Latest / Bloomberg Intelligence / Lack of Bids For EM High Yield Debt: Bloomberg's Sassower

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Lack of Bids For EM High Yield Debt: Bloomberg's Sassower · Bloomberg Intelligence

0:05
Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
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Speaker 1: Along with my co host Lisa Bramowitz. Each day we
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Speaker 1: bring you the most important, noteworthy, and useful interviews for
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Speaker 1: you and your money, whether you're at the grocery store
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Speaker 1: or the trading floor. Find the Bloomberg p m L
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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Emerging
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Speaker 1: Markets debt this is a big question mark right now
0:36
Speaker 1: for a lot of fund managers. You have seen outflows
0:39
Speaker 1: continue from the largest emerging markets debt e t F
0:43
Speaker 1: and emerging market high yield yields are currently lower than
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Speaker 1: similarly rated debt yields in the US UH. This has
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Speaker 1: only occurred twice. In both instances, it has reversed in
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Speaker 1: less than one month. Here to talk about that with us,
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Speaker 1: Damien Sassauer, our own of Mberg Intelligence, who focuses on
1:02
Speaker 1: everything having to do with emerging markets. Thank you so
1:04
Speaker 1: much for being with us. So tell us what is
1:06
Speaker 1: going on and why has there been this resilience in
1:09
Speaker 1: emerging markets do you haven't seen as much in other
1:12
Speaker 1: US as a classes. Well, first of all, Happy Year
1:15
Speaker 1: of the Dog, Lisa pim Um. So you know, wait, yeah,
1:19
Speaker 1: of course, you know China is emerging market, so anyway, UM, yeah,
1:22
Speaker 1: So let's talk about emerging market high yield relative to
1:24
Speaker 1: US high yield. So yes, only twice before since twelve
1:28
Speaker 1: have emerging market high yield yields will yield to worse
1:31
Speaker 1: uh drop below or dip below US high yield. And
1:34
Speaker 1: the reason for that, quite frankly, is because US high
1:36
Speaker 1: yield monk to date has sold off at a quicker pace.
1:39
Speaker 1: And the reason for that is the prevalence of call
1:41
Speaker 1: features in US junk debt. Right, So what that does
1:44
Speaker 1: adds extension risks. So when yields are rising, you see
1:48
Speaker 1: an exaggerated impact, well an exaggerated effect on US high
1:51
Speaker 1: yield relative to e M high yield. And that's actually
1:55
Speaker 1: what we're seeing right now. But let's talk about the
1:57
Speaker 1: actual market dynamic, because you pointed out some thing that
2:00
Speaker 1: was fascinating I thought, which is the bid ask spread,
2:03
Speaker 1: basically the differential of what people want the price that
2:06
Speaker 1: people want to sell the bond for versus what people
2:09
Speaker 1: are offering to buy. It's widening out a sign of
2:12
Speaker 1: illiquidity in the emerging market complex. Can you talk about
2:15
Speaker 1: that and what does this signify to you, Well, it's
2:18
Speaker 1: happening in US highyield as well, but yes, and e
2:20
Speaker 1: M high yield. What it signifies for me? And you
2:21
Speaker 1: really have to kind of drill down and see exactly
2:24
Speaker 1: which junk bonds in emerging markets are are effectively where
2:27
Speaker 1: the bid offer spreads are widening. And it's these single
2:30
Speaker 1: b these you know, I mean Zambia or Angola, these
2:34
Speaker 1: kind of smaller small terms of market value, small terms
2:37
Speaker 1: of the size of their country and their economies. There's
2:39
Speaker 1: just no demand there, the bids aren't there. When liquidity,
2:42
Speaker 1: you know, kind of drives up like we saw last Friday,
2:44
Speaker 1: and so when that happens, you know, it gives a
2:47
Speaker 1: lot of investors costs for concerning what they are then
2:49
Speaker 1: forced to do, especially the big fund managers, is they
2:52
Speaker 1: have to sell their higher quality investment grade debt in
2:55
Speaker 1: order to meet redemptions, which as we all know, are
2:58
Speaker 1: coming through this month. I mean we've seen that not
3:00
Speaker 1: just in the world's largest emerging market bond ETF, but
3:03
Speaker 1: in all emerging market that ETFs hard currency. That is,
3:06
Speaker 1: we've seen a lot of redemptions month to date, and
3:08
Speaker 1: we're only halfway through. And the Act of funds they
3:11
Speaker 1: have to meet redemptions at the end of this month.
