WEBVTT - ISM Non-Manufacturing Data, Markets, Argentina Debt 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge. You. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Waits, each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor, find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.799 at Bloomberg dot com. For months, a lot of economists 0:00:21.800 --> 0:00:25.200 and traders have been saying, it's just manufacturing. It is 0:00:25.239 --> 0:00:29.120 a specific sector that is suffering specific pain. Today we 0:00:29.200 --> 0:00:32.720 get data showing that a U S services gauge dropped 0:00:32.760 --> 0:00:35.879 to a three year low. A gauge of employment in 0:00:35.920 --> 0:00:38.879 the U S services sector fell into contraction for the 0:00:38.920 --> 0:00:43.280 first time since two thousand ten. This is beyond manufacturing. 0:00:43.360 --> 0:00:46.960 Joining us here, Lena Shilietieva in our senior US economist 0:00:46.960 --> 0:00:50.400 for Bloomberg Economics, Joining us in our Bloomberg Interactive Broker Studios. 0:00:50.440 --> 0:00:54.840 How concerned should we be so? Uh? Today's numbers a 0:00:55.000 --> 0:00:59.000 clear sign that worries you know that we saw in 0:00:59.040 --> 0:01:05.280 the manufacturing sector are spreading beyond into a broader economic activity. However, 0:01:05.480 --> 0:01:08.720 I would question against you know, saying, Okay, this is 0:01:08.760 --> 0:01:12.800 a recession signal, it's not. You know, the sector is 0:01:12.840 --> 0:01:18.000 still expanding, expanding although slower pace. You know. I think 0:01:18.240 --> 0:01:23.000 this kind of number is comparable to what happened back 0:01:23.000 --> 0:01:27.480 into thousands sixteen. Remember when we had China devaluation and 0:01:27.680 --> 0:01:30.480 a market route on the back of it, and that 0:01:30.600 --> 0:01:34.760 affected business sentiment to quite a significant degree. But we 0:01:34.760 --> 0:01:37.600 were not talking about recession. So we're not talking about 0:01:37.600 --> 0:01:43.560 the recession now. We think the probability still remains relatively low. Elena, 0:01:43.680 --> 0:01:47.480 when we saw the manufacturing side of the economy turned 0:01:47.480 --> 0:01:50.240 negative and actually into contraction, I think a lot of 0:01:50.240 --> 0:01:54.120 people felt like it was primarily driven by uncertainties associated 0:01:54.160 --> 0:01:57.320 with the trade tensions. Is that you think that's also 0:01:57.360 --> 0:02:00.760 impacting the service society economy as well? Uh? Sure, So 0:02:01.400 --> 0:02:04.040 if you read some comments, you know, not only look 0:02:04.080 --> 0:02:06.160 at the numbers, but if you read the comments in 0:02:06.200 --> 0:02:10.320 the actual ism report, Uh, there's a lot of discussion 0:02:10.600 --> 0:02:15.360 all across the manufacturing and non manufacturing industries about how 0:02:15.480 --> 0:02:19.280 tariffs are impacting the businesses. So, but what I found 0:02:19.360 --> 0:02:23.360 very interesting in today's report actually is that, uh, some 0:02:23.360 --> 0:02:27.399 some people are talking about how they are substituting how 0:02:27.440 --> 0:02:31.200 they are working to substitute some imports from China with 0:02:31.600 --> 0:02:35.200 UH imports from other countries. So I think eventually this 0:02:35.320 --> 0:02:39.919 will work and we will be just okay. But right 0:02:39.919 --> 0:02:42.480 now is just creating a lot of uncertainty. So how 0:02:42.560 --> 0:02:44.880 much of a concern just sort of raise ahead of 0:02:44.880 --> 0:02:50.080 tomorrow's jobs number. I think it's a significant indicator, you know, 0:02:50.240 --> 0:02:54.760 along with other labor market indicators. I think it's telling 0:02:54.880 --> 0:02:59.680 us we will see another relatively weak number, but again 0:02:59.800 --> 0:03:03.559 not something that will be able to push the unemployment 0:03:03.639 --> 0:03:07.200 rate higher. In fact, we expect the unemployment rate to 0:03:07.200 --> 0:03:10.440 go down by attempts to three point six percent, so 0:03:10.919 --> 0:03:15.119 a one thirty