WEBVTT - Why It's Time to Sell High Yield 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.120 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well 0:00:32.200 --> 0:00:34.600 high yelled bonds has been an area that a lot 0:00:34.680 --> 0:00:37.839 of investors have been hating for years, and yet it 0:00:37.880 --> 0:00:41.920 has continued to deliver, with almost an eight gain last 0:00:42.000 --> 0:00:45.120 year and on pace for a three point nine increase 0:00:45.280 --> 0:00:47.720 just year to date. We're not even halfway through the year. 0:00:47.960 --> 0:00:50.040 But now we have Peter Sheer, head of macro strategy 0:00:50.080 --> 0:00:52.480 at Breen Capital, saying that it is important to start 0:00:52.520 --> 0:00:54.720 being cautious on high yields, and I want to bring 0:00:54.800 --> 0:00:57.240 them on to get a sense of why. Peter, thank 0:00:57.280 --> 0:00:59.400 you so much for joining us. So at this time 0:00:59.400 --> 0:01:02.040 when you don't have defaults picking up materially and you 0:01:02.080 --> 0:01:05.600 don't necessarily see a recession within the next six month 0:01:05.640 --> 0:01:09.119 horizon according to most forecasts, why is now a good 0:01:09.160 --> 0:01:11.720 time to start getting barished on high yield You know? 0:01:11.800 --> 0:01:15.200 I think there's two overriding themes. One is that spreads 0:01:15.200 --> 0:01:17.560 are very tight, So credit spreads a contracted a lot, 0:01:18.280 --> 0:01:19.920 you know, on the back of last year's rally and 0:01:19.920 --> 0:01:22.120 what we've had so far this year, and overall yields 0:01:22.120 --> 0:01:24.920 are pretty low given where treasuries are, so a lot 0:01:24.959 --> 0:01:27.160 of these indices and index based products are kind of 0:01:27.200 --> 0:01:29.360 giving you five and a half maybe six percent yields, 0:01:29.560 --> 0:01:31.520 which is a little bit low for the risk. And 0:01:31.560 --> 0:01:33.600 then the other big factor for me really is that 0:01:33.959 --> 0:01:36.640 oil had been such a tale wind in the past year. 0:01:37.200 --> 0:01:39.399 It had been very helpful to the whole industry and 0:01:39.560 --> 0:01:42.520 story to the whole high yield portfolio. Right now, I 0:01:42.560 --> 0:01:46.000 think oils, you know, stalled out. Peach here can we 0:01:46.080 --> 0:01:50.000 read anything into this because spreads were below four in 0:01:50.080 --> 0:01:53.040 mid two thousand seven, we know what happened then, and 0:01:53.040 --> 0:01:56.559 then there was a decline in the high yield market, 0:01:57.000 --> 0:02:03.080 and then spreads also were below in and after that 0:02:03.160 --> 0:02:09.040 what happened drop in high yield is this said harbature 0:02:09.160 --> 0:02:11.840 of things to come. I don't know that we'll see 0:02:11.840 --> 0:02:13.480 that sort of drop, but I do think it is 0:02:13.480 --> 0:02:16.000 a warning sign that the risk reward is now skewed 0:02:16.040 --> 0:02:18.760 to the downside. People have to remember that how yield 0:02:18.800 --> 0:02:20.720 does tend to when it sells off, it tends to 0:02:20.720 --> 0:02:24.320 sell off fairly quickly and fairly aggressively. Two other little 0:02:24.320 --> 0:02:27.160 warning signs that strike me as I look at some 0:02:27.240 --> 0:02:30.160 of the high yield ets they have as much as 0:02:30.160 --> 0:02:35.240 of their portfolio is technology and communications. If you go 0:02:35.320 --> 0:02:39.080 back to right before the energy problems hit, energy sector 0:02:39.160 --> 0:02:42.240 had to become a big part of these portfolios because 0:02:42.280 --> 0:02:45.280 all these industries, they basically are based on the amount 0:02:45.280 --> 0:02:48.160 of debt outstanding. So companies that need money tend to, 0:02:48.320 --> 0:02:51.160 you know, issue a lot of debt become big parts 0:02:51.160 --> 0:02:54.080 of these indusseries, and then they become very problematic if 0:02:54.120 --> 0:02:56.480 that