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Extremely Low Odds For Infrastructure Bill Becoming Law: Dean · Bloomberg Intelligence

0:05
Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.
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Speaker 1: Along with my co host Lisa Abramowitz. Each day we
0:11
Speaker 1: bring you the most important, noteworthy, and useful interviews for
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Speaker 1: you and your money, whether you're at the grocery store
0:17
Speaker 1: or the trading floor. Find the Bloomberg P M L
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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. President
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Speaker 1: Donald Trump's a fiscal budget proposal calls for one point
0:37
Speaker 1: seven trillion dollars in cuts to mandatory spending and receipts
0:41
Speaker 1: and a two percent yearly reduction in non defense discretionary
0:45
Speaker 1: budget after twenty nine, but it also includes spending for infrastructure.
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Speaker 1: Here to tell us more about the plan is Nathan Dean,
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Speaker 1: our senior analyst Financial Services Policy for Bloomberg Intelligence, and
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Speaker 1: you can follow Nathan on Twitter at Nathan Dean d C.
1:01
Speaker 1: All Right, Nathan Dean d C. Tell us about this
1:04
Speaker 1: infrastructure proposal and what we should take away from it. So,
1:08
Speaker 1: the first thing you can take away from it is
1:10
Speaker 1: that the odds of this actually going into law extremely low.
1:12
Speaker 1: It's two billion in federal spending. That two billion would
1:16
Speaker 1: then entice the one point three trillion and spending that
1:19
Speaker 1: one point three trillion would come from local and state municipalities,
1:22
Speaker 1: would also come from the private sector. Uh, it's a
1:25
Speaker 1: five fifty five page plan. You know, this is a
1:27
Speaker 1: little bit more detailed than what we saw from the
1:29
Speaker 1: tax reform plan that came up from the White House,
1:31
Speaker 1: which is about eight or nine pages. Now it has
1:33
Speaker 1: to go to Congress to actually come up with a
1:35
Speaker 1: piece of legislation, and like I just said, during an
1:37
Speaker 1: election year, this is probably not the best time for
1:40
Speaker 1: this plan to come out. The odds of it actually
1:42
Speaker 1: passing are quite low. But that said, do we learn
1:45
Speaker 1: anything from this as far as what President Trump's approach
1:48
Speaker 1: will be to infrastructure spending of perhaps not something that
1:53
Speaker 1: will get implemented or even passed any time this year,
1:56
Speaker 1: but even even beyond well, you know, it's really a
1:59
Speaker 1: fundamental disagreement between the Republicans and the Democrats of who's
2:02
Speaker 1: going to pay for the infrastructure. So, you know, this
2:04
Speaker 1: plan is fairly it's a new idea. It's you know,
2:07
Speaker 1: let's actually dial back the frill spending and let's get
2:10
Speaker 1: public private partnerships and state and local municipalities put that up.
2:14
Speaker 1: Now that that's the problem because these P three's, they
2:17
Speaker 1: only account for about three percent of total infrastructure spend,
2:22
Speaker 1: and in its entirety, P three have only done about
2:24
Speaker 1: thirty billion dollars worth of spend. Uh, you know where
2:27
Speaker 1: this is something where they want one point three trillion
2:29
Speaker 1: to come out. The Democrats on the other side are
2:31
Speaker 1: saying this is extremely too low. And so I think
2:34
Speaker 1: the problem for this plan is that even if you
2:37
Speaker 1: were to get the sixty votes to go, you know,
2:39
Speaker 1: and pass this thing, because you can't use reconciliation. It's
2:41
Speaker 1: got to be a bipartisan measure. Even if you are
2:43
Speaker 1: to get that sixty sixty votes, then you need the
2:46
Speaker 1: state and local municipalities to pay for it or come
2:49
Speaker 1: up with their own user fees. So if you're sitting
2:51
Speaker 1: in New York, for example, and you're wondering whether or
2:53
Speaker 1: not this tunnel between New York and New Jersey are
2:54
Speaker 1: gonna come, well, then it's gonna be up to New
2:56
Speaker 1: York and New Jersey to decide, well, are we going
2:58
Speaker 1: to charge a fifteen dollar toll every time you go
3:00
Speaker 1: through that tunnel, etcetera. Okay, another thing that we are
3:03
Speaker 1: learning is that President Trump is going to call for
3:07
Speaker 1: one point seven trillion dollars in cuts to mandatory spending
3:11
Speaker 1: and receipt um. This he will be announcing later today
3:16
Speaker 1: as part of his fiscal year nineteen budget proposal. How
3:20
Speaker 1: realistic is that a one point seven trillion dollars and
3:23
Speaker 1: cuts and where are they likely to come? So the
3:25
Speaker 1: President President Trump's budget essentially is just something that we
3:30
Speaker 1: what we tell our our clients is don't pay attention
3:32
Speaker 1: to the big numbers, pay attention to the specifics the
3:35
Speaker 1: plan that they put out last week and they agreed
3:37
Speaker 1: to essentially set the budget. This thing is pretty much irrelevant. However,
3:41
Speaker 1: you know, there are specific things in there for specific industry.
