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Ford Bonds Are A Golden Opportunity If Rating Holds Up · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim
• 0:08
  Speaker 1: Fox along with my co host Lisa Abramowitz. Each day
• 0:11
  Speaker 1: we bring you the most important, noteworthy and useful interviews
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  Speaker 1: for you and your money, whether you're at the grocery
• 0:17
  Speaker 1: store or the trading floor. Find the Bloomberg P and
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  Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well,
• 0:31
  Speaker 1: he comes bearing his own lanyard. You know that, Lisa.
• 0:35
  Speaker 1: Joel Levington is our expert when it comes to all
• 0:39
  Speaker 1: things having to do with credit. He is our senior
• 0:41
  Speaker 1: credit analyst for Bloomberg Intelligence. And I mentioned his lanyard
• 0:45
  Speaker 1: because it references a company called American Axle and Manufacturing
• 0:52
  Speaker 1: and that leads us into automobiles. And we want to
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  Speaker 1: talk about the Ford Motor Company. Joel. This is a
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  Speaker 1: company whose stock has fallen more than thirty percent so
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  Speaker 1: far this year. They have more than eighty billion dollars
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  Speaker 1: in debt. It has a market cap of thirty three
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  Speaker 1: billion dollars. How do you balance that elephant on top
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  Speaker 1: of the peanut without crushing the peanut? Well, I am
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  Speaker 1: a man with with with the landard um, but I
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  Speaker 1: would but I would say that the debt is mostly
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  Speaker 1: at the finance company. Uh, the debt at the manufacturing
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  Speaker 1: company is about sixteen billion dollars, so I guess it's
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  Speaker 1: about a two to one ratio in terms of market
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  Speaker 1: cap to the debt. So there's a little bit more
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  Speaker 1: room than than the eight billion would imply. So does
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  Speaker 1: that room mean that the dividend that Ford is safe
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  Speaker 1: because they can afford to keep paying about fifteen cents
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  Speaker 1: per quarter per share. I don't think so. And the
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  Speaker 1: reason that I don't think so is because it's the
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  Speaker 1: dividend is running about a hundred and twenty free cash flow,
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  Speaker 1: and if you look at what the raiders focus on,
• 2:02
  Speaker 1: which is liquidity, you can't spend more than you make
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  Speaker 1: without bumping into your liquidity. So at some point that
• 2:10
  Speaker 1: becomes an issue, and the company desperately wants to hold
• 2:14
  Speaker 1: and retaine its investment grade ratings, which will require it
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  Speaker 1: at some point either to improve its profitability or to
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  Speaker 1: you know, take an action on its dividends. All right,
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  Speaker 1: So just taking a step back, I mean, Ford is
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  Speaker 1: investment grade rated, but barely in the bond market, it
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  Speaker 1: is being treated basically as junk, right, I mean, I'm
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  Speaker 1: looking right now at its bonds that are maturing in
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  Speaker 1: six It was trading above par earlier this year at
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  Speaker 1: a hundred four cents to the dollar. It's currently trading
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  Speaker 1: at less than ninety cents in the dollar. This is
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  Speaker 1: a huge move in the bond market. If you see
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  Speaker 1: a fourteen fiftcent decline in a bunch of months when
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  Speaker 1: the company is not going under, is pretty significant. No,
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  Speaker 1: what is that telling you? Yeah, the bonds have been
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  Speaker 1: crushed as CDs has doubled on the company earnings expectations.
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  Speaker 1: At the beginning of the year, we're about thirteen million
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  Speaker 1: dollars worth of EVRA, it's about ten billion today. So
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  Speaker 1: the fact that you're seeing that in the bond market
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  Speaker 1: as a reflection of the weakness of the business performance
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  Speaker 1: and that's gonna continue LISA for several more quarters. So
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  Speaker 1: how much does it pressure them that they're borrowing costs
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  Speaker 1: arising so rapidly at a time when they need cheap
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  Speaker 1: financing to try to dig themselves out of this whole Oh,
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  Speaker 1: it's a It's a big issue for the finance company
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  Speaker 1: and it's one of the reasons why they really have
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  Speaker 1: to retain investment grade readings as a mechanism to reduce
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  Speaker 1: the lower you know, or it's implausible. I think it
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  Speaker 1: is plausible, and and and in fact, you know, we
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  Speaker 1: wrote a note on it today because SMP had a
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  Speaker 1: closed door meeting for investors on Friday morning where they
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  Speaker 1: basically laid out a plan where they were saying, you know,
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  Speaker 1: they could reduce UH forwards ratings by a notch but
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  Speaker 1: not but not cutting into junk. So at some point
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  Speaker 1: it's gonna look like it looks like an ugly duckling today,
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  Speaker 1: but this thing is gonna look like a golden goose
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  Speaker 1: not that far away. And that's what we've been writing
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  Speaker 1: about as well. Doesn't it all come down to whether
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  Speaker 1: they can sell more automobiles? Really they can sell more
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  Speaker 1: F one pickup trucks, well, it's selling more profitably as well,
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  Speaker 1: like that, you don't have to sell more product. In fact,
• 4:26
  Speaker 1: they might consider the opposite of getting of divesting. F
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  Speaker 1: one fifty is very very profitable business for them. North
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  Speaker 1: America is a very profitable business. But the rest of
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  Speaker 1: the world for them, Asia, the Middle Eastern Africa, Europe
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  Speaker 1: is money losing. And so sometimes it's additioned by subtraction.
