WEBVTT - Penn Mutual Is Selling HY Bonds, Opting for IG: CIO 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 wits 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 --> 0:00:21.280 at Bloomberg dot com. Well, the everything rally that investors 0:00:21.360 --> 0:00:24.560 enjoyed in nineteen appears to be continuing here in the 0:00:24.640 --> 0:00:27.040 early parts of To get a sense of what the 0:00:27.160 --> 0:00:30.040 risk rewards scenario is for investors right now, we welcome 0:00:30.240 --> 0:00:33.600 Mark hepp Install, chief investment officer of pen Mutual Asset Management. 0:00:33.600 --> 0:00:35.519 They have about twenty eight and a half billion dollars 0:00:35.800 --> 0:00:38.280 under management based in Philadelphia, but Mark joins us here 0:00:38.280 --> 0:00:41.240 on our Bloomberg Interactive Broker studio. So Mark, again, a 0:00:41.640 --> 0:00:44.960 fantastic performance in financial markets last year, A good start 0:00:45.000 --> 0:00:47.000 to the year. What are the risk to the market 0:00:47.080 --> 0:00:50.680 from your perspective? Well, you know, I do think that, um, 0:00:50.800 --> 0:00:53.760 the geopolitical risks um, certainly with what's going on with 0:00:53.800 --> 0:00:58.440 the RAND attentions there. Um, Clearly the coronavirus is front 0:00:58.440 --> 0:01:00.240 and center, and it seems as though the second case 0:01:00.320 --> 0:01:03.080 arriving here in the United States is enough to pressure 0:01:03.440 --> 0:01:06.480 equity markets some today and lower interest rates. So um, 0:01:06.520 --> 0:01:09.040 but you know, generally our outlook is for a more 0:01:09.120 --> 0:01:11.880 stable market both equities and interest rates this year, and 0:01:11.880 --> 0:01:15.360 I think that's really resulting from the veed honestly wanting 0:01:15.400 --> 0:01:17.479 to get out of the spotlight, move to the side, 0:01:17.880 --> 0:01:19.920 keep interest rates where they are, and we think that's 0:01:19.959 --> 0:01:23.319 going to be uh, really an outcome where both equities 0:01:23.319 --> 0:01:25.399 and interest rates are more range bound this year as 0:01:25.440 --> 0:01:28.000 opposed to dramatic moves like we've seen the previous two years. 0:01:28.080 --> 0:01:31.959 There's been a common theme where people say that bonds 0:01:31.959 --> 0:01:35.280 and stocks are sending different messages, with bonds rallying typically 0:01:35.280 --> 0:01:42.040 indicating some negativity, pessimism about global growth, stocks rallying indicating optimism. 0:01:42.120 --> 0:01:44.959 You said you disagree, You don't think that these narratives 0:01:45.000 --> 0:01:48.480 are inconsistent. Why well, I would say, on the short term, 0:01:48.520 --> 0:01:49.840 like you get a day like the day where fear 0:01:49.920 --> 0:01:52.640 enders and market you can you're gonna see a situation 0:01:52.680 --> 0:01:56.160 where bonds and stocks act differently. However, over the long term, 0:01:56.160 --> 0:01:58.840 I do think that the fact interest rates are so low, 0:01:59.200 --> 0:02:02.480 they are so on a tractive versus other alternatives. UM 0:02:02.520 --> 0:02:04.840 inequities I think are a big part of that equation. 0:02:05.160 --> 0:02:07.880 UM it really forces investors to take more risk when 0:02:07.880 --> 0:02:10.800 interest rates really sit where they do today. So I 0:02:10.800 --> 0:02:13.800 think over the long term that's supportive evaluations. And I 0:02:13.840 --> 0:02:15.920 do think that you know and clearly that you know 0:02:15.960 --> 0:02:18.600 that the mantra don't fight. The Fed worked um in 0:02:18.680 --> 0:02:20.520 late two thousand and eighteen and then worked in two 0:02:20.600 --> 0:02:23.880 thousand nineteen, So I think that's also part of the equation. 0:02:23.919 --> 0:02:26.400 And last year, you know, the FED at the beginning 0:02:26.400 --> 0:02:28.720 of the year was expected to really move interest rates higher. 