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Speaker 1: Hello, and welcome to the Credit Edge Weekly Markets Podcast.

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Speaker 1: My name is James Crombie. I'm a senior editor at Bloomberg.

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Speaker 1: This week, we're very pleased to welcome Will Smith. No,

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Speaker 1: not the Hollywood actor and rapper, but Allion Spernstein's director

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Speaker 1: of high yield credit.

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Speaker 2: How are you, Will, I'm doing great.

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Speaker 3: Thanks for having me, James, Thank.

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Speaker 2: You so much for joining us today.

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Speaker 1: We're very excited to hear your credit market views, and

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Speaker 1: we're also delighted to welcome back Spencer Cutter from Bloomberg Intelligence.

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Speaker 2: How are you sponsor great?

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Speaker 4: James, thanks for having me.

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Speaker 1: So Just to set the scene a little bit here,

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Speaker 1: credit markets have bounced back a bit after taking a

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Speaker 1: hit earlier in August when stock markets tanked and the

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Speaker 1: Vicks figage sword. Global markets are generally calmer, but there's

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Speaker 1: still some lingering anxiety given the wild price swings of

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Speaker 1: the last few weeks. Liquidity is thin and there's still

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Speaker 1: a lot of risk out there. Doesn't take too much

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Speaker 1: to cause a major sell off. Just one bad economic

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Speaker 1: data point can do it. That said, we have had

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Speaker 1: some good news on the economy. Inflation appears to be cooling,

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Speaker 1: and there's some growing expectations of rate cuts from the

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Speaker 1: FED in September, which will ease pressure on the weak

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Speaker 1: companies that have been struggling with high borrowing costs over

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Speaker 1: the last few years. Meanwhile, there has been more debt issuance.

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Speaker 1: Companies are taking advantage of very strong investor demand for

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Speaker 1: corporate bonds and loans, with yields at historically high levels.

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Speaker 1: In general, there's more demand than net supply of corporate

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Speaker 1: bonds and loans, which is a technical boost. Credit markets

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Speaker 1: are supported by economic resilience and investors seem to be

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Speaker 1: betting on a soft landing. Fundamentally, though, there is still

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Speaker 1: a lot to worry about, debt defaults, bankruptcies, commercial real

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Speaker 1: estate stress, war, the US election, global geopolitics, and recession

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Speaker 1: risk hasn't really gone away, so will What's your take?

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Speaker 1: Some people are saying credit markets are too complacent, especially

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Speaker 1: when you look at how much the vix moved.

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Speaker 2: Where do we go from here?

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Speaker 3: Thanks James, thanks for setting that backstrap. I think you

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Speaker 3: touched on all of the major topics that are on investors' minds.

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Speaker 3: When we look at credit markets today, it's really a

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Speaker 3: push pull between really strong starting fundamentals and the direction

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Speaker 3: of travel of the economy. I think inevitably the economy

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Speaker 3: is slowing. That's why we're talking about the FED cutting

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Speaker 3: rates maybe aggressively, and the big question is how much

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Speaker 3: does it slow? And importantly, where have there been excesses

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Speaker 3: that have built up in either the economy or credit

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Speaker 3: markets or some combination of both. And looking at credit

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Speaker 3: markets generally speaking, that there certainly are some exceptions. There

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Speaker 3: isn't that obvious part of markets where we have seen

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Speaker 3: a lot of debt build up, where we have started

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Speaker 3: to see some significant cracks in the system that would

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Speaker 3: cause some sort of a big repricing of credit spreads,

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Speaker 3: called that like a systemic credit event, if you will.

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Speaker 3: And historically that there have been pockets that were a

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Speaker 3: little bit more obvious. If you go back to the

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Speaker 3: twenty fifteen time frame, the amount of debt issuanes that

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Speaker 3: we saw out of the energy space was really historic

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Speaker 3: and you were really financing the marginal credit in those areas.

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Speaker 3: And if you go back to seven, you know there

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Speaker 3: were there were clear signs of bubbles and areas where

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Speaker 3: underwriting quality had really deteriorated. Today, it's really not the

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Speaker 3: case to us. It looks like a more traditional slowdown

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Speaker 3: that we're facing in terms of, you know, the economy

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Speaker 3: maybe going or growing below trend, the FED cutting rates

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Speaker 3: and having some issues for companies to grow earnings, but

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Speaker 3: not necessarily a big systemic credit event that you know.

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Speaker 3: I think in this industry, we've all grown grown up

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Speaker 3: around the eight crisis, and we're constantly looking for signs

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Speaker 3: that it's happening again. And to us, it's just there's

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Speaker 3: not a lot of obvious signs that it is.

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Speaker 4: Hey, well, hey it's Spencer Cutter. Just backgrounds.

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Speaker 5: As James mentioned the beginning, I'm with Bloomberg Intelligence and

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Speaker 5: we're part of Bloomberg's research department. I've got about five

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Speaker 5: hundred analysts and strategists, and one thing I'd love to

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Speaker 5: pick your brain on is, you know, everybody's starting to

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Speaker 5: talk about, as you're saying, a slow down, possibly the

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Speaker 5: FED cutting, what do you think the market is pricing

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Speaker 5: in or expecting in terms of FED rate cuts. I've

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Speaker 5: personally been in the camp of we're going to be

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Speaker 5: higher for longer and actually maybe believe what the Fed's

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Speaker 5: telling us in terms of cuts, Whereas the market, I

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Speaker 5: think for the last couple of years has always been

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Speaker 5: expecting less hikes and now more cuts. What do you

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Speaker 5: think the market, the high yield market is anticipating and

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Speaker 5: pricing in happens if we get something different.

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Speaker 3: Yeah, that's one of the bigger questions, Spencer. And what

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Speaker 3: we generally say is that it's less important where the

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Speaker 3: FED ends up, and it's more important the context as

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Speaker 3: to why they got there. If you will, for instance,

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Speaker 3: if this if the Fed's able to cut rates to

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Speaker 3: say three and a half or four percent over the

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Speaker 3: next couple of years, and the economy slows but it's

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Speaker 3: not really in dangerous recessionary period, then that's probably fine.

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Speaker 3: And my guess is credit markets are basically pricing in

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Speaker 3: some sort of an outcome that looks like that. Right.

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Speaker 3: Inflation is well behaved, the FED can cut a decent

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Speaker 3: number of times, but growth never really fully rolls over

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Speaker 3: and we don't get that hard landing. I think there

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Speaker 3: are parts of credit that really need rates to be

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Speaker 3: cut faster, Like when we look at parts of the

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Speaker 3: syndicated loan market, probably parts of private credit it I

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Speaker 3: think those companies would probably be better off if we

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Speaker 3: were to see a fast or growth slowdown and a

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Speaker 3: subsequent bigger rate cut cycle because of the amount of

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Speaker 3: floating rate debt that they have on the balance sheet

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Speaker 3: and the issues they have generating free cash flow and

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Speaker 3: rates in the front end or this high. Now, I

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Speaker 3: think all that being said, there are still parts of

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Speaker 3: credit markets that are pricing in a lot of negative news.

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Speaker 3: If you look at high yield, there's there's basically like

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Speaker 3: ninety six percent of the bond space that trades as

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Speaker 3: if you hard landing is probably not in the range

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Speaker 3: of outcomes, And there's about four or five percent of

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Speaker 3: the market that trades extremely wide right big discounts topar

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Speaker 3: are very high yields, and some of those companies are

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Speaker 3: facing some significant challenges. But that's where there's potentially some

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Speaker 3: real equity like returns in our market. And if we

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Speaker 3: do end up with a economic environment that is somewhat

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Speaker 3: positive a rate cut cycle that happens pretty quickly, some

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Speaker 3: of those companies stand to benefit.

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Speaker 1: So in that small pool, will you identify sort of

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Speaker 1: more at risk companies. Is there any kind of alignment

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Speaker 1: in terms of sector, or is it a particular type

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Speaker 1: of company, or is it all over the map.

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Speaker 3: It's a bit all over the map, But I would

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Speaker 3: say there's a concentration in TMT and healthcare, and that's

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Speaker 3: a function I think of two things. One is that's

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Speaker 3: where there's been more private equity LBO type activity over

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Speaker 3: the last several years, So you have higher debt balances,

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Speaker 3: higher floating rate debt balances on those businesses. And then

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Speaker 3: some degree parts of those markets are dealing with some

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Speaker 3: secular changes, some secular headwinds. And cables a great example

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Speaker 3: where companies are really seeing a deteriorating top line and

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Speaker 3: some margin issues at the same time where they're facing

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Speaker 3: significantly higher borrowing costs, and when you have a balance

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Speaker 3: sheet that's already fairly stretched from the dead side, that

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Speaker 3: causes a lot of a lot of the stress that

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Speaker 3: we've seen. Healthcare is a little bit more of a

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Speaker 3: mixed bag.

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Speaker 1: The given where we are, what you've laid out in

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Speaker 1: terms of the economy, you know it's taking along. Rates

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Speaker 1: are going to come down. Is that enough of an

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Speaker 1: off ramp for those companies or should we expect more defaults?

