Latest / Bloomberg Intelligence / Revival Of Steel Tariffs May Be A Signal To China

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Revival Of Steel Tariffs May Be A Signal To China · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul Swinge you,
• 0:05
  Speaker 1: along with my co host Lisa Brahma Waits. Each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
• 0:10
  Speaker 1: you and your money, whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. The day started with some tweets
• 0:21
  Speaker 1: from President Trump saying that he planned to re implement
• 0:24
  Speaker 1: some tariffs on Argentina and Brazil having to do with
• 0:27
  Speaker 1: steal as a results of their devaluing their currencies. He also, though,
• 0:31
  Speaker 1: said that China was on board with getting some sort
• 0:34
  Speaker 1: of trade deal done, but if they didn't do it
• 0:37
  Speaker 1: that he would escalate tariffs. To try to make sense
• 0:39
  Speaker 1: of all of these cross winds, Damian Sasa are joining
• 0:41
  Speaker 1: us now, chief Emerging market credit strategist for Bloomberg Intelligence,
• 0:46
  Speaker 1: as well as Brendan Murray. The trades are for Bloomberg,
• 0:49
  Speaker 1: so let's head to our trades are first. Brendon lay
• 0:52
  Speaker 1: out the land for us in terms of trade headlines
• 0:55
  Speaker 1: this morning. Yes, so there was a lot to unpack
• 0:57
  Speaker 1: this morning, And at about six am Washington time, the
• 1:01
  Speaker 1: President tweeted, uh this stuff about Brazil and Argentina and
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  Speaker 1: reinstating the steel and aluminum tariffs which had been uh
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  Speaker 1: sort of uh lifted a little over a year ago
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  Speaker 1: to those two countries. And his justification was that they
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  Speaker 1: were uh they as he said, they were massive devaluations
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  Speaker 1: of those currencies, which is not good for American farmers.
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  Speaker 1: So he said he's restoring those uh tariffs on those
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  Speaker 1: medals immediately, and uh and and the and the market
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  Speaker 1: fallout from that was, you know that U S steel
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  Speaker 1: companies shares rows and Brazilian steelmakers shares declined, and so
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  Speaker 1: it was. It was another even by Trump standards, surprise
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  Speaker 1: for for everyone this morning. So, Damian, let's focus on
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  Speaker 1: some of those emerging markets, UM, Argentina and Brazil. What
• 1:49
  Speaker 1: does this news mean for those countries and just kind
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  Speaker 1: of investments in those economies. Well, it's still very great
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  Speaker 1: in terms of exactly what he's announced here. But I mean, Paul,
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  Speaker 1: you make a good point. I mean, this is actually
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  Speaker 1: the first time that Trump has actually um initiated tariffs
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  Speaker 1: due to currency manipulation. Go figure, right, this is actually
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  Speaker 1: the first time he's done it, so you know, let's
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  Speaker 1: take that for what it's worth. But really, you know,
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  Speaker 1: he didn't elaborate on the level of the tax. I mean,
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  Speaker 1: if we just look backwards, yeah, okay, we can assume
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  Speaker 1: maybe a tarafund steel, another ten percent on aluminium because
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  Speaker 1: that's what we had earlier this year. But look, I
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  Speaker 1: mean this hurts you as steelmakers who are relying on
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  Speaker 1: Brazilian exporters for their components anyway, So it's really kind
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  Speaker 1: of difficult to gauge who wins and who loses at
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  Speaker 1: this point, especially when this is done in lieu of
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  Speaker 1: the ongoing China U s trade discussions, And to me,
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  Speaker 1: it just seems like a signal he's trying to send
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  Speaker 1: to China more than anything else. Do you think that
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  Speaker 1: he's going to reimplement these tariffs? I mean, is this
• 2:41
  Speaker 1: basically a done deal? Well, wilber Ross was just on
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  Speaker 1: the tape saying December fifte is the deadline. He's reaffirmed that,
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  Speaker 1: so I mean, it's it's anyone's guess as to how
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  Speaker 1: serious Trump is. But you know, I mean, when when
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  Speaker 1: wilber Ross does kind of you know, draw that line
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  Speaker 1: in the Santa I think a lot of investors, myself included,
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  Speaker 1: are shure to take note of it. So Brendan, give
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  Speaker 1: us just sense of this on again, off again, you know,
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  Speaker 1: just the tweet of the day. Is there a sense
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  Speaker 1: that a Phase one deal is still something that both
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  Speaker 1: sides can get to maybe at or near this December
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  Speaker 1: fifte date. Let me just go back to the steel
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  Speaker 1: aluminum terrorists. First. There is a question about this threat
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  Speaker 1: that he uh he issued today, about whether it's even
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  Speaker 1: legal that he can do that. So, um, you know,
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  Speaker 1: once once, once the experts figure that out, um, you know,
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  Speaker 1: then then I think we can assess what the damage
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  Speaker 1: might be. As far as the China tariffs, Um, we've
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  Speaker 1: been hearing for weeks now that this that this thing
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  Speaker 1: was imminent, that you know, they're in the final stages,
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  Speaker 1: and we've h and the latest we get is that
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  Speaker 1: they're not quite there yet. So and they're still haggling
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  Speaker 1: over the same basic things that they were haggling over
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  Speaker 1: six months ago. So the longer time drags out here
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  Speaker 1: and the closer we get to December fifteenth, for now,
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  Speaker 1: you know, less than two weeks from there. Uh, you know,
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  Speaker 1: the more I think investors are gonna worry that you
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  Speaker 1: know this, this isn't coming together, and we are going
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  Speaker 1: to get the tariffs that the President threatened, you know.
