1 00:00:01,360 --> 00:00:04,120 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 2 00:00:04,120 --> 00:00:06,200 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 --> 00:00:13,600 Speaker 1: along with essential market moving news. Find the Bloomberg Markets 5 00:00:13,600 --> 00:00:16,920 Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts, 6 00:00:17,000 --> 00:00:22,000 Speaker 1: and on Bloomberg dot com. It is time for Bloomberg Opinion. 7 00:00:22,280 --> 00:00:26,079 Speaker 1: You're joined by Tara la Chapelle Entertainment, Telecommunications and deal 8 00:00:26,120 --> 00:00:29,240 Speaker 1: columns for Bloomberg Opinion. Uh and it really just a 9 00:00:29,280 --> 00:00:31,560 Speaker 1: fascinating story coming out of the Walt Disney Company, once 10 00:00:31,600 --> 00:00:35,519 Speaker 1: again highlighting the really difficult challenges out there for the 11 00:00:35,560 --> 00:00:38,720 Speaker 1: American worker. Walt Disney announcing that it's gonna slash twenty 12 00:00:38,840 --> 00:00:43,159 Speaker 1: eight thousand workers in its slumping US parks and resorts business. 13 00:00:43,200 --> 00:00:45,199 Speaker 1: Terror Thanks so much for joining us here. Boy, the 14 00:00:45,240 --> 00:00:48,520 Speaker 1: pain is really being felt at the Walt Disney Company, 15 00:00:48,560 --> 00:00:51,360 Speaker 1: among others. Yeah. I think you know a lot of 16 00:00:51,400 --> 00:00:54,280 Speaker 1: companies had been holding out hope these last few months 17 00:00:54,280 --> 00:00:56,120 Speaker 1: that you just had to get through these for a 18 00:00:56,200 --> 00:00:58,240 Speaker 1: few months and that they could keep their workers and 19 00:00:58,280 --> 00:01:00,760 Speaker 1: that you know, you could kind of see normal on 20 00:01:00,800 --> 00:01:03,480 Speaker 1: the Horizon, and I think this is Disney saying in 21 00:01:03,480 --> 00:01:05,520 Speaker 1: a big way that we're really not there and we're 22 00:01:05,560 --> 00:01:06,960 Speaker 1: not going to be there for a while, and they 23 00:01:07,000 --> 00:01:08,400 Speaker 1: needed to do this, and I think it's going to 24 00:01:08,480 --> 00:01:11,399 Speaker 1: be the start of other companies badly doing this as well. 25 00:01:11,720 --> 00:01:14,720 Speaker 1: You know, their theme park in California has been closed, 26 00:01:14,720 --> 00:01:17,000 Speaker 1: and they've kind of Disney has kind of pointed fingers 27 00:01:17,040 --> 00:01:20,399 Speaker 1: at California's state government for that. But the reality is 28 00:01:20,440 --> 00:01:23,520 Speaker 1: that even in Florida where they are opening, they're they're open, 29 00:01:23,560 --> 00:01:26,200 Speaker 1: they're not seeing a lot of travelers come in because 30 00:01:26,240 --> 00:01:29,200 Speaker 1: people are still really weary about doing this. Not to mention, 31 00:01:29,200 --> 00:01:30,840 Speaker 1: we're in a recession, so you know, I don't know 32 00:01:30,880 --> 00:01:33,560 Speaker 1: how many families are willing to spend a hundred bucks 33 00:01:33,640 --> 00:01:36,880 Speaker 1: or more a day on each person in their household 34 00:01:36,920 --> 00:01:39,479 Speaker 1: to go to Disney World right now. Yeah, the head 35 00:01:39,520 --> 00:01:42,520 Speaker 1: of the theme park send out a statement in which 36 00:01:42,520 --> 00:01:44,560 Speaker 1: he said that many of these were part time already 37 00:01:44,640 --> 00:01:46,320 Speaker 1: or contract workers. In other words, they were in the 38 00:01:46,440 --> 00:01:48,520 Speaker 1: union employees, and they're going to trying them to some 39 00:01:48,600 --> 00:01:51,280 Speaker 1: kind of an agreement with the union employees. But nevertheless, 40 00:01:51,680 --> 00:01:54,800 Speaker 1: a phenomenal amount of workers that we're getting some kind 41 00:01:54,800 --> 00:01:58,160 Speaker 1: of paycheck from Disney, right. You know, they had furloughed 42 00:01:58,160 --> 00:02:00,640 Speaker 1: about a hundred thousand people and in kept their task 43 00:02:00,760 --> 00:02:05,040 Speaker 1: members um on their healthcare uh since April when they 44 00:02:05,040 --> 00:02:07,080 Speaker 1: had to do this, And I think now they're starting 45 00:02:07,120 --> 00:02:09,440 Speaker 1: to realize, you know, the same parts really aren't going 46 00:02:09,480 --> 00:02:11,720 Speaker 1: to come back for a while because they simply can't. 47 00:02:11,960 --> 00:02:14,680 Speaker 1: And it's similar for the movie theater industry, which Disney 48 00:02:14,720 --> 00:02:17,600 Speaker 1: is also typed to, where you have them reopening around 49 00:02:17,600 --> 00:02:20,560 Speaker 1: the country, but you're not seeing people come back in 50 00:02:20,600 --> 00:02:22,920 Speaker 1: big numbers for a lot of different reasons. And it 51 00:02:23,000 --> 00:02:25,720 Speaker 1: just shows that to get the economy back on track, 52 00:02:25,800 --> 00:02:28,480 Speaker 1: we need to fix the virus first. It's just there's 53 00:02:28,520 --> 00:02:30,440 Speaker 1: no way to get around it. And I think this 54 00:02:30,520 --> 00:02:33,320 Speaker 1: is what these companies are starting to realize, and unfortunately 55 00:02:33,320 --> 00:02:34,640 Speaker 1: it's going to cause a lot of pain for a 56 00:02:34,639 --> 00:02:37,880 Speaker 1: lot of workers. Yeah, it's Terry. You know you've covered 57 00:02:38,200 --> 00:02:40,720 Speaker 1: Disney for a long time. You know that the big 58 00:02:40,720 --> 00:02:44,600 Speaker 1: moves they've made uh to pivot towards their streaming business. 59 00:02:44,600 --> 00:02:47,680 Speaker 1: But the reality is most of their operating income today 60 00:02:47,760 --> 00:02:51,560 Speaker 1: comes from their theme parks and their cable networks and 61 00:02:51,600 --> 00:02:55,120 Speaker 1: the filmed entertainment studio and all those businesses are really 62 00:02:55,160 --> 00:02:59,880 Speaker 1: being impacted by the economic infects effects of this pandemic. 63 00:03:01,240 --> 00:03:03,480 Speaker 1: Is what's the thinking do you think within Disney about 64 00:03:03,520 --> 00:03:05,560 Speaker 1: kind of their strategy for dealing with this pandemic. Is 65 00:03:05,560 --> 00:03:07,679 Speaker 1: it just to batten down the hatches and wait to 66 00:03:07,720 --> 00:03:10,680 Speaker 1: get together side. I mean, I guess so, but it's 67 00:03:10,680 --> 00:03:13,720 Speaker 1: been a little bit confusing. I mean, they installed a 68 00:03:13,760 --> 00:03:16,400 Speaker 1: new CEO in February, which is Bob Shapeck, who came 69 00:03:16,440 --> 00:03:18,360 Speaker 1: from the theme park side, which I guess is a 70 00:03:18,360 --> 00:03:20,640 Speaker 1: good thing right now in this moment because he really 71 00:03:20,639 --> 00:03:24,480 Speaker 1: knows that business. However, what is Disney's future, And if 72 00:03:24,480 --> 00:03:27,080 Speaker 1: their future is streaming, I mean, good luck to them. 73 00:03:27,120 --> 00:03:30,600 Speaker 1: That's going to be a really difficult challenge going up 74 00:03:30,639 --> 00:03:33,240 Speaker 1: against Netflix and trying to make money in this industry. 