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Speaker 3: First, well, when you look at that universe, there certainly

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Speaker 3: has to be some names that restructure right. Balance sheets

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Speaker 3: that simply just don't work, and they probably didn't work

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Speaker 3: even when rates are lower, but assuming that rates stay

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Speaker 3: structurally higher than they have been over the last decade,

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Speaker 3: they certainly don't seem to work. So you're going to

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Speaker 3: see some defaults. Now. One of the technical matters is

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Speaker 3: does that default happen in the traditional way through a

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Speaker 3: Chapter eleven bankruptcy process that hits all of our default screens,

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Speaker 3: or does it happen in any kind of out of

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Speaker 3: court way. You know, the technical jargon that we use

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Speaker 3: is an LME or reliability management exercise, where companies are

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Speaker 3: really trying to extend the runway, reduce debt balances, but

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Speaker 3: not necessarily go through a traditional Chapter eleven process. And

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Speaker 3: that's already happening in a lot of places, and we

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Speaker 3: think it continues to happen because these companies. These companies

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Speaker 3: have the ability to do so given where they're what

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Speaker 3: they've been able to negotiate in terms of bond documents

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Speaker 3: their protection for investors, but they also need to because

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Speaker 3: they have maturities that they really can't pay back and

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Speaker 3: they can't refinance in traditional markets.

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Speaker 5: Well, sort of keeping it at a high level, maybe

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Speaker 5: shifting gears a little bit, but curious what your thoughts

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Speaker 5: are on where credit spreads are today or where they've

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Speaker 5: been particularly over the last year.

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Speaker 4: I mean, I cover energy. I know you've you mentioned

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Speaker 4: that a.

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Speaker 5: Little bit earlier, and we can talk about that a

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Speaker 5: little bit more, but the credit spreads in the energy

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Speaker 5: space have been at historically tight levels. And when I

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Speaker 5: talk to people about it, they say, yeah, the spreads

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Speaker 5: are tight, but look at the yields. You know, I

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Speaker 5: can finally invest and get six seven percent something like that.

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Speaker 5: So do people do spreads matter anymore? What are people

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Speaker 5: looking at?

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Speaker 3: Yeah, Spencer, it's a great question. It's something we probably

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Speaker 3: talk about every day with clients and should I look

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Speaker 3: at yield or spreads or some combination? We think the

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Speaker 3: answer is you should probably look at some combination, you know.

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Speaker 3: I think the reality is is before the FED cut

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Speaker 3: rates significantly post GFC, the highal market didn't really have

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Speaker 3: a concept of spreads, right, you talked about yields. Then

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Speaker 3: essentially what happened was treasure yields went so low that

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Speaker 3: the all in yields for high yield looked really poor,

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Speaker 3: but spreads looked okay, right, because because treasure yields are

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Speaker 3: so low, So we really kind of shifted how we

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Speaker 3: talked about the marketplace as a result or as a

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Speaker 3: function of treasury yields being solo for a long time,

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Speaker 3: And now you can argue we're in a different regime

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Speaker 3: and we should really go back to, Hey, what what

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Speaker 3: I earn as an investor is yield? You know, I don't.

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Speaker 3: I don't go out there and stell treasuries when I

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Speaker 3: buy a high yield bond as a as a retail

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Speaker 3: investor who buys a mutual fund. So why do I

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Speaker 3: really care if my eight percent is coming you know,

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Speaker 3: four percent from treasuries and four percent from spreads, or

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Speaker 3: you know, two percent from treasuries and six percent from

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Speaker 3: trudgure from spreads. To them, it doesn't necessarily matter all

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Speaker 3: that much. And I think that that's one of the

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Speaker 3: big reasons why spreads are optically tight, because investors are

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Speaker 3: happy to buy that yield. And if you can buy

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Speaker 3: credit at seven eight nine percent type yield and feel

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Speaker 3: pretty good that you're going to get paid back, well

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Speaker 3: that starts to become competitive with either an alternative investment

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Speaker 3: that maybe you've put a lot of capital to work

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Speaker 3: in over last decade, or maybe going forward, equity turns

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Speaker 3: might be somewhat challenged by these higher debt levels higher

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Speaker 3: cost of borrowing.

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Speaker 5: Yeah, well that that was the follow on to the person.

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Speaker 5: One of the people I was having this conversation with

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Speaker 5: was you know now that I can actually get six

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Speaker 5: seven percent yield for the first time in five six years.

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Speaker 5: Not only were they focused on that, but so were

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Speaker 5: their clients, and so they were getting a lot of money.

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Speaker 5: As a fixed income manager, you know, you were in

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Speaker 5: a zero interestring world. Now all of a sudden, people

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Speaker 5: are throwing money at them to invest, and so you

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Speaker 5: have to put that to work and it just sort

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Speaker 5: of becomes, like, I guess, a feedback loop. Whether it's

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Speaker 5: a positive or negative one, we can discuss, but kind

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Speaker 5: of kept kept driving that train forward.

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Speaker 3: Yeah. This is something that James said at the at

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Speaker 3: the top of the session, which was, you know, there's

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Speaker 3: not enough bonds, right, That's that's the structural problem. Like

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Speaker 3: we focus as an industry on the gross supply numbers,

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Speaker 3: but what we really care about is the net supply

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Speaker 3: numbers our market growing And the answer is no, it's

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Speaker 3: actually shrinking. The HILD bond space is something like twenty

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Speaker 3: percent off the peak size that we saw post COVID,

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Speaker 3: and they're to your point, Spencer, there's a lot more

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Speaker 3: folks who are excited to buy highield credit here and

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Speaker 3: not just hig yield investment create as well because of

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Speaker 3: those yield levels. And that's that's a technical backdrop that

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Speaker 3: keeps things extremely compressed. And this can last for a

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Speaker 3: long time, right until there is something that materially shifts

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Speaker 3: the narrative where investors go from hey, I'm really excited

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Speaker 3: about this yield that I can earn, once they shift

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Speaker 3: from that to oh, I'm concerned that these credits aren't

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Speaker 3: going to pay me back. That's really what's required to

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Speaker 3: change that technical backdrop, and we seem like we're decently

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Speaker 3: far away from that.

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Speaker 1: And what we've also seen is a lot of compression

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Speaker 1: between different ratings tiers and that you know, you're not

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Speaker 1: getting paid that much more for earning triple c's over

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Speaker 1: single bees, and then everyone is kind of crowded up

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Speaker 1: into the double B space because I think that's kind of,

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Speaker 1: you know, offensively safer than anything else. But how are

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Speaker 1: you thinking about positioning will by by ratings bucket at

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Speaker 1: the moment?

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Speaker 3: Yeah, James, I agree with you. There are some parts

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Speaker 3: of credit that are starting to feel a little bit more crowded,

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Speaker 3: and I think the general consensus is if you're going

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Speaker 3: to buy credit, you want to buy quality. And so

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Speaker 3: if you're an investor who wants to focus on investment grade,

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Speaker 3: really steer clear of the low rated triple be's. If

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Speaker 3: you're an investor that wants to or is willing to

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Speaker 3: buy double to buy high yield, you're going to focus

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Speaker 3: on double be's sleep at night type high yield bonds

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Speaker 3: and teer clear of triple c's. And what we think

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Speaker 3: is that's creating a bit of an opportunity because if

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Speaker 3: we look at high yield in particular, the double B

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Speaker 3: space looks quite expensive to us, Whereas if we were

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Speaker 3: to move a little bit up in quality ourselves and

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Speaker 3: buy some low rated triple bes that IG buyers don't

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Speaker 3: want to own, that actually looks a lot more attractive

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Speaker 3: to us. So we have a lot of investment grade

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Speaker 3: in the portfolio, one of the highest levels that we've

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Speaker 3: had in terms of our high yield book of business

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Speaker 3: within single bs and triple c's. You can argue that

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Speaker 3: triple c's look cheap if you're looking on a spread basis,

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Speaker 3: it's really the only thing in credit that's not at

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Speaker 3: kind of almost all time tights. It's more like average

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Speaker 3: type spreads and triple c's, But you really need to

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Speaker 3: be extremely selective to state the obvious and triple c's

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Speaker 3: because if you get one wrong, they go to zero

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Speaker 3: or you have really low recoveries, and that all in

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Speaker 3: level of spreads are really driven by that tale that

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Speaker 3: I talked about earlier, the four percent or so of

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Speaker 3: the high old space that's really challenged, and those spreads

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Speaker 3: are generally overstated because you're you're probably not going to

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Speaker 3: earn that yield or spread over time because those companies

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Speaker 3: can't really pay you back hundred cents on the dollar.

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Speaker 3: So I think the long answer is prefer owning triple

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Speaker 3: b's over double bees. Be very selective in triple c's,

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Speaker 3: but don't necessarily be scared of them.

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Speaker 1: And a lot of the triple c's. You know, there's

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Speaker 1: there's a little media and there's a little cable. You

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Speaker 1: seem to like that sector. We've talked about that before.

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Speaker 1: This cool what's what's your take on that?

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Speaker 2: Why? Why do you think that it's over sold?

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Speaker 3: We do think there's a difference between media and and

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Speaker 3: basically non media cable companies. The cable companies to us

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Speaker 3: have a little bit less of a material secular headwind.

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Speaker 3: We think a lot of the bad news potentially is

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Speaker 3: behind those businesses. It's still going to be a rocky road.

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Speaker 3: Some of these names still have too much leverage on

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Speaker 3: the balance sheet, But the market seems to be pricing

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Speaker 3: in a real deterioration in those business models that we

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Speaker 3: think is pretty unlikely. The media space is a bit

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Speaker 3: more of a of a mixed bag. If you look

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Speaker 3: at low quality media, those names are pretty challenged. Their

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Speaker 3: ability to really grow into their capital structures, we think

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Speaker 3: is very limited. And one of the concerns that we

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Speaker 3: have is that you want to have a management team

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Speaker 3: or an industry that knows how to deal with those

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Speaker 3: types of situations. S Spencer, you cover the energy space.

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Speaker 3: An energy management team understands how to survive at this

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Speaker 3: point because they've survived through so many brutal cycles with

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Speaker 3: incredibly low energy prices.

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Speaker 4: And guess I still standing now, yes.