sector runs into a hiccup at all. So you're 0:02:56.520 --> 0:03:01.359 talking about Sprint, for example, on the telecommunication side, and 0:03:01.400 --> 0:03:03.960 then on the technology side, I mean, dell Is is 0:03:03.960 --> 0:03:06.040 obviously the big example, and they're going to be selling 0:03:06.080 --> 0:03:09.280 more debt to finance their l BO. So, UH, do 0:03:09.360 --> 0:03:11.880 you think that we're going to see weakness in the 0:03:11.880 --> 0:03:16.320 tech and the UH and the telecommunications areas in the 0:03:16.320 --> 0:03:18.080 near term Because this has been a big question for 0:03:18.120 --> 0:03:20.000 a lot of people because of what you're saying the 0:03:20.080 --> 0:03:22.760 concentration in the index. And I'm not sure that we 0:03:22.800 --> 0:03:25.080 will see weakness, but what I am fairly confident if 0:03:25.120 --> 0:03:27.440 we see any weakness, it will be more than you 0:03:27.440 --> 0:03:30.840 would expect otherwise, because the technicals will take over. Anytime 0:03:30.880 --> 0:03:34.120 you get these big sectors have weakness, people are forced 0:03:34.160 --> 0:03:36.680 to reduce exposure, and everyone already owns so much of 0:03:36.680 --> 0:03:39.520 that it tends to, you know, create a clearing price 0:03:39.600 --> 0:03:41.680 much lower than you would expect. So I think that's 0:03:41.720 --> 0:03:44.720 why we're very susceptible to a larger sell off. And 0:03:44.760 --> 0:03:46.680 it is a reason too. I think I would really 0:03:46.720 --> 0:03:50.400 look to finding good managers that you like. You know, 0:03:50.560 --> 0:03:52.840 there's a whole debate passive versus active, I think right 0:03:52.880 --> 0:03:55.080 now in the high yield space in particular, you want 0:03:55.080 --> 0:03:57.680 to find a good active manager. Are you seeing money 0:03:57.680 --> 0:04:00.360 flow more to active managers as a result or P 0:04:00.520 --> 0:04:03.360 or investors sort of ignoring the tile is showing that 0:04:03.360 --> 0:04:06.080 that perhaps an active manager uh, And frankly, in high 0:04:06.120 --> 0:04:10.000 yield I think they have outperformed UH passive pretty consistently, 0:04:10.080 --> 0:04:12.240 particularly in hig yield bonds. Yeah, and I think that's 0:04:12.280 --> 0:04:15.200 going to be an area that how yield the active 0:04:15.240 --> 0:04:17.160 did suffer with this whole kind of wards passive I 0:04:17.160 --> 0:04:19.560 think is people take a closer look, they'll realize this 0:04:19.640 --> 0:04:22.720 is a sector where credit expertise, building the right portfolio, 0:04:22.920 --> 0:04:25.080 finding the right bonds, being able to participate in the 0:04:25.120 --> 0:04:27.840 new issues can offer a lot of values. So I 0:04:27.880 --> 0:04:29.919 think the active you know, if we're gonna draw a 0:04:29.960 --> 0:04:32.320 line in the stand where actives can be passes, maybe 0:04:32.320 --> 0:04:33.920 it's the high yield and that message has to get 0:04:33.960 --> 0:04:35.800 out there a little bit. So with respect to you 0:04:35.880 --> 0:04:38.800 sort of barish view on high yield saying that there's 0:04:38.839 --> 0:04:41.680 more downside than upside. Right now, what's the best way 0:04:41.720 --> 0:04:43.640 to play that? Do you recommend that people try to 0:04:43.720 --> 0:04:47.520 short this debt because it's notoriously very difficult to short. Yeah, 0:04:47.520 --> 0:04:49.520 I think it's very difficult to short. I would say 0:04:49.560 --> 0:04:51.040 probably the best way to play it right now is 0:04:51.080 --> 0:04:53.400 if you can do it by some maybe puts on 0:04:53.480 --> 0:04:54.920 some of the e t F So there's j n 0:04:55.000 --> 0:04:57.239 K and h y G, which are two very large 0:04:57.240 --> 0:05:00.279 and liquid etf that have pretty deep options more market 0:05:00.480 --> 0:05:02.520 so that would probably be the easiest way to play it. 0:05:03.000 --> 0:05:05.240 Beyond that, you know you could short, you I would 0:05:05.279 --> 0:05:08.360 not recommend shorting individual issues. I think that's just too hard. 0:05:09.520 --> 0:05:12.280 He Is there a way for an investor to get 0:05:12.320 --> 0:05:14.640 this kind of yield without taking this kind of risk? 0:05:16.680 --> 0:05:20.200 Who That's a tricky question. I think there are some 0:05:20.279 --> 0:05:22.880 other areas people have been very successful. We've had, you 0:05:22.880 --> 0:05:26.280 know best successful looking at the closed end fund arena. 