Latest / Bloomberg Intelligence / Stimulus Has Obscured The Health of Credit Assets: TCW's Rivelle

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Stimulus Has Obscured The Health of Credit Assets: TCW's Rivelle · Bloomberg Intelligence

0:01
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
0:04
Speaker 1: with my co host of Bonnie Quinn. Every business day
0:06
Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
0:10
Speaker 1: along with essential market moving news. Kind of Bloomberg Markets
0:13
Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
0:17
Speaker 1: and on Bloomberg dot com. Well, companies have been borrowing
0:21
Speaker 1: absolutely at nauseum since that difficulty rose in March that
0:26
Speaker 1: we like to refer to as the pandemic, but of
0:29
Speaker 1: course it was around for much longer than that. Companies
0:31
Speaker 1: now though, topping them on markets, maybe at a pace
0:34
Speaker 1: that's moderating amid rising credit risk, because why well, the
0:38
Speaker 1: coronavirus seems to be surging again around the world. Let's
0:41
Speaker 1: bring in somebody who knows a lot about fixed income,
0:43
Speaker 1: also covers high yield and of course everything else from
0:46
Speaker 1: here to Europe where we're seeing a one hundred year
0:49
Speaker 1: bond today being sold by Austria. TAD Ravelle is ce
0:52
Speaker 1: IO for fixed income at t c W two twelve
0:55
Speaker 1: billion dollars firm wide under management. TAD just summarize is
1:00
Speaker 1: what you think is going on in fixed income markets?
1:02
Speaker 1: These days, we have yields attaching themselves to ranges are
1:05
Speaker 1: not moving, and yet so much activity. Yes, well, we've
1:11
Speaker 1: gone through Alison Bonland the last couple of months, right,
1:14
Speaker 1: we have. We are experiencing, from the perspective of fundamental
1:19
Speaker 1: some of the worst fundamentals that the US economy, the
1:22
Speaker 1: global economy has ever seen. And yet we have gone
1:26
Speaker 1: over the course of two months basically from what might
1:29
Speaker 1: have been actually semi rational levels in fixed income in
1:34
Speaker 1: terms of credit spreads in March, where spreads were out
1:38
Speaker 1: in i G and investment grade out to three and
1:41
Speaker 1: fifty basis points over treasuries, to where we are today,
1:44
Speaker 1: wherein we have almost completely repriced where we were back
1:48
Speaker 1: in January of this year. The fundamentals obviously don't look
1:53
Speaker 1: even remotely like where we were in January when we
1:56
Speaker 1: were experiencing three and a half percent unemployment, and the
1:59
Speaker 1: idea that we would have a global economic depression were
2:03
Speaker 1: would would have been viewed as insane type of type
2:06
Speaker 1: of comments. So where are we? I think where we
2:09
Speaker 1: are basically is we are in a market that is
2:12
Speaker 1: utterly supported by the central banks, most particularly by the FED,
2:16
Speaker 1: and they're not supported by fundamentals and um as you
2:20
Speaker 1: alluded to, we have had a record pace of borrowing
2:23
Speaker 1: on the part of corporate America more than one trillion
2:25
Speaker 1: year to date in investment grade. So what is you're
2:29
Speaker 1: supposed to take away from this? This is the de
2:31
Speaker 1: leveraging that was supposed to happen at the end of
2:34
Speaker 1: the cycle, that is actually taking on the character of
2:37
Speaker 1: a releveraging. So I think it's a case of the
2:40
Speaker 1: can is getting kicked way down the road, and the
2:44
Speaker 1: issues and the problems and the leverage that had built
2:47
Speaker 1: for years as we went into the late cycle, they're
2:49
Speaker 1: still with us. So tad given that the fundamentals are
2:53
Speaker 1: not there to necessarily support some of these risky assets.
2:56
Speaker 1: Does this end badly from your perspective? I'm not really
3:00
Speaker 1: sure that there's any other way for it to end,
3:02
Speaker 1: but badly. I mean, it's it's interesting. I mean, I'm
3:04
Speaker 1: a fixed income person, so I should probably not ever
3:08
Speaker 1: comment on the equity market. We never understand it. But
3:11
Speaker 1: it is rather instructive to recognize that the that those
3:16
Speaker 1: four stocks that everybody likes to talk about the pangs
3:19
Speaker 1: are up anywhere from let's say to as much as
3:22
Speaker 1: fifty year to date, in the case of Amazon, four
3:26
Speaker 1: stocks appear to be supporting the vast bulk of the
3:30
Speaker 1: of the equity market. I mean, again, maybe I'm not
3:32
Speaker 1: an expert on this, but it certainly strikes me that
3:35
Speaker 1: with the SMP down about five percent, with the move
3:38
Speaker 1: this morning, that you have a a very narrow base
3:41
Speaker 1: actually to build upon, and a perspective from from bond
3:45
Speaker 1: Land would continue this way somewhere depending upon eight to
3:49
Speaker 1: twelve percent of the mortgages out there, depending upon which
3:53
Speaker 1: kind of mortgage you're looking at. But home mortgages, of
3:56
Speaker 1: course are in some state of forbearance. How many of
3:59
Speaker 1: these all timately get work through? Adversely, we don't know.