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Speaker 3: Exactly, yeah. Whereas you know, a media company in our

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Speaker 3: view might not necessarily get the joke or understand how

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Speaker 3: different they need to run these businesses now that they're

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Speaker 3: dealing with a significant deterioration of their economics and at

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Speaker 3: this time is really different. So that would be, you know,

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Speaker 3: kind of a high level distinction. We'd make.

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Speaker 1: Huge names like Altis that are you know, really struggling

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Speaker 1: a lot and everyone's kind of holding it. You know,

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Speaker 1: how do you deal with those situations? They're just so

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Speaker 1: big and there's a big fundandal you need to kind

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Speaker 1: of be exposed. I mean, do you how do you

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Speaker 1: how do you kind of head yourself against the worst outcome?

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Speaker 3: Yeah, I mean, it's it's it's it's an interesting question, James.

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Speaker 3: When you have big issuers in high yield and they

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Speaker 3: trade really well, it's pretty easy. If you don't like

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Speaker 3: the credit, you just don't need to own it, right

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Speaker 3: because your your potential loss. Like the way we think

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Speaker 3: about it is, hey, would I short these bonds and

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Speaker 3: if the bonds are paying you five six seven percent

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Speaker 3: and they're at par, well that's fine, Like you can't

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Speaker 3: really lose that much money. Just mathematically, now, once the

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Speaker 3: bonds start to price in a lot of it are

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Speaker 3: a pretty big discount. How bonds are trading at fifty

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Speaker 3: sixty seventy cents on a dollar double digit yields. It's

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Speaker 3: much tougher to have a lot of conviction that you

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Speaker 3: would short the name essentially from those levels, especially when

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Speaker 3: it's big, because there are there are certainly pathways where

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Speaker 3: a credit starts to improve significantly, and we've seen that

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Speaker 3: so far this year. There are some names that folks

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Speaker 3: and we're not necessarily excluded from this, didn't think could

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Speaker 3: could really work. They couldn't grow into their balantes, they

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Speaker 3: couldn't fix the business fast enough, and the market is

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Speaker 3: repriced that risk aggressively higher. So it's been very costly

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Speaker 3: to be underweight or necessary or really short those names

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Speaker 3: from these levels. And the way that we approach it

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Speaker 3: in general is we take a probability based outcome and

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Speaker 3: we look at all of the scenarios that we think

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Speaker 3: are somewhat likely and how much could the bonds perform

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Speaker 3: in either in all of those situations. And to the

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Speaker 3: extent that we can really start to price in those

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Speaker 3: different probabilities, then we have a better way to kind

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Speaker 3: of set up portfolios in those bigger cab structures. We

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Speaker 3: think there's a real pathway to the bonds working, then

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Speaker 3: we're going to own it. If we think that there's

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Speaker 3: a very limited chance that there's significant recoveries, and we

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Speaker 3: think there's a pretty high chance of significantly negative returns,

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Speaker 3: then we can continue to avoid it.

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Speaker 1: You mentioned liability management exchanges though, and that seems to

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Speaker 1: be changing the landscape, and is a lot more credits

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Speaker 1: your own credits of violence and a lot more you know,

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Speaker 1: you could call it innovation in terms of you know,

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Speaker 1: how aggressive some of the companies are getting and some

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Speaker 1: of the credits are getting. How much is that changing

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Speaker 1: your assessment of probabilities?

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Speaker 3: Genus certainly matters. I think the first thing that's a

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Speaker 3: very big change is that historically you could look at

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Speaker 3: a business and say, all right, this is our best

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Speaker 3: guess for what we think the assets are worth, and

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Speaker 3: here's where the debt's trading, and therefore we feel like

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Speaker 3: there's a pretty decent version of safety. The big change

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Speaker 3: this time is that you really don't know how much

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Speaker 3: of that asset value accrues to you, because the companies

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Speaker 3: can strip that asset value over time. I think that's

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Speaker 3: the first big change. And the second big change is

379
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Speaker 3: that the capital structure itself can change quite dramatically, so

380
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Speaker 3: you might be a secured lender and in a six

381
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Speaker 3: month time period you suddenly are significantly layered by some

382
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Speaker 3: sort of super senior financing that's come ahead of you.

383
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Speaker 3: So the credit work is a lot more complicated because

384
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Speaker 3: you need to really start to see where the puck

385
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Speaker 3: is going and what does this capital structure look like

386
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Speaker 3: and what assets are available to me as a lender.

387
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Speaker 3: I think that's the first thing. The second thing is

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Speaker 3: your size can really matter and what bonds or loans

389
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Speaker 3: that you have that size in, because what we've seen

390
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Speaker 3: is that oftentimes it's really just three to five investors

391
00:22:04,960 --> 00:22:08,879
Speaker 3: that really out of corporate structure that debt and a

392
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Speaker 3: lot of the recovery can accrue to them because they're

393
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Speaker 3: doing all the heavy lifting. Maybe they're providing new capital.

394
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Speaker 3: So if you are a smaller investor in a situation,

395
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Speaker 3: maybe you're a small distress shop or you're a big

396
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Speaker 3: ass manager and you have a very small position in

397
00:22:24,080 --> 00:22:26,840
Speaker 3: that particular name, that's a very dangerous position to be

398
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Speaker 3: it because if you're not at the table and you're

399
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Speaker 3: not structuring the deal, then oftentimes somebody else is capturing

400
00:22:34,840 --> 00:22:37,280
Speaker 3: a whole lot more of the recovery at your expense.

401
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Speaker 5: Well Spencer, again, we touched briefly on energy a couple times,

402
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Speaker 5: and since that's the world I live in, speaking of

403
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Speaker 5: a sector that's gone through a lot of restructuring over

404
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Speaker 5: the last couple of years and exchanges, et cetera, be

405
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Speaker 5: remiss if I didn't sort of try to dig into

406
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Speaker 5: that a little bit more curious what your thoughts are

407
00:22:56,960 --> 00:23:02,200
Speaker 5: on the sector, and I'll just lead to stay with mine.

408
00:23:01,680 --> 00:23:06,080
Speaker 5: I see it as credit spreads if you look and

409
00:23:06,119 --> 00:23:08,240
Speaker 5: again we can argue other spreads are the right thing

410
00:23:08,359 --> 00:23:10,160
Speaker 5: to look at anymore. But you know, they were at

411
00:23:10,520 --> 00:23:13,080
Speaker 5: historically tight levels as recently as May. They've bindened a

412
00:23:13,119 --> 00:23:17,120
Speaker 5: little bit since, but certainly not a lot. Fundamentals are

413
00:23:17,240 --> 00:23:20,040
Speaker 5: very strong because as you mentioned, if your company that's

414
00:23:20,040 --> 00:23:24,520
Speaker 5: still standing today, you went through went through quite a

415
00:23:24,520 --> 00:23:28,680
Speaker 5: bit over the last six seven years. They've all fixed

416
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Speaker 5: up their balance sheets. That said, credit metrics are trending

417
00:23:33,600 --> 00:23:36,160
Speaker 5: in the negative direction, particularly if you're a natural gas

418
00:23:36,240 --> 00:23:40,520
Speaker 5: focused company. And even if commodity prices shoot through the

419
00:23:40,600 --> 00:23:44,000
Speaker 5: roof for whatever reason, and these companies are swimming in cash,

420
00:23:44,160 --> 00:23:45,560
Speaker 5: all that cash is going to go out the door

421
00:23:45,560 --> 00:23:48,600
Speaker 5: to shareholders because they're doing all doing stock buybacks instead

422
00:23:48,600 --> 00:23:51,160
Speaker 5: of paying down debt, but that the de leveraging trend

423
00:23:51,200 --> 00:23:55,600
Speaker 5: is certainly trailing off dramatically. So I've kind of looked

424
00:23:55,600 --> 00:23:58,080
Speaker 5: at it and said, spreads are really tight. The trend

425
00:23:58,160 --> 00:24:01,800
Speaker 5: is not terrible, but it's certainly not positive. Is there

426
00:24:01,440 --> 00:24:05,960
Speaker 5: is the risk reward trade there anymore? My views, it's

427
00:24:06,080 --> 00:24:08,119
Speaker 5: kind of not. But I'm curious what your thoughts might be.

428
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Speaker 3: Spenser. I like the way you phrase that in terms

429
00:24:11,800 --> 00:24:14,560
Speaker 3: of the risk reward, and that's been kind of our

430
00:24:14,680 --> 00:24:17,640
Speaker 3: view on Energy for the last call it year plus,

431
00:24:17,760 --> 00:24:22,119
Speaker 3: where I'm sure the fundamentals look good, You're probably you're

432
00:24:22,400 --> 00:24:25,760
Speaker 3: probably going to craft the base case where the company's

433
00:24:25,840 --> 00:24:29,680
Speaker 3: fine and potentially they're deleveraging joining a lot of free

434
00:24:29,680 --> 00:24:33,880
Speaker 3: cash flow, and so the bond's probably holding well. However,

435
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Speaker 3: what we really do as credit investors is try to

436
00:24:37,760 --> 00:24:41,240
Speaker 3: price that left tail. You know, what is the really

437
00:24:41,280 --> 00:24:47,480
Speaker 3: negative outcome that causes me to basically lose principle in

438
00:24:47,520 --> 00:24:52,520
Speaker 3: this investment. And when we look at a space like energy,

439
00:24:53,960 --> 00:24:57,120
Speaker 3: historically the market just kind of misprices that left tail.

