04:29,480 --> 00:04:32,120 Speaker 1: but she has said she will go regardless. So you know, 83 00:04:32,200 --> 00:04:36,040 Speaker 1: even if her dream scenario plays out and she gets 84 00:04:36,080 --> 00:04:38,160 Speaker 1: a Brexit deal through, she has still announced that she 85 00:04:38,200 --> 00:04:40,880 Speaker 1: will leave. So I think we are likely to see 86 00:04:41,120 --> 00:04:43,599 Speaker 1: you know, the leadership race is already underway. We may 87 00:04:43,760 --> 00:04:45,960 Speaker 1: very well see a new Tory Party leader and a 88 00:04:45,960 --> 00:04:48,240 Speaker 1: new Prime Minister before the end of the summer. We 89 00:04:48,279 --> 00:04:52,200 Speaker 1: know that several members of the European Commissioned European Union 90 00:04:52,440 --> 00:04:55,760 Speaker 1: have supported another referendum, would like to see this whole 91 00:04:55,800 --> 00:04:59,560 Speaker 1: thing go away and the UK just simply rejoin the 92 00:04:59,560 --> 00:05:02,840 Speaker 1: European in Union. Are they involved at all in this 93 00:05:02,880 --> 00:05:07,480 Speaker 1: whole process as it's sort of muddles through Parliament. Well, 94 00:05:07,520 --> 00:05:09,600 Speaker 1: we'll have to see what sort of reaction we get there. 95 00:05:09,640 --> 00:05:12,680 Speaker 1: But from the list of ten changes that she announced today, 96 00:05:12,680 --> 00:05:16,400 Speaker 1: I couldn't see any that would really bother the EU. 97 00:05:16,480 --> 00:05:18,320 Speaker 1: They will, you know, they were pleased that there were 98 00:05:18,400 --> 00:05:21,080 Speaker 1: cross party talks and and and I think there was 99 00:05:21,120 --> 00:05:23,880 Speaker 1: a measure of dismay when they broke down. Um, I 100 00:05:23,920 --> 00:05:25,920 Speaker 1: think the EU is sort of braced for the worst. 101 00:05:25,960 --> 00:05:30,040 Speaker 1: Their brace for Theresa may uh leaving the scene and 102 00:05:30,120 --> 00:05:32,760 Speaker 1: for a hard Brexitter taking her place, so that I 103 00:05:32,839 --> 00:05:35,120 Speaker 1: think they'll be They'll be happy to see one last 104 00:05:35,200 --> 00:05:38,240 Speaker 1: roll of the dice and and hopeful that it turns 105 00:05:38,320 --> 00:05:42,360 Speaker 1: up either agreement to her deal or possibly UH move 106 00:05:42,440 --> 00:05:44,599 Speaker 1: towards a second referendum. But at this stage I don't 107 00:05:44,640 --> 00:05:49,680 Speaker 1: think on any side of anyone is counting on that happening. Well, 108 00:05:49,720 --> 00:05:52,719 Speaker 1: Theresa who is is the right front runner to replace 109 00:05:53,040 --> 00:05:55,880 Speaker 1: Theresa May? I think if the front runner we'd have 110 00:05:55,960 --> 00:06:00,120 Speaker 1: to say as Boris Johnson. He is uh the the 111 00:06:00,120 --> 00:06:04,080 Speaker 1: the best known Conservative figure. He's the one that a 112 00:06:04,120 --> 00:06:07,320 Speaker 1: lot of Tories believe is best place to take on 113 00:06:07,440 --> 00:06:10,880 Speaker 1: Jeremy Corbyn. And now you know, Nigel Farage is Brexit 114 00:06:10,960 --> 00:06:14,200 Speaker 1: party which is winning over a lot of Conservative votes. 115 00:06:14,400 --> 00:06:17,520 Speaker 1: And of course he is a real Brexitter who has 116 00:06:17,920 --> 00:06:21,960 Speaker 1: UH advocated leaving even with the no deal, so he 117 00:06:22,000 --> 00:06:27,200 Speaker 1: would be amenable uh to UH to either not negotiating 118 00:06:27,240 --> 00:06:30,000 Speaker 1: at all or negotiating a a new arrangement. But he 119 00:06:30,000 --> 00:06:32,839 Speaker 1: would be UH the He would be certainly the preferred 120 00:06:32,880 --> 00:06:36,640 Speaker 1: choice of the Conservative Party members and it is likely 121 00:06:36,720 --> 00:06:39,760 Speaker 1: they who will get to choose because the Parliamentary Party 122 00:06:39,960 --> 00:06:43,320 Speaker 1: would submit two names to the membership, and the membership 123 00:06:43,720 --> 00:06:47,640 Speaker 1: um are are pretty unequivocally for Boris just thirty seconds 124 00:06:47,680 --> 00:06:51,440 Speaker 1: Boris Johnson and I tell Farrage. Could either of them win? 125 00:06:53,200 --> 00:06:56,240 Speaker 1: Could either of them win the election? Win in a 126 00:06:56,320 --> 00:06:59,360 Speaker 1: general election? For Farrage, it's still a big uphill battle. 127 00:06:59,360 --> 00:07:01,960 Speaker 1: Britain's parlia mentory system as a first past supposed system, 128 00:07:02,000 --> 00:07:05,159 Speaker 1: so small parties don't tend to do well. But that said, 129 00:07:05,400 --> 00:07:08,160 Speaker 1: I've just seen him in the West Midlands. He has 130 00:07:08,200 --> 00:07:12,720 Speaker 1: exactly those ambitions. So as Raphael Bloomberg Opinion editor, thank 131 00:07:12,720 --> 00:07:17,640 Speaker 1: you so much calling in from London. Well. Rising trade 132 00:07:17,680 --> 00:07:20,920 Speaker 1: tensions with China have royal financial markets over the past 133 00:07:20,920 --> 00:07:23,520 Speaker 1: several weeks, yet they are still holding onto double digit 134 00:07:23,520 --> 00:07:25,760 Speaker 1: gains in SMP. To get a sense of where we 135 00:07:25,800 --> 00:07:29,120 Speaker 1: go from here, return to Jonathan McKay john as head 136 00:07:29,120 --> 