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 --> 00:00:11,560 Speaker 1: Along with my co host Lisa Abramowitz. 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 --> 00:00:33,120 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. This 7 00:00:33,280 --> 00:00:37,440 Speaker 1: is a day twenty one of the partial government shutdown. 8 00:00:37,920 --> 00:00:42,560 Speaker 1: This shutdown began days before Christmas over a standoff between 9 00:00:42,600 --> 00:00:47,120 Speaker 1: President Donald Trump and congressional Democrats over funding for the 10 00:00:47,159 --> 00:00:51,239 Speaker 1: President's long promised border wall. Here to help us understand 11 00:00:51,280 --> 00:00:54,400 Speaker 1: the issue is David Beer. He is an immigration policy 12 00:00:54,440 --> 00:00:59,040 Speaker 1: analyst for the Cato Institute in Washington, d C. David Beer, 13 00:00:59,160 --> 00:01:03,720 Speaker 1: thank you for being with us as an immigration policy analysts. 14 00:01:03,720 --> 00:01:06,200 Speaker 1: Could we just go through some of the issues that 15 00:01:06,280 --> 00:01:10,319 Speaker 1: the President has cited as the need for this border wall. 16 00:01:10,840 --> 00:01:15,679 Speaker 1: Let's begin with drug smuggling. What are the facts. Well, 17 00:01:15,720 --> 00:01:20,000 Speaker 1: the fact is that about nine of all of the 18 00:01:20,080 --> 00:01:26,200 Speaker 1: hard drugs you're talking about, cocaine, methamphetamine, heroin, and fentanyl 19 00:01:26,480 --> 00:01:31,720 Speaker 1: are trafficked through ports of entry. So they're carried in luggage, 20 00:01:31,760 --> 00:01:34,680 Speaker 1: they're sent through the mail, they're brought on airplanes. They 21 00:01:34,720 --> 00:01:39,679 Speaker 1: are not uh smuggled between ports of entry where a 22 00:01:39,720 --> 00:01:43,680 Speaker 1: border wall would go. Um. Really, the only drug that 23 00:01:43,959 --> 00:01:48,800 Speaker 1: is primarily smuggled between ports of entry is marijuana, and 24 00:01:48,920 --> 00:01:54,400 Speaker 1: marijuana smuggling has declined about eight percent since the legalization 25 00:01:54,480 --> 00:02:00,560 Speaker 1: of marijuana in several states starting in so UM demand 26 00:02:00,680 --> 00:02:05,640 Speaker 1: is now being done legally domestically in the United States 27 00:02:05,800 --> 00:02:10,160 Speaker 1: rather than from Mexico. And so the need for a 28 00:02:10,280 --> 00:02:13,680 Speaker 1: border wall between ports of entry to stop drugs smuggling 29 00:02:13,840 --> 00:02:17,040 Speaker 1: just doesn't add up. You're gonna spend billions upon billions 30 00:02:17,040 --> 00:02:21,040 Speaker 1: of dollars for this project when most of the drugs 31 00:02:21,080 --> 00:02:24,400 Speaker 1: and most of the hard drugs are coming through the 32 00:02:24,480 --> 00:02:29,400 Speaker 1: ports of entry where they're understaffed and um, you know, 33 00:02:29,600 --> 00:02:32,680 Speaker 1: need more support than they have right now. David, what 34 00:02:32,680 --> 00:02:36,799 Speaker 1: do you think the President Trump actually wants. I think 35 00:02:36,800 --> 00:02:38,960 Speaker 1: he wants a border wall. No, I mean in terms 36 00:02:38,960 --> 00:02:44,040 Speaker 1: of immigration policy, Uh, you know, in terms of legal immigration. 37 00:02:44,120 --> 00:02:46,920 Speaker 1: I think he's been quite clear that he wants a 38 00:02:46,919 --> 00:02:50,000 Speaker 1: lot less of it. Um, whether you're talking about refugees, 39 00:02:50,040 --> 00:02:55,480 Speaker 1: asylum seekers, people reuniting with their family members, uh. Really, 40 00:02:55,520 --> 00:02:58,880 Speaker 1: the only people, he says that he wants are so 41 00:02:58,960 --> 00:03:02,880 Speaker 1: called merit by immigrants. But every plan that he supports 42 00:03:03,520 --> 00:03:07,520 Speaker 1: UH to move our system in that direction doesn't actually 43 00:03:07,600 --> 00:03:13,160 Speaker 1: increase UH merit based immigration hardly at all, while cutting 44 00:03:13,200 --> 00:03:16,080 Speaker 1: legal immigration dramatically. Do you think that that is the 45 00:03:16,200 --> 00:03:22,079 Speaker 1: correct policy for the US economy and for and for security? Oh? 46 00:03:22,120 --> 00:03:26,400 Speaker 1: Absolutely not. On the security side, UH, the constraints on 47 00:03:26,560 --> 00:03:31,840 Speaker 1: legal immigration actually drive illegal immigration. If we were admitting 48 00:03:31,880 --> 00:03:35,320 Speaker 1: people at ports of entry, if we were issuing pieces 49 00:03:35,400 --> 00:03:39,160 Speaker 1: in their home countries, they wouldn't be showing up in caravans, 50 00:03:39,240 --> 00:03:42,400 Speaker 1: they wouldn't be crossing the border illegally. We would be 51 00:03:42,440 --> 00:03:44,560 Speaker 1: able to do background checks, we'd be able to do 52 00:03:44,680 --> 00:03:48,760 Speaker 1: medical checks. People would be coming safely legally, UM through 53 00:03:48,800 --> 00:03:51,800 Speaker 1: a process where we can vet them. Would be a 54 00:03:51,880 --> 00:03:55,200 Speaker 1: far better situation than the one that we have now. 55 00:03:55,800 --> 00:03:59,880 Speaker 1: From an economic perspective, we're seeing you know, the President 56 00:04:00,040 --> 00:04:03,400 Speaker 1: spragging every day about how great the economy is, how 57 00:04:03,440 --> 00:04:07,680 Speaker 1: we're growing jobs, how unemployments a record lows. And if 58 00:04:07,680 --> 00:04:10,320 Speaker 1: you look at UH, you know our visa you know, 59 00:04:10,400 --> 00:04:14,320 Speaker 1: one of the visa programs that is available for non 60 00:04:14,800 --> 00:04:18,960 Speaker 1: for seasonal guest workers in non agricultural industries. We have 61 00:04:19,000 --> 00:04:23,480 Speaker 1: a cap on that and uh, basically in one day 62 00:04:23,520 --> 00:04:26,880 Speaker 1: that cap was filled and there were three times more 63 00:04:27,360 --> 00:04:31,440 Speaker 1: UM jobs demanded than slots available for that. So the 64 00:04:31,560 --> 00:04:34,320 Speaker 1: demand is there. These are people, these are companies willing 65 00:04:34,360 --> 00:04:39,240 Speaker 1: to do recruitment of US workers, spend thousands of dollars 66 00:04:39,560 --> 00:04:43,800 Speaker 1: to go through the legal immigration process, but because of 67 00:04:43,800 --> 00:04:47,200 Speaker 1: these outdated caps um, you know, they're not able to 68 00:04:47,240 --> 00:04:51,760 Speaker 1: fill those positions through the legal immigration system. David, if 69 00:04:51,800 --> 00:04:54,880 Speaker 1: you were asked to testify before Congress and asked whether 70 00:04:54,920 --> 00:04:58,159 Speaker 1: there is a security crisis on the southern border of 71 00:04:58,160 --> 00:05:03,160 Speaker 1: the United States, how would you respond? I would say there's, 72 00:05:03,200 --> 00:05:06,400 Speaker 1: by no measure, a security crisis at our southern border. 73 00:05:07,040 --> 00:05:11,719 Speaker 1: If you look at in fiscal year eighteen, the number 74 00:05:11,920 --> 00:05:15,680 Speaker 1: of apprehensions for each border patrol agent, which is the 75 00:05:15,720 --> 00:05:19,280 Speaker 1: best measure of illegal immigration that you could have, each 76 00:05:19,360 --> 00:05:25,080 Speaker 1: border agent was apprehending just one person every two weeks. 77 00:05:25,760 --> 00:05:29,320 Speaker 1: So for the vast majority of the time, border patrol 78 00:05:29,360 --> 00:05:32,000 Speaker 1: agents are not bringing people into their custody, which is 79 00:05:32,000 --> 00:05:35,359 Speaker 1: a sign that we do have the situation under control. 80 00:05:35,400 --> 00:05:40,239 Speaker 1: Maybe we need to shift resources around. The second fact 81 00:05:40,279 --> 00:05:42,240 Speaker 1: that you need to consider is that half of the 82 00:05:42,240 --> 00:05:45,680 Speaker 1: people that they are bringing into their custody, are simply 83 00:05:45,720 --> 00:05:49,719 Speaker 1: turning themselves in their asylum seekers. They actually are seeking 84 00:05:50,120 --> 00:05:52,799 Speaker 1: agents out to say, please bring me into your custody. 85 00:05:52,839 --> 00:05:54,680 Speaker 1: I want to get part of the legal system. I 86 00:05:54,680 --> 00:05:58,200 Speaker 1: want to go through the process. And so the idea 87 00:05:58,279 --> 00:06:01,159 Speaker 1: that we're just seeing this huge which influx the people 88 00:06:01,240 --> 00:06:04,160 Speaker 1: trying to sneak into our country to commit crimes in 89 00:06:04,160 --> 00:06:08,880 Speaker 1: this in this country, it's just absolutely untrue. If you 90 00:06:08,920 --> 00:06:12,920 Speaker 1: look at border patrol figures on the number of criminals 91 00:06:12,920 --> 00:06:17,640 Speaker 1: that they actually apprehend crossing the border illegally, you just 92 00:06:17,760 --> 00:06:21,040 Speaker 1: have less than a thousand of the more than four 93 00:06:21,440 --> 00:06:28,279 Speaker 1: thousand people that they apprehended in had violent criminal convictions 94 00:06:28,360 --> 00:06:32,320 Speaker 1: or histories. Now that's a thousand too many, but we're 95 00:06:32,360 --> 00:06:35,400 Speaker 1: apprehending them. And if we could focus on them and 96 00:06:35,480 --> 00:06:38,320 Speaker 1: not on the people who are just trying to reunite 97 00:06:38,320 --> 00:06:42,080 Speaker 1: with their families or seek economic opportunity or seek safety 98 00:06:42,279 --> 00:06:45,880 Speaker 1: from uh you know, violent threats in their home countries, 99 00:06:46,240 --> 00:06:48,680 Speaker 1: that would be a better situation for everyone from a 100 00:06:48,720 --> 00:06:52,440 Speaker 1: security perspective. So, David, you work for the Kido Institute, 101 00:06:52,480 --> 00:06:55,600 Speaker 1: which was founded by Charles Coke and funded by the 102 00:06:55,680 --> 00:06:58,720 Speaker 1: Koch Brothers. Uh it has sort of sort of known 103 00:06:58,839 --> 00:07:04,159 Speaker 1: as speaking with, among others, Republican representatives, and I'm wondering 104 00:07:04,200 --> 00:07:07,400 Speaker 1: how receptive they are to what you're saying. Well, I 105 00:07:07,400 --> 00:07:11,360 Speaker 1: think there's a growing understanding that the economy is growing 106 00:07:11,360 --> 00:07:14,840 Speaker 1: in such a way that you absolutely need an outlet 107 00:07:15,400 --> 00:07:19,600 Speaker 1: um for companies to hire people legally. Um. You know, 108 00:07:20,000 --> 00:07:24,000 Speaker 1: if you look at the partisanship that dominates this town, 109 00:07:24,160 --> 00:07:27,560 Speaker 1: it's going to be difficult to get the reforms that 110 00:07:27,640 --> 00:07:31,680 Speaker 1: are needed simply because we have a partisan impass about 111 00:07:31,720 --> 00:07:35,600 Speaker 1: this border wall, and it's really um holding up everything 112 00:07:35,640 --> 00:07:39,680 Speaker 1: else in terms of immigration reforms. So UM, I do 113 00:07:39,760 --> 00:07:42,600 Speaker 1: think a substantial portion of the Republican Party still is 114 00:07:42,600 --> 00:07:45,520 Speaker 1: in the camp of we need to have legal immigration. 115 00:07:45,600 --> 00:07:48,880 Speaker 1: We need to fulfill this demand in a legal way, 116 00:07:49,480 --> 00:07:52,200 Speaker 1: deal with the people who are here illegally for many 117 00:07:52,280 --> 00:07:57,080 Speaker 1: years in in a reasonable manner. Um. But I do 118 00:07:57,240 --> 00:08:00,280 Speaker 1: also think and recognize that there's a significant part of 119 00:08:00,320 --> 00:08:03,000 Speaker 1: the Republican Party that's not in that camp, and they 120 00:08:03,080 --> 00:08:06,960 Speaker 1: just want fewer legal immigrants and illegal immigrants. They just 121 00:08:07,120 --> 00:08:11,679 Speaker 1: want fewer people from foreign countries. Uh, in our country. 