4:03
Speaker 1: There's complete opacity, I think as it relates to the
4:05
Speaker 1: economic fundamentals. And if you cast your eye into the
4:09
Speaker 1: commercial mortgage world and you look at it, if you
4:12
Speaker 1: pull a typical uh C MBS commercial mortgage back deal
4:16
Speaker 1: off the shelf and then looking under the hood, you'll
4:19
Speaker 1: see that about of the loans are retail oriented or
4:23
Speaker 1: lodging hotel oriented. The idea that we're going to see
4:27
Speaker 1: a rebound and a retracement and a reperformance of these
4:32
Speaker 1: loans back to where we were six months ago. Is
4:35
Speaker 1: I think it's just it's strains credulity to the to
4:38
Speaker 1: the breaking point. So will there be losses? Is that
4:41
Speaker 1: what you're saying? Yes, there are going to be losses.
4:44
Speaker 1: But the the the policy response in a way has
4:48
Speaker 1: destroyed information. UM. You don't actually know which loans are
4:52
Speaker 1: good or bad. I mean, I'm not speaking against the
4:55
Speaker 1: policy response, because I think that once the leverage got
4:59
Speaker 1: to these boles, and once we got ourselves into a
5:01
Speaker 1: state of vulnerability and then the pandemic occurred. I'm not
5:05
Speaker 1: sure that there was any other response. But nonetheless, one
5:09
Speaker 1: of the adverse consequences from a capital markets perspective with
5:13
Speaker 1: respect to the policy response, if you don't know what
5:15
Speaker 1: loans are good or bad, you don't know what businesses
5:17
Speaker 1: are going to make it through UM. And part of
5:21
Speaker 1: that process is also piling on additional leverage UM onto
5:25
Speaker 1: the balance sheets. In fact, Bank of America, I believe,
5:28
Speaker 1: recently put out a research piece in which I mean
5:31
Speaker 1: their best guests, of course, but that leverage ratios UH
5:35
Speaker 1: debt to IBADA ratios are probably going to be rising
5:38
Speaker 1: by at least a full turn UM in the investment
5:41
Speaker 1: grade universe that's very strange. At the end of the
5:44
Speaker 1: cycle is exactly when corporations are supposed to be getting
5:48
Speaker 1: their house in order, deleveraging UM and essentially adapting themselves
5:54
Speaker 1: to new realities. So is it supposed to end badly? Yeah,
5:59
Speaker 1: because unless you restore economic growth back to uh some
6:05
Speaker 1: semblance of normality. Um, you don't know where you are. Um.
6:09
Speaker 1: I mean again, I mean maybe I'm rambling a little bit.
6:12
Speaker 1: Where where's unemployment is it? Where? Where is it going
6:15
Speaker 1: to settle down? Is it going to settle down at
6:18
Speaker 1: the end of the pandemic at ten percent? At fifteen? Right,
6:23
Speaker 1: I was gonna go back to three I'll say, no, Tad,
6:27
Speaker 1: as you look across your portfolio, give us a sense
6:29
Speaker 1: of kind of credit quality now and kind of how
6:31
Speaker 1: you think that might trend. Uh. Well, there was a
6:35
Speaker 1: great opportunity. There was the greatest opportunity in many years
6:38
Speaker 1: to add credit exposure in March, and we took I
6:41
Speaker 1: think pretty full advantage of it. That basically there was
6:45
Speaker 1: a The way we talked about it internally is that
6:48
Speaker 1: we're going to do credit committee meetings that last no
6:51
Speaker 1: more than seconds. Because what we said, if we have
6:54
Speaker 1: to if we have to discuss a credit in March
6:56
Speaker 1: for more than ninety seconds, um, if it takes that
6:59
Speaker 1: much analysis us, we probably don't want to be involved.