0:05:26.560 --> 0:05:30.360 I also still like leverage loans, where that's the loan 0:05:30.440 --> 0:05:32.680 equivalent of the high yeld bond market, but it's senior 0:05:32.720 --> 0:05:35.279 secured in this floating rate. So I'm more comfortable in 0:05:35.320 --> 0:05:36.880 that space because I don't think it's going to have 0:05:36.960 --> 0:05:38.919 quite the volatility the high yeld bond market, so you 0:05:38.960 --> 0:05:41.200 give up a little bit of yield, but I think 0:05:41.200 --> 0:05:44.080 that risk reward characteristic is much more in your favorite 0:05:44.080 --> 0:05:45.720 to be in the leverage loan space rather than the 0:05:45.760 --> 0:05:48.000 bond space, right even even with author of pricing, because 0:05:48.000 --> 0:05:50.520 basically what happens when people are flooding into into the 0:05:50.600 --> 0:05:52.840 leverage loan market is that the borrowers can go back 0:05:53.080 --> 0:05:55.120 to the investors and say, you know what, we can 0:05:55.160 --> 0:05:57.280 get this loan for a better deal, so we're gonna 0:05:57.279 --> 0:05:58.680 cut the rate that we're gonna pay you, and they're 0:05:58.680 --> 0:06:00.760 doing that at a record pace. Doesn't that sort of 0:06:00.760 --> 0:06:03.640 create a downside. Well, that's the thing, it doesn't really 0:06:03.640 --> 0:06:06.320 create a downside. I mean your income will be less. 0:06:06.320 --> 0:06:09.040 So to me though high yield, the bond side has 0:06:09.160 --> 0:06:12.000 much more upside typically than the loans, and right now 0:06:12.040 --> 0:06:14.080 I don't see that upside for the bond market. So 0:06:14.160 --> 0:06:16.560 you're not giving up as much, right because a lot 0:06:16.600 --> 0:06:18.920 of the bonds not only do they have fairly low yields, 0:06:19.480 --> 0:06:21.880 a good portion of these industries are now yield the calls, 0:06:21.880 --> 0:06:24.159 so they're say, trading at a one eighteen dollar price 0:06:24.200 --> 0:06:26.440 and are callable at one oh eight in two years. 0:06:26.640 --> 0:06:28.920 So there's no upside in the bonds either. So that's 0:06:28.960 --> 0:06:31.680 happening through time as those bonds become callable. So I 0:06:31.720 --> 0:06:34.880 think that differential is less. I would agree. You know, 0:06:34.920 --> 0:06:36.400 if you get a bit of a sell off, then 0:06:36.400 --> 0:06:38.240 you're gonna want to high yield bonds and avoid that 0:06:38.279 --> 0:06:43.359 repricing risk. Peter, are there investors or even professionals that 0:06:43.400 --> 0:06:46.479 have gotten into the high yield business that shouldn't be 0:06:46.560 --> 0:06:50.239 there and will be washed out when or if there's 0:06:50.240 --> 0:06:54.520 a decline? You know, I'm not sure about that, but 0:06:54.760 --> 0:06:59.000 I do think this whole friend towards index investing doesn't 0:06:59.040 --> 0:07:01.280 work quite as well in the credit space or the 0:07:01.320 --> 0:07:04.839 fixed income space, because there really does tend to be 0:07:04.880 --> 0:07:07.960 a longer term disconnect. The companies that issue debt are 0:07:07.960 --> 0:07:10.760 the ones that become dominant in these indices over time. 0:07:10.760 --> 0:07:12.480 They tend to be not the companies that you want 0:07:12.480 --> 0:07:15.080 to own the most of. So that's the big disconnect. 