122 00:08:12,800 --> 00:08:14,320 Speaker 1: We got to leave it there. But thank you very 123 00:08:14,400 --> 00:08:17,800 Speaker 1: much for being with us. David Beer, immigration policy analyst 124 00:08:17,920 --> 00:08:23,160 Speaker 1: for Cato Institute based in Washington, d C. On day 125 00:08:23,200 --> 00:08:28,000 Speaker 1: one of the partial federal government shutdown over funding for 126 00:08:28,040 --> 00:08:48,400 Speaker 1: a border wall, the request by President Donald Trump, it 127 00:08:48,640 --> 00:08:52,520 Speaker 1: is risk on again in a credit markets, flows in, 128 00:08:53,120 --> 00:08:56,839 Speaker 1: yields down, borrowers coming back to the market. Joining us 129 00:08:56,840 --> 00:08:59,840 Speaker 1: here in our Bloomberg Interactive Broker Studios is Tom Adam, 130 00:09:00,360 --> 00:09:02,920 Speaker 1: chief investment officer and founding partner of f p A. 131 00:09:03,080 --> 00:09:06,199 Speaker 1: He manages more than six billion dollars for the firm, 132 00:09:06,440 --> 00:09:08,840 Speaker 1: which is based in Los Angeles. Tom, thank you so 133 00:09:08,920 --> 00:09:11,720 Speaker 1: much for being here. Are you feeling risk on right now? 134 00:09:11,720 --> 00:09:13,560 Speaker 1: Are you feeling like it's time to go out there 135 00:09:13,559 --> 00:09:16,080 Speaker 1: and dive back into the credit markets? The answer would 136 00:09:16,120 --> 00:09:18,400 Speaker 1: be would be no. I mean, when you think about 137 00:09:18,800 --> 00:09:22,600 Speaker 1: just as an example, look at investment grade corporates where 138 00:09:22,640 --> 00:09:25,040 Speaker 1: you've got roughly half of them now our triple B. 139 00:09:25,920 --> 00:09:28,800 Speaker 1: And if you look at the so to EBA down number, 140 00:09:28,840 --> 00:09:30,640 Speaker 1: you look at it to debt and look at that ratio, 141 00:09:31,000 --> 00:09:33,480 Speaker 1: you realize it's as high as it was in two 142 00:09:33,480 --> 00:09:35,400 Speaker 1: thousand and eight, and it's as high as it was 143 00:09:35,440 --> 00:09:37,959 Speaker 1: in two thousand Both of those, you know, the heights 144 00:09:37,960 --> 00:09:41,280 Speaker 1: of a recession. So you think about that and go, 145 00:09:41,600 --> 00:09:43,400 Speaker 1: do I think the economy is going to go into 146 00:09:43,440 --> 00:09:46,760 Speaker 1: a recession or just slow down in some fashion over 147 00:09:46,800 --> 00:09:51,400 Speaker 1: the next several years. Not an unreasonable expectations. You're already 148 00:09:51,480 --> 00:09:54,400 Speaker 1: highly levered. You also have to think about the fact 149 00:09:54,480 --> 00:09:56,440 Speaker 1: that they're gonna need to refinance some of the debt. 150 00:09:56,480 --> 00:09:58,520 Speaker 1: What if they need to refinance it at a higher level, 151 00:09:58,840 --> 00:10:00,280 Speaker 1: may not be able to do it as well in 152 00:10:00,320 --> 00:10:03,000 Speaker 1: a in a lower cash flow environment. So we don't 153 00:10:03,080 --> 00:10:08,320 Speaker 1: see value now. If I compare December, it was extremely overvalued. 154 00:10:09,080 --> 00:10:14,000 Speaker 1: Now it's just overvalued. Talk if you can about the 155 00:10:14,040 --> 00:10:19,640 Speaker 1: idea that debt growing faster than g d P, and 156 00:10:19,880 --> 00:10:22,719 Speaker 1: we could even connect that to what happens in a household. 157 00:10:23,040 --> 00:10:26,800 Speaker 1: Excuse me, for example, if you are taking on debts 158 00:10:26,840 --> 00:10:31,040 Speaker 1: in a household at a greater pace than your income 159 00:10:31,800 --> 00:10:36,640 Speaker 1: is accelerating, everybody knows that's not a winning recipe. Why 160 00:10:36,679 --> 00:10:40,520 Speaker 1: does that exist when it comes to investments? It's to 161 00:10:40,600 --> 00:10:44,440 Speaker 1: our view and within the non sovereign state, the non 162 00:10:44,480 --> 00:10:47,640 Speaker 1: sovereign world, on government world, it's not a sustainable and 163 00:10:47,679 --> 00:10:50,400 Speaker 1: we've seen periods of the past where this occurred and 164 00:10:50,440 --> 00:10:53,800 Speaker 1: the end result was You mentioned the household, and you 165 00:10:53,840 --> 00:10:56,640 Speaker 1: think back to the oh six through oh A period, 166 00:10:56,880 --> 00:10:59,680 Speaker 1: the household had had to go through a rather cathartic 167 00:11:00,520 --> 00:11:04,679 Speaker 1: reevaluation of their balance sheet, right, debt off, get into 168 00:11:04,679 --> 00:11:06,840 Speaker 1: all sorts of a you know, to get themselves cleaned 169 00:11:06,880 --> 00:11:10,400 Speaker 1: up again. You think back to two thousand period of 170 00:11:10,400 --> 00:11:13,480 Speaker 1: time corporate America did. When you think about the Corporate 171 00:11:13,480 --> 00:11:15,840 Speaker 1: American problems that went on there, that's Enron and World 172 00:11:15,880 --> 00:11:20,960 Speaker 1: common in tycho. So it is not a sustainable from 173 00:11:20,960 --> 00:11:24,120 Speaker 1: a from a corporate standpoint. You can say the same 174 00:11:24,120 --> 00:11:26,880 Speaker 1: thing about government. It's just much harder to figure out 175 00:11:27,240 --> 00:11:32,240 Speaker 1: how long, yeah, ones it stopped. But when does it 176 00:11:32,320 --> 00:11:34,720 Speaker 1: stop for the corporate borrower? It will stop for the 177 00:11:34,760 --> 00:11:38,800 Speaker 1: corporate borrow or when you think about them today, they're 178 00:11:38,840 --> 00:11:43,000 Speaker 1: able to support the debt today because their interest cost 179 00:11:43,120 --> 00:11:47,840 Speaker 1: is low, their leverage is high. But looking forward, if 180 00:11:47,920 --> 00:11:51,439 Speaker 1: you start to raise rates for them to refinance, that 181 00:11:51,520 --> 00:11:54,840 Speaker 1: benefit goes away. They still got too much debt. There's 182 00:11:55,040 --> 00:11:57,640 Speaker 1: a chart that we use, we've used with clients that 183 00:11:57,720 --> 00:12:02,040 Speaker 1: shows implied um you know, ratings. So you just take 184 00:12:02,080 --> 00:12:04,440 Speaker 1: like S and P or Moody's and they say half 185 00:12:04,480 --> 00:12:07,600 Speaker 1: of it is triple bright. Well if you just base 186 00:12:07,720 --> 