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  Speaker 1: He he issued another tweet today which kind of went
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  Speaker 1: under the radar screen that said, uh, you know, the
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  Speaker 1: stock market is up twenty one since uh, you know,
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  Speaker 1: March when I first started the tariffs. Um, you know,
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  Speaker 1: and and so you wonder what he's kind of laying
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  Speaker 1: the groundwork for here. Is it bad news or good news?
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  Speaker 1: You know, you can make a case for either one. Really,
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  Speaker 1: take me in our Argentina and Brazil manipulating their currency. Well,
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  Speaker 1: let's start with Argentina. The answer there is assuredly no,
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  Speaker 1: because the currency is so liquid, it's so it's capital constrained.
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  Speaker 1: Now after the you know, everything that's gone on in
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  Speaker 1: the country. I mean, they've they've lost complete control of it.
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  Speaker 1: I mean I wouldn't. I would go so far as
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  Speaker 1: to argue that the Argentine pace it wasn't worth the
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  Speaker 1: paper it's written on, right, I mean, that's what most
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  Speaker 1: investors think. No off shore overseas institutional investor has the
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  Speaker 1: risk tolerance to move into pace of denominated assets at
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  Speaker 1: this point in time. In my opinion, there's a's a
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  Speaker 1: different story and Brazil. I mean, look, you've got to
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  Speaker 1: be clear here, when when the rail kind of moved
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  Speaker 1: through that for twenty threshold, which we saw just a
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  Speaker 1: few weeks ago, you know, that was a pretty big move.
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  Speaker 1: I don't think they wanted that to happen. In fact,
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  Speaker 1: if you just look at some of their FX swap
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  Speaker 1: activity and some of the things that they do to
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  Speaker 1: sort of manage the volatility around the dollar rayale, you know,
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  Speaker 1: they were pretty mindful. They kept defending that for twenty level.
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  Speaker 1: So the fact that it went through, and I think
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  Speaker 1: I don't think it has much to do with the
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  Speaker 1: fact that they were allowing it to depreciate. I think
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  Speaker 1: it was more than markets pushing back. And so right
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  Speaker 1: now the rails off over eight percent year to date. UM,
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  Speaker 1: I think it's a good time to probably start looking
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  Speaker 1: at the local denominated debt in Brazil. I mean, it's
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  Speaker 1: it's it's definitely attractive at these levels receiving in the
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  Speaker 1: front end. Damien Sassi are chief Emerging Markets credit strategist
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  Speaker 1: for Bloomberg Intelligence and Brendan Murray uh Bloomberg Trade reporter,
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  Speaker 1: joining us from the London Damien here in our Bloomberg
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  Speaker 1: Interactor Broker Studio. Thank you both for that those comments
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  Speaker 1: on what has been a busy day on the trade
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  Speaker 1: front tariffs Trump. President Trump reaginstating some tariffs on Brazil,
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  Speaker 1: uh and Argentina, while still making some broadly positive comments
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  Speaker 1: about the China trade negotiations that China wants a deal
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  Speaker 1: and the US wants the right deal, so we will
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  Speaker 1: continue to follow that story well. For quite a long time,
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  Speaker 1: global interest rates have been at exceptionally low levels, including
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  Speaker 1: the US. We even have a significant developed markets such
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  Speaker 1: as Germany and Japan with negative interest rates. Is that
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  Speaker 1: a good thing going forward long term for the global economy?
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  Speaker 1: Our next guest, I think can help us answer that,
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  Speaker 1: Dr Brendan Brown. He's a senior fellow at the Hudston
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  Speaker 1: Institute and publisher of the newsletter Monetary Scenarios at the
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  Speaker 1: Hudsdon Institute based in London, but joining us here in
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  Speaker 1: our Bloomberg Interactive Broker Studio. Dr Brown, thanks so much
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  Speaker 1: for joining us. Just help us put into contests this
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  Speaker 1: interest rate environment, this easy money environment that we've seen
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  Speaker 1: around the world and again most notably Germany with negative
• 7:01
  Speaker 1: interest rates in Japan. Is that a good thing or
• 7:05
  Speaker 1: a bad thing for the global economy? Well, I would say,
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  Speaker 1: first of all, low interest rates in this radical monetary
• 7:10
  Speaker 1: policy has been a good thing for the masters of
• 7:13
  Speaker 1: the central banks governments. It's saved from a lot of
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  Speaker 1: interest rate cost on massive budget deficits or overhang of
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  Speaker 1: government debt. And they've been able to do this because
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  Speaker 1: the fundamental background for global economy has been disinflationary, falling
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  Speaker 1: tendency of prices due to technological change and globalization. I
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  Speaker 1: would say, as far as you and I and general
• 7:35
  Speaker 1: prosperity goes, if they've been a bad thing there. In
• 7:38
  Speaker 1: several ways, this low interest rate environment has has held
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  Speaker 1: back prosperity. It's encouraged a lot of malinvestment. It's created
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  Speaker 1: a lot of uncertainty about a long term picture, which
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  Speaker 1: has held investment back. It's spurred monopoly power by creating
• 7:55
  Speaker 1: desperation for yield and what do people like at the moment.