0:07:15.120 --> 0:07:17.760 So I think in the fixed income space and the 0:07:17.760 --> 0:07:20.280 credit space and some of these ets, we should see 0:07:20.280 --> 0:07:22.720 a slowdown in et F and people look to managers 0:07:22.840 --> 0:07:25.520 and look to building their own portfolios. Even Peter, this 0:07:25.600 --> 0:07:27.360 is such a tough time. Imagine that when you talk 0:07:27.440 --> 0:07:29.720 to investment managers, they say to you, you know this 0:07:29.800 --> 0:07:31.840 is this is a boring market. I mean, we just 0:07:31.840 --> 0:07:34.280 don't see a big catastrophe on the horizon, and nothing 0:07:34.320 --> 0:07:37.600 looks that great either. Are people just like angsting to 0:07:37.640 --> 0:07:40.800 you these days? Yeah? I think the industry of the 0:07:40.840 --> 0:07:44.600 whole seems every it's frustrated, right, it's we've been churning. 0:07:44.640 --> 0:07:45.960 I guess, for lack of a better word, we go 0:07:46.040 --> 0:07:47.360 up a little bit, we go down a little bit. 0:07:47.440 --> 0:07:50.000 There's been no clear trend. What seems to work one 0:07:50.040 --> 0:07:54.080 day gets banged up by Washington the next day. It's 0:07:54.360 --> 0:07:57.680 been a very tough and frustrating market. The strategies that 0:07:57.760 --> 0:07:59.680 I believe are winning are doing well. Are people who 0:07:59.720 --> 0:08:02.960 have moved to far less liquid bond given up some 0:08:03.080 --> 0:08:07.120 liquidity maybe into more structured debt. But the bomb there 0:08:07.200 --> 0:08:09.800 is they're making it through yield and his excess, you know, 0:08:10.120 --> 0:08:12.960 interest margin that just takes a long time to show 0:08:13.000 --> 0:08:14.280 up in the numbers. It's not like you buy a 0:08:14.320 --> 0:08:16.520 bond and stuff eight points and you know everyone's high 0:08:16.520 --> 0:08:19.600 five in each other. It's the steady grind and not 0:08:19.680 --> 0:08:22.400 making mistakes. That's what we look for you to do. 0:08:22.720 --> 0:08:26.440 Help us navigate those potential mistakes. Thanks very much, Peter Cheer, 0:08:26.800 --> 0:08:30.559 head of macro strategy at Breen Capital. You can follow 0:08:30.680 --> 0:08:48.240 him on Twitter at t F m k T s Now, however, 0:08:48.240 --> 0:08:50.280 we want to get an update on what is going 0:08:50.320 --> 0:08:52.960 on with auto sales and how the sales have been 0:08:53.040 --> 0:08:56.840 slowing and used car resell values have been declining. How 0:08:56.880 --> 0:08:59.760 long will this continue? Jamie Butters has that for us. 0:08:59.760 --> 0:09:03.440 He's UUs autos reporter for Bloomberg News and he comes 0:09:03.480 --> 0:09:06.240 to us from Detroit. So Jamie, you know, can we 0:09:06.280 --> 0:09:09.160 just take a look, take scope of what's happened so far, 0:09:09.280 --> 0:09:12.400 how much uh, you know, car sales have declined, and 0:09:12.480 --> 0:09:16.520 how much more car executives think that they will continue 0:09:16.520 --> 0:09:19.199 to decline. But you know, that's the that's the billion 0:09:19.200 --> 0:09:22.520 dollar question, Lisa. You know, sales are down only about 0:09:22.600 --> 0:09:24.920 you know, one and a half percent so far this year, 0:09:24.960 --> 0:09:27.040 and they might follow by you know, out of a 0:09:27.080 --> 0:09:29.559 seventeen and a half million market by two or three 0:09:29.600 --> 0:09:32.520 hundred thousand for the year, which is all pretty manageable. 0:09:33.080 --> 0:09:35.720 But the big, the big question, the big issue hanging 0:09:35.760 --> 0:09:37.559 out you know, two or three years down the road 0:09:37.640 --> 0:09:40.000 is is this, uh we can do a lot of 0:09:40.000 --> 0:09:43.400 people are hoping and predicting that this is a plateaus 0:09:43.480 --> 0:09:47.480 sales will say, around seventeen million, uh, near the near 0:09:47.520 --> 0:09:50.000 the all time records, uh, and just kind of scuffle 0:09:50.080 --> 0:09:52.679 along there. But uh, some other folks are looking at 0:09:52.679 --> 0:09:55.120 and saying, this is not an industry that