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  Speaker 1: As how the math people work it and you if
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  Speaker 1: you get rid of the addition by subtraction, that's good.
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  Speaker 1: If you if you get rid of the of the
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  Speaker 1: painful parts of that business, it makes the overall forward
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  Speaker 1: a stronger company. Joe, We'll have to have you back
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  Speaker 1: and talk more about this, because that's a bold call,
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  Speaker 1: basically that this could be a real buying opportunity essentially
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  Speaker 1: if for does retain its investment grade ratings. Unfortunately, we
• 5:10
  Speaker 1: have to leave with their Joel Levington, senior credit analyst
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  Speaker 1: for Bloomberg Intelligence talking about the auto sector, and I
• 5:16
  Speaker 1: will just give him a shout out that he nailed
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  Speaker 1: that auto parts are auto auto suppliers. Bonds of those
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  Speaker 1: companies would not do well this year and they have
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  Speaker 1: absolutely been crushed. So he is somebody to listen to.
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  Speaker 1: Also with Tesla, I'm impressed by Joel's calls. We're getting
• 5:42
  Speaker 1: a lot of predictions about what will happen in the
• 5:44
  Speaker 1: wake of the midterm elections that are coming up in
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  Speaker 1: the next two weeks. Uh Coleman Sacks coming out this
• 5:49
  Speaker 1: morning and saying that equity equity volatility may rise if
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  Speaker 1: Democrats take the House. Let's hear what Michael Jesus has
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  Speaker 1: to say, Michael Jesus ahead of US Public Policy and
• 5:59
  Speaker 1: municipal credit Strategy at Morgan Stanley. Michael, thank you so
• 6:02
  Speaker 1: much for joining us. First of all, what do you
• 6:05
  Speaker 1: think is the most likely outcome from the midterm elections
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  Speaker 1: and how should markets be positioning? Well, I mean, we're
• 6:12
  Speaker 1: really just following the polls and the models here, and
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  Speaker 1: it tells you that over the last few weeks anyway,
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  Speaker 1: that the base case is becoming more and more likely.
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  Speaker 1: The base case being that the Democrats get get controlled
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  Speaker 1: the House, but the Republicans kind of hold serve in
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  Speaker 1: the Senate. And obviously there's a pretty substantial structural advantage
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  Speaker 1: of the Republicans have in the Senate at this time around,
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  Speaker 1: because they're only defending nine seats. The Democrats are defending
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  Speaker 1: twenty six seats and ten of them are in red states. Uh.
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  Speaker 1: And what's happened is this kind of divergence in the
• 6:40
  Speaker 1: polls over the last few weeks where the Democrats are
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  Speaker 1: doing better in the House and worse in those kind
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  Speaker 1: of red Senate seats that they're competing in. So, you know,
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  Speaker 1: what does the base case gets you? Um, I think
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  Speaker 1: it really just kind of gets you, at least for
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  Speaker 1: the next couple of years. The existing policy set that
• 6:56
  Speaker 1: we have on board more or less frozen. Right, So
• 7:00
  Speaker 1: fiscal policy doesn't necessarily get any better or worse. Right,
• 7:03
  Speaker 1: you don't get more tax cuts or any tax roll back.
• 7:06
  Speaker 1: In trade policy is still kind of an independent variable.
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  Speaker 1: There's no sort of obvious reaction to the idea that
• 7:13
  Speaker 1: a change in Congress means that the President is any
• 7:17
  Speaker 1: less likely to to put a lot of pressure on
• 7:20
  Speaker 1: China and escalate that situation further. Uh, you know, we
• 7:23
  Speaker 1: think we're gonna get to a place relatively early next year.