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  Speaker 1: It's anything which claims it will have monopoly power in
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  Speaker 1: the future. And all these things together have weighed on prosperity.
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  Speaker 1: So when you look at for general picture now, I
• 8:09
  Speaker 1: don't believe investment spending or slow growth as a result
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  Speaker 1: of the crash ten years ago. I believe it's a
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  Speaker 1: result of cumulative malinvestment in all these forces I'm talking about.
• 8:19
  Speaker 1: What's monetary pessimism. Well, monitory pessimism has many strands. I've
• 8:23
  Speaker 1: talked of several here, with monopoly power, the the the
• 8:29
  Speaker 1: these radical monetary policies producing low growth and prosperity and
• 8:32
  Speaker 1: weighing on investment. I would save us two aspects of
• 8:36
  Speaker 1: monetary pessimism miss pessimism, which have been false. That is,
• 8:40
  Speaker 1: first of all, the belief that all this radical monetary
• 8:43
  Speaker 1: policy will create high inflation soon. That clearly isn't the
• 8:45
  Speaker 1: case in our disinflationary environment. And the other aspect of
• 8:49
  Speaker 1: monetary pessimism which has proved false has been the belief
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  Speaker 1: that it's all going to fizzle out quite soon and
• 8:53
  Speaker 1: we're going to get a crash or recession. There's been
• 8:55
  Speaker 1: a lot of false crash and recession warnings. But what
• 8:59
  Speaker 1: you call that monetary optimism that we have in You
• 9:02
  Speaker 1: could say that, but I think for dilemmo investors and
• 9:05
  Speaker 1: everybody everybody now faces is the central banks and led
• 9:10
  Speaker 1: by the FED, have been a ministering alexas to the
• 9:14
  Speaker 1: business cycle now for a long time, making this for
• 9:17
  Speaker 1: longest cyclical expansion on record. But we all know that
• 9:22
  Speaker 1: the alex her is not going to create perpetual life
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  Speaker 1: for the business cycle and that eventually there was an
• 9:27
  Speaker 1: endgame there. So when I look at Germany, you know,
• 9:31
  Speaker 1: the largest economy in Europe, manufacturing economy, export economy, is
• 9:38
  Speaker 1: it talked to us about the negative rate environment there?
• 9:41
  Speaker 1: Why are the rates negative there? And is there what
• 9:44
  Speaker 1: is the scenario for them to turn positive? But negative
• 9:48
  Speaker 1: rates in Germany are a key aspect of a fundamental
• 9:52
  Speaker 1: arrangement or coalition between Germany and the e c B
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  Speaker 1: where Germany keeps keeps rates negative or allows rage to
• 10:03
  Speaker 1: be negative to help bail out Italian banks um but
• 10:06
  Speaker 1: at the same time that benefits for German export sector.
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  Speaker 1: I think it's creating a very treacherous situation in Germany
• 10:13
  Speaker 1: because a lot of the people who are suffering from
• 10:16
  Speaker 1: negative rates at a moment think they're doing okay elsewhere
• 10:20
  Speaker 1: through asset market inflation. But when that turns round, we'll
• 10:25
  Speaker 1: find out if we didn't do any any good there,
• 10:27
  Speaker 1: And we've also lost in netfix investments. So there's a
• 10:30
  Speaker 1: story out on the Bloomberg today Peak private equity fears
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  Speaker 1: are spreading across the pension world, and it talks about
• 10:36
  Speaker 1: how the fears are growing among the pension community that
• 10:40
  Speaker 1: as a prices in the private equity space have gotten
• 10:43
  Speaker 1: too high. Where do you see the biggest bubbles being
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  Speaker 1: formed or if you don't want to use the word bubble,
• 10:49
  Speaker 1: excesses being formed as a result of some of these
• 10:52
  Speaker 1: negative rate policies. Well, in terms of a real investment,
• 10:55
  Speaker 1: I think the biggest question of all we face is
• 10:58
  Speaker 1: has been over invest ment and digitalization and this Third
• 11:04
  Speaker 1: Industrial Revolution. It's a bit like asking the question of
• 11:06
  Speaker 1: the ninete essentially was for over investment in the railroads,
• 11:09
  Speaker 1: and yes I was research. It has been done at
• 11:12
  Speaker 1: the University of Chicago by Fogel and Angerment showed that
• 11:16
  Speaker 1: there was over investment and the actual prosperity gain was
• 11:18
  Speaker 1: quite small. I think we're probably in something like that
• 11:20
  Speaker 1: with digitalization today. But in terms of financial investments and dangers,
• 11:26
  Speaker 1: I think you've highlighted the core of that, which is
• 11:28
  Speaker 1: private equity. See thing. Private equity is a space that's
• 11:31
  Speaker 1: most inflated at this point, definitely, And alongside that you
• 11:33
  Speaker 1: also mentioned insurance companies. You have to think of all
• 11:36
  Speaker 1: these European and insurance companies who have been going more
• 11:39
  Speaker 1: and more into risky products to produce returns, and if
• 11:44
  Speaker 1: eventually they are not there on a cumulative basis, there's
• 11:47
  Speaker 1: going to be a lot of disappointment and results among
• 11:49
  Speaker 1: households in Europe and just real quick over investing in
• 11:53
  Speaker 1: the digitalization. Does that mean that the Google's and the
• 11:56
  Speaker 1: apples are overvalued? Well, Google's and Apples of value on
• 12:00
  Speaker 1: the basis of them having monopoly part into the long run.