0:02:29.000 --> 0:02:31.680 So the fact that everything rallied last year in response 0:02:31.720 --> 0:02:33.919 to lower FED interest rates, you know, I think makes 0:02:33.919 --> 0:02:38.000 sense markets an election year this year, how do you 0:02:38.040 --> 0:02:41.560 typically think about your portfolio and positioning in in a 0:02:41.680 --> 0:02:45.560 presidential election year? Well, I will say the pull from 0:02:45.560 --> 0:02:48.720 the middle, um from I would say both parties, really, 0:02:49.040 --> 0:02:51.680 I think means the outcome for the election is going 0:02:51.720 --> 0:02:55.480 to have significance for markets. And it doesn't necessarily mean 0:02:55.480 --> 0:02:58.440 that stocks are gonna scream higher scream lower depending on 0:02:58.480 --> 0:03:00.680 which party wins. But I do think in terms of 0:03:00.960 --> 0:03:04.160 winners and losers will be quite different, um depending on 0:03:04.560 --> 0:03:07.320 the outcome of this year's presidential elections. So and we've 0:03:07.360 --> 0:03:10.639 been involved heavily in the fixed income markets. That's where 0:03:10.639 --> 0:03:13.840 we tend to focus our investment activity. And so you know, 0:03:13.880 --> 0:03:16.280 certainly healthcare is an area that has been under some 0:03:16.320 --> 0:03:18.600 pressure there for fear that you know, there could be 0:03:18.680 --> 0:03:21.920 dramatic changes for the health insurance in the United States, 0:03:21.960 --> 0:03:24.360 so that you know, is against something that the outcome 0:03:24.400 --> 0:03:28.239 I think will deliver different winners and losers next year. 0:03:28.720 --> 0:03:32.200 HILED bonds, they've been on a tear at least through 0:03:32.280 --> 0:03:34.160 the last couple of days when we saw the price 0:03:34.200 --> 0:03:37.000 of oil really tank. Wow. Crew trading on the imax 0:03:37.040 --> 0:03:39.760 now fifty four dollars and forty eight cents on a barrel. 0:03:39.800 --> 0:03:41.680 That's down from the end of the year when it 0:03:41.760 --> 0:03:43.960 was sixty three. It's almost now ten dollars since the 0:03:44.040 --> 0:03:47.240 end of last year. Amazing. Uh. And you are seeing 0:03:47.320 --> 0:03:51.680 HIL debt underperform other types of credit as a result 0:03:51.760 --> 0:03:54.240 of this due to their energy component. What's your view 0:03:54.720 --> 0:03:57.960 on this space, Well, I do think when the double 0:03:58.000 --> 0:04:00.960 B universe is trading sub for scent where it sits 0:04:01.120 --> 0:04:03.280 or close to it today. You know, it's hard to 0:04:03.320 --> 0:04:06.280 make a case that UM, I would say, high quality, 0:04:06.360 --> 0:04:08.360 high yield makes a lot of sense. So you know, 0:04:08.440 --> 0:04:11.240 I do think there are better opportunities for total return 0:04:11.360 --> 0:04:14.400 within uh the investment grade corporate bomb market and also 0:04:14.480 --> 0:04:18.039 within certain parts of the securities securities markets. So you know, 0:04:18.200 --> 0:04:20.840 I will say I think generally consumer balance sheets are 0:04:20.920 --> 0:04:23.640 in better condition than corporate balance sheets. So I think 0:04:23.640 --> 0:04:26.039 if you're gonna take credit risk, you much more UM 0:04:26.160 --> 0:04:29.000 paid well to do it and rewarded in consumer credit 0:04:29.040 --> 0:04:31.360 as opposed to corporate credits. So are you underweaiting how 0:04:31.480 --> 0:04:34.840 yield right now? We are, Yeah, We're looking for opportunities 0:04:34.880 --> 0:04:38.120 to lighten UM our high you would exposure and upgrade 0:04:38.160 --> 0:04:42.240 to UM investment grade into securitized, in particular for our 0:04:42.279 --> 0:04:45.360 Strategic Income Fund, which is really a go anywhere fixed 0:04:45.400 --> 0:04:49.280 income strategy. When did you start doing that, Well, probably 0:04:49.360 --> 0:04:52.240 towards the second half of last year. UM. You know 0:04:52.279 --> 0:04:54.479 when we generally, you know, at the high end, we 0:04:54.560 --> 0:04:56.840 may have ten to fifteen percent of how you would 0:04:56.839 --> 0:05:00.600 exposure within our Strategic Income fund, but we've been gradually 0:05:00.640 --> 0:05:03.440 reducing that. And again, you know, we we're finding similar 0:05:03.480 --> 0:05:07.200 types of spreads for highly rated securitized products. The residential 0:05:07.240 --> 0:05:10.640 mortgage backed securities market in particular, last year