1 00:00:01,400 --> 00:00:04,120 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 2 00:00:04,120 --> 00:00:06,240 Speaker 1: with my co host of Bonnie Quinn. Every business day 3 00:00:06,240 --> 00:00:10,360 Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts, 4 00:00:10,400 --> 00:00:13,560 Speaker 1: along with essential market moving news. Kind the Bloomberg Markets 5 00:00:13,600 --> 00:00:17,000 Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts, 6 00:00:17,000 --> 00:00:21,400 Speaker 1: and on Bloomberg dot com. Let's bring in Leslie Falconio, 7 00:00:21,560 --> 00:00:25,639 Speaker 1: senior fixed income strategist at UBS Global Wealth Management. Nearly 8 00:00:25,680 --> 00:00:29,200 Speaker 1: a trillion dollars in assets under management firm whide, including 9 00:00:29,360 --> 00:00:33,920 Speaker 1: family office assets. So Leslie really has a great view 10 00:00:34,479 --> 00:00:38,120 Speaker 1: of where people are putting their money, where flows are going, 11 00:00:38,520 --> 00:00:42,080 Speaker 1: and what families are doing versus what institutions are doing. 12 00:00:42,120 --> 00:00:44,720 Speaker 1: So Leslie talked to us first about those flows. Have 13 00:00:44,840 --> 00:00:49,000 Speaker 1: we seen much of anything change hands recently? Is there 14 00:00:49,040 --> 00:00:54,520 Speaker 1: a sort of an area that certain certain um demographics 15 00:00:54,600 --> 00:00:57,760 Speaker 1: or what have you are moving towards. Yeah, I mean 16 00:00:58,120 --> 00:01:00,480 Speaker 1: right now. Obviously we still have this in our in 17 00:01:00,480 --> 00:01:02,400 Speaker 1: our opinion, a little bit too much cash on hands 18 00:01:02,440 --> 00:01:05,360 Speaker 1: that we think investors have. But I think to your points, 19 00:01:05,680 --> 00:01:07,919 Speaker 1: you know, as we know, especially in the fixed income aside, 20 00:01:07,920 --> 00:01:11,000 Speaker 1: it's the search field and in order to really gain 21 00:01:11,640 --> 00:01:14,280 Speaker 1: you know, decent yield and decent return going forward, you 22 00:01:14,280 --> 00:01:16,800 Speaker 1: have to sort of looking at at the alternatives market, 23 00:01:17,160 --> 00:01:19,040 Speaker 1: and that's where right now a lot of people are 24 00:01:19,080 --> 00:01:21,960 Speaker 1: sort of allocating because of this stimulus that we've seen, 25 00:01:22,040 --> 00:01:24,120 Speaker 1: because of all this central bank support, and because of 26 00:01:24,160 --> 00:01:27,160 Speaker 1: the liquidity that people who have a little bit longer 27 00:01:27,200 --> 00:01:29,920 Speaker 1: time horizons are really sort of picking their spots that 28 00:01:30,040 --> 00:01:32,119 Speaker 1: areas that have been hit due to this crisis. So 29 00:01:32,400 --> 00:01:34,440 Speaker 1: although people in our opinios still have a little bit 30 00:01:34,480 --> 00:01:37,120 Speaker 1: too much cash, they are starting to allocate to somebody's 31 00:01:37,120 --> 00:01:41,400 Speaker 1: alternative investments. When you say alternative investments, give us a 32 00:01:41,480 --> 00:01:46,360 Speaker 1: little more detail on where, yeah, absolutely, Like i' let's 33 00:01:46,360 --> 00:01:48,600 Speaker 1: just say things like commercial real estate. Okay, we know 34 00:01:48,800 --> 00:01:51,880 Speaker 1: that the commercial real estate areas actually has had obviously 35 00:01:52,280 --> 00:01:54,640 Speaker 1: you know a lot of points of concern, particularly those 36 00:01:54,680 --> 00:01:58,480 Speaker 1: pockets of vulnerability, whether it's office space, you know, hotels, 37 00:01:59,160 --> 00:02:01,880 Speaker 1: you know all those all those sort of areas that 38 00:02:01,920 --> 00:02:04,760 Speaker 1: have really been a problem, problematic area that have not 39 00:02:04,840 --> 00:02:08,640 Speaker 1: recovered yet. But the market is forecasting such high levels 40 00:02:08,680 --> 00:02:12,040 Speaker 1: of delinquencies that right now there are alternatives that allow 41 00:02:12,120 --> 00:02:14,280 Speaker 1: investors to really get involved for if they have a 42 00:02:14,320 --> 00:02:17,160 Speaker 1: longer term of time arising and they're willing to forego 43 00:02:17,240 --> 00:02:20,000 Speaker 1: a bit of liquidity. There are these pockets of opportunity 44 00:02:20,000 --> 00:02:24,240 Speaker 1: because the market is pressing in such negativity. That's really 45 00:02:24,240 --> 00:02:26,520 Speaker 1: interesting because you know, we hear so much about some 46 00:02:26,600 --> 00:02:30,359 Speaker 1: of these businesses going going away, you know, hotels in particular, 47 00:02:30,480 --> 00:02:35,040 Speaker 1: So is there a big premium to these investments? There are? 48 00:02:35,080 --> 00:02:36,720 Speaker 1: I mean, and actually, and you're absolutely right. I mean, 49 00:02:36,800 --> 00:02:38,640 Speaker 1: that's why you really need to pick your spots, and 50 00:02:38,680 --> 00:02:40,960 Speaker 1: you really need to do your due diligence. But as 51 00:02:40,560 --> 00:02:44,000 Speaker 1: as as opportunistic sort of as the opportunity set, particularly 52 00:02:44,040 --> 00:02:47,800 Speaker 1: within fixed income and co and has participated, it's really 53 00:02:47,800 --> 00:02:52,080 Speaker 1: gotten white. When you look at things like CMBs theory, 54 00:02:52,400 --> 00:02:54,880 Speaker 1: those there are pockets of opportunities there if you do 55 00:02:54,960 --> 00:02:58,280 Speaker 1: your due diligence, that are actually for the longer term, 56 00:02:58,440 --> 00:03:01,560 Speaker 1: we believe, particularly because we do believe it'shistical stateless the summing, 57 00:03:01,840 --> 00:03:04,120 Speaker 1: because we do believe there's there's the Fed and the 58 00:03:04,160 --> 00:03:07,280 Speaker 1: government is a great backstop. We'll be able to recover, 59 00:03:07,360 --> 00:03:09,160 Speaker 1: not not everywhere, but so you really need to pick 60 00:03:09,200 --> 00:03:12,120 Speaker 1: your spots. But given you're an environment where you've had 61 00:03:12,120 --> 00:03:14,120 Speaker 1: such great returns and equity and even a lot of 62 00:03:14,160 --> 00:03:17,360 Speaker 1: recovery and fixed income. The opportunities are very small. So 63 00:03:17,480 --> 00:03:19,639 Speaker 1: if you pick your spots, then over the longer term, 64 00:03:19,919 --> 00:03:24,280 Speaker 1: you know, you have really good returns. So the market 65 00:03:25,040 --> 00:03:28,560 Speaker 1: it's looking like it's anticipating a Biden victory right now. 66 00:03:28,760 --> 00:03:32,520 Speaker 1: Is it too complacent? Leslie? You know, honestly, I think 67 00:03:32,560 --> 00:03:34,160 