440
00:24:58,440 --> 00:25:02,800
Speaker 3: And when things feel good, you look at these balance

441
00:25:02,840 --> 00:25:05,760
Speaker 3: sheets in the cashlew statements and it looks great, but

442
00:25:05,880 --> 00:25:12,159
Speaker 3: at some point the macro position changes. And one of

443
00:25:12,240 --> 00:25:16,240
Speaker 3: our big concerns, and I think this is a mohominalarian quote,

444
00:25:16,280 --> 00:25:25,320
Speaker 3: is that energy prices themselves are inherently unstable because higher

445
00:25:25,400 --> 00:25:30,320
Speaker 3: energy prices really force a lot more create a lot

446
00:25:30,359 --> 00:25:34,640
Speaker 3: more production, and then that production eventually leads to significant

447
00:25:35,840 --> 00:25:40,560
Speaker 3: over capacity and then much lower energy prices eventually. Now

448
00:25:40,560 --> 00:25:43,879
Speaker 3: that hasn't really played out ten a degree over the

449
00:25:43,960 --> 00:25:46,000
Speaker 3: last couple of years, but you know, in our view,

450
00:25:46,040 --> 00:25:48,800
Speaker 3: that's because demands held in so well. Right, the economy's

451
00:25:49,000 --> 00:25:51,639
Speaker 3: done extremely well, probably better than most people would have

452
00:25:51,640 --> 00:25:54,119
Speaker 3: anticipated the last eighteen months. But at some point that

453
00:25:54,240 --> 00:25:58,000
Speaker 3: might change. And so whatever you think, the probability is

454
00:25:58,040 --> 00:26:02,359
Speaker 3: that energy prices are going to be significantly lower than

455
00:26:02,359 --> 00:26:06,280
Speaker 3: they are today. Let's assume that's something like a ten

456
00:26:07,359 --> 00:26:12,439
Speaker 3: chance probability. I think that's probably a reasonable guess. Those

457
00:26:12,520 --> 00:26:15,800
Speaker 3: bonds really are not pricing in that type of outcome

458
00:26:16,080 --> 00:26:19,320
Speaker 3: almost at all. And this kind of goes to one

459
00:26:19,320 --> 00:26:22,399
Speaker 3: of our key philosophical points how we think where we

460
00:26:22,440 --> 00:26:25,679
Speaker 3: add value to client portfolios is that we don't really

461
00:26:25,720 --> 00:26:27,600
Speaker 3: care all that much what's going to happen over the

462
00:26:27,600 --> 00:26:30,840
Speaker 3: next three, six, twelve months, and most investors are really

463
00:26:30,840 --> 00:26:32,919
Speaker 3: focused on that which energy company is going to get

464
00:26:32,920 --> 00:26:35,800
Speaker 3: bought by an IG company, Which company is going to

465
00:26:35,840 --> 00:26:38,040
Speaker 3: pay down a whole bunch of debt or sell some assets,

466
00:26:38,080 --> 00:26:39,440
Speaker 3: and therefore the bonds are going to be up like

467
00:26:39,480 --> 00:26:42,879
Speaker 3: two points, right. We focus on what are we getting

468
00:26:42,880 --> 00:26:46,640
Speaker 3: paid for this instrument, how big is and how bad

469
00:26:46,720 --> 00:26:50,160
Speaker 3: is that left tail? And where are the best risk

470
00:26:50,200 --> 00:26:55,040
Speaker 3: return investments for us to make in credit markets. And

471
00:26:55,640 --> 00:26:58,560
Speaker 3: having that longer term our eyes and thinking through a cycle,

472
00:26:59,160 --> 00:27:02,800
Speaker 3: we think puts us in a place that you know,

473
00:27:02,880 --> 00:27:06,760
Speaker 3: we're able to generate just better investment decisions for clients.

474
00:27:06,760 --> 00:27:09,680
Speaker 3: Not to say we're always right, and oftentimes we're wrong

475
00:27:09,720 --> 00:27:11,400
Speaker 3: over the short term, but what we really care about

476
00:27:11,440 --> 00:27:13,120
Speaker 3: is being right over the long term.

477
00:27:13,680 --> 00:27:17,960
Speaker 5: Yeah, it's interesting you mentioned that allan quote and it's

478
00:27:18,000 --> 00:27:21,560
Speaker 5: certainly something that's held true and that for the sector.

479
00:27:21,720 --> 00:27:26,199
Speaker 5: The answer to high prices is high prices because if

480
00:27:26,240 --> 00:27:29,880
Speaker 5: oil prices are high, producers want to capture those prices

481
00:27:29,880 --> 00:27:32,040
Speaker 5: and they produce more, and that floods the market and

482
00:27:32,119 --> 00:27:34,399
Speaker 5: prices come down. And one of the dynamics that's really

483
00:27:35,160 --> 00:27:40,360
Speaker 5: struck me now since twenty twenty is this new capital

484
00:27:40,400 --> 00:27:44,680
Speaker 5: discipline where all the producers are focusing less on production.

485
00:27:44,760 --> 00:27:48,120
Speaker 5: Even if oil jumps to one hundred and twenty dollars

486
00:27:48,160 --> 00:27:50,159
Speaker 5: a barrel, I would say natural gas goes back up

487
00:27:50,160 --> 00:27:52,800
Speaker 5: to six six bucks, a lot of the producers are saying, well,

488
00:27:52,800 --> 00:27:57,880
Speaker 5: we're just gonna maintain our relatively flat production profile and

489
00:27:58,080 --> 00:28:00,159
Speaker 5: harvests as much free cash flow as we can and

490
00:28:00,200 --> 00:28:02,040
Speaker 5: then use that again that used to be used that

491
00:28:02,080 --> 00:28:04,080
Speaker 5: to pay down debt. Now that that trends over, it's

492
00:28:04,119 --> 00:28:08,240
Speaker 5: to buy back stock and paid dividends. We'll see if

493
00:28:08,560 --> 00:28:10,640
Speaker 5: it's lasted longer than I would have thought, because oil

494
00:28:10,640 --> 00:28:12,840
Speaker 5: and gas producers are paid to produce and that's what

495
00:28:12,880 --> 00:28:16,399
Speaker 5: they tend to do. But you have seen some cracks

496
00:28:16,400 --> 00:28:19,199
Speaker 5: in that, particularly in the private side where they're not

497
00:28:19,240 --> 00:28:22,119
Speaker 5: publicly traded companies, and they've been wrapping up production a

498
00:28:22,160 --> 00:28:22,760
Speaker 5: little bit more.

499
00:28:22,800 --> 00:28:25,000
Speaker 4: So we'll see where that goes. But it's been an

500
00:28:25,000 --> 00:28:26,240
Speaker 4: interesting dynamic.

501
00:28:26,520 --> 00:28:29,919
Speaker 5: Something something that us old folks been falling the sector

502
00:28:29,920 --> 00:28:32,560
Speaker 5: for a few decades, have to adjust to and still

503
00:28:32,680 --> 00:28:33,800
Speaker 5: not quite comfortable with it.

504
00:28:34,119 --> 00:28:39,320
Speaker 3: Your intenna goes off when energy companies start returning capital shareholders. Yeah,

505
00:28:39,360 --> 00:28:39,880
Speaker 3: we're with.

506
00:28:39,800 --> 00:28:43,480
Speaker 4: You, Yes, Yes, is.

507
00:28:43,400 --> 00:28:45,600
Speaker 1: There a trade there, well, you are you shortening the

508
00:28:45,640 --> 00:28:48,560
Speaker 1: setor you just underweight I mean buying CDs.

509
00:28:48,600 --> 00:28:50,880
Speaker 2: What's the trade energy.

510
00:28:52,280 --> 00:28:55,280
Speaker 3: Overall being underway? You know, to us when we look

511
00:28:55,320 --> 00:28:59,280
Speaker 3: at particularly the exploration and production companies that have a

512
00:28:59,320 --> 00:29:04,040
Speaker 3: lot of call it beta to oil and gas prices,

513
00:29:05,320 --> 00:29:07,480
Speaker 3: those are easy things just to avoid. Like if you

514
00:29:07,480 --> 00:29:11,960
Speaker 3: don't have a real catalyst or or view that those

515
00:29:12,040 --> 00:29:14,400
Speaker 3: assets are so worthwhile, then there's really no point known

516
00:29:14,440 --> 00:29:17,200
Speaker 3: in the bonds. That's probably the easiest thing to do.

517
00:29:17,720 --> 00:29:20,560
Speaker 3: You know, there's there's oil field service companies that are

518
00:29:20,840 --> 00:29:23,640
Speaker 3: somewhat of a derivative. They tend to be extremely cyclical

519
00:29:23,680 --> 00:29:28,400
Speaker 3: as well and don't really have much acid value to us,

520
00:29:28,800 --> 00:29:33,240
Speaker 3: those are easy things to avoid in this marketplace. Places

521
00:29:33,240 --> 00:29:35,360
Speaker 3: like midstream are a little bit harder. You know, if

522
00:29:35,400 --> 00:29:40,360
Speaker 3: you really view those as utility type assets that are

523
00:29:40,360 --> 00:29:44,200
Speaker 3: structurally important and as long as oil and gas is

524
00:29:44,240 --> 00:29:46,360
Speaker 3: being pumped through their pipes and you know, it doesn't

525
00:29:46,360 --> 00:29:48,600
Speaker 3: really matter what the price of the commodity is, like,

526
00:29:48,640 --> 00:29:50,800
Speaker 3: those businesses are probably a lot better, so you can

527
00:29:51,080 --> 00:29:54,680
Speaker 3: you can invest in the space, just try to move

528
00:29:54,680 --> 00:29:58,160
Speaker 3: away from the areas that are most exposed that downside

529
00:29:58,200 --> 00:30:00,800
Speaker 3: in commodity prices.