3:13
Speaker 1: And uh, if they're seeing the same trend we're seeing
3:16
Speaker 1: uh in ETFs, it could get it could get a
3:18
Speaker 1: little uglier. So let me understand this, Damian. If an
3:22
Speaker 1: investor wants to lend their money to a middling credit
3:27
Speaker 1: emerging market company, they're going to receive less money than
3:33
Speaker 1: if they decide to lend their money to a similar
3:37
Speaker 1: rated company in the United States. Right, well, phim, let's
3:40
Speaker 1: just differentiate. I mean, it's really sovereign debt, right, I
3:43
Speaker 1: mean we're talking about a country, not a company, right,
3:46
Speaker 1: which is even worse to your point, I mean, so
3:48
Speaker 1: so you're right. So, so you're telling me that if
3:50
Speaker 1: I want to lend my money to the government of Angola,
3:52
Speaker 1: I'm going to get less than if I lend my
3:54
Speaker 1: money to the United States government or to the United
3:57
Speaker 1: States I know and equivalently rated you s high old corporate, Okay.
4:01
Speaker 1: And the reason for this is not because the United
4:04
Speaker 1: States is a better or worse bet, although you could
4:07
Speaker 1: certainly make the case that it might mean a better bet.
4:10
Speaker 1: It's because no one wants to buy your angal and
4:14
Speaker 1: sovereign debt, So you stick it in the drawer and
4:17
Speaker 1: you look for something that someone will buy, and then
4:21
Speaker 1: it shows up and it goes, oh yeah, US debt
4:23
Speaker 1: will sell that because we know someone will buy. But
4:26
Speaker 1: there lies the opportunity ten because what it does these
4:28
Speaker 1: fund managers are forced to sell higher quality, better bonds
4:32
Speaker 1: in order to meet in order to raise cash to
4:33
Speaker 1: meet redemptions. Right, So you're seeing these kind of outliers
4:36
Speaker 1: so and and they're exaggerated in environments like this, and
4:39
Speaker 1: this is where you know, the real savvy EM fund managers,
4:42
Speaker 1: you know, really earn their keep, right if they're able
4:44
Speaker 1: to kind of manage their cash balances. So what is
4:46
Speaker 1: one of these So, what is one of these uh,
4:48
Speaker 1: sort of savvy investments that is being thrown out because
4:53
Speaker 1: someone is trying to meet a redemption call and they
4:57
Speaker 1: can't find anyone to you know, by their paper from
5:02
Speaker 1: Angola at a price that they're willing to take. Well.
5:05
Speaker 1: And and I mean look the two largest most liquid
5:08
Speaker 1: credits in e M high yield our Argentina and Petrol Buss, right,
5:11
Speaker 1: I mean they are huge issuers of high yield emerging
5:14
Speaker 1: market debt and invariably, if you need to sell m
5:17
Speaker 1: e M high YELD debt to meet redemptions. I would
5:19
Speaker 1: imagine those are a source of liquidity for fund managers.
5:22
Speaker 1: So learn Portuguese, learned Spanish and lineup for some petrol
5:25
Speaker 1: bras and some Argentine bonds. Pretty much. Yeah. So, so
5:29
Speaker 1: here's my question right now, how much of this is
5:32
Speaker 1: a currency bet? Because you did see a bit more
5:36
Speaker 1: dollar strength I mean obviously now, I mean I don't
5:38
Speaker 1: want to say that a bit mar because now we're
5:40
Speaker 1: back at four year lows with a dollar. But you know,
5:42
Speaker 1: there was a little bit more strength which would which
5:45
Speaker 1: would make these investments less valuable for people who hadn't hedged,
5:49
Speaker 1: right because e M currencies were losing value against the dollar.
5:52
Speaker 1: Uh So, can you talk to us about how much
5:54
Speaker 1: that plays into this or is this something to me?