Speaker 1: it is a bit too complaced. And and and I'll 68 00:03:34,200 --> 00:03:35,760 Speaker 1: tell you why if you look at things like the 69 00:03:35,840 --> 00:03:38,080 Speaker 1: credit market. Let's just look at the credit market for example, 70 00:03:38,360 --> 00:03:42,520 Speaker 1: triple see how yield spreads are at pre COVID levels. Okay, 71 00:03:42,680 --> 00:03:46,840 Speaker 1: the credit markets spreads are right now are incredibly incredibly tight, 72 00:03:47,120 --> 00:03:50,640 Speaker 1: and you're really not getting compensated a tremendous amount for 73 00:03:50,800 --> 00:03:53,800 Speaker 1: a fact elevent whether it's upboard down. So I do 74 00:03:53,920 --> 00:03:55,920 Speaker 1: think the market is a bit complacent. It is just 75 00:03:55,960 --> 00:03:59,040 Speaker 1: spooming this Biden suite. And you know, over longer term, 76 00:03:59,040 --> 00:04:00,960 Speaker 1: I think with the market really needs to focus on 77 00:04:01,160 --> 00:04:03,240 Speaker 1: is the fact that the curvice sea thing. You know, 78 00:04:03,280 --> 00:04:06,600 Speaker 1: deals are a bit higher. But more importantly, that cushion 79 00:04:06,800 --> 00:04:11,040 Speaker 1: that you once had is pretty much gone. Can you 80 00:04:11,120 --> 00:04:16,200 Speaker 1: elaborate a little bit um Yeah? Absolutely, yeah. So for example, 81 00:04:16,240 --> 00:04:17,839 Speaker 1: so if you like I seari the trip sea side, 82 00:04:17,960 --> 00:04:20,000 Speaker 1: like right, if you have things like you know is 83 00:04:20,040 --> 00:04:22,000 Speaker 1: now the pre COVID spreads and a lot of the 84 00:04:22,160 --> 00:04:24,240 Speaker 1: issuance that we're seeing are at triple seas and as 85 00:04:24,240 --> 00:04:26,560 Speaker 1: we know, you know a lot of these companies have 86 00:04:26,600 --> 00:04:28,960 Speaker 1: sort of been riding the hotel of the fed liquidity. 87 00:04:29,040 --> 00:04:31,200 Speaker 1: You know, when we look at things like say, for example, 88 00:04:31,279 --> 00:04:33,400 Speaker 1: just a basic invest in grade corporate, which has been 89 00:04:33,400 --> 00:04:35,799 Speaker 1: a great faccept for the feed the set has bought 90 00:04:35,920 --> 00:04:38,360 Speaker 1: invest in grade corporate. It has a lot of powder 91 00:04:38,440 --> 00:04:41,160 Speaker 1: drive to do more. But you asn't as a corporate 92 00:04:41,240 --> 00:04:44,040 Speaker 1: if you're going to corporate right now, you have only 93 00:04:44,120 --> 00:04:47,599 Speaker 1: maybe twenty basis points rise in interest rates where you 94 00:04:47,640 --> 00:04:49,960 Speaker 1: wipe out a whole year of income. You don't have 95 00:04:50,000 --> 00:04:53,000 Speaker 1: a lot of spread Crishian there to really you know, 96 00:04:53,279 --> 00:04:55,520 Speaker 1: compensate you if in fact you get more default in 97 00:04:55,560 --> 00:04:59,560 Speaker 1: both investment grade and high you okay, So let's see 98 00:04:59,640 --> 00:05:02,040 Speaker 1: can I skill us all about you know outside of 99 00:05:02,080 --> 00:05:04,120 Speaker 1: the US. You know, there's a lot of talk about 100 00:05:04,160 --> 00:05:07,640 Speaker 1: Asia these days, and I suppose emerging markets more generally 101 00:05:07,640 --> 00:05:10,120 Speaker 1: the China we sort of treat a little bit separately. 102 00:05:10,520 --> 00:05:13,839 Speaker 1: What are you doing there? Particularly given the the strengthening 103 00:05:13,880 --> 00:05:17,479 Speaker 1: in the yuan recently. Yeah, we we do feel for 104 00:05:17,520 --> 00:05:19,880 Speaker 1: those investors that are looking for their guild, and then 105 00:05:19,880 --> 00:05:21,960 Speaker 1: when we talk about high yield, for example, that we 106 00:05:22,000 --> 00:05:24,039 Speaker 1: feel it's a little bit more tight in the US. 107 00:05:24,120 --> 00:05:26,039 Speaker 1: You can go over to Asia high yields and actually 108 00:05:26,080 --> 00:05:29,280 Speaker 1: took up a nice, a nice yield at like six. 109 00:05:30,360 --> 00:05:32,479 Speaker 1: We do think the Asian the Asian market is actually 110 00:05:32,560 --> 00:05:34,800 Speaker 1: on a road to recovery. A little bit more inflation 111 00:05:34,920 --> 00:05:37,760 Speaker 1: that they have obviously the backstep of the central bank, 112 00:05:38,000 --> 00:05:39,720 Speaker 1: and we do think that that p m I is, 113 00:05:39,760 --> 00:05:43,560 Speaker 1: although volatile overall, we expect about recovery there. So our 114 00:05:43,640 --> 00:05:46,880 Speaker 1: preference for those that are really that are yield speakers 115 00:05:46,920 --> 00:05:49,920 Speaker 1: that believe that the US is just simply a bit 116 00:05:49,960 --> 00:05:52,279 Speaker 1: too tight. Asia high yield is another alternative that you 117 00:05:52,320 --> 00:05:55,360 Speaker 1: can invest it. All right, Leslie, thank you so interesting 118 00:05:55,400 --> 00:05:57,479 Speaker 1: to speak with you. One final question, if you don't mind, 119 00:05:57,680 --> 00:06:01,400 Speaker 1: families that have great wealth, are they trying to do 120 00:06:01,480 --> 00:06:04,920 Speaker 1: something with that before there is a change in administration 121 00:06:04,960 --> 00:06:08,520 Speaker 1: assuming that there is, Yeah, I mean list really look, 122 00:06:08,560 --> 00:06:10,880 Speaker 1: taxicles harvesting is always, always, always a big thing to do, 123 00:06:10,920 --> 00:06:13,560 Speaker 1: and I'm sure that there there there are families that 124 00:06:13,560 --> 00:06:17,000 Speaker 1: are trying to allocate in terms of potential changes. But 125 00:06:17,480 --> 00:06:20,080 Speaker 1: you know, and frankly, our view is that even if 126 00:06:20,080 --> 00:06:22,159 Speaker 1: we do have a democratic suite, it's that's gonna be 127 00:06:22,160 --> 00:06:24,599 Speaker 1: the first thing on the agenda to go changing taxes. 