plateaus, this 0:09:55.240 --> 0:09:57.920 industry that booms and bus and is this really the 0:09:57.960 --> 0:10:02.200 start of a traditional cyclical contraction that would take a 0:10:02.240 --> 0:10:04.679 few million units out of the market. So that's kind 0:10:04.720 --> 0:10:07.600 of really the thing to keep watching. And Jamie, can 0:10:07.640 --> 0:10:10.920 I interest you in a fifty dollar minivan is a 0:10:11.080 --> 0:10:14.520 lovely minivan that is a really nice car. Tell people 0:10:14.559 --> 0:10:18.160 the story of this minivan, this Chrysler Pacific. I think 0:10:18.200 --> 0:10:21.160 it's a very cool product when you get into it. 0:10:21.240 --> 0:10:24.200 But what is going on with a fifty dollar minivan? 0:10:24.280 --> 0:10:27.120 I mean, it's it's like a entertainment center on wheels. 0:10:27.440 --> 0:10:29.520 I was. I was just so amazed I got the 0:10:29.600 --> 0:10:31.600 chance to drive this car and I and I got 0:10:31.600 --> 0:10:32.880 in and I was like, wow, you know, this is 0:10:32.960 --> 0:10:35.040 this is really nice. I had heard about and I 0:10:35.040 --> 0:10:37.480 had read about. How you know, it's so much better 0:10:37.559 --> 0:10:40.679 made than all the previous Chrysler's, which you know, are 0:10:40.720 --> 0:10:43.880 traditionally not the highest quality, really among the among the 0:10:43.920 --> 0:10:46.600 lowest quality, uh, in all the big surveys. But this 0:10:46.679 --> 0:10:50.000 is a really well made vehicle. It's got great materials. 0:10:50.240 --> 0:10:51.880 And then you get in the back seat and their 0:10:52.000 --> 0:10:55.400 twin touch screens. You can play multiple videos on them, 0:10:55.400 --> 0:10:58.160 you can play video games against each other. The third 0:10:58.280 --> 0:11:01.319 row seats reclined. There's the the built in vacuum cleaner. 0:11:01.320 --> 0:11:05.360 I guess if you spill your hundred dollar cheerios or something. Uh. 0:11:05.440 --> 0:11:07.160 And it is just it is not at all, not 0:11:07.240 --> 0:11:10.400 at all a traditional you know, kind of family holler, 0:11:10.480 --> 0:11:12.719 it's more like a more like a luxury vehicle. It 0:11:12.800 --> 0:11:15.040 was just fantastic, But then I look and it was, 0:11:15.200 --> 0:11:19.400 you know, forty nine for fifty before taxes or license 0:11:19.520 --> 0:11:21.760 or any of that, and it is. It just kind 0:11:21.760 --> 0:11:25.160 of blew my mind at how we really keep reaching 0:11:25.240 --> 0:11:28.440 into new levels of luxury and higher prices, because that's 0:11:28.480 --> 0:11:31.079 of course where the automakers make their money. The higher 0:11:31.080 --> 0:11:33.760 price tickets, higher price items they can sell you, the 0:11:33.760 --> 0:11:36.960 bigger the margins are well and are there people out 0:11:36.960 --> 0:11:41.040 there who have a robust demand and appetite for a 0:11:41.040 --> 0:11:45.640 fifty minivan? Well, we'll see. I mean, it's certainly worth exploring. 0:11:45.880 --> 0:11:48.800 Right if you're a Fiat Chrysler and you invented that segment. 0:11:49.200 --> 0:11:52.080 They still have a lower end minivan, the Dodge Caravan 0:11:52.280 --> 0:11:54.160 is still on the market, and and the range of 0:11:54.200 --> 0:11:57.160 the Pacific as uh, you know, starts in the high 0:11:57.160 --> 0:11:59.440 twenties and then reaches up. So we'll see. You know, 0:11:59.480 --> 0:12:01.800 they have had they've given a lot of thought to 0:12:01.880 --> 0:12:04.520 many vans over the years. Up at Auburn Hills, where 0:12:04.600 --> 0:12:07.480 Chrysler is based has long been based and uh, and 0:12:07.480 --> 0:12:09.559 there have been some who believe that it's really going 0:12:09.600 --> 0:12:12.880 to be the vehicle of retirement, you know, for boomers 0:12:12.920 --> 0:12:15.800 who drove them when they were uh young and had 0:12:15.880 --> 0:12:18.199 young families, that they might might be what they want 0:12:18.640 --> 0:12:22.760 in retirement. Is it's easier ingress and easier to get 0:12:22.760 --> 0:12:25.839 in and out of than than a big suv h 0:12:26.000 --> 0:12:29.000 But we'll see it's certainly it's a it's an exciting offering. 