5:56
Speaker 1: At least it's all about the dollar and em local currency,
5:59
Speaker 1: especially today. And I mean this has been a big
6:01
Speaker 1: story all day long with the dollar declining to three
6:03
Speaker 1: or lows, but I mean it has fully decoupled from
6:05
Speaker 1: safe safe haven assets such as this was frong the
6:08
Speaker 1: en and gold and um. And that's good for emerging
6:11
Speaker 1: markets for now, right because you know that's Basically e
6:15
Speaker 1: M and commodities are are continuing to perform well, but
6:18
Speaker 1: it is a In fact, it is the second most
6:20
Speaker 1: crowded short and global financial markets today if you listen
6:23
Speaker 1: to Bank of America and I just I'm not sure
6:25
Speaker 1: how long dollar bears can hold on given the magnitude
6:27
Speaker 1: of this week's move. Okay, so let's say the dollar
6:29
Speaker 1: does strengthen. How much of a problem is that for
6:32
Speaker 1: these investments. Oh yeah, I think that's going to be
6:34
Speaker 1: a problem, certainly for e M local currency debt. I mean,
6:37
Speaker 1: I've seen a lot of emerging market managers come and go,
6:40
Speaker 1: you know, getting barished on the dollar. It's it's just,
6:42
Speaker 1: you know, it works when it works, and when it doesn't,
6:45
Speaker 1: it really really doesn't. How much fear are you hearing
6:49
Speaker 1: from portfolio managing? You know, I don't think it's a
6:51
Speaker 1: lot of fear, really. I think it's just more, um,
6:54
Speaker 1: it's just more that people are trying to get accustomed
6:56
Speaker 1: to this new paradigm. I mean, we all yields are rising.
6:59
Speaker 1: I mean we have autom than US yields and the
7:01
Speaker 1: impact and total returns in all emerging market asset classes,
7:04
Speaker 1: hard and local currency here to date have been you know,
7:07
Speaker 1: materially impacted by rising US yield has just dominated the
7:11
Speaker 1: impact on spread, compression and carry. So um, so that's
7:14
Speaker 1: a bad thing. What happens if this continues? Um, well,
7:19
Speaker 1: I don't know how much higher US heils are gonna go.
7:21
Speaker 1: We're gonna have to bring Ira Jersey and to answer
7:23
Speaker 1: that question. But let's say you get the tenure at
7:25
Speaker 1: three Um, you know, I mean what we're almost there
7:29
Speaker 1: when we twelve BIPs away? Right, So I think I
7:31
Speaker 1: think the US tenure. Look if it continues to go,
7:34
Speaker 1: if it goes to three and a quarter, three and
7:35
Speaker 1: a half, I think ginus and four percent. I mean,
7:38
Speaker 1: things can get really bad for emerging markets at that point. Sure,
7:40
Speaker 1: but um, but for now, I think you know, it's
7:43
Speaker 1: gonna be uh, it's gonna be steady sail until the
7:45
Speaker 1: end of the month and we see what redemptions have
7:47
Speaker 1: in store for us. All right, thanks very much, you're
7:49
Speaker 1: going to us informed. As always, he's got great research.
7:52
Speaker 1: I highly recommend it. Check it out. Yes, that is
7:57
Speaker 1: Damian Sas. He's our fixed income strategists. When it comes
8:00
Speaker 1: to Bloomberg Intelligence, all about a merchant market at approximately
8:18
Speaker 1: on people are diagnosed with colon cancer in the United States,
8:23
Speaker 1: and over fifty thousand people die from it annually. Here
8:27
Speaker 1: to help us understand this disease and ways to combat
8:30
Speaker 1: it are his Cameron Reynolds. He is the president and
8:33
Speaker 1: the chief executive of Volition r X and he joins
8:38
Speaker 1: us from London. Cameron, thank you very much for being
8:40
Speaker 1: with us. Tell us about your company and about how
8:43
Speaker 1: you became involved with Volition r X. Yes, I think
8:47
Speaker 1: cancer is something which touches everyone, and at Volition we've
8:50
Speaker 1: developed a range of different tests for different types of cancer,
8:54
Speaker 1: beginning with cole rectal cancer as as you mentioned, and
8:57
Speaker 1: ultimately the way best way to treat cancer, short of
9:00
Speaker 1: a cure, which is unfortunately not not upon us, is
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Speaker 1: to find it early and get the cancer removed. And
9:06
Speaker 1: if you can do that in stage one or stage
9:09
Speaker 1: two or is a pre cancerous poll up, then your
9:11
Speaker 1: chances are surviving more than five years are very high,
9:14
Speaker 1: well over ninety. So that's what we're developing a range
9:17
Speaker 1: of different blood tests which can detect cancer and in
9:22
Speaker 1: a routine blood test, which means it can be part
9:24
Speaker 1: of your normal blood work at a very low cost. Cameron,
9:27
Speaker 1: talking about the costs. That's what I wanted to pick
9:29
Speaker 1: up on because a colon ascopy, which is the traditional
9:32
Speaker 1: method of detecting calling cancer, is very challenging and people
9:38
Speaker 1: have to be partially anaesthetized and drink all sorts of
9:42
Speaker 1: stuff and have somebody bring them home. I mean, it's
9:44
Speaker 1: a big complicated or deal. Imagine. It's also pretty expensive.