00:07:32,679 Speaker 1: of sales for the Wealth Management Solutions at Schroeder's based 137 00:07:32,680 --> 00:07:35,720 Speaker 1: in New York City. John, thanks so much for joining us. Boy, 138 00:07:35,760 --> 00:07:37,680 Speaker 1: it's been a kind of a bumpy last couple of 139 00:07:37,680 --> 00:07:39,840 Speaker 1: weeks and the trade tensions have kind of come back 140 00:07:40,000 --> 00:07:43,480 Speaker 1: into investors focus. How does that fit into your view 141 00:07:43,560 --> 00:07:47,600 Speaker 1: of the equity markets? Currently. Thanks Paul for having me 142 00:07:47,640 --> 00:07:50,600 Speaker 1: and shout out to your optimism over a our excitement 143 00:07:50,680 --> 00:07:53,480 Speaker 1: or a second potential second referendum in the UK. It's 144 00:07:53,480 --> 00:07:57,920 Speaker 1: been my call, share share, I share that excitement. So 145 00:07:58,120 --> 00:08:02,040 Speaker 1: OURBU is that the mark it should be lower UM, 146 00:08:02,120 --> 00:08:05,200 Speaker 1: specifically US markets. I think there's way too much optimism 147 00:08:05,200 --> 00:08:09,560 Speaker 1: of the reaction function of UM, both policymakers from a 148 00:08:09,560 --> 00:08:12,680 Speaker 1: political perspective as well as from essential bank perspective and 149 00:08:12,760 --> 00:08:14,640 Speaker 1: what they can do to offset the risks of the 150 00:08:14,680 --> 00:08:17,240 Speaker 1: trade war. The rally at the beginning of the year 151 00:08:17,320 --> 00:08:19,560 Speaker 1: was basically built on a three legged stool. You had 152 00:08:19,680 --> 00:08:24,160 Speaker 1: cheap valuations start with, and optimism over the growth outlook 153 00:08:24,200 --> 00:08:26,120 Speaker 1: given where we were in the fourth quarter of last year, 154 00:08:26,160 --> 00:08:28,120 Speaker 1: which was essentially that the U S economy was at 155 00:08:28,200 --> 00:08:31,480 Speaker 1: risk of going into recession, a dobash turn by central banks, 156 00:08:31,520 --> 00:08:34,080 Speaker 1: as well as optimism around the trade deal. You've knocked 157 00:08:34,080 --> 00:08:37,800 Speaker 1: out one of those legs UM with their rising escalation 158 00:08:37,840 --> 00:08:40,400 Speaker 1: and trade tensions here with China UM, so then you 159 00:08:40,400 --> 00:08:44,440 Speaker 1: get back to well dovash central banks help at the margin. UM. 160 00:08:44,520 --> 00:08:46,400 Speaker 1: The growth outlook isn't as bad as it was in 161 00:08:46,480 --> 00:08:48,480 Speaker 1: the fourth quarter of last year, but it's not that good, 162 00:08:48,920 --> 00:08:50,880 Speaker 1: and the earnings outlook isn't that good. So why should 163 00:08:50,920 --> 00:08:54,439 Speaker 1: markets rally um after rallying this year at the levels 164 00:08:54,440 --> 00:08:57,120 Speaker 1: are currently at. So I think there's more downside potential 165 00:08:57,120 --> 00:08:59,120 Speaker 1: from him than there is upside even in a good 166 00:08:59,120 --> 00:09:03,520 Speaker 1: outcome in the trade are how much downside? It's tough 167 00:09:03,559 --> 00:09:05,760 Speaker 1: to say. I mean, look, you're three to four percent 168 00:09:05,920 --> 00:09:08,960 Speaker 1: down um off the peak, somewhere in that range um. 169 00:09:09,160 --> 00:09:11,960 Speaker 1: The US equity market is still trading at roughly sixteen 170 00:09:12,000 --> 00:09:15,000 Speaker 1: and a half times forward pe. I think there's too 171 00:09:15,080 --> 00:09:18,000 Speaker 1: much optimism of our earnings growth. So if earnings estimates 172 00:09:18,000 --> 00:09:19,960 Speaker 1: actually come down as we moved through the second and 173 00:09:19,960 --> 00:09:23,120 Speaker 1: third quarter, the marketing theory get richer, right, unless that 174 00:09:23,240 --> 00:09:26,080 Speaker 1: multiple decline. So I think a multiple suwhere in the 175 00:09:26,120 --> 00:09:28,400 Speaker 1: range of sort of fifteen to fifteen and a half, 176 00:09:28,480 --> 00:09:30,679 Speaker 1: it's fairer value for the US equity market, which means 177 00:09:30,679 --> 00:09:32,920 Speaker 1: you've got probably you know, somewhere in the somewhere in 178 00:09:32,920 --> 00:09:35,520 Speaker 1: the range of about five to seven percent additional downside. 179 00:09:35,720 --> 00:09:39,240 Speaker 1: So you started off commenting on Paul Squeeney's excitement about 180 00:09:39,280 --> 00:09:42,920 Speaker 1: another referendum in Great Britain, and I have to wonder 181 00:09:42,960 --> 00:09:45,079 Speaker 1: how much of a game changer that would be from 182 00:09:45,120 --> 00:09:49,120 Speaker 1: an asset perspective. Currently looking at the pound that is 183 00:09:49,200 --> 00:09:51,760 Speaker 1: gaining a versus the dollar, but not by that much, 184 00:09:51,800 --> 00:09:53,599 Speaker 1: So it seems like it's not exactly as if the 185 00:09:53,640 --> 00:09:56,520 Speaker 1: markets are pricing in this possibility. But is this something 186 00:09:56,679 --> 00:10:01,360 Speaker 1: that would materially change your outlook for European assets? Uh? Yes, 187 00:10:01,400 --> 00:10:04,280 Speaker 1: it would make us. So we're already on a relative basis, 188 00:10:04,280 --> 00:10:08,480 Speaker 1: we're already more optimistic about European equities. Um, even with 189 00:10:08,760 --> 00:10:11,040 Speaker 1: all the turmoil that you've seen happening in the UK 190 00:10:11,200 --> 00:10:13,880 Speaker 1: over the last six months or so, UM, all the 191 00:10:13,920 --> 00:10:17,640 Speaker 1: Theresa A deals coming to a getting rejected, etcetera. Um, 192 00:10:17,679 --> 00:10:19,640 Speaker 1: then we are relative to the US. It doesn't mean 193 00:10:19,640 --> 00:10:22,760 Speaker 1: we expect gangbuster returns in Europe, but expectations are lower 194 00:10:22,800 --> 00:10:26,000 Speaker 1: earning his growth is actually better based on consensus expectations 195 00:10:26,000 --> 00:10:27,840 Speaker 1: in Europe than it is in the US. And we 196 00:10:27,880 --> 00:10:30,680 Speaker 1: think the dollars over valued and should decline versus the euro. 197 00:10:30,720 --> 00:10:33,000 Speaker 1: And that helps you from a total re term perspective 198 00:10:33,040 --> 00:10:35,719 Speaker 1: if you're a US based investor, so you added in 199 00:10:36,360 --> 00:10:39,280 Speaker 1: a second referendum with a likelihood that it actually gets passed, 200 00:10:39,280 --> 00:10:42,360 Speaker 1: that they stay UM in the euro in the European Union. 201 00:10:42,640 --> 00:10:45,520 Speaker 1: I think that would definitely help sentiment and provide UM, 202 00:10:45,559 --> 00:10:48,240 Speaker 1: you know, a little bit of more bullish upside for 203 00:10:48,320 --> 00:10:51,240 Speaker 1: European equities as a whole. But I'd be a little 204 00:10:51,240 --> 00:10:53,200 Speaker 1: bit cautious. I was being a little bit cynical about 205 00:10:53,240 --> 00:10:55,960 Speaker 1: jumping on Paul's bandwagon there, just because we've seen so 206 00:10:56,000 --> 00:10:58,720 Speaker 1: many false starts over the past six months. But if 207 00:10:58,720 --> 00:11:01,240 Speaker 1: it does move down that direction, I think we can UM, 208 00:11:01,280 --> 00:11:03,960 Speaker 1: you know, we can get more bullish on Europe. John. 209 00:11:03,960 --> 00:11:06,079 Speaker 1: I'm looking at the w I RP function on the 210 00:11:06,120 --> 00:11:09,520 Speaker 1: Bloomer terminal, which and it shows that the investors are 211 00:11:09,520 --> 00:11:12,120 Speaker 1: looking roughly seventy percent of investors are looking for a 212 00:11:12,240 --> 00:11:15,400 Speaker 1: rate cut by the Fed. By your end, what is 213 00:11:15,400 --> 00:11:18,520 Speaker 1: your view? So I think that's look at rates are 214 00:11:18,520 --> 00:11:20,120 Speaker 1: going to head lower at some point. Right we're near 215 00:11:20,120 --> 00:11:21,960 Speaker 1: the nearer the end of the cycle than we are 216 00:11:22,040 --> 00:11:24,560 Speaker 1: near the beginning. I think there's a little bit too 217 00:11:24,600 --> 00:11:27,960 Speaker 1: much optimism in UM the likelihood of a rate cut. 218 00:11:28,520 --> 00:11:30,679 Speaker 1: I think part of that is because of the escalation 219 00:11:30,679 --> 00:11:32,719 Speaker 1: in the trade war and the fear that UM if 220 00:11:32,760 --> 00:11:36,559 Speaker 1: we do putariffs that does move forward on the remaining 221 00:11:36,559 --> 00:11:39,880 Speaker 1: three billion dollars of Chinese inputs, and then China retaliates, 222 00:11:39,880 --> 00:11:41,920 Speaker 1: the count retaliate, and kind that they can do other 223 00:11:42,000 --> 00:11:46,000 Speaker 1: things to try and hold our economy indirectly. UM that 224 00:11:46,080 --> 00:11:48,679 Speaker 1: the federal react in the automatically cut rates. What everyone's 225 00:11:48,679 --> 00:11:52,120 Speaker 1: forgetting is that that adds to inflationary pressures. We saw that, 226 00:11:52,280 --> 00:11:54,760 Speaker 1: you know, the primary example of being washing machine prices 227 00:11:54,800 --> 00:11:57,120 Speaker 1: at the beginning of last year, and so you'd get 228 00:11:57,120 --> 00:12:00,640 Speaker 1: a direct follow through to UM core goods price inflation 229 00:12:00,679 --> 00:12:03,120 Speaker 1: going up, not to mention wage inflation which has been 230 00:12:03,200 --> 00:12:05,840 Speaker 1: rising for the past three to four years. So I 231 00:12:05,840 --> 00:12:08,360 Speaker 1: think the Fed would cut rates, but probably not as 232 00:12:08,440 --> 00:12:10,760 Speaker 1: quickly and as much as the market is hoping for. 233 00:12:11,679 --> 00:12:15,120 Speaker 1: John McKay one quick question, Hi, yould bonds pro or 234 00:12:15,160 --> 00:12:23,240 Speaker 1: anti anti? Why elaborate there? I'll give you. So the 235 00:12:23,400 --> 00:12:26,480 Speaker 1: quick story is valuations a way too rich. Um. If 236 00:12:26,480 --> 00:12:28,560 Speaker 1: you think corporate earnings are slowing down, the amount of 237 00:12:28,559 --> 00:12:30,960 Speaker 1: debt that UM corporates in the US have taken on 238 00:12:31,040 --> 00:12:33,800 Speaker 1: over the past seven or eight years, UM, they're gonna 239 00:12:33,800 --> 00:12:35,680 Speaker 1: have to pay a price to that. Not suggesting a 240 00:12:36,040 --> 00:12:38,920 Speaker 1: you know, a quick rise in the default rate, but 241 00:12:39,000 --> 00:12:41,960 Speaker 1: you will see companies losing access to the capital markets, 242 00:12:42,000 --> 00:12:44,800 Speaker 1: and thus investors will amount of higher risk premium meanings. 