five thousand number that we are forecasting 0:03:15.160 --> 0:03:19.040 would be just enough to do that. So, given that 0:03:19.080 --> 0:03:21.040 we are starting to see a little bit of weakness 0:03:21.720 --> 0:03:25.200 creep into the consumer of the services side um and 0:03:25.200 --> 0:03:28.400 will certainly wait for the jobs data tomorrow, how do 0:03:28.400 --> 0:03:31.080 you think that the FED will react for the remainder 0:03:31.120 --> 0:03:34.560 of this year? Interesting you mentioned that because we already 0:03:34.639 --> 0:03:38.440 heard today after the week, same number, and you know 0:03:38.520 --> 0:03:44.800 other indicators. We heard from UH Charlie Evans overnight he 0:03:44.840 --> 0:03:48.840 was speaking in Madrid and he actually said that he's 0:03:48.920 --> 0:03:52.680 still not convinced they need to act at the October meeting. 0:03:53.160 --> 0:03:57.560 He thinks that fundamentals remain solid, but I think if 0:03:57.600 --> 0:04:01.240 we continue to get weak data like we did today, 0:04:01.400 --> 0:04:04.920 especially the unemployment Rade report, this will push the fits 0:04:05.000 --> 0:04:07.920 And at the end of the months, let's say there 0:04:07.960 --> 0:04:10.440 are some optimists out there saying, let's buy this deep. 0:04:10.920 --> 0:04:13.280 We think that the market is going to turn around 0:04:13.400 --> 0:04:15.600 and that either the feder will come in with stimulus 0:04:16.000 --> 0:04:19.320 or we'll see strength from somewhere else where in the economy. 0:04:19.440 --> 0:04:24.039 Could we see strength, well, you know it's it's the consumer. 0:04:24.120 --> 0:04:26.840 We've been talking about it for quite some time, right, 0:04:26.880 --> 0:04:30.359 So that doesn't this directly feed into consumer spending? And 0:04:30.360 --> 0:04:33.680 it isn't consumer spending essentially a lagging indicator, and employment 0:04:33.720 --> 0:04:38.200 kind of procedes that it depends on how much wages grow, okay, 0:04:38.320 --> 0:04:42.880 and how much will consumers feel optimistic about the outlook 0:04:43.200 --> 0:04:47.120 and will they spend it. So we are heading into 0:04:47.160 --> 0:04:50.520 a holiday season pretty soon, so we'll see how that 0:04:50.560 --> 0:04:53.640 plays out. So that, like early indicators are saying that 0:04:53.680 --> 0:04:56.240 the holiday season will be a good one. So, Lena, 0:04:56.279 --> 0:05:00.440 are you guys at Bloomberg Economics in the camp that UM, 0:05:00.480 --> 0:05:04.279 there could be a recession in or maybe just more 0:05:04.400 --> 0:05:07.440 like the new normal, which might be one and a 0:05:07.520 --> 0:05:10.280 half to two growth, and that might be kind of 0:05:10.279 --> 0:05:12.640 what we have. So we don't see a recession within 0:05:12.680 --> 0:05:16.920 the next twelve months. We think the probability is relatively low. 0:05:16.960 --> 0:05:22.640 We just published some research. Actually our recession indicator is 0:05:22.640 --> 0:05:26.719 that for the next twelve months, and we think that 0:05:26.760 --> 0:05:29.040 we will see a significant slow down in the second 0:05:29.040 --> 0:05:32.360 half of the year uh to something like one percent 0:05:32.480 --> 0:05:34.920 on average from two point six percent in the first 0:05:34.960 --> 0:05:37.920 half of the year. But that by no means means 0:05:38.240 --> 0:05:43.680 recession is coming. I'm just trying to understand going forward. 0:05:43.800 --> 0:05:45.760 It seems like the market is saying the federal reserve 0:05:45.839 --> 0:05:50.080 or cut rates it will be insufficient to fuel economic 0:05:50.120 --> 0:05:54.440 growth real quick. That accurate, I think it is. I 0:05:54.480 --> 0:05:58.039 think you know, the market is thinking the FIT might 0:05:58.080 --> 0:06:02.360 not have enough ammunition to act. They will obviously do 0:06:02.400 --> 0:06:05.800 what they can, but this might require some sort of 0:06:05.800 --> 0:06:08.960 a fiscal stimulus. The chances I don't know. I cannot 0:06:09.040 --> 0:06:11.760 talk about the chances of that, but it seems like 0:06:11.839 --> 0:06:15.840 that's