0:12:29.840 --> 0:12:33.840 Anyone else going down the same road. We'll see, you know, 0:12:33.840 --> 0:12:37.520 we're gonna see a new minivan from Honda, I believe 0:12:37.600 --> 0:12:40.280 later this year, and we'll see how how far upscale 0:12:40.320 --> 0:12:45.679 they go. Honda is has has gotten higher prices traditionally 0:12:45.800 --> 0:12:48.880 for their Odyssey minivan than Chrysler got for the town 0:12:48.920 --> 0:12:51.920 and country that the PACIFICA replaces. Whether they try to 0:12:51.960 --> 0:12:55.680 go this far up, it'll be really interested to watch 0:12:55.720 --> 0:12:57.720 that what the high end is on the new Odyssey. 0:12:57.800 --> 0:13:00.240 We'll go for a ride with you. Jamie Butters are 0:13:00.559 --> 0:13:03.680 US Autos reporter joining us from our Detroit bureau, and 0:13:03.880 --> 0:13:07.880 you can follow him on Twitter at mitten hawk. That's 0:13:08.080 --> 0:13:11.880 m I double t e n Hawk. Jamie Butters, thank 0:13:11.920 --> 0:13:24.240 you very much talking about fifty dollar Chrysler minivans. We 0:13:24.320 --> 0:13:26.000 want to take a moment to let you know about 0:13:26.120 --> 0:13:29.480 something new from Bloomberg. 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Well, we'd like 0:14:05.160 --> 0:14:07.439 to find out what's going on in Washington, d C. 0:14:07.640 --> 0:14:09.920 And there's no one better than Eric Watson are a 0:14:10.080 --> 0:14:13.960 congressional reporter for Bloomberg. Eric, thanks for being with us. 0:14:14.120 --> 0:14:16.679 Where do you want to begin the spending bill that 0:14:16.760 --> 0:14:20.080 gets rid of some of Donald Trump's favorite programs, or 0:14:20.120 --> 0:14:22.600 should we look internally at the White House and what's 0:14:22.640 --> 0:14:26.520 going on between cabinet officials and White House advisors. Where 0:14:26.520 --> 0:14:28.080 do you want to go? Well, I want to talk 0:14:28.080 --> 0:14:30.640 about the spending bill that released that was released at 0:14:30.640 --> 0:14:33.160 to eighteen in the morning. This is a typical practice 0:14:33.200 --> 0:14:36.080 for Congress to drop a trillion dollars spending bill in 0:14:36.080 --> 0:14:38.200 the middle of the night when no one's looking. Uh. 0:14:38.240 --> 0:14:42.200 This deal is a real winner for Congressional Democrats. President 0:14:42.200 --> 0:14:44.960 Trump was looking to make about eighteen billion dollars and 0:14:45.000 --> 0:14:48.160 cuts to the budget for the bill that will fund 0:14:48.160 --> 0:14:51.400 the government through September. Those cuts are not being made. 0:14:51.480 --> 0:14:54.280 He was also looking for border wall money to build 0:14:54.320 --> 0:14:58.000 the wall on the border with Mexico. That's also not 0:14:58.080 --> 0:15:01.760 happening in this bill. Uh. Democrats were basically able to 0:15:01.800 --> 0:15:05.520 get Republican leaders to go along under the argument that 0:15:05.560 --> 0:15:07.600 if the government were to shut down, which it would 0:15:07.640 --> 0:15:11.960 on Friday evening without another spending bill, that Democrats would 0:15:11.960 --> 0:15:14.440 be would not be the ones blamed. Instead would be 0:15:14.440 --> 0:15:18.240 Trump and Republicans because they control Congress. Well, Eric, what 0:15:18.320 --> 0:15:22.360 does this particular bill that got passed say about Republican 0:15:22.440 --> 0:15:25.720 support for President Trump's agenda? Well, I should mention, first 0:15:25.720 --> 0:15:27.200 of all, it's it's not been passed yet, it was 0:15:27.240 --> 0:15:28.800 released in the middle of the night. It's probably going 0:15:28.840 --> 0:15:31.720 to be voted on Wednesday, and it will probably be 0:15:31.760 --> 0:15:35.360 a biparson vote with Democrats and and and most Republicans 0:15:35.400 --> 0:15:38.400 going for it Altho'll be a number of fiscally conservative 0:15:38.400 --> 0:15:40.480 Republicans who won't be able to support it because it 0:15:40.480 --> 0:15:43.840 does not cut spending. I think it shows at this point, 0:15:44.320 --> 0:15:47.880 at least on spending bills which require Democrats, Republicans don't 0:15:47.880 --> 0:15:52.120 have a sixty vote uh filibuster proof majority in the Senate. 