• 12:06
  Speaker 1: We know from economic history that monopolies do not generally
• 12:10
  Speaker 1: survive into a long run unless something really has changed here,
• 12:13
  Speaker 1: and so to value these on the basis of perpetual
• 12:17
  Speaker 1: monopoly streams or in some companies in the case of
• 12:20
  Speaker 1: monopoly streams still to come, is symptomatic of the general
• 12:24
  Speaker 1: effvescence of financial markets. Fascinating, especially as Amazon attracts all
• 12:29
  Speaker 1: of the attention on this cyber Monday. Thank you so
• 12:32
  Speaker 1: much for being with us. Brendan Brown, Senior Fellow. He
• 12:35
  Speaker 1: is joining us here senior fellow at the Hudson Institute
• 12:37
  Speaker 1: and publisher of the newsletter A Monetary Scenarios here in
• 12:40
  Speaker 1: our eleven three oh studios are interactive broker studios. Really
• 12:43
  Speaker 1: interesting to me the idea of comparing tech investment, digitalization
• 12:48
  Speaker 1: investment today to the investment in railroads years and years back,
• 12:53
  Speaker 1: and how yes that was revolutionary, but perhaps the amount
• 12:56
  Speaker 1: of money that went in was a little bit more
• 12:59
  Speaker 1: than the foot people we're going to get out. Time
• 13:17
  Speaker 1: to check in with Bloomberg Opinion. We're joined by Opinion
• 13:19
  Speaker 1: Calumnust Sour Halzac. It is cyber Monday, it was Black Friday.
• 13:24
  Speaker 1: Let's get a sense of how this is playing out.
• 13:26
  Speaker 1: Sarah covers All Things Retails. She joins us from the
• 13:29
  Speaker 1: Washington d C Bureau. So, Sarah, we've had a pretty
• 13:32
  Speaker 1: good look at what happened on Black Friday. We're starting
• 13:35
  Speaker 1: to get some data here on some of the cyber
• 13:37
  Speaker 1: trends Monday. What are your takeaways? Sure, So, the latest
• 13:40
  Speaker 1: data we have on Cyber Monday is it's off to
• 13:42
  Speaker 1: a strong star. As of nine am, seventy three million
• 13:47
  Speaker 1: in online sales, and according to Adobe, that puts us
• 13:50
  Speaker 1: on pace for it to achieve the projected nine point
• 13:54
  Speaker 1: four billion dollars in sales for the day overall. So
• 13:56
  Speaker 1: clearly the big spending hours still yet to come, but
• 14:00
  Speaker 1: a lot of momentum for the industry today. Um and
• 14:02
  Speaker 1: that sort of tracks with what we saw over the
• 14:04
  Speaker 1: holiday weekend overall, healthy online spending on Thanksgiving and Black
• 14:08
  Speaker 1: Friday as well. Sarah, this has been something everyone has
• 14:11
  Speaker 1: been talking about. In other words, people are shifting to
• 14:14
  Speaker 1: online shopping, and we did get a record amount of sales.
• 14:18
  Speaker 1: How out of the expectation is this? In other words,
• 14:21
  Speaker 1: what's going to be the takeaway the surprise from this
• 14:23
  Speaker 1: shopping series season? Yeah, one thing that I think is
• 14:27
  Speaker 1: perhaps surprising is there's all this conversation about how Black
• 14:30
  Speaker 1: Friday is dead, that these deals started, you know, as
• 14:33
  Speaker 1: it really is November one now, and so what's the
• 14:35
  Speaker 1: incentive to get off the block and shop over this
• 14:38
  Speaker 1: past weekend or even on Cyber Monday. And I think
• 14:40
  Speaker 1: what's interesting is that online Black Friday sales were up
• 14:44
  Speaker 1: nineteen point six percent Cyber Monday over last year. Uh,
• 14:47
  Speaker 1: Cyber Monday sales are expected to be up eighteen point
• 14:50
  Speaker 1: nine percent. That will make them two of the fastest
• 14:52
  Speaker 1: growing days of online shopping of the whole holiday season.