128 00:06:24,640 --> 00:06:26,400 Speaker 1: It's just not the economy is the first and the 129 00:06:26,440 --> 00:06:29,360 Speaker 1: agenda jobs with the first on the agenda, you know, 130 00:06:29,440 --> 00:06:32,440 Speaker 1: and make sure and having you know, corporations remain and 131 00:06:32,480 --> 00:06:35,479 Speaker 1: sustainability of corporations on the agenda. So although yes, they are, 132 00:06:35,800 --> 00:06:37,560 Speaker 1: it's just not going to be on day one, that day. 133 00:06:37,760 --> 00:06:41,040 Speaker 1: This change is gonna ocurse, gonna occur over over time. Yeah, 134 00:06:41,120 --> 00:06:43,640 Speaker 1: that's for sure. Okay, Leslie, thank you, we'll be talking 135 00:06:43,640 --> 00:06:46,440 Speaker 1: to you again. Well before then, Leslie Falconio is senior 136 00:06:46,520 --> 00:06:51,680 Speaker 1: strategist at ubs A Global Wealth Management. All right now 137 00:06:51,720 --> 00:06:53,599 Speaker 1: it is time to turn to the world of commercial banking, 138 00:06:53,680 --> 00:06:56,360 Speaker 1: and for that we bring in a specialist. We have 139 00:06:56,440 --> 00:07:00,479 Speaker 1: Done mcque head of commercial banking as Citizens Bank. Don 140 00:07:00,720 --> 00:07:05,360 Speaker 1: What does your job involved primarily these days and pandemic times, Well, 141 00:07:05,360 --> 00:07:08,000 Speaker 1: it's really taking care of our clients. Fannie um. You know, 142 00:07:08,400 --> 00:07:11,800 Speaker 1: right at the beginning of the pandemic, we we actually 143 00:07:11,880 --> 00:07:14,400 Speaker 1: said our primary job is to help our clients get 144 00:07:14,400 --> 00:07:17,680 Speaker 1: through this really unprecedented events, and that you know, started 145 00:07:17,680 --> 00:07:20,440 Speaker 1: with the p PP loans, that started with the provision 146 00:07:20,480 --> 00:07:23,920 Speaker 1: of a lot of liquidity lines, some restructuring of credit agreements. 147 00:07:23,960 --> 00:07:26,520 Speaker 1: And we're really encouraged by what we're saying. We're seeing 148 00:07:26,960 --> 00:07:29,440 Speaker 1: some real bright spots in the portfolio. There's obviously some 149 00:07:29,520 --> 00:07:33,800 Speaker 1: real trouble in certain industries, but but so far, so good. 150 00:07:34,160 --> 00:07:36,360 Speaker 1: You must have had an internal conversation about what the 151 00:07:36,360 --> 00:07:39,240 Speaker 1: criteria might be, what the lines in the sand might be, 152 00:07:39,400 --> 00:07:43,680 Speaker 1: what industries you're willing to be more lenient on than others. 153 00:07:43,880 --> 00:07:46,680 Speaker 1: How did that conversation go. Well, you know what what 154 00:07:46,720 --> 00:07:50,040 Speaker 1: we really did was we immediately undertook what we call 155 00:07:50,080 --> 00:07:52,640 Speaker 1: it cash burn analysis on our client base, and we 156 00:07:53,080 --> 00:07:56,320 Speaker 1: really throughout history and went to what current cash flow 157 00:07:56,520 --> 00:08:01,040 Speaker 1: was versus current cash resources and try to project forwards three, six, 158 00:08:01,080 --> 00:08:03,640 Speaker 1: twelve months to see how long the company you know, 159 00:08:03,760 --> 00:08:06,440 Speaker 1: had before it ran into a real liquidity problem. And 160 00:08:06,440 --> 00:08:08,800 Speaker 1: then we we actually took a ride of different actions 161 00:08:08,840 --> 00:08:12,600 Speaker 1: against those different scenarios and and really tried to bolster 162 00:08:12,640 --> 00:08:15,160 Speaker 1: the companies to get to the other end of the pandemic. 163 00:08:15,240 --> 00:08:17,760 Speaker 1: We we don't. We don't have any redline industries in 164 00:08:17,840 --> 00:08:19,880 Speaker 1: terms of things that the places that we won't help. 165 00:08:19,920 --> 00:08:22,280 Speaker 1: We certainly have some there in a little bit more 166 00:08:22,320 --> 00:08:25,400 Speaker 1: difficulty than others. So anything that's in the hospitality sector 167 00:08:25,640 --> 00:08:29,040 Speaker 1: or the restaurants sector, or the leisure sectors obviously experiencing 168 00:08:29,800 --> 00:08:32,720 Speaker 1: a fair amount of distress right now. But but the 169 00:08:32,720 --> 00:08:36,920 Speaker 1: broad portfolio looks like it's stabilizing. How do you avoid 170 00:08:37,080 --> 00:08:40,560 Speaker 1: some of your clients being aided by other, you know, 171 00:08:40,920 --> 00:08:44,800 Speaker 1: maybe shadow banking type entities. Is there a way that 172 00:08:44,840 --> 00:08:47,400 Speaker 1: you can hold onto them, or are you actually quite 173 00:08:47,440 --> 00:08:50,120 Speaker 1: happy for some of these private equity companies or what 174 00:08:50,200 --> 00:08:53,880 Speaker 1: have you dig on sometimes that might be underperforming. We haven't. 175 00:08:53,920 --> 00:08:55,560 Speaker 1: We haven't seen a lot of that, you know. What 176 00:08:55,600 --> 00:08:59,600 Speaker 1: we what we have seen is some distressed investments, for example, 177 00:08:59,640 --> 00:09:02,840 Speaker 1: So some clients just needs minority equity and and we'll 178 00:09:02,840 --> 00:09:05,160 Speaker 1: try to facilitate that. But we haven't seen the non 179 00:09:05,240 --> 00:09:07,160 Speaker 1: banks trying to come in and take our clients away 180 00:09:07,200 --> 00:09:09,520 Speaker 1: at the split second. And you know, I think our 181 00:09:09,600 --> 00:09:11,640 Speaker 1: general approaches if we do a good job of our 182 00:09:11,679 --> 00:09:14,240 Speaker 1: clients and take care of them and are close to them. 183 00:09:14,280 --> 00:09:18,040 Speaker 1: And we went on a real communication effort with all 184 00:09:18,080 --> 00:09:20,160 Speaker 1: of our CEOs as we went through this to make 185 00:09:20,160 --> 00:09:22,559 Speaker 1: sure we understood what was happening with their companies. So 186 00:09:22,880 --> 00:09:25,839 Speaker 1: we've seen some refinancing. We we've refanced some people out 187 00:09:25,840 --> 00:09:30,800 Speaker 1: of other facilities, but it's nothing very different from usual way. Well, 188 00:09:30,840 --> 00:09:33,160 Speaker 1: that's good to hear from your perspective. I suppose how 189 00:09:33,200 --> 00:09:35,720 Speaker 1: are you handling the we're in the we're mortgage and 190 00:09:35,880 --> 00:09:39,120 Speaker 1: interest rates in general. Well, you know, we we've done 191 00:09:39,160 --> 00:09:42,200 Speaker 1: a great job in lowering our costs of deposits um 192 00:09:42,240 --> 00:09:45,480 Speaker 1: and so we've held up on our energy margin pretty well. 193 00:09:46,480 --> 00:09:49,040 Speaker 1: Can I just intervene and say that that's bank for 194 00:09:49,760 --> 00:09:54,000 Speaker 1: not paying anything on deposits. Well, we pail, we pay 195 00:09:54,040 --> 00:09:57,600 Speaker 1: a little bit, but but our our our neg interest 196 00:09:57,640 --> 00:10:00,199 Speaker 1: margin while under pressure is held up, held up. Okay, 197 00:10:00,679 --> 00:10:03,560 Speaker 1: we've benefited from a very strong fee line, so as 198 00:10:03,559 --> 00:10:05,720 Speaker 1: you might have seen when we when we reported last 199 00:10:05,720 --> 00:10:08,480 Speaker 1: week or pp ANDR line was quite strong, and in 200 00:10:08,480 --> 00:10:10,200 Speaker 1: fact it was a record level. So we feel good 201 00:10:10,200 --> 00:10:13,079 Speaker 1: about our overall PANO. Well, that's good to hear. And 202 00:10:13,160 --> 