they underperformed 0:05:10.880 --> 0:05:13.720 partly as a result of higher prepayment field as h 0:05:13.880 --> 0:05:17.120 fears as mortgage rates declined. So that's an opportunity where 0:05:17.120 --> 0:05:19.240 if our outlook is for more stable rates this year, 0:05:19.279 --> 0:05:22.320 that should outperform corporate credit for example, how about credit 0:05:22.400 --> 0:05:25.120 quality in your portfolio. We're ten eleven years into this 0:05:25.400 --> 0:05:29.120 economic cycle. People are concerned perhaps about credit quality. What 0:05:29.160 --> 0:05:31.320 do you see in your portfolio? Well, we you know, 0:05:31.400 --> 0:05:34.880 we do think that UM. You know, good solid credit research, 0:05:35.000 --> 0:05:38.880 especially UM on the corporate credit side is critical today 0:05:38.960 --> 0:05:42.440 given where UM valuations sits. So you know, our corporate 0:05:42.480 --> 0:05:45.599 credit team, you know, they really focus across the credit spectrum, 0:05:45.640 --> 0:05:47.560 both investment grade and high yield, and they've done a 0:05:47.640 --> 0:05:50.719 terrific job in terms of of navigating these markets. And 0:05:50.760 --> 0:05:53.240 I will say last year, even though generally it wasn't 0:05:53.240 --> 0:05:56.960 everything rally, there were pockets of weakened weakness, especially among 0:05:57.080 --> 0:06:00.320 lower rated high yield credit so energy, some certain triple 0:06:00.400 --> 0:06:04.080 C rated securities last year really underperformed. So that's been 0:06:04.120 --> 0:06:07.120 an area where we have been underweight. What kind of 0:06:07.160 --> 0:06:11.400 returns can people expect from a credit portfolio right now 0:06:11.800 --> 0:06:15.400 that takes a bit of risk. Uh, it doesn't go crazy, 0:06:15.480 --> 0:06:18.880 but is trying to operate and getting a little carry 0:06:18.920 --> 0:06:22.279 in this environment. Well, you know, the starting point really 0:06:22.360 --> 0:06:25.000 for all financial asset pricing is the resk free rate. 0:06:25.080 --> 0:06:27.440 So when you have the ten year yield trading now 0:06:27.480 --> 0:06:31.160 below one point seven percent, you know, to me, it's 0:06:31.200 --> 0:06:32.720 it's hard to make a case that you're going to 0:06:32.839 --> 0:06:36.040 get much more than you know, mid twos to three 0:06:36.040 --> 0:06:39.800 percent for a reasonably high quality investment grade corporate bond 0:06:39.800 --> 0:06:42.680 portfolio today. So you know, again we think it's time 0:06:42.720 --> 0:06:44.520 to be cautious, and we do want to make sure 0:06:44.560 --> 0:06:46.280 that you know, if do if we do get in 0:06:46.320 --> 0:06:49.400 a circumstance similar to the December of two thousand eighteen, 0:06:49.400 --> 0:06:52.160 when really the credit markets were on sale, equities were 0:06:52.200 --> 0:06:54.279 under pressure, you know, we want to have dry powder 0:06:54.320 --> 0:06:56.680 to take advantage of those opportunities. How about new issues 0:06:56.680 --> 0:06:58.440 at least? And I we keep saying Bloomberg News stories 0:06:58.480 --> 0:07:00.880 about all the new issues coming into estment grade market, 0:07:01.240 --> 0:07:04.640 Well there has been, Yeah, there's been incredible demand. And 0:07:04.640 --> 0:07:07.960 I will say there are certain um securities, especially within 0:07:08.600 --> 0:07:11.800 the banking space. Some perpetual preferred securities are getting done 0:07:11.800 --> 0:07:14.360 in that low four percent zip code. So you know 0:07:14.440 --> 0:07:18.240 that was levels of issuance that were unthinkable twelve months ago. 0:07:18.320 --> 0:07:21.040 But you know, again, I do think the negative interest 0:07:21.160 --> 0:07:26.160 rates abroad um really are steering foreign investors to US 0:07:26.240 --> 0:07:30.400 financial assets. Low treasury yield, steering investors to to yield 0:07:30.440 --> 0:07:32.480 where they can get it anywhere. So even though we 0:07:32.560 --> 0:07:35.320 generally think bank credit quality is good, you know some 0:07:35.400 --> 0:07:38.320 of some of the opportunities, they are definitely uh less 0:07:38.320 --> 0:07:41.680 attractive today. That's actually what's distracting me right now is 0:07:41.720 --> 0:07:45.840 the gap between two year bonds in the US and Germany. 