00:12:12,120 Speaker 1: that analysis off of the leverage component, not the interest 187 00:12:12,160 --> 00:12:15,240 Speaker 1: coverage component, just a leverage component, instead of half of 188 00:12:15,240 --> 00:12:18,360 Speaker 1: them being triple B, only about thirty or triple B, 189 00:12:19,080 --> 00:12:22,160 Speaker 1: Well that's nice. The problem is the fifteen percent become 190 00:12:23,000 --> 00:12:25,480 Speaker 1: double B and single B they go they go to 191 00:12:25,480 --> 00:12:27,960 Speaker 1: the right, which is a way of telling you that, look, 192 00:12:28,000 --> 00:12:30,240 Speaker 1: this is not sustainable. If you rate you know they 193 00:12:30,520 --> 00:12:32,679 Speaker 1: are unable to get that debt down, You're going to 194 00:12:32,800 --> 00:12:35,439 Speaker 1: have to do some some sort of restructuring. So there's 195 00:12:35,480 --> 00:12:37,800 Speaker 1: a question of long term versus short term because in 196 00:12:37,840 --> 00:12:40,040 Speaker 1: the long term, everything that you're saying makes sense. In 197 00:12:40,080 --> 00:12:42,720 Speaker 1: the short term, people don't see necessarily a recession. So 198 00:12:42,760 --> 00:12:44,960 Speaker 1: what are you buying now? How do you determine, you know, 199 00:12:45,000 --> 00:12:47,120 Speaker 1: how to balance the short term and long term. So 200 00:12:48,160 --> 00:12:51,160 Speaker 1: we look at the world for a corporate bond investment, 201 00:12:51,160 --> 00:12:53,560 Speaker 1: whether it's a high yield or a bank loan or 202 00:12:53,600 --> 00:12:56,360 Speaker 1: investment grad you think in terms of three to five years, 203 00:12:57,200 --> 00:12:59,280 Speaker 1: and so we look at that and go, this doesn't 204 00:12:59,280 --> 00:13:05,320 Speaker 1: look attractive from evaluation standpoint, Let's not commit our capital there. Conversely, 205 00:13:05,360 --> 00:13:07,400 Speaker 1: if I think of high quality bonds, things that are 206 00:13:07,480 --> 00:13:10,200 Speaker 1: single A rated and higher, we really comfortable you're gonna 207 00:13:10,200 --> 00:13:12,920 Speaker 1: get paid back. You realize that over the last couple 208 00:13:12,960 --> 00:13:15,360 Speaker 1: of years is the Fed sort of systematically raised the 209 00:13:15,400 --> 00:13:17,960 Speaker 1: Fed funds rate from bases points to the two and 210 00:13:17,960 --> 00:13:20,760 Speaker 1: a half. I took a two year treasury that was 211 00:13:20,800 --> 00:13:23,079 Speaker 1: twenty five basis points in its peak was what two 212 00:13:23,120 --> 00:13:26,680 Speaker 1: eight fifties now, and I took a three year treasury 213 00:13:26,679 --> 00:13:28,880 Speaker 1: and almost got it to three percent. You look at 214 00:13:28,920 --> 00:13:31,840 Speaker 1: those high quality return rates and you go, wait a minute, 215 00:13:31,960 --> 00:13:34,360 Speaker 1: that's higher than inflation. I don't have to worry about 216 00:13:34,360 --> 00:13:37,880 Speaker 1: the credit problems. I can go by that high quality 217 00:13:37,920 --> 00:13:40,480 Speaker 1: security that's a three year or four year or maybe 218 00:13:40,480 --> 00:13:43,080 Speaker 1: a two year and get a reasonable return in this environment. 219 00:13:43,200 --> 00:13:45,680 Speaker 1: So what's how how much has the balance shifted in 220 00:13:45,720 --> 00:13:50,800 Speaker 1: your portfolio treasuries to credit. So if we had this 221 00:13:50,840 --> 00:13:53,319 Speaker 1: conversation in two thousand and fifteen and sixteen, I was 222 00:13:53,360 --> 00:13:57,040 Speaker 1: a roughly and things that were tripled being below it's 223 00:13:57,040 --> 00:14:00,360 Speaker 1: at seven today. We had that conversation, then I would 224 00:14:00,360 --> 00:14:03,880 Speaker 1: have said I have zero in treasuries. Then those three 225 00:14:03,880 --> 00:14:05,920 Speaker 1: and five year treasuries make up about five percent of 226 00:14:05,920 --> 00:14:08,760 Speaker 1: the portfolio. But I've got other high quality investments that 227 00:14:08,800 --> 00:14:12,760 Speaker 1: are in that same three four year maturity range because 228 00:14:12,800 --> 00:14:16,040 Speaker 1: they made sense force from so the risk return trade 229 00:14:16,080 --> 00:14:19,200 Speaker 1: off you were looking at. Investors spend a lot of 230 00:14:19,240 --> 00:14:23,800 Speaker 1: time comparing their results to those of other investors. Do 231 00:14:23,840 --> 00:14:27,440 Speaker 1: you believe that benchmarking leads to poor decisions? And should 232 00:14:27,440 --> 00:14:33,080 Speaker 1: people benchmark against something such as inflation rather what they should, 233 00:14:33,480 --> 00:14:37,160 Speaker 1: could or would have invested in? In hindsight, our view 234 00:14:37,240 --> 00:14:40,440 Speaker 1: is is much worth what what are you trying to 235 00:14:40,480 --> 00:14:44,480 Speaker 1: accomplish with the capital you've deployed? And our particular strategy 236 00:14:44,600 --> 00:14:49,360 Speaker 1: is very um capital preservation oriented. So if I think 237 00:14:49,360 --> 00:14:51,440 Speaker 1: about it in those terms, I go, Okay, what do 238 00:14:51,480 --> 00:14:54,040 Speaker 1: I need? What should I be doing in capital preservation? Well, 239 00:14:54,080 --> 00:14:56,600 Speaker 1: the first thing, I should have an absolute positive return 240 00:14:56,960 --> 00:14:59,880 Speaker 1: in our strategy, it's a twelve month horizon for that. 241 00:15:00,480 --> 00:15:02,760 Speaker 1: But I also need to at least get inflation to 242 00:15:02,800 --> 00:15:06,040 Speaker 1: protect its buying power, and should try to get something 243 00:15:06,080 --> 00:15:09,480 Speaker 1: that maybe a hunter basis points over inflation. The interesting 244 00:15:09,520 --> 00:15:11,520 Speaker 1: thing is when you start to look at the investment 245 00:15:11,560 --> 00:15:14,600 Speaker 1: world that way, I'm indifferent to what the benchmark is. 246 00:15:16,280 --> 00:15:18,960 Speaker 1: I just look at what could my own that helps 247 00:15:19,000 --> 00:15:23,040 Speaker 1: me accomplish those two objectives and just strictly look for 248 00:15:23,080 --> 00:15:26,520 Speaker 1: securities that might do that. It one narrows the number 249 00:15:26,560 --> 00:15:28,760 Speaker 1: of securities to look at down a lot, and you 250 00:15:28,800 --> 00:15:31,560 Speaker 1: realize many things in the bond market just to us 251 00:15:32,520 --> 00:15:35,800 Speaker 1: don't make sense because they don't help us accomplish our objective. 