3:44
Speaker 1: So if you're in the healthcare sector, for example, look
3:47
Speaker 1: at what they say specifically to the FDA for example.
3:50
Speaker 1: And then what we'll see is is that there there's
3:52
Speaker 1: a couple more must pass pieces of legislation coming up
3:55
Speaker 1: between now and the end of the year. Maybe you know,
3:57
Speaker 1: the Federal Aviation Administration has to be re author in March.
4:00
Speaker 1: That's the time where specific sectors could be inserted. So, uh,
4:05
Speaker 1: you know, avoid the high level noise goes specifically to
4:08
Speaker 1: the industries that you care about, and then look for
4:10
Speaker 1: those opportunities for the rest of the year. That's where
4:12
Speaker 1: some of that stuff may be inserted. Nathan, What are
4:14
Speaker 1: private activity bonds and how do they play into this conversation?
4:18
Speaker 1: So this is something that the Trump administration has pushed forth.
4:21
Speaker 1: It's a new way of financing. Uh. It's something that
4:24
Speaker 1: hasn't been really tested on this grant of a scale. UH.
4:27
Speaker 1: And so you know, that's one of the other hardships
4:29
Speaker 1: that's really coming up with this plan is that you know,
4:32
Speaker 1: they're coming up with a lot of new ideas and
4:33
Speaker 1: they're trying to say, this is where we want to
4:35
Speaker 1: take infrastructure. And I think everybody agrees that, you know,
4:38
Speaker 1: we need about five you know, billions and billions and
4:40
Speaker 1: billions of dollars of new infrastructure spending. The problem is
4:44
Speaker 1: how do you go forth and pay for these Republicans
4:46
Speaker 1: are trying you know, private activity bonds, they're trying local
4:49
Speaker 1: and state municipalities to try and get to pay for it.
4:52
Speaker 1: The Democrats just want the federal government to do it.
4:54
Speaker 1: So again, it's it's not like they're not coming up
4:57
Speaker 1: with good idea or new ideas. It's just the two
5:00
Speaker 1: teens done that, not the year to do it. What
5:02
Speaker 1: about the highway the federal highway tax you know for
5:05
Speaker 1: the Highway Trust Fund. Isn't that right? About eighteen cents
5:08
Speaker 1: a gallon right now hasn't really changed, No, and that's correct.
5:13
Speaker 1: And you know, this is something that the you know,
5:14
Speaker 1: the gas tax is something that the US Chamber has
5:16
Speaker 1: actually pushed and said, let's let's increase this. And you know,
5:19
Speaker 1: if the US Chamber is pushing that, let's go forth
5:22
Speaker 1: and do you know that that's something that's actually they're
5:24
Speaker 1: gonna give some political coverage to the Republicans pushing this.
5:27
Speaker 1: You know, one thing that we were Bloomberg Intelligence we've
5:29
Speaker 1: looked at in terms of the gas tax is that
5:31
Speaker 1: it really doesn't change behavior, uh in auto drivers. So
5:35
Speaker 1: if you're investing in auto companies, for example, twenty five
5:38
Speaker 1: or thirty cent gas tax isn't really going to change
5:41
Speaker 1: consumer behavior. It's the optics of putting in a tax, uh.
5:46
Speaker 1: When you know, we've just been lauding all these tax
5:48
Speaker 1: cuts and tax reform and so forth in the era
5:50
Speaker 1: of an election or an election year, the putting an
5:54
Speaker 1: additional gas tax on consumers is probably not good politics. So,
5:58
Speaker 1: you know, we don't think the gas tax is actually
6:00
Speaker 1: something to be too concerned about. Uh, you know, even
6:03
Speaker 1: if it were to go through, I don't think we
6:04
Speaker 1: would see much impact on uh, you know, position on
6:07
Speaker 1: the auto companies. How much unity is there right now
6:11
Speaker 1: among Republicans as they try to push this through and
6:15
Speaker 1: as we look at the details of the proposal where
6:18
Speaker 1: there might be actually some really intel So I don't
6:20
Speaker 1: think there's a lot of unity right now. I mean
6:22
Speaker 1: you'll hear it publicly. You know, everybody wants to say, yet,
6:25
Speaker 1: we need to do infrastructure spending. But you know, they've
6:27
Speaker 1: just passed tax reform, they've just passed a budget deal.