7:01
Speaker 1: And so the names that we did get involved in
7:03
Speaker 1: would include things like Exxon and Intel and Procter and Gamble,
7:08
Speaker 1: some of the money center banks and Disney and buying
7:11
Speaker 1: those issues. They were coming new issue. Not only were
7:14
Speaker 1: they coming cheap, they were coming with new issue cancer.
7:17
Speaker 1: I want to hear one of those pitches, do you
7:18
Speaker 1: have ninety seconds left? Fall exactly? We might have to
7:22
Speaker 1: wait till the next time, because I don't think we
7:23
Speaker 1: have fully ninety seconds. All right, Thanks so much for
7:27
Speaker 1: joining us. We appreciate it. As always loved to get
7:30
Speaker 1: your take on the markets. You've been cautious, Continue to
7:33
Speaker 1: be cautious. Tad Revelle, chief investment Officer for fixed Income
7:37
Speaker 1: at TCW. Big folks out on the West Coast over
7:40
Speaker 1: two billion dollars in assets under management. They know what
7:42
Speaker 1: they're doing out there. Uh. They see every deal that
7:45
Speaker 1: comes across the tape, and so we always love talking
7:48
Speaker 1: to tags. He gives us a great perspective. The elevator
7:51
Speaker 1: issue pitch. Yes, I mean, come on, ninety seconds. It's true.
7:55
Speaker 1: If you can't sell something in ninety seconds, don't try
7:57
Speaker 1: and sell it, right, Yeah, exactly, And you know the issue.
8:00
Speaker 1: There are some opportunities, as Tad was saying, they were
8:02
Speaker 1: trying to be pretty aggressive there back in March when
8:04
Speaker 1: there was some real dislocation in the market and they
8:07
Speaker 1: had some capital dry and put some money to work.
8:10
Speaker 1: So we'll see here. But again, uh, this is a market,
8:12
Speaker 1: as we've talked about, a lot of money that's really
8:15
Speaker 1: really been supported, maybe even back stopped by the US
8:18
Speaker 1: Federal Reserve and other central banks around the world. And
8:21
Speaker 1: the question is will that be enough? And what happens
8:23
Speaker 1: when that support starts to be pulled back. We'll have
8:27
Speaker 1: it now. Plenty of stories about political interference at the
8:32
Speaker 1: Department of Justice. We have former roger Stone prosecutor Eron
8:37
Speaker 1: Zelinski testifying on Capitol Hill again today at noon. He's
8:40
Speaker 1: been telling lawmakers the d o j G favorable treatment
8:43
Speaker 1: to Roger Stone. We also had, of course, that massive
8:47
Speaker 1: clash between a g bar and the former Manhattan Chief
8:50
Speaker 1: federal prosecutor, which played out Friday night and over the weekend,
8:53
Speaker 1: and just earlier we had a three judge Apple a
8:56
Speaker 1: panel deciding to deny the U. S. District judge the
9:00
Speaker 1: authority to examine whether the government's surprise motion to dismiss
9:03
Speaker 1: the Michael Flynn case was part of a corrupt effort
9:06
Speaker 1: to aid one of Trump's political allies. In other words,
9:09
Speaker 1: another win from Resident Donald Trump. To speak to all
9:11
Speaker 1: of these stories, let's bring in Cana nowadays, former corruption
9:14
Speaker 1: and fraud prosecutor for the U. S. Attorney's Office in
9:17
Speaker 1: the Southern District of New York, is now partner at
9:19
Speaker 1: Available LLLP. Kind of thanks for joining. Let's begin with
9:23
Speaker 1: the decision today, which is a win for President Trump,
9:27
Speaker 1: and it's basically the dismissal of the case against former
9:31
Speaker 1: National Security advisor Michael Flynn. Now, the decision may be appealed,
9:35
Speaker 1: but is it going to be considered a win for
9:38
Speaker 1: Resident Trump? Is this going to be the end of this?
9:41
Speaker 1: You know, likelihood it will be the end. This is
9:45
Speaker 1: a win for um the administration. Uh, And there is
9:50
Speaker 1: a likely there's a possibility that this can go on bank,
9:54
Speaker 1: which means all the district court judges will review this decision.
9:57
Speaker 1: But I would take a majority of the judges to
10:00
Speaker 1: actually want to do that. So UM, I think it's unlikely. Um,
10:04
Speaker 1: it's possible, But to answer your question, this might very
10:09
Speaker 1: likely be it and Flynn is done. All right, can
10:13
Speaker 1: let's go back to your home turf the Southern District
10:16
Speaker 1: of New York. Give us your interpretation of what happened
10:20
Speaker 1: Friday night. Uh. What happened was, it's been said, unprecedented. Uh.