what we need UM at this point. Elena Chila Tieva, 0:06:15.880 --> 0:06:18.839 thank you so much. Senior US economists for Bloomberg Economics, 0:06:18.880 --> 0:06:34.720 joining us here on our Bloomberg Interactor broker studio. George Young, 0:06:34.800 --> 0:06:38.520 partner and portfolio manager at Villary Funds, joins us to 0:06:38.600 --> 0:06:41.680 talk about volatility and trading in this market. Villary Funds 0:06:41.720 --> 0:06:44.559 they are based in the great City of New Orleans, 0:06:44.560 --> 0:06:46.920 but George joins us here live in our Bloomberg Interact 0:06:46.920 --> 0:06:49.320 their broker studio. So, George, I was just talking about, 0:06:49.360 --> 0:06:51.480 you know, these past couple of days, this week has 0:06:51.520 --> 0:06:53.800 just been you know, a sell off on some weekending 0:06:53.880 --> 0:06:57.599 economic news. How are you guys viewing the market right here. Well, 0:06:57.600 --> 0:07:00.120 we're long term investors and I think that's import and 0:07:00.240 --> 0:07:02.279 for people to keep in mind because this is not 0:07:02.400 --> 0:07:04.520 a short term event. It's not like going to the 0:07:04.520 --> 0:07:06.240 casino where you need to cash out at the end 0:07:06.279 --> 0:07:08.800 of the day. So if you can put on some 0:07:08.880 --> 0:07:12.240 blinders and look out into the future again, I'd like 0:07:12.320 --> 0:07:15.160 to think that our investors are investing for retirement, for 0:07:15.240 --> 0:07:18.280 specific goals, whether it's education for the kids, whatever it 0:07:18.320 --> 0:07:21.080 may be. Uh, you need to look at the fact 0:07:21.160 --> 0:07:24.280 that the economy is basically healthy. Yeah, there's some ripples 0:07:24.320 --> 0:07:26.960 out there worried about the manufacturing index, But I think 0:07:27.080 --> 0:07:29.880 that is a short term indicator. Uh, when I say 0:07:29.920 --> 0:07:32.920 the economy is healthy, We've got good g d P numbers, 0:07:33.160 --> 0:07:37.760 we've got low unemployment, we've got not overly strong valuations 0:07:37.760 --> 0:07:40.080 in the stock market. So it's still attracted from a 0:07:40.080 --> 0:07:41.880 pe base, especially in the light of the fact that 0:07:41.920 --> 0:07:44.880 you've got one point six percent yields on the ten 0:07:44.920 --> 0:07:47.120 year treasury. Got to keep all that in mind. So 0:07:47.640 --> 0:07:50.920 this is something people say, we're long term investors, buy 0:07:50.960 --> 0:07:54.480 and hold. The U S. Economy isn't going to collapse entirely. 0:07:55.760 --> 0:07:58.440 It's a good time to just stay invested and stay 0:07:58.480 --> 0:08:02.360 the course. What happened. And if someone is sixty four 0:08:02.440 --> 0:08:05.520 years old, they're going to retire in the next three years, 0:08:06.320 --> 0:08:08.720 and they want to know where should they be hiding 0:08:08.920 --> 0:08:12.160 right now? You know, should they basically shift away from 0:08:12.240 --> 0:08:14.800 all their stocks and just go to cash because there 0:08:14.840 --> 0:08:17.760 is sort of an imminent crash being signaled by weakening 0:08:17.880 --> 0:08:21.640 services and on the heels of manufacturing and then talk 0:08:21.720 --> 0:08:24.680 of trade wars and forget about it. Well, I'll give 0:08:24.680 --> 0:08:26.960 you two answers on that one. If you're sixty four 0:08:27.040 --> 0:08:30.640 years old, that means that you're retiring possibly, but that 0:08:30.640 --> 0:08:32.680 doesn't mean you're going to die tomorrow. So you've got 0:08:32.679 --> 0:08:34.800 to think that you've got another twenty years to live. 0:08:35.320 --> 0:08:37.840 And if that's going to happen on a statistical basis, 0:08:37.960 --> 0:08:40.640 you've got to buy stocks one point six percent and 0:08:40.640 --> 0:08:42.720 a government bond is not going to cut it. So 0:08:42.760 --> 0:08:44.640 you really need to be prepared to invest for a 0:08:44.679 --> 0:08:47.400 longer term. And that's not going to be fun. But again, 0:08:47.679 --> 0:08:50.640 it's very easy to look backwards and see what the 0:08:50.720 --> 0:08:53.199 cell signals