0:07:46.080 --> 0:07:49.520 It's just absolutely blown my mind. It's the lowest since 0:07:50.040 --> 0:07:55.200 September seventeen. I'm actually completely serious. But it's exactly your point, Mark, 0:07:55.240 --> 0:07:58.960 which is that basically, uh, this is confirmation in my view, 0:07:59.440 --> 0:08:02.000 I mean take it as you well to me, this 0:08:02.120 --> 0:08:04.840 means that investors are coming over from Europe and coming 0:08:04.840 --> 0:08:07.080 into the US and trying to take advantage of that gap. 0:08:07.200 --> 0:08:09.640 I could be wrong by email address if you want 0:08:09.640 --> 0:08:11.600 to right to me to tell me I'm wrong, Lebrono. 0:08:11.720 --> 0:08:13.960 It's at Bloomberg dot Net. Mark Happens Style, chief investment 0:08:13.960 --> 0:08:28.800 officer of Pen Mutual Asset Management. Well, much of the 0:08:28.840 --> 0:08:31.680 focus on international trade has between between the U S 0:08:31.720 --> 0:08:34.160 and China, but there's also been rising rhetoric between the 0:08:34.200 --> 0:08:37.920 US and France on a whole host of items, including wine. 0:08:37.960 --> 0:08:40.120 We have to figure out what's going on there. Nobody 0:08:40.160 --> 0:08:42.760 better to do that than with Tom Gearing. He's a 0:08:42.840 --> 0:08:46.120 chief executive officer and co founder of Cult Wines Asset 0:08:46.200 --> 0:08:49.680 Management based in London. Tom, thanks so much for joining us. 0:08:49.760 --> 0:08:53.520 Tell us what's going on potentially with the French wine 0:08:53.559 --> 0:08:58.240 market and tariffs? Yeah, good morning, Thanks so much for 0:08:58.240 --> 0:09:01.200 having me. Well, I mean, obviously the current sort of 0:09:01.520 --> 0:09:04.199 impass between the France and US over the digital service 0:09:04.240 --> 0:09:06.760 attacks was in one way you had going to have 0:09:06.800 --> 0:09:10.520 a huge implication potentially on the French wine industry, and 0:09:10.960 --> 0:09:13.920 one particular region that I think would have suffered significantly 0:09:13.960 --> 0:09:17.640 would have been a Champagne region. The Champagne, for example, 0:09:18.280 --> 0:09:22.280 US represents the biggest export market for at four five 0:09:22.320 --> 0:09:25.520 million euros, and the potential ents tariffs that they were 0:09:25.520 --> 0:09:28.920 looking to impose on French goods would have included Champagne 0:09:28.920 --> 0:09:31.840 could have been quite a catastrophic really for the for 0:09:31.920 --> 0:09:34.360 the for the Champagne region, and would have been I mean, 0:09:34.400 --> 0:09:37.079 I don't think you can underestimate the seismic impact that 0:09:37.080 --> 0:09:40.320 would have had on the global wine marketing, in particular um, 0:09:40.559 --> 0:09:42.480 you know, the French wine market. But now that that 0:09:42.760 --> 0:09:46.319 sort of ceasefire has um has been established seen the 0:09:46.440 --> 0:09:48.760 two sides, I think what people have sort of forgotten 0:09:48.760 --> 0:09:51.680 about is that there already are tariffs imposed on e wines, 0:09:51.720 --> 0:09:54.840 in particular French wines, and these were imposed back in 0:09:54.880 --> 0:09:58.120 October as a result of the dispute over airbus. So 0:09:58.160 --> 0:10:00.199 if you actually look at the European wines in take 0:10:00.200 --> 0:10:01.959 a French wines, you know that they've been under fire 0:10:02.000 --> 0:10:05.200 considerably over the last few months. And we've already started 0:10:05.240 --> 0:10:08.679 to see the impact um those tariffs have had on 0:10:08.920 --> 0:10:11.720 French wines in the in the global marketplace, and and 0:10:11.720 --> 0:10:15.560 in particular the impact it's had with US importers canceling 0:10:15.640 --> 0:10:18.640 orders UM that they had placed canceling on from a 0:10:18.760 --> 0:10:21.600 futures contracts they had in place UM. And you know 0:10:21.679 --> 0:10:25.720 a lot of the wine owners, wineries, distributors you know 0:10:25.760 --> 0:10:30.200 in Europe understandably worried and Similarly in the US. You know, 0:10:30.240 --> 0:10:33.360 a lot of the importers, merchants, distributors again are very 0:10:33.400 --> 0:10:35.920 concerned about what's going to happen over over the next 0:10:35.920 --> 0:10:38.160 few months. So I think even though this is a 0:10:38.200 --> 0:10:39.760 this is a good sign for the market, you know 0:10:39.800 --> 0:10:42.480 that they've decided to hold fire. Um, you know, we're 0:10:42.520 --> 0:10:44.120 not out of the woods yet, and it's it's very 0:10:44.120 --> 0:10:47.160 finely poised. I have to ask the burning question in 0:10:47.200 --> 0:10:51.079 the room, Tom Gearing, how does one get into wine 0:10:51.120 --> 0:10:56.200 asset management? So, I mean, my my my background, my 0:10:56.240 --> 0:10:59.360 family we were were passionate wine collectors. It's something that 0:10:59.400 --> 0:11:01.240 I've known about for a long time. But I really 0:11:01.240 --> 0:11:04.200 believe in in the financial viability of wine as a 0:11:04.240 --> 0:11:07.199 as a diversification for an investment portfolio. You know, wine 0:11:07.280 --> 0:11:10.120 is it as an asset. Classes is a tangible product. 0:11:10.240 --> 0:11:15.079 It's something that is um fundamentally based on unique characteristics 0:11:15.080 --> 0:11:17.000 in that the greatest wines in the world are produced 0:11:17.000 --> 0:11:20.800 in very small quantities and they're consumed. So wine has 0:11:20.800 --> 0:11:23.560 a perfectly inverse affly curve. So there's you know, there's 0:11:23.600 --> 0:11:25.880 there's a lot of history and romance around the product. 0:11:25.960 --> 0:11:28.480 But if you take some of that romanticism away and 0:11:28.480 --> 0:11:30.319 treat it as a financial asset. You know, it has 0:11:30.360 --> 0:11:33.640 a lot of potential benefits to anyone investing it. So 0:11:33.760 --> 0:11:37.600 fine wine as an as as as an asset management concept. 0:11:37.679 --> 0:11:39.160 I think it's something that's going to become more and 0:11:39.160 --> 0:11:42.400 more mainstream. Um. You know, over the years, Paul I 0:11:42.440 --> 0:11:45.000 will say that I treated as a viable asset in 0:11:45.040 --> 0:11:48.600 the evening. It does work. It does work. So town, 0:11:48.920 --> 0:11:51.480 what are you buying right now? What are the wines 0:11:51.520 --> 0:11:54.959 that are promising the value right now? Well, I mean 0:11:55.000 --> 0:11:56.880 look to keep it in the context of the conversation 0:11:56.920 --> 0:11:59.440 about the terrorists. Um, you know, it's Italian wines. The 0:11:59.440 --> 0:12:01.480 best Italian wines that have done extremely well. You know, 0:12:01.480 --> 0:12:03.840 they were the best performing subregion last year in terms 0:12:03.840 --> 0:12:06.520 of price performance. Um. If you look at some of 0:12:06.520 --> 0:12:08.440 the best wines that are produced in northern Italy in 0:12:08.440 --> 0:12:11.680 particular and Pierre Mont where the Nebuola grape is uh, 0:12:11.800 --> 0:12:15.640 you know, the grape that's grown more than most the 0:12:15.679 --> 0:12:18.440 wines in that region have gone up significantly in value. 0:12:18.480 --> 0:12:20.319 There's demand that's increasing because if you look at the 0:12:20.400 --> 0:12:23.280 quality the wines are being produced there. In comparison to 0:12:23.360 --> 0:12:26.200 say that the equivalent of Grand Crew Burgundy. There's quite 0:12:26.200 --> 0:12:29.079 a significant price gap, and there's quite a significant price disparity. 0:12:29.120 --> 0:12:31.719 And I think that globally, consumers, especially at the top 0:12:31.800 --> 0:12:35.040 end of the market, um where prices have increased, in 0:12:35.080 --> 0:12:39.200 particular for French wines, in particular Burgundy Groan Crew for example, 0:12:39.480 --> 0:12:41.640 People on our something to look outside that for value, 0:12:41.640 --> 0:12:42.839 you know where, kind of whe where else in the 0:12:42.880 --> 0:12:44.360 wh Where else in the world can I buy into 0:12:44.480 --> 0:12:47.439 really really high quality, um small production wines, but that 0:12:47.520 --> 0:12:51.640 can still deliver um, you know, outstanding experience. Well, I 0:12:51.640 --> 0:12:54.560 guess that there's