10:28
Speaker 1: It was embarrassing for everyone involved and frankly terrible. It
10:34
Speaker 1: shouldn't have happened. Um. It it's rare that U S
10:41
Speaker 1: attorneys just missed when they've been doing a great job.
10:44
Speaker 1: And to have it be done that way is terrible
10:49
Speaker 1: for everyone involved. Um. And that's that's my reaction to it.
10:56
Speaker 1: And and it puts a cloud on what d o
10:58
Speaker 1: J does as as an institution. Um. You know, it's
11:04
Speaker 1: smacks of something very suspicious. Uh. And the fairy, how
11:10
Speaker 1: does the relationship now improve between the d o J
11:13
Speaker 1: and you know, officers such as the SDN Y the
11:17
Speaker 1: federal prosecuting offices around the country on various matters. If
11:22
Speaker 1: there's no trust between the two, or if there is
11:25
Speaker 1: some sort of a you know, suspicion hanging over any relationship,
11:32
Speaker 1: how does anything get on Uh? It's hard for the
11:36
Speaker 1: work to get done. You're absolutely right on. Uh, it's
11:39
Speaker 1: very hard. Um. And it doesn't seem to me that
11:43
Speaker 1: this is the end of the story necessarily between the
11:46
Speaker 1: Seven District of New York and B. O. J and A. G.
11:49
Speaker 1: Bar and that tension because Bar did not get what
11:52
Speaker 1: he ultimately wanted, which was someone from the outside at
11:57
Speaker 1: least on an interim basis to be in charge of
11:59
Speaker 1: the Seven District of New York. Bar lost that fight.
12:02
Speaker 1: He could very well with his wounds and then come
12:05
Speaker 1: back again and try to uh replace Audrey Strausch, who
12:09
Speaker 1: was Burman's and his Berman's deputy and now the acting
12:12
Speaker 1: US Attorney in the Southern districtive work. So what the
12:15
Speaker 1: window will continue? Right? So Ken, what can you tell
12:18
Speaker 1: us about Audrey strauss Do you how independent is she?
12:21
Speaker 1: Do you expect her to continue? Um? The some of
12:25
Speaker 1: the investigations that do touch upon the Trump organization and
12:30
Speaker 1: President himself. Absolutely, she wills to do it with independence. Um.
12:36
Speaker 1: She was Berman's right hand person. She has a razor
12:41
Speaker 1: sharp legal intellect and she cannot be corrupted. Um. And
12:46
Speaker 1: what's interesting is she was the one overseeing many of
12:50
Speaker 1: the Trump related investigation prosecution episode con Districtive New York
12:55
Speaker 1: and it wasn't Berman anyway, because Burman was conflicted. So
13:00
Speaker 1: I'd expect those investigations to proceed at a fast clip. Now.
13:06
Speaker 1: So much of the work is done by the rank
13:07
Speaker 1: and file, right, so you obviously have people at the
13:10
Speaker 1: top that are directing and responsible for everything, but so
13:13
Speaker 1: many rank and file workers are just be hiving every
13:19
Speaker 1: day on so many different cases. How much turnover has
13:23
Speaker 1: there been since this administration took control? And you know,
13:27
Speaker 1: you know roughly what would happen if the president were
13:32
Speaker 1: to be re elected. I mean, would there be more
13:34
Speaker 1: of an influx of um, you know, administration sympathetic people
13:38
Speaker 1: to the SDN Y or will it still remain the
13:42
Speaker 1: sort of similar to the way it is now? Um?
13:46
Speaker 1: I think the turnover has slowed down since the administration,
13:53
Speaker 1: uh all right came in back in. UM. I think
14:02
Speaker 1: morale generally at the U. S. Attorney's offices and d
14:06
Speaker 1: o J is pretty low because it's not good to
14:10
Speaker 1: have the credibility of the institution UH affected in this way. UM.
14:18
Speaker 1: You know, it affects how as a line prosecutor you
14:21
Speaker 1: do your job. If people think that certain people get
14:25
Speaker 1: a better deal because of who they know. It's not good.
14:29
Speaker 1: You can't do your job. You're supposed to be trusted,
14:31
Speaker 1: and the bar, the bench stops trusting you. The courts
14:35
Speaker 1: and the judges stopped trusting you, and that's just bad.
14:39
Speaker 1: So Ken, I mean, the key thing it would seem
14:41
Speaker 1: for the for the president, as you suggested, would and
14:44
Speaker 1: for an attorney general, Bar would be to get one
14:45
Speaker 1: of their people in their heading the southern District of
14:49
Speaker 1: New York. Do you think that will happen at some point?