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  Speaker 1: We're probably gonna be teriffing everything that we that we
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  Speaker 1: import from China. So um. The most likely outcome, I
• 7:35
  Speaker 1: think is that the existing policy set that you have
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  Speaker 1: right now is going to continue the more interesting divergences.
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  Speaker 1: Or if the Democrats somehow win the Senate, or if
• 7:43
  Speaker 1: the Republicans somehow holds hold their advantage in the House, well,
• 7:47
  Speaker 1: let's just say with the consensus for just a second, Michael,
• 7:50
  Speaker 1: and just give us your thoughts on a couple of
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  Speaker 1: key equity sectors such as pharmaceuticals, telecom as well as
• 7:56
  Speaker 1: healthcare services. What do you think if the Democrats are
• 8:00
  Speaker 1: able to take the House, what will happen to those sectors? Yes,
• 8:05
  Speaker 1: so those are the most outcome. Sense of the sectors
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  Speaker 1: less because it's less about whether or not the Democrats
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  Speaker 1: can get the House, and it's more about whether or
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  Speaker 1: not they can get the Senate in addition to the House.
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  Speaker 1: Because the reason those are the sense of the sectors
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  Speaker 1: is because, um, those are the sectors that have benefit
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  Speaker 1: the most from regulatory rollback. So it's any outcome that
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  Speaker 1: tells you that that regulatory rollback is less likely or
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  Speaker 1: could go in the other direction, that's gonna be that's
• 8:32
  Speaker 1: going to make them underperformers or vice versa. So if
• 8:36
  Speaker 1: the Democrats get the Senate, it's not that they're going
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  Speaker 1: to be able to force the executive branchs to change
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  Speaker 1: direction on the regulatory rollbacks that they've initiated. But it
• 8:47
  Speaker 1: tells you something given those barriers, how hard it would
• 8:50
  Speaker 1: be to take the Senate. It tells you something about
• 8:52
  Speaker 1: how progressive minded the electorate has become. And think the
• 8:56
  Speaker 1: market would start thinking ahead to what a possible democratic
• 9:02
  Speaker 1: control of both of the White House and both has
• 9:04
  Speaker 1: the Congress would mean for those sectors. Um. Conversely, if
• 9:08
  Speaker 1: the Republicans are able to keep the House, uh, you know,
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  Speaker 1: that tells you that the elector it's not in a
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  Speaker 1: mood to deliver over the next few years the kind
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  Speaker 1: of uh you know, the kind of legislative backdrop that
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  Speaker 1: would push back on the regulatory rollback that's helped those sectors. Michael,
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  Speaker 1: how much do you believe the polls? I think the
• 9:26
  Speaker 1: polls are are are fine. Uh. Yeah, we get this
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  Speaker 1: question all the time. I think the problem is not
• 9:31
  Speaker 1: with the polls. The problem is sometimes with how uh
• 9:35
  Speaker 1: you know, not just investors, but all of us understand
• 9:38
  Speaker 1: the probabilities implied by those polls. Right, So if you
• 9:42
  Speaker 1: think back to um, there weren't really polling errors at play. Um,
• 9:48
  Speaker 1: you know, the national I think the national polling average
• 9:51
  Speaker 1: lead for Clinton going into the election night was about
• 9:54
  Speaker 1: four percentage points, with a kind of plus or minus
• 9:57
  Speaker 1: three on each side, and she won the popular the
• 10:00
  Speaker 1: rope by about two percent I believe so. And if
• 10:03
  Speaker 1: you if you look at most states that everything was
• 10:06
  Speaker 1: more or less within the margin of error. So the
• 10:09
  Speaker 1: against the probabilities implied by that, which is to say
• 10:12
  Speaker 1: that going into election night you should have. You know,
• 10:15
  Speaker 1: you shouldn't have thought of Clinton as more than a
• 10:17
  Speaker 1: roughly seventy chance of winning, and anything that has a
• 10:21