6:30
Speaker 1: You know, if you're on the Republican side and you're
6:33
Speaker 1: a deficit hawk, you know, there's not a lot of
6:35
Speaker 1: good standing for you right now. But uh, you have
6:38
Speaker 1: to go into an election year and you have to
6:39
Speaker 1: say that within ten years our deficit is going to be,
6:43
Speaker 1: you know, well above the twenty trillion dollars that it
6:47
Speaker 1: is right now, and so, uh, you know, there is
6:49
Speaker 1: some unity on the public side, but when they privately talk,
6:52
Speaker 1: I don't I don't think there is there. I think
6:54
Speaker 1: a lot of the Republicans, especially in the Senate and
6:56
Speaker 1: those who are running for reelection right now, we'll just say,
6:59
Speaker 1: you know what, this is a great plan, Thank you,
7:01
Speaker 1: White House. We're gonna take it. We're gonna review it. Uh,
7:03
Speaker 1: we're gonna spend the next two to three months talking
7:05
Speaker 1: about it, and then come summer, let's just move off
7:08
Speaker 1: and actually deal with the elections. So is there anything
7:10
Speaker 1: that we should take away from this that would actually
7:13
Speaker 1: be put into uh into place. I mean, maybe some
7:16
Speaker 1: kind of proposal that would actually gain some kind of agreement. Well,
7:21
Speaker 1: you know, again, I would just go back to the specifics.
7:23
Speaker 1: And you know, this fifty five page plan came out,
7:25
Speaker 1: and you know there's a lot of money in here
7:27
Speaker 1: for rural infrastructure projects. Uh. So that's something that I
7:32
Speaker 1: think that you know, both sides of the aisle would
7:34
Speaker 1: agree on. Uh. You know, infrastructure growth is going to
7:36
Speaker 1: be positive for two thousand eighteen. That's what we estimate anyway. Uh.
7:39
Speaker 1: You know, I don't think that this bill or this
7:41
Speaker 1: plan is going to enhance that all that much. Uh.
7:44
Speaker 1: You know, again, you need sixty votes in the Senate.
7:46
Speaker 1: I don't think they're gonna get it. Uh. And so
7:49
Speaker 1: I think what I would just say is is that
7:51
Speaker 1: you know, is This is just the first step of
7:54
Speaker 1: the negotiation, and that if the administration decides that they
7:57
Speaker 1: want to try and do infrastructure again in ten this
8:00
Speaker 1: is something that they can start working with and maybe
8:02
Speaker 1: dial it down. So that's not one point five trillion.
8:05
Speaker 1: But you know, again, I just say stay tuned. Nathan Dean,
8:09
Speaker 1: thank you so much for joining us. Nathan Dean, senior
8:12
Speaker 1: analyst for Financial services policy for Bloomberg Intelligence, coming to
8:17
Speaker 1: us from our Bloomberg studios in Washington, d C. I
8:33
Speaker 1: want to bring in Jason Shanker. He is the president
8:36
Speaker 1: and the founder of Prestige Economics. He is also a
8:39
Speaker 1: Bloomberg prophet. Bloomberg Profits are professionals offering actionable insights on
8:44
Speaker 1: markets and the economy as well as monetary policy. He's
8:48
Speaker 1: based in Austin, Texas. Jason, the topic is commodities. What
8:53
Speaker 1: is the best commodity to invest in? Now, well, there
8:59
Speaker 1: are a number are different commodities that I think offer
9:03
Speaker 1: opportunities to leverage what's going on in the global economy.
9:07
Speaker 1: We don't normally, we don't offer explicit investment advice, but
9:11
Speaker 1: you know, I'd say that if we're looking at what's
9:13
Speaker 1: going on in the global economy. I think that um
9:16
Speaker 1: China offers big insights into what will happen with aluminum
9:20
Speaker 1: with oil. Just this morning Opex monthly oil report was out.