14:55
Speaker 1: I don't. It's a political question. I don't. I don't
14:58
Speaker 1: know if politically Bar can do that right now because
15:01
Speaker 1: he had his hand handed a way of trying to
15:05
Speaker 1: do it, and it was found out that he lied
15:07
Speaker 1: about Burman uh resigning, it turns out at least and
15:12
Speaker 1: he reported that he lied to the district New Jersey
15:14
Speaker 1: u S Attorney as well about that. Um. But procedurally
15:19
Speaker 1: is I think it is possible. Um, I think it's
15:21
Speaker 1: possible he can do what do it in the manner
15:25
Speaker 1: that Burman actually was appointed as he was attorney originally,
15:28
Speaker 1: Berman was appointed by Bar on an interim basis By statute,
15:34
Speaker 1: uh Bar can do that again. It's never been done before. Uh,
15:41
Speaker 1: and the legality of doing a successive interim appointment is
15:46
Speaker 1: up in the air. But my question is if he
15:48
Speaker 1: did do it, who would have standing to challenge it anyway? Yeah, exactly,
15:52
Speaker 1: I can't. Thanks so much for joining us today giving
15:55
Speaker 1: us your thoughts on a lot of these legal issues happening.
15:59
Speaker 1: Crossing tape can nowaday partnered Venable l l P. He
16:02
Speaker 1: was formerly nine years at the Southern District of New York,
16:05
Speaker 1: giving us his thoughts there well. One of the negative
16:12
Speaker 1: byproducts of the pandemic has been higher food costs. We
16:16
Speaker 1: had some some supply chain issues we had uh certain
16:19
Speaker 1: meat and poultry processing plants shutting down due to the virus.
16:22
Speaker 1: But the conservatism maybe food prices will remain at these
16:25
Speaker 1: higher levels even as some of these issues get resolved.
16:28
Speaker 1: To discuss this, we welcome Stud Leonard Jr. He's a
16:31
Speaker 1: chief executive officer of Stewart Stud Leonards. He's on the
16:35
Speaker 1: phone from Danbury, Connecticut. STU, thanks so much for joining
16:38
Speaker 1: us here. We saw that initial spike up in food
16:41
Speaker 1: prices at the supermarket level. Should we expect those prices
16:45
Speaker 1: that come down as supply chain issues get resolved. Well,
16:49
Speaker 1: first of all, good to be with did this morning
16:52
Speaker 1: call by? How are you? Um? You know what this
16:56
Speaker 1: has been. I've been in the business fifty years and
16:59
Speaker 1: you know, we have a family business here in New York,
17:01
Speaker 1: New Jersey and Connecticut. And I have never seen such
17:05
Speaker 1: a volatile food market as we've seen since the pandemic hit. Um.
17:10
Speaker 1: You've seen all sorts of our you know, big processing
17:15
Speaker 1: plants across the country closed down, and you know, whenever
17:20
Speaker 1: there is a shortage of supply, prices always go up. Well,
17:25
Speaker 1: we're noticing it's stew Leonards and we buy direct right
17:28
Speaker 1: from the local farms and and and you know, local
17:32
Speaker 1: meat companies and so forth. What we have seen and
17:35
Speaker 1: I just talked to all our buyers this morning with meat, fish, produce, cheese, fish,
17:40
Speaker 1: We're starting to see the prices coming down. And I'm
17:44
Speaker 1: reading the newspaper and I'm saying that our prices aren't
17:48
Speaker 1: going up at stew Leonards. You know, we've even lowered
17:50
Speaker 1: the price on ground beef, you know, from Memorial Day
17:54
Speaker 1: a dollar a pound, um. And it might even decrease
17:58
Speaker 1: a little bit more in the future. As as the
18:01
Speaker 1: processing plants in the Midwest stabilize a little bit. What's
18:05
Speaker 1: demand been like stew because people haven't been able to
18:08
Speaker 1: just you know, pop out the store to buy something
18:10
Speaker 1: last minutes in many cases. And also there have been
18:13
Speaker 1: so many reports about you know, infections at plants. Has
18:17
Speaker 1: it put people off things like ground beef? You know
18:21
Speaker 1: it hasn't you know, it's it's a rock star item
18:25
Speaker 1: at stew Leonards. You know, you grind it fresh and
18:28
Speaker 1: what could be better than hamburger. I mean, it's part
18:30
Speaker 1: of America. Just you know, put a little cheese on
18:34
Speaker 1: it too, and you're all set um. But you know,
18:37
Speaker 1: we we have seen that that a lot of our
18:40
Speaker 1: suppliers will be going through normal normal variations that happened
18:46
Speaker 1: last year's happened every year have been in business. You know,
18:48
Speaker 1: if the lobsters are shedding up up the coast of
18:51
Speaker 1: Maine and they're not out there catching lobsters, lobster price
18:54
Speaker 1: will be a little high at this time of the year,
18:57
Speaker 1: but it comes down again. So there's a market driven
19:00
Speaker 1: roller coaster that most people are used to every year
19:03
Speaker 1: with eggs, butter, all the pressed commodities, and you know
19:07
Speaker 1: we're gonna ride those I don't know. Maybe people are
19:11
Speaker 1: picking items that might be on a natural high right now,
19:16
Speaker 1: but you know it's stud Leonards. I don't see our
19:18
Speaker 1: prices going up. I actually see him going down a
19:21
Speaker 1: little bit in the month of July. So, Stu one
19:24
Speaker 1: of the things, you know, I'm fascinated about as we
19:26
Speaker 1: as we take a look at some of the uh,
19:29
Speaker 1: the issues are surrounding this pandemic because how consumer behavior
19:32
Speaker 1: may change going forward as a result of this pandemic.