9:47
Speaker 1: Can you give us a sense of what the price
9:49
Speaker 1: differential would be from the test that you're developing versus
9:52
Speaker 1: a colonoscopy. Yeah, the colonoscopy is a very good test
9:55
Speaker 1: as far as accuracy goes, but as you say, it's
9:57
Speaker 1: very unpleasant and costly. Depending on what what state you're in,
10:02
Speaker 1: you can range up to three or four or five
10:04
Speaker 1: or six thousand dollars, so you normally don't see that
10:06
Speaker 1: except through the COPAI, but the co pay can be
10:08
Speaker 1: very large as well. So, unfortunately, because of its cost
10:12
Speaker 1: and unpleasantness, there's about thirty million Americans who are not
10:15
Speaker 1: currently screened for colon cancer. So one of the ways
10:19
Speaker 1: of getting around that is to have a low cost
10:21
Speaker 1: blood test. Ours is on a very simple platform called
10:24
Speaker 1: a lizer, So it's part of your routine blood work
10:27
Speaker 1: and we aim to price around the hundred dollar range,
10:29
Speaker 1: so it's very affordable for pretty much everyone. And because
10:32
Speaker 1: it's affordable and the decision is really taken out of
10:35
Speaker 1: your hands, if the doctor takes that extra BOXUM, like
10:38
Speaker 1: your cholesterol test, like your PSA, like all the blood
10:41
Speaker 1: tests you currently have, that really should put compliance way
10:44
Speaker 1: higher than it is now. Compliance is not something people
10:47
Speaker 1: talk about a lot, but if you're not doing the test,
10:50
Speaker 1: the accuracy is very easy to work out, which is zero.
10:54
Speaker 1: So by doing a very routine blood test is the
10:57
Speaker 1: best way of getting the most people screened. And if
10:59
Speaker 1: you do screen you can find the cancer early. Normally,
11:02
Speaker 1: you're in very good shape. Talking about tests, can you
11:05
Speaker 1: give us an update on your diagnostic test? Is that
11:08
Speaker 1: already launched in Europe? UM, We're just in the process
11:12
Speaker 1: now of doing some very large trials in Europe. We'll
11:14
Speaker 1: have about fifteen thousand patient samples run this year. UM
11:18
Speaker 1: we've made public. We're about to announce this month at
11:21
Speaker 1: the first read out on the first of those trials,
11:23
Speaker 1: which is six eight patients, which we haven't got the
11:26
Speaker 1: data from, but we're very hopeful to announce it soon
11:29
Speaker 1: and we're very hopeful that it will show something very unique,
11:32
Speaker 1: which is ability to detect early stage cancer and pre cancer. Again,
11:36
Speaker 1: that's where you really want to be diagnosed before it's metastasized,
11:39
Speaker 1: before you need chemotherapy and all those things. So we'll
11:42
Speaker 1: have a read on out on that very soon. And
11:45
Speaker 1: then we have the two big trials in Europe underway
11:48
Speaker 1: this year, which we'll have read outs on both of
11:50
Speaker 1: them this year as well. So we're very hopeful of
11:52
Speaker 1: having a product on the market for next year in
11:55
Speaker 1: Europe which is ce marked, which means we can sell
11:58
Speaker 1: in twenty eight European country. Is to to anyone clinically, Karen,
12:03