a question about wine. When you say 0:12:54.559 --> 0:12:56.520 that it's a financial asset, I mean it is, but 0:12:56.559 --> 0:12:58.880 you can consume it. And there's a question are people 0:12:58.920 --> 0:13:03.000 buying these mainly as an investment vehicle? Do they expect 0:13:03.040 --> 0:13:05.000 them to be drunk at some point? I mean, is 0:13:05.040 --> 0:13:07.680 there sort of that end goal or is it that 0:13:07.800 --> 0:13:13.040 they are being increasingly treated as financial assets. Well, I mean, look, 0:13:13.080 --> 0:13:15.040 if you look at wine from a very basic expective 0:13:15.080 --> 0:13:16.720 that you know, the great wines in the world are 0:13:16.760 --> 0:13:19.079 actually made to be drunk in ten, fifty, twenty years. 0:13:19.120 --> 0:13:22.360 So they need someone to carry that cost um. They 0:13:22.400 --> 0:13:24.480 need someone to carry the cost of storage, of insurance 0:13:24.520 --> 0:13:25.959 of the wines and making sure that they're kept in 0:13:26.000 --> 0:13:28.960 the opten conditions. So the fact that wine as an asset, 0:13:29.040 --> 0:13:31.680 as a as a product sorry, um, you know, increases 0:13:31.760 --> 0:13:36.040 over time and value in most cases provides the holder, 0:13:36.120 --> 0:13:39.560 the person who's carrying the costum, a financial incentive to 0:13:39.600 --> 0:13:42.920 do so. So regardless of whether your intentions on day 0:13:42.920 --> 0:13:45.920 one are to buy for purely collection purposes or whether 0:13:45.960 --> 0:13:48.800 you're buying purely for drinking purposes, the fact that wine 0:13:48.800 --> 0:13:51.720 increases in value gives you the financial incentive to actually 0:13:51.760 --> 0:13:53.760 hold and store these wines, which can be quite a 0:13:53.760 --> 0:13:56.760 costly exercise. Um. So what I think is, you know, 0:13:56.920 --> 0:13:59.760 as altruistic is you could be as a wine connoisseur. 0:14:00.360 --> 0:14:03.840 Sometimes you don't know how much your preferences or objectives 0:14:03.840 --> 0:14:07.160 in life might change over time. So with wine, it's 0:14:07.520 --> 0:14:10.040 of course first and foremost product that should be consumed, 0:14:10.080 --> 0:14:11.720 and a lot of people in the world are consuming 0:14:11.760 --> 0:14:14.560 these wines. But from a secondary perspective, if you're if 0:14:14.559 --> 0:14:16.520 you're a collector and you can get a financial benefit 0:14:16.559 --> 0:14:18.160 from doing so and end up drinking the wines for 0:14:18.280 --> 0:14:20.440 less in the future, or you can resell them and 0:14:20.480 --> 0:14:22.840 generate a profit. Or you can come into the markets 0:14:22.840 --> 0:14:26.360 a pure investor and generate a very low risk adjusted turns. 0:14:26.400 --> 0:14:28.920 Then I forget all adds to the overall greatness of 0:14:28.960 --> 0:14:30.880 the asset. Tom Gearing, thank you so much for being 0:14:30.880 --> 0:14:33.720 where us. Tom Geary, chief executive Officer of cult Wines 0:14:33.800 --> 0:14:50.480 Asset Management, joining us by phone. I want to get 0:14:50.480 --> 0:14:53.480 to a fascinating story here. President Donald Trump is again 0:14:53.520 --> 0:14:57.000 facing questions about his relationship with Mohammed been Salmon if 0:14:57.080 --> 0:15:00.360 the Sudi Crown Prince was accused of spying on Amazon 0:15:00.400 --> 0:15:02.760 dot Com chief Jeff Bezos. To get some more on 0:15:02.760 --> 0:15:05.680 this story, we welcome Justin Sinc. Justin covers the White 0:15:05.680 --> 0:15:08.560 House for Bloomberg News. Justin, thanks so much for joining us. 0:15:09.000 --> 0:15:11.400 Talk to us about how this story is expanding from 0:15:11.440 --> 0:15:14.360 what it was originally reported. Jeff Bezos and the Saudi 0:15:14.400 --> 0:15:17.360 Crown Prince. Yeah, I mean what we're seeing now is 0:15:17.600 --> 0:15:19.400 I think a lot of pressure on the US government 0:15:19.960 --> 0:15:24.640 to respond. Obviously, President Trump is still sort of facing 0:15:24.720 --> 0:15:27.840 the fallout from the killing of Jamalika Shogi, who was 0:15:27.920 --> 0:15:32.200 the Washington Post columnist who was murdered in inside a 0:15:32.240 --> 0:15:36.320 diplomatic facility. Uh, and this again has gone back in 0:15:36.400 --> 0:15:40.359 some ways. This uh latest controversy is like an amalgamation 0:15:40.440 --> 0:15:43.440 of all the sort of controversies of President Trump's tenure. 