• 14:55
  Speaker 1: In other words, in the digital space, Black Friday and
• 14:58
  Speaker 1: Cyber Monday aren't getting less impor and they're actually getting
• 15:01
  Speaker 1: more important. More of our spending is concentrating in these
• 15:04
  Speaker 1: big deals events. So it's really critical for retailers to
• 15:06
  Speaker 1: stay in stock today, to not have some website outages,
• 15:09
  Speaker 1: make sure they have the merchandise that customers want. How
• 15:12
  Speaker 1: about for the Gen Z and the millennials, what are
• 15:14
  Speaker 1: we learning about how they are shopping here bricks and
• 15:18
  Speaker 1: mortar versus e commerce? So interestingly, I think we all
• 15:22
  Speaker 1: have this idea that Generation Z, you know, live their
• 15:25
  Speaker 1: life with their nose and their phones, and so probably
• 15:28
  Speaker 1: they are going to prefer that channel to in store shopping.
• 15:31
  Speaker 1: That's not exactly what we see. Uh. In fact, when
• 15:35
  Speaker 1: we looked at data heading into this long holiday we
• 15:38
  Speaker 1: uh long holiday weekend, it was Gen Z shoppers, the
• 15:42
  Speaker 1: ones who are going to stores were the ones who
• 15:44
  Speaker 1: are most likely to say, I'm going to be doing
• 15:45
  Speaker 1: it with family and friends. I'm gonna be doing it
• 15:47
  Speaker 1: in a social experiential way. I like getting out of
• 15:50
  Speaker 1: the house, I like trying trying garments on before I
• 15:54
  Speaker 1: buy them, or testing out electronics in person. And so
• 15:57
  Speaker 1: I think that there's not a lot of evidence out
• 16:00
  Speaker 1: or to suggest that gen Z is going to kill
• 16:02
  Speaker 1: the physical store. They might just continue to as other
• 16:05
  Speaker 1: generations have kind of change what we use the store
• 16:08
  Speaker 1: for and how frequently we go to it. Let's throw
• 16:10
  Speaker 1: some statistics out here as we speak with Sarah how Zach,
• 16:12
  Speaker 1: retail columnist for Bloomberg Opinion. Black Friday hit a record
• 16:16
  Speaker 1: seven point for billion dollars in US online sales people
• 16:20
  Speaker 1: buying a lot from their phones. Also is the second
• 16:23
  Speaker 1: biggest US online sales stay ever, behind Cyber Monday seven
• 16:27
  Speaker 1: point nine billion dollars. And we see a healthy clip today,
• 16:30
  Speaker 1: So perhaps will surpass it today? I'm wondering, Sarah, you
• 16:34
  Speaker 1: said that the bulk of the shopping was done in
• 16:36
  Speaker 1: this period. At this point people are concentrating their purchases.
• 16:39
  Speaker 1: How deep are the discounts, in other words, how much
• 16:42
  Speaker 1: are margins compressing for the retailers as they try to
• 16:46
  Speaker 1: lure in shoppers during this period. Yeah, so margins are
• 16:50
  Speaker 1: especially tricky, not just because of the deals, but because
• 16:53
  Speaker 1: as we make this migration to online shopping, we all know,
• 16:55
  Speaker 1: we've all come to expect free shipping is table stakes, right,
• 16:59
  Speaker 1: and so that's a lot of the margin pressure is
• 17:01
  Speaker 1: going to come in for retailers in this holiday season
• 17:04
  Speaker 1: is that two day shipping has become the standard, and
• 17:06
  Speaker 1: now Amazon has sort of stepped up our expectations even
• 17:09
  Speaker 1: more by offering one day shipping on a lot of products.
• 17:12
  Speaker 1: Walmart two is offering one day shipping on a lot
• 17:14
  Speaker 1: of products, and so that's going to be a huge
• 17:16
  Speaker 1: expense for them to shoulder and work through during the season.
• 17:20
  Speaker 1: And so a lot of these retailers have been warning
• 17:22
  Speaker 1: us that this shopping season would actually be about a
• 17:25
  Speaker 1: week less than last year. How does that can impact
• 17:28
  Speaker 1: kind of results? I'm skeptical that it will have a
• 17:31
  Speaker 1: big impact on results, frankly, because, as we mentioned earlier,
• 17:35
  Speaker 1: a lot of these deals have been in place since
• 17:36
  Speaker 1: early November. Folks have gotten their shopping started earlier in
• 17:40
  Speaker 1: the month. And we just if you look historically over
• 17:43
  Speaker 1: time at whether there's a correlation between the years when
• 17:46
  Speaker 1: Thanksgiving falls late uh and Thanksgiving falls early, and whether
• 17:50
  Speaker 1: or not holiday sales overall or strong, we just don't
• 17:52
  Speaker 1: really see a clear correlation there. So I have no
• 17:55
  Speaker 1: doubt that many retailers will trt that out as an
• 17:57
  Speaker 1: excuse when they report their holiday sales results in January
• 18:02
  Speaker 1: or February as a reason for their challenge, but I
• 18:05
  Speaker 1: don't think they should have a big impact on how
• 18:07
  Speaker 1: the season shapes up overall. I have to say I
• 18:09
  Speaker 1: don't want to be Debbie Downer, but I was reading
• 18:12
  Speaker 1: this column in the New York Times about how Amazon
• 18:15
  Speaker 1: wove itself into the life of an American city, and
• 18:18
  Speaker 1: I did see American Factory, this documentary about what's been
• 18:22
  Speaker 1: going on in a date in Ohio in particular, with
• 18:24
  Speaker 1: a Chinese factory coming in. And it's not so much
• 18:27
  Speaker 1: about trade wars and who is running the factory, but
• 18:30
  Speaker 1: there is a shift away from human expertise toward humans
• 18:35
  Speaker 1: just for now being better or at least more less
• 18:38
  Speaker 1: expensive than the machines. But at some point that will flip.