75 00:03:33,520 --> 00:03:35,600 Speaker 1: And like you said, you know, the streaming business is 76 00:03:35,600 --> 00:03:37,760 Speaker 1: doing well and that it's growing and a lot of 77 00:03:37,760 --> 00:03:40,440 Speaker 1: people of interest in Disney Plus and the other products 78 00:03:40,440 --> 00:03:43,480 Speaker 1: that they're coming out with. However, it doesn't generate the 79 00:03:43,560 --> 00:03:45,640 Speaker 1: kind of money and won't for a long time that 80 00:03:45,760 --> 00:03:48,560 Speaker 1: these theme parks, the cable networks do, and all these 81 00:03:48,600 --> 00:03:52,360 Speaker 1: different businesses. So there's a lot of question marks around Disney. 82 00:03:52,360 --> 00:03:55,120 Speaker 1: It just makes me wonder, you know, what does Disney 83 00:03:55,200 --> 00:03:57,400 Speaker 1: look like in a new normal? What is the company? 84 00:03:57,440 --> 00:04:02,280 Speaker 1: Is it a theme park and movie and uh cable 85 00:04:02,360 --> 00:04:05,960 Speaker 1: network giant or is it a streaming company? And and 86 00:04:06,240 --> 00:04:09,240 Speaker 1: how do they kind of what does that look like? 87 00:04:09,280 --> 00:04:12,240 Speaker 1: I think there's just a lot of questions about, um, 88 00:04:12,360 --> 00:04:14,280 Speaker 1: how they're kind of going to get through this, and 89 00:04:14,680 --> 00:04:17,280 Speaker 1: what the thinking is at the top, since they do 90 00:04:17,360 --> 00:04:20,560 Speaker 1: have a new CEO who really didn't come from the 91 00:04:20,720 --> 00:04:23,320 Speaker 1: entertainment side of this company. Yeah, and he actually went 92 00:04:23,360 --> 00:04:27,200 Speaker 1: to half salary for the rest of the pandemic. Correct me, 93 00:04:27,320 --> 00:04:29,720 Speaker 1: both of you if I'm wrong, because goodness knows, nobody 94 00:04:29,760 --> 00:04:32,720 Speaker 1: knows Disney better than YouTube. But wasn't there a time 95 00:04:32,760 --> 00:04:35,400 Speaker 1: when Disney was certainly not counting on its theme parks 96 00:04:35,480 --> 00:04:38,880 Speaker 1: for you know, its revenue stream or for its operating income. 97 00:04:39,560 --> 00:04:41,640 Speaker 1: You know, it was almost a surprise, was it not 98 00:04:41,720 --> 00:04:44,640 Speaker 1: that the theme parks were keeping other parts of Disney 99 00:04:45,040 --> 00:04:47,960 Speaker 1: aflows if you like, am I right? Pole and Tara, Well, 100 00:04:48,000 --> 00:04:50,120 Speaker 1: it's actually, you know, the theme park business has been 101 00:04:50,200 --> 00:04:52,480 Speaker 1: kind of terror writes about this. It's kind of been 102 00:04:52,720 --> 00:04:55,159 Speaker 1: a sleepy part of the business relative to the you know, 103 00:04:55,240 --> 00:04:57,760 Speaker 1: the movies and all the other cool stuff, the espns 104 00:04:57,760 --> 00:05:00,359 Speaker 1: of the world. But it's always been a very deady 105 00:05:00,600 --> 00:05:03,839 Speaker 1: generator of profit and profit growth. And it's such a 106 00:05:03,880 --> 00:05:06,440 Speaker 1: good business that, as Tera knows. You know, they invested 107 00:05:06,440 --> 00:05:08,840 Speaker 1: over five billion dollars in their theme parks business in 108 00:05:08,960 --> 00:05:11,839 Speaker 1: Shanghai to open a theme park business in Shanghai. So 109 00:05:11,839 --> 00:05:14,200 Speaker 1: it's a business they've always liked. They've always been a 110 00:05:14,279 --> 00:05:18,080 Speaker 1: leader in it. What was interesting when Comcasts bought NBC Universal, 111 00:05:18,440 --> 00:05:21,159 Speaker 1: they didn't even really think about the Universal theme park business, 112 00:05:21,160 --> 00:05:23,719 Speaker 1: but that turned out to be a great business for 113 00:05:23,960 --> 00:05:26,520 Speaker 1: Comcasts as part of that acquisition. Yeah, so I suppose 114 00:05:26,560 --> 00:05:28,560 Speaker 1: that's what I mean in the sense that, you know, 115 00:05:28,600 --> 00:05:31,880 Speaker 1: it's almost an unexpected gift. So therefore, can it be 116 00:05:32,080 --> 00:05:35,240 Speaker 1: made more boutique and still work as that unexpected gift? 117 00:05:35,279 --> 00:05:37,560 Speaker 1: I mean, do you need two hundred thousand cast members? 118 00:05:37,600 --> 00:05:39,400 Speaker 1: Do you you know, do you need to change up 119 00:05:39,400 --> 00:05:41,919 Speaker 1: your rides every year? Can you just have it maybe 120 00:05:41,960 --> 00:05:44,960 Speaker 1: a little less exciting, a little less full, and still 121 00:05:45,000 --> 00:05:49,040 Speaker 1: be generating enough income that's possible. I mean, I think 122 00:05:49,040 --> 00:05:51,400 Speaker 1: a lot of companies are having to make that calculation. Now, 123 00:05:51,440 --> 00:05:54,160 Speaker 1: do you operate at a smaller capacity. We saw the 124 00:05:54,240 --> 00:05:57,520 Speaker 1: retail industry goes through this in recent years, even before COVID, 125 00:05:57,800 --> 00:06:01,159 Speaker 1: you know, becoming more boutique. I think Disney can do that. 126 00:06:01,200 --> 00:06:04,159 Speaker 1: There's just so much fascination and and love around the 127 00:06:04,200 --> 00:06:06,360 Speaker 1: Disney brand. I mean, people are obsessed with it all 128 00:06:06,400 --> 00:06:08,960 Speaker 1: around the world. But how do you get all these 129 00:06:08,960 --> 00:06:11,120 Speaker 1: people to come back and travel again? You know, maybe 130 00:06:11,120 --> 00:06:13,800 Speaker 1: it doesn't mean operating at a at a lower capacity, 131 00:06:13,800 --> 00:06:15,960 Speaker 1: being smaller, but then how do you charge as much 132 00:06:16,000 --> 00:06:18,280 Speaker 1: as you're charging for these things? So I think there's 133 00:06:18,279 --> 00:06:19,840 Speaker 1: just there's a lot that's going to change, and it's 134 00:06:19,880 --> 00:06:22,240 Speaker 1: going to take a lot of trial and error and 135 00:06:22,279 --> 00:06:24,280 Speaker 1: trying to figure out where do we land at the 136 00:06:24,400 --> 00:06:26,200 Speaker 1: end of this pandemic, What does it mean and do 137 00:06:26,240 --> 00:06:29,280 Speaker 1: we go back to quote normal or is normal no 138 00:06:29,360 --> 00:06:32,000 Speaker 1: longer part of our vocab here? And what does it 139 00:06:32,040 --> 00:06:34,320 Speaker 1: mean for these giant companies that have operated this way 140 00:06:34,320 --> 00:06:36,320 Speaker 1: for so long? They're really gonna have to rethink things. 141 00:06:37,760 --> 00:06:42,000 Speaker 1: Um Tera, what do we know about Shanghai? Has that reopened? 