1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:34,360 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Late Friday, 7 00:00:34,479 --> 00:00:40,960 Speaker 1: a Texas judge ruled against Obamaca Obamacare, declaring an unconstitutional, 8 00:00:41,000 --> 00:00:44,160 Speaker 1: and the response today has been swift and fierce among 9 00:00:44,280 --> 00:00:48,199 Speaker 1: healthcare stocks, some of which are down more than eight percent. 10 00:00:48,320 --> 00:00:51,400 Speaker 1: Joining us now, Max Nisson, Biotech, pharma and healthcare columnist 11 00:00:51,400 --> 00:00:53,760 Speaker 1: a Bloomberg opinion joining us here in our eleven three 12 00:00:53,760 --> 00:00:56,040 Speaker 1: oh studios. Max, thank you so much for being here. 13 00:00:56,440 --> 00:01:00,920 Speaker 1: So as market's digestis, it seems like Senten, uh, Community Health, 14 00:01:01,000 --> 00:01:05,120 Speaker 1: Tenant are some of the biggest losers. Why them in particular? 15 00:01:05,760 --> 00:01:08,440 Speaker 1: So the companies that are down the most are the 16 00:01:08,440 --> 00:01:12,240 Speaker 1: ones you'd expect. You mentioned Centena, also Molina Health to 17 00:01:12,440 --> 00:01:16,600 Speaker 1: insurers that have the largest exposure both to the affordable carrects, 18 00:01:16,600 --> 00:01:21,280 Speaker 1: individual exchanges and to the Medicaid expansion. On the hospital side, 19 00:01:21,360 --> 00:01:24,360 Speaker 1: I think it's just the general sense um basically that 20 00:01:24,400 --> 00:01:28,040 Speaker 1: they might be facing more more having to provide more 21 00:01:28,120 --> 00:01:32,520 Speaker 1: uncompensated care, and just generally seeing the obvious cooling effect 22 00:01:32,560 --> 00:01:36,120 Speaker 1: that millions of people potentially losing health coverage would have 23 00:01:36,319 --> 00:01:40,200 Speaker 1: on their their ability to perform max. Based on your 24 00:01:40,240 --> 00:01:44,000 Speaker 1: reporting in your analysis, is Obamacare dead or is this 25 00:01:44,200 --> 00:01:48,279 Speaker 1: just going to be one step in a long legal march. 26 00:01:49,240 --> 00:01:52,760 Speaker 1: I'd expect the ladder um. You know, the the affordable 27 00:01:52,840 --> 00:01:57,520 Speaker 1: character has has survived more more cogent legal threats than 28 00:01:57,560 --> 00:02:00,640 Speaker 1: this one in the past. Uh, it's a pretty weak 29 00:02:00,680 --> 00:02:04,840 Speaker 1: case and a pretty conservative judge. Even though the Fifth Circuit, 30 00:02:04,920 --> 00:02:06,800 Speaker 1: which is the next place it would go, is a 31 00:02:06,840 --> 00:02:10,080 Speaker 1: pretty conservative um appellate court as far as they go, 32 00:02:10,400 --> 00:02:12,560 Speaker 1: I still think they're likely to overturn, and if not, 33 00:02:12,600 --> 00:02:15,800 Speaker 1: then the Supreme Court, just because you know, this is 34 00:02:15,840 --> 00:02:19,440 Speaker 1: really a pretty big overreach by this judge and by 35 00:02:19,480 --> 00:02:21,679 Speaker 1: the Republican attorneys general that brought the case of the 36 00:02:21,720 --> 00:02:25,600 Speaker 1: first place. Although, is the uncertainty that this introduces enough 37 00:02:25,680 --> 00:02:28,760 Speaker 1: to create a material risk regardless of whether the judge's 38 00:02:28,760 --> 00:02:31,359 Speaker 1: decision has ever turned sure, I think you know the 39 00:02:31,600 --> 00:02:34,919 Speaker 1: prospect of facing yet another year when it finally seemed 40 00:02:34,960 --> 00:02:37,520 Speaker 1: like things were going to settle down the repeal effort 41 00:02:37,520 --> 00:02:41,560 Speaker 1: in Congress failed, premiums were down, and chairs were expanding. 42 00:02:42,080 --> 00:02:45,360 Speaker 1: Here's another year of something with I'll be frank, you 43 00:02:45,360 --> 00:02:48,120 Speaker 1: know you saw enormous downside risk, which is the entire 44 00:02:48,200 --> 00:02:52,560 Speaker 1: law being being overturned, um potentially in a pretty disorderly 45 00:02:52,639 --> 00:02:56,160 Speaker 1: fact fashion, if there's an injunction, if it's upheld. So 46 00:02:56,200 --> 00:02:57,880 Speaker 1: that's definitely a big risk. I think that's why you're 47 00:02:57,880 --> 00:03:00,480 Speaker 1: seeing the sell off, even though UM I you might 48 00:03:00,480 --> 00:03:04,720 Speaker 1: consider an overreaction, just because the outcome with the greatest 49 00:03:04,760 --> 00:03:07,840 Speaker 1: likelihood is that this ruling gets reversed in the end. 50 00:03:08,280 --> 00:03:12,399 Speaker 1: Is this a philosophical battle or is there a viable 51 00:03:12,440 --> 00:03:17,720 Speaker 1: alternative to what is currently described as Obamacare EI. There 52 00:03:17,720 --> 00:03:19,800 Speaker 1: are plenty of of vible alternatis. I don't know if 53 00:03:19,800 --> 00:03:23,760 Speaker 1: we've seen one proposed in full that that would have 54 00:03:23,800 --> 00:03:26,600 Speaker 1: the backing of both parties, but you could certainly, you know, 55 00:03:26,639 --> 00:03:29,240 Speaker 1: there are plenty of ways to go about ensuring a 56 00:03:29,280 --> 00:03:32,399 Speaker 1: broader class of people. The a C certainly as its flaws, 57 00:03:32,440 --> 00:03:34,800 Speaker 1: but but in terms of kind of a philosophical disagreement 58 00:03:34,840 --> 00:03:37,560 Speaker 1: over kind of the legal aspects of this case, Um, 59 00:03:37,720 --> 00:03:41,200 Speaker 1: you know, it's whether the individual mandate is severable from 60 00:03:41,200 --> 00:03:43,680 Speaker 1: the rest of the law. And I think both from 61 00:03:43,880 --> 00:03:47,200 Speaker 1: a standpoint of congressional intent, we know that they think 62 00:03:47,240 --> 00:03:52,360 Speaker 1: it's severable because they literally last year voted to repeal 63 00:03:52,400 --> 00:03:54,400 Speaker 1: the mandate but keep the rest of the law. That 64 00:03:54,560 --> 00:03:57,760 Speaker 1: is clearly their intent. And also just from a logical 65 00:03:58,280 --> 00:04:03,760 Speaker 1: economic and financial stand point, insurers expanded knowing that the 66 00:04:03,800 --> 00:04:06,320 Speaker 1: individual mandate was going away. They clearly see it as 67 00:04:06,360 --> 00:04:10,360 Speaker 1: economically severable as well. So, you know, I think it's 68 00:04:10,400 --> 00:04:12,840 Speaker 1: it's reasonably expect to get it to get overturned. Where's 69 00:04:12,840 --> 00:04:16,160 Speaker 1: the political pressure right now in terms of either edifying 70 00:04:16,200 --> 00:04:19,600 Speaker 1: Obamacare or replacing it with something that has sort of 71 