9:24
Speaker 1: China is expected to see even greater oil demand growth
9:28
Speaker 1: than last year the global economy. Those I m F
9:30
Speaker 1: numbers really convey that industrial metals and oil prices are
9:34
Speaker 1: like to see some upward pressure. And that's despite the
9:37
Speaker 1: fact that there's potential for capacity to come online, especially
9:41
Speaker 1: for say oil with with shale. But a lot of
9:44
Speaker 1: this will hinge on what happens with the outlook for
9:47
Speaker 1: the global economy, the outlook for the dollar, and I
9:50
Speaker 1: think US inflation will remain the biggest question as to
9:54
Speaker 1: how much upside there really is for monty prices. You know, Jason,
9:58
Speaker 1: I want to I want to home in on oil
10:00
Speaker 1: because last week we had the worst week for crude
10:04
Speaker 1: I believe since twenty sixteen and two years, and today
10:07
Speaker 1: we are seeing a little bit of a bounds. But
10:09
Speaker 1: you know, you were talking about the good numbers that
10:11
Speaker 1: we're getting out of China. It's surprising, it's not more
10:14
Speaker 1: if people really believed that there was significant further upside
10:18
Speaker 1: for oil. So you know, how far could we go
10:20
Speaker 1: right now, we're underneath sixty dollars of barrel? Where do
10:24
Speaker 1: you see crewde ending the year? Well, for the year's
10:29
Speaker 1: average price, you know we see w t I between
10:31
Speaker 1: sixty and sixty five. But you know we're going to
10:33
Speaker 1: have a really hot driving season this year. You know,
10:35
Speaker 1: the job markets that's been since two thousands, two thousand one,
10:40
Speaker 1: we've seen. Uh. Now with the tax cuts, people are
10:44
Speaker 1: gonna have more disposable income. You're gonna see this be
10:48
Speaker 1: a very big, rocking driving season. And that means that
10:52
Speaker 1: gasoline demand in the US is going to be very strong,
10:56
Speaker 1: and that drives global oil prices. So once we get
11:00
Speaker 1: to the latter part here of Q one and we
11:02
Speaker 1: go into Q two and we see the ramp up
11:05
Speaker 1: for the US driving season, there's going to be a
11:07
Speaker 1: lot of demand for refineries for crude oil, and that
11:10
Speaker 1: could some prices higher. We could see spikes to seventy,
11:13
Speaker 1: We could see spikes above that. I wouldn't expect those
11:16
Speaker 1: to be sustained prices because the shale drillers are going
11:19
Speaker 1: to see those spikes as opportunities to lock in production
11:23
Speaker 1: at a certain price level. But I think you're gonna
11:25
Speaker 1: see most of the price action for the year being
11:28
Speaker 1: the six sixty five range for w t I and
11:31
Speaker 1: a few dollars higher for brents. So but one of
11:34
Speaker 1: the question though with oil, how much is uh sort
11:37
Speaker 1: of the direction of prices they're dependent on the dollar,
11:39
Speaker 1: because we are seeing a bit of a rebound today
11:42
Speaker 1: in prices, although not recouping even the losses on Friday. Uh,
11:46
Speaker 1: And of course the dollar is weakening a little bit,
11:49
Speaker 1: and this has sort of been a move in tandem.
11:51
Speaker 1: So how much do you sort of judge that? Well,
11:55
Speaker 1: that's more of a long term thing, you know, we've
11:56
Speaker 1: looked at these dollar crude price dynamics. That's more of
11:59
Speaker 1: a long term uh. You know, over a multi year
12:02
Speaker 1: period or over a single year period, you can see
12:05
Speaker 1: that there's an inverse correlation. What's more important is the
12:08
Speaker 1: expectation of how stable is growth. And that's why I
12:11
Speaker 1: say US inflation is gonna be really important right now.
12:14
Speaker 1: That's CPI report on Wednesday is going to be critical
12:16
Speaker 1: for what happens to the dollar, what happens to equities,
12:19
Speaker 1: what happens to oil, what happens to metals, Because the
12:23
Speaker 1: sell offs we've seen not just in oil, but in equities,
12:27
Speaker 1: the rebound in the green back and the rise in
12:30
Speaker 1: bond yields that was all triggered by the wage inflation
12:33
Speaker 1: in the February second release of that January jobs report
12:37
Speaker 1: that was two point nine percent year over year. And
12:40
Speaker 1: so I think you're gonna see folks looking for this
12:42
Speaker 1: to be you know, kind of a modest CPI report
12:44
Speaker 1: and and that would you know, potentially send oil prices,
12:48
Speaker 1: medals prices, equities back up on yields, and the dollar
12:51
Speaker 1: back down. But against that backdrop, if you get a
12:54
Speaker 1: surprise of more inflation, uh, then you know that that
12:58
Speaker 1: party is over and you see these things take another hit.