142 00:06:42,000 --> 00:06:45,840 Speaker 1: If so, how is you know traffic there? Yeah, they 143 00:06:45,880 --> 00:06:47,800 Speaker 1: reopened that. I think they actually had quite a bit 144 00:06:47,800 --> 00:06:50,400 Speaker 1: of demands. I think it was maybe the beginning of 145 00:06:50,400 --> 00:06:54,000 Speaker 1: the summer, um the local government there had them reduced 146 00:06:54,000 --> 00:06:56,920 Speaker 1: capacity again because virus cases were spiking, but I think 147 00:06:56,960 --> 00:06:58,920 Speaker 1: they've been opened. I mean, I think the big problem 148 00:06:58,920 --> 00:07:02,000 Speaker 1: area has been California for Disney, and they really wanted 149 00:07:02,000 --> 00:07:04,160 Speaker 1: to get that park back open, especially since I think 150 00:07:04,160 --> 00:07:07,200 Speaker 1: the California park Disneyland gets a lot of local visitors 151 00:07:07,200 --> 00:07:09,560 Speaker 1: as opposed to Orlando, which relies on a lot of 152 00:07:09,600 --> 00:07:12,000 Speaker 1: people getting out a plane and coming. So I think 153 00:07:12,000 --> 00:07:14,280 Speaker 1: they really wanted to get that one open, and obviously 154 00:07:14,280 --> 00:07:17,680 Speaker 1: that's not happening anytime soon. Tara's thanks so much for 155 00:07:17,760 --> 00:07:19,920 Speaker 1: joining us with all of your info there on Disney 156 00:07:19,920 --> 00:07:23,400 Speaker 1: and of course, you know, entertainment companies in general. Tara 157 00:07:23,560 --> 00:07:27,440 Speaker 1: is Bloomberg Opinion columnists covers all of that media, entertainment 158 00:07:27,480 --> 00:07:30,000 Speaker 1: and so on. And Disney today down four tenths one 159 00:07:30,320 --> 00:07:32,320 Speaker 1: over the last year. It's down four point two percent, 160 00:07:32,440 --> 00:07:35,240 Speaker 1: so definitely not one of those docks that benefited. Pole 161 00:07:35,280 --> 00:07:38,240 Speaker 1: has said that without looking at the chart. Yeah, exactly right. 162 00:07:38,240 --> 00:07:40,840 Speaker 1: They've really been hit hard and again their theme park 163 00:07:40,880 --> 00:07:44,040 Speaker 1: business has just effectively been shut down. Um so and 164 00:07:44,040 --> 00:07:46,760 Speaker 1: and as Terror you know points out, you know, they 165 00:07:46,840 --> 00:07:50,160 Speaker 1: really full of Florida parks. They need global travel to 166 00:07:50,200 --> 00:07:52,480 Speaker 1: pick up because a lot of their customers come from 167 00:07:52,520 --> 00:07:54,960 Speaker 1: outside of Florida, outside the United States, and they need 168 00:07:55,000 --> 00:07:57,160 Speaker 1: global travel to pick up. And that doesn't seem like 169 00:07:57,240 --> 00:08:00,360 Speaker 1: it's something on the near term horizon. Yeah, it's such 170 00:08:00,400 --> 00:08:03,920 Speaker 1: a such a difficult time for everybody involved. And of 171 00:08:03,960 --> 00:08:06,360 Speaker 1: course the story the other day that the Disneyland resort 172 00:08:06,400 --> 00:08:08,640 Speaker 1: in a Hong Kong lost an option to expand its 173 00:08:08,760 --> 00:08:16,640 Speaker 1: side and just just headlines negative coming constantly for Disney. 174 00:08:18,360 --> 00:08:22,240 Speaker 1: It is time to talk bonds, bond market, fixed income, volatility, 175 00:08:22,360 --> 00:08:24,559 Speaker 1: and all the rest of it. We have somebody who 176 00:08:24,760 --> 00:08:27,360 Speaker 1: is glued to this day in day out. Bryan Whalen 177 00:08:27,520 --> 00:08:30,120 Speaker 1: is general portfolio manager for fixed income at tc W, 178 00:08:30,120 --> 00:08:32,280 Speaker 1: which has of course two D twelve billion dollars in 179 00:08:32,360 --> 00:08:35,640 Speaker 1: asss under management. Brian, thanks for joining. When you come 180 00:08:35,679 --> 00:08:38,679 Speaker 1: into the office the day after you know, a debate 181 00:08:38,880 --> 00:08:43,360 Speaker 1: that was so content to contentious and so difficult, where 182 00:08:43,360 --> 00:08:45,400 Speaker 1: do you go to look first to see if there's 183 00:08:45,440 --> 00:08:49,560 Speaker 1: a reaction in the marketplace. Well, well, first, thanks for 184 00:08:49,600 --> 00:08:52,600 Speaker 1: having me. Um. You know clearly you know we're bond managers, 185 00:08:52,600 --> 00:08:53,920 Speaker 1: so we look at the yield curve will look at 186 00:08:53,920 --> 00:08:57,360 Speaker 1: the moves across the board, and honestly, this morning it's 187 00:08:57,400 --> 00:08:59,439 Speaker 1: just more of the same. I think that debate kind 188 00:08:59,440 --> 00:09:02,400 Speaker 1: of with your opinion on it, you know, good bad. 189 00:09:02,679 --> 00:09:05,160 Speaker 1: I don't think it really um changed anyone's you know, 190 00:09:05,520 --> 00:09:08,280 Speaker 1: UM expectations for the election. And you know we're seeing 191 00:09:08,280 --> 00:09:10,600 Speaker 1: that in treasury yields, which are still confined to a 192 00:09:10,679 --> 00:09:14,480 Speaker 1: to a very narrow range. So, Brian, where do you 193 00:09:14,480 --> 00:09:17,240 Speaker 1: guys at TCU, with all the assets under management you 194 00:09:17,240 --> 00:09:21,120 Speaker 1: guys have, where do you see opportunities given where yields 195 00:09:21,120 --> 00:09:26,240 Speaker 1: are here? Yeah, great question. I mean, you know, look, um, 196 00:09:26,280 --> 00:09:28,560 Speaker 1: I think you know, as a bond manager, you have 197 00:09:28,600 --> 00:09:30,640 Speaker 1: to you have to recognize, you know, the power of 198 00:09:30,640 --> 00:09:33,760 Speaker 1: the FED and the influence on asset prices. And you know, 199 00:09:33,840 --> 00:09:36,880 Speaker 1: we have an opinion that the economy is you know, 200 00:09:37,480 --> 00:09:39,840 Speaker 1: actually you know, much worse than than it may appear, 201 00:09:40,200 --> 00:09:42,760 Speaker 1: and it feels and that has to do with what 202 00:09:42,880 --> 00:09:46,440 Speaker 1: we've seen in terms of the fiscal uh stimulus UH, 203 00:09:46,640 --> 00:09:51,000 Speaker 1: you know, and monetary um, you know, aggressive monetary policy 204 00:09:51,040 --> 00:09:53,240 Speaker 1: from the Fed. UH. And so you know, when we're 205 00:09:53,240 --> 00:09:56,000 Speaker 1: thinking about the marketplace today, you know, areas where the 206 00:09:56,000 --> 00:09:58,880 Speaker 1: FED is directly involved. I think you have to embrace that. 207 00:09:58,960 --> 00:10:01,280 Speaker 1: I have to kind of look at high quality assets 208 00:10:01,320 --> 00:10:03,959 Speaker 1: and you have to realize that, you know, the prices 209 00:10:03,960 --> 00:10:06,240 Speaker 1: are the spread that we saw happening in in March, 210 00:10:07,200 --> 00:10:08,960 Speaker 1: most like, you're not going to see that again in 211 00:10:09,040 --> 00:10:10,920 Speaker 1: high quality assets because because the FED is not gonna 212 00:10:10,960 --> 00:10:13,160 Speaker 1: let it happen. And so you have to embrace that. 213 00:10:13,520 --> 00:10:15,200 Speaker 1: And I think, you know, maybe take maybe a little 214 00:10:15,200 --> 00:10:18,960 Speaker 1: bit more risk there then you might otherwise would take 215 00:10:19,160 --> 00:10:21,280 Speaker 1: in an environment like this. And then on the other hand, 216 00:10:21,760 --> 00:10:23,960 Speaker 1: you have to be patient giving the amount of you know, 217 00:10:24,040 --> 00:10:27,319 Speaker 1: just outright trauma the economy has incurred, uh, any amount 218 00:10:27,360 --> 00:10:29,520 Speaker 1: of demand you know, destruction and the amount of really 219 00:10:29,559 --> 00:10:31,800 Speaker 1: creative destruction going on. You when we get into two 220 00:10:31,800 --> 00:10:35,200 Speaker 1: thousand twenty one, you need to be patient, uh in 221 00:10:35,280 --> 00:10:37,960 Speaker 1: parts of the capital structure and parts of the market, 222 00:10:38,440 --> 00:10:41,680 Speaker 1: um that are vulnerable to all the damage and and 223 00:10:41,720 --> 00:10:45,200 Speaker 1: the changes going on. How far down the credit stock 224 00:10:45,240 --> 00:10:48,960 Speaker 1: are you going by in uh, not very far to 225 00:10:48,960 --> 00:10:50,600 Speaker 1: be honest with you, you know, the errors we like 226 00:10:50,679 --> 00:10:54,160 Speaker 1: the most, you know, Uh, Agency mortgages is one area. 227 00:10:54,640 --> 00:10:56,400 Speaker 1: UM that's you know, the FED has bought you know, 228 00:10:56,480 --> 00:10:59,839 Speaker 1: in this QUEWI period over a trillion dollars of A 229 00:11:00,040 --> 00:11:04,000 Speaker 1: and C mbs, and they've kept spread volatility incredibly muted. 