243 00:12:44,920 --> 00:12:48,240 Speaker 1: Hi you old spreads will have to widen from current levels, 244 00:12:48,240 --> 00:12:51,720 Speaker 1: which are around three sixty three eighty basis points off. 245 00:12:51,920 --> 00:12:53,719 Speaker 1: I think we think there are better options out there 246 00:12:53,720 --> 00:12:57,160 Speaker 1: for investors to get yield. I would throw non agency 247 00:12:57,240 --> 00:12:59,920 Speaker 1: securitized out there, as well as certain parts of the 248 00:13:00,000 --> 00:13:02,719 Speaker 1: E merging market debt universe. John McKay, well done, Thank 249 00:13:02,760 --> 00:13:04,360 Speaker 1: you so much for joining us. John McKay a head 250 00:13:04,360 --> 00:13:08,440 Speaker 1: of sales focusing on wealth management solutions at Schroeder's based 251 00:13:08,480 --> 00:13:14,520 Speaker 1: in New York. Well, yesterday it was an odd day 252 00:13:14,600 --> 00:13:17,760 Speaker 1: for the pending Sprint t Mobile merger. First, the FEC 253 00:13:17,960 --> 00:13:20,920 Speaker 1: said that it was inclined to approve the deal. Then 254 00:13:20,920 --> 00:13:22,559 Speaker 1: just a couple of hours later, the d o J 255 00:13:22,760 --> 00:13:25,640 Speaker 1: said not so fast. So hopefully our next guest can 256 00:13:25,679 --> 00:13:28,640 Speaker 1: help us clear things up. Jennifer Rees a senior litigation 257 00:13:28,640 --> 00:13:31,559 Speaker 1: analysts for Bloomberg Intelligence. She joins us live here on 258 00:13:31,559 --> 00:13:34,200 Speaker 1: the Bloomberg Interactive broke her studio, So, Jen, I have 259 00:13:34,240 --> 00:13:37,480 Speaker 1: to admit, of my thirty years roughly of following communications deals, 260 00:13:37,480 --> 00:13:40,160 Speaker 1: I don't ever recall the d O J and the 261 00:13:40,320 --> 00:13:43,160 Speaker 1: f c C, you know, opining on the same day 262 00:13:43,160 --> 00:13:45,440 Speaker 1: and having different views. What do you think is going 263 00:13:45,480 --> 00:13:47,719 Speaker 1: on here? You know, it's really strange, And you are 264 00:13:47,760 --> 00:13:49,960 Speaker 1: exactly right because I did some research on this and 265 00:13:50,000 --> 00:13:52,360 Speaker 1: found the only one instance of the f c C 266 00:13:52,480 --> 00:13:55,480 Speaker 1: and d o J disagreeing on ultimate outcome, and this 267 00:13:55,520 --> 00:13:58,160 Speaker 1: was in the nineteen seventies, So you're thirty years before 268 00:13:58,160 --> 00:14:01,000 Speaker 1: my time, before your time, Paulics exactly. So you're you're 269 00:14:01,080 --> 00:14:05,040 Speaker 1: right on that this is really strange. Um, it's not. 270 00:14:05,160 --> 00:14:07,320 Speaker 1: It remains to be seen what happens here to It 271 00:14:07,400 --> 00:14:09,040 Speaker 1: just may be that the d o J needs a 272 00:14:09,080 --> 00:14:11,640 Speaker 1: little bit more than what the companies have offered up 273 00:14:11,679 --> 00:14:14,199 Speaker 1: to the FCC. And I think it's actually not surprising 274 00:14:14,240 --> 00:14:16,680 Speaker 1: because you know, Sprint and T Mobile have offered to 275 00:14:16,720 --> 00:14:21,120 Speaker 1: divest one of sprints prepaid brands, and they have two 276 00:14:21,160 --> 00:14:23,640 Speaker 1: brands now. The other brand, Virgin Mobile, is very small 277 00:14:23,680 --> 00:14:26,200 Speaker 1: compared to Boost Mobile, but still the d o J 278 00:14:26,360 --> 00:14:28,880 Speaker 1: would want them to divest their entire twelve percent share, 279 00:14:29,200 --> 00:14:31,040 Speaker 1: and they're not offering to do that. So it may 280 00:14:31,040 --> 00:14:33,880 Speaker 1: be that they just need to divest both brands, or 281 00:14:33,960 --> 00:14:35,960 Speaker 1: it may be that they need to divest more and 282 00:14:36,000 --> 00:14:39,000 Speaker 1: not just the brands. In other words, satellites more business 283 00:14:39,000 --> 00:14:41,440 Speaker 1: assets than what they've offered up to the FCC. So 284 00:14:41,480 --> 00:14:43,600 Speaker 1: I think they may still have some room here to 285 00:14:43,640 --> 00:14:46,160 Speaker 1: bargain with the Department of Justice. Well, certainly that's what 286 00:14:46,200 --> 00:14:48,200 Speaker 1: the markets are betting on, because we're not seeing enough 287 00:14:48,200 --> 00:14:50,880 Speaker 1: of a sell off in Sprint shares, which are down 288 00:14:51,040 --> 00:14:54,440 Speaker 1: about two percent today following the game yesterday, and you're 289 00:14:54,440 --> 00:14:56,600 Speaker 1: not seeing enough of a decline in the bonds of 290 00:14:56,640 --> 00:14:59,280 Speaker 1: Sprint either to sort of represent the markets are writing 291 00:14:59,320 --> 00:15:01,600 Speaker 1: off this deal. I mean, still it is being baked in. 292 00:15:01,760 --> 00:15:04,280 Speaker 1: I'm trying to understand what could have happened. Don't the 293 00:15:04,400 --> 00:15:08,200 Speaker 1: d o j uh and it doesn't do the DJ 294 00:15:08,360 --> 00:15:11,520 Speaker 1: and FCC speak to each other. Yeah, they've been communicating 295 00:15:11,520 --> 00:15:13,760 Speaker 1: the whole time, you know, during the year long investigation, 296 00:15:13,880 --> 00:15:17,600 Speaker 1: and they've said publicly that they've been coordinating and communicating. 