530
00:30:01,240 --> 00:30:04,120
Speaker 1: A lot of the i'll guess talk about the consumer

531
00:30:04,680 --> 00:30:07,920
Speaker 1: on this show. The consumer sectors in highyield have done

532
00:30:07,960 --> 00:30:10,120
Speaker 1: really really well this year. The retail is you know,

533
00:30:10,400 --> 00:30:13,920
Speaker 1: I think is outperformed. But you would you would assume

534
00:30:14,000 --> 00:30:16,760
Speaker 1: that if the economy is you know, sliding in the

535
00:30:16,760 --> 00:30:20,480
Speaker 1: consumer is understrained, that's going to fade at some point

536
00:30:20,560 --> 00:30:23,440
Speaker 1: over this How are feeling about the consumer in terms

537
00:30:23,440 --> 00:30:24,280
Speaker 1: of high yield?

538
00:30:25,240 --> 00:30:28,600
Speaker 3: The consumer overall, James still seems like they're in pretty

539
00:30:28,600 --> 00:30:32,000
Speaker 3: good shape, but there are some more cracks showing. We

540
00:30:32,120 --> 00:30:34,520
Speaker 3: have started to see some cracks in the abs space.

541
00:30:34,600 --> 00:30:38,840
Speaker 3: You're starting to hear companies that really cater to the

542
00:30:38,960 --> 00:30:43,840
Speaker 3: lower income cohort calling out some some weakening trends and

543
00:30:43,880 --> 00:30:49,160
Speaker 3: some concerns about there forward guidance. But you know, to

544
00:30:49,160 --> 00:30:51,680
Speaker 3: some degree that should be expected. I mean, borrowing costs

545
00:30:51,680 --> 00:30:54,960
Speaker 3: are a lot higher and for folks that have to

546
00:30:55,040 --> 00:30:57,719
Speaker 3: borrow that that's starting to bite. And you are starting

547
00:30:57,760 --> 00:31:01,680
Speaker 3: to see less optimism around the job market and ability

548
00:31:01,720 --> 00:31:07,200
Speaker 3: to see their wages move higher. But overall, we still

549
00:31:07,480 --> 00:31:13,240
Speaker 3: see the consumer space in US hailed as a space

550
00:31:13,280 --> 00:31:17,800
Speaker 3: that's improving. Particular, if you look at the leisure businesses

551
00:31:17,880 --> 00:31:24,160
Speaker 3: like cruise liners and hotels, where these companies most likely

552
00:31:24,200 --> 00:31:26,920
Speaker 3: are going to have significantly less leverage in twelve to

553
00:31:26,920 --> 00:31:30,760
Speaker 3: eighteen months than they do today. And today their leverage

554
00:31:30,760 --> 00:31:34,520
Speaker 3: is significantly lower than it was twelve to twenty four

555
00:31:34,560 --> 00:31:38,480
Speaker 3: months ago. So that direction of travel we think is

556
00:31:38,520 --> 00:31:43,520
Speaker 3: still intact. However, at some point you start to get concerned,

557
00:31:44,040 --> 00:31:47,120
Speaker 3: similar to the energy conversation, that there's not that much

558
00:31:47,240 --> 00:31:50,120
Speaker 3: upside in some of these names, and potentially some significant

559
00:31:50,200 --> 00:31:54,600
Speaker 3: downside because even though today the overall consumer seems to

560
00:31:54,640 --> 00:31:57,840
Speaker 3: be in pretty good shape, that can change, and sometimes

561
00:31:57,840 --> 00:32:00,600
Speaker 3: that can change rather quickly, especially if the labor market

562
00:32:00,680 --> 00:32:06,000
Speaker 3: starts to weaken. So you want to own quality assets

563
00:32:06,080 --> 00:32:10,880
Speaker 3: that have a discipline cost structure that really still are

564
00:32:10,920 --> 00:32:13,600
Speaker 3: benefiting from a de leveraging trend, and stay away from

565
00:32:13,600 --> 00:32:16,400
Speaker 3: the ones that require the consumer to get better from here,

566
00:32:16,400 --> 00:32:17,520
Speaker 3: which we think is unlikely.

567
00:32:18,360 --> 00:32:20,920
Speaker 1: Yeah, okay, and on the leverage loans that do you

568
00:32:20,960 --> 00:32:23,440
Speaker 1: mentioned earlier that that the you know, borrowers of floating

569
00:32:23,520 --> 00:32:25,560
Speaker 1: rate obviously they're going to benefit from rates coming down.

570
00:32:25,640 --> 00:32:26,800
Speaker 2: They'll see some relief there.

571
00:32:26,800 --> 00:32:29,200
Speaker 1: But again that market's just done so well this year

572
00:32:29,280 --> 00:32:31,800
Speaker 1: is outperform the bond market. It's done way better than

573
00:32:31,800 --> 00:32:34,160
Speaker 1: anyone expected. Is there is there still an opportunity in

574
00:32:34,240 --> 00:32:36,520
Speaker 1: leverage loans or I mean, how do you measure up

575
00:32:36,520 --> 00:32:38,000
Speaker 1: loans against high bonds?

576
00:32:38,000 --> 00:32:42,600
Speaker 3: At this point, they look pretty fair to us from here, James,

577
00:32:43,400 --> 00:32:45,680
Speaker 3: One of the metrics that investors will look at is

578
00:32:46,200 --> 00:32:50,200
Speaker 3: looking at the spread of similarly rated loans to the

579
00:32:50,200 --> 00:32:55,160
Speaker 3: spread of bonds, and they'll say, well, you know, the

580
00:32:55,320 --> 00:32:58,200
Speaker 3: loan space is secure to have a floating rate hedge,

581
00:32:59,400 --> 00:33:01,800
Speaker 3: and therefore or I can and I can also earn

582
00:33:01,840 --> 00:33:03,920
Speaker 3: more on spread in the loan space. We think that's

583
00:33:03,960 --> 00:33:07,800
Speaker 3: a little bit misleading because back to my comment before

584
00:33:07,840 --> 00:33:11,920
Speaker 3: about supply, supply has been almost entirely refinancing based, and

585
00:33:12,000 --> 00:33:16,440
Speaker 3: a loan market has really almost never seen a refinancing

586
00:33:16,440 --> 00:33:19,880
Speaker 3: wave as strong as we've seen this year. And what

587
00:33:19,920 --> 00:33:23,440
Speaker 3: that means is that companies that are paying today maybe

588
00:33:23,680 --> 00:33:26,920
Speaker 3: three twenty five of spread on a loan, they might

589
00:33:26,960 --> 00:33:29,960
Speaker 3: be repricing that down to two fifty or two twenty

590
00:33:29,960 --> 00:33:32,600
Speaker 3: five because the call protection is so weak in the

591
00:33:32,640 --> 00:33:36,480
Speaker 3: loan space. So for investors that say, wow, that spread

592
00:33:36,480 --> 00:33:38,160
Speaker 3: books great, well, you're really not going to earn that

593
00:33:38,200 --> 00:33:42,920
Speaker 3: spread because companies are repricing that debt aggressively. I think

594
00:33:42,960 --> 00:33:45,080
Speaker 3: the other thing to keep in mind for the loan

595
00:33:45,200 --> 00:33:50,960
Speaker 3: space is that investors like to buy loans when they

596
00:33:50,960 --> 00:33:53,560
Speaker 3: think rates are going up, and they tend to sell

597
00:33:53,600 --> 00:33:55,880
Speaker 3: loans when they think rates are going down, and we

598
00:33:55,920 --> 00:33:58,480
Speaker 3: have started to see that dynamic. We have seen a

599
00:33:58,480 --> 00:34:02,000
Speaker 3: few weeks now of pretty significant outflows from loan funds.

600
00:34:02,400 --> 00:34:07,160
Speaker 3: Now the market's been very capable of soaking up that

601
00:34:07,760 --> 00:34:11,320
Speaker 3: selling pressure because the loan space still has a similar

602
00:34:11,440 --> 00:34:14,920
Speaker 3: technical backdrop when you look at like institutional demand for loans,

603
00:34:15,600 --> 00:34:19,839
Speaker 3: colo creation, etc. So it's not worrisome yet. But our

604
00:34:19,840 --> 00:34:21,440
Speaker 3: guess is that once you start to move into a

605
00:34:21,520 --> 00:34:24,920
Speaker 3: rate cutting cycle, we're more focused on loan fund outflows

606
00:34:25,280 --> 00:34:27,120
Speaker 3: and that probably just weighs on that market. So I

607
00:34:27,120 --> 00:34:30,560
Speaker 3: think the combination of those two it means we're less

608
00:34:30,680 --> 00:34:34,120
Speaker 3: enthused about the loan space than maybe some other folks are.

609
00:34:35,360 --> 00:34:38,200
Speaker 5: Maybe one good follow up to the loan space is

610
00:34:38,200 --> 00:34:40,920
Speaker 5: it's close because of the private credit market, since that

611
00:34:40,920 --> 00:34:43,840
Speaker 5: seems to be cannibalizing a lot of the traditional leverage

612
00:34:43,920 --> 00:34:48,520
Speaker 5: loan market. Curious on your reaction to the growth of

613
00:34:48,520 --> 00:34:52,520
Speaker 5: that market and I'll frame it as I'm old enough

614
00:34:52,520 --> 00:34:56,480
Speaker 5: to have seen several other products evolve over the last

615
00:34:56,520 --> 00:35:00,480
Speaker 5: several decades, and as they evolve, they grow like gang usters.

616
00:35:01,480 --> 00:35:03,479
Speaker 5: A few people will raise their hands and say, hey,

617
00:35:03,480 --> 00:35:05,600
Speaker 5: there might be some risk here that we haven't really

618
00:35:05,680 --> 00:35:07,640
Speaker 5: gotten our arms around, and all the people in the

619
00:35:07,640 --> 00:35:10,240
Speaker 5: market say, oh no, no, you just don't understand this product.