00:04:20,560 --> 00:04:23,880 Speaker 1: perhaps more feasibility the long term, especially from the financial 72 00:04:24,520 --> 00:04:27,440 Speaker 1: point of view, especially if you don't have the mandated 73 00:04:27,720 --> 00:04:31,760 Speaker 1: UH coverage. So I think there kind of falls into 74 00:04:31,880 --> 00:04:34,080 Speaker 1: a few separate branches. There's not much in the way 75 00:04:34,080 --> 00:04:37,360 Speaker 1: of political repeal to our political will to of repeal 76 00:04:37,360 --> 00:04:40,960 Speaker 1: and replacement. Considering that even the GOP with a larger 77 00:04:41,040 --> 00:04:44,120 Speaker 1: majority in the in the Senate or someone in the 78 00:04:44,160 --> 00:04:46,760 Speaker 1: Senate and that majority now couldn't manage to do it now. 79 00:04:46,880 --> 00:04:49,000 Speaker 1: Democrats of the House, So it's kind of likely to 80 00:04:49,040 --> 00:04:51,280 Speaker 1: be a little bit of a standpoint, a little bit 81 00:04:51,320 --> 00:04:54,400 Speaker 1: of a stalemate. Uh, there's the potential push for for 82 00:04:54,480 --> 00:04:58,039 Speaker 1: something like Medicare for All by Democrats. UM, that's going 83 00:04:58,120 --> 00:05:00,840 Speaker 1: to be kind of the next battleground, I think, or 84 00:05:01,240 --> 00:05:04,200 Speaker 1: a push maybe for a bipodssan effort to stabilize the 85 00:05:04,200 --> 00:05:09,159 Speaker 1: exchanges UM by introducing reinsurance UM something other than the mandate, 86 00:05:09,279 --> 00:05:12,800 Speaker 1: conceivably reintroducing the mandate, although I'd expect that's a bit 87 00:05:12,800 --> 00:05:16,560 Speaker 1: of a long shot. In analyzing all of this, have 88 00:05:16,680 --> 00:05:21,359 Speaker 1: you found that premiums for these insurance policies that exist 89 00:05:21,520 --> 00:05:25,760 Speaker 1: on these online exchanges have increased, you know, for the 90 00:05:25,839 --> 00:05:28,880 Speaker 1: first time this year, they're actually in the first time 91 00:05:28,880 --> 00:05:31,200 Speaker 1: in years there they're down in a number of states, 92 00:05:31,240 --> 00:05:35,560 Speaker 1: they're still increases, and they're still unsustainably high, particularly for 93 00:05:35,680 --> 00:05:39,040 Speaker 1: the portion of the population that is ineligible for subsidies UM. 94 00:05:39,080 --> 00:05:40,920 Speaker 1: And that's a product of a lot of things, Uh, 95 00:05:41,160 --> 00:05:44,839 Speaker 1: Partially the mandate going away, Partially the fact that you know, 96 00:05:44,920 --> 00:05:47,279 Speaker 1: Congress has been in the hands of the JUP, which 97 00:05:47,279 --> 00:05:52,120 Speaker 1: has been outwardly explicitly hostile law and the Trump administration 98 00:05:52,160 --> 00:05:55,360 Speaker 1: has done a few things that have caused preministerized cutting 99 00:05:55,400 --> 00:05:59,600 Speaker 1: marketing budgets, cutting outreach and introducing um or pushing for 100 00:06:00,360 --> 00:06:03,520 Speaker 1: the broader use of short term plans that aren't is 101 00:06:03,600 --> 00:06:06,479 Speaker 1: comprehensive and might sipe and healthy people away. So that's 102 00:06:06,520 --> 00:06:09,000 Speaker 1: all had kind of an impact on premiums. Could be 103 00:06:09,040 --> 00:06:12,839 Speaker 1: reversed with with action, but that just hasn't happened. Thank 104 00:06:12,880 --> 00:06:15,320 Speaker 1: you very much. Max Neeson has always a pleasure to 105 00:06:15,360 --> 00:06:19,880 Speaker 1: have you here. Are biotechnology, pharmaceutical and healthcare columnist for 106 00:06:20,080 --> 00:06:23,400 Speaker 1: Bloomberg Opinion, and you can follow Max on Twitter as 107 00:06:23,440 --> 00:06:27,599 Speaker 1: we all do at Max Neeson and I S. E. N. 108 00:06:42,080 --> 00:06:47,120 Speaker 1: If you ask Amazon's Alexa, this is the artificial intelligence 109 00:06:47,240 --> 00:06:51,719 Speaker 1: natural language technology. If you ask it who helped to 110 00:06:51,839 --> 00:06:56,599 Speaker 1: create Alexa, the name Alex Spinelli should turn up. He 111 00:06:56,680 --> 00:06:59,440 Speaker 1: is the chief technology officer of Live Person. He is 112 00:06:59,440 --> 00:07:02,720 Speaker 1: the former head of Amazon's Alexa, and he joins us 113 00:07:02,720 --> 00:07:05,640 Speaker 1: here in studio. Alex, thank you very much, and I 114 00:07:05,680 --> 00:07:07,839 Speaker 1: have to ask you is the reason why it is 115 00:07:07,920 --> 00:07:11,800 Speaker 1: called Alexa. Doesn't have anything to do with your first name. 116 00:07:12,360 --> 00:07:13,960 Speaker 1: It has thank you for having me. It has nothing 117 00:07:13,960 --> 00:07:15,640 Speaker 1: to do with my first name. It was named before. 118 00:07:15,680 --> 00:07:19,240 Speaker 1: I OK, alright, fair enough, I'd like to tell a 119 00:07:19,280 --> 00:07:22,440 Speaker 1: different story there, but uh not not my name. Tell 120 00:07:22,520 --> 00:07:26,240 Speaker 1: the story about how you go from Alexa and Amazon 121 00:07:26,400 --> 00:07:30,440 Speaker 1: to your current role of Chief Technology Officer for Live 122 00:07:30,640 --> 00:07:37,400 Speaker 1: Person and another artificial intelligence creation called Maven. Yes so um. 123 00:07:37,440 --> 00:07:40,440 Speaker 1: I met Rob Lcacio about eight years ago here in 124 00:07:40,440 --> 00:07:44,840 Speaker 1: New York and we had this wonderful, amazing conversation about conversation. 125 00:07:44,920 --> 00:07:49,400 Speaker 1: So built a business enabling brands have conversations with people online, 126 00:07:49,920 --> 00:07:52,160 Speaker 1: and we hadn't talked for many years and we reconnected 127 00:07:52,200 --> 00:07:55,120 Speaker 1: almost a year to the day. While I was running 128 00:07:55,160 --> 00:07:58,960 Speaker 1: the alex os at Amazon, And what really fascinated me 129 00:07:59,240 --> 00:08:02,119 Speaker 1: was I was helping build what I believe our natural 130 00:08:02,160 --> 00:08:05,760 Speaker 1: language experiences, UH ambient experiences, which I think of the 131 00:08:05,800 --> 00:08:08,680 Speaker 1: next way people will talk to their to have conversations 132 00:08:08,720 --> 00:08:11,640 Speaker 1: with their digital lives. Um. And I was just fascinated 133 00:08:11,680 --> 00:08:14,160 Speaker 1: the ability to go from working just for Amazon to 134 00:08:14,200 --> 00:08:17,040 Speaker 1: deliver that to working for all of the brands that 135 00:08:17,080 --> 00:08:19,400 Speaker 1: we use day in and day day out. So Live 136 00:08:19,480 --> 00:08:24,640 Speaker 1: Person's customers are banks, tel cos, retail businesses, and the 137 00:08:24,680 --> 00:08:26,720 Speaker 1: opportunity to actually go do that and make a real 138 00:08:26,880 --> 00:08:29,960 Speaker 1: change in all the services that we use is the 139 00:08:29,960 --> 00:08:32,800 Speaker 1: primary reason I can join. So going from a arguably 140 00:08:32,800 --> 00:08:35,360 Speaker 1: the hottest product on a on the planet, very large 141 00:08:35,360 --> 00:08:37,440 Speaker 1: company to a small company, but to have a bigger 142 00:08:37,480 --> 00:08:40,440 Speaker 1: impact in the experience that I think we need. So 143 00:08:40,559 --> 00:08:44,160 Speaker 1: when you say a conversation about conversations, what is it 144 00:08:44,520 --> 00:08:49,680 Speaker 1: about a conversation that so many artificial intelligence programs have 145 00:08:49,800 --> 00:08:52,480 Speaker 1: failed to get? What sort of the secret sauce in 146 00:08:52,559 --> 00:08:57,520 Speaker 1: replicating a human to human experience with a robot? Right? Well, Um, 147 00:08:57,720 --> 00:08:59,920 Speaker 1: the hard part is the sort of core language understand 148 00:09:00,559 --> 00:09:04,000 Speaker 1: And I think I don't know if previous ais have failed. 149 00:09:04,040 --> 00:09:05,840 Speaker 1: I think it's been an evolution and we're getting better 150 00:09:05,880 --> 00:09:08,200 Speaker 1: and better and better. I think we started with Sirie 151 00:09:08,320 --> 00:09:11,960 Speaker 1: very early, capturing people's imaginations. I think Alexa kind of 152 00:09:12,000 --> 00:09:14,640 Speaker 1: went into the living room and across the home. And 153 00:09:14,720 --> 00:09:17,440 Speaker 1: now when you see the ability, what we're doing at 154 00:09:17,480 --> 00:09:21,120 Speaker 1: Life Person is actually embedding that capability in any of 155 00:09:21,120 --> 00:09:24,160 Speaker 1: the messaging tools that you use today. So, um, all 156 00:09:24,200 --> 00:09:25,680 Speaker 1: of the things that you use today day in and 157 00:09:25,760 --> 00:09:29,800 Speaker 1: day out, your What's app I message line in Japan, 158 00:09:30,240 --> 00:09:32,320 Speaker 1: those are the places that we're integrating me even so 159 00:09:32,400 --> 00:09:35,800 Speaker 1: that brands can actually have conversations with people, where they live, 160 00:09:35,960 --> 00:09:39,760 Speaker 1: where they talk to their wives, their girlfriend's boyfriends, their families. 161 00:09:40,440 --> 00:09:44,120 Speaker 1: Do you see a time when websites will be obsolete? 162 00:09:45,040 --> 00:09:47,680 Speaker 1: So absolutely so. I I actually joined to kill the 163 00:09:47,720 --> 00:09:50,439 Speaker 1: website in the app. I think they're kind of failures. 164 00:09:50,480 --> 00:09:51,840 Speaker 1: I think I look at my phone and I have 165 00:09:51,840 --> 00:09:54,200 Speaker 1: a hundred and sixty two apps that need to be updated. 166 00:09:54,559 --> 00:09:57,880 Speaker 1: If you look at the share of retail sales that's 167 00:09:57,920 --> 00:10:00,840 Speaker 1: online in the US, it's still under fourte percent, and 168 00:10:00,880 --> 00:10:04,480 Speaker 1: in Europe they don't predict it to be Forrester doesn't 169 00:10:04,480 --> 00:10:08,040 Speaker 1: predict it to be fourteen percent until so for I 170 00:10:08,080 --> 00:10:11,840 Speaker 1: think for most businesses, the web is somewhat of a failure. Uh, 171 00:10:11,880 --> 00:10:14,760 Speaker 1: it's never really produced the return. Sure, I can manage 172 00:10:14,800 --> 00:10:18,000 Speaker 1: my account, I can pay bills, but they're Amazon has 173 00:10:18,040 --> 00:10:21,720 Speaker 1: been successful, they own nearly half that retail sale online. 174 00:10:21,880 --> 00:10:25,319 Speaker 1: But for most businesses it's not working. If the flip 175 00:10:25,360 --> 00:10:28,680 Speaker 1: side and Alexa sort of has highlighted this is when 176 00:10:28,679 --> 00:10:32,800 Speaker 1: you start to have a robot that understands human language 177 00:10:33,200 --> 00:10:36,560 Speaker 1: and can also track your movements and can also video you, 178 00:10:37,240 --> 00:10:40,200 Speaker 1: it becomes a security issue and a privacy issue that 179 00:10:40,480 --> 00:10:43,880 Speaker 1: becomes very uh. Front Front and Front and foremost, so 180 00:10:43,920 --> 00:10:47,240 Speaker 1: I just wandered from your perspective, does that privacy issue 181 00:10:47,280 --> 00:10:50,079 Speaker 1: become more of a concern when all of a sudden, 182 00:10:50,200 --> 00:10:56,719 Speaker 1: this is a multisensory experience and device. So privacy is 183 00:10:56,800 --> 00:10:59,360 Speaker 1: super important to us. It was super important to me 184 00:11:00,320 --> 00:11:02,240 Speaker 1: when I was at Amazon. It's super important to me 185 00:11:02,240 --> 00:11:05,120 Speaker 1: as a consumer. So we take great pains to drive 186 00:11:05,160 --> 00:11:08,960 Speaker 1: a lot of privacy and security. We don't sell or 187 00:11:09,080 --> 00:11:11,960 Speaker 1: market your data as a consumer. We don't mix and 188 00:11:12,000 --> 00:11:15,720 Speaker 1: match enterprise and brand data. Um. But yes, I think industry, 189 00:11:15,800 --> 00:11:18,120 Speaker 1: why this is something that we all need to actually, 190 00:11:18,160 --> 00:11:20,480 Speaker 1: you know, pay close attention to. Well, not selling the 191 00:11:20,559 --> 00:11:23,120 Speaker 1: data is one thing, but what about police for example, 192 00:11:23,360 --> 00:11:25,960 Speaker 1: that now that the crime has been committed, Uh, and 193 00:11:26,000 --> 00:11:28,600 Speaker 1: they can go and if let's say it's let's say 194 00:11:28,600 --> 00:11:30,280 Speaker 1: it's a brand, right, they can go in and they 195 00:11:30,280 --> 00:11:32,240 Speaker 1: can say, well, someone might have talked to you, it 196 00:11:32,320 --> 00:11:34,360 Speaker 1: might have stayed on their device, but I've stayed on longer. 197 00:11:34,720 --> 00:11:37,040 Speaker 1: Can you just give us the tapes? Yeah? And I 198 00:11:37,080 --> 00:11:39,040 Speaker 1: think these are these are real concerns. I think they 199 00:11:39,080 --> 00:11:41,600 Speaker 1: exist today and they existed before AI. You know, whenever 200 00:11:41,640 --> 00:11:44,559 Speaker 1: you call your phone, your phone calls recorded. You get 201 00:11:44,559 --> 00:11:47,160 Speaker 1: that message, anything you do on the website, there's a 202 00:11:47,200 --> 00:11:48,880 Speaker 1: lot of ability to track that. So I think this 203 00:11:48,960 --> 00:11:50,880 Speaker 1: is just something we need to pay close attention to. 204 00:11:51,200 --> 00:11:53,640 Speaker 1: I think consumers need to have a say and input. 