13:01
Speaker 1: So I think that's the biggest economic data point to watch,
13:04
Speaker 1: and that's going to impact what happens to prices right
13:07
Speaker 1: for a couple of weeks because you've got um Now,
13:10
Speaker 1: then the eyes will be on the next FED meeting
13:12
Speaker 1: where we expect the rate high can we have been
13:14
Speaker 1: for a number of months? Jason just quickly, does that
13:17
Speaker 1: mean that it would be a good investment refining companies
13:21
Speaker 1: oil refineries like Marathon patrol it Well, you know we
13:26
Speaker 1: don't comment on specific company names. You know, it'll depends
13:29
Speaker 1: what they called the crack spreads, and crack spread is
13:31
Speaker 1: a profit margin between product and crewde prices. UM. You know,
13:34
Speaker 1: if you were to see the demand for those products
13:38
Speaker 1: be high and crew prices below, then that should make
13:40
Speaker 1: the profit margins for refineries UH quite high. Especially if
13:45
Speaker 1: we see that that that demand that driving season be
13:48
Speaker 1: as strong as we expect to. Refineries are likely as
13:51
Speaker 1: an industry to do well going into the driving season.
13:55
Speaker 1: Jason Shanker, thank you so much for joining us. Jason Shanker,
13:58
Speaker 1: president and founder of Prestige Economics. He also is a
14:02
Speaker 1: Bloomberg Profit writing columns on everything from commodities to equities.
14:07
Speaker 1: Thank you so much for being with us. For e
14:23
Speaker 1: t F that has been largely a one way road
14:26
Speaker 1: over the past few years with investors pouring money into
14:30
Speaker 1: these funds. Last week there was a change with exchange
14:34
Speaker 1: traded funds seeing thirty one billion dollars in withdrawals. You
14:38
Speaker 1: to talk about the industry, Karen Shnoony. She has a
14:40
Speaker 1: fixed income strategist for black Rock based in San Francisco. UH,
14:44
Speaker 1: And Karen, before we get into a study that black
14:47
Speaker 1: Rock conducted about E t F investing, I want to
14:50
Speaker 1: get your take on last week because we did see
14:53
Speaker 1: some very big withdrawals across the board from some corporate
14:57
Speaker 1: debt fixed income ETFs, but really from the big broad
15:01
Speaker 1: US equity e t s. Is this a signal of
15:04
Speaker 1: something broader? And are are you concerned about it? No,
15:08
Speaker 1: we're not concerned. What we tend to see whenever we
15:11
Speaker 1: have these market sell offics is ets really step in
15:14
Speaker 1: and help the capital markets because they provide pricing transparency
15:17
Speaker 1: and they allow a lot of investors to be able
15:19
Speaker 1: to get in an out of asset classes very easily.
15:23
Speaker 1: Having said that, maybe you could just step back and
15:25
Speaker 1: tell us about this survey for a moment and what
15:28
Speaker 1: you learned that may be surprising to some investors. Absolutely, so,
15:33
Speaker 1: black Rock conducted an e t F Pulse survey, and
15:36
Speaker 1: this talks to both investors who are users of ets
15:40
Speaker 1: and non users of ets to really help them help
15:42
Speaker 1: us understand what's driving their behavior and how they think
15:45
Speaker 1: about ets. So there were some pretty interesting trends that
15:48
Speaker 1: came out of this year's surveys. About one in three
15:50
Speaker 1: investors right now is using e t s and they're
15:53
Speaker 1: using them in a variety of different nasset classes, not
15:56
Speaker 1: only that we've noticed that the holding period for e
15:58
Speaker 1: t s has really increased. So it was only about
16:01
Speaker 1: five years was the average holding period. That's increased to
16:04
Speaker 1: five point seven years, and we're seeing that over of
16:08
Speaker 1: investors plan on keeping their et F holdings over eleven years.
16:11
Speaker 1: So we're releasing that these are low cost investments that
16:13
Speaker 1: are really driving the core of investors portfolios UM. But
16:16
Speaker 1: one of the other interesting things that we noticed was
16:19
Speaker 1: the boomers, the baby Boomers actually had some of the
16:21
Speaker 1: lowest usage of ETS, even below the silver's Gen X
16:25
Speaker 1: and millennials in terms of their portfolio adoption. Karen, what's
16:28
Speaker 1: the breakdown with respect to institutional use versus retail use?