Speaker 1: just preliminary studies, do they show that the accuracy is
12:07
Speaker 1: enough to replace colonoscopies or would this be an additional
12:11
Speaker 1: test that would be done for people who might shy
12:14
Speaker 1: away from the procedure that is more invasive and so
12:17
Speaker 1: in other words, this might be another cost rather than
12:21
Speaker 1: reducing the cost of the colon asky because it wouldn't
12:23
Speaker 1: be a replacement. Yeah. No, I think ultimately, if you're
12:26
Speaker 1: currently having a colonoscopy, if you can afford it, you
12:28
Speaker 1: are prepared to do it. My advice and the correct
12:31
Speaker 1: advice is to continue taking it. It's a very accurate
12:34
Speaker 1: test and pull ups can be removed straight away. But
12:37
Speaker 1: the tragedy is that thirty Americans of screening age either
12:42
Speaker 1: not up to date or have never been screened. So
12:45
Speaker 1: the only way to reduce the massive cost not only
12:47
Speaker 1: on the healthcare system, late stage cancer patients cost up
12:51
Speaker 1: to half a million dollars to for the last few
12:54
Speaker 1: years of their life, and it's not a very pleasant
12:55
Speaker 1: few years. The only way to really deal with that
12:58
Speaker 1: to get those people screened is a low cost, easy
13:02
Speaker 1: to run routine blood test. So yes, it's correct if
13:06
Speaker 1: you if you are positive, you need a colonoscopy to
13:08
Speaker 1: follow it up. But it's a way of driving people
13:11
Speaker 1: who have a much higher chance of having cancer because
13:13
Speaker 1: they're positive in our test from actually having a colonoscopy.
13:16
Speaker 1: So ultimately being a very low cost test, it would
13:18
Speaker 1: it would save a lot of money from the healthcare
13:20
Speaker 1: system because it's apart from the human toil, it's extremely
13:24
Speaker 1: expensive treating late stage cancer patents. So we think it's
13:27
Speaker 1: the only way of really dealing with that of people
13:30
Speaker 1: who just refused to take a colonoscopy. Well, I want
13:33
Speaker 1: to push back a little bit because there are other
13:35
Speaker 1: biod tests that you know, for example, are really not
13:39
Speaker 1: very accurate one for say, varying cancer. Uh. And you know,
13:42
Speaker 1: one one concern with blood tests that have limited accuracy
13:47
Speaker 1: is that they lead to a lot more unnecessary testing
13:50
Speaker 1: um and it might end up adding to costs just
13:53
Speaker 1: by virtue of uh you know, extra perhaps I needed surveillance,
13:58
Speaker 1: uh and and and false alarms. I mean, how do
14:00
Speaker 1: you how do you respond to that? That's absolutely grect.
14:03
Speaker 1: You've got to be very careful. You're not just diagnosing
14:05
Speaker 1: a small number of late stage cancers, which many routine
14:08
Speaker 1: blood tests do do. So when you're looking at our
14:10
Speaker 1: data which is coming up very soon, looked, if you
14:13
Speaker 1: can find the cancer early and and a good percentage
14:15
Speaker 1: of them, you've got to be in the sevent or
14:17
Speaker 1: more or range of getting those numbers of cancers. If
14:20
Speaker 1: you can do that at the low cost, then you
14:22
Speaker 1: are saving the system a lot of money. You're very correct, though.