205 00:11:54,200 --> 00:11:56,800 Speaker 1: Uh and you know we have to actually hold companies 206 00:11:56,800 --> 00:11:58,720 Speaker 1: like ours too accountable for those kind of things. Again, 207 00:11:58,800 --> 00:12:03,320 Speaker 1: we take this very seriously. We're consumers as well. Let's 208 00:12:03,320 --> 00:12:06,040 Speaker 1: say someone is running a business, any kind of business 209 00:12:06,040 --> 00:12:08,320 Speaker 1: that could be a service business, a business that makes 210 00:12:08,320 --> 00:12:15,120 Speaker 1: a product, if they are interested in adding this artificial intelligence, 211 00:12:15,320 --> 00:12:20,400 Speaker 1: natural language capability, and they don't have a strategy currently 212 00:12:20,559 --> 00:12:26,040 Speaker 1: for eye message, for what'sapp, for Amazon's Alexa, for live person, 213 00:12:26,480 --> 00:12:29,360 Speaker 1: what are the characteristics of the people that they need 214 00:12:29,400 --> 00:12:31,520 Speaker 1: to hire in order to tell them how to get there? 215 00:12:32,520 --> 00:12:34,920 Speaker 1: Well as a as a business person support of what 216 00:12:34,960 --> 00:12:37,000 Speaker 1: we're doing, I think they should come talk to to us. 217 00:12:37,000 --> 00:12:38,760 Speaker 1: Alive person for sure, they don't even know what the 218 00:12:39,840 --> 00:12:42,000 Speaker 1: right so they definitely need to look to people who 219 00:12:42,080 --> 00:12:46,199 Speaker 1: understand machine learning, who understand AI. AI is not a panacea. 220 00:12:46,240 --> 00:12:48,959 Speaker 1: It's not a solution to anyone's problem. If people come 221 00:12:48,960 --> 00:12:50,599 Speaker 1: and tell you drop the AI in here and it 222 00:12:50,640 --> 00:12:53,280 Speaker 1: will solve all your problems, that's wrong. So I think 223 00:12:53,280 --> 00:12:55,719 Speaker 1: they need to start to hire people who understand it's 224 00:12:55,720 --> 00:12:57,480 Speaker 1: a tool. It's a tool that can be used for 225 00:12:57,720 --> 00:12:59,880 Speaker 1: great things. It's a tool that can you can spend 226 00:12:59,920 --> 00:13:01,520 Speaker 1: a lot of money and waste. So I think finding 227 00:13:01,559 --> 00:13:05,200 Speaker 1: the right experts to help develop that strategy is really 228 00:13:05,240 --> 00:13:08,240 Speaker 1: important because we do think you'll see the brands and 229 00:13:08,280 --> 00:13:12,280 Speaker 1: businesses that invest in using technologies of where people live, 230 00:13:12,400 --> 00:13:16,880 Speaker 1: conversations where people are fifteen million texts every minute, sixty 231 00:13:16,920 --> 00:13:21,240 Speaker 1: billion messages on WhatsApp and Facebook Messenger every day. You 232 00:13:21,280 --> 00:13:22,880 Speaker 1: have to go where the consumer is, so you need 233 00:13:22,920 --> 00:13:26,480 Speaker 1: to find people who understand that shift. Which brands are 234 00:13:26,760 --> 00:13:31,439 Speaker 1: most forward thinking when it comes to this shift UM, Well, 235 00:13:31,520 --> 00:13:33,280 Speaker 1: we have some of the largest brands in the world, 236 00:13:33,320 --> 00:13:37,440 Speaker 1: T Mobile, Home depot Rack, Utan and Japan MUFG, So 237 00:13:37,640 --> 00:13:41,679 Speaker 1: there's it's pretty much across the spectrum. Banks, Telco's UH 238 00:13:41,840 --> 00:13:46,600 Speaker 1: utilities are all investing in this UM. I think that Amazon, certainly, 239 00:13:46,640 --> 00:13:48,079 Speaker 1: you know and you look to the sort of big ones, 240 00:13:48,120 --> 00:13:49,840 Speaker 1: are certainly kind of leading a charge in some of 241 00:13:49,880 --> 00:13:52,640 Speaker 1: these ways. I think more and more businesses are starting 242 00:13:52,640 --> 00:13:54,480 Speaker 1: to hire the kind of people we talked to before 243 00:13:54,880 --> 00:13:57,120 Speaker 1: and are starting to explore UM I think the ones 244 00:13:57,160 --> 00:14:01,439 Speaker 1: that you see um take bigger experiment and really start 245 00:14:01,480 --> 00:14:04,480 Speaker 1: to play and learn and iterate quickly are the ones 246 00:14:04,520 --> 00:14:06,880 Speaker 1: that I think we'll be successful. Thank you so much 247 00:14:06,920 --> 00:14:10,040 Speaker 1: for being with us. Pleasure. It was a pleasure speaking 248 00:14:10,080 --> 00:14:11,679 Speaker 1: with you, and I know my nine year old son 249 00:14:11,720 --> 00:14:14,520 Speaker 1: would be unbelievably excited to thank that I spoke of 250 00:14:14,600 --> 00:14:19,120 Speaker 1: someone who helped create Alexa. Alex Binelli, chief technology officer 251 00:14:19,200 --> 00:14:22,120 Speaker 1: of Live Person in Seattle and New York, joining us 252 00:14:22,160 --> 00:14:24,840 Speaker 1: here in our eleven three hour studios today in New 253 00:14:24,920 --> 00:14:44,640 Speaker 1: York City. Joining us now is Brendan to Hearne, chief 254 00:14:44,720 --> 00:14:47,560 Speaker 1: investment Officer A Crane Shares in New York. Brendan, thank 255 00:14:47,560 --> 00:14:50,120 Speaker 1: you so much for being with us. I'm really struck 256 00:14:50,320 --> 00:14:53,880 Speaker 1: by the slew of disappointing data that has been coming 257 00:14:53,920 --> 00:14:56,840 Speaker 1: out of China from retail sales on and I'm wondering 258 00:14:56,840 --> 00:15:00,600 Speaker 1: whether you have a view on whether perhaps China is 259 00:15:00,840 --> 00:15:05,520 Speaker 1: suffering vastly more than markets are currently pricing in well 260 00:15:05,680 --> 00:15:08,040 Speaker 1: in the first forward. Thank you for the opportunity, Lisa China. 261 00:15:08,120 --> 00:15:11,320 Speaker 1: China has been running a number of domestic policies aimed 262 00:15:11,400 --> 00:15:16,240 Speaker 1: at transitioning from high growth fueled by debt too slower, 263 00:15:16,280 --> 00:15:21,920 Speaker 1: but higher quality growth. And it's really been the trade 264 00:15:21,960 --> 00:15:25,800 Speaker 1: war in conjunction with these policies has created a little 265 00:15:25,800 --> 00:15:29,160 Speaker 1: bit of a down draft that's taking place. I mean, 266 00:15:29,160 --> 00:15:32,120 Speaker 1: I think if you step back, China's GDP will continue 267 00:15:32,120 --> 00:15:34,760 Speaker 1: to slow just law of large numbers, but I think 268 00:15:34,760 --> 00:15:37,520 Speaker 1: it's just the culmination of some of these domestic policies 269 00:15:37,720 --> 00:15:39,880 Speaker 1: as well as the effects of a trade war have 270 00:15:39,960 --> 00:15:44,800 Speaker 1: created pretty soft self economic numbers here of late. Do 271 00:15:44,800 --> 00:15:48,200 Speaker 1: you believe that this will continue into and what effects 272 00:15:48,200 --> 00:15:51,560 Speaker 1: will it have in the commodity markets? So, yeah, great question. 