252 00:15:35,880 --> 00:15:38,360 Speaker 1: I think investors should go much more away from benchmarks 253 00:15:38,360 --> 00:15:42,320 Speaker 1: and comparing myself to somebody else and going what is 254 00:15:42,360 --> 00:15:47,280 Speaker 1: my objective of this capital? What am I trying to accomplish? 255 00:15:47,320 --> 00:15:50,560 Speaker 1: Thank you for helping us understand this and giving us 256 00:15:50,600 --> 00:15:54,080 Speaker 1: a different perspective. I appreciate you having on this morning. Well, 257 00:15:54,120 --> 00:15:57,920 Speaker 1: we didn't even mention your former radio career. No, they 258 00:15:57,920 --> 00:16:03,040 Speaker 1: didn't help prepare you for investing. No. Interestingly, it helped 259 00:16:03,040 --> 00:16:05,880 Speaker 1: me with presentation skills and trying to explain things to 260 00:16:06,480 --> 00:16:09,080 Speaker 1: large audiences as small audiences. And that's probably and it 261 00:16:09,120 --> 00:16:10,200 Speaker 1: was a heck of a lot of fun when I 262 00:16:10,240 --> 00:16:12,600 Speaker 1: did it. Thanks very much, it's been fun having you on. 263 00:16:12,720 --> 00:16:16,120 Speaker 1: Tom Attabury is the chief investment officer and founding a 264 00:16:16,200 --> 00:16:20,040 Speaker 1: partner of f p A, and of course he helps 265 00:16:20,080 --> 00:16:23,600 Speaker 1: to manage over six billion dollars based in Los Angeles, 266 00:16:23,600 --> 00:16:28,000 Speaker 1: and they recently launched the f p A Flexible Income 267 00:16:28,440 --> 00:16:48,920 Speaker 1: fun first Pacific. The government shutdown is entering its twenty 268 00:16:49,160 --> 00:16:53,000 Speaker 1: first day without a resolution insight. The question becomes, at 269 00:16:53,040 --> 00:16:57,040 Speaker 1: what point does this gridlock imperil the US? Is triple 270 00:16:57,160 --> 00:17:00,920 Speaker 1: A rating joining US now James McCormack, Global head of 271 00:17:01,040 --> 00:17:04,200 Speaker 1: Sovereign Debt at Fitch Ratings, raining US from London, James, 272 00:17:04,240 --> 00:17:06,720 Speaker 1: thank you so much for being with US. Fitch Ratings 273 00:17:06,720 --> 00:17:08,760 Speaker 1: has sounded a bit of an alarm, saying that if 274 00:17:08,760 --> 00:17:12,040 Speaker 1: this government shutdown does drag on much longer, it will 275 00:17:12,119 --> 00:17:15,200 Speaker 1: consider a downgrade to the top rating that the US 276 00:17:15,240 --> 00:17:19,439 Speaker 1: currently in. Choice. Please explain, Yeah, that's yeah, that's right. 277 00:17:19,480 --> 00:17:22,560 Speaker 1: I guess there's a couple of things that really come 278 00:17:22,600 --> 00:17:26,280 Speaker 1: into focus really the longer this goes on. One is 279 00:17:26,880 --> 00:17:29,200 Speaker 1: consistent with a note we put out last week. We said, 280 00:17:29,240 --> 00:17:33,679 Speaker 1: you know, if this foreshadows are more they pronounced destabilization 281 00:17:33,680 --> 00:17:37,920 Speaker 1: and policymaking that would include the standoff over the debt limit, 282 00:17:37,960 --> 00:17:41,040 Speaker 1: which is really much more important than than the shutdown, 283 00:17:41,520 --> 00:17:44,240 Speaker 1: then I think we'd have to be quite concerned about that. 284 00:17:44,400 --> 00:17:47,920 Speaker 1: And and the second sort of parallel track we're thinking 285 00:17:47,960 --> 00:17:51,200 Speaker 1: about is that the policy making framework matters so much 286 00:17:51,240 --> 00:17:53,399 Speaker 1: in the US because there are some pretty big fiscal 287 00:17:53,440 --> 00:17:56,159 Speaker 1: policy challenges ahead in addition to the dead limits. So 288 00:17:56,800 --> 00:18:00,520 Speaker 1: the fiscal deterioration that's under way with sits in the 289 00:18:00,600 --> 00:18:02,200 Speaker 1: order of five and a half to six percent in 290 00:18:02,240 --> 00:18:05,080 Speaker 1: the debt level, where it is without at a round 291 00:18:05,080 --> 00:18:08,240 Speaker 1: a percent the way we measure it without a resolution 292 00:18:08,280 --> 00:18:11,520 Speaker 1: insight kind of sets the fiscal trajectory of the US 293 00:18:11,600 --> 00:18:13,760 Speaker 1: on a slightly different path than what we would see 294 00:18:13,760 --> 00:18:15,440 Speaker 1: in another trip away, So we do have to think 295 00:18:15,440 --> 00:18:20,160 Speaker 1: about it in those contexts. Well, Chairman Power drum Power 296 00:18:20,160 --> 00:18:23,959 Speaker 1: of the Federal Reserve said at the Economic Club meeting 297 00:18:24,240 --> 00:18:27,439 Speaker 1: that he's concerned about the level of the US debt 298 00:18:27,640 --> 00:18:31,119 Speaker 1: and that it is something that they have really no 299 00:18:31,320 --> 00:18:35,720 Speaker 1: power over. As a result, what do you think will 300 00:18:36,240 --> 00:18:40,440 Speaker 1: it take to get lawmakers to focus on it. Well, 301 00:18:40,440 --> 00:18:42,760 Speaker 1: that's a very good question, because lawmakers have not been 302 00:18:42,760 --> 00:18:44,920 Speaker 1: focused on it for some time. This is a debt 303 00:18:44,960 --> 00:18:49,400 Speaker 1: burden that has been creeping higher. Congress has not yet 304 00:18:49,480 --> 00:18:52,280 Speaker 1: taken on the issues that need to be resolved. And 305 00:18:52,720 --> 00:18:55,560 Speaker 1: the primary issue why the deficit continues to grow in 306 00:18:55,600 --> 00:18:58,199 Speaker 1: addition to the tax cut tax cuts that we've just 307 00:18:58,280 --> 00:19:01,399 Speaker 1: seen