00:10:15,680 Speaker 1: now there's been a lot of talk about whether there 203 00:10:15,760 --> 00:10:18,840 Speaker 1: might be some consolidation. How is citizens faring in terms 204 00:10:18,840 --> 00:10:22,960 Speaker 1: of being able to ward off any outside interest or 205 00:10:23,000 --> 00:10:25,240 Speaker 1: indeed maybe looking around if if you're in that good 206 00:10:25,240 --> 00:10:28,000 Speaker 1: of a position and trying to beef up what you have, well, 207 00:10:28,040 --> 00:10:29,720 Speaker 1: we don't. You know, we don't feel like we have 208 00:10:29,840 --> 00:10:33,200 Speaker 1: to do a transaction to be successful. And you know, 209 00:10:33,320 --> 00:10:35,839 Speaker 1: we're not really in discussions either way with anyone, and 210 00:10:35,840 --> 00:10:38,559 Speaker 1: we wouldn't talk about it anyway. So what we have 211 00:10:38,600 --> 00:10:42,880 Speaker 1: done is we've we've focused on acquiring smaller companies to 212 00:10:43,280 --> 00:10:46,200 Speaker 1: basically beef up our offerings on our solution set. So 213 00:10:46,240 --> 00:10:48,120 Speaker 1: I bought three M and A boutiques in the last 214 00:10:48,160 --> 00:10:50,280 Speaker 1: two years. We bought a big mortgage company. We brought 215 00:10:50,280 --> 00:10:53,320 Speaker 1: a wealth management company. So our our strategy is really 216 00:10:53,600 --> 00:10:56,560 Speaker 1: um fill in acquisitions that that that broughten out our 217 00:10:56,559 --> 00:10:59,760 Speaker 1: products White. Yeah, so Bolletons. Then, so what are these 218 00:11:00,040 --> 00:11:03,439 Speaker 1: t companies on? What do they specialize in mergers? And 219 00:11:03,480 --> 00:11:06,640 Speaker 1: actually no, I mean what kinds of mergers rooms? So, 220 00:11:06,640 --> 00:11:09,360 Speaker 1: so one is a general industrial UM and we bought 221 00:11:09,400 --> 00:11:12,280 Speaker 1: them two years ago. They really do Midwestern industrial companies. 222 00:11:13,200 --> 00:11:15,720 Speaker 1: We bought one down in Atlanta, which is really business 223 00:11:15,720 --> 00:11:18,520 Speaker 1: services and and other kinds of services. And we bought 224 00:11:18,520 --> 00:11:22,280 Speaker 1: one in California, which is restaurants and franchise franchise finance, 225 00:11:22,640 --> 00:11:25,640 Speaker 1: so fascinating and why did you land on those particular ones. 226 00:11:26,280 --> 00:11:28,520 Speaker 1: We just saw that one day were leaders in their market. 227 00:11:28,840 --> 00:11:32,160 Speaker 1: Um and we want to buy M and A boutiques 228 00:11:32,200 --> 00:11:35,800 Speaker 1: which are which are really strong and very narrow sectors. 229 00:11:35,840 --> 00:11:37,640 Speaker 1: We're not going to compete with Golden Sacks or JP 230 00:11:37,720 --> 00:11:41,480 Speaker 1: Morgan in M and can't compete in narrow sectors. And frankly, 231 00:11:41,480 --> 00:11:44,240 Speaker 1: we've been incredibly successful through the pandemic. I think we're 232 00:11:44,280 --> 00:11:46,120 Speaker 1: closing an M and A deal a week right now, 233 00:11:46,200 --> 00:11:49,160 Speaker 1: so it's it's gone quite well. That's really phenomenal. I 234 00:11:49,160 --> 00:11:50,959 Speaker 1: want to hear more about these M and A deals. 235 00:11:51,040 --> 00:11:55,400 Speaker 1: So one a week is a distress semina or no? 236 00:11:55,559 --> 00:11:57,920 Speaker 1: You know. I think the perspective I give you is 237 00:11:58,080 --> 00:12:00,000 Speaker 1: they're an awful lot of companies that are doing quite 238 00:12:00,080 --> 00:12:03,840 Speaker 1: well and some are actually thriving through the pandemic. And 239 00:12:04,000 --> 00:12:06,320 Speaker 1: as long as as long as the company's EBA diesn't 240 00:12:06,360 --> 00:12:11,080 Speaker 1: being impacted, we're seeing that people want to complete transactions 241 00:12:11,080 --> 00:12:12,800 Speaker 1: that we're in the pipeline. So they're not huge. I mean, 242 00:12:12,800 --> 00:12:15,559 Speaker 1: they're anywhere from fifty million to three million in terms 243 00:12:15,600 --> 00:12:18,800 Speaker 1: of valuation. So it's not the billion ten billion dollar deals, 244 00:12:19,080 --> 00:12:21,719 Speaker 1: but you're seeing some of those happen also. So you know, 245 00:12:21,800 --> 00:12:24,320 Speaker 1: we see some that have gone on hold because you've 246 00:12:24,320 --> 00:12:26,560 Speaker 1: had cash flows disrupted and we just have to figure 247 00:12:26,559 --> 00:12:29,000 Speaker 1: out what a profile looks like on the back end. 248 00:12:29,360 --> 00:12:31,280 Speaker 1: But a lot of them have moved forward. We've been 249 00:12:31,320 --> 00:12:33,800 Speaker 1: frankly surprised at how many moved forward. Yeah, I mean, 250 00:12:33,840 --> 00:12:36,360 Speaker 1: it's the wheels of capitalism, isn't it. They just keep turning, 251 00:12:36,360 --> 00:12:39,040 Speaker 1: and it's really really fascinating to watch and also a 252 00:12:39,160 --> 00:12:42,240 Speaker 1: very good sign because you do want to, you know, 253 00:12:42,280 --> 00:12:46,000 Speaker 1: the wheels of industry to be well oiled and turning, 254 00:12:46,240 --> 00:12:48,280 Speaker 1: even at times like this. You just hope that that 255 00:12:48,400 --> 00:12:50,800 Speaker 1: can be the case. Well, thank you very much, Don, 256 00:12:51,000 --> 00:12:54,360 Speaker 1: very interesting conversation and good look for the next couple 257 00:12:54,360 --> 00:12:56,199 Speaker 1: of months. We'll be talking to you again before long. 258 00:12:56,280 --> 00:13:00,200 Speaker 1: Don McCree is head of commercial Banking citizens by Ink, 259 00:13:00,440 --> 00:13:02,319 Speaker 1: and you heard him. So much going on in the 260 00:13:02,360 --> 00:13:06,920 Speaker 1: capital markets these days. It's it's not all just stagnancy 261 00:13:06,960 --> 00:13:09,920 Speaker 1: and dooming loom and waiting for stimulus. The fields of 262 00:13:09,960 --> 00:13:16,200 Speaker 1: capitalism do continue to turn. So let's bring in George 263 00:13:16,200 --> 00:13:21,160 Speaker 1: ferguson our senior aerospace, defense and airlines analysts with Bloomberg Intelligence. George. 