were. Again, if you look back at the 0:08:53.240 --> 0:08:56.480 fourth quarter of last year, a lot of people are remembering, oh, 0:08:56.720 --> 0:08:59.440 fourth quarter last year, that was a problem. We're entering 0:08:59.440 --> 0:09:01.920 the fourth quarter or now October, i'm told is a 0:09:01.960 --> 0:09:04.000 bad month. All those things are true, And I have 0:09:04.080 --> 0:09:07.120 no aversion to a sixty four year old having a 0:09:07.120 --> 0:09:09.320 certain amount in cash or certain amount in bonds. But 0:09:09.360 --> 0:09:11.480 I think they've still got to have a preponderance in 0:09:11.520 --> 0:09:13.200 stocks because that's what's going to keep them for the 0:09:13.240 --> 0:09:15.360 long term. I'd say a different answer if you were 0:09:15.360 --> 0:09:18.600 talking about an eighty year old. Life expectancy isn't as long. 0:09:18.720 --> 0:09:23.040 Different needs, different reaction to volatility. Uh. And there's one 0:09:23.080 --> 0:09:26.520 of our old aphorism. Uh, no safe haven for capital 0:09:26.640 --> 0:09:29.719 or capitalists. So you've got to be a little cautious. 0:09:30.640 --> 0:09:34.120 But again, you you enter the stock market assuming there's 0:09:34.120 --> 0:09:35.800 gonna be a certain amount of risk, and you have 0:09:35.800 --> 0:09:38.800 to be willing to take that. So here we are, George, 0:09:39.000 --> 0:09:43.080 ten plus years into this economic cycle. We have signs of, 0:09:43.720 --> 0:09:46.080 you know, a weakening economy, still growing in the US, 0:09:46.120 --> 0:09:49.080 but but weakening. What are the sectors that you think 0:09:49.520 --> 0:09:52.840 that you're recommending to your clients that they pay attention to. Well, 0:09:52.840 --> 0:09:55.240 I think you've got good opportunities in technology. And again 0:09:55.320 --> 0:09:59.120 technology dominates the S and P five. But one common 0:09:59.240 --> 0:10:03.720 characteristic technologies whatever software, for instance, that you buy, you 0:10:03.880 --> 0:10:06.360 as a user, tend to re up that same software, 0:10:06.760 --> 0:10:09.960 and so they've got very visible cash flow streams. The 0:10:09.960 --> 0:10:12.400 other thing that's attractive as most technology companies have very 0:10:12.440 --> 0:10:14.840 little debt, and that's obvious the way that you get 0:10:14.840 --> 0:10:18.559 in trouble nowadays if you have too much debt, and 0:10:18.679 --> 0:10:21.240 as we all know with a lot of corporations, any 0:10:21.400 --> 0:10:24.640 debt that is on a company's books can be refinanced 0:10:24.640 --> 0:10:28.040 at these historically low rates. So I think technology is 0:10:28.040 --> 0:10:30.440 a good area to look at. I want to go 0:10:30.520 --> 0:10:35.640 back to the sort of age issues I'm having. My head, 0:10:35.679 --> 0:10:38.000 of course went on succeed four. I'm not going to 0:10:38.120 --> 0:10:42.880 say it. I'm wondering, do you think then that, for 0:10:42.920 --> 0:10:46.120 no reason, should people change their allocations? In other words, 0:10:46.160 --> 0:10:49.079 let's just say, I mean, should they reduce their allocations 0:10:49.080 --> 0:10:52.480 to equities in a situation where they're needing to preserve 0:10:52.559 --> 0:10:55.040 cash and focus on the income level, or should they 0:10:55.040 --> 0:10:59.080 look to stocks as the new income providers. I think 0:10:59.080 --> 0:11:01.559 that people need to understan and the total return concept, 0:11:01.600 --> 0:11:04.280 and I think most people do that. As you shift, 0:11:04.360 --> 0:11:06.400 and let's say we're talking about i RA, so for 0:11:06.440 --> 0:11:08.760 the argument's sake, you don't have to worry about taxes. 