• 18:42
  Speaker 1: Can you give us a sense of who the big
• 18:44
  Speaker 1: winners and who the big losers are as we see
• 18:47
  Speaker 1: this shift unfold but before our eyes, Because basically the
• 18:50
  Speaker 1: data that we're getting out of Black Friday and Cyber
• 18:52
  Speaker 1: Monday is just confirming foot traffic falling in department stores,
• 18:57
  Speaker 1: and the focus on how fast you can ship sore
• 19:00
  Speaker 1: and to all these things that computers eventually in robots
• 19:02
  Speaker 1: will do. Sure, I think the winners and losers. Are
• 19:05
  Speaker 1: the ones who are are the winners, I should say,
• 19:06
  Speaker 1: are the ones who are figuring out how to manage
• 19:09
  Speaker 1: both the store portfolio and a digital portfolio. And I
• 19:12
  Speaker 1: think Walmart, Target, and Best Buy are probably clearly in
• 19:15
  Speaker 1: that winner circle. Um. They've made a lot of investments
• 19:18
  Speaker 1: and figuring out how to expand their online assortments, how
• 19:21
  Speaker 1: to not get clovered on price by Amazon in the
• 19:24
  Speaker 1: digital space, um, and in certain cases use their stores
• 19:28
  Speaker 1: as an asset. You know, best Buy says that its
• 19:31
  Speaker 1: online orders are picked up in stores. Uh, So, clearly
• 19:35
  Speaker 1: consumers like that click and collect model. It's a more
• 19:37
  Speaker 1: profitable model for them. And by figuring out how to
• 19:39
  Speaker 1: steer people to make that choice, they're figuring out how
• 19:42
  Speaker 1: to do online shopping in a more profitable way. And
• 19:45
  Speaker 1: so I suspect those will be to the folks that
• 19:46
  Speaker 1: come out as winners from this Thanksgiving A Cyber Monday
• 19:50
  Speaker 1: stretch from from the holiday season overall. A thirty seconds sir,
• 19:53
  Speaker 1: do we know what people are buying this year? Is
• 19:54
  Speaker 1: it just electronics? So? Lots of frozen two toys, ELSA
• 19:59
  Speaker 1: certainly having an impact, l O L Surprise and other
• 20:02
  Speaker 1: really popular toy property. And yes, it's always a big
• 20:05
  Speaker 1: weekend for electronics, UH is, particularly in the online space,
• 20:08
  Speaker 1: strong sales of Samson TVs and air pods, or some
• 20:12
  Speaker 1: of the reports we saw coming out of this weekend. Sarah,
• 20:14
  Speaker 1: did you buy lots of frozen two gear tons? Right,
• 20:17
  Speaker 1: you're going to show up on television. I'm gonna see
• 20:19
  Speaker 1: her wearing a little Elsa outfit. I'm sure. No, not
• 20:23
  Speaker 1: so much. Well, I'm expecting a girl baby, so maybe
• 20:25
  Speaker 1: I should get ahead of account on that and start
• 20:27
  Speaker 1: buying save Elsa stuff for sure. Congratulations, very exciting. I
• 20:31
  Speaker 1: expect great things. Uh so, Sarah, thank you so much
• 20:35
  Speaker 1: for being with us. Sarah, how Zach Bloomberg opinion retail
• 20:37
  Speaker 1: columnist joining us from Washington, D C. Well E. S
• 20:54
  Speaker 1: G investing is becoming a much bigger part of the
• 20:57
  Speaker 1: global institutional investing marketplace. S G, of course, stands for
• 21:01
  Speaker 1: environment UH, sustainability and governance. In fact, today Bloomberg and
• 21:06
  Speaker 1: our good friends at New Vine are co sponsoring a
• 21:08
  Speaker 1: global responsible Investing conference here at Bloomberg headquarters in New York.
• 21:13
  Speaker 1: If you get a sense of what this means for investors, investors,
• 21:15
  Speaker 1: we welcome my next guest. Steve Libertur lead fixed income
• 21:18
  Speaker 1: E s G portfolio manager at New Vine's based in Charlotte,
• 21:21
  Speaker 1: North Carolina, but he joins us here on our Bloomberg
• 21:23
  Speaker 1: Interactor Brokers studio. Steve, thanks so much for joining us again.