264 00:13:21,240 --> 00:13:24,520 Speaker 1: What I found interesting about the conversation was that Scary 265 00:13:24,640 --> 00:13:27,600 Speaker 1: Kelly seems to be so optimistic that it looks like 266 00:13:27,640 --> 00:13:30,640 Speaker 1: he's still almost expecting some kind of targeted stimientos somewhere 267 00:13:32,040 --> 00:13:34,920 Speaker 1: he does. I found that interesting as well. It seems 268 00:13:34,960 --> 00:13:36,760 Speaker 1: to me I'm in the camp that we probably don't 269 00:13:36,760 --> 00:13:41,040 Speaker 1: see a stimulus package for the airline um until next year, 270 00:13:41,080 --> 00:13:43,280 Speaker 1: if we get one at all. I really don't see 271 00:13:43,320 --> 00:13:45,959 Speaker 1: anything happening in a lame duck session. I sense it 272 00:13:46,040 --> 00:13:50,240 Speaker 1: potentially the Republicans don't, you know, don't really see a 273 00:13:50,360 --> 00:13:52,360 Speaker 1: need to be stimulating in parts of the economy like 274 00:13:52,400 --> 00:13:55,200 Speaker 1: the airlines, and so I think I think the best 275 00:13:55,240 --> 00:13:58,200 Speaker 1: case would be a Democratic win for the airlines. Democratic 276 00:13:58,200 --> 00:14:00,640 Speaker 1: win in November, and then they could actually gets into 277 00:14:00,640 --> 00:14:03,400 Speaker 1: stimulust into into early next year. We'll see. That's funny 278 00:14:03,400 --> 00:14:05,360 Speaker 1: because I would have thought that if the Democrats win, 279 00:14:05,800 --> 00:14:08,200 Speaker 1: that it would not be politically expedient for them to 280 00:14:08,200 --> 00:14:11,680 Speaker 1: be seen to be quote unquote bailing out particular industries, 281 00:14:11,720 --> 00:14:14,000 Speaker 1: and that in fact, the Republicans would be more likely 282 00:14:14,040 --> 00:14:17,280 Speaker 1: to do targeted some stimulus how do you get to 283 00:14:17,480 --> 00:14:22,360 Speaker 1: Democrats bailing out airlines? I just think I think the 284 00:14:22,480 --> 00:14:25,400 Speaker 1: unionized labor force is one that they have, you know, 285 00:14:25,440 --> 00:14:28,440 Speaker 1: they have a strong support from and they and they 286 00:14:28,520 --> 00:14:31,320 Speaker 1: in turn on a continue support and I use some 287 00:14:31,400 --> 00:14:37,240 Speaker 1: of the Pat Toomey, Republican from Pennsylvania is on the 288 00:14:37,280 --> 00:14:40,640 Speaker 1: record is saying the airline shouldn't be providing any more 289 00:14:40,640 --> 00:14:44,040 Speaker 1: stimulus like kind of us. I guess those two, uh, 290 00:14:44,080 --> 00:14:46,280 Speaker 1: you know, benchmarks as well as I think Republicans are 291 00:14:46,320 --> 00:14:49,480 Speaker 1: more concerned about deficit spending, and I think there's a 292 00:14:49,480 --> 00:14:52,880 Speaker 1: little bit less concerned about that. And that's certainly will 293 00:14:52,920 --> 00:14:54,920 Speaker 1: come back to the four if indeed there is a 294 00:14:54,960 --> 00:14:58,160 Speaker 1: transfer of power. And you know it because right now 295 00:14:58,200 --> 00:15:01,520 Speaker 1: it's it's not popular to talk about the deficit, but 296 00:15:01,600 --> 00:15:05,240 Speaker 1: it will be soon if the Republicans aren't in power still. So, George, 297 00:15:06,440 --> 00:15:09,840 Speaker 1: is Gary Kelly a little bit misguided? Or can he 298 00:15:10,600 --> 00:15:13,320 Speaker 1: get enough liquidity? Can he wait until next year until 299 00:15:13,360 --> 00:15:17,280 Speaker 1: something comes? Yeah? So you know what, Gary Kelly, he 300 00:15:17,320 --> 00:15:21,000 Speaker 1: has plenty of liqudity. I mean he's Southwest is in 301 00:15:21,080 --> 00:15:23,200 Speaker 1: one of the best positions of any U S airline 302 00:15:23,760 --> 00:15:26,440 Speaker 1: to weather this storm. They have a lot of cash 303 00:15:26,440 --> 00:15:29,920 Speaker 1: they would. I think somewhere around fifteen billion cash they 304 00:15:29,960 --> 00:15:33,080 Speaker 1: reported this morning. Uh, and they have less debt than that. 305 00:15:33,600 --> 00:15:35,160 Speaker 1: You know, when we even we look at all the 306 00:15:35,240 --> 00:15:38,480 Speaker 1: US airlines, we see them all able to survive into 307 00:15:38,720 --> 00:15:42,960 Speaker 1: into summer. I think they've all sort of targeted that area. 308 00:15:43,520 --> 00:15:45,760 Speaker 1: Late next year's being a time when they think demand 309 00:15:45,800 --> 00:15:49,240 Speaker 1: is gonna hopefully start to recover. So I think it's 310 00:15:49,280 --> 00:15:51,040 Speaker 1: for Gary, it's more a question of whether or not, 311 00:15:51,480 --> 00:15:52,880 Speaker 1: you know, as he as he mentioned, whether or not 312 00:15:52,920 --> 00:15:56,240 Speaker 1: he's going to push his employees through, you know, taking 313 00:15:56,280 --> 00:15:58,920 Speaker 1: pay cuts and things like that and furloughing more employees, 314 00:15:59,320 --> 00:16:02,480 Speaker 1: and his role can Sorry, I think about you know, 315 00:16:02,840 --> 00:16:05,920 Speaker 1: an unsettled environment at Southwest. It years to make those 316 00:16:05,960 --> 00:16:09,840 Speaker 1: moves to drive down, drive down costs and get to 317 00:16:09,880 --> 00:16:12,960 Speaker 1: a zero cash man, Georgie, I love to have your 318 00:16:12,960 --> 00:16:15,400 Speaker 1: thoughts on Bowing on the seven thirty seven Max getting 319 00:16:15,440 --> 00:16:17,080 Speaker 1: back up in the air. We were waiting for it 320 00:16:17,160 --> 00:16:19,560 Speaker 1: for so long and so long, and suddenly it's it's 321 00:16:19,600 --> 00:16:24,160 Speaker 1: all happening. Yes, I mean I think that you know, 322 00:16:24,600 --> 00:16:28,480 Speaker 1: Bowing Bowing, He's had some challenges, but the airplane is 323 00:16:28,520 --> 00:16:31,280 Speaker 1: an absolutely viable airplane, and I think Bowing really gets 324 00:16:31,280 --> 00:16:33,760 Speaker 1: focused on getting the airplane back in the air. It's 325 00:16:33,760 --> 00:16:35,600 Speaker 1: been a while, but we think it's going to be 326 00:16:36,160 --> 00:16:38,280 Speaker 1: approved by the f a A, you know, by end 327 00:16:38,320 --> 00:16:40,880 Speaker 1: of year this year or early next year. So I 328 00:16:40,880 --> 00:16:43,640 Speaker 1: think Gary is going to be having that discussion more 329 00:16:43,680 --> 00:16:46,920 Speaker 1: intensely now about when he really wants all those airplanes 330 00:16:46,920 --> 00:16:49,440 Speaker 1: that Bowing is built for him. Because it's it's again 331 00:16:49,480 --> 00:16:51,280 Speaker 1: we see it's sort of late this year early next 332 00:16:51,320 --> 00:16:54,080 Speaker 1: year back in service. Can you give us an update 333 00:16:54,120 --> 00:16:56,360 Speaker 1: on orders? So there was a big order book and 334 00:16:56,400 --> 00:16:58,880 Speaker 1: then it was slowly you know, lines in that book 335 00:16:58,880 --> 00:17:01,440 Speaker 1: we're getting crossed out, as are some airlines a you know, 336 00:17:01,520 --> 00:17:04,959 Speaker 1: got hit by the pandemic. But we weren't maybe willing 337 00:17:05,000 --> 00:17:07,280 Speaker 1: fully to