16:35
Speaker 1: So at least I would say it depends on the fund.
16:38
Speaker 1: What we've noticed this with some of the larger, most
16:40
Speaker 1: liquid funds, we are seeing more institutional adoption. It can
16:42
Speaker 1: be as high as sixty seventy UM, but we're noticing
16:46
Speaker 1: with some of the smaller, newer funds or more niche exposures,
16:49
Speaker 1: it still is primarily dominated by retail. But in general,
16:52
Speaker 1: we're seeing more pension plans, insurance companies, either other other
16:55
Speaker 1: asset managers using ETS as a way to get exposure
16:58
Speaker 1: to different asset classes to give any reason for why
17:01
Speaker 1: they are opting for exchange traded funds, Yes, I think
17:05
Speaker 1: some of the biggest reasons that we're seeing is that
17:07
Speaker 1: people are starting to use them more as a long
17:09
Speaker 1: term holding. And we're also seeing that some people are
17:12
Speaker 1: migrating away from using actively managed mutual funds, and I
17:15
Speaker 1: think the flows um helped demonstrate that narrative as well.
17:19
Speaker 1: Just as we've seen a lot of money coming out
17:20
Speaker 1: of especially active stock funds in favor of more index products.
17:24
Speaker 1: So with respect to pensions, uh, and say perhaps even
17:28
Speaker 1: insurance companies, which funds do they tend to gravitate toward?
17:33
Speaker 1: And what what are et f s replacing? Is it
17:35
Speaker 1: managed to counts exactly what you're saying. Uh. Some of
17:38
Speaker 1: it is individual bonds, so they might be especially on
17:41
Speaker 1: the fixed income side. We might see pension plans and
17:43
Speaker 1: insurance companies. They've they've been very big buyers of individual securities.
17:48
Speaker 1: They're also looking for creative ways to build liquidity into
17:51
Speaker 1: their portfolios so they can be more nimble as well.
17:53
Speaker 1: So we're seeing go ahead, so know that, just to
17:55
Speaker 1: make sure that I understand this. In other words, Uh,
17:57
Speaker 1: they might own specific bonds which is not E t
18:01
Speaker 1: F s U, and they would go after and uh
18:04
Speaker 1: look at specific securities that they analyze, but they would
18:07
Speaker 1: then have basically E t F exposure that they could
18:10
Speaker 1: sell if they wanted to change their positioning. On a
18:13
Speaker 1: broad level, that's right. Our our flagship investment grade corporate
18:17
Speaker 1: bond fund l q D is being held by quite
18:19
Speaker 1: a bit of insurance companies and pension plans because they
18:23
Speaker 1: know that they can get that exposure to corporate bonds
18:25
Speaker 1: that they're looking for in a much more diversified liquid
18:27
Speaker 1: way than they compare that with maybe other securities that
18:30
Speaker 1: are higher and book yield that they wanted to buy
18:33
Speaker 1: um and then they can do the look through and
18:36
Speaker 1: DTF to see how much exposure they have to individual issuers.
18:39
Speaker 1: When you mentioned the sort of relative popularity of exchange
18:44
Speaker 1: traded funds between millennials and other age cohorts, could it
18:48
Speaker 1: be possible that, you know, millennials, they may be invest
18:52
Speaker 1: through there for oh one K plans and many for
18:54
Speaker 1: oh one case don't include e t F s as
18:56
Speaker 1: an option. You're right, A lot of foreign k as,
19:00
Speaker 1: a lot of retirement plans don't currently have very much
19:02
Speaker 1: at F usage, but we found that the millennials indicated
19:05
Speaker 1: that about forty of them do own E t F
19:09
Speaker 1: and the current allocations about eighteen percent. So we're seeing
19:12
Speaker 1: that especially with robo advisors. UM it's a very popular
19:15
Speaker 1: way for millennials to invest because they can literally use
19:18
Speaker 1: an app on their phone to do it. So we're
19:20
Speaker 1: finding that that's one of the ways that a lot
19:22
Speaker 1: of monials get started with investing, and those robo advisors
19:24
Speaker 1: are using a lot of ets. Just real quick, Karen,
19:27
Speaker 1: I'm wondering from your perspective, how much can people read
19:30
Speaker 1: into flows as being significant with respect to a broad market.
19:34
Speaker 1: I'm I'm thinking about l QT, which you were talking
19:36
Speaker 1: about just then, with insurance companies and pensions. It saw
19:40
Speaker 1: about two billion dollars about outflows over the past week.