0:15:52.480 --> 0:15:55.080 Trump doesn't have the upper hand that he might have 0:15:55.160 --> 0:15:57.920 on on tax or or healthcare, where they can use 0:15:57.960 --> 0:16:00.800 special budget procedures in order to sort of ram bills 0:16:00.840 --> 0:16:04.560 through Congress without democratic support. You know, Eric, you started 0:16:04.560 --> 0:16:07.920 off by saying that the budget was delivered at two 0:16:08.000 --> 0:16:10.680 in the morning. What was it to eighteen? That's right, 0:16:10.720 --> 0:16:14.640 all right? So is there any possibility that the actual system, 0:16:14.680 --> 0:16:17.600 the machinery of government has broken down to the point 0:16:17.640 --> 0:16:21.120 where people just shrugged their shoulders when the federal government 0:16:21.160 --> 0:16:25.280 threatens to shut down. I think it's it is interesting 0:16:25.600 --> 0:16:27.480 the way that these things are done. You know, we 0:16:27.520 --> 0:16:30.840 have a democracy, yet bills are often rammed through before 0:16:30.840 --> 0:16:32.560 people really have a chance to read it. I think 0:16:32.600 --> 0:16:34.800 a lot of people will be voting on this bill 0:16:34.840 --> 0:16:37.440 on Wednesday, and they'll have really very little idea of 0:16:37.440 --> 0:16:39.760 what's in it. We all hear at Bloomberg. We have 0:16:39.840 --> 0:16:42.360 very good team at Bloomberg. Government as well are combing 0:16:42.400 --> 0:16:44.200 through all the texts of this and there's a lot 0:16:44.240 --> 0:16:47.640 of hidden provisions. Uh there. There's benefits from everyone from 0:16:47.720 --> 0:16:51.760 home builders to mining companies in here, you know. But 0:16:52.560 --> 0:16:54.880 the way these things are released it does raise questions 0:16:54.920 --> 0:16:57.280 about democracy, I have to say that well. And not 0:16:57.320 --> 0:17:00.080 only that, but also it only extends the deadline and 0:17:00.120 --> 0:17:03.120 for one, government would get shut down until September, right, 0:17:03.120 --> 0:17:04.680 I mean, we're gonna be doing this all over again 0:17:04.680 --> 0:17:06.479 in a couple of months, that's right. We are already 0:17:06.480 --> 0:17:09.119 seven months into the current fiscal year. There couldn't be 0:17:09.160 --> 0:17:12.919 any agreement. Actually it's spending Panel members tried to come 0:17:12.960 --> 0:17:15.600 up with an agreement in December, but President Trump, when 0:17:15.880 --> 0:17:18.359 he was coming in said he wanted to weigh in 0:17:18.359 --> 0:17:21.880 in order to influence the bills. But what's really striking 0:17:21.920 --> 0:17:24.520 about it is the lack of influence that the administration 0:17:24.560 --> 0:17:27.040 has on these bills. It's very much similar to the 0:17:27.760 --> 0:17:30.800 deal that was on the table in December. One notable exception, though, 0:17:30.880 --> 0:17:34.320 is a fifteen billion dollar increased to the Pentagon. Trump 0:17:34.320 --> 0:17:38.679 had sought a thirty billion dollar increase in Pentagon funding 0:17:38.880 --> 0:17:40.840 and he's going to get about half that well, and 0:17:40.920 --> 0:17:42.880 he will get about a billion dollars and a half 0:17:42.960 --> 0:17:45.240 for border security, but it can't use to be used 0:17:45.280 --> 0:17:49.959 for the border wall or additional ICE officials, immigration and 0:17:50.000 --> 0:17:52.280 Customs enforcement agents, right, I mean, so in other words, 0:17:52.280 --> 0:17:54.560 it's sort of he kind of