wait for Boeing. Where are we out now 338 00:17:07,320 --> 00:17:10,080 Speaker 1: for Boing? Yeah? I mean the last time we looked 339 00:17:10,080 --> 00:17:11,960 Speaker 1: at the set seven max, I'm going to give you 340 00:17:12,000 --> 00:17:14,159 Speaker 1: a rough Converns around five thousand. The challenge with the 341 00:17:14,240 --> 00:17:17,359 Speaker 1: order book is exactly like you heard this morning, right, 342 00:17:17,359 --> 00:17:20,199 Speaker 1: Gary Kelly wouldn't go on record as to what he 343 00:17:20,240 --> 00:17:22,119 Speaker 1: was going to do in that order book, and he 344 00:17:22,160 --> 00:17:25,360 Speaker 1: said he would continue to talk to Bowing. Now, look, 345 00:17:25,400 --> 00:17:28,320 Speaker 1: we know over time, Gary will need airplanes, and he's 346 00:17:28,359 --> 00:17:31,240 Speaker 1: a solely he's solely a Bowing shop. And when the 347 00:17:31,280 --> 00:17:33,200 Speaker 1: world looks better, Gary will go to Bowing. I need 348 00:17:33,240 --> 00:17:36,800 Speaker 1: airplanes and airplanes sooner because I got great demand, and 349 00:17:36,840 --> 00:17:39,360 Speaker 1: he'll want Bowing to give him those airplanes. And so 350 00:17:39,800 --> 00:17:41,520 Speaker 1: Bowing is going to come to him at this time 351 00:17:41,560 --> 00:17:44,679 Speaker 1: and say, look, we have a problem, right, We've got 352 00:17:44,680 --> 00:17:46,719 Speaker 1: a lot of airplanes stacked up, we need to deliver, 353 00:17:47,280 --> 00:17:49,040 Speaker 1: we need to cash what we need you to support 354 00:17:49,080 --> 00:17:52,400 Speaker 1: us through this downturn. So that negotiation and and Gary 355 00:17:52,480 --> 00:17:54,480 Speaker 1: Kelly is one of the most important customers for Bowing. 356 00:17:54,920 --> 00:17:58,440 Speaker 1: That conversation is going on throughout that Bowing order book, 357 00:17:58,960 --> 00:18:02,080 Speaker 1: you know, with this and sort of intensities. So it's 358 00:18:02,080 --> 00:18:05,360 Speaker 1: really hard to plumb what portion of those of those 359 00:18:05,480 --> 00:18:08,359 Speaker 1: orders could go away or not. We think a lot 360 00:18:08,400 --> 00:18:11,359 Speaker 1: of them will just be deferred. And what will happen 361 00:18:11,400 --> 00:18:13,920 Speaker 1: is Boweling and Airbus. Airbus will be in the same 362 00:18:13,960 --> 00:18:16,680 Speaker 1: boat with their customers, will have to lower build rates 363 00:18:18,119 --> 00:18:21,520 Speaker 1: as they manage manage a slower airline recovery, and the 364 00:18:21,640 --> 00:18:24,560 Speaker 1: customers say, look, I just can't take those airplanes this year. 365 00:18:24,680 --> 00:18:26,439 Speaker 1: So we don't see a lot of unwinding the books, 366 00:18:26,760 --> 00:18:30,080 Speaker 1: but we see a lot of deferrals in the books. George, 367 00:18:30,080 --> 00:18:32,040 Speaker 1: we went into this thing with you know, close on 368 00:18:32,200 --> 00:18:34,879 Speaker 1: twenty airlines were now at what's seventeen? I think, can 369 00:18:34,920 --> 00:18:36,680 Speaker 1: you give us an update on on where we are 370 00:18:36,800 --> 00:18:42,040 Speaker 1: and who didn't survive? I'm sorry say it again. We 371 00:18:42,080 --> 00:18:44,480 Speaker 1: went into the pandemic with a couple of more airlines 372 00:18:44,520 --> 00:18:48,280 Speaker 1: than than are in existence now. Basically, you know around 373 00:18:48,280 --> 00:18:51,000 Speaker 1: the world, can you give us an update? Well, I 374 00:18:51,000 --> 00:18:53,480 Speaker 1: mean right right now, you know, right now, I don't 375 00:18:53,480 --> 00:18:56,560 Speaker 1: think we've seen anybody really liquidated and taken out of 376 00:18:56,560 --> 00:19:00,159 Speaker 1: the game yet, so you know, there may be or 377 00:19:00,200 --> 00:19:02,400 Speaker 1: to I I'm missing, but we know we have hot 378 00:19:02,400 --> 00:19:05,040 Speaker 1: spots of problems. You know, down in South America we 379 00:19:05,040 --> 00:19:09,560 Speaker 1: had lat Time in Avianca declared bankruptcy and restructure their companies, 380 00:19:09,600 --> 00:19:13,920 Speaker 1: which if if demand doesn't improve long term, more airlines 381 00:19:13,960 --> 00:19:17,560 Speaker 1: will need to go through that bankruptcy and lay off 382 00:19:17,600 --> 00:19:20,080 Speaker 1: their debt and get rid of their airplanes. So we 383 00:19:20,119 --> 00:19:23,840 Speaker 1: saw them. We know Norwegian out in Europe is having 384 00:19:23,920 --> 00:19:28,240 Speaker 1: challenges and cut operations percent, but is still limping along. 385 00:19:28,680 --> 00:19:31,080 Speaker 1: We have a number of airlines around the world that 386 00:19:31,080 --> 00:19:34,520 Speaker 1: are kind of limping through. We know air Asia out 387 00:19:34,520 --> 00:19:37,240 Speaker 1: in Malaysia's having big problems with they're big buyer of 388 00:19:37,760 --> 00:19:41,959 Speaker 1: air A three and A three thirties their Asia X 389 00:19:42,000 --> 00:19:46,280 Speaker 1: longer haul um a portion of that airline, so we 390 00:19:46,359 --> 00:19:48,560 Speaker 1: see it cropping up. But remember we're now coming into 391 00:19:48,640 --> 00:19:52,480 Speaker 1: winter season, and so winter season is the really difficult 392 00:19:53,400 --> 00:19:55,639 Speaker 1: travel season, and I think now is where we're going 393 00:19:55,680 --> 00:19:59,040 Speaker 1: to start to see even more failures as airlines don't 394 00:19:59,040 --> 00:20:01,639 Speaker 1: see this demand come in cash flow this weekend to 395 00:20:01,720 --> 00:20:05,119 Speaker 1: go into the weaker season. But again, the airlines have 396 00:20:05,160 --> 00:20:09,520 Speaker 1: a great propensity to sort of um limp along, go 397 00:20:09,600 --> 00:20:12,800 Speaker 1: to a bankruptcy, restructuring, and continue. I think what we'll 398 00:20:12,800 --> 00:20:16,120 Speaker 1: really watch though, is the amount of capacity that comes 399 00:20:16,119 --> 00:20:18,840 Speaker 1: out of the marketplace. Right these airplanes have to leave 400 00:20:18,920 --> 00:20:21,760 Speaker 1: these airlines because they don't have to they don't have 401 00:20:21,800 --> 00:20:24,480 Speaker 1: the demand to fly them. And the question will start 402 00:20:24,520 --> 00:20:26,159 Speaker 1: to become what do we do with all these airplanes 403 00:20:27,000 --> 00:20:28,680 Speaker 1: and the market up there a bunch of them down. 404 00:20:29,119 --> 00:20:31,240 Speaker 1: But we're watching for capacity to come out of these 405 00:20:31,240 --> 00:20:34,560 Speaker 1: global airlines. Gosh, those car parks and Phoenix, or those 406 00:20:34,600 --> 00:20:36,760 Speaker 1: airplane parks and Phoenix are going to get pretty full 407 00:20:36,760 --> 00:20:39,400 Speaker 1: if they're not already. George, thank you so much. George Ferguson, 408 00:20:39,720 --> 00:20:44,040 Speaker 1: Senior Aerospace, Defense and Airlines analyst for Bloomberg Intelligence, joining 409 00:20:44,119 --> 00:20:48,880 Speaker 1: us there. All right, it is time for our weekly 410 00:20:48,960 --> 00:20:52,880 Speaker 1: visit with Barry Whittle's Bloomberg opinion columnists. We're always thrilled 411 00:20:52,920 --> 00:20:55,439 Speaker 1: to have them on, and Barry, I want you to 412 00:20:55,480 --> 00:20:58,240 Speaker 1: take on things because you're so learned and you also 413 00:20:58,359 --> 00:21:01,359 Speaker 1: read just voraciously about the market, and you're also in 414 00:21:01,400 --> 00:21:03,199 Speaker 1: the market as well, so you've got people's money and 415 00:21:03,200 --> 00:21:05,840 Speaker 1: your money, you know, at risk. We've heard a lot 416 00:21:05,880 --> 00:21:07,879 Speaker 1: of different opinions about what's going on here in the 417 00:21:07,960 --> 00:21:10,399 Speaker 1: last week. And I'm talking about people like Bill Miller, 418 00:21:10,480 --> 00:21:13,119 Speaker 1: for example, talking in his note about it and that 419 00:21:13,200 --> 00:21:17,200 Speaker 1: getting disseminated. We had Eric Shatsker talking to bos Weinstein today. 420 00:21:17,240 --> 00:21:19,640 Speaker 1: A lot of big names are trying to figure out 421 00:21:19,720 --> 00:21:22,680 Speaker 1: the environment. What have you taken away from them? Who 422 00:21:22,680 --> 00:21:26,480 Speaker 1: are the best thinkers on this? Wow, that's such a 423 00:21:26,600 --> 00:21:32,040 Speaker 1: challenging question. There we go, you know, I think that 424 00:21:33,200 --> 00:21:36,000 Speaker 1: and my vantage point is having sat with many of 425 00:21:36,040 --> 00:21:41,080 Speaker 1: these people for masters and business interviews for the podcast. 426 00:21:41,160 --> 00:21:46,480 Speaker 1: Each of these people have a a somewhat unique um perspective, 427 00:21:46,960 --> 00:21:53,880 Speaker 1: but a much more um precise specialty. So when I'm 428 00:21:53,920 --> 00:21:57,040 Speaker 1: talking to Howard Marks, I'm talking to him about two things. 429 00:21:57,080 --> 00:22:00,439 Speaker 1: I'm talking to him about the thinking pro says, how 430 00:22:00,440 --> 00:22:03,480 Speaker 1: do you make decisions? How do you analyze things? As 431 00:22:03,520 --> 00:22:09,000 Speaker 1: well as this specifics of distress debt um. This weekend's 432 00:22:09,040 --> 00:22:12,960 Speaker 1: guest is Ray Dalio from from Bridgewater Associates. He's a 433 00:22:13,000 --> 00:22:16,919 Speaker 1: big macro thinker. So when I'm talking to Ray, I 434 00:22:17,040 --> 00:22:20,199 Speaker 1: want to ask him about different asset classes, what do 435 00:22:20,240 --> 00:22:22,199 Speaker 1: you do now that rates are so low? What do 436 00:22:22,240 --> 00:22:24,119 Speaker 1: you do with gold? What do you do you know, 437 00:22:24,160 --> 00:22:26,520 Speaker 1: those sort of questions. But at the same time, I 438 00:22:26,560 --> 00:22:29,840 Speaker 1: want to understand how he looks at the world, and 439 00:22:29,920 --> 00:22:33,040 Speaker 1: I know he's he's not just an investor, but a 440 00:22:33,240 --> 00:22:38,720 Speaker 1: historian and someone who's thought process is really what is 441 00:22:38,760 --> 00:22:43,320 Speaker 1: the history tell us about this particular area. Um So, 442 00:22:43,320 --> 00:22:46,440 Speaker 1: So we were talking for for this week's show about 443 00:22:46,480 --> 00:22:49,719 Speaker 1: the pandemic and the lockdown and how unique this is, 444 00:22:49,760 --> 00:22:52,520 Speaker 1: and his answer is, yeah, it's unique in your lifetime, 445 00:22:52,560 --> 00:22:54,919 Speaker 1: but you look back a few hundred years and you 446 00:22:54,920 --> 00:22:58,359 Speaker 1: could see examples of things that have happened before. We've 447 00:22:58,440 --> 00:23:02,480 Speaker 1: had um Central Bank create a lot of um take 448 00:23:02,560 --> 00:23:07,280 Speaker 1: rates down to zero. We've had governments have all sorts 449 00:23:07,280 --> 00:23:11,879 Speaker 1: of debt be monetized. We've seen the wealth gap expand 450 00:23:12,119 --> 00:23:17,000 Speaker 1: in prior cycles, and we've seen um arising power challenge 451 00:23:17,080 --> 00:23:21,439 Speaker 1: the established um powers that be. All these things that 452 00:23:21,480 --> 00:23:26,520 Speaker 1: we're experiencing today, they've all happened before, sometimes separately, sometimes together, 453 00:23:27,000 --> 00:23:30,840 Speaker 1: and and so it's that whole what drives their thought 454 00:23:30,920 --> 00:23:35,680 Speaker 1: process before they get to their specific expertise. That really 455 00:23:35,720 --> 00:23:37,919 Speaker 1: is quite fast, and I mean very honestly, you know, 456 00:23:37,920 --> 00:23:40,040 Speaker 1: wouldn't you argue that not only has it happened before, 457 00:23:40,080 --> 00:23:42,240 Speaker 1: but it happens roughly once every ten years. So, I mean, 458 00:23:42,240 --> 00:23:44,560 Speaker 1: we had the Great Financial Crisis ten years ago. In 459 00:23:44,680 --> 00:23:47,280 Speaker 1: terms of pandemics, we we had one twenty years ago. 460 00:23:47,520 --> 00:23:50,679 Speaker 1: And I mean, these things happen. We're very likely to 461 00:23:50,720 --> 00:23:53,720 Speaker 1: have a rolling series of these for the rest of 462 00:23:53,720 --> 00:23:58,520 Speaker 1: our lifetimes, particularly out of time when global thought systems 463 00:23:58,560 --> 00:24:02,360 Speaker 1: are fragmenting and disintegrating, and you know, the world that 464 00:24:02,520 --> 00:24:04,800 Speaker 1: worked for a while has not been working for a 465 00:24:04,800 --> 00:24:08,080 Speaker 1: long time. So that's why you want these guys's opinions 466 00:24:08,080 --> 00:24:10,159 Speaker 1: on things. You want to see how they're thinking about it. 467 00:24:10,240 --> 00:24:15,200 Speaker 1: So so that's Ray Dalio. Those who specialize in treasury investing, though, 468 00:24:15,320 --> 00:24:18,080 Speaker 1: may have a different opinion on this, because it certainly 469 00:24:18,119 --> 00:24:21,400 Speaker 1: is the greatest expansion, even greater than the Great Financial 470 00:24:21,440 --> 00:24:26,919 Speaker 1: Crisis of you know, monetary policy tools and um just 471 00:24:27,040 --> 00:24:30,840 Speaker 1: the monetary base that we've ever seen across the world. Right, 472 00:24:30,960 --> 00:24:33,880 Speaker 1: Dalio