  Speaker 1: thirty percent chance of happening in this case, in that case,
• 10:25
  Speaker 1: the Trump presidency, it shouldn't be that surprising events happened
• 10:30
  Speaker 1: quite frequently. I guess that there's a question that I have,
• 10:32
  Speaker 1: which is, is there some sentiment or some population that
• 10:36
  Speaker 1: isn't being picked up in the polls, or where polls,
• 10:41
  Speaker 1: you know, aren't necessarily I don't know, representing the zeitgeist
• 10:45
  Speaker 1: in the way that perhaps people would like a surprise. Maybe. Yeah,
• 10:49
  Speaker 1: I mean, I guess I'm just trying to figure out
• 10:50
  Speaker 1: where the disconnect came from people's confidence versus what's been
• 10:55
  Speaker 1: happening in elections. Yeah, I mean again, I think it's
• 11:00
  Speaker 1: you know, the the recent history up to would suggest
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  Speaker 1: that or sort of would make people feel that a
• 11:09
  Speaker 1: three or four percentage point lead in polls should be
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  Speaker 1: pretty solid. And in fact, if you think back to
• 11:17
  Speaker 1: the polling error actually went in favor of Barack Obama
• 11:21
  Speaker 1: versus meant Romney and so, and he was the leader
• 11:24
  Speaker 1: going in. So I think some of this is recency
• 11:27
  Speaker 1: bias where investors perceive a polling lead as insurmountable, even
• 11:32
  Speaker 1: if it's relatively small, and so what I would recommend is,
• 11:36
  Speaker 1: yet you should have appropriate um respect for you know,
• 11:40
  Speaker 1: a small single digit lead suggest that there's a meaningful
• 11:44
  Speaker 1: probability that the outcome is different than the poll lead, right,
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  Speaker 1: And so for for this particular election, you know, the
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  Speaker 1: base case that we described at the top of this talk,
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  Speaker 1: it probably is not no more than a sixty or
• 11:57
  Speaker 1: sixty five probability outcome tells you that it's almost a
• 12:01
  Speaker 1: toss up. That's something different. Either the Democrats get control
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  Speaker 1: of both houses or the Republicans hold on to control.
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  Speaker 1: Uh is something you really have to seriously consider. That's
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  Speaker 1: almost at chance that one of those two things will happen,
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  Speaker 1: and the markets move in very different directions based on that,
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  Speaker 1: which is you know why in our last note we
• 12:20
  Speaker 1: said we think the equity volatility is very week We
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  Speaker 1: got to run, but we're sorry, thanks very much. Michael
• 12:25
  Speaker 1: Jesus He is the chief US policy and municipal strategist
• 12:29
  Speaker 1: for Morgan Stanley. We're going to focus on a story
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  Speaker 1: that is interesting from so many angles. It talks about
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  Speaker 1: how Blackstone it managed to get a twenty billion dollar
• 12:50
  Speaker 1: commitment from Saudi Arabia's main fund for its infrastructure fund.
• 12:57
  Speaker 1: And it talks about the fee structure which was beneficial,
• 13:01
  Speaker 1: and some other perks. And this comes at a time
• 13:04
  Speaker 1: when US Saudi relationships has been strained significantly. Let's bring
• 13:08
  Speaker 1: in the author of this story, Jillian Tans, and your
• 13:10
  Speaker 1: reporter for Bloomberg News. Julian, can you first explain exactly
• 13:14
  Speaker 1: what Blackstone promised Saudi Arabia in order to get their money. Sure,
• 13:20
  Speaker 1: I guess at the very heart of the story, and
• 13:22
  Speaker 1: the main point that is surprising to a lot of
• 13:24
  Speaker 1: folks today is that Blackstone agreed to deal where for
• 13:29
  Speaker 1: every dollar that any other investor, for example, Pennsylvania teachers
• 13:33
  Speaker 1: or Texas teachers, or whoever it may be, that pays
• 13:36
  Speaker 1: a management fee to Blackstone, for every dollar that one
• 13:39
  Speaker 1: other investor pays, Saudi Arabia's Sovereign Wealth Fund gets to
• 13:42
  Speaker 1: pay fifteen cents less. So it's essentially structured as a
• 13:45
  Speaker 1: revenue sharing agreement. It's offset as a fifteen percent discount
• 13:50
  Speaker 1: to the fees that they would pay. But very clearly
• 13:52
  Speaker 1: in our story, we have a chart that sort of
• 13:54
  Speaker 1: illustrates exactly how that money is taken off pi's commitment.