620
00:35:10,280 --> 00:35:12,520
Speaker 4: There is no risk or there's very little.

621
00:35:12,320 --> 00:35:15,520
Speaker 5: Risk, and I'm thinking clos and credit default swaps and

622
00:35:16,160 --> 00:35:19,040
Speaker 5: even all the way back to long Term Capital Management's

623
00:35:19,080 --> 00:35:21,600
Speaker 5: trading strategy, and then something happens in the boops there

624
00:35:21,719 --> 00:35:27,080
Speaker 5: was some risk. What is the risk that everybody's missing

625
00:35:27,160 --> 00:35:30,160
Speaker 5: in the private credit market is their risk? Seems to

626
00:35:30,200 --> 00:35:33,120
Speaker 5: me like liquidity may be one of them, because everybody's saying, well,

627
00:35:33,200 --> 00:35:35,560
Speaker 5: one of the nice things about private credits that's buy

628
00:35:35,600 --> 00:35:38,680
Speaker 5: and hold. We're not training it, and that's fine. Everybody's

629
00:35:38,719 --> 00:35:40,759
Speaker 5: buying hold until they can't be buying hold and they're

630
00:35:40,800 --> 00:35:43,560
Speaker 5: forced to sell. And that tends to happen to a

631
00:35:43,560 --> 00:35:46,440
Speaker 5: lot of people all at once for whatever reason. So

632
00:35:46,520 --> 00:35:48,440
Speaker 5: I don't know, just it's something I ask a lot

633
00:35:48,520 --> 00:35:50,800
Speaker 5: of people like to get their feedback on. I'm curious

634
00:35:50,840 --> 00:35:51,840
Speaker 5: what your thoughts are.

635
00:35:52,760 --> 00:35:55,239
Speaker 3: Yes, Spencer, I think you touched upon all the major

636
00:35:55,840 --> 00:36:00,480
Speaker 3: hot topics for private credit. The one thing that I

637
00:36:00,560 --> 00:36:04,880
Speaker 3: do think is different than some of the other fast

638
00:36:04,960 --> 00:36:08,480
Speaker 3: growing credit markets that we've seen historically is that this

639
00:36:08,560 --> 00:36:13,600
Speaker 3: isn't necessarily a new market. It is a big risk transfer,

640
00:36:13,800 --> 00:36:17,279
Speaker 3: if you will, because essentially banks used to make most

641
00:36:17,320 --> 00:36:21,320
Speaker 3: of these loans. Now they can't because of regulatory changes

642
00:36:21,400 --> 00:36:27,399
Speaker 3: postdfcpost Dot frank and so private credit has basically taken

643
00:36:27,440 --> 00:36:31,000
Speaker 3: ownership of that risk. That's I think the biggest argument

644
00:36:31,040 --> 00:36:34,759
Speaker 3: that it's not this big case of a brand new

645
00:36:34,760 --> 00:36:39,839
Speaker 3: market that's untested. Now. That being said, there have has

646
00:36:39,920 --> 00:36:45,160
Speaker 3: been really historic demand for investors from investors to buy

647
00:36:45,280 --> 00:36:48,359
Speaker 3: private credit, and we've seen the flows are just been

648
00:36:49,400 --> 00:36:52,680
Speaker 3: really really massive and the sizes over a short time

649
00:36:53,440 --> 00:36:56,000
Speaker 3: over a short time period have been pretty historic. And

650
00:36:56,239 --> 00:36:59,359
Speaker 3: that makes us concern on the margin that there are

651
00:36:59,360 --> 00:37:01,719
Speaker 3: folks that have too much capital have to put it

652
00:37:01,760 --> 00:37:06,040
Speaker 3: to work. They're financing of that marginal credit at spreads

653
00:37:06,080 --> 00:37:07,520
Speaker 3: that are probably too tight, and maybe they have to

654
00:37:07,560 --> 00:37:13,280
Speaker 3: give on covenants. So you know, I think the argument

655
00:37:13,440 --> 00:37:17,760
Speaker 3: is you really want to be selective in private credit

656
00:37:17,800 --> 00:37:21,600
Speaker 3: and we'd certainly caution against folks who say, well, I'm

657
00:37:21,600 --> 00:37:24,360
Speaker 3: going to take my entire credit allocation and move it

658
00:37:24,400 --> 00:37:27,640
Speaker 3: into private credit because I get paid more and the

659
00:37:27,719 --> 00:37:31,360
Speaker 3: returns look great. That to us is a risky proposition.

660
00:37:31,400 --> 00:37:33,520
Speaker 3: It should be part of your portfolio, but it should

661
00:37:33,520 --> 00:37:36,200
Speaker 3: be sized according to what we think the real risk is.

662
00:37:36,280 --> 00:37:39,400
Speaker 3: And I think the risk is you're buying pretty leveraged

663
00:37:39,440 --> 00:37:44,160
Speaker 3: capital structures with no liquidity, and that should be a

664
00:37:44,200 --> 00:37:47,280
Speaker 3: percentage of your portfolio, but not the majority of your portfolio.

665
00:37:48,320 --> 00:37:51,280
Speaker 3: I do think you know one other point that's worth mentioning,

666
00:37:51,840 --> 00:37:54,279
Speaker 3: because we get asked this question all the time, like

667
00:37:54,360 --> 00:37:58,200
Speaker 3: what's going to cause significant stress and private credit? And

668
00:37:58,239 --> 00:38:01,439
Speaker 3: I think the smartest thing that private credit did as

669
00:38:01,440 --> 00:38:07,799
Speaker 3: an industry is they created rappers that basically locked up capital, right,

670
00:38:07,840 --> 00:38:11,120
Speaker 3: and the key is to in all these financial instruments

671
00:38:11,120 --> 00:38:13,200
Speaker 3: is to match your assets and your liabilities, and I

672
00:38:13,200 --> 00:38:15,080
Speaker 3: think they did a phenomenal job of doing that, and

673
00:38:15,080 --> 00:38:19,040
Speaker 3: they convinced investors that locking up their capital for a

674
00:38:19,120 --> 00:38:22,279
Speaker 3: long time period is actually in their best interests. So

675
00:38:22,880 --> 00:38:26,400
Speaker 3: when we consider that, you know, versus some of the

676
00:38:26,440 --> 00:38:29,840
Speaker 3: other historical events that you brought up, like there isn't

677
00:38:29,880 --> 00:38:33,680
Speaker 3: that studden catalyst that causes a bunch of forced selling.

678
00:38:34,640 --> 00:38:38,480
Speaker 3: Maybe there's certainly some leverage in the system, but we

679
00:38:38,520 --> 00:38:40,239
Speaker 3: think it's been done in a way that's not really

680
00:38:40,280 --> 00:38:43,520
Speaker 3: marked to market and therefore doesn't necessarily cause that negative

681
00:38:43,520 --> 00:38:47,040
Speaker 3: spiral that we've seen in those other big credit build ups,

682
00:38:47,040 --> 00:38:49,120
Speaker 3: where you have a lot of leverage, it's marked to market,

683
00:38:49,200 --> 00:38:52,640
Speaker 3: you have a big acid liability mismatched, and we just

684
00:38:52,640 --> 00:38:55,320
Speaker 3: don't necessarily see that in private credit. Are there issues, Sure,

685
00:38:55,840 --> 00:38:58,879
Speaker 3: are there credits that we think should not have been

686
00:38:58,880 --> 00:39:02,640
Speaker 3: financed and probably priced and probably need to be more lower. Yes,

687
00:39:03,920 --> 00:39:06,160
Speaker 3: but we think as part of a diversified portfolio, it's

688
00:39:06,200 --> 00:39:07,440
Speaker 3: it's a good asset class owned.

689
00:39:08,480 --> 00:39:11,200
Speaker 1: Does it have any impacts on public markets? I mean,

690
00:39:11,239 --> 00:39:13,120
Speaker 1: presumably it's taking away some of the supply, but is

691
00:39:13,160 --> 00:39:14,440
Speaker 1: there any other impact.

692
00:39:15,680 --> 00:39:18,920
Speaker 3: The biggest impact is the supply element chains. I mean,

693
00:39:18,960 --> 00:39:21,240
Speaker 3: that's that's the reason why the bond market is shrinking,

694
00:39:21,600 --> 00:39:25,800
Speaker 3: because issuers are either going to the syndicated loan space

695
00:39:25,840 --> 00:39:28,600
Speaker 3: more frequently or they're going to private credit. That's the

696
00:39:28,600 --> 00:39:31,440
Speaker 3: first and the second is there are increasingly more deals

697
00:39:31,480 --> 00:39:37,720
Speaker 3: where issuers are kind of using private credit and public

698
00:39:37,760 --> 00:39:42,040
Speaker 3: markets to compete to reduce their borrowing costs. So that's

699
00:39:42,040 --> 00:39:44,920
Speaker 3: good for companies they have more access to capital different ways,

700
00:39:45,600 --> 00:39:50,160
Speaker 3: But for investors sometimes it's frustrating because you know, we

701
00:39:50,200 --> 00:39:52,920
Speaker 3: think a situation has a certain amount of risk to it,

702
00:39:52,920 --> 00:39:55,319
Speaker 3: and we need a certain amount of comptence. But if

703
00:39:55,480 --> 00:39:57,960
Speaker 3: private credit is willing to do it at more aggressive levels,

704
00:39:59,040 --> 00:40:01,279
Speaker 3: then you know you're you're not seeing the same sort

705
00:40:01,320 --> 00:40:03,280
Speaker 3: of opportunities that you wish you you could.