14:24
Speaker 1: If you look at a lot of screening modalities, mommography,
14:28
Speaker 1: the p s A for prostate, they're very widely carried out,
14:31
Speaker 1: but there are under a lot of criticism because if
14:32
Speaker 1: they can add more burden to the healthcare system. But
14:35
Speaker 1: if if you do what we're aiming to do, and
14:37
Speaker 1: we'll get a good read out on that in in
14:39
Speaker 1: this month, is if you can do it in a
14:41
Speaker 1: very low cost routine test, you then drive the people
14:44
Speaker 1: who are positive towards colonoscopies and then you save them
14:47
Speaker 1: at an early stage to have the treatment, which then
14:50
Speaker 1: are not only save the healthcare system the half a
14:53
Speaker 1: million dollars ODD in the treatment, but also gives that
14:56
Speaker 1: person another ten or twenty years or thirty years of
14:58
Speaker 1: productive life. So there is a lot of concern out
15:01
Speaker 1: there and very well dodge concern that you don't want
15:04
Speaker 1: to over diagnose. And the p s A for prostate
15:07
Speaker 1: is probably the ultimate example. But if if our test
15:10
Speaker 1: is as accurate as we think it's hoping has been
15:12
Speaker 1: in the previous trials, then we'd be in a very
15:15
Speaker 1: rare category of an accurate blood test that's routine, that
15:18
Speaker 1: is also low cost. And one thing which is also
15:21
Speaker 1: important is there's also a small amount of blood, so
15:23
Speaker 1: it's not a separate blood draw it so it can
15:26
Speaker 1: be done in your normal lab. You don't have to
15:27
Speaker 1: send it off somewhere else. Um. I think if we
15:30
Speaker 1: can show all of that which we're hopeful of. Then
15:33
Speaker 1: I think we'll be very unique and add a tremendous
15:35
Speaker 1: amount of the healthcare system and save an awful lot
15:37
Speaker 1: of suffering. Cameron Reynolds, thank you so much for being
15:39
Speaker 1: with us. Cameron Reynolds as president and chief executive officer
15:43
Speaker 1: of Volition our X, which is based in London and
15:47
Speaker 1: is currently testing a blood test to detect colon cancer
15:51
Speaker 1: and avoid call it well non avoid call it ask
15:55
Speaker 1: perhaps direct a greater number of people to get them
15:58
Speaker 1: should they test past it is. I want to turn
16:15
Speaker 1: our attention to infrastructure. The President did release a plan
16:22
Speaker 1: for how to unleash one point five trillion dollars of
16:26
Speaker 1: investments in the US infrastructure. Here to talk about that
16:29
Speaker 1: with us, as Christina Swallow, president of the American Society
16:33
Speaker 1: of Civil Engineers, coming to us from Washington, d C. Christina,
16:36
Speaker 1: I think that there was one really big question right now,
16:40
Speaker 1: which is how to spend this money. I mean, aside
16:43
Speaker 1: from the fact that this isn't going to necessarily uh
16:46
Speaker 1: get done in the form that he's proposing, but what
16:48
Speaker 1: needs to happen right now? So from your perspective, let's
16:51
Speaker 1: start there. So from our perspective, we look at all
16:56
Speaker 1: categories sixteen categories of infrastructure, and we recognize that there's
17:00
Speaker 1: two trillion dollar investment gap. So when we're starting to
17:05
Speaker 1: look at that, we need to make sure that we
17:07
Speaker 1: prioritize any funding that we put towards, that we prioritize
17:11
Speaker 1: it and put it towards projects that will have the
17:13
Speaker 1: most substantial economic and public benefit. We need to really
17:17
Speaker 1: make sure that we're prioritizing our projects and spending the
17:20
Speaker 1: money where it will have the most long term benefit. Okay,
17:24
Speaker 1: I mean that seems reasonable. Maybe we could go through
17:27
Speaker 1: some of the states that specifically need this kind of
17:30
Speaker 1: infrastructure spending if we can. Let's start with Massachusetts. Massachusetts,
17:35
Speaker 1: by many measures, has an issue with its water system.
17:39
Speaker 1: Their estimates that it needs about a seven and a
17:41
Speaker 1: half billion dollar flow of money in order to fix
17:45
Speaker 1: the water infrastructure. Is that something that you see as being, uh,
17:50
Speaker 1: as you just described, you know, like the biggest bang
17:53
Speaker 1: for the buck. So definitely, as Americans, every single American
17:58
Speaker 1: should be able to have access to quality drinking water
18:02
Speaker 1: as we need it. So that is definitely something It's
18:04
Speaker 1: a public health and a safety issue right having proper
18:07
Speaker 1: treatment and availability of water, so that is definitely something
18:10
Speaker 1: that should be a priority on a national level. We
18:13
Speaker 1: know that our surface transportation system is the largest piece
18:18
Speaker 1: of that infrastructure investment gap, so that's also a place
18:20
Speaker 1: where you can see the need to invest um as
18:24
Speaker 1: a priority because it drives so much of our economy. Christina,
18:28
Speaker 1: if you were designing the infrastructure plan, what would be
18:32
Speaker 1: your first location and first project. That's a good question.