• 13:59
  Speaker 1: So just in other words, Saudi Arabia not only is
• 14:03
  Speaker 1: being offered lower fees, but in order to offset its fees,
• 14:08
  Speaker 1: some of the fees that other investors, including pensions and
• 14:11
  Speaker 1: others in the United States that are investing in this fund,
• 14:14
  Speaker 1: the fees that they pay are funneled to Saudi Arabia. Essentially, yes,
• 14:19
  Speaker 1: but I guess the word funnel is a little bit touchy,
• 14:22
  Speaker 1: but it's yeah, it's offset against the phase that Saudi
• 14:25
  Speaker 1: Arabia would pay. So hypothetically Blackstone could write a fifteen
• 14:29
  Speaker 1: percent check, but that's unnecessary given that Saudi's owe them
• 14:33
  Speaker 1: so much in pease anyway, so it just comes off
• 14:35
  Speaker 1: their fee. Tital are other investors when they were being
• 14:40
  Speaker 1: pitched this fund? Were they given the same deal or
• 14:44
  Speaker 1: were they at least alerted to what they would be
• 14:47
  Speaker 1: buying into in terms of how that would change the
• 14:49
  Speaker 1: relationship financially between Saudi Arabian investment and the fund. Okay,
• 14:55
  Speaker 1: on the first point, um, all other investors were not
• 14:59
  Speaker 1: offered the same to so based on public filings, we
• 15:02
  Speaker 1: can see that, for example, the biggest investor that's not
• 15:05
  Speaker 1: the Saudi Fund is Pennsylvania Teachers Fund, and they are
• 15:09
  Speaker 1: paying seventy five basis points for the first two years,
• 15:12
  Speaker 1: and that quickly jumps to ninety basis points after that.
• 15:15
  Speaker 1: The Saudi Fund gets to pay seventy five basis points
• 15:18
  Speaker 1: on the first ten billion, and then sixty five basis
• 15:21
  Speaker 1: points after that. So that's just the very basic fact.
• 15:23
  Speaker 1: Is that unusual? That b it's less unusual because you know,
• 15:27
  Speaker 1: it's such a big commitment. Black Stone points out, it's
• 15:29
  Speaker 1: I think the biggest commitment in their history, maybe ten
• 15:33
  Speaker 1: times the size of any other commitment. What is unusual
• 15:36
  Speaker 1: is the revenue sharing that comes after that. Sort it's
• 15:38
  Speaker 1: an additional concession where fift of what any other investor
• 15:42
  Speaker 1: is paying Blackstone then comes off the Saudi fees. Okay,
• 15:47
  Speaker 1: so this isn't this comes at an interesting time. I
• 15:50
  Speaker 1: imagine you would have written this story even if Saudi
• 15:53
  Speaker 1: Arabia and the US who weren't engaged in a sort
• 15:56
  Speaker 1: of tense situation right now. But it's complicated by this
• 15:59
  Speaker 1: fact that Saudi Arabia, which has a lot of money
• 16:02
  Speaker 1: that it wants to invest, is now sort of being
• 16:05
  Speaker 1: accused of some pretty substantial human rights violations and clamping
• 16:08
  Speaker 1: down on the freedom of press, and it sort of
• 16:12
  Speaker 1: caused some executives to back away. So has there been
• 16:16
  Speaker 1: any kind of rethink, Is there an ability to rethink
• 16:19
  Speaker 1: from Blackstone's part? How does that kind of come into this.