is really on amanded Tory spending side, and that 308 00:19:01,560 --> 00:19:04,399 Speaker 1: is going to be a very difficulty issue for for 309 00:19:04,480 --> 00:19:08,840 Speaker 1: politicians to to embrace, but at some point down the 310 00:19:08,880 --> 00:19:10,960 Speaker 1: line that does need to be addressed. If you look 311 00:19:11,000 --> 00:19:14,040 Speaker 1: at Congressional Budget Office projections over the next ten years, 312 00:19:14,640 --> 00:19:18,040 Speaker 1: it's very clear that there are two items, two items 313 00:19:18,040 --> 00:19:22,000 Speaker 1: on the spending side where things need to be things 314 00:19:22,040 --> 00:19:24,760 Speaker 1: need to be addressed. One is on the mandatory spending 315 00:19:24,800 --> 00:19:27,720 Speaker 1: and the other is really interest burden. So both of 316 00:19:27,760 --> 00:19:30,520 Speaker 1: those things arising very quickly to the interest burden, can't 317 00:19:30,560 --> 00:19:33,000 Speaker 1: do much about that unless the debt comes down. But 318 00:19:33,119 --> 00:19:35,880 Speaker 1: mandatory spending something can be done about that, but it's 319 00:19:36,119 --> 00:19:39,760 Speaker 1: very very difficult politically to get agreement on that. So James, 320 00:19:40,000 --> 00:19:42,840 Speaker 1: is there sort of a deadline for which the US 321 00:19:42,880 --> 00:19:44,960 Speaker 1: has to come for come to a resolution for you 322 00:19:45,000 --> 00:19:46,960 Speaker 1: to stop taking a look at the triple A rating? 323 00:19:46,960 --> 00:19:49,040 Speaker 1: In other words, how long does this have to go 324 00:19:49,119 --> 00:19:51,560 Speaker 1: on before you really do consider stripping the US of 325 00:19:51,560 --> 00:19:55,520 Speaker 1: the top rating. Yeah, it's not so much about the shutdown. 326 00:19:55,560 --> 00:19:57,359 Speaker 1: It's really more about the debt ceiling. And as you 327 00:19:57,400 --> 00:19:59,920 Speaker 1: may you may know, the dead ceiling comes back into 328 00:20:00,000 --> 00:20:02,560 Speaker 1: force at the beginning of March, and then the Treasury 329 00:20:02,600 --> 00:20:05,560 Speaker 1: begins to use what it calls extraordinary measures at that point, 330 00:20:05,560 --> 00:20:08,639 Speaker 1: so there's probably a couple of months before that really 331 00:20:08,680 --> 00:20:12,000 Speaker 1: begins to bite. When we last put took any rating 332 00:20:12,040 --> 00:20:13,639 Speaker 1: action on the US, it was to put it on 333 00:20:13,800 --> 00:20:17,639 Speaker 1: Rating Watch negative, and that was back in when the 334 00:20:17,840 --> 00:20:21,520 Speaker 1: when the period during which those extraordinary measures operate was 335 00:20:21,600 --> 00:20:25,160 Speaker 1: coming to an end um and there was no resolution 336 00:20:25,200 --> 00:20:27,480 Speaker 1: in sight. We were within forty eight hours of the 337 00:20:27,520 --> 00:20:31,240 Speaker 1: so called X date um, and I think we would 338 00:20:31,240 --> 00:20:33,560 Speaker 1: need to be in a position similar to that before 339 00:20:33,560 --> 00:20:36,480 Speaker 1: we thought about rating actions, So sometime down the road. 340 00:20:36,720 --> 00:20:39,000 Speaker 1: One thing that I don't understand though, If these situations 341 00:20:39,359 --> 00:20:42,199 Speaker 1: keep arising and it does not appear that gridlock is 342 00:20:42,240 --> 00:20:45,400 Speaker 1: going to ease anytime soon in Washington, why not down 343 00:20:45,400 --> 00:20:50,280 Speaker 1: grade the US? Now? Yeah? I mean we kind of 344 00:20:50,320 --> 00:20:53,080 Speaker 1: down this road before, but not quite as pronounced. And 345 00:20:53,160 --> 00:20:55,800 Speaker 1: that's why we're that's why we're talking about it now, 346 00:20:55,880 --> 00:20:58,560 Speaker 1: because we want to make sure that, you know, market 347 00:20:58,560 --> 00:21:01,920 Speaker 1: participants in other vers understand our position. If we were 348 00:21:02,000 --> 00:21:04,600 Speaker 1: to take a rating action on the US, we want 349 00:21:04,600 --> 00:21:07,639 Speaker 1: that to be as well flagged as possible um, And 350 00:21:07,720 --> 00:21:10,080 Speaker 1: so we are speaking about it now because it's an 351 00:21:10,080 --> 00:21:12,719 Speaker 1: issue that we think the markets should be made aware of, 352 00:21:13,320 --> 00:21:15,280 Speaker 1: but we're not in a position to suggest that this 353 00:21:15,359 --> 00:21:18,560 Speaker 1: is definitively going to happen. So there's still plenty of 354 00:21:18,640 --> 00:21:23,080 Speaker 1: time for Congress and the White House to act to 355 00:21:23,200 --> 00:21:27,080 Speaker 1: resolve both feed the shutdown and then subsequently to to 356 00:21:27,160 --> 00:21:30,120 Speaker 1: address the dead limit UM. And if that happens, as 357 00:21:30,160 --> 00:21:33,040 Speaker 1: it has in the past, then the triple A rating 358 00:21:33,080 --> 00:21:37,320 Speaker 1: is is probably sound. James. If you believe that a 359 00:21:37,359 --> 00:21:42,960 Speaker 1: recession is coming in, would that change any of your ratings? 360 00:21:44,240 --> 00:21:45,919 Speaker 1: I don't think so. I mean the rating is supposed 361 00:21:45,960 --> 00:21:48,440 Speaker 1: to be resilient through an economic cycle. We don't see 362 00:21:48,440 --> 00:21:51,920 Speaker 1: a recession. In fact, in we don't see a recession 363 00:21:51,960 --> 00:21:57,280 Speaker 1: in either. We certainly see slowing growth um, particularly as 364 00:21:57,320 --> 00:22:00,240 Speaker 1: the fiscal stimulus begins to fade in twenty nine scene, 365 00:22:00,280 --> 00:22:02,199 Speaker 1: and we will have weaker growth towards the end of 366 00:22:02,200 --> 00:22:07,200 Speaker 1: the year. We see growth only in the around two 367 00:22:07,200 --> 00:22:08,760 Speaker 1: in this year we see it at sort of two 368 00:22:08,800 --> 00:22:11,680 Speaker 1: point six percent, So definitely a slowing of growth, but 369 00:22:12,119 --> 00:22:14,480 Speaker 1: not a recession. And I