0:11:08.920 --> 0:11:11.040 You can make that shift, and you should as you 0:11:11.080 --> 0:11:13.320 move from let's say the sixty four year old to 0:11:13.400 --> 0:11:15.280 the eighty year old. The other thing to keep in 0:11:15.320 --> 0:11:18.200 mind is that if you do make an abrupt decision 0:11:18.520 --> 0:11:22.640 to liquidate your portfolio and go fifty into cash, what's 0:11:22.679 --> 0:11:24.439 going to be the sign that's going to tell you, Okay, 0:11:24.480 --> 0:11:27.040 now it's quote safe to get back in. It does 0:11:27.080 --> 0:11:29.040 not ring a bell. You never know when that's going 0:11:29.080 --> 0:11:31.480 to happen. So I think it's much better to adopt 0:11:31.520 --> 0:11:36.600 a constant um uh investment policy statement for yourself. Endowment 0:11:36.720 --> 0:11:40.400 funds mutual funds have an investment policy statement and they 0:11:40.440 --> 0:11:42.800 adhere to those with good reason. So if you think 0:11:42.920 --> 0:11:46.240 back about the fourth quarter of last year, think back 0:11:46.280 --> 0:11:49.840 to the first quarter of two thousand nine, when the 0:11:49.880 --> 0:11:52.360 market was hitting loads, it's good that you would have 0:11:52.400 --> 0:11:55.320 stuck to your investment policy statement to maintain the proper 0:11:55.360 --> 0:11:58.840 asset allocation. Well, certainly people who stuck to their allocations 0:11:58.840 --> 0:12:01.920 today in equities are actually going to be pleasantly surprised 0:12:01.960 --> 0:12:03.800 because what looked like it was going to be a 0:12:03.960 --> 0:12:07.480 very down day has turned surprisingly positive with the nastac 0:12:07.480 --> 0:12:09.840 opp nearly six tenths of a percent. George Young, thank 0:12:09.840 --> 0:12:12.040 you so much for being with us. George Young, portfolio 0:12:12.080 --> 0:12:14.679 manager of the Villary Balanced Fund, which trades under the 0:12:14.720 --> 0:12:35.000 ticker v I l l X, joining us now. We 0:12:35.040 --> 0:12:37.520 are so happy to have Damien Sassaur Fixing come Strategistic 0:12:37.559 --> 0:12:41.800 focused on the emerging markets for Bloomberg Intelligence and UH. 0:12:42.240 --> 0:12:45.640 I want to look first at Argentina because it's hundred 0:12:45.679 --> 0:12:47.640 year bonds that were sold just a couple of years ago, 0:12:47.920 --> 0:12:50.280 trading at forty three cents in the dollar trading a 0:12:50.360 --> 0:12:53.679 par not so long ago. What is the implication here, Well, 0:12:53.720 --> 0:12:55.440 I think you want to talk about Argentina, because I 0:12:55.480 --> 0:12:58.199 just returned from Buenos Ayres last week, So let's talk 0:12:58.200 --> 0:13:01.360 about Argentina. Argentina, and I've met with quite a bunch 0:13:01.360 --> 0:13:03.479 of people on the ground, and it's certainly a deflating 0:13:03.520 --> 0:13:06.960 a sentiment down there. But three hundred fifty billion dollars 0:13:07.000 --> 0:13:10.360 of debt outstanding, of which two hundred sixty billion dollars 0:13:10.440 --> 0:13:13.199 is in hard currency, so they will have to undergo 0:13:13.360 --> 0:13:15.559 a major restructuring. I mean, this isn't just gonna be 0:13:15.600 --> 0:13:18.160 a reprofiling maturities such as they've led us to believe. 0:13:18.200 --> 0:13:20.480 This is gonna be led by the I m F, which, 0:13:20.720 --> 0:13:22.960 by the way, forty four billion dollars of that hard 0:13:22.960 --> 0:13:25.360 currency debt is owed to the I m F. And 0:13:25.400 --> 0:13:27.240 so there's gonna be a lot of interplay there. I mean, 0:13:27.280 --> 0:13:28.959 certainly with the Guard moving to the e c B 0:13:29.040 --> 0:13:31.840 and now Krystalina Georgieva ascending to the head of the 0:13:31.840 --> 0:13:35.160 I m F. You know, she's a Bulgarian economist. The 0:13:35.200 --> 0:13:37.520 Bulgaria was bailed out by the I m F BA. 0:13:38.840 --> 0:13:41.080 But really, you have to look back to to know 0:13:41.320 --> 0:13:44.200 why Argentina is in the current situation. It's in Lisa 0:13:44.280 --> 0:13:46.439 and the fact remains, you know, they've got a lot 0:13:46.440 --> 0:13:48.800 of debt outstanding. They need short term relief. It's going 0:13:48.840 --> 0:13:51.000 to be led by the I M F and how 0:13:51.600 --> 0:13:54.600 RGIVA and UM whoever is in office after the elections 0:13:54.600 --> 0:13:57.400 on the seven is. You know, however they play and 0:13:57.440 --> 0:13:59.719 however those negotiations go. We can only hope from the 0:14:00.000 --> 0:14:02.480 back of an external U. S Dollar creditor that they 0:14:02.480 --> 0:14:05.160 go smoothly and then they go quite frankly, quite quickly, 0:14:05.200 --> 0:14:08.359 because in addition to you know, the bonds that are outstanding, 0:14:08.559 --> 0:14:12.720 there's also CDs twenty a billion notional of CDs outstanding, 0:14:12.800 --> 0:14:16.160 of which five billion is net not gross notional outstanding. 