0:15:43.560 --> 0:15:48.000 So you've got, uh, these concerns over you know, closeness 0:15:48.000 --> 0:15:52.600 with Saudi Arabia despite UM human rights violations. He've got 0:15:52.640 --> 0:15:55.840 his back and forth with Jeff Bezos and Amazon, who 0:15:56.160 --> 0:15:59.720 President Trump himself has been frustrated with because of the 0:15:59.720 --> 0:16:02.920 owner ship of the Washington Post. You've got this ongoing 0:16:02.960 --> 0:16:08.960 court case over whether you know, the Pentagon violated UM 0:16:09.440 --> 0:16:12.160 kind of a fair competition by giving Microsoft rather than 0:16:12.160 --> 0:16:16.120 Amazon this huge ten billion dollar contract. And so I 0:16:16.120 --> 0:16:17.960 think a lot of attention is now turning into how 0:16:18.000 --> 0:16:19.880 President Trump is going to handle this, because you would 0:16:19.880 --> 0:16:25.160 think under normal circumstances of foreign government hacking the richest 0:16:25.200 --> 0:16:29.320 man in the United States the head of a prominent 0:16:29.320 --> 0:16:31.840 American company would be something that the US government would 0:16:31.880 --> 0:16:35.160 respond to. Justin there's also a question of cybersecurity. So, 0:16:35.200 --> 0:16:38.920 putting aside the politics of whether President Trump responds to this, UH, 0:16:38.960 --> 0:16:42.760 there is a question of Saudi Arabia's capabilities in any 0:16:42.760 --> 0:16:46.840 potential friendship or contact from people close to the administration. 0:16:46.920 --> 0:16:49.800 We know that, for example, President Trump's son in law 0:16:49.880 --> 0:16:53.600 had some direct contact with Mohammed bin Salmon. Uh. So, 0:16:53.680 --> 0:16:56.960 I'm wondering do we have any sense or better surveillance 0:16:57.360 --> 0:17:01.040 into knowing that other members apps of the government were 0:17:01.080 --> 0:17:03.280 not hacked by the Saudi Arabians in the same kind 0:17:03.280 --> 0:17:05.720 of way that they are suspected of doing so with 0:17:05.800 --> 0:17:08.359 the richest man in America. Yeah, I mean, this is 0:17:08.359 --> 0:17:11.000 a real question here on the White House, is you 0:17:11.040 --> 0:17:15.040 know they're they're Is all that's reporting about Jared Kushner 0:17:15.080 --> 0:17:20.000 and an MBS speaking with each other over WhatsApp? Obviously 0:17:20.040 --> 0:17:23.879 the Saudius have been sort of brazen, at least allegedly. 0:17:23.960 --> 0:17:27.600 But the one kind of point of caution that that 0:17:27.800 --> 0:17:30.600 some people have said during this is that the investigation 0:17:30.640 --> 0:17:34.600 into Jeff bezos phone was done by an independent firm. 0:17:34.680 --> 0:17:39.240 It hasn't yet been reviewed by outside government sources. We're 0:17:39.280 --> 0:17:41.360 not sure if the U. S. Intelligence community has made 0:17:41.400 --> 0:17:44.800 the same determination, and that that could explain some of 0:17:44.840 --> 0:17:46.639 the reticents so far by the White House in the 0:17:46.640 --> 0:17:49.840 administration to to publicly say anything about this. But my 0:17:49.960 --> 0:17:53.560 guess is that they are undertaking a security review, not 0:17:53.600 --> 0:17:55.719 just what happened in the basis case, but if anything 0:17:55.760 --> 0:17:58.720 had happened that could potentially compromise the US security here 0:17:59.359 --> 0:18:02.840 Um the way else it said previously that that Jared's 0:18:02.880 --> 0:18:07.320 PHONN conversations were all properly documented and security measures were taken. 