273 00:15:51,840 --> 00:15:54,280 Speaker 1: You know, Um, what we see is we believe that 274 00:15:54,280 --> 00:15:57,160 Speaker 1: that we're at a market bottom at or near equity 275 00:15:57,560 --> 00:16:00,560 Speaker 1: um Chinese markets at the bottom. We then believe we're 276 00:16:00,560 --> 00:16:04,000 Speaker 1: at a policy bottom, that we're seeing an effect by 277 00:16:04,840 --> 00:16:08,320 Speaker 1: policymakers in China to stimulate the economy. And what will 278 00:16:08,360 --> 00:16:11,160 Speaker 1: happen over the course of Q four as well as 279 00:16:11,160 --> 00:16:13,720 Speaker 1: in Q one will be an earnings bottom so as 280 00:16:13,720 --> 00:16:16,640 Speaker 1: well as an economic number bottom. So I think these 281 00:16:16,680 --> 00:16:19,760 Speaker 1: stimuluses is making its way into the system. It just 282 00:16:19,760 --> 00:16:22,280 Speaker 1: takes a little while to show up what you might 283 00:16:22,320 --> 00:16:25,240 Speaker 1: see him around the commodities that could be interesting is 284 00:16:25,280 --> 00:16:28,520 Speaker 1: we're seeing a little bit more of some infrastructure projects 285 00:16:28,560 --> 00:16:32,520 Speaker 1: have been approved as well as potentially a curbing of 286 00:16:32,600 --> 00:16:36,120 Speaker 1: some of the property. Property development has been curtailed, and 287 00:16:36,160 --> 00:16:38,160 Speaker 1: we might see that come off as well, which which 288 00:16:38,200 --> 00:16:41,440 Speaker 1: I think could have a very big benefit for commodities. Alright, 289 00:16:41,520 --> 00:16:43,920 Speaker 1: So Brennan, it sounds like you're pretty positive on China 290 00:16:44,000 --> 00:16:47,320 Speaker 1: right now, Is that right? Well? I do think, um, 291 00:16:47,360 --> 00:16:49,640 Speaker 1: you know, as an entry point, it looks very appealing 292 00:16:49,680 --> 00:16:52,840 Speaker 1: from both a relative as well as a historical valuation basis. 293 00:16:53,080 --> 00:16:57,520 Speaker 1: So how would you recommend the international investors gain exposure 294 00:16:57,680 --> 00:17:01,760 Speaker 1: to China? Well, I think at the stage you have, uh, 295 00:17:01,800 --> 00:17:04,960 Speaker 1: the Chinese A share market is off, you have Hong 296 00:17:05,040 --> 00:17:08,120 Speaker 1: Kong markets off as well as US listed names. It's 297 00:17:08,119 --> 00:17:10,600 Speaker 1: self serving and highly biased obviously Crane shirts as a 298 00:17:10,640 --> 00:17:13,480 Speaker 1: family of China focus dts. But I really like the 299 00:17:13,520 --> 00:17:16,280 Speaker 1: prospect for investors with a three to five three to 300 00:17:16,359 --> 00:17:20,160 Speaker 1: five year time rising for potential entry point here. Well, 301 00:17:20,200 --> 00:17:23,359 Speaker 1: if you listen to members of the of the Trump administration, 302 00:17:23,440 --> 00:17:26,600 Speaker 1: I mean, for example, Peter Navarro saying that investors should 303 00:17:26,640 --> 00:17:31,239 Speaker 1: just let the China trade war play itself out, do 304 00:17:31,359 --> 00:17:36,840 Speaker 1: you agree stand on the sidelines until something becomes clear. Well, 305 00:17:36,840 --> 00:17:39,600 Speaker 1: I think for a lot of investors, you don't have 306 00:17:39,720 --> 00:17:42,399 Speaker 1: necessarily that ability that you know your your mandate is 307 00:17:42,440 --> 00:17:45,040 Speaker 1: to stay invested. I think you know if you wait 308 00:17:45,040 --> 00:17:46,880 Speaker 1: for the year, but you don't have to stay invested 309 00:17:46,880 --> 00:17:50,159 Speaker 1: in China, well, well to some degree. I mean, China 310 00:17:50,480 --> 00:17:54,840 Speaker 1: is almost it's four hundred and sixty five of the 311 00:17:55,640 --> 00:17:58,560 Speaker 1: plus stocks in a ms c I emerging market. It's 312 00:17:58,600 --> 00:18:01,640 Speaker 1: about it, just over thirty percent of the total sources. 313 00:18:01,640 --> 00:18:04,199 Speaker 1: So it's a big, big part of of these benchmarks. 314 00:18:04,200 --> 00:18:07,320 Speaker 1: So they'll go to a meaningful underweight, could create pretty 315 00:18:07,400 --> 00:18:10,919 Speaker 1: dramatic tracking error. But but I do think in general, 316 00:18:11,040 --> 00:18:13,040 Speaker 1: if you wait for the green light, you know, the 317 00:18:13,160 --> 00:18:16,080 Speaker 1: all clear sign, you've missed the move. And I think 318 00:18:16,160 --> 00:18:19,480 Speaker 1: if we get some progress, as we're seeing on the trade, 319 00:18:19,480 --> 00:18:21,720 Speaker 1: if we get some some rays of sunlight as the 320 00:18:21,720 --> 00:18:24,720 Speaker 1: clouds part um, I think the markets can and well 321 00:18:25,119 --> 00:18:29,080 Speaker 1: respond positively. I have to wonder we're seeing an increase 322 00:18:29,119 --> 00:18:32,719 Speaker 1: in defaults UH in the corporate debt market in China, 323 00:18:32,960 --> 00:18:36,080 Speaker 1: and there have been a number of distressed investors, including 324 00:18:36,080 --> 00:18:38,480 Speaker 1: oak Tree, that have said that they actually see opportunity 325 00:18:38,520 --> 00:18:40,879 Speaker 1: in China right now. Do you agree, I mean, do 326 00:18:40,920 --> 00:18:43,159 Speaker 1: you think beyond just the public markets since sort of 327 00:18:43,200 --> 00:18:46,520 Speaker 1: the easy access points, that this is a time for 328 00:18:46,560 --> 00:18:49,480 Speaker 1: firms to be moving more deeply into the into the 329 00:18:49,520 --> 00:18:53,760 Speaker 1: markets there. Yeah, I saw last week, uh great Warward 330 00:18:53,840 --> 00:18:56,960 Speaker 1: Pinkus announced that it was raising a billion plus dollar 331 00:18:57,000 --> 00:18:59,960 Speaker 1: fund to focus on distressed reality. So so in general China, 332 00:19:00,400 --> 00:19:04,960 Speaker 1: China is becoming Darwinistic when it comes to uh, defaults. 