don't think we would be 370 00:22:14,520 --> 00:22:17,960 Speaker 1: wanting to suggest that the US rating was under under 371 00:22:18,000 --> 00:22:20,760 Speaker 1: any kind of threat from from a normal economic cycle, 372 00:22:20,800 --> 00:22:24,919 Speaker 1: including one that was inclusive every recession all right, well 373 00:22:24,920 --> 00:22:26,639 Speaker 1: we're gonna leave it there, but thanks very much for 374 00:22:26,680 --> 00:22:29,000 Speaker 1: being with us. James McCormack is a global head of 375 00:22:29,040 --> 00:22:34,080 Speaker 1: a Global sovereigns and supernational at Fitch Ratings, speaking about 376 00:22:34,119 --> 00:22:37,600 Speaker 1: the US sovereign debt rating at a time when there's 377 00:22:37,800 --> 00:22:40,240 Speaker 1: a bit of buying in the treasury market right now, 378 00:22:55,560 --> 00:22:59,399 Speaker 1: and Heuser Busch in Bev considering an initial public offering 379 00:22:59,440 --> 00:23:02,200 Speaker 1: of its a Asian operations. Here to tell us more 380 00:23:02,400 --> 00:23:04,680 Speaker 1: is a Francois sn of Elle. He is the senior 381 00:23:04,720 --> 00:23:08,439 Speaker 1: beverage analyst at Rabo Bank Francois. Thank you very much 382 00:23:08,480 --> 00:23:12,880 Speaker 1: for being with us. Why is Anaheuser Busch in Bev 383 00:23:13,240 --> 00:23:19,520 Speaker 1: looking to split off this Asian business? Good afternoon, and 384 00:23:19,720 --> 00:23:22,000 Speaker 1: thank you for having me on the show. And I 385 00:23:22,000 --> 00:23:23,840 Speaker 1: think that a good question would be like is the 386 00:23:23,880 --> 00:23:27,800 Speaker 1: company in trouble? And that depends online from whose perspective 387 00:23:27,880 --> 00:23:30,040 Speaker 1: you are looking at this. I think if you look 388 00:23:30,080 --> 00:23:32,840 Speaker 1: from the shareholders perspective, they've had a very rough time 389 00:23:33,480 --> 00:23:37,240 Speaker 1: since October two thousand sixteen until now, the share process 390 00:23:37,320 --> 00:23:40,800 Speaker 1: roughly halfd and recently also the dividend has been cut, 391 00:23:40,800 --> 00:23:43,480 Speaker 1: so it's all of the large shareholders have had a 392 00:23:43,520 --> 00:23:46,040 Speaker 1: tough time and probably are not that happy with the 393 00:23:46,080 --> 00:23:49,399 Speaker 1: way things are going. I think if you're a bondholder, however, 394 00:23:49,520 --> 00:23:52,720 Speaker 1: you're like quite okay. I think the cash loow pattern 395 00:23:52,760 --> 00:23:54,960 Speaker 1: of the company is good. And also if you look 396 00:23:54,960 --> 00:23:57,159 Speaker 1: at your operations, I would say that the company is 397 00:23:57,200 --> 00:24:00,720 Speaker 1: not a disaster, but more like a disappointment in recent years. 398 00:24:00,720 --> 00:24:03,800 Speaker 1: In recent months, I've been really struggling with a series 399 00:24:03,960 --> 00:24:06,879 Speaker 1: of Anheuser, Bush and BOV moves. This week, they sold 400 00:24:06,920 --> 00:24:09,720 Speaker 1: fifteen and a half billion dollars of debt, pushing out 401 00:24:09,760 --> 00:24:13,520 Speaker 1: the maturities a bit, but they tendered for less than 402 00:24:13,560 --> 00:24:16,959 Speaker 1: they borrowed, their increasing their overall debt load. With this, 403 00:24:17,280 --> 00:24:19,920 Speaker 1: they're paying higher rates than they did last year when 404 00:24:19,920 --> 00:24:24,119 Speaker 1: they borrowed, and now they're trying to perhaps do an 405 00:24:24,160 --> 00:24:25,879 Speaker 1: I p O maybe to use some of that cash 406 00:24:25,920 --> 00:24:28,240 Speaker 1: to pay down their debt. Can you understand what the 407 00:24:28,280 --> 00:24:33,000 Speaker 1: overarching strategy here of the company is. I think probably 408 00:24:33,000 --> 00:24:36,800 Speaker 1: it's like a little bit preparing for for unexpected things. 409 00:24:37,359 --> 00:24:41,719 Speaker 1: I think the company is it's already like quite conservatively financed, 410 00:24:41,840 --> 00:24:45,359 Speaker 1: but and doubtfully the debt levels are quite at a 411 00:24:45,440 --> 00:24:48,760 Speaker 1: high level, and I think the company has seen like 412 00:24:49,040 --> 00:24:52,520 Speaker 1: heat wins in the United States where beer sales are 413 00:24:52,560 --> 00:24:55,760 Speaker 1: slowing and they're losing market here to craft beer and 414 00:24:55,760 --> 00:24:58,760 Speaker 1: and two imports. I think also, like in some of 415 00:24:58,800 --> 00:25:02,680 Speaker 1: the emerging markets, it had like a currency impact, So 416 00:25:02,800 --> 00:25:05,399 Speaker 1: I think that they're probably looking at like how to 417 00:25:06,000 --> 00:25:09,639 Speaker 1: make their financing like more bulletproof in case like there's 418 00:25:09,680 --> 00:25:12,199 Speaker 1: more headwind to come. Do you think that it's going 419 00:25:12,240 --> 00:25:14,720 Speaker 1: to be a popular initial public offering if it takes place, 420 00:25:14,720 --> 00:25:18,320 Speaker 1: will investors one a piece of it? I think if 421 00:25:18,320 --> 00:25:20,600 Speaker 1: you look at like the operations of a b Nbath 422 00:25:20,680 --> 00:25:23,840 Speaker 1: across the world, I think they're definitely like Asia Pacific 423 00:25:23,920 --> 00:25:26,399 Speaker 1: has been like an area where they've been very strong. 424 00:25:27,160 --> 00:25:30,679 Speaker 1: If we look at those operations, about three quarters of 425 00:25:30,680 --> 00:25:34,359 Speaker 1: it would be in China. And although China was like 426 00:25:34,400 --> 00:25:36,400 Speaker 1: a decade ago, a market where there was a lot 427 00:25:36,440 --> 00:25:39,920 Speaker 1: of volume but very little value or profit to be achieved, 428 00:25:40,320 --> 00:25:43,239 Speaker 1: that has really changed and a b Nbath has been 429 00:25:43,280 --> 00:25:47,000 Speaker 1: like the driving force in premiumization in the Chinese market. 