0:18:07.359 --> 0:18:10.439 But I'm sure that this this case has sort of 0:18:10.480 --> 0:18:13.320 prompted a new look at all. That what's interesting, I 0:18:13.320 --> 0:18:15.840 think the is there any sense that the US government 0:18:16.080 --> 0:18:19.200 plans to launch an investigation or are they just going 0:18:19.240 --> 0:18:21.480 to sit on the sidelines and hope this maybe pu 0:18:21.600 --> 0:18:25.480 bose over. Yeah, I mean, certainly the public indications is 0:18:25.520 --> 0:18:29.280 the second. UM. White House spokesman Hogan Ghibley was asked 0:18:29.280 --> 0:18:32.520 about this yesterday. Uh, he said, you know, the while 0:18:32.560 --> 0:18:35.720 the administration takes it seriously that Saudis are an important ally, 0:18:36.160 --> 0:18:38.840 the President himself said he wasn't really familiar with the case, 0:18:38.920 --> 0:18:43.080 and Treasury Secretary Ammunition uh said it shouldn't stop American 0:18:43.119 --> 0:18:47.320 companies from continuing to work with and invest in Saudi Arabia. 0:18:47.480 --> 0:18:50.359 So there's not yet kind of an indication that the 0:18:51.200 --> 0:18:54.000 US is launching kind of a full scale investigation or 0:18:54.600 --> 0:18:57.200 raising red flags in the way that the Obama administration, 0:18:57.200 --> 0:19:00.520 for instance, did after the sort of famous ony hack 0:19:00.880 --> 0:19:05.120 um by North Korea, which ended up, you know, releasing 0:19:05.160 --> 0:19:09.080 a lot of embarrassing internal documents and emails justin sink 0:19:09.280 --> 0:19:11.600 of Flaver News. Thank you so much for bringing us that. 0:19:11.720 --> 0:19:12.960 I do want to just give you an update and 0:19:13.000 --> 0:19:15.040 what's going on in markets right now? You're saying oil 0:19:15.080 --> 0:19:18.840 prices fall, uh, it's actually down now, crede on the 0:19:18.920 --> 0:19:24.399 imax cents, that's down almost ten dollars from the end 0:19:24.440 --> 0:19:27.280 of last year. Meanwhile, you're seeing tenure into your treasury. 0:19:27.320 --> 0:19:31.040 Yields fall to their lowest since October. And there is 0:19:31.080 --> 0:19:33.240 a question of why you've seen it right, you know, 0:19:33.359 --> 0:19:36.560 seen the equities rebound, certainly led by tech. You aren't 0:19:36.600 --> 0:19:40.280 seeing necessarily a massive bid in gold, and there is 0:19:40.320 --> 0:19:43.359 a question of why yields are constantly being pressed lower 0:19:43.400 --> 0:19:45.920 in the US. I do just have to say, I 0:19:46.359 --> 0:19:48.800 do find this interesting. The foreign bid, how much is that? 0:19:48.920 --> 0:19:51.760 What's driving it given the fact that the ECB is 0:19:51.840 --> 0:19:55.600 on hold, possibly looking at more ways to stimulate inflation 0:20:08.240 --> 0:20:10.200 in the rearview mirror, and what a year it was 0:20:10.520 --> 0:20:14.720 starting off, and generally similar type of fashion, broad strength 0:20:14.760 --> 0:20:17.240 of financial markets across the board. Let's see kind of 0:20:17.320 --> 0:20:20.960 what the big drivers are for going forward. Welcome Mark Lusheni, 0:20:21.040 --> 0:20:24.960 Chief investment strategist A Johnny Montgomery Scott Basin, Philadelphia. They 0:20:25.000 --> 0:20:28.200 have ninety billion dollars under management, so lots of money 0:20:28.240 --> 0:20:30.440 putting to work there. Mark, thanks so much for joining 0:20:30.560 --> 0:20:32.960 us on the phone again. We started out the year 0:20:33.119 --> 0:20:35.119 kind of like we ended in some pretty good strength 0:20:35.200 --> 0:20:40.720 across the financial markets. How are you framing outlook? Sure? Well, 0:20:40.920 --> 0:20:43.560 I don't expect a repeat in what we had in 0:20:43.600 --> 0:20:47.520 twenty the least by way of order magnitude, but directionally similar. 0:20:47.640 --> 0:20:50.640 And that is to say, I think that US economy 0:20:50.720 --> 0:20:54.480 is going to remain on sound footing. There are now, 0:20:54.640 --> 0:20:59.760 I think increasingly evidence of better economic growth abroad. We 0:21:00.000 --> 0:21:03.600 a slew of manufacturing numbers that came out from the 0:21:03.720 --> 0:21:06.280 European area this morning, and they were all indicative of 0:21:06.720 --> 0:21:09.920 a month over month sequential improvement. And I think that 0:21:10.200 --> 0:21:12.960 is going to largely play out in a fashion that 0:21:13.160 --> 0:21:17.960 allows investors and business leaders alike to see those better conditions, 0:21:18.040 --> 0:21:21.960 framing an outlook for corporate earnings in twenty to improve, 0:21:22.560 --> 0:21:24.920