706
00:40:03,640 --> 00:40:05,680
Speaker 1: And in the public markets, which is supposed to be

707
00:40:05,719 --> 00:40:08,640
Speaker 1: much more liquid. We were soon to be tested on

708
00:40:08,680 --> 00:40:11,120
Speaker 1: that thesis not that long ago, when it got very

709
00:40:11,160 --> 00:40:13,200
Speaker 1: choppy and people were trying to buy and sell and

710
00:40:13,239 --> 00:40:15,360
Speaker 1: trade in and out and whatever. How easy was it

711
00:40:15,440 --> 00:40:18,439
Speaker 1: during that time to actually find liquidity in let's say,

712
00:40:18,480 --> 00:40:20,400
Speaker 1: high old bonds or what leverage loans.

713
00:40:21,719 --> 00:40:26,719
Speaker 3: Liquidity was actually pretty good from our perspective, so we

714
00:40:26,800 --> 00:40:29,840
Speaker 3: talked about owning a bunch of investment grade bonds and

715
00:40:29,880 --> 00:40:34,799
Speaker 3: higher portfolios. One of the things that really repriced aggressively,

716
00:40:34,880 --> 00:40:37,480
Speaker 3: and it was only for about thirty six hours, honestly,

717
00:40:37,719 --> 00:40:41,680
Speaker 3: was that investment grade spreads had really outperformed high quality

718
00:40:41,840 --> 00:40:44,680
Speaker 3: high yield, so that double b cohort that we think

719
00:40:44,800 --> 00:40:48,400
Speaker 3: is fairly expensive actually widened for the first time in

720
00:40:48,440 --> 00:40:52,200
Speaker 3: what seems like a very long time, and we were

721
00:40:52,239 --> 00:40:56,560
Speaker 3: able to actually move some exposure, decent amount of exposure

722
00:40:56,560 --> 00:41:00,640
Speaker 3: across portfolios by selling investment grade bonds and buying those

723
00:41:00,680 --> 00:41:03,799
Speaker 3: double B names. And we were surprised. The liquidity was

724
00:41:03,920 --> 00:41:06,480
Speaker 3: pretty strong, and there's a lot of things that you

725
00:41:06,560 --> 00:41:09,879
Speaker 3: need to have lined up to take advantage of that

726
00:41:10,000 --> 00:41:13,960
Speaker 3: liquidity if and when it's available. And a big thesis

727
00:41:14,000 --> 00:41:16,480
Speaker 3: that we've had over the years is that your windows

728
00:41:16,480 --> 00:41:21,319
Speaker 3: out of opportunity just continuously shrink. If you go back

729
00:41:21,360 --> 00:41:25,120
Speaker 3: to the GFC, you had probably quarters to buy risk.

730
00:41:26,320 --> 00:41:30,520
Speaker 3: If you fast forward to the fifteen sixteen time period,

731
00:41:30,560 --> 00:41:33,319
Speaker 3: you had probably months to buy risk. Then you go

732
00:41:33,360 --> 00:41:36,399
Speaker 3: to COVID, you had weeks. Today you probably have days,

733
00:41:36,400 --> 00:41:39,160
Speaker 3: if not hours. So if and when you have those

734
00:41:39,320 --> 00:41:42,080
Speaker 3: pockets of volatility, you need to be able to move

735
00:41:42,560 --> 00:41:44,440
Speaker 3: extremely quickly. You have to know what you want to

736
00:41:44,440 --> 00:41:47,600
Speaker 3: buy and which you need to sell, and you need

737
00:41:47,640 --> 00:41:49,680
Speaker 3: to line that up well. But we think the market,

738
00:41:49,760 --> 00:41:52,879
Speaker 3: especially in credit, functioned quite well. I think you mentioned

739
00:41:52,880 --> 00:41:55,759
Speaker 3: this earlier, James, like looking at vix versus credit, like

740
00:41:55,880 --> 00:41:59,640
Speaker 3: it you got to really stretch levels, right. VIX told

741
00:41:59,680 --> 00:42:01,759
Speaker 3: you that the world was exploding, and credit markets were like, no,

742
00:42:01,840 --> 00:42:06,080
Speaker 3: we're fine. And I think that that was reflected in

743
00:42:06,160 --> 00:42:08,880
Speaker 3: liquidity right where there wasn't this kind of panic selling,

744
00:42:09,040 --> 00:42:12,920
Speaker 3: didn't see outflows, you didn't have leverage on wines, and

745
00:42:13,719 --> 00:42:14,960
Speaker 3: as a result were really orderly.

746
00:42:15,440 --> 00:42:17,840
Speaker 4: Always trust the bond market.

747
00:42:19,719 --> 00:42:22,520
Speaker 3: Well to be determined, we'll see.

748
00:42:24,239 --> 00:42:26,280
Speaker 1: So credit was right in that case and not complacent

749
00:42:26,320 --> 00:42:30,120
Speaker 1: that some people are saying. And when you look across markets,

750
00:42:30,239 --> 00:42:32,239
Speaker 1: will all the stuff you can get to see? I mean,

751
00:42:32,520 --> 00:42:33,880
Speaker 1: is there a could you put your finger on the

752
00:42:33,920 --> 00:42:36,480
Speaker 1: best relative value right now, the best opportunity in terms

753
00:42:36,480 --> 00:42:38,280
Speaker 1: of credit markets.

754
00:42:39,000 --> 00:42:42,720
Speaker 3: We take a global approach to this question, James, across

755
00:42:42,760 --> 00:42:45,880
Speaker 3: asset classes. I would say that the first thing that

756
00:42:45,920 --> 00:42:49,920
Speaker 3: stands out to us is that emerging market corporate bonds

757
00:42:49,960 --> 00:42:53,319
Speaker 3: still look relatively attractive. We think you're getting paid a

758
00:42:53,360 --> 00:42:54,960
Speaker 3: lot more risk prem in there, a lot more in

759
00:42:55,000 --> 00:43:00,360
Speaker 3: spreads than you are in developed market credit markets. So

760
00:43:00,400 --> 00:43:01,600
Speaker 3: I think that that would be the first.

761
00:43:02,000 --> 00:43:04,160
Speaker 1: Sorry, you're talking about hard currency bonds there, right, not

762
00:43:04,280 --> 00:43:05,319
Speaker 1: local currency.

763
00:43:05,480 --> 00:43:11,560
Speaker 3: Exactly a dollar dollar corporates. I think the second would

764
00:43:11,600 --> 00:43:15,759
Speaker 3: be parts of the securitized space. So we highlight colos

765
00:43:15,840 --> 00:43:19,960
Speaker 3: parts of residential real estate that to us just have

766
00:43:20,360 --> 00:43:24,720
Speaker 3: pretty attractive upside downsides right where you're still getting paid

767
00:43:25,080 --> 00:43:29,080
Speaker 3: more than a comparable risk in the corporate space, but

768
00:43:29,200 --> 00:43:31,680
Speaker 3: your downsides might be more limited. I'm not quite as

769
00:43:31,719 --> 00:43:35,000
Speaker 3: exposed to an economic downturn, you know, we think the

770
00:43:35,120 --> 00:43:39,920
Speaker 3: residential real estate space is still in pretty good shape.

771
00:43:40,400 --> 00:43:42,920
Speaker 3: And then I would say the last thing is European

772
00:43:43,000 --> 00:43:46,240
Speaker 3: high yield, particularly high quality European higield on a dollar

773
00:43:46,239 --> 00:43:52,879
Speaker 3: hedged basis is attractive. You know, folks are concerned, maybe

774
00:43:52,960 --> 00:43:57,560
Speaker 3: rightfully so, about political volatility and maybe an elevated recession

775
00:43:57,640 --> 00:44:01,239
Speaker 3: risk in Europe, but we've seen this time again and

776
00:44:02,760 --> 00:44:06,400
Speaker 3: if we can buy even in some instances the same

777
00:44:06,520 --> 00:44:10,000
Speaker 3: name at issues in euros versus dollars, those zero bonds

778
00:44:10,400 --> 00:44:13,680
Speaker 3: are paying us a decent amount. More so again the

779
00:44:13,760 --> 00:44:15,759
Speaker 3: ex time we can we like to be global think

780
00:44:15,800 --> 00:44:19,959
Speaker 3: about these things multisector and and take advantage when when

781
00:44:20,560 --> 00:44:23,360
Speaker 3: you know, US corporates straight a lot better than other things.

782
00:44:24,200 --> 00:44:26,840
Speaker 1: And what about countries will when you think about you know,

783
00:44:27,080 --> 00:44:30,759
Speaker 1: em or Europe or any particular country focus areas you

784
00:44:30,800 --> 00:44:32,040
Speaker 1: have all sector.

785
00:44:32,520 --> 00:44:37,279
Speaker 3: It's it's fairly diversified in them corporate space. It's more

786
00:44:37,320 --> 00:44:41,120
Speaker 3: about avoiding the areas that we think have maybe an

787
00:44:41,160 --> 00:44:45,680
Speaker 3: elevated left tail. So you probably want to be less

788
00:44:45,719 --> 00:44:51,000
Speaker 3: exposed to names that have like Chinese industrial risk, because

789
00:44:51,040 --> 00:44:55,520
Speaker 3: that that seems like a pretty dangerous place to be today,

790
00:44:56,840 --> 00:44:59,520
Speaker 3: and you want to align yourself with growth. So we

791
00:44:59,560 --> 00:45:02,480
Speaker 3: have a lot more exposure to say in India as

792
00:45:02,520 --> 00:45:05,120
Speaker 3: an example, than we do in other areas where you're

793
00:45:05,120 --> 00:45:07,320
Speaker 3: not seeing the same sort of GDP growth.