• 21:27
  Speaker 1: You manage ten billion dollars in core bond strategies at
• 21:31
  Speaker 1: t I double a Craft part of New Vine. How
• 21:34
  Speaker 1: do you use a portfolio manager UM really integrate E
• 21:38
  Speaker 1: s G aspects into your analysis? Sure, Paul, thanks for
• 21:41
  Speaker 1: having me UM. I think there's really two different ways
• 21:43
  Speaker 1: that we look at it. UM. E s G is
• 21:45
  Speaker 1: is really an application of trying to identify the best
• 21:48
  Speaker 1: operating to manage issuers UM in the market, and it's
• 21:51
  Speaker 1: not a way of trying to create value definitions or
• 21:55
  Speaker 1: value judgments. You know, what we're not saying don't invest
• 21:57
  Speaker 1: in the oil and gas issue, or what we're saying
• 21:59
  Speaker 1: is if going to invest in an oil and gas issue,
• 22:01
  Speaker 1: or what you want to look for those issuers that
• 22:04
  Speaker 1: have a good track record as far as taking care
• 22:06
  Speaker 1: of the environment. You know that you don't want to
• 22:08
  Speaker 1: invest with someone who consistently has spills or continually is
• 22:11
  Speaker 1: being fined because what they're doing is putting at risk
• 22:14
  Speaker 1: their ability to generate free cash flow in the future,
• 22:16
  Speaker 1: which obviously, as a as an unsecured creditor, that's really
• 22:20
  Speaker 1: what you're focused on getting repayment from. So we we
• 22:22
  Speaker 1: look at those issuers that we feel our our e
• 22:25
  Speaker 1: s G leaders and we feel are therefore are the
• 22:27
  Speaker 1: best operating and managed and less likely to blow up
• 22:30
  Speaker 1: over time. And we combine that with a view on
• 22:33
  Speaker 1: impact investing, where we're looking for very specific um proceed
• 22:38
  Speaker 1: utilization that is direct and measurable. So think of things
• 22:41
  Speaker 1: like the easy ones are so solar and wind farms,
• 22:44
  Speaker 1: for example, but it's much broader than that, where we
• 22:47
  Speaker 1: look at different types of things, whether it the affordable
• 22:50
  Speaker 1: housing issues or attempting to help with education opportunities, things
• 22:54
  Speaker 1: of that nature that allow our investors to have a
• 22:57
  Speaker 1: direct and measurable exposure to security that generates some type
• 23:01
  Speaker 1: of u UH impact in areas that they care about.
• 23:04
  Speaker 1: We've read about an increasing number of investors inquiring about
• 23:08
  Speaker 1: E s G strategies, but when you look at the
• 23:11
  Speaker 1: actual flows, it still is a fraction of the overall money.
• 23:14
  Speaker 1: I'm wondering what you're seeing on that front. Yeah, that's
• 23:17
  Speaker 1: a great question. I think, really what it is there's
• 23:19
  Speaker 1: a couple of things there. I think when when you
• 23:22
  Speaker 1: look at E s G investing, it's still fairly nascent
• 23:24
  Speaker 1: when you really think about it. Um. You know, it's
• 23:26
  Speaker 1: been going on in the equity market for a much
• 23:28
  Speaker 1: longer period of time than it certainly hasn't fixed. But
• 23:31
  Speaker 1: what we're starting to see is the asset management industry
• 23:35
  Speaker 1: as a whole had not been good at being able
• 23:37
  Speaker 1: to create products that performed well relative to common benchmarks
• 23:41
  Speaker 1: or to peer groups. UM. And that's really due to
• 23:43
  Speaker 1: how E s G was applied historically, which is really
• 23:46
  Speaker 1: more of an exclusionary screen perspective. You were good or
• 23:49
  Speaker 1: you were bad, and that was it. You wouldn't invest
• 23:51
  Speaker 1: in any oil and gas name. So when oil and
• 23:52
  Speaker 1: gas rallied, your portfolio was structurally deficient. You couldn't perform well. UM.
• 23:57
  Speaker 1: Now when you look at E s G application, it's
• 23:59
  Speaker 1: really more of a active industry class. You're looking to
• 24:02
  Speaker 1: invest in issuers, not necessarily excluding them solely. So when
• 24:06
  Speaker 1: you do that, you can build the broadly diversified portfolio.
• 24:09
  Speaker 1: And now you're seeing product that is able to perform
• 24:11
  Speaker 1: well against common benchmarks and against peer groups. So I
• 24:14
  Speaker 1: think it makes investors more comfortable that they can invest
• 24:17
  Speaker 1: in this way without dealing with the main the main
• 24:21
  Speaker 1: misperception in the space, which is you sacrifice performance. I
• 24:24
  Speaker 1: want to talk about the data behind E s G
• 24:26
  Speaker 1: investing because I know a lot of people that we've
• 24:28
  Speaker 1: spoken to about s G investing say, you know that
• 24:30
  Speaker 1: there's not that great data out there. Let you know,
• 24:32
  Speaker 1: it's just I can't just rely on income statement balance
• 24:35
  Speaker 1: and I need other data. Help me figure this out. Now.