297 00:15:17,600 --> 00:15:20,520 Speaker 1: So so the dual message yesterday was a little bit odd. 298 00:15:21,080 --> 00:15:23,080 Speaker 1: It's hard to say what is happening there. But the 299 00:15:23,120 --> 00:15:25,480 Speaker 1: FCC clearly wanted to come out with their decision. They 300 00:15:25,480 --> 00:15:28,440 Speaker 1: were ready, They had extra time. Their their clock doesn't 301 00:15:28,520 --> 00:15:30,720 Speaker 1: run until early June, so they didn't have to say 302 00:15:30,760 --> 00:15:33,280 Speaker 1: anything when they did, and the Department of Justice may 303 00:15:33,320 --> 00:15:35,280 Speaker 1: have been reacting to what they were seeing in the news. 304 00:15:35,360 --> 00:15:38,400 Speaker 1: An immediate reaction by many that well, it's a given 305 00:15:38,400 --> 00:15:40,240 Speaker 1: that the Department of Justice now is going to clear 306 00:15:40,280 --> 00:15:41,920 Speaker 1: and maybe they just wanted to make the point look 307 00:15:42,160 --> 00:15:45,200 Speaker 1: not so fast. We do our own independent investigation, we 308 00:15:45,280 --> 00:15:47,920 Speaker 1: have a different standard, and in fact we may need more. 309 00:15:47,960 --> 00:15:50,400 Speaker 1: And in my I'm not surprised by it, because I 310 00:15:50,440 --> 00:15:53,920 Speaker 1: do actually think based on their standards, they do need more. 311 00:15:54,160 --> 00:15:56,800 Speaker 1: You know, when when they accept a divestitor to remedy 312 00:15:56,840 --> 00:15:59,600 Speaker 1: a deal, they need to replace all of the competition 313 00:15:59,640 --> 00:16:02,640 Speaker 1: lost virtue of the merger. Twelve percent is being absorbed 314 00:16:02,680 --> 00:16:05,200 Speaker 1: in this prepaid market, That entire twelve percent needs to 315 00:16:05,240 --> 00:16:07,600 Speaker 1: go to a new competitor, and that isn't what's Britain 316 00:16:07,600 --> 00:16:10,080 Speaker 1: Tea Mobile have offered up the FCC. Now. This is 317 00:16:10,120 --> 00:16:12,880 Speaker 1: just on the prepaid side. It could also be that 318 00:16:12,920 --> 00:16:14,920 Speaker 1: the Department of Justice has some issues on the post 319 00:16:14,920 --> 00:16:18,480 Speaker 1: paid side, So the market's reaction may also be a 320 00:16:18,520 --> 00:16:21,120 Speaker 1: little bit too optimistic in that it's unclear to me 321 00:16:21,200 --> 00:16:24,120 Speaker 1: whether they are resolved on the post paid side. The 322 00:16:24,200 --> 00:16:26,360 Speaker 1: numbers don't look quite as bad there in terms of 323 00:16:26,400 --> 00:16:29,600 Speaker 1: the market share combined, which is at about and the 324 00:16:29,640 --> 00:16:32,600 Speaker 1: concentration numbers. And it's in that area that they're going 325 00:16:32,640 --> 00:16:35,320 Speaker 1: to look at the pro competitive consumer benefits that could 326 00:16:35,360 --> 00:16:38,080 Speaker 1: come from this and balance that against some potential harm. 327 00:16:38,080 --> 00:16:39,520 Speaker 1: But it's not a given that the d o J 328 00:16:39,720 --> 00:16:42,400 Speaker 1: is over the hump there either. It's interesting that you 329 00:16:42,400 --> 00:16:45,480 Speaker 1: know this. When the President Trump and Republican administration came 330 00:16:45,480 --> 00:16:47,920 Speaker 1: into power, the expectation was, Okay, let's do M and 331 00:16:48,000 --> 00:16:49,360 Speaker 1: A deals. The d o J is not gonna be 332 00:16:49,360 --> 00:16:51,760 Speaker 1: a problem. But they were very, very tough on A 333 00:16:51,840 --> 00:16:53,960 Speaker 1: T and T Time Warner. The appear to be taking 334 00:16:53,960 --> 00:16:55,800 Speaker 1: a pretty strong stance here. What do you think is 335 00:16:55,840 --> 00:16:59,120 Speaker 1: going on? You know, the the A T and T 336 00:16:59,120 --> 00:17:01,160 Speaker 1: Time Warner deal. That was a big surprise, and I 337 00:17:01,160 --> 00:17:03,000 Speaker 1: think it took a lot of people, particularly in the 338 00:17:03,040 --> 00:17:06,480 Speaker 1: antitrust community, by surprise when that happened. And I think 339 00:17:06,520 --> 00:17:08,560 Speaker 1: some of it just may simply be the fact that 340 00:17:08,960 --> 00:17:11,520 Speaker 1: there was a lot of press about the fact that 341 00:17:11,560 --> 00:17:14,360 Speaker 1: this new Republican administration would be so easy on mergers. 342 00:17:14,560 --> 00:17:16,080 Speaker 1: And you know the fact is that if you go 343 00:17:16,160 --> 00:17:19,200 Speaker 1: back in history and you look at statistics, the difference 344 00:17:19,200 --> 00:17:23,280 Speaker 1: between Democratic administrations and Republican administrations and merger enforcement is 345 00:17:23,320 --> 00:17:26,679 Speaker 1: it really only incremental? It really isn't as big as 346 00:17:26,760 --> 00:17:29,960 Speaker 1: I think the reaction was when Donald Trump was elected 347 00:17:29,960 --> 00:17:32,320 Speaker 1: and started to put the point his own people. You know, 348 00:17:32,400 --> 00:17:35,480 Speaker 1: the difference tends to be in pursuing monopolistic conduct and 349 00:17:35,560 --> 00:17:38,439 Speaker 1: things like that, and the Republicans do tend to look 350 00:17:38,480 --> 00:17:41,160 Speaker 1: at efficiencies and give efficiencies a little more weight, let's say, 351 00:17:41,160 --> 00:17:44,320 Speaker 1: than the Democrats. But it really is only an incremental difference. 