19:43
Speaker 1: Is that significant? I think it's just an indication that
19:47
Speaker 1: a lot of investors are either a thinking that credit
19:50
Speaker 1: spreads are very tight and maybe they want to lighten
19:53
Speaker 1: up some of their corporate credit. Maybe they might want
19:55
Speaker 1: to go to either risk your securities, like we've seen
19:57
Speaker 1: a lot of them flows into emerging market debt. The
19:59
Speaker 1: last few weeks, we've seen some people using the price
20:02
Speaker 1: dislocation in the equity markets as a as a buying
20:04
Speaker 1: opportunity to go back into equities. So I think you
20:07
Speaker 1: can look at thet F flows and understand that they're
20:09
Speaker 1: indicative of broader sentiment on an asset class. Thanks very
20:13
Speaker 1: much for being with us. Karen Shinnoni is fixed income
20:15
Speaker 1: strategist for black Rock, joining us from San Francisco, giving
20:19
Speaker 1: us details about the results of their latest black Rock
20:23
Speaker 1: e t F Pulse survey, Luxury travel in Asia. What
20:40
Speaker 1: makes it luxurious? Let's find out more from deep pac Ory.
20:43
Speaker 1: He is the chief executive of Lebua Hotels and Resorts.
20:47
Speaker 1: They are based in Bangkok, and Deepak joins us here
20:51
Speaker 1: in our eleven three oh studios. Thank you very much
20:53
Speaker 1: for being here. Thank you very much. All right now
20:55
Speaker 1: you're going to have to do all the pronunciations here
20:57
Speaker 1: because this is a new world for many of us.
21:00
Speaker 1: And maybe you could just describe your background and how
21:03
Speaker 1: you came to be employee number one. I came to
21:07
Speaker 1: Bangkok for honeymoon and we went to Bangkok and my
21:10
Speaker 1: wife said, you know what, I love this city and
21:12
Speaker 1: I'm not going back. And I said, okay. Then we
21:14
Speaker 1: stay there and then this was building after the financial
21:17
Speaker 1: crisis seven years lying vacant and no interior designer wanted
21:21
Speaker 1: to design that. We came to us. We went to
21:23
Speaker 1: Hong Kong, London, uh and we ended up hiding an
21:27
Speaker 1: office designer to design our first restaurant. And actually, the
21:31
Speaker 1: the reason we are quite known in luxury today is
21:34
Speaker 1: ours is the inverted moderate. Meaning most of the hotel
21:37
Speaker 1: companies in the world start with the hotels and then
21:39
Speaker 1: go to the restaurants. We started with the restaurant, building
21:42
Speaker 1: a luxury and then came with the hotel. I want
21:45
Speaker 1: to talk to you about where tourists come from that
21:49
Speaker 1: visit your your hotels, because you know, there was this
21:52
Speaker 1: story on the Bloomberg yesterday that I thought was really
21:55
Speaker 1: interesting talking about how China is emerging as one of
21:58
Speaker 1: the biggest provide are of tourists around the world. Frankly, okay,
22:03
Speaker 1: I'm not flattering Bloomberg listeners, but still in the world,
22:07
Speaker 1: the number one luxury spending comes from the United States
22:10
Speaker 1: of America. Okay, so when I say number one luxury spending,
22:14
Speaker 1: China is a blip meaning they have to put a
22:16
Speaker 1: tick mark. So the population is huge they've got a
22:19
Speaker 1: lot of money, they will go shop. They have take
22:22
Speaker 1: that box, then they will continue. But in US, when
22:25
Speaker 1: it comes to luxury, it's become a not a luxury,
22:28
Speaker 1: but it's become a style. And in Asia, if we
22:31
Speaker 1: have to pick up any countries, Japan, because after World
22:33
Speaker 1: War Two, Japan became very financially independent and they started
22:38
Speaker 1: spending on luxury like that. So China is more of
22:41
Speaker 1: a mass tourism than luxury. Is there a difference in
22:45
Speaker 1: how you cater to different clients depending on where they're from.
22:49
Speaker 1: I mean, they sort of demand different things, so we
22:52
Speaker 1: cannot cater to different clients. If I will be telling
22:54
Speaker 1: that we cater to different clients with the different needs,
22:57
Speaker 1: I'll be telling a lie. So we have a model
22:59
Speaker 1: that this is what we all king at in our
23:00
Speaker 1: clients and we put filters. Our filters are menu prizing,
23:06
Speaker 1: the dress codes, the design of the restaurants, and that's
23:09
Speaker 1: how people come to us. Uh. You know, when I
23:13
Speaker 1: asked you about your background, there's more than just a
23:16
Speaker 1: honeymoon in in Bangkok, because you have experience working for
23:20
Speaker 1: the Kampinski German kamp Pinsky brands as well as TAJ International.