• 24:37
  Speaker 1: On the Bloomberg terminal, in the FA function, which is
• 24:39
  Speaker 1: one of our most widely used functions, there is a
• 24:42
  Speaker 1: tab right there on the F A function for E
• 24:44
  Speaker 1: s G. So you know it's important to Bloomberg we're
• 24:47
  Speaker 1: collecting that data. What is your sense of kind of
• 24:49
  Speaker 1: where the data is today to allow you to really
• 24:53
  Speaker 1: use your analytical skills to factor it into your decision. Yeah,
• 24:57
  Speaker 1: it's really at this point in time, a little bit
• 24:59
  Speaker 1: all over the place there. There are certainly getting better
• 25:02
  Speaker 1: over time, and it gets better on a daily basis.
• 25:05
  Speaker 1: UM there are certainly efforts outstanding at the moment to
• 25:08
  Speaker 1: try to to UM provide centralized data that is common
• 25:13
  Speaker 1: for all issuers to provide. The one challenge, of course,
• 25:16
  Speaker 1: within e s G data for an issue is that
• 25:18
  Speaker 1: it's different for all of them. You know that environmental
• 25:21
  Speaker 1: issues may not apply as much to a technology companies,
• 25:24
  Speaker 1: let's say an oil and gas issue. So the key
• 25:27
  Speaker 1: is is really finding those factors that are material for
• 25:29
  Speaker 1: your particular sector and being able to report on those.
• 25:32
  Speaker 1: The really good thing is that issuers have become very
• 25:35
  Speaker 1: much focused on this particular topic and willing to try
• 25:38
  Speaker 1: to work with investors um when we engage with them,
• 25:41
  Speaker 1: to try to improve their overall quality of data and
• 25:44
  Speaker 1: provide a wider range of data that allows an investor
• 25:47
  Speaker 1: to utilize it in a way to build a portfolio.
• 25:50
  Speaker 1: There's a structural challenge to when you talk about e
• 25:52
  Speaker 1: s G, particularly environmental and social, and that is that
• 25:57
  Speaker 1: the universe of public equities is shrinking and a lot
• 26:01
  Speaker 1: of people who are looking to have an impact are
• 26:04
  Speaker 1: looking to alternative methods that are less tested, smaller investments,
• 26:09
  Speaker 1: more at U syncratic. How do you see the market
• 26:12
  Speaker 1: evolving based on that challenge? Now, that's a great point,
• 26:15
  Speaker 1: and that's why I really think that people are now
• 26:18
  Speaker 1: becoming more comfortable with the application at B s G
• 26:20
  Speaker 1: and impact in public fixed income because we have such
• 26:23
  Speaker 1: a wider array of investment opportunities, we're not looking for issuers.
• 26:27
  Speaker 1: We don't need a public issuer you know in the
• 26:29
  Speaker 1: fixed income market. But how we can utilize that as
• 26:31
  Speaker 1: we can get issuance at a sector, at a subsector
• 26:34
  Speaker 1: level or a subsidiary level for a corporate. But these
• 26:37
  Speaker 1: are companies that already are issuing bonds in the public markets, right,
• 26:41
  Speaker 1: I mean, this isn't necessarily a company that's trying to
• 26:44
  Speaker 1: put toilets in in villages in in you know, pick
• 26:47
  Speaker 1: your country, right, it depends actually from a corporate perspective
• 26:51
  Speaker 1: that is correct. But where we would have issues like
• 26:53
  Speaker 1: that for example you just described with be with super
• 26:56
  Speaker 1: sovereign issuers or n g O s that come to
• 26:58
  Speaker 1: the market. Um, we've done things from you know, looked
• 27:01
  Speaker 1: at deals where we provided vaccination financing, um, all the
• 27:05
  Speaker 1: way through looking at transactions that provided soul Wark cook
• 27:08
  Speaker 1: tops to sub Saharan African families. So there is because
• 27:12
  Speaker 1: I think the nature of the fixed income mark is
• 27:14
  Speaker 1: so much more diverse and wider that you have the
• 27:18
  Speaker 1: opportunity to look at NGO super sovereign's agency, securities, municipalities
• 27:22
  Speaker 1: and structured securities to find a growing opportunity set. Thank
• 27:26
  Speaker 1: you so much for being with us. Thanks for having me.
• 27:28
  Speaker 1: Steve Liberal Tour joining us here, lead fixed income E
• 27:32
  Speaker 1: s G portfolio manager with New Vine uh joining us
• 27:35
  Speaker 1: in our in our active broker's studios. Thanks for listening
• 27:38
  Speaker 1: to the Bloomberg P and L podcast. You can subscribe
• 27:40
  Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast
• 27:43
  Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney.
• 27:47
  Speaker 1: I'm Lisa abram Woods. I'm on Twitter at Lisa A.
• 27:49
  Speaker 1: Bramwoits one before the podcast. You can always catch us
• 27:52
  Speaker 1: worldwide on Bloomberg Radio