0:14:16.240 --> 0:14:18.720 So someone's gonna have to eat that loss if indeed 0:14:18.920 --> 0:14:21.400 money changes his hands and there's a CDs trigger which 0:14:21.440 --> 0:14:23.360 is hit. So you know, there's a lot to look at. 0:14:23.360 --> 0:14:25.920 I mean, certainly, I mean, but you know, just looking 0:14:25.920 --> 0:14:29.200 back at what's in the best interest of Argentina. You know, 0:14:29.360 --> 0:14:31.720 if before my trip down there last week, I would 0:14:31.720 --> 0:14:33.600 have said, you know, most people would have thought that 0:14:33.760 --> 0:14:36.680 you know, a Fernandez Kirshner government would have been deemed 0:14:37.120 --> 0:14:39.320 um bad for the market. I don't think you can 0:14:39.360 --> 0:14:41.120 make that claim anymore. I mean, certainly some of the 0:14:41.160 --> 0:14:43.520 capital controls, and not all capital controls are bad, but 0:14:43.600 --> 0:14:46.080 the Macaree administration, some of the capital controls they just 0:14:46.080 --> 0:14:48.720 put into place. I mean basically what they did was 0:14:48.800 --> 0:14:54.040 they they they basically um wouldn't let local paceol denominated 0:14:54.080 --> 0:14:56.360 money market funds which are holding the salaries for local 0:14:56.360 --> 0:14:59.120 workers basically pay back that money. So you know, I 0:14:59.160 --> 0:15:01.760 mean corporates, local corporates who are using money markets to 0:15:01.800 --> 0:15:04.600 stash their cash couldn't access it to pay salaries last 0:15:04.600 --> 0:15:06.920 month because of a lot of these capital controls. So 0:15:07.200 --> 0:15:09.360 I mean McCree is not well loved locally on the ground, 0:15:09.400 --> 0:15:11.640 and certainly that was probably a very hasty and cumbersome 0:15:11.680 --> 0:15:14.680 move in my opinion. So what's what would be a 0:15:14.760 --> 0:15:17.880 quick resolution here? What kind of timing are we looking for? 0:15:17.960 --> 0:15:19.840 I mean, most I am a you know kind of 0:15:19.840 --> 0:15:23.280 negotiations probably take about six months, um. So anything before 0:15:23.320 --> 0:15:25.080 that would be very very quick, because this is a 0:15:25.200 --> 0:15:28.000 very very complicated restructuring that needs to take place. I mean, 0:15:28.280 --> 0:15:30.760 you know, Paul, I mean we have marketable and non 0:15:30.800 --> 0:15:33.440 marketable debt. We have hard currency and local currency that 0:15:33.640 --> 0:15:36.040 we have different creditors. We have pars, we have discoes, 0:15:36.080 --> 0:15:37.840 we have bonars, we have leleaks. I mean, we have 0:15:37.960 --> 0:15:40.880 so many different structures that form that debt stack that 0:15:40.960 --> 0:15:42.560 to kind of go through it all and kind of 0:15:42.840 --> 0:15:46.240 i mean different covenants, different um um, it's just so 0:15:46.320 --> 0:15:48.160 much stuff that you need to go through. But the 0:15:48.200 --> 0:15:50.000 good thing is you do have collective action clauses and 0:15:50.080 --> 0:15:52.640 most of the foreign law debt, so they should be 0:15:52.680 --> 0:15:54.280 able to kind of push things forward a little bit 0:15:54.280 --> 0:15:55.960 more quickly than we've seen in the past. Just in 0:15:55.960 --> 0:15:59.440 a minute, I'm wondering how representative is Argentina of other 0:15:59.560 --> 0:16:03.200 potential potholes in emerging markets. Well, Argentina is very unique. 0:16:03.200 --> 0:16:04.880 I mean this has been going on for years. I 0:16:04.880 --> 0:16:07.120 mean they've defaulted twice in the last twenty years already. 0:16:07.160 --> 0:16:09.360 I mean again, a lot of us started with with 0:16:09.360 --> 0:16:11.960 with in ninety nine when Russia defaulted on its debt 0:16:12.000 --> 0:16:14.600 and basically that pushed a great recession into Latin America. 