230 00:11:04,240 --> 00:11:08,000 Speaker 1: High quality investment grade corporate bonds. UM. You know, we 231 00:11:08,120 --> 00:11:11,760 Speaker 1: still like them. Obviously the Feds involved, maybe not to 232 00:11:11,840 --> 00:11:14,640 Speaker 1: the same extent, uh, and that they've only bought a 233 00:11:14,679 --> 00:11:17,400 Speaker 1: you know, a very little amount, but just the presence 234 00:11:17,440 --> 00:11:19,720 Speaker 1: of the FED has given that market a sense of 235 00:11:19,720 --> 00:11:22,040 Speaker 1: a kind of a an absolute kind of cap on 236 00:11:22,120 --> 00:11:25,559 Speaker 1: spreads and that again the FED won't lead volatility pick 237 00:11:25,640 --> 00:11:28,560 Speaker 1: up too much there. But you know, outside of the UM, 238 00:11:28,960 --> 00:11:31,280 Speaker 1: let's say they called the you know, the warm embrace 239 00:11:31,360 --> 00:11:33,760 Speaker 1: of the FED, where they have kind of ring fence 240 00:11:33,800 --> 00:11:37,200 Speaker 1: asset classes like that. You have areas like leverage finance, 241 00:11:37,240 --> 00:11:39,400 Speaker 1: which includes high old bonds and leverage loans. You have 242 00:11:39,480 --> 00:11:42,240 Speaker 1: areas like UM you know, down the capital structure, as 243 00:11:42,280 --> 00:11:44,720 Speaker 1: you said, and in the commercial mortgage back market where 244 00:11:44,800 --> 00:11:46,679 Speaker 1: you know, there's a lot of damage, uh and it's 245 00:11:46,720 --> 00:11:48,439 Speaker 1: going to take a long time to play out. So 246 00:11:48,600 --> 00:11:50,520 Speaker 1: you know, as I mentioned before, you know, we think 247 00:11:50,600 --> 00:11:53,000 Speaker 1: the best way to kind of spend your dollars and 248 00:11:53,000 --> 00:11:55,280 Speaker 1: fixed income now is in the high quality parts of 249 00:11:55,320 --> 00:11:58,360 Speaker 1: the market and be patient and wait for better opportunities 250 00:11:58,480 --> 00:12:01,240 Speaker 1: or maybe I should say better price is um down 251 00:12:01,280 --> 00:12:04,480 Speaker 1: capital structure. Brian talked us a little bit about credit 252 00:12:04,559 --> 00:12:08,400 Speaker 1: quality as you look across your portfolio here, Um, we're 253 00:12:08,440 --> 00:12:11,400 Speaker 1: six seven months into this pandemic. I suspect you're starting 254 00:12:11,400 --> 00:12:15,120 Speaker 1: to see some some real cracks. Yeah, I mean this 255 00:12:15,200 --> 00:12:18,200 Speaker 1: is a you know, as as a you know, like 256 00:12:18,240 --> 00:12:20,520 Speaker 1: you're seeing in the real economy, seeing in the bond market, 257 00:12:20,640 --> 00:12:22,240 Speaker 1: meaning you know, we're kind of we're moving into a 258 00:12:22,240 --> 00:12:24,800 Speaker 1: world of the halves and the have nots. Uh. And 259 00:12:24,920 --> 00:12:27,559 Speaker 1: even though you know, if you look at big kind 260 00:12:27,559 --> 00:12:30,959 Speaker 1: of major kind of barometers for let's take corporate bonds, 261 00:12:31,000 --> 00:12:33,720 Speaker 1: like the investment Grade UH index and the spread of 262 00:12:33,720 --> 00:12:35,839 Speaker 1: that index, you know, it's around a hundred twenty five 263 00:12:36,120 --> 00:12:39,480 Speaker 1: hundred thirty basis points, which historically is about average. The 264 00:12:39,520 --> 00:12:41,040 Speaker 1: same thing in the high old bond market, you know, 265 00:12:41,080 --> 00:12:44,400 Speaker 1: plus minus five hundred basis points. But um, there is 266 00:12:44,440 --> 00:12:48,000 Speaker 1: more dispersion under the surface, and that is reflective of 267 00:12:48,080 --> 00:12:50,200 Speaker 1: you know, what's going on in the broader economy and 268 00:12:50,240 --> 00:12:52,599 Speaker 1: that you know this this will take a while to 269 00:12:52,640 --> 00:12:55,320 Speaker 1: play out, uh, and we're going to see lots of winners, 270 00:12:55,360 --> 00:12:56,839 Speaker 1: but we're all going to see also going to see 271 00:12:56,880 --> 00:13:00,600 Speaker 1: lots of losers. So you say you need to look 272 00:13:00,600 --> 00:13:03,840 Speaker 1: for more risk, but yet not go down too far 273 00:13:03,920 --> 00:13:11,280 Speaker 1: into sort of the depths of you know, the corporates, ratings, issuance. 274 00:13:12,080 --> 00:13:13,520 Speaker 1: How do you do that? How do you do both? 275 00:13:13,559 --> 00:13:15,880 Speaker 1: Do you look abroad? Do you I mean, are there 276 00:13:15,920 --> 00:13:19,440 Speaker 1: still opportunities that people haven't seen? It's bottoms up work. 277 00:13:19,600 --> 00:13:21,319 Speaker 1: I mean you have to have you know, you've got 278 00:13:21,320 --> 00:13:24,680 Speaker 1: to have a lot of smart people um underwriting, not 279 00:13:24,800 --> 00:13:27,719 Speaker 1: just sectors anymore, but you know, individual credits because it's 280 00:13:27,760 --> 00:13:30,040 Speaker 1: not just you know, there'll be sectors that win, they'll 281 00:13:30,080 --> 00:13:32,320 Speaker 1: be sectors that loses. But even in the sectors that win, 282 00:13:32,520 --> 00:13:34,560 Speaker 1: you know, there will be companies that kind of rise 283 00:13:34,600 --> 00:13:38,440 Speaker 1: to the top and you know they will prosper. Uh 284 00:13:38,679 --> 00:13:41,040 Speaker 1: when we you know, look at look at the retail 285 00:13:41,160 --> 00:13:43,640 Speaker 1: for instance. I mean, you know, the amount of change 286 00:13:43,679 --> 00:13:47,280 Speaker 1: we've seen over the past six months during the pandemic 287 00:13:47,480 --> 00:13:50,520 Speaker 1: in terms of let's say e commerce penetration and retail sales. 288 00:13:50,920 --> 00:13:53,440 Speaker 1: You know, we've seen basically a four point jump you know, 289 00:13:53,520 --> 00:13:57,240 Speaker 1: from about twelve to six of e commerce penetration just 290 00:13:57,400 --> 00:14:01,800 Speaker 1: during the pandemic. Previously, that four point increase took about 291 00:14:01,880 --> 00:14:05,160 Speaker 1: five years to occur, so the change is rapid. You 292 00:14:05,160 --> 00:14:07,360 Speaker 1: know that. There's that old kind of Leneing quote about 293 00:14:07,360 --> 00:14:09,640 Speaker 1: you know, their decades when nothing happens, and then every 294 00:14:09,679 --> 00:14:12,240 Speaker 1: weeks where decades happen. We're living in the middle of 295 00:14:12,280 --> 00:14:15,959 Speaker 1: that right now. Yeah. Absolutely, in many many ways. Brian Will, 296 00:14:16,040 --> 00:14:17,680 Speaker 1: and thank you so much for joining us. Brian Will 297 00:14:17,760 --> 00:14:21,080 Speaker 1: and general portfolio manager for fixed income at tc W. 298 00:14:21,640 --> 00:14:24,080 Speaker 1: They have two d and twelve billion dollars firm wide 299 00:14:24,120 --> 00:14:26,800 Speaker 1: under management, so they see all parts of the market. 