19:37
Speaker 1: What is your sense for people, you know, kind of
19:40
Speaker 1: beating out versus you know, shopping at supermarkets and and
19:44
Speaker 1: staying home and making maybe you know, more elaborate and
19:47
Speaker 1: better meals. Do you have a sense that things are
19:49
Speaker 1: going to change from your perspective, Hey, that's a great question,
19:53
Speaker 1: because you know what we've found now people are cooking
19:57
Speaker 1: at home. They're baking at home. We started during items
20:00
Speaker 1: that we never used to carry. You know, we're we're
20:02
Speaker 1: mainly fresh foods, but we've added yeast to the menu
20:06
Speaker 1: and there are lots of flour we've been selling. People
20:09
Speaker 1: are baking banana bread, you know, and things they never
20:12
Speaker 1: used to do in their cooking at home and looking
20:14
Speaker 1: for new recipes. We've seen the fish uh uh department
20:20
Speaker 1: grow in size because people are starting to experiment with
20:24
Speaker 1: different kinds of food. So I think post a pandemic,
20:28
Speaker 1: you're gonna see a lot more people that are interested
20:31
Speaker 1: in food. And I will say also wine. You know,
20:35
Speaker 1: our wine sales have gone way up, and and even
20:38
Speaker 1: even cottails. You know, we can't keep tequila in the
20:42
Speaker 1: store just about. Um, you know, these margarita mixes are
20:46
Speaker 1: flying up the shelves and a little uh you know,
20:49
Speaker 1: cottails in a bottle now are really popular. And we
20:52
Speaker 1: just put an item in now, which is like you
20:54
Speaker 1: know those little um, those little pop frozen sticks that
20:58
Speaker 1: you used to eat as a kid. Um, you know,
21:01
Speaker 1: made your lips all blue. Now they have them, um,
21:06
Speaker 1: but there's alcohol in them. Now we're talking. This is
21:10
Speaker 1: not an endorsement, by the way on our part. Pull No.
21:14
Speaker 1: I know that they're very low alcohol. It's like a
21:17
Speaker 1: little more than beer just about. But um, we're starting
21:21
Speaker 1: to see all sorts of items. We've put a five
21:23
Speaker 1: pound bag of French fries in the store. You never
21:26
Speaker 1: would have thought that cells, but they're they're gobbling them up.
21:30
Speaker 1: Um More. Also towards immunity fighting, foods right now because look,
21:35
Speaker 1: with the cold and a few flu everybody says more citrus.
21:39
Speaker 1: So we've noticed our lemon cells have gone up sevenfold.
21:43
Speaker 1: The same with limes, oranges. You know, grapefruit, ball of
21:47
Speaker 1: citrus is really popular orange juice right now. So you're
21:52
Speaker 1: seeing a real change in in the way people are
21:56
Speaker 1: eating and shopping. And the big question we have at
21:58
Speaker 1: stew Leonards is where's is going to settle out right? Yeah,
22:02
Speaker 1: exactly still, you know, not to make light of at all,
22:06
Speaker 1: but thank you so much for jumping on and talking
22:08
Speaker 1: to us. A very difficult time for you guys in
22:11
Speaker 1: terms of trying to figure out what to price, you know,
22:14
Speaker 1: and where to change prices, how often to change prices
22:16
Speaker 1: and so on. Headline just crossing the bloomberg. Though it
22:19
Speaker 1: might actually be a good news for local grocery stores.