0:16:14.840 --> 0:16:17.440 If you look at OTWO, Brazil emerged from that, and 0:16:17.480 --> 0:16:20.520 there was a similar politician that was actually um running 0:16:20.600 --> 0:16:23.160 under a very kind of populous platform in Braziliano two 0:16:23.160 --> 0:16:25.800 and that was Lula and so Lula, which was the 0:16:25.840 --> 0:16:28.760 market thought he would be very market unfriendly going into office, 0:16:28.800 --> 0:16:31.840 actually wound up being very friendly in terms of the market. 0:16:31.880 --> 0:16:33.760 And actually, you know, the economy, look at where it 0:16:33.800 --> 0:16:36.560 is now relative to our to where it once was. Um, 0:16:36.800 --> 0:16:39.080 you can only hope that Alberta Fernandez might kind of 0:16:39.080 --> 0:16:41.640 fit into that category. I mean, the verdict is still 0:16:41.640 --> 0:16:43.920 out because he's not saying anything until he's elected, and 0:16:43.960 --> 0:16:45.320 we don't know what it was cabinet is going to 0:16:45.360 --> 0:16:47.400 be comprised of. But I think that's gonna be really 0:16:47.480 --> 0:16:49.880 key after the election. Who does he pick to be 0:16:49.960 --> 0:16:52.240 in his cabinet? From an economics perspective, that is the 0:16:52.280 --> 0:16:54.200 most important thing that we're looking at right now. Paul, 0:16:54.240 --> 0:16:55.960 all right, well, have you back on to give us 0:16:55.960 --> 0:16:59.440 some colors. This plays out big, big numbers for Argentina. 0:17:00.040 --> 0:17:02.160 Hopefully sooner ra the later they get a resolution there. 0:17:02.200 --> 0:17:05.560 Damien sass Our, chief Emerging markets credit strategist, joining us 0:17:05.560 --> 0:17:23.719 in a Bloomberg Interactive broker's studio. People don't want to 0:17:23.800 --> 0:17:27.760 pay to trade stocks. That has been the resounding message 0:17:27.960 --> 0:17:30.919 behind the success of apps like robin Hood, which allows 0:17:30.920 --> 0:17:32.800 people to do just that. Joining us down to talk 0:17:32.840 --> 0:17:36.840 about the shift to no fee trading is Bill Capuzzi. 0:17:36.880 --> 0:17:40.159 He's chief executive officer of APEX Clearing, joining us on 0:17:40.200 --> 0:17:42.520 the phone from Chicago. Bill, I want to talk a 0:17:42.520 --> 0:17:45.760 little bit about Charles Schwab's decision announcement earlier this week 0:17:46.080 --> 0:17:51.399 to abandon commissions for their brokers and move into a 0:17:51.520 --> 0:17:57.120 model that more closely resembles robin Hood. What was your reaction. Yeah, 0:17:57.119 --> 0:18:00.600 I'm not surprised. I'm not surprised at all that that happen, 0:18:00.640 --> 0:18:03.000 and it's just a matter of time. Uh. You know, 0:18:03.119 --> 0:18:06.040 as you mentioned robin Hood, which we helped as a 0:18:06.119 --> 0:18:10.160 custodial uh partner to robin Hood back when we helped 0:18:10.160 --> 0:18:13.600 them launch of the free app. We also helped since 0:18:13.640 --> 0:18:18.080 then a couple of dozen others offer free trading solutions, 0:18:18.320 --> 0:18:21.720 and uh, there's there's demand right look at robin and 0:18:21.880 --> 0:18:25.840 they have, you know, close to seven million users today 0:18:25.920 --> 0:18:29.159 and and the reason for it is people are looking 0:18:29.280 --> 0:18:35.000 for yield, looking for opportunities and lowering barriers to investing. 0:18:36.280 --> 0:18:38.479 So I'm not surprised at all, and I'm certainly not 0:18:38.560 --> 0:18:42.480 surprised that TV and the trade followed suit. And my 0:18:42.640 --> 0:18:45.439 expectation is somewhere in the next twenty four hours we'll 0:18:45.480 --> 0:18:49.560 hear from from Fidelity as well. So, Bill, we've seen 0:18:49.560 --> 0:18:52.280 in the asset management business, uh, you know, rates UM 0:18:52.320 --> 0:18:56.480 fees continuing to go lower. Where does just give us 0:18:56.480 --> 0:18:58.919 a sense of like the economic model for like a 0:18:59.000 --> 0:19:01.679 robin head for robin hood, for example, how did they 0:19:01.720 --> 0:19:05.240 make money? Yeah, that's a great