352 00:17:44,600 --> 00:17:48,000 Speaker 1: So I think the aggressiveness should have been expected in 353 00:17:48,040 --> 00:17:51,840 Speaker 1: this age of these great big mergers and consolidated industries. Yes, 354 00:17:52,000 --> 00:17:55,040 Speaker 1: still though a real head scratcher in terms of the 355 00:17:55,119 --> 00:17:58,359 Speaker 1: dual messaging yesterday from the d o J and the FCC. 356 00:17:58,520 --> 00:18:01,560 Speaker 1: Jennifer Ree, thank you very much much, really illuminating. Jennifer 357 00:18:01,600 --> 00:18:07,760 Speaker 1: Rea's senior litigation analyst for Bloomberg Intelligence. Well, we are 358 00:18:07,800 --> 00:18:10,480 Speaker 1: ten plus years into this financial psycho, We've got the 359 00:18:10,560 --> 00:18:13,800 Speaker 1: Fed on the sidelines, and financial markets quite frankly, this 360 00:18:13,880 --> 00:18:17,879 Speaker 1: year performed exceptionally well despite the near term volatility. To 361 00:18:17,920 --> 00:18:20,440 Speaker 1: get a sense of where we go from here, Pleased 362 00:18:20,440 --> 00:18:23,680 Speaker 1: to welcome our next guest, Christiana Mamani, chief investment officer 363 00:18:23,720 --> 00:18:26,960 Speaker 1: and had a fixed income for Oppenheimer Funds, and Peter Straktowski, 364 00:18:27,400 --> 00:18:29,879 Speaker 1: portfolio manager for Oppenheimer Funds. They joined us on our 365 00:18:29,880 --> 00:18:33,040 Speaker 1: Bloomberg Interactive Broker Studio and to point out that Christian 366 00:18:33,040 --> 00:18:36,480 Speaker 1: and Peter recently celebrated their ten year anniversary of the 367 00:18:36,480 --> 00:18:39,520 Speaker 1: firm's investment grade Debt Team, which manages over six point 368 00:18:39,560 --> 00:18:42,800 Speaker 1: six billion dollars primarily investment grade assets. So these folks 369 00:18:42,840 --> 00:18:46,080 Speaker 1: have been doing this for a while. So Chrystial, let's 370 00:18:46,119 --> 00:18:49,360 Speaker 1: start with you, um the rising trade tensions. How are 371 00:18:49,400 --> 00:18:54,000 Speaker 1: you positioning the portfolio for what might be a prolonged 372 00:18:54,440 --> 00:18:57,719 Speaker 1: heightened sense of trade concerns? Well, so, the first thing 373 00:18:57,760 --> 00:19:00,320 Speaker 1: with respect to trade tensions to the fact that it's 374 00:19:00,359 --> 00:19:04,679 Speaker 1: not a good outcome for anyone, despite what Trump or 375 00:19:04,800 --> 00:19:07,400 Speaker 1: President She may be saying. It's bad for China, it's 376 00:19:07,440 --> 00:19:09,240 Speaker 1: bad for the US. But I think what we need 377 00:19:09,280 --> 00:19:12,800 Speaker 1: to focus on is the magnitude of that badness, if 378 00:19:12,800 --> 00:19:16,800 Speaker 1: you will. So it's uh, it shaves off roughly half 379 00:19:16,840 --> 00:19:19,600 Speaker 1: a percent from U S GDP and probably slightly more 380 00:19:19,640 --> 00:19:24,080 Speaker 1: than that from the Chinese GDP. Uh, So it's a 381 00:19:24,200 --> 00:19:26,880 Speaker 1: it's not a good outcome, but it's a manageable outcome, 382 00:19:26,920 --> 00:19:29,919 Speaker 1: and I think our expectation is as a result of this, 383 00:19:30,280 --> 00:19:35,280 Speaker 1: the likelihood of FED easing increases in and the likelihood 384 00:19:35,600 --> 00:19:40,520 Speaker 1: of the Chinese policymakers trying to stimulate their economy to 385 00:19:40,600 --> 00:19:44,760 Speaker 1: help help support that economy is probably increasing as well. 386 00:19:44,880 --> 00:19:47,320 Speaker 1: So it's not a good outcome, but it's not the 387 00:19:47,400 --> 00:19:50,120 Speaker 1: end of the world. After the D rating that took 388 00:19:50,160 --> 00:19:53,800 Speaker 1: place last week, our expectations still that markets go higher 389 00:19:53,800 --> 00:19:55,760 Speaker 1: and global equities is still the place to be. But 390 00:19:55,800 --> 00:19:57,639 Speaker 1: that's what I was going to say, is that it 391 00:19:57,720 --> 00:20:00,920 Speaker 1: sounds like this is a perfect environment for risk acids 392 00:20:00,960 --> 00:20:03,920 Speaker 1: because it sounds like from what you're saying, there's gonna 393 00:20:03,920 --> 00:20:07,960 Speaker 1: be more stimulus and FED easing, and certainly we have 394 00:20:08,080 --> 00:20:11,960 Speaker 1: the ECB and others also moving into an easy stance. Peter, 395 00:20:12,119 --> 00:20:14,480 Speaker 1: I'm just running from the fixed income standpoint, from investment 396 00:20:14,520 --> 00:20:17,880 Speaker 1: great debt standpoint, which area of the market looks most 397 00:20:17,920 --> 00:20:22,600 Speaker 1: attractive attractive given that backdrop. Okay, So I think, UH, 398 00:20:23,400 --> 00:20:25,480 Speaker 1: despite what you hear or read somewhere else, I think 399 00:20:25,600 --> 00:20:29,639 Speaker 1: that the US corporate sector UH still offers decent value 400 00:20:29,640 --> 00:20:32,120 Speaker 1: over treasuries on average, that spreads on the trip will 401 00:20:32,119 --> 00:20:36,040 Speaker 1: be rated. Bonds are hunting fifty basis points over a 402 00:20:36,080 --> 00:20:38,240 Speaker 1: course of five to seven years. So that's that's still 403 00:20:38,400 --> 00:20:41,200 Speaker 1: decent value with low holatility. And we're still in the 404 00:20:41,240 --> 00:20:44,439 Speaker 1: credit cycle. Uh, as far as you know, we we 405 00:20:44,520 --> 00:20:46,520 Speaker 1: tend to look six to twelve months. Are I think 406 00:20:46,600 --> 00:20:48,600 Speaker 1: over the next three years the FED doesn't move where 407 00:20:48,960 --> 00:20:51,840 Speaker 1: FED is very cautious. Credit cycle is going to continue. 