300 00:14:27,080 --> 00:14:28,680 Speaker 1: We always like to talk to the smart folks at 301 00:14:28,680 --> 00:14:31,800 Speaker 1: tc W. They generally had a more conservative view of 302 00:14:31,880 --> 00:14:33,960 Speaker 1: the market, and I think that's been born out here. 303 00:14:34,080 --> 00:14:37,200 Speaker 1: So again, Brian Will and Gender portfolio manager, fixed Income. 304 00:14:39,520 --> 00:14:42,520 Speaker 1: The first presidential debate last night is in the books 305 00:14:42,520 --> 00:14:46,240 Speaker 1: and what the debate. It was back and forth, very lively, 306 00:14:46,440 --> 00:14:49,720 Speaker 1: to say the least, between President Trump and former Vice 307 00:14:49,720 --> 00:14:52,680 Speaker 1: President Joe Biden. Let's take a listen to some of 308 00:14:52,720 --> 00:14:56,920 Speaker 1: the highlights. Everybody knows he's a liar, but I just 309 00:14:57,000 --> 00:15:00,440 Speaker 1: want to I want to make sure and you wanted 310 00:15:00,560 --> 00:15:05,320 Speaker 1: last I want to make sure. Can you let him 311 00:15:05,320 --> 00:15:07,600 Speaker 1: finish sir, he don't know how to do that. He 312 00:15:07,720 --> 00:15:10,800 Speaker 1: knew it was a deadly disease. What did he do. 313 00:15:11,320 --> 00:15:13,960 Speaker 1: He's on tape, is acknowledging he knew it. He said 314 00:15:14,000 --> 00:15:16,080 Speaker 1: he didn't tell us or give people a warning of 315 00:15:16,120 --> 00:15:18,680 Speaker 1: it because he didn't want to panic the American people. 316 00:15:19,200 --> 00:15:22,360 Speaker 1: You don't panic. He panicked. We've done a great job. 317 00:15:22,600 --> 00:15:24,360 Speaker 1: The only thing I haven't done a good job, and 318 00:15:24,400 --> 00:15:26,720 Speaker 1: that's because of the fake news. No matter what you 319 00:15:26,760 --> 00:15:28,280 Speaker 1: say to them, they give you a bad press on 320 00:15:28,360 --> 00:15:32,160 Speaker 1: It's just fake news. They had the slowest recovery since 321 00:15:32,280 --> 00:15:37,440 Speaker 1: ninety economic recovery since nine. It was the slowest recovery. 322 00:15:37,640 --> 00:15:41,160 Speaker 1: I paid thirty eight million dollars one year. I paid 323 00:15:41,240 --> 00:15:47,200 Speaker 1: twenty seven minute. Nobody's done that. He's just he's here's 324 00:15:47,240 --> 00:15:49,520 Speaker 1: the deal. I know a lot more about it. Let 325 00:15:49,560 --> 00:15:54,720 Speaker 1: him finish. The fact is that there is racial insensitivity. 326 00:15:54,800 --> 00:15:57,880 Speaker 1: People have to be made aware of what other people 327 00:15:57,960 --> 00:16:02,920 Speaker 1: feel like. That was President Donald Trump and former Vice 328 00:16:02,920 --> 00:16:06,080 Speaker 1: President Joe Biden at the debates last night. Let's get 329 00:16:06,080 --> 00:16:09,240 Speaker 1: a postmortem, if you will. Jeanie Zano title. She's a 330 00:16:09,240 --> 00:16:12,920 Speaker 1: political contributor for Bloomberg News and also professor of political 331 00:16:12,920 --> 00:16:15,720 Speaker 1: science at Iona College. Jenny, thanks so much for joining 332 00:16:15,800 --> 00:16:18,880 Speaker 1: us here. Boy, lots to unpack from last night. What 333 00:16:19,000 --> 00:16:22,640 Speaker 1: was your thirty thousand foot takeaway from the debates? Winners, 334 00:16:22,720 --> 00:16:25,880 Speaker 1: losers or a draw? Yeah, it's so good to talk 335 00:16:25,880 --> 00:16:28,000 Speaker 1: to you. I think, you know, I think debate at 336 00:16:28,000 --> 00:16:30,440 Speaker 1: this point is a generous word. It was more like 337 00:16:30,480 --> 00:16:33,360 Speaker 1: a brawl. And um, I think you know when you 338 00:16:33,400 --> 00:16:37,000 Speaker 1: talk about winners and losers, my takeaway was when it 339 00:16:37,000 --> 00:16:40,520 Speaker 1: it is so divisive and you know, described in so 340 00:16:40,560 --> 00:16:43,840 Speaker 1: many ways, but certainly no Linkenant Douglas debate. This was 341 00:16:43,960 --> 00:16:47,880 Speaker 1: like a you know, all out barbarawl. I think it's 342 00:16:47,920 --> 00:16:49,760 Speaker 1: hard for there to be a winner or a loser 343 00:16:49,800 --> 00:16:52,640 Speaker 1: in that context. You know, you had the vice president 344 00:16:52,720 --> 00:16:56,280 Speaker 1: calling the president names, you had the President repeatedly interrupting. 345 00:16:56,720 --> 00:16:59,280 Speaker 1: I'm curious to see how many people tuned out after 346 00:16:59,320 --> 00:17:02,440 Speaker 1: the first fifty in twenty minutes. And so from that perspective, 347 00:17:02,480 --> 00:17:04,320 Speaker 1: I think it is a draw, and I think you 348 00:17:04,480 --> 00:17:07,760 Speaker 1: end up pretty much with the status quo. And unfortunately 349 00:17:07,800 --> 00:17:11,320 Speaker 1: for the President, he went into this debate lower in 350 00:17:11,760 --> 00:17:14,240 Speaker 1: you know, the polls across the country and even in 351 00:17:14,280 --> 00:17:17,240 Speaker 1: many of the battleground states and that's a big challenge 352 00:17:17,240 --> 00:17:19,480 Speaker 1: for him. When you're looking at a you know, Washington 353 00:17:19,480 --> 00:17:23,240 Speaker 1: Post ABC poll the other day with the vice president 354 00:17:23,359 --> 00:17:27,640 Speaker 1: nine almost double digits lead in Pennsylvania, that's a problem. 355 00:17:27,760 --> 00:17:30,040 Speaker 1: And I think that is, you know, where we find 356 00:17:30,040 --> 00:17:33,200 Speaker 1: ourselves the morning after Genny doesn't make a difference of 357 00:17:33,240 --> 00:17:36,480 Speaker 1: the polls, even if someone decided to decide just a 358 00:17:36,560 --> 00:17:39,920 Speaker 1: non botherable thing after last night. Um, I do think, 359 00:17:40,160 --> 00:17:42,120 Speaker 1: you know, of course, for me as a political scientists, 360 00:17:42,160 --> 00:17:44,560 Speaker 1: I think that is so unfortunate because of course that's 361 00:17:44,600 --> 00:17:47,600 Speaker 1: how we speak, that's how we express ourselves, that's how 362 00:17:47,640 --> 00:17:50,960 Speaker 1: we have power as Americans and as citizens in the republic. 