333 00:19:05,000 --> 00:19:07,680 Speaker 1: They're they're allowing the proverbial hand of the market to 334 00:19:07,720 --> 00:19:11,520 Speaker 1: play a factor. What China has had been tightening in 335 00:19:12,119 --> 00:19:16,639 Speaker 1: seventeen um, they've had the back burner a little bit 336 00:19:16,680 --> 00:19:20,240 Speaker 1: of this tightening and de leveraging process because of because 337 00:19:20,280 --> 00:19:22,439 Speaker 1: of the trade war. But but I think in general, 338 00:19:22,480 --> 00:19:26,200 Speaker 1: for smaller players, UH, there's going to be a rise 339 00:19:26,240 --> 00:19:30,359 Speaker 1: in defaults. If you're a very large player that has 340 00:19:30,480 --> 00:19:34,320 Speaker 1: the potential to be that first domino and creating a 341 00:19:34,400 --> 00:19:37,560 Speaker 1: systematic risk, they're going they're gonna do things to try 342 00:19:37,600 --> 00:19:40,760 Speaker 1: to prevent that from happening. But certainly I think for 343 00:19:40,880 --> 00:19:44,159 Speaker 1: bond investors, UM, you really want to stay clear of 344 00:19:44,280 --> 00:19:47,920 Speaker 1: some of these smaller players, uh, simply because they don't 345 00:19:47,920 --> 00:19:50,600 Speaker 1: have the backing, they don't have that systematic risk and 346 00:19:50,640 --> 00:19:54,800 Speaker 1: therefore that the policymakers are gonna let them go. Brendan. 347 00:19:54,880 --> 00:19:58,320 Speaker 1: Just as an example, the Crane Shares, a CSI China 348 00:19:58,480 --> 00:20:03,560 Speaker 1: Internet fund is trading at levels that we haven't seen 349 00:20:03,640 --> 00:20:08,280 Speaker 1: since May of seventeen. Go back even further, it was 350 00:20:08,359 --> 00:20:12,680 Speaker 1: trading lower, and that's even before the U S election. 351 00:20:13,119 --> 00:20:18,320 Speaker 1: What would prevent it from returning to those pre election levels. Well, 352 00:20:18,560 --> 00:20:21,119 Speaker 1: I think what we're seeing is and and you know, 353 00:20:21,200 --> 00:20:24,000 Speaker 1: there's been a lot of pressure on on managers. If 354 00:20:24,000 --> 00:20:27,280 Speaker 1: you hold something with China in the name, uh, you're 355 00:20:27,280 --> 00:20:28,879 Speaker 1: going to get a lot of questions. I mean, we 356 00:20:28,920 --> 00:20:31,200 Speaker 1: could argue all day that Ali Baba, one of our 357 00:20:31,240 --> 00:20:35,320 Speaker 1: top holdings in k web, has no revenue exposure to 358 00:20:35,359 --> 00:20:38,840 Speaker 1: the United States, and yet the stock is well off. UM. 359 00:20:38,880 --> 00:20:41,199 Speaker 1: So I think this is a little bit of the 360 00:20:41,240 --> 00:20:45,760 Speaker 1: effect of a trade war on professional investors UM in general. 361 00:20:45,960 --> 00:20:47,840 Speaker 1: When you look at a lot of the revenue growth 362 00:20:47,880 --> 00:20:50,480 Speaker 1: of the companies that we hold, they're very, very high, 363 00:20:50,560 --> 00:20:54,399 Speaker 1: and yet we're at at a fairly meaningful valuation discount 364 00:20:54,760 --> 00:20:58,960 Speaker 1: to our US equivalents despite having a higher rate of 365 00:20:59,080 --> 00:21:01,600 Speaker 1: revenue growth. So this is where you know, I think 366 00:21:01,600 --> 00:21:04,200 Speaker 1: the per real baby in the bath waters thrown out. 367 00:21:04,359 --> 00:21:06,400 Speaker 1: All right, we gotta leave it there. Thanks very much. 368 00:21:06,480 --> 00:21:10,880 Speaker 1: Brendan A. Hearn is the chief investment officer for Crane Shares, 369 00:21:11,359 --> 00:21:30,720 Speaker 1: speaking about equity investments in China. It is that time 370 00:21:30,760 --> 00:21:33,280 Speaker 1: of year when we get a slew of Wall Street 371 00:21:33,320 --> 00:21:37,280 Speaker 1: analyst predictions for the year to come. Joining us now 372 00:21:37,320 --> 00:21:40,080 Speaker 1: with one of those, Matt, Tom's chief investment officer focusing 373 00:21:40,119 --> 00:21:43,400 Speaker 1: on the fixed income market for Voy Investment Management, overseeing 374 00:21:43,400 --> 00:21:47,320 Speaker 1: more than two hundred billion dollars from Atlanta, Georgia. Matt, 375 00:21:47,440 --> 00:21:51,520 Speaker 1: thank you so much for being with us. Increasingly we 376 00:21:51,720 --> 00:21:56,359 Speaker 1: hear from analysts start becoming defensive. What does that mean 377 00:21:56,520 --> 00:21:58,679 Speaker 1: in the fixed income markets? And do you think a 378 00:21:58,760 --> 00:22:02,360 Speaker 1: defensive posture is the one to take? Um it's it's 379 00:22:02,400 --> 00:22:04,920 Speaker 1: important to bifrecate' is a good question, important to biofrecate 380 00:22:05,000 --> 00:22:09,000 Speaker 1: between credit sensitivity and interest rate sensitivity. There's been a 381 00:22:09,040 --> 00:22:11,399 Speaker 1: lot of discussion over the last three years about the 382 00:22:11,400 --> 00:22:13,719 Speaker 1: potential of rates going up, and so it's been right 383 00:22:13,760 --> 00:22:16,960 Speaker 1: to be defensive in the interest rate risk that that 384 00:22:17,000 --> 00:22:19,000 Speaker 1: one has been taken. As you have seen the interest 385 00:22:19,119 --> 00:22:21,920 Speaker 1: rates obviously increase in the US up to just below 386 00:22:22,040 --> 00:22:24,600 Speaker 1: three percent in the tenure. However, it is right to 387 00:22:24,920 --> 00:22:27,800 Speaker 1: look to be a bit more defensive in credit sensitive assets, 388 00:22:27,800 --> 00:22:31,960 Speaker 1: so bank loans, high yield UM or more volatile UH, 389 00:22:32,320 --> 00:22:34,520 Speaker 1: components of the BOD markets that have a higher correlation 390 00:22:34,560 --> 00:22:37,479 Speaker 1: to equities. That's where that defensiveness has made sense the 391 00:22:37,480 --> 00:22:39,840 Speaker 1: second half of eighteen and is likely to make sense 392 00:22:39,920 --> 00:22:43,480 Speaker 1: in in early nineteen as well. So where can investors 393 00:22:43,560 --> 00:22:47,280 Speaker 1: hide um? Well, UH, the big push has been in 394 00:22:47,280 --> 00:22:49,440 Speaker 1: the floating rate, and one of our big beliefs is 395 00:22:49,480 --> 00:22:50,919 Speaker 1: that you had in the next year, the FETE is 396 00:22:50,960 --> 00:22:52,960 Speaker 1: likely to slow. We'll get some more information in the 397 00:22:52,960 --> 00:22:57,160 Speaker 1: middle of this week. Unlikely to really signal a pause yet. 398 00:22:57,200 --> 00:22:59,080 Speaker 1: I'll come back to that. But where can you hide 399 00:22:59,080 --> 00:23:01,399 Speaker 1: to used to be floating rate instruments that would protect 400 00:23:01,480 --> 00:23:05,120 Speaker 1: against that that melt higher and rates. We think investment 401 00:23:05,160 --> 00:23:08,399 Speaker 1: grade oriented bond funds are quote unquote intermediate bond funds 402 00:23:08,440 --> 00:23:11,119 Speaker 1: now have the best stress return balance, you have some 403 00:23:11,200 --> 00:23:13,840 Speaker 1: duration to help you, you have some yield, and you 404 00:23:13,880 --> 00:23:18,720 Speaker 1: have more modest forms of credit sensitivity. So we'd advise 405 00:23:19,119 --> 00:23:22,040 Speaker 1: more towards those higher quality funds and less towards high 406 00:23:22,080 --> 00:23:24,639 Speaker 1: yield and bank loans at this time, I'm curious what 407 00:23:24,760 --> 00:23:27,199 Speaker 1: you think about that triple B rated sect to the 408 00:23:27,240 --> 00:23:31,480 Speaker 1: lowest rated investment grade rank of debt. I mean, just 409 00:23:31,600 --> 00:23:34,760 Speaker 1: think about Xerox just downgraded bonds fell out of bed. 410 00:23:35,440 --> 00:23:38,359 Speaker 1: Does that present a risk to your to your thesis? 