• 16:22
  Speaker 1: So my understanding is that all the investors that are
• 16:25
  Speaker 1: already committed, including pif UM and the US pensions that
• 16:28
  Speaker 1: are already locked in, they've signed pretty tight agreements. But
• 16:32
  Speaker 1: I think this more impacts the investors that Blackstones out
• 16:35
  Speaker 1: speaking to today or you know, this week, this month,
• 16:37
  Speaker 1: this year, next year. Um. I think they're raising right
• 16:41
  Speaker 1: until next March, and I think that's when the fund
• 16:43
  Speaker 1: will close for a little while and then they'll invest
• 16:45
  Speaker 1: that money. But the interesting thing will be if other
• 16:48
  Speaker 1: pensions sort of feel uncomfortable with the fact that you know,
• 16:51
  Speaker 1: every dollar of their management phase is you know, that
• 16:55
  Speaker 1: will offset the Southeast and if you think about the
• 16:58
  Speaker 1: broad sort of political content next, you know, investing alongside
• 17:02
  Speaker 1: the Saudis is very fraught in itself right now because
• 17:05
  Speaker 1: you have a situation where the Saudi Arabian government is
• 17:09
  Speaker 1: being accused of killing the journalist Jamal Kashogi in their
• 17:15
  Speaker 1: consulate in Is temple correct. So if that's the case
• 17:20
  Speaker 1: and investors other than the Saudis are getting a less
• 17:26
  Speaker 1: virtuous deal, then isn't there a way for them to
• 17:31
  Speaker 1: say to the people running the fund, we want the
• 17:34
  Speaker 1: same deal as the Saudias, and if we can't get
• 17:37
  Speaker 1: the same deal as the Saudis, we don't necessarily want
• 17:40
  Speaker 1: to participate. Can they pull out? I think the existing
• 17:44
  Speaker 1: investors will have a hard time because UM just knowing
• 17:47
  Speaker 1: how all these fear agreements or just general relationships agreements
• 17:50
  Speaker 1: are structured, they're pretty water tight. They probably won't be
• 17:53
  Speaker 1: able to pull out. But it's more the ones that
• 17:55
  Speaker 1: are perspective, they probably will look at that, and they'll
• 17:57
  Speaker 1: look at the current landscape. There's just so any other
• 18:00
  Speaker 1: infrastructure funds being raised right now, Brookfield and g I
• 18:03
  Speaker 1: P with massive funds of their own, Morgan Stanley, others
• 18:06
  Speaker 1: three I. There's just a lot of options out there,
• 18:08
  Speaker 1: and if you can kind of deal with the firm
• 18:10
  Speaker 1: that's maybe not um investing along or where you would
• 18:13
  Speaker 1: not be investing alongside the Saudis, maybe that's a better
• 18:16
  Speaker 1: option for them. Do you do you see that the
• 18:19
  Speaker 1: board of directors of the pension funds in this case Pennsylvania.
• 18:23
  Speaker 1: Would they get involved at this nitty gritty level, and
• 18:26
  Speaker 1: would the people who benefit from the pension fund, the pensioneers,
• 18:30
  Speaker 1: they're now going to learn about this in equal investment opportunity. Yes,
• 18:36
  Speaker 1: So they've declined to comment to me. They only just
• 18:38
  Speaker 1: got back to me this morning. For sure, their their
• 18:40
  Speaker 1: pension is can lolly them. I'm sure they'll hear from them.
• 18:43
  Speaker 1: I think people might be a little bit upset, a
• 18:45
  Speaker 1: little bit outraged. Um, But yeah, I think for the
• 18:48
  Speaker 1: folks that are in I don't know if they're stuck,
• 18:50
  Speaker 1: I'm very interested in that. The other thing that I
• 18:52
  Speaker 1: would just point out that we haven't talked about is
• 18:55
  Speaker 1: the cipious I was going to get there. That's what
• 18:57
  Speaker 1: I think is really interesting as well. Yeah, so in
• 19:00
  Speaker 1: part of our reporting, we sort of learned a few
• 19:03
  Speaker 1: things that PIV has some rights where they PEP being
• 19:06
  Speaker 1: the Saudi Arabian Fund is the Saudi Arabian Fund Um.
• 19:10
  Speaker 1: They and Blackstone sort of struck a deal where black
• 19:14
  Speaker 1: Stone can and piff sorry for keeping using PIV, but
• 19:19
  Speaker 1: they can, in their best interests encourage CIFIUS not to
• 19:22
  Speaker 1: require certain disclosures about folks on the on the Saudi
• 19:26
  Speaker 1: board um in deference to their royalty, and that's because
• 19:29
  Speaker 1: crown prints Muhammad bin Salman is on the PIFF board.
• 19:34
  Speaker 1: So in other words, basically there is certain controls in place.
• 19:38
  Speaker 1: There are certain controls and police where the Saudi Arabian
• 19:40
  Speaker 1: Fund can get involved in specific deals if they run
• 19:44
  Speaker 1: a mark of Siphius, or they can be sort of
• 19:46
  Speaker 1: a little bit more hands on with certain investments. Uh
• 19:50
  Speaker 1: just I wouldn't structure it just like that. It's more
• 19:52
  Speaker 1: that they can opt out or be excluded from deals
• 19:55
  Speaker 1: where Syphius might you know, throw a fit because it
• 19:58
  Speaker 1: threatens national security, whether it's an airport support or utilities.