22:23
Speaker 1: We'll see about that at a moment our thanks to
22:25
Speaker 1: stud Lenard, Junior CEO of Stu Lenards. Now latent questions
22:32
Speaker 1: for corporate Aurica have come up very strongly in recent
22:34
Speaker 1: weeks on race in the United States, but it's not
22:37
Speaker 1: a new conversation for many. For most, I would suggest
22:41
Speaker 1: one group of people that have been looking at this
22:44
Speaker 1: is a group of people that have already come up
22:46
Speaker 1: with something called the Impact Shares in double a CP
22:48
Speaker 1: Minority Empowerment et F. It's a fun design to provide
22:51
Speaker 1: exposures to companies with strong racial and ethnic diversity policies
22:55
Speaker 1: in place. Let's welcome now two of the men who
22:58
Speaker 1: created and are helping to mark this, Ethan Powell, the
23:01
Speaker 1: CEO of Impact Shares, and Marvin Owens Jr. Is Senior
23:04
Speaker 1: Director of Economic Development at the n Double a CP. Welcome, gentlemen,
23:08
Speaker 1: and it is great to have you. The ticker for
23:11
Speaker 1: the e t F is an a CP for those
23:13
Speaker 1: who like to look it up. My question to you is,
23:16
Speaker 1: right now, it's a small fund, but Impact Shares is
23:20
Speaker 1: a non property TF issuer. How do you plan. Let's
23:23
Speaker 1: go to you first, Ethan, on marketing this. I would
23:26
Speaker 1: imagine that in recent weeks it may have become easier. No,
23:30
Speaker 1: you're right, Um, there's six under D s G funds
23:33
Speaker 1: in the United States, and this is the only one
23:35
Speaker 1: that's specifically addressing issues of UH corporate America and how
23:40
Speaker 1: they interact with communities of color. Um, so I think
23:43
Speaker 1: you know to your point, it's getting a lot of attention.
23:45
Speaker 1: The volume on the secondary market has increased, and we
23:47
Speaker 1: have seen some inflows. Um. I think you know, one
23:50
Speaker 1: of the things that we need to appreciate is that
23:54
Speaker 1: traditional asset managers really have a credibility and a communication
23:58
Speaker 1: problem as it relates to E s G UM. And
24:01
Speaker 1: that's why we partner with leading social advocacy groups to
24:04
Speaker 1: craft issues specific E s G solutions. And we asked
24:08
Speaker 1: what does a good corporate citizen look like through the
24:10
Speaker 1: lens of the Double A CP, specifically as relates to
24:14
Speaker 1: people of color in the United States, and we work
24:16
Speaker 1: with them and the Corporate America to improve their business
24:19
Speaker 1: practices relative to these issues. Marvin, I want to bring
24:23
Speaker 1: you in here. I mean, you know, we all saw
24:25
Speaker 1: the tremendous events the civil unrest as a result of
24:29
Speaker 1: the death of George Floyd. To me at least to
24:33
Speaker 1: it just as an individual, it feels different this time.
24:37
Speaker 1: The conversation feels different than this time than in past episodes.
24:43
Speaker 1: The folks at the Double A c P did they
24:45
Speaker 1: feel the same way, Yeah, we do. Um. Though we've
24:48
Speaker 1: been at this four hundred and eleven years, this does
24:51
Speaker 1: feel like a watershed moment in which UM. Corporations and
24:55
Speaker 1: individuals are thinking about how to get engaged with a
25:00
Speaker 1: fight against racial injustice and against discrimination. And I think this, UH,
25:05
Speaker 1: this fund has given us an opportunity to engage corporate
25:08
Speaker 1: America and this conversation in a different way. For probably
25:11
Speaker 1: twenty five years or more, the d c P has
25:13
Speaker 1: been doing corporate scorecards UH. And the scorecard model is
25:17
Speaker 1: essentially what is being used in this in this e
25:20
Speaker 1: t F UH. And that's why we think it's a
25:22
Speaker 1: it's a wonderful tool for engagement. UM. We need everyone involved,
25:26
Speaker 1: and this is the way to get everybody involved. Marvin.
25:29
Speaker 1: There are on holdings in the e t F, and
25:32
Speaker 1: I'm curious about companies such as Amazon. It has the
25:35
Speaker 1: highest net percentage, Microsoft and Apple right behind Amazon. Are
25:39
Speaker 1: they doing the best on diversity? No, they're not doing
25:43
Speaker 1: the best on diversity. I think what that indicates is
25:46
Speaker 1: simply the fact that they've they've really committed the resources,
25:49
Speaker 1: are trying to develop and trying to measure what they're
25:51
Speaker 1: doing UM. And I think that, quite frankly, is a
25:55
Speaker 1: result of of their size. Again again, and I think
25:59
Speaker 1: they're their focused and wanting to make sure sure that
26:01
Speaker 1: they're creating a diverse, inequitable uh corporate corporate culture. Uh.