question. You know, there's 0:19:05.280 --> 0:19:07.239 there's lots of pressed out over the last twenty four 0:19:07.280 --> 0:19:10.080 hours around this and and the reality is there's there's 0:19:10.119 --> 0:19:13.760 a few different levers I'll say that are that are 0:19:13.840 --> 0:19:17.280 pulled in terms of how to monetize you know, a 0:19:17.359 --> 0:19:21.359 free uh you know from an explicit the perspective of 0:19:21.480 --> 0:19:25.520 free solution UM one is payment for order flow, right, 0:19:25.560 --> 0:19:28.760 so to they send people are trading actively in stocks 0:19:29.960 --> 0:19:33.560 those orders. Retailers are routed to market makers UM, and 0:19:33.640 --> 0:19:37.440 there's spread in the name UM and there's an opportunity 0:19:37.440 --> 0:19:41.760 to make make money off of the trading UM. And 0:19:41.840 --> 0:19:45.920 what I would say is, uh, you know, for retail investor, 0:19:46.680 --> 0:19:51.480 the friction lists way of trading today, it's probably never 0:19:51.560 --> 0:19:52.959 been better as a matter of fact, I want to say, 0:19:53.000 --> 0:19:56.159 probably it's never been better than this today, and the 0:19:56.280 --> 0:20:00.000 spreads are so tight. Uh you know, there's some opportunity there, 0:20:00.040 --> 0:20:01.880 but I think you know, in terms of the win 0:20:02.000 --> 0:20:05.840 win for an end investor, it's a it's a tremendous 0:20:05.840 --> 0:20:09.000 time in just in terms of trading friction. The second 0:20:09.040 --> 0:20:11.640 is interest, right, So you know, if you look at 0:20:11.680 --> 0:20:13.760 schwabing what they came out with, they said, hey, look, 0:20:14.280 --> 0:20:17.240 three to four percent of our top line revenue came 0:20:17.400 --> 0:20:22.639 from commissions. The vast majority of their uh you know 0:20:22.680 --> 0:20:28.080 there revenue today is either interest income or fee based revenue. 0:20:28.920 --> 0:20:30.800 And then the last thing that's not talked about a 0:20:30.800 --> 0:20:36.639 lot is just traditional brokerage is um stock loan al Right, 0:20:36.680 --> 0:20:40.719 So every anytime someone is buying a stock, there's an 0:20:40.720 --> 0:20:43.000 opportunity on the street where someone wants to short the 0:20:43.080 --> 0:20:46.919 stock and is looking for the ability to loan the 0:20:47.000 --> 0:20:49.200 stock and has money made in terms of stock loan. 0:20:50.280 --> 0:20:53.760 So despite all of those areas to possibly make money, 0:20:53.760 --> 0:20:57.040 we are looking at charl Schwab shares down an additional 0:20:57.080 --> 0:21:00.560 three point two today following a three three point three 0:21:00.560 --> 0:21:04.399 percent loss yesterday and a nine point seven percent loss 0:21:04.640 --> 0:21:07.720 the day that they made this announcement, So it does 0:21:07.760 --> 0:21:10.360 seem like people will view this in a negative light 0:21:10.400 --> 0:21:13.080 in terms of earning his profitability. There is a saying 0:21:13.320 --> 0:21:18.000 there's no such thing as free lunch. For individual investors 0:21:18.160 --> 0:21:21.199 who are looking at potential brokers, what should they be 0:21:21.240 --> 0:21:24.600 looking for for truly a good deal and not perhaps 0:21:24.800 --> 0:21:26.399 some fees that are gonna be baked in on the 0:21:26.400 --> 0:21:30.199 back end. Yeah, that's a that's a great question. And 0:21:30.240 --> 0:21:32.840 I think that there are some things right. So, uh, 0:21:32.880 --> 0:21:36.200 you know the fine print you talked about the free launch, right, 0:21:36.240 --> 0:21:38.920 make the analogy to you know, the ads for Verizon 0:21:39.040 --> 0:21:41.560 where it's a free you get a free iPhone? Right, 0:21:41.600 --> 0:21:44.720 it's not free, it's baked into a longer term contract, 0:21:45.560 --> 0:21:47.920 and the same those for brokerage. Like people made to 0:21:47.960 --> 0:21:51.560 look at things like is there a minimum balance that's 0:21:51.600 --> 0:21:55.480 required in the account? Is there a certain trade size 0:21:55.800 --> 0:21:57.879 that I have to do in order to to to 0:21:57.960 --> 0:22:01.880