• 20:03
  Speaker 1: Incredible story. Thank you very much Jillian Tan for sharing
• 20:06
  Speaker 1: it with us. You can follow Jillian on Twitter at
• 20:08
  Speaker 1: Jillian Tan. That's all one word, and uh, well, we'll
• 20:12
  Speaker 1: have to see what happens with those other investors. They
• 20:14
  Speaker 1: include the Teachers Retirement System of the State of Illinois,
• 20:17
  Speaker 1: Teachers Retirement System of Texas, and the New Mexico State
• 20:21
  Speaker 1: Investment Council, among other major investors in that fund that
• 20:27
  Speaker 1: Blackstone launched for infrastructure twenty billion dollars. The topic right now,
• 20:42
  Speaker 1: maybe a little early in the day for some. But
• 20:44
  Speaker 1: the topic is whiskey and joining us as the founding
• 20:48
  Speaker 1: partner and managing director of Glass Revolution Imports. Raj sabarrow
• 20:53
  Speaker 1: Wall he joins us now he's the founding partner. Raj,
• 20:56
  Speaker 1: thank you very much for being with us. How did
• 20:58
  Speaker 1: you come to create eat this company, Glass Revolution Imports?
• 21:04
  Speaker 1: Why did you decide to do this? Pam First, thanks
• 21:07
  Speaker 1: for having me on this morning. I appreciate it. Um.
• 21:10
  Speaker 1: I was in the corporate world, got tired of working
• 21:13
  Speaker 1: for big corporations and decided to follow my passion and
• 21:17
  Speaker 1: started the company in two thousand and nine. At that time,
• 21:20
  Speaker 1: we were lucky enough to get access to arm Roots
• 21:24
  Speaker 1: single malt, which was the first single malt out of
• 21:27
  Speaker 1: India to be exported, and we started with that brand. Um,
• 21:31
  Speaker 1: like I said, nine years ago, we've added several different
• 21:34
  Speaker 1: brands now and are one of the leading importers of
• 21:38
  Speaker 1: world whiskey into the US. So let's talk about how
• 21:42
  Speaker 1: whiskey is taking off. And I'm thinking about whiskey bars
• 21:45
  Speaker 1: that are starting up in Brooklyn, and I feel like
• 21:48
  Speaker 1: that that hard drinks, in particular whiskey and bourbon are
• 21:50
  Speaker 1: kind of overtaking in some places even beer among millennials.
• 21:55
  Speaker 1: What do you think is driving us how many? How
• 21:57
  Speaker 1: much more can whiskey and urban kind of infiltrate the
• 22:02
  Speaker 1: alcohol scene and gain share here? I let you go question. So,
• 22:06
  Speaker 1: I think that obviously beer sales are declining and they're
• 22:10
  Speaker 1: giving way to spirits. Spirits continue to uh increase in
• 22:14
  Speaker 1: sales UH, And I think that the consumers really are
• 22:17
  Speaker 1: looking for different uniqueness. Um. You know, we can see
• 22:21
  Speaker 1: that premium Scotch sales are up slightly, Bourbon sales that
• 22:25
  Speaker 1: you mentioned, and world whiskey in general. I mean, I
• 22:27
  Speaker 1: think led by the Japanese praise um, and now that's
• 22:31
  Speaker 1: being affected by both shortages in Japanese whiskey availability and
• 22:37
  Speaker 1: increasing prices. So I think consumers are still appreciating brown
• 22:41
  Speaker 1: spirits as a general category and spirits overall. RAJ, in
• 22:46
  Speaker 1: addition to Amerate whiskey that you import, you also have
• 22:51
  Speaker 1: in your portfolio Blackadder whiskey, English whiskey stock, and barrel whiskey.
• 22:56
  Speaker 1: You also have gin. What does it come we have
• 23:00
  Speaker 1: to do in order to get RAJ interested in importing
• 23:04
  Speaker 1: it into the United States? Great question. We everything we
• 23:08
  Speaker 1: bring in is either owned by a small family distillery
• 23:12
  Speaker 1: or have some history in producing product, So we're dealing
• 23:16
  Speaker 1: directly with the owners of the company and the distillers. UM.
• 23:20
  Speaker 1: You know the gin you mentioned that is from Spain.