says, you have to go back to ninety three 473 00:24:33,920 --> 00:24:38,760 Speaker 1: to find a central bank like the US taking rates 474 00:24:38,800 --> 00:24:41,320 Speaker 1: now to zero. But when you look at the balance 475 00:24:41,359 --> 00:24:45,080 Speaker 1: sheet of the by the joke about that was, I 476 00:24:45,080 --> 00:24:49,760 Speaker 1: guess modern monetary theory ain't so modern because the version 477 00:24:49,800 --> 00:24:53,280 Speaker 1: of it that that we're sort of experiencing goes back 478 00:24:53,320 --> 00:24:58,359 Speaker 1: to UM. But but to your point about how cyclical 479 00:24:58,400 --> 00:25:02,000 Speaker 1: all these things are, and how you know, unprecedented is 480 00:25:02,440 --> 00:25:05,600 Speaker 1: a bad word because unprecedented things happen all the time. 481 00:25:06,400 --> 00:25:09,720 Speaker 1: I think I say the same thing every time I 482 00:25:09,760 --> 00:25:13,560 Speaker 1: hear someone say it's a hundred year flood. It's yeah, 483 00:25:13,600 --> 00:25:16,000 Speaker 1: we but we get them every ten years. Maybe we 484 00:25:16,000 --> 00:25:20,240 Speaker 1: should stop calling these things that come along ten or 485 00:25:20,320 --> 00:25:22,879 Speaker 1: more times a century. Maybe we should stop calling them 486 00:25:22,920 --> 00:25:26,480 Speaker 1: hundred year floods. Yeah, I mean, honestly, the people that 487 00:25:26,560 --> 00:25:30,560 Speaker 1: do do you do you take them seriously? So I 488 00:25:31,160 --> 00:25:34,520 Speaker 1: almost think of it as a verbal tick, the phrase 489 00:25:34,720 --> 00:25:37,560 Speaker 1: you know, you ever speak to someone who every other sentences? 490 00:25:37,640 --> 00:25:43,440 Speaker 1: You know, we have these unthinking, unconscious verbal ticks. Uh. 491 00:25:43,720 --> 00:25:47,280 Speaker 1: Market hates uncertainty is probably the one that's most dominance 492 00:25:47,359 --> 00:25:51,080 Speaker 1: these days, and I think we should really stop and 493 00:25:51,760 --> 00:25:57,119 Speaker 1: carefully consider what we say and and try to avoid cliches. 494 00:25:57,680 --> 00:26:00,520 Speaker 1: Market hates uncertainty is a perfect example mark it's thrived 495 00:26:00,560 --> 00:26:04,000 Speaker 1: on uncertainty. Anytime there's certainty, there isn't someone to take 496 00:26:04,000 --> 00:26:05,919 Speaker 1: the other side of your trade. There there has to 497 00:26:05,960 --> 00:26:11,160 Speaker 1: be by definition, uncertainty about the future. It's inherently unknown, 498 00:26:11,160 --> 00:26:14,960 Speaker 1: and therefore markets are a mechanism to make sense I 499 00:26:15,000 --> 00:26:18,679 Speaker 1: have of uncertainty. Given what's been going on in the 500 00:26:18,720 --> 00:26:23,479 Speaker 1: markets lately, UM, I love the narrative that we've been 501 00:26:23,520 --> 00:26:27,760 Speaker 1: hearing lately that the possibility of a lack of resolution 502 00:26:27,920 --> 00:26:32,480 Speaker 1: of the presidential contest on November three is it has 503 00:26:32,520 --> 00:26:35,680 Speaker 1: been all the uncertainty. Let me let me point out 504 00:26:35,720 --> 00:26:39,480 Speaker 1: that in two thousand um Bush v. Gore wasn't resolved 505 00:26:39,560 --> 00:26:42,480 Speaker 1: until I think it was December twelfth or December thirteenth. 506 00:26:42,560 --> 00:26:44,320 Speaker 1: And if you really want to be a story and 507 00:26:44,880 --> 00:26:47,320 Speaker 1: you could go back to the election of eighteen hundred, 508 00:26:47,840 --> 00:26:51,960 Speaker 1: which was an electoral college tie. It was a dead heat. 509 00:26:52,480 --> 00:26:55,080 Speaker 1: When that happens, it gets thrown to the House, and 510 00:26:55,240 --> 00:27:00,000 Speaker 1: each state gets a vote in the House of representative 511 00:27:00,000 --> 00:27:04,280 Speaker 1: of each state's um congressional delegation gets one vote plus 512 00:27:04,359 --> 00:27:09,760 Speaker 1: plus the various um um territories and and non states 513 00:27:09,800 --> 00:27:13,040 Speaker 1: and and so that's in the event of an electoral 514 00:27:13,040 --> 00:27:16,600 Speaker 1: college tie, the House is the final determiner. So all 515 00:27:16,600 --> 00:27:19,600 Speaker 1: these things that look like they're so unique in one off, 516 00:27:19,640 --> 00:27:22,680 Speaker 1: we've experienced some form of them in the past. Yeah, 517 00:27:22,680 --> 00:27:24,520 Speaker 1: I mean, it's that old joke on Wall Street, right 518 00:27:24,560 --> 00:27:27,919 Speaker 1: that the interns or the newies haven't seen this before 519 00:27:28,000 --> 00:27:30,960 Speaker 1: and they have no idea what they're in for. But 520 00:27:31,080 --> 00:27:33,080 Speaker 1: you know, it really does help to live through a 521 00:27:33,119 --> 00:27:35,040 Speaker 1: couple of them, I think, and you see how markets 522 00:27:35,240 --> 00:27:37,600 Speaker 1: react and how they work, and and and you have 523 00:27:37,680 --> 00:27:40,360 Speaker 1: minor ones, you know, in the meantime. So for example, 524 00:27:40,400 --> 00:27:43,639 Speaker 1: when remember when when when the credit rating was was 525 00:27:43,680 --> 00:27:45,840 Speaker 1: downgraded for the US, that was a little bit of 526 00:27:45,960 --> 00:27:48,680 Speaker 1: a minor shock to the system as well. So it's 527 00:27:48,680 --> 00:27:52,000 Speaker 1: all practiced it yet it did nothing to the contractory 528 00:27:52,080 --> 00:27:54,560 Speaker 1: market other than the news broke. There was a little 529 00:27:54,560 --> 00:27:58,000 Speaker 1: wobble for a couple of minutes, and then the bullmarket 530 00:27:58,040 --> 00:28:05,240 Speaker 1: and treasuries continued for they're ongoing. Arguably it still hasn't ended. Barry, 531 00:28:05,359 --> 00:28:07,880 Speaker 1: Thank you. Always fun to have a chat Barry Riddles. 532 00:28:08,080 --> 00:28:11,200 Speaker 1: Do tune into his Master's in Business podcast. He also 533 00:28:11,200 --> 00:28:13,880 Speaker 1: makes frequent appearances here on Bloomberg Radio and of course, 534 00:28:13,960 --> 00:28:18,040 Speaker 1: on Bloomberg Television in the mornings. Thanks for listening to 535 00:28:18,080 --> 00:28:21,880 Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews 536 00:28:21,880 --> 00:28:25,640 Speaker 1: at Apple Podcasts or whatever podcast platform you prefer. I'm 537 00:28:25,680 --> 00:28:28,639 Speaker 1: Bonnie Quinn. I'm on Twitter at Bonnie Quinn, and I'm 538 00:28:28,680 --> 00:28:31,760 Speaker 1: Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, 539 00:28:31,800 --> 00:28:34,280 Speaker 1: you can always catch us worldwide at Bloomberg Radio.