23:27
Speaker 1: Was that what allowed you to gain the credibility to
23:30
Speaker 1: raise the money in order to build out the hotel business.
23:35
Speaker 1: That I met the promoters in Thailand, so they were
23:38
Speaker 1: high promoters. Just the credibility came neither from Kapinsky nor
23:42
Speaker 1: from that, but came from Carlson. I I did work
23:46
Speaker 1: for Region Brand for some period of time. That was
23:48
Speaker 1: brought by Carlson at that point of time, So that's
23:50
Speaker 1: where the credibility came. But actually the credibility came to us.
23:54
Speaker 1: Anybody could have done that project at that point in
23:56
Speaker 1: time because nobody wanted to touch it. We ended up
23:59
Speaker 1: hiding office as anato designer restaurant, and today it is
24:02
Speaker 1: the hottest restaurant. You know, there's a saying you can
24:04
Speaker 1: visit Rome and not visit Vatican, but when you visit
24:06
Speaker 1: Bangkok you have to visit Laboa otherwise it's a said,
24:09
Speaker 1: So anybody could have done that. And this is the Dome.
24:12
Speaker 1: This is the Dome, and this became sort of an
24:15
Speaker 1: icon right in the city. It became an icon. See
24:18
Speaker 1: when we opened Dome in ther two thousand three, Hiroco,
24:22
Speaker 1: there was no rooftop restaurant in New York today. You
24:24
Speaker 1: tell me sitting here. How many rooftop places are there?
24:27
Speaker 1: So we started a trend. We started a trend. Just
24:30
Speaker 1: to give an example, we have a champagne bar which
24:32
Speaker 1: is eighteen square meter. Only eighteen square meter one particular
24:36
Speaker 1: champagne is sold more than whole Singapore, including duty free Singapore.
24:40
Speaker 1: I'm talking about city, so so you can imagine what
24:44
Speaker 1: kind of clientele what And it's a corporate b city,
24:47
Speaker 1: developing city. So the luxury market group by about five
24:51
Speaker 1: last year. I'm wondering, what's the sort of price point
24:56
Speaker 1: for say a night in a hotel or for an entree.
25:00
Speaker 1: Uh that is sort of enough that you can survive
25:04
Speaker 1: and thrive. That won't okay? So I say, are depends
25:09
Speaker 1: on what kind of restaurants. So if if we go
25:12
Speaker 1: to our two Michigan Star restaurant, which is Mezzaluna, it's
25:14
Speaker 1: a set coast, so that sets you per person, including
25:18
Speaker 1: some beverages not all in some and the room. I
25:23
Speaker 1: think the cheapest room rate in the world comes from Bangkok.
25:27
Speaker 1: It's because of supply and demand, and though the supply
25:30
Speaker 1: is huge, thirty five million tourists ended up in near
25:33
Speaker 1: two thousand seventeen. It is the second year. That is
25:37
Speaker 1: the largest tourist in bound tourism in any city in
25:40
Speaker 1: the world million. So it's sort of because it's cheaper
25:45
Speaker 1: though because there are more because of the experience. So
25:48
Speaker 1: see when we talk about luxury prices a nonrelative, it's
25:52
Speaker 1: the experience. You know, when a customers start looking at
25:54
Speaker 1: the right side of the menu, he's not looking at
25:58
Speaker 1: the luxury, he's just looking at the price. So it
26:01
Speaker 1: can be cheap, it can be expensive, it doesn't matter.
26:03
Speaker 1: It's an experience. Thank you so much for being here.
26:06
Speaker 1: Thank you, Lisa. Thank you Ari, chief executive officer of
26:09
Speaker 1: Leboa Hotels and Resorts based in Bangkok, Thailand, and the
26:14
Speaker 1: luxury travel market is certainly huge and growing rapidly and
26:20
Speaker 1: definitely a trend to watch as it does contribute so
26:23
Speaker 1: much to the economy. Thanks for listening to the Bloomberg
26:30
Speaker 1: P and L podcast. You can subscribe and listen to
26:33
Speaker 1: interviews at Apple Podcasts, SoundCloud or whatever podcast platform you prefer.
26:38
Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm
26:41
Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.
26:45
Speaker 1: You can always catch us worldwide on Bloomberg Radio