363 00:17:51,320 --> 00:17:53,560 Speaker 1: So I think it is a problem, and I think 364 00:17:53,680 --> 00:17:56,320 Speaker 1: your point is well taken. We heard from Frank Luntz 365 00:17:56,400 --> 00:18:00,159 Speaker 1: after the debate that many of the undecideds that he 366 00:18:00,320 --> 00:18:03,560 Speaker 1: was pulling seemed like they just made tune out at 367 00:18:03,600 --> 00:18:05,880 Speaker 1: this point, that they just didn't want to be involved, 368 00:18:05,960 --> 00:18:08,640 Speaker 1: and who can blame them? And of course we all 369 00:18:08,680 --> 00:18:11,080 Speaker 1: lose in that perspective. And so you know, you talk 370 00:18:11,119 --> 00:18:12,720 Speaker 1: about a winner a loser, I think a lot of 371 00:18:12,720 --> 00:18:15,040 Speaker 1: people said, and I agree, the American public is a 372 00:18:15,040 --> 00:18:19,440 Speaker 1: loser when you can't have a real sustained debate about this. 373 00:18:19,880 --> 00:18:22,280 Speaker 1: So many issues that are going on all around us. 374 00:18:22,400 --> 00:18:24,960 Speaker 1: We're waiting for a Job's report out on Friday, We're 375 00:18:24,960 --> 00:18:26,879 Speaker 1: in the middle of a pandemic, We've got a Supreme 376 00:18:26,920 --> 00:18:29,960 Speaker 1: Court nomination. The list goes on and on, and there was, 377 00:18:30,080 --> 00:18:32,080 Speaker 1: you know, a little bit of substance one. We don't 378 00:18:32,080 --> 00:18:34,439 Speaker 1: want to say there was nothing, but it wasn't nearly 379 00:18:34,480 --> 00:18:37,840 Speaker 1: what it should have been. So, Jennie, I guess that 380 00:18:37,880 --> 00:18:41,040 Speaker 1: begs a question should be should there these two candidates 381 00:18:41,080 --> 00:18:45,199 Speaker 1: even debate any further? You know, I know this is 382 00:18:45,240 --> 00:18:48,000 Speaker 1: I've heard so many different ideas about this, and and 383 00:18:48,080 --> 00:18:51,040 Speaker 1: you know, Democrats urging the president the vice president sorry 384 00:18:51,080 --> 00:18:54,240 Speaker 1: not to debate. I think that would be unfortunate. I'm 385 00:18:54,280 --> 00:18:57,240 Speaker 1: hoping this isn't the end of the presidential debates, probably 386 00:18:57,280 --> 00:18:59,959 Speaker 1: selfishly because I was so excited about yesterday. I love 387 00:19:00,119 --> 00:19:02,720 Speaker 1: this time of year. Um. I do hope that they 388 00:19:02,760 --> 00:19:04,800 Speaker 1: have them. Um, I have to admit that I do 389 00:19:04,880 --> 00:19:06,960 Speaker 1: hope that they have them, and I hope that there 390 00:19:07,040 --> 00:19:09,800 Speaker 1: is a way that they could be done so that we, 391 00:19:10,119 --> 00:19:12,919 Speaker 1: the American people, can benefit. Whether that means, you know, 392 00:19:12,960 --> 00:19:16,400 Speaker 1: people are talking about shutting down Mike's. But the bottom 393 00:19:16,400 --> 00:19:19,240 Speaker 1: line is if two people agree to debate and one 394 00:19:19,280 --> 00:19:22,200 Speaker 1: of or both decide not to follow the rules, this 395 00:19:22,280 --> 00:19:24,399 Speaker 1: is what happens. And I think this was a concerted 396 00:19:24,440 --> 00:19:27,840 Speaker 1: strategy on the President's part to throw the vice president 397 00:19:27,920 --> 00:19:30,560 Speaker 1: off his game, to make it hard for him to 398 00:19:31,000 --> 00:19:34,160 Speaker 1: you know, express his opinions and to you know, show 399 00:19:34,160 --> 00:19:36,920 Speaker 1: any strength. And I think the President may have gone 400 00:19:36,920 --> 00:19:40,440 Speaker 1: too far in that respect. I think, you know, quite frankly, 401 00:19:40,600 --> 00:19:42,600 Speaker 1: had the president done a little bit of that, the 402 00:19:42,680 --> 00:19:45,159 Speaker 1: vice president may or may not have stumbled. But what 403 00:19:45,280 --> 00:19:48,439 Speaker 1: the president is, he just went overboard, and he, I think, 404 00:19:48,560 --> 00:19:51,600 Speaker 1: is the one who came out the loser around this. Yeah, 405 00:19:51,640 --> 00:19:54,040 Speaker 1: I mean even in terms of policy, it's not like 406 00:19:54,119 --> 00:19:58,800 Speaker 1: we heard all that substantive. You know, policy platforms in 407 00:19:58,880 --> 00:20:02,080 Speaker 1: any area really just had a lot of complaints. Will 408 00:20:02,080 --> 00:20:04,160 Speaker 1: it make it any more likely that we get stimulus 409 00:20:04,200 --> 00:20:07,520 Speaker 1: around four though? I mean Pelosi emotion right now are 410 00:20:07,600 --> 00:20:11,080 Speaker 1: chatting and they will want to distract from last night's 411 00:20:11,119 --> 00:20:15,080 Speaker 1: tobacco now. Absolutely, And you know that's one of the 412 00:20:15,119 --> 00:20:17,280 Speaker 1: things that kept occurring to me last night. You have 413 00:20:17,480 --> 00:20:20,440 Speaker 1: you know, we have not had the stimulus package. Obviously, 414 00:20:20,480 --> 00:20:23,040 Speaker 1: no agreement on that we have. These offers on the 415 00:20:23,040 --> 00:20:26,359 Speaker 1: table are being discussed, and I'm not sure I heard, 416 00:20:26,440 --> 00:20:29,119 Speaker 1: you know, more than just sort of a little, you know, 417 00:20:29,840 --> 00:20:34,600 Speaker 1: mention of those nothing substantive. And that again is where 418 00:20:34,600 --> 00:20:38,440 Speaker 1: we find ourselves with unemployment where it is and people 419 00:20:38,640 --> 00:20:41,919 Speaker 1: suffering on the ground, over two hundred thousand dead, no 420 00:20:42,080 --> 00:20:45,000 Speaker 1: stimulus package out of Washington, and a lot of back 421 00:20:45,000 --> 00:20:47,280 Speaker 1: and forth. But I'm not clear at this point where 422 00:20:47,280 --> 00:20:50,200 Speaker 1: either the President or the Vice president stand on something 423 00:20:50,240 --> 00:20:53,960 Speaker 1: as basic as the proposal that both sides in Congress 424 00:20:53,960 --> 00:20:58,119 Speaker 1: in the White House has put forward at this point. So, Jenny, 425 00:20:58,160 --> 00:21:01,720 Speaker 1: what do you think the president needs to do to 426 00:21:01,760 --> 00:21:04,120 Speaker 1: close that gap that the polls are indicating right now. 427 00:21:04,720 --> 00:21:06,720 Speaker 1: I think what the president needs to do is he 428 00:21:06,840 --> 00:21:09,200 Speaker 1: needs to appeal to the people who helped him win 429 00:21:09,240 --> 00:21:13,719 Speaker 1: in twos sixteen. That is a traditional moderate, undecided Republican 430 00:21:14,200 --> 00:21:18,800 Speaker 1: women in the suburbs, in particular seniors, college educated voters, 431 00:21:19,200 --> 00:21:21,720 Speaker 1: and they believe they can pick up some Latinos. And 432 00:21:21,760 --> 00:21:24,439 Speaker 1: I think to do that, he cannot repeat what he 433 00:21:24,480 --> 00:21:26,439 Speaker 1: did last night, and I think that's going to be 434 00:21:26,480 --> 00:21:29,280 Speaker 1: his big challenge. I'll just give you one quick example 435 00:21:29,320 --> 00:21:33,160 Speaker 1: on the economy. You know, he interrupted Joe Biden talking 436 00:21:33,200 --> 00:21:36,520 Speaker 1: about the pre COVID economy, and I was wondering why 437 00:21:36,560 --> 00:21:40,280 Speaker 1: the pre COVID economy was very strong. Donald Trump does 438 00:21:40,359 --> 00:21:43,000 Speaker 1: great in all polls, and rightly so when you talk 439 00:21:43,080 --> 00:21:46,080 Speaker 1: about the pre COVID economy, why not let Joe Biden 440 00:21:46,119 --> 00:21:48,800 Speaker 1: try to take that on. And yet he sort of 441 00:21:49,400 --> 