411 00:23:38,080 --> 00:23:41,800 Speaker 1: It is a meaningful market risk and a very important topic. 412 00:23:41,840 --> 00:23:44,159 Speaker 1: And there's been a lot of good work done at 413 00:23:44,160 --> 00:23:48,200 Speaker 1: Boomberg and beyond on detailing now that fifty percent, more 414 00:23:48,200 --> 00:23:51,119 Speaker 1: than fifty percent of the investment grade corporate bond market 415 00:23:51,160 --> 00:23:53,399 Speaker 1: is made up of triple b's. Now we think one 416 00:23:53,400 --> 00:23:56,720 Speaker 1: of the important things to talk about is because there's 417 00:23:56,840 --> 00:24:00,080 Speaker 1: more of them, does that necessarily change how they're going 418 00:24:00,119 --> 00:24:03,719 Speaker 1: to act? And we think it's important to separate between 419 00:24:03,720 --> 00:24:06,320 Speaker 1: the triple B. So there's two types of companies that 420 00:24:06,320 --> 00:24:10,080 Speaker 1: that get lower ratings, good companies with strained balance sheets 421 00:24:10,200 --> 00:24:14,119 Speaker 1: or strained companies with good balance sheets, and and lending 422 00:24:14,160 --> 00:24:17,120 Speaker 1: to good companies with strained balance sheets is usually a 423 00:24:17,160 --> 00:24:20,440 Speaker 1: good trend. And so companies like City or Verizon, or 424 00:24:20,480 --> 00:24:23,040 Speaker 1: A T and T or CVS, these are names that 425 00:24:23,080 --> 00:24:25,960 Speaker 1: everyone knows they're in the triple B category. There's some 426 00:24:26,000 --> 00:24:30,000 Speaker 1: of the biggest issuers not necessarily strained business models, but 427 00:24:30,040 --> 00:24:33,320 Speaker 1: more aggressive financing. So those are companies are examples of 428 00:24:33,359 --> 00:24:36,200 Speaker 1: companies that we think you can still invest in and 429 00:24:36,200 --> 00:24:38,000 Speaker 1: and and have as a part of a strategy. There 430 00:24:38,040 --> 00:24:41,119 Speaker 1: are some that have more velocity into the downside of 431 00:24:41,119 --> 00:24:44,800 Speaker 1: their fundamentals business that's where you'd be concerned. So we think, yes, 432 00:24:44,920 --> 00:24:48,280 Speaker 1: it's important, but be you can't lump them all together. 433 00:24:48,359 --> 00:24:50,880 Speaker 1: There is still going to be ample opportunity within many 434 00:24:50,880 --> 00:24:54,080 Speaker 1: of those triple b's. Will the market make that distinction 435 00:24:54,440 --> 00:24:59,480 Speaker 1: when liquidity flees the bond market, we think it will broadly. 436 00:24:59,560 --> 00:25:02,560 Speaker 1: There is one area where it may not, though, and 437 00:25:02,640 --> 00:25:06,760 Speaker 1: that's in the longest maturity forms of triple b'sum which 438 00:25:06,800 --> 00:25:09,600 Speaker 1: is the least liquid but has also grown. So that's 439 00:25:09,680 --> 00:25:12,960 Speaker 1: thirty year component of the bond market where fewer retail 440 00:25:13,040 --> 00:25:16,680 Speaker 1: investors are involved. It's much more insurance companies and pension 441 00:25:16,760 --> 00:25:20,040 Speaker 1: funds with this big stock of triple B debt. When 442 00:25:20,040 --> 00:25:23,680 Speaker 1: those are downgraded, there's very little demand by high yield 443 00:25:23,720 --> 00:25:27,520 Speaker 1: buyers or others for twenty to thirty year data double 444 00:25:27,560 --> 00:25:30,480 Speaker 1: B debt once it's downgraded from triple B. That's the 445 00:25:30,600 --> 00:25:33,440 Speaker 1: area where the market will have a tough time distinguishing, 446 00:25:33,560 --> 00:25:35,680 Speaker 1: and that's where you're most likely to see the most 447 00:25:35,760 --> 00:25:39,440 Speaker 1: severe price velocity, shorter data triple bs. We do think 448 00:25:39,440 --> 00:25:42,160 Speaker 1: the market will differentiate. I'm wondering what do you think 449 00:25:42,560 --> 00:25:45,719 Speaker 1: US versus the rest of the world, in particular emerging markets, 450 00:25:45,720 --> 00:25:49,879 Speaker 1: because there's been actually a lack of consensus on developing 451 00:25:49,920 --> 00:25:52,359 Speaker 1: markets next year. Given the fact that the fusure reserve 452 00:25:52,359 --> 00:25:55,879 Speaker 1: continues to tighten, UM, our bias is still towards the 453 00:25:55,960 --> 00:25:58,400 Speaker 1: US um We think that you have a strong US 454 00:25:58,480 --> 00:26:03,480 Speaker 1: consumer that has been very diligent and very modest in 455 00:26:03,520 --> 00:26:07,239 Speaker 1: its re leveraging. Actually debt to debt to GDP at 456 00:26:07,240 --> 00:26:11,119 Speaker 1: the consumer level continues to be lower and now even 457 00:26:11,160 --> 00:26:15,879 Speaker 1: just barely barely sideways to ups, so that contrast meaningfully 458 00:26:15,960 --> 00:26:18,840 Speaker 1: versus the corporate segment that's been re leveraging. So a 459 00:26:18,920 --> 00:26:22,880 Speaker 1: US bias still holds. We think the downside on main 460 00:26:22,960 --> 00:26:25,359 Speaker 1: Street in the US is still limited, even if you 461 00:26:25,400 --> 00:26:29,560 Speaker 1: have valuation headwinds on Wall Street now e M has 462 00:26:29,560 --> 00:26:32,800 Speaker 1: been a fantastic area to avoid over the last eighteen 463 00:26:32,800 --> 00:26:35,399 Speaker 1: months with the FED in motion, our belief that the 464 00:26:35,400 --> 00:26:38,320 Speaker 1: FED starts to step back, and our belief that you 465 00:26:38,400 --> 00:26:42,400 Speaker 1: have incrementally softer growth out of Europe does mean e 466 00:26:42,640 --> 00:26:45,240 Speaker 1: m um does it starts to look a bit more 467 00:26:45,240 --> 00:26:49,360 Speaker 1: attractive next year. Valuations will eventually pull money in as 468 00:26:49,400 --> 00:26:52,439 Speaker 1: that natural growth rate of VM is higher than developed markets. 469 00:26:52,440 --> 00:26:54,800 Speaker 1: That'll matter more next year. So it's a little early 470 00:26:54,840 --> 00:26:56,800 Speaker 1: to go all in on EM but certainly a brighter 471 00:26:56,800 --> 00:26:58,960 Speaker 1: outlook than it has been for the last eighteen months. 