got more support for 0:17:54.600 --> 0:17:57.879 some of his law enforcement push, but not really to 0:17:58.000 --> 0:18:01.280 exactly back his initiatives. Correct, that's right. I mean Democrats, 0:18:01.480 --> 0:18:04.159 many Democrats have been on record saying they support you know, 0:18:04.359 --> 0:18:07.879 increased border security, better you know, technology along the border, 0:18:08.240 --> 0:18:11.520 upgrades to existing equipment. They do not want to be 0:18:11.600 --> 0:18:15.479 seen backing Trump's call for a quote, deportation force. So 0:18:15.520 --> 0:18:17.560 that's why they put a restriction in the in this 0:18:17.600 --> 0:18:20.879 bill on hiring additional ICE agents. And they also do 0:18:20.920 --> 0:18:23.680 not want to fund a coast to coast border wall, 0:18:23.720 --> 0:18:26.080 which they view as an incredible waste of money, and 0:18:26.119 --> 0:18:29.000 they say that it would actually cost about seventy billion 0:18:29.040 --> 0:18:31.920 dollars if you went through and built that. I was 0:18:31.960 --> 0:18:35.720 looking at the reports about this legislation. It's over sixteen 0:18:35.800 --> 0:18:39.479 hundred pages. Correct, that's right. And that's just the text. 0:18:39.800 --> 0:18:43.560 There's also what's called explanatory statements where they explain or 0:18:43.600 --> 0:18:45.719 have other hidden provisions. So there's just a lot of 0:18:45.920 --> 0:18:47.880 paper that was was dumped on us in the middle 0:18:47.880 --> 0:18:49.639 of the night. Okay. The reason I bring that up 0:18:49.720 --> 0:18:52.040 is because I mean, has do you believe anybody has 0:18:52.080 --> 0:18:56.000 actually read all sixteen hundred and sixty five pages. I 0:18:56.040 --> 0:18:58.000 don't think there's one person I know there's Uh. The 0:18:58.000 --> 0:18:59.800 way they do is they have teams of staff re 0:19:00.040 --> 0:19:04.600 being through but that's that's broken up into eleven different subcommittees. 0:19:04.640 --> 0:19:06.920 So yeah, as to whether the chairman or anyone who's 0:19:06.920 --> 0:19:09.720 actually read the whole thing, I would tend to doubt it. 0:19:09.880 --> 0:19:12.520 So Eric, is the fact that the House and Senate 0:19:12.520 --> 0:19:16.600 Democrats and Republicans came to this agreement in itself representative 0:19:16.680 --> 0:19:20.560 of actually somewhat of a truce between both members of 0:19:20.680 --> 0:19:23.320 the different parties, I think so. I think it also. 0:19:23.480 --> 0:19:25.439 You know, the Trump has for for the next budget, 0:19:25.440 --> 0:19:29.199 the one that begins in September, called for very big changes, 0:19:29.240 --> 0:19:32.680 called for fifty four billion dollars and cuts to federal agencies, 0:19:32.720 --> 0:19:36.760 and already is having places like the Environmental Protection Agency 0:19:36.760 --> 0:19:39.960 and State Department prepare for a massive reductions in the 0:19:40.000 --> 0:19:43.520 federal workforce. I think it shows that Congress has very 0:19:43.520 --> 0:19:46.359 little appetite for that, and and those who work for 0:19:46.400 --> 0:19:49.320 the federal government may rest a little bit easier tonight 0:19:49.400 --> 0:19:52.480 that their jobs are more likely to be secure. Eric Wasson, 0:19:52.480 --> 0:19:54.080 thank you so much for joining us. Eric Watson as 0:19:54.119 --> 0:19:57.960 Congressional reporter for Bloomberg News based in Washington, d C. 0:19:58.160 --> 0:20:00.600 Talking about the one point one trillion dollar are spending 0:20:00.640 --> 0:20:03.200 bill that will likely be passed this week to stave 0:20:03.240 --> 0:20:06.800 off a government shutdown. Definitely something we will keep you 0:20:06.880 --> 0:20:21.840 up to date as we hear more details. Let's turn 0:20:21.920 --> 0:20:24.280 to a potential media deal I want to bring in 0:20:24.320 --> 0:20:29.639 Paul Swiney. Paul, of course, is our chief director of Research. 0:20:29.640 --> 0:20:32.240