408 00:20:51,840 --> 00:20:53,720 Speaker 1: In corporate Dad will do well and sam with asset 409 00:20:53,840 --> 00:20:56,719 Speaker 1: backs because the US consumer is doing very well. Balance 410 00:20:56,760 --> 00:21:00,560 Speaker 1: sheets at at households are strong, and that will continue 411 00:21:00,560 --> 00:21:02,760 Speaker 1: to perform very well. So, Christian, are you of the 412 00:21:02,760 --> 00:21:05,119 Speaker 1: opinion like when Lisa and I look on the Blommer 413 00:21:05,200 --> 00:21:08,240 Speaker 1: terminals roughly eight odds of a rate cut by the 414 00:21:08,320 --> 00:21:09,879 Speaker 1: end of the year. Is that kind of where you 415 00:21:10,200 --> 00:21:12,760 Speaker 1: think rates are going in that timeframe? Well, so, I 416 00:21:13,200 --> 00:21:17,000 Speaker 1: think the markets have kind of gotten little ahead of themselves. 417 00:21:17,040 --> 00:21:20,000 Speaker 1: So I think while the data today is soft, our 418 00:21:20,040 --> 00:21:22,400 Speaker 1: expectations still that in the back half of the year 419 00:21:22,520 --> 00:21:26,280 Speaker 1: data probably uh that improves and as a result, the 420 00:21:26,280 --> 00:21:29,800 Speaker 1: FED probably doesn't cut rates this year. Having said that, 421 00:21:30,119 --> 00:21:33,879 Speaker 1: if there's any bit of give on the economy, the 422 00:21:33,920 --> 00:21:37,679 Speaker 1: FED is probably going to be far more proactive because 423 00:21:37,720 --> 00:21:41,040 Speaker 1: it's really worried about the trade issues, and uh, their 424 00:21:41,160 --> 00:21:45,320 Speaker 1: reaction function with respect to the moment they see the 425 00:21:45,359 --> 00:21:47,679 Speaker 1: weakness to how they're going to react is going to 426 00:21:47,720 --> 00:21:50,240 Speaker 1: be much shorter with trade than anything else that we 427 00:21:50,320 --> 00:21:53,240 Speaker 1: have faced off late. One thing I'm struggling to understand 428 00:21:53,680 --> 00:21:57,199 Speaker 1: is what are some potential surprises that could upend this 429 00:21:57,359 --> 00:22:01,480 Speaker 1: thesis Because recently we've seen others buying into it, We've 430 00:22:01,480 --> 00:22:04,000 Speaker 1: seen money going into investment grade bond funds. It's been 431 00:22:04,000 --> 00:22:07,000 Speaker 1: a sweet spot of sorts over the past a month 432 00:22:07,119 --> 00:22:10,920 Speaker 1: or so. What's the risk to this view? Peter? So, 433 00:22:11,560 --> 00:22:14,280 Speaker 1: the first and foremost risk to any bond portfolio is 434 00:22:14,400 --> 00:22:17,800 Speaker 1: higher interest rates. But I think given the current regime 435 00:22:17,840 --> 00:22:20,439 Speaker 1: and the fact that the FED actually paused because we 436 00:22:20,480 --> 00:22:23,360 Speaker 1: don't really see any price pressures, I think the Fed 437 00:22:23,480 --> 00:22:25,640 Speaker 1: is going to continue to stay on on the sideline 438 00:22:25,680 --> 00:22:28,520 Speaker 1: and be very watchful, and I think that risk is eliminated. 439 00:22:28,880 --> 00:22:31,119 Speaker 1: The other risk is volatibly coming back into the market 440 00:22:31,160 --> 00:22:35,720 Speaker 1: from some unforeseen source where there's large draw on on 441 00:22:35,720 --> 00:22:38,679 Speaker 1: on debt because people want to buy equities. For that, 442 00:22:38,760 --> 00:22:40,440 Speaker 1: equities would have to sell out, So I don't really 443 00:22:40,480 --> 00:22:43,639 Speaker 1: see it anytime soon. So, but Christna, I guess that 444 00:22:43,840 --> 00:22:46,640 Speaker 1: it raises a question is the FED more in control here? 445 00:22:46,760 --> 00:22:48,520 Speaker 1: Is the FED more important or is it the e 446 00:22:48,600 --> 00:22:50,520 Speaker 1: c B and the b O J And the fact 447 00:22:50,560 --> 00:22:53,080 Speaker 1: that the amount of negative yielding debt has surged to 448 00:22:53,520 --> 00:22:57,240 Speaker 1: a new post high. Well, so I think the FED 449 00:22:57,440 --> 00:23:00,679 Speaker 1: was the most important central bank for I'm a pivot 450 00:23:00,760 --> 00:23:05,400 Speaker 1: standpoint in two thousand, two thousand eighteen because they were 451 00:23:05,480 --> 00:23:09,199 Speaker 1: the furthest along on the tightening cycle. So them pulling 452 00:23:09,280 --> 00:23:12,040 Speaker 1: back I think was very very important on a go 453 00:23:12,200 --> 00:23:16,240 Speaker 1: forward basis. FED is a is in it for a ride. Effectively, 454 00:23:16,320 --> 00:23:19,400 Speaker 1: they don't control anything. They're basically going to be reacting 455 00:23:19,600 --> 00:23:23,199 Speaker 1: to whatever happens in the marketplace. People who are central 456 00:23:23,200 --> 00:23:26,720 Speaker 1: banks that can actually be far more proactive as to 457 00:23:27,000 --> 00:23:31,359 