472 00:26:59,760 --> 00:27:02,760 Speaker 1: What do you take away from the recent reports about 473 00:27:02,880 --> 00:27:08,720 Speaker 1: economic health in China? On Friday, the Chinese government reported 474 00:27:08,760 --> 00:27:14,240 Speaker 1: that trade slowed sharply in November, imports of copper and 475 00:27:14,440 --> 00:27:18,320 Speaker 1: iron ore declining from the same month last year, weak 476 00:27:18,359 --> 00:27:23,960 Speaker 1: growth in monthly retail sales and industrial production. What does 477 00:27:24,040 --> 00:27:27,040 Speaker 1: that mean for that thesis? What a bevy of good 478 00:27:27,040 --> 00:27:30,919 Speaker 1: news right? Uh? Yeah, So it's certainly a risk to 479 00:27:30,960 --> 00:27:33,880 Speaker 1: the markets. UM. We think one thing that one thing 480 00:27:33,920 --> 00:27:36,760 Speaker 1: that it does highlight is that a tariff for is 481 00:27:36,800 --> 00:27:40,280 Speaker 1: a lose lose game and ultimately, UM, the markets are 482 00:27:40,320 --> 00:27:43,520 Speaker 1: looking for this h for this tariff spat or war 483 00:27:43,760 --> 00:27:47,560 Speaker 1: to be concluded UM with ultimately lower tariffs. So we 484 00:27:47,640 --> 00:27:52,320 Speaker 1: think both sides are hurting us. Consumer confidence is still resilient, 485 00:27:52,320 --> 00:27:55,240 Speaker 1: but business confidence is taking a hit UM, and we're 486 00:27:55,240 --> 00:27:57,760 Speaker 1: looking for signs that that melts through to the consumer. 487 00:27:57,800 --> 00:28:01,240 Speaker 1: But on the Chinese run, it's clear China growth is 488 00:28:01,240 --> 00:28:05,680 Speaker 1: is softer. Um. We think what you'll see is fiscal policy, 489 00:28:05,840 --> 00:28:10,080 Speaker 1: tax spending, tax cuts, getting dollars and you on into 490 00:28:10,119 --> 00:28:12,520 Speaker 1: the in the hands of the of the consumers will 491 00:28:12,560 --> 00:28:16,040 Speaker 1: be their next step. And infrastructure spending, so no longer 492 00:28:16,080 --> 00:28:18,480 Speaker 1: on the housing front, but on infrastructure and tax that 493 00:28:18,640 --> 00:28:22,199 Speaker 1: should be enough to offset that downward trend in the 494 00:28:22,280 --> 00:28:25,360 Speaker 1: stop Chinese growth from plummeting lower. That's the belief. There 495 00:28:25,440 --> 00:28:27,720 Speaker 1: is more risk in the you know all else equal 496 00:28:27,760 --> 00:28:29,960 Speaker 1: than there has been, but it still looks like a 497 00:28:30,040 --> 00:28:33,760 Speaker 1: very manageable situation in China. It's interesting that you continue 498 00:28:33,840 --> 00:28:36,600 Speaker 1: to view the US as a brighter spot than the 499 00:28:36,640 --> 00:28:38,520 Speaker 1: rest of the world. And I have to wonder how 500 00:28:38,520 --> 00:28:42,320 Speaker 1: did that uh sort of plays with the yield curve 501 00:28:42,360 --> 00:28:45,400 Speaker 1: that we've seen flattening recently, with the shorter data ends 502 00:28:46,120 --> 00:28:49,360 Speaker 1: of the curve actually inverting. Are you concerned about this? 503 00:28:49,400 --> 00:28:54,200 Speaker 1: When do you foresee recession? Um? We think clearly you're 504 00:28:54,560 --> 00:28:58,120 Speaker 1: you're at best mid cycle and very likely moving towards 505 00:28:58,320 --> 00:29:01,480 Speaker 1: a late cycle right now. However, the flatness of the 506 00:29:01,560 --> 00:29:06,040 Speaker 1: US curve. UM it doesn't cause a change in financial 507 00:29:06,080 --> 00:29:09,400 Speaker 1: conditions in and of itself right, doesn't stop banks from lending. 508 00:29:09,560 --> 00:29:11,920 Speaker 1: Much of that lending is now. It's done through the 509 00:29:12,040 --> 00:29:14,680 Speaker 1: markets channel is where you've seen that trip will be 510 00:29:14,720 --> 00:29:17,680 Speaker 1: debt created, and then the leverage loan market, where you've 511 00:29:17,720 --> 00:29:19,760 Speaker 1: seen that below invest in great debt created. So the 512 00:29:19,800 --> 00:29:23,840 Speaker 1: flattening of the yield curve doesn't um cause a recession, 513 00:29:24,040 --> 00:29:26,440 Speaker 1: it certainly is a sign that the bond market is 514 00:29:26,440 --> 00:29:29,800 Speaker 1: saying FED please pause. As I mentioned, we think they 515 00:29:29,840 --> 00:29:33,000 Speaker 1: will pause. And if the Fed pauses and the balance 516 00:29:33,040 --> 00:29:35,720 Speaker 1: sheet does begin to wind down, we would expect, and 517 00:29:35,800 --> 00:29:38,840 Speaker 1: this is a contrarian view, we'd expect the yield curve 518 00:29:38,880 --> 00:29:41,080 Speaker 1: to be able to slowly begin to steep in next 519 00:29:41,160 --> 00:29:45,080 Speaker 1: year UM as they Fed looks to be more cautious. 520 00:29:45,280 --> 00:29:47,840 Speaker 1: That lets the dollar come off of its highs, That 521 00:29:47,960 --> 00:29:52,000 Speaker 1: lets em rebound, and we're very likely to roll into 522 00:29:52,040 --> 00:29:55,080 Speaker 1: the second half of nineteen having experienced something that looks 523 00:29:55,120 --> 00:29:58,160 Speaker 1: like a mid cycle slowdown. So that ability for the 524 00:29:58,200 --> 00:30:03,120 Speaker 1: FED to step back is a positive. And importantly, we 525 00:30:03,280 --> 00:30:05,200 Speaker 1: have made the exit in the US from zero all 526 00:30:05,240 --> 00:30:06,960 Speaker 1: the way up to two and a half percent on 527 00:30:07,120 --> 00:30:10,000 Speaker 1: Fed Funds rate um. Other central banks have not been 528 00:30:10,040 --> 00:30:12,640 Speaker 1: able to do that, and that is also a cushion 529 00:30:13,080 --> 00:30:16,480 Speaker 1: should there be economic down downside. Not many central banks 530 00:30:16,480 --> 00:30:20,040 Speaker 1: that globally have that cushion. Much appreciated. Matt Tom's is 531 00:30:20,120 --> 00:30:24,040 Speaker 1: the Chief Investment Officer Fixed Income for Voya Investment Management, 532 00:30:24,040 --> 00:30:27,560 Speaker 1: based in Atlanta, helping to manage more than two hundred 533 00:30:27,720 --> 00:30:35,760 Speaker 1: billion dollars of customer assets. Thanks for listening to the 534 00:30:35,760 --> 00:30:38,880 Speaker 1: Bloomberg P and L podcast. You can subscribe and listen 535 00:30:38,880 --> 00:30:43,040 Speaker 1: to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform 536 00:30:43,120 --> 00:30:47,000 Speaker 1: you prefer. I'm pim Fox. I'm on Twitter at pim Fox. 537 00:30:47,360 --> 00:30:50,840 Speaker 1: I'm on Twitter at Lisa abramowits one before the podcast. 538 00:30:50,880 --> 00:31:01,160 Speaker 1: You can always catch us worldwide on Bloomberg Radio