00:21:52,040 Speaker 1: interrupted him, and I think was a loser for the 442 00:21:52,080 --> 00:21:55,800 Speaker 1: president talk about the economy, especially pre COVID, because you 443 00:21:55,840 --> 00:21:58,560 Speaker 1: win on that. So I think he needs to, you know, 444 00:21:58,680 --> 00:22:01,919 Speaker 1: try to appeal to those voters by not stepping on 445 00:22:01,960 --> 00:22:04,639 Speaker 1: the vice president in those moments and by letting the 446 00:22:04,720 --> 00:22:08,200 Speaker 1: vice president make his case, because I do think the president, 447 00:22:08,240 --> 00:22:10,879 Speaker 1: on the economy and in other areas has an argument 448 00:22:10,960 --> 00:22:13,520 Speaker 1: to make that will appeal to some of these moderates 449 00:22:13,520 --> 00:22:16,400 Speaker 1: he needs to pull over. Genie, thank you so much 450 00:22:16,480 --> 00:22:19,200 Speaker 1: for watching the base first of all, and for talking 451 00:22:19,240 --> 00:22:21,760 Speaker 1: to us about is Gennie of course, is on television 452 00:22:21,840 --> 00:22:24,879 Speaker 1: last night on Bloomberg Television, watching the debate and commenting 453 00:22:24,880 --> 00:22:26,960 Speaker 1: on it and moving on balance of power again today. 454 00:22:27,080 --> 00:22:29,880 Speaker 1: Junie zy Know is political contributor for Bloomberg News, also 455 00:22:29,920 --> 00:22:35,959 Speaker 1: professor of political science at Iona College let's talk a 456 00:22:35,960 --> 00:22:38,440 Speaker 1: little et F action, shall we. When I think E 457 00:22:38,560 --> 00:22:40,680 Speaker 1: t F s, I think Vanguards, some of these huge, 458 00:22:40,760 --> 00:22:42,760 Speaker 1: huge players in the space. I want to get a 459 00:22:42,800 --> 00:22:44,440 Speaker 1: sense of kind of the future of the E t 460 00:22:44,560 --> 00:22:46,879 Speaker 1: F business where some of the big players stand. We 461 00:22:46,920 --> 00:22:50,400 Speaker 1: can do that with Eric Valchunis, senior et F analysts 462 00:22:50,440 --> 00:22:55,680 Speaker 1: for Bloomberg Intelligence. Bloomberg Intelligence is Bloomberg's investment research business 463 00:22:55,720 --> 00:22:59,679 Speaker 1: staff with hundreds of world class analysts around the world. Eric, 464 00:22:59,720 --> 00:23:02,160 Speaker 1: thanks much for joining us here. Talk to us about 465 00:23:02,240 --> 00:23:04,760 Speaker 1: Vanguard here. I mean, I know they are just monsters 466 00:23:04,760 --> 00:23:07,000 Speaker 1: in the space about a billion and a half I'm sorry, 467 00:23:07,040 --> 00:23:10,080 Speaker 1: a trillion and a half bond fund business. You think 468 00:23:10,080 --> 00:23:13,639 Speaker 1: they're gonna get even bigger, don't you? I do. We 469 00:23:13,800 --> 00:23:16,320 Speaker 1: think they're probably going to double that number to three 470 00:23:16,359 --> 00:23:20,159 Speaker 1: trillion within five years perhaps um, as long as this 471 00:23:20,240 --> 00:23:23,560 Speaker 1: low rate environment continues. First of all, just a little 472 00:23:23,560 --> 00:23:26,440 Speaker 1: on the one point five trillion that is double any 473 00:23:26,480 --> 00:23:29,560 Speaker 1: other asset manager. We were even shocked. We hadn't dug 474 00:23:29,760 --> 00:23:31,720 Speaker 1: dug into their bond funds in quite a while. We're 475 00:23:32,040 --> 00:23:33,840 Speaker 1: largely in et F, so we looked at all of 476 00:23:33,840 --> 00:23:37,359 Speaker 1: their bond funds and fillion of that is inactive, which 477 00:23:37,359 --> 00:23:40,119 Speaker 1: makes them the biggest active bond fund manager as well. 478 00:23:40,480 --> 00:23:43,000 Speaker 1: They're just a monster in the space. And the reason 479 00:23:43,040 --> 00:23:45,000 Speaker 1: we're so bullish is because if you have a low 480 00:23:45,080 --> 00:23:49,399 Speaker 1: rate environment and real yields are falling, the expense ratio 481 00:23:49,600 --> 00:23:52,280 Speaker 1: of your bond fund, whether it's active, war passes, it's 482 00:23:52,320 --> 00:23:55,159 Speaker 1: going to start eating up an increasingly large chunk of 483 00:23:55,160 --> 00:23:59,000 Speaker 1: that yield. Thus, if Vanguard has fees that are five 484 00:23:59,080 --> 00:24:02,840 Speaker 1: to ten, perhaps twenty basis points at most, they're going 485 00:24:02,880 --> 00:24:05,840 Speaker 1: to eat up a lot much smaller portion of the yield. 486 00:24:06,119 --> 00:24:09,600 Speaker 1: That's going to help investors get more yield from the fund. 487 00:24:09,640 --> 00:24:12,560 Speaker 1: In addition, it will give them a little more breathing 488 00:24:12,640 --> 00:24:15,159 Speaker 1: room to take a little less risk to try to 489 00:24:15,200 --> 00:24:18,960 Speaker 1: go out further on the credit spectrum to increase the yield, 490 00:24:18,960 --> 00:24:21,320 Speaker 1: which then makes a fund vulnerable to a sell off, 491 00:24:21,359 --> 00:24:23,720 Speaker 1: and we saw Pempco get hit with that in March. 492 00:24:23,800 --> 00:24:25,959 Speaker 1: They had a much bigger draw down. So those are 493 00:24:26,000 --> 00:24:29,640 Speaker 1: the factors that we think really aligned perfectly with Vanguard, 494 00:24:29,680 --> 00:24:33,560 Speaker 1: and yeah, they could get much bigger. Could Vanguard learn 495 00:24:33,640 --> 00:24:37,439 Speaker 1: anything from the March sell off teachable moment to hedge 496 00:24:37,440 --> 00:24:41,840 Speaker 1: against that possibility again? Well, I would almost go and 497 00:24:41,880 --> 00:24:44,000 Speaker 1: flip and say, what could PIMCO learn Because if you 498 00:24:44,040 --> 00:24:47,280 Speaker 1: look at the March sell off, like vanguards equivalent to 499 00:24:47,320 --> 00:24:49,560 Speaker 1: the total return or the PIMCO income fund is the 500 00:24:49,680 --> 00:24:54,480 Speaker 1: Vanguard bond fund v t O b X, and it 501 00:24:54,680 --> 00:24:57,399 Speaker 1: only went down about half as much as the PIMPCO fund. 502 00:24:58,000 --> 00:25:02,119 Speaker 1: That saving that much raw down becomes very huge. And 503 00:25:02,160 --> 00:25:04,640 Speaker 1: so that fund is up nine percent in the past year, 504 00:25:05,200 --> 00:25:07,399 Speaker 1: whereas p m I m X, which is the largest 505 00:25:07,440 --> 00:25:10,600 Speaker 1: actively managed bond funds PIMCO is is only a one percent. 