18:38
Speaker 1: I really I don't know that I have a first
18:41
Speaker 1: location of first project. I would want to look probably
18:44
Speaker 1: first at our transportation system. Like I mentioned, it's half
18:48
Speaker 1: of the gap, and it drives I mean, it really
18:50
Speaker 1: does drive our economy. Infrastructure, the sort of transportation system
18:56
Speaker 1: in urban settings or in rural settings. Urban settings have
19:01
Speaker 1: the most impact on us as people, as well as
19:05
Speaker 1: on safety. When you consider that hundred on average a
19:09
Speaker 1: hundred and eighty eight million trips are made over structurally
19:12
Speaker 1: deficient bridges each day, that's something that's definitely an area
19:16
Speaker 1: that we want to make sure we focus on to
19:18
Speaker 1: improve safety and also reduce congestion so our our freight
19:22
Speaker 1: bottlenecks don't continue to exist. So that's a focus, but
19:26
Speaker 1: we can't ignore our rural areas because the freight travels
19:30
Speaker 1: across the nation, and so we need to make sure
19:31
Speaker 1: rural areas are also maintained. But definitely urban areas needs
19:35
Speaker 1: to be a focus. There is more of a focus,
19:37
Speaker 1: it seems from the President's plan on the rural areas
19:40
Speaker 1: and sort of fortifying the rural grade. Do you think
19:42
Speaker 1: that is a bad approach. I think the President is
19:48
Speaker 1: looking at the fact that our gut instinct often is
19:51
Speaker 1: to fund the urban areas, and just recognizing the fact
19:55
Speaker 1: that if we ignore the rural areas, we will be
19:59
Speaker 1: um short changing ourselves. I think about so many of
20:03
Speaker 1: the states that have these major freight networks. You know,
20:06
Speaker 1: when you think about I forty and I and I
20:08
Speaker 1: tend that crossed these significant areas of just rule. If
20:12
Speaker 1: we don't make sure that those are maintained, are the
20:17
Speaker 1: frame won't be able to get to where it's going.
20:18
Speaker 1: So we need to make sure that we also focus
20:20
Speaker 1: on that. And I think that was the intent, was
20:22
Speaker 1: just to make sure we don't ignore it. Okay, Now,
20:25
Speaker 1: the American Society of Civil Engineers, you're based in Reston, Virginia,
20:30
Speaker 1: so maybe just even close to Virginia, we can talk
20:33
Speaker 1: about in Maryland, because if you live anywhere near the
20:36
Speaker 1: nation's capital, you know that you faced daily disruptions. Right
20:40
Speaker 1: there was this big steam pipe explosion last June. What
20:45
Speaker 1: about the deficient bridges there, there's some estimates that six
20:49
Speaker 1: of them are deficient. The average commute to work is
20:52
Speaker 1: over thirty two minute. What kind of money and what
20:56
Speaker 1: specific roads or infrastructure would you recommend that we've focus on.
21:02
Speaker 1: We've talked about bridges, and we definitely know in the
21:05
Speaker 1: DC area they're working on improving the Frederick Douglas Bridge.
21:08
Speaker 1: That's one that's been talked about for really a long time,
21:11
Speaker 1: and they're finally at the point where they're going to
21:12
Speaker 1: be investing in that. I think we also need to
21:15
Speaker 1: look when you look at that whole DC Metro area,
21:18
Speaker 1: how do we increase investment in transit. Metro has been
21:21
Speaker 1: doing a really good job recently at focusing on that,
21:24
Speaker 1: but they could still use some additional investment and that
21:27
Speaker 1: would help alleviate some of the congestion on the roads
21:30
Speaker 1: if people went back to trusting the transit system. So
21:33
Speaker 1: there's opportunities there not just to invest in the roads
21:36
Speaker 1: and the bridges, but also to invest in transit On
21:39
Speaker 1: a national level, Transit received our lowest grade at a
21:42
Speaker 1: D minus. Christina, you probably have a lot of discussions
21:46
Speaker 1: with some of the workers who would be trying to
21:49
Speaker 1: design and make these infrastructure projects happen. Are there enough
21:54
Speaker 1: people in this country at this point to fill the
21:58
Speaker 1: jobs that would be required with some kind of substantial
22:02
Speaker 1: infrastructure plan. The people are there. Um, If the funding
22:08
Speaker 1: came through, it wouldn't come through all tomorrow. It would
22:11
Speaker 1: come out in a phase phase manner, in which case, um,
22:14
Speaker 1: the people that are already in the industries would be
22:17
Speaker 1: able to ramp up and do additional work and