Speaker 1: reactive is probably ECB and Bank of Japan. FED is 458 00:23:31,760 --> 00:23:33,920 Speaker 1: at the end of the day the most important central bank, 459 00:23:34,000 --> 00:23:37,119 Speaker 1: but right now it's not in control of anything, not 460 00:23:37,200 --> 00:23:41,000 Speaker 1: in control of anything. That's reassuring, Uh, Peter, give us 461 00:23:41,000 --> 00:23:43,280 Speaker 1: a sense within the investment grade space kind of where 462 00:23:43,400 --> 00:23:48,280 Speaker 1: you guys are um seeing value today versus maybe some others. Okay, 463 00:23:48,320 --> 00:23:52,160 Speaker 1: Like so I mentioned before, Uh, good quality corporate debt 464 00:23:52,280 --> 00:23:55,960 Speaker 1: not necessarily single a rated but still investment great. Uh, 465 00:23:56,080 --> 00:23:59,199 Speaker 1: good asset bags their industry sectors, I mean, are you 466 00:24:00,040 --> 00:24:03,960 Speaker 1: tis true? But I mean I'm looking at financials, health, healthcare, 467 00:24:04,200 --> 00:24:07,200 Speaker 1: those types other sectors. Are you like? Sure, as regulated 468 00:24:07,240 --> 00:24:10,200 Speaker 1: as the financial companies are today, there is always a 469 00:24:10,240 --> 00:24:18,280 Speaker 1: good value post on nine. Okay, No, that is not 470 00:24:18,359 --> 00:24:20,480 Speaker 1: a US company. I know they operate here, but that 471 00:24:20,640 --> 00:24:25,000 Speaker 1: is not a US company. Uh. But the main thing 472 00:24:25,080 --> 00:24:28,520 Speaker 1: is that there's good that it's been picked over. You 473 00:24:28,600 --> 00:24:30,440 Speaker 1: have to be very careful at this point in the 474 00:24:30,480 --> 00:24:33,040 Speaker 1: credit cycle, but doesn't mean there aren't any deals to 475 00:24:33,359 --> 00:24:36,359 Speaker 1: be gotten Christmas. Since you're here and you oversee all 476 00:24:36,520 --> 00:24:39,679 Speaker 1: fixed income, what about how yelled at this point? Well, so, 477 00:24:39,920 --> 00:24:43,440 Speaker 1: I think how you represents good value. It's not as 478 00:24:43,600 --> 00:24:46,360 Speaker 1: good value as it was let's say three or four 479 00:24:46,400 --> 00:24:49,520 Speaker 1: months ago, but still still pretty good value. I think 480 00:24:49,680 --> 00:24:52,440 Speaker 1: the question you have to ask yourself is how are 481 00:24:52,480 --> 00:24:56,119 Speaker 1: you going to source income in this environment where overall 482 00:24:56,200 --> 00:24:59,479 Speaker 1: policy rates and nintenior treasury rates are relatively low? And 483 00:24:59,560 --> 00:25:02,120 Speaker 1: for that you'll have to take meaningful amount of risk 484 00:25:02,200 --> 00:25:05,480 Speaker 1: because otherwise you'll be you know too and change percentage 485 00:25:05,480 --> 00:25:07,880 Speaker 1: the maximum amount of yield that you can generate, and 486 00:25:08,040 --> 00:25:10,239 Speaker 1: you need four percent five percent, what are you gonna do? 487 00:25:10,480 --> 00:25:13,840 Speaker 1: High yield is one, loans is another. And emerging market 488 00:25:13,920 --> 00:25:17,400 Speaker 1: local currency debt I think is still still good value. 489 00:25:17,520 --> 00:25:20,520 Speaker 1: You know, because think about it from a global perspective, 490 00:25:20,680 --> 00:25:24,840 Speaker 1: there are two certainties. Inflation on a global basis is 491 00:25:24,880 --> 00:25:29,560 Speaker 1: still going down, and emerging market real yields are still 492 00:25:30,160 --> 00:25:33,199 Speaker 1: meaningfully higher than what you can find on the on 493 00:25:33,280 --> 00:25:35,560 Speaker 1: the developed market. So that is over the next two 494 00:25:35,640 --> 00:25:38,439 Speaker 1: or three five years, real yields and emerging markets are 495 00:25:38,480 --> 00:25:42,240 Speaker 1: going down. Uh and uh I. I think the overall 496 00:25:42,480 --> 00:25:45,480 Speaker 1: nominal rates and emerging markets are probably going down as well, 497 00:25:45,480 --> 00:25:48,960 Speaker 1: So it's a good environment for emerging market debt. Christian Money, 498 00:25:49,080 --> 00:25:51,359 Speaker 1: chief investment officer and head of fixed to come at 499 00:25:51,680 --> 00:25:55,399 Speaker 1: an Oppeniver and Have Funds, and Peter Stokowski, portfolio manager 500 00:25:55,440 --> 00:25:57,880 Speaker 1: also at Oppenheimer Funds, joining us here in our Bloomberg 501 00:25:57,880 --> 00:26:00,760 Speaker 1: Interactive Broker Studios, thank you so much celebrating their tenure 502 00:26:00,800 --> 00:26:04,400 Speaker 1: anniversary of the firm's investment grade debt TIVA. They help 503 00:26:04,640 --> 00:26:08,040 Speaker 1: oversee or they do oversee, the Oppenheimer Total Return Bond Fund. 504 00:26:09,040 --> 00:26:11,600 Speaker 1: Thanks for listening to the Bloomberg P and L podcast, 505 00:26:11,920 --> 00:26:15,840 Speaker 1: you can subscribe and listen to interviews at Apple Podcasts, SoundCloud, 506 00:26:15,960 --> 00:26:19,400 Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm 507 00:26:19,440 --> 00:26:23,440 Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. 508 00:26:23,560 --> 00:26:26,159 Speaker 1: It's one before the podcast. You can always catch us 509 00:26:26,200 --> 00:26:27,800 Speaker 1: worldwide on Bloomberg Radio