506 00:25:10,720 --> 00:25:14,040 Speaker 1: I think the agg might be about seven. So in general, 507 00:25:14,520 --> 00:25:18,440 Speaker 1: if there's a real nice rally and bonds, which there 508 00:25:18,440 --> 00:25:20,800 Speaker 1: has been in five years prior to the sell off, 509 00:25:21,200 --> 00:25:23,040 Speaker 1: the Pimcos of the world are going to do a 510 00:25:23,080 --> 00:25:25,360 Speaker 1: little better. They take on a little more risk UH, 511 00:25:25,359 --> 00:25:26,800 Speaker 1: and they're going to beat the agg by a lot. 512 00:25:26,880 --> 00:25:29,720 Speaker 1: But in these sell offs really hurt them. And this 513 00:25:29,800 --> 00:25:33,400 Speaker 1: is what Vanguard is less exposed to UH than most 514 00:25:33,440 --> 00:25:35,400 Speaker 1: active manager. I will say all of them, but many 515 00:25:35,440 --> 00:25:37,880 Speaker 1: of them do dip a little higher into the high 516 00:25:37,960 --> 00:25:39,920 Speaker 1: yield areas. So you might have PIMCO at ten percent 517 00:25:40,000 --> 00:25:42,640 Speaker 1: high yield and Vanguard will be maybe more three, four 518 00:25:42,680 --> 00:25:46,600 Speaker 1: or five. So it's interesting, Eric, you talk about the 519 00:25:46,600 --> 00:25:50,520 Speaker 1: fun flows into uh, this one and a half trillion 520 00:25:50,560 --> 00:25:54,800 Speaker 1: dollar bond fund business for Vanguard with rates so low, 521 00:25:55,600 --> 00:25:59,199 Speaker 1: I'm kind of surprised that folks are thinking about, you know, 522 00:25:59,200 --> 00:26:01,840 Speaker 1: people putting even more money into these bond funds. Perhaps 523 00:26:01,840 --> 00:26:06,560 Speaker 1: they should be looking elsewhere for yield. Yeah, and this 524 00:26:06,600 --> 00:26:09,040 Speaker 1: is this is perhaps one of the head winds to 525 00:26:09,080 --> 00:26:11,880 Speaker 1: our call, which is just people not really being into 526 00:26:11,920 --> 00:26:13,960 Speaker 1: bond funds. I I just think you look at the 527 00:26:13,960 --> 00:26:16,159 Speaker 1: equity markets and you know that they can see them 528 00:26:16,200 --> 00:26:18,840 Speaker 1: a little frothy too. I I still believe the sixty 529 00:26:19,840 --> 00:26:23,480 Speaker 1: is a huge uh issue here because we do find 530 00:26:23,480 --> 00:26:26,280 Speaker 1: that if the equity markets rally, then people will rebalance 531 00:26:26,359 --> 00:26:30,120 Speaker 1: into bonds to keep that allocation. So um yeah, I mean, 532 00:26:30,160 --> 00:26:33,439 Speaker 1: if if equity markets falter and bonds keep rowling, you 533 00:26:33,440 --> 00:26:36,400 Speaker 1: could people have people rebalance more into equities. So there's 534 00:26:36,440 --> 00:26:38,879 Speaker 1: some other factors that could come into it. But I 535 00:26:38,960 --> 00:26:41,919 Speaker 1: do think you know, bonds from just major asset class, 536 00:26:42,119 --> 00:26:44,159 Speaker 1: and I think if you look, uh, you know, the 537 00:26:44,200 --> 00:26:47,240 Speaker 1: stability they provide is also part of what you get 538 00:26:47,240 --> 00:26:49,760 Speaker 1: out of them. It's not just the yield return it's 539 00:26:49,800 --> 00:26:53,320 Speaker 1: also they can provide some diversification benefits, and so I 540 00:26:53,359 --> 00:26:55,520 Speaker 1: do think that will carry the day. And I do 541 00:26:55,600 --> 00:26:57,760 Speaker 1: think that's a large chunk of a portfolio and I 542 00:26:57,760 --> 00:27:01,600 Speaker 1: don't see that going away completely. Eric, Where is on 543 00:27:01,720 --> 00:27:04,720 Speaker 1: Guard taking market share from or is this new money 544 00:27:05,080 --> 00:27:09,640 Speaker 1: maybe perhaps made in the hecity market. Uh? Well, Vanguard 545 00:27:09,680 --> 00:27:12,280 Speaker 1: I think takes market share from everybody, um, you know 546 00:27:12,320 --> 00:27:15,800 Speaker 1: in the bond space, which they Pimco, black Rock Capital Group, 547 00:27:16,760 --> 00:27:20,040 Speaker 1: all of they're all the competitors of Vanguard. And you 548 00:27:20,080 --> 00:27:22,000 Speaker 1: know that they have their competitors on the equity side. 549 00:27:22,000 --> 00:27:24,840 Speaker 1: To UM, it's they're just you know, to me, they're 550 00:27:24,840 --> 00:27:29,479 Speaker 1: like Amazon. Vanguard is like Amazon is to retail, except 551 00:27:29,480 --> 00:27:31,520 Speaker 1: to the asset management world. You just don't hear as 552 00:27:31,600 --> 00:27:34,760 Speaker 1: much about them because they're not couplely traded. But their 553 00:27:34,880 --> 00:27:38,240 Speaker 1: fees are usually four or five times lower. And we're 554 00:27:38,280 --> 00:27:41,160 Speaker 1: just in a world where people are obsessed with cost. 555 00:27:41,280 --> 00:27:43,160 Speaker 1: It's one of the things they trust the most now, 556 00:27:43,720 --> 00:27:45,840 Speaker 1: and so they're going to just continue to eat market share. 557 00:27:46,200 --> 00:27:48,280 Speaker 1: It's just on the bond side, the fee comes in 558 00:27:48,400 --> 00:27:53,200 Speaker 1: extra is extra important, perhaps because of those shrinking yields. 559 00:27:54,160 --> 00:27:55,879 Speaker 1: All right, Er, let's switch gears a little bit, just 560 00:27:55,880 --> 00:27:57,719 Speaker 1: real quickly, what's the most exciting thing you're looking at 561 00:27:57,800 --> 00:28:02,960 Speaker 1: an et F world today? We're looking at a spack 562 00:28:03,040 --> 00:28:06,920 Speaker 1: eks that is going to launch tomorrow. We think, yeah, 563 00:28:06,960 --> 00:28:10,719 Speaker 1: you guess it, um and uh, there's another one filed. 564 00:28:10,760 --> 00:28:13,480 Speaker 1: We're calling it the spack attack. We're expecting about four 565 00:28:13,560 --> 00:28:15,280 Speaker 1: or five of these bad plays to launch in the 566 00:28:15,280 --> 00:28:18,160 Speaker 1: next couple of months. Probably two or three will survive 567 00:28:18,320 --> 00:28:20,920 Speaker 1: the next couple of years. It reminds me the blockchain 568 00:28:21,280 --> 00:28:24,560 Speaker 1: frenzy and the cannabis frenzy, uh recent years. So that's 569 00:28:24,560 --> 00:28:28,520 Speaker 1: what we're looking at. Wow, I don't know what to 570 00:28:28,560 --> 00:28:31,240 Speaker 1: say about that. I mean, yeah, I mean, I guess 571 00:28:31,240 --> 00:28:35,400 Speaker 1: these ets can come and go pretty quickly, right, Yeah, Look, 572 00:28:35,440 --> 00:28:38,120 Speaker 1: I mean e t s are opportunistic like a lot 573 00:28:38,160 --> 00:28:41,240 Speaker 1: a lot of areas, but especially when it's a new area. 574 00:28:41,320 --> 00:28:44,239 Speaker 1: Because speaking of Vanguard, these new areas I call them 575 00:28:44,320 --> 00:28:46,440 Speaker 1: Vanguard free zones, Like Vanguard is not going to launch 576 00:28:46,480 --> 00:28:48,760 Speaker 1: this back ets, so issuers love that can come in 577 00:28:48,840 --> 00:28:51,320 Speaker 1: charge a little higher fee and not get priced down 578 00:28:51,440 --> 00:28:54,320 Speaker 1: so quickly. Right, it makes so much sense. Eric Belltoon 579 00:28:54,480 --> 00:28:57,160 Speaker 1: is always bringing us the news stories and the new 580 00:28:57,360 --> 00:28:59,640 Speaker 1: at s that are out there. Thank you so much 581 00:28:59,800 --> 00:29:03,000 Speaker 1: for joining us. Eric caball Tunas of Bloomberg Intelligence is there, 582 00:29:03,040 --> 00:29:07,560 Speaker 1: et F analysts. Thanks for listening to Bloomberg Markets podcast. 583 00:29:07,720 --> 00:29:11,080 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts 584 00:29:11,200 --> 00:29:14,440 Speaker 1: or whatever a podcast platform you prefer. I'm Bonnie Quinn, 585 00:29:14,560 --> 00:29:17,240 Speaker 1: I'm on Twitter at Bonnie Quinn, and I'm Paul Sweeney. 586 00:29:17,240 --> 00:29:19,880 Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you 587 00:29:19,920 --> 00:29:22,320 Speaker 1: can always catch us worldwide at Bloomberg Radio