794
00:45:07,960 --> 00:45:10,440
Speaker 2: Just back to the US briefly before we close.

795
00:45:10,480 --> 00:45:13,600
Speaker 1: I mean, people only a couple of weeks ago, we're

796
00:45:13,600 --> 00:45:17,239
Speaker 1: talking about the Trump trade as the big thing to

797
00:45:17,280 --> 00:45:20,000
Speaker 1: focus on in terms of the upcoming election, and that

798
00:45:20,160 --> 00:45:22,440
Speaker 1: was as simple in some cases as by American high

799
00:45:22,480 --> 00:45:26,280
Speaker 1: yield bonds and steer clear of anything inflation sensitive. Obviously,

800
00:45:26,320 --> 00:45:30,359
Speaker 1: we've seen a bit of an upturn in the Democratic

801
00:45:30,920 --> 00:45:33,520
Speaker 1: Party support and the polls there, so there could be

802
00:45:33,560 --> 00:45:35,839
Speaker 1: a Harris trade to think about. How are you thinking

803
00:45:35,840 --> 00:45:36,759
Speaker 1: about the election right now?

804
00:45:36,760 --> 00:45:36,880
Speaker 3: Will?

805
00:45:36,920 --> 00:45:38,959
Speaker 2: I mean, it's obviously complicated, but it's getting close.

806
00:45:40,320 --> 00:45:43,600
Speaker 3: The election to us is a really difficult thing to

807
00:45:44,200 --> 00:45:49,080
Speaker 3: position yourself for, at least as an overall portfolio, meaning

808
00:45:50,440 --> 00:45:54,160
Speaker 3: we could potentially say, let's assume you knew who's going

809
00:45:54,239 --> 00:45:57,359
Speaker 3: to win the election. I couldn't necessarily tell you what

810
00:45:57,400 --> 00:46:00,600
Speaker 3: that meant for rates or credit spreads or the direction

811
00:46:00,680 --> 00:46:04,440
Speaker 3: of the equity market. However, the really important thing to

812
00:46:04,520 --> 00:46:09,920
Speaker 3: us is where are there significant policy differences that structurally

813
00:46:09,960 --> 00:46:15,680
Speaker 3: can change some businesses or industries. Meaning you know, for instance,

814
00:46:16,400 --> 00:46:22,680
Speaker 3: the Democratic Party might really focus in on payday lenders

815
00:46:22,800 --> 00:46:25,799
Speaker 3: as an example, And to the extent that you're not

816
00:46:25,840 --> 00:46:29,960
Speaker 3: getting paid for that risk, you should probably look to

817
00:46:29,960 --> 00:46:33,000
Speaker 3: exit that position. Because let's assume that you know, the

818
00:46:33,120 --> 00:46:37,799
Speaker 3: election is a coin flip and in you know, the

819
00:46:37,880 --> 00:46:43,080
Speaker 3: Democratic Democratic win for Harris, then those bonds can potentially

820
00:46:43,080 --> 00:46:44,759
Speaker 3: be down a lot. That's probably not good risk reward

821
00:46:44,800 --> 00:46:47,799
Speaker 3: for the portfolio. That to us is how you should

822
00:46:47,840 --> 00:46:50,799
Speaker 3: really spend your time calling through the portfolio where you're

823
00:46:50,880 --> 00:46:56,040
Speaker 3: more exposed in one election outcome versus the other, so.

824
00:46:56,040 --> 00:46:59,360
Speaker 1: There's no kind of gravitation towards I mean, this is

825
00:46:59,400 --> 00:47:02,759
Speaker 1: what was going on weeks. Go to buying companies that

826
00:47:02,920 --> 00:47:04,759
Speaker 1: had you know, most of their revenue in the US,

827
00:47:04,760 --> 00:47:07,560
Speaker 1: because there'll be this massive increase in protectionism, there'll be

828
00:47:07,600 --> 00:47:10,400
Speaker 1: all these barriers that come down. You're not you're not

829
00:47:10,400 --> 00:47:12,319
Speaker 1: positioning around those of trades at this point.

830
00:47:12,400 --> 00:47:12,760
Speaker 2: Yet.

831
00:47:12,920 --> 00:47:17,600
Speaker 3: Well, I kind of take the maybe the opposite side

832
00:47:17,600 --> 00:47:20,040
Speaker 3: of that, James, which is you want to make sure

833
00:47:20,080 --> 00:47:25,600
Speaker 3: that companies that require a lot of those say a

834
00:47:25,600 --> 00:47:28,279
Speaker 3: lot of their inputs or their costs that come from

835
00:47:28,280 --> 00:47:33,479
Speaker 3: other areas and if they're really exposed to that, which

836
00:47:33,520 --> 00:47:38,640
Speaker 3: we saw during the first round of Trump tariffs, that

837
00:47:38,680 --> 00:47:41,560
Speaker 3: can really impact the business negatively. So it's more about

838
00:47:41,680 --> 00:47:45,279
Speaker 3: not owning those names that have that real downside risk

839
00:47:45,320 --> 00:47:49,000
Speaker 3: of the business if we see some major policy change.

840
00:47:49,280 --> 00:47:51,879
Speaker 3: To us, it's you don't necessarily buy energy bonds because

841
00:47:51,880 --> 00:47:53,200
Speaker 3: you think Trump's going to win that That to us

842
00:47:53,239 --> 00:47:55,600
Speaker 3: as a bit of a a bit of a mistake.

843
00:47:56,239 --> 00:47:57,440
Speaker 2: Okay, that's it.

844
00:47:57,520 --> 00:48:01,640
Speaker 1: And in terms of one big risk, well, maybe one

845
00:48:01,640 --> 00:48:03,319
Speaker 1: that we haven't talked about is there is this something

846
00:48:03,360 --> 00:48:06,560
Speaker 1: that just horrifies you and keeps you up at night worrying.

847
00:48:08,239 --> 00:48:11,120
Speaker 3: There's there's a laundry list, James. I think you mentioned

848
00:48:11,120 --> 00:48:12,560
Speaker 3: at the top of the show all the things that

849
00:48:12,560 --> 00:48:16,200
Speaker 3: we should be concerned about. You know, the thing that

850
00:48:16,320 --> 00:48:19,359
Speaker 3: honestly always scares us is the thing that we're not

851
00:48:19,480 --> 00:48:23,160
Speaker 3: talking about, right, and we just don't even have to

852
00:48:23,160 --> 00:48:25,080
Speaker 3: go back more than a couple of weeks. Like not

853
00:48:25,160 --> 00:48:30,960
Speaker 3: many people were talking about the risk of currency online

854
00:48:31,040 --> 00:48:34,960
Speaker 3: trade and the BOJ potentially hiking rates which would cause

855
00:48:35,040 --> 00:48:37,839
Speaker 3: a massive move in volatility that that you know, had

856
00:48:37,920 --> 00:48:40,560
Speaker 3: ripple effects across all markets, and that to us is

857
00:48:40,600 --> 00:48:44,879
Speaker 3: what's more concerning. For the most part, we're believers that

858
00:48:45,040 --> 00:48:47,920
Speaker 3: like the obvious risk factors out there, you know, a

859
00:48:48,040 --> 00:48:54,680
Speaker 3: US slow down, an escalation of the Israel Palestine conflict,

860
00:48:55,840 --> 00:48:58,880
Speaker 3: all of those things are probably already in prices. The

861
00:48:58,960 --> 00:49:01,200
Speaker 3: thing that is not in price is what we're not

862
00:49:01,239 --> 00:49:04,760
Speaker 3: talking about. And I think the reality is when spreads

863
00:49:04,760 --> 00:49:07,960
Speaker 3: are really tight, we are a lot more concerned that

864
00:49:08,520 --> 00:49:11,520
Speaker 3: those kind of unforeseen events will have a big negative impact.

865
00:49:11,760 --> 00:49:14,680
Speaker 3: When spreads are wide, you having much bigger margin of safety.

866
00:49:14,680 --> 00:49:18,640
Speaker 3: And that's our big takeaway for how to set up portfolios.

867
00:49:18,960 --> 00:49:21,319
Speaker 1: Great stuff. Will Smith, Director of US high youel Credit

868
00:49:21,440 --> 00:49:23,320
Speaker 1: Alliance Burns Stein, It's been a pleasure having you on

869
00:49:23,360 --> 00:49:23,960
Speaker 1: the Credit Edge.

870
00:49:24,000 --> 00:49:24,680
Speaker 2: Many thanks.

871
00:49:25,000 --> 00:49:27,120
Speaker 3: Thanks James, great to be here, and of.

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Speaker 1: Course I'm very grateful to Spencer Cutter from Bloomberg Intelligence.

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Speaker 1: Thank you for joining us today.

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Speaker 4: Great James, thank you.

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Speaker 1: For more credit market analysis and energy sector insight. Read

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Speaker 1: all of Spencer Cutter's great work on the Bloomberg Terminal.

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Speaker 1: Bloomberg Intelligence is part of our research department, with five

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Speaker 1: hundred analysts and strategists working across all markets. Coverage includes

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Speaker 1: over two thousand equities and credits and outlooks on more

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00:49:49,480 --> 00:49:54,239
Speaker 1: than ninety industries and one hundred market indices, currencies and commodities.

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Speaker 1: Please do subscribe to the Credit Edge wherever you get

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Speaker 1: your podcasts. We're on Apple, Spotify, and all other good

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Speaker 1: us a review, tell your friends, or email me directly

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Speaker 1: at Jcrombie eight at Bloomberg dot net.

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Speaker 2: I'm James Crombie.

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Speaker 1: It's been a pleasure having you join us again next

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Speaker 1: week on the Credit Edge