430 00:25:47,640 --> 00:25:49,959 Speaker 1: And one of the interesting things that we found was 431 00:25:50,000 --> 00:25:52,320 Speaker 1: that if you look, for example, at the Budweiser sales, 432 00:25:53,200 --> 00:25:57,000 Speaker 1: you see that in two thousand seventeen, China overtook the 433 00:25:57,080 --> 00:26:00,560 Speaker 1: US as the largest market for Budweiser volume, so the 434 00:26:00,600 --> 00:26:03,320 Speaker 1: company has been doing really well there. I think one 435 00:26:03,400 --> 00:26:05,960 Speaker 1: question would be like can they continue to do so? 436 00:26:06,440 --> 00:26:08,400 Speaker 1: And we think that for the near term they can, 437 00:26:08,680 --> 00:26:12,679 Speaker 1: so it probably will be quite popular PIM. That's so ironic, 438 00:26:12,880 --> 00:26:15,199 Speaker 1: isn't it that Budweiser, which has been the sort of 439 00:26:15,280 --> 00:26:19,359 Speaker 1: quintessential American beer, is now having greater success in China 440 00:26:19,480 --> 00:26:21,760 Speaker 1: at a time when US and China are locked in 441 00:26:21,800 --> 00:26:24,960 Speaker 1: a lot of tight negotiations. Friends, why I'd love to 442 00:26:24,960 --> 00:26:27,360 Speaker 1: get your opinion on the credit rating Van Heuser Bush 443 00:26:27,400 --> 00:26:30,639 Speaker 1: and Beev because they were downgraded at the end of 444 00:26:30,760 --> 00:26:34,400 Speaker 1: last year because of their high debtload and their lack 445 00:26:34,440 --> 00:26:38,480 Speaker 1: of progress in addressing it. Do you think that immunizing 446 00:26:38,520 --> 00:26:40,119 Speaker 1: their balance sheet the way that they have is an 447 00:26:40,160 --> 00:26:43,560 Speaker 1: indication that they won't care if they're down graded to junk. 448 00:26:44,359 --> 00:26:46,240 Speaker 1: I find it's very difficult. So we've got like other 449 00:26:46,400 --> 00:26:49,080 Speaker 1: experts within Rabble Bank who who are better position to 450 00:26:49,119 --> 00:26:52,359 Speaker 1: talk about that. So I like to passle that question 451 00:26:52,440 --> 00:26:54,560 Speaker 1: if I may. It's not really my my expertise at 452 00:26:54,800 --> 00:26:57,760 Speaker 1: totally fine. I'm wondering going forward, where will the big 453 00:26:57,760 --> 00:27:01,640 Speaker 1: growth driver be for the company. I think what's really 454 00:27:01,680 --> 00:27:04,359 Speaker 1: interesting is to look at Africa, and I think that 455 00:27:05,200 --> 00:27:07,320 Speaker 1: in recent months it has been a little bit like 456 00:27:07,920 --> 00:27:12,560 Speaker 1: under under amplified by by the markets. I think if 457 00:27:12,600 --> 00:27:16,520 Speaker 1: we look at Africa, per capita consumption is still incredibly low. 458 00:27:17,080 --> 00:27:19,680 Speaker 1: We see that about three quarters of consumption of beer 459 00:27:19,720 --> 00:27:23,040 Speaker 1: in Africa is like home brewed, and we also see 460 00:27:23,040 --> 00:27:26,600 Speaker 1: that population grows with three percent per year a b 461 00:27:26,720 --> 00:27:29,000 Speaker 1: n beth Obviously it's like very strong in the continent 462 00:27:29,440 --> 00:27:32,640 Speaker 1: of the sab Miller acquisition. So I think they will 463 00:27:32,720 --> 00:27:35,919 Speaker 1: benefit there from like volume growth, but also from like 464 00:27:36,080 --> 00:27:38,880 Speaker 1: people who can afford like a little bit better beer 465 00:27:38,960 --> 00:27:41,560 Speaker 1: spend a bit more. So Africa I think would be 466 00:27:41,560 --> 00:27:44,359 Speaker 1: really interesting for like the mid to longer term for 467 00:27:44,400 --> 00:27:47,480 Speaker 1: the company. And it just quickly give you about thirty seconds. 468 00:27:47,480 --> 00:27:51,080 Speaker 1: The distribution network that Anaheuser Busch in Bev have is 469 00:27:51,320 --> 00:27:54,840 Speaker 1: global and pretty good. Is there an opportunity for them 470 00:27:54,840 --> 00:27:59,679 Speaker 1: to sell other products in addition to beer? I definitely 471 00:27:59,760 --> 00:28:02,760 Speaker 1: think so. I mean actually more like a strong distribution 472 00:28:02,880 --> 00:28:05,800 Speaker 1: platform with brands rather than the other way around. And 473 00:28:05,840 --> 00:28:08,480 Speaker 1: there has been a lot of speculation whether a BI 474 00:28:08,600 --> 00:28:11,639 Speaker 1: should get together with like a soft drink company and 475 00:28:11,680 --> 00:28:14,000 Speaker 1: if that's the case, you obviously want a strong share 476 00:28:14,080 --> 00:28:17,159 Speaker 1: price and today's move would make a little sense. Prince 477 00:28:17,520 --> 00:28:19,879 Speaker 1: Francoise so Neville, thank you so much for being with us. 478 00:28:20,080 --> 00:28:23,640 Speaker 1: Francois son Neville is senior beverage analyst at robber Bank International, 479 00:28:23,680 --> 00:28:28,480 Speaker 1: coming to US from London. Anheuser Busch is definitely trying 480 00:28:28,560 --> 00:28:31,359 Speaker 1: to offend off some of the headwinds that it faced 481 00:28:31,600 --> 00:28:33,960 Speaker 1: over the past twelve months. It has had a pretty 482 00:28:34,080 --> 00:28:37,199 Speaker 1: rough time of it. Today, though, we are seeing a 483 00:28:37,200 --> 00:28:39,560 Speaker 1: little pop in their shares a about three point three 484 00:28:39,560 --> 00:28:41,400 Speaker 1: percent on the news that they are planning to spin 485 00:28:41,440 --> 00:28:47,840 Speaker 1: off their Asian operations and initial public offering. Thanks for 486 00:28:47,920 --> 00:28:50,560 Speaker 1: listening to the Bloomberg P and L podcast. You can 487 00:28:50,600 --> 00:28:54,440 Speaker 1: subscribe and listen to interviews at Apple Podcasts, SoundCloud, or 488 00:28:54,480 --> 00:28:57,959 Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm on 489 00:28:58,000 --> 00:29:01,840 Speaker 1: Twitter at pim Fox. I'm on Twitter at Lisa Abramo. 490 00:29:01,960 --> 00:29:04,560 Speaker 1: It's one before the podcast. You can always catch us 491 00:29:04,600 --> 00:29:06,160 Speaker 1: worldwide on Bloomberg Radio.