• 23:23
  Speaker 1: It's one of the oldest chins in the world, goes
• 23:26
  Speaker 1: back to fifty that they've been producing it. This is correct,
• 23:31
  Speaker 1: and so we're always looking for a unique story, UH,
• 23:34
  Speaker 1: something that will have authenticity behind the brand and allow
• 23:39
  Speaker 1: the brand to stand out. So Rauj, I have to ask,
• 23:42
  Speaker 1: you know, we've been talking a lot about trade tensions
• 23:46
  Speaker 1: and tariffs over the past few months. How has that
• 23:49
  Speaker 1: impacted what you do, especially since some European countries have
• 23:52
  Speaker 1: actually targeted whiskey UH in recent in recent months, Well,
• 23:58
  Speaker 1: the target by the European county is primarily on American
• 24:02
  Speaker 1: whiskey that is being exported to Europe. Are basically as
• 24:07
  Speaker 1: importers and the fact that we're bringing in product from
• 24:11
  Speaker 1: non traditional markets, we have not really been impacted by tariffs. However,
• 24:16
  Speaker 1: we actually see UH the ability to grow because as
• 24:20
  Speaker 1: other products are targeted in the availability declines and the
• 24:24
  Speaker 1: prices go up, we're seeing a hole that we can
• 24:27
  Speaker 1: fill with our brands. RAGE how important are these whiskey
• 24:31
  Speaker 1: fest events. They take place all over the world. You
• 24:34
  Speaker 1: had Whiskey Fest San Francisco at the beginning of the year.
• 24:37
  Speaker 1: I believe you just had Spirits in the Sky in Brussels.
• 24:40
  Speaker 1: You've got Whiskey Fest coming to New York in December.
• 24:44
  Speaker 1: Are those big events for you? Do you really make
• 24:46
  Speaker 1: a lot of business happen during those events? Him? I
• 24:50
  Speaker 1: think those are very important because, you know, when you
• 24:53
  Speaker 1: have a product that's not familiar to consumers, Uh, the
• 24:56
  Speaker 1: only way to convince them and get them excited about
• 24:58
  Speaker 1: it is getting them to try. So rather than them
• 25:02
  Speaker 1: going into a retail store and paying, you know, for
• 25:07
  Speaker 1: a ball of whiskey, they can go to a show
• 25:09
  Speaker 1: and try different products and therefore make their own decision
• 25:13
  Speaker 1: whether or not they like it. Um. We found that
• 25:16
  Speaker 1: education is a huge factor, and the more exposure we
• 25:20
  Speaker 1: have to the consumer directly impacts our sales. Him. What's
• 25:25
  Speaker 1: your favorite drink? Well, it actually is water? Yes? Sorry, sorry,
• 25:31
  Speaker 1: but here's here's a question for your rage. Are you
• 25:34
  Speaker 1: scheduled to go to the Whiskey Extravaganza in Washington that's
• 25:37
  Speaker 1: on the twenty five this month. I'm feeling a lot
• 25:40
  Speaker 1: of lawmakers could use a lot of help. Now I
• 25:43
  Speaker 1: will be there definitely. I'm not only exhibiting, but also
• 25:46
  Speaker 1: we'll be leading a master class on the effect of
• 25:50
  Speaker 1: would on aging whiskey. So we're gonna taste six different whiskeys,
• 25:53
  Speaker 1: all aged in different barrels, to highlight what factors wood
• 25:58
  Speaker 1: has on aging. The raj what's your favorite whiskey? Wait,
• 26:03
  Speaker 1: so that depends on the time of day, who I'm with,
• 26:05
  Speaker 1: and what I'm doing. Eight am on a Monday, you
• 26:08
  Speaker 1: have a happy to have a breakfast whiskey. So Harmond
• 26:10
  Speaker 1: single Malt, which is a lighter whiskey, more fruit notes
• 26:14
  Speaker 1: and floral. Uh, it makes a great breakfast whiskey. Love it?
• 26:19
  Speaker 1: You speak of my language? Love it? Rush soaperall, thank
• 26:22
  Speaker 1: you so much for joining us. Ross sober Walls founding
• 26:25
  Speaker 1: partner and managing director at Glass Revolution in Boards, based
• 26:28
  Speaker 1: in Pittsburgh Water pim Fox. Come on, sorry, you know, honestly,
• 26:34
  Speaker 1: it's I actually just pulled my husband. I asked him
• 26:37
  Speaker 1: what his favorite liquor was. It's bourbons. He's more of
• 26:41
  Speaker 1: a bourbon person because it's not as sweet he likes.
• 26:44
  Speaker 1: The whiskey isn't really either, and It's good standalone too.
• 26:50
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 26:53
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
• 26:57
  Speaker 1: or whatever podcast platform you prefer. I'm Pim fall Box.
• 27:00
  Speaker 1: I'm on Twitter at pim Fox. I'm on Twitter at
• 27:03
  Speaker 1: Lisa abramowits one before the podcast. You can always catch
• 27:07
  Speaker 1: us worldwide on Blueberg Radio