26:08
Speaker 1: And I think that's a great thing to be to celebrate.
26:10
Speaker 1: But I also think that it's important to recognize that
26:13
Speaker 1: that those these organizations have put the money and resources
26:16
Speaker 1: towards this effort. There are other organizations, other corporations, um,
26:20
Speaker 1: that are also doing great work. Um. And so yeah,
26:22
Speaker 1: while they are represented in our fund in a significant way, UM,
26:26
Speaker 1: they are not the best in class. I would say so, Ethan,
26:30
Speaker 1: as you look at the class within their individual sector. Right.
26:34
Speaker 1: So we have every sector of the economy represented, and
26:36
Speaker 1: we picked the leaders within each sector. So while the
26:39
Speaker 1: tech sector certainly has room to grow, um, you know
26:42
Speaker 1: those those names in particular are taking a leadership position. Yeah. So, Ethan,
26:47
Speaker 1: I want to get a sense from you kind of
26:49
Speaker 1: what are some of the characteristics or what are companies
26:52
Speaker 1: that are doing a good job? Right? Were they just early?
26:54
Speaker 1: Were they do they have commitment from the board? What
26:57
Speaker 1: are some of the characteristics and companies that school are
27:00
Speaker 1: well on your screen? Right? So we look for supplier
27:04
Speaker 1: diversity programs, spare hiring, game promotion practices, community engagement programs,
27:09
Speaker 1: digital divide programs, and as Marvin said, it does have
27:12
Speaker 1: a larger tapskew because those are the companies that have
27:15
Speaker 1: the resources not only to commit to the programs, but
27:18
Speaker 1: to prioritize reporting to the public as well. Now, yesterday
27:25
Speaker 1: we saw Black Wall come out and say it plans
27:27
Speaker 1: to increase its black workforce by twenty four you have
27:31
Speaker 1: other companies making similar pledges. Marvin, is the workforce enough
27:37
Speaker 1: and by four even not even immediately? I don't think
27:42
Speaker 1: it's enough. I do think that it's a wonderful effort.
27:46
Speaker 1: I think it's the right time to do it. But
27:48
Speaker 1: but you have to raise the question about why is
27:50
Speaker 1: it happening in this moment um. If this was a
27:53
Speaker 1: priority um, then it should have been a part of
27:55
Speaker 1: the culporate corporate culture corporate culture prior to this moment.
28:00
Speaker 1: And that's why I think it's important to engage these
28:01
Speaker 1: corporations and needing institutions in these kinds of conversations. It's
28:05
Speaker 1: it's great that they're making the commitment, and it's great
28:08
Speaker 1: that they're sort of implementing these kinds of changes. It
28:11
Speaker 1: does suggest to us that there's a lot more work
28:13
Speaker 1: to be done, because in this moment, there was a
28:17
Speaker 1: decision to do it, and it was a decision to
28:18
Speaker 1: do it based on the current events that were happening.
28:22
Speaker 1: What was happening prior to this moment is important to
28:24
Speaker 1: also recognize UH, and so that's why it's important that
28:27
Speaker 1: Black Rockets is making the commitment publicly UM and we're
28:31
Speaker 1: excited to hear that they're doing it. Gentlemen, thank you
28:33
Speaker 1: so much for this important conversation. Ethan pal CEO Impact
28:37
Speaker 1: Shares based in Dallas, Texas and Marvin Owen's Junior Senior
28:41
Speaker 1: Director of Economic Development for the n double a CP
28:44
Speaker 1: based in Washington, Washington, d C. Talking about the E
28:47
Speaker 1: T F n A CP is the symbol UH focusing
28:50
Speaker 1: on companies UH that score well in the E s
28:54
Speaker 1: G REALM, paying particular focus UH to diversity and certainly
28:58
Speaker 1: a topic on the on the front burner these days.
29:02
Speaker 1: Thanks for listening to Bloomberg Markets podcast. You can subscribe
29:06
Speaker 1: and listen to interviews at Apple Podcasts or whatever a
29:09
Speaker 1: podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter
29:12
Speaker 1: at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter
29:15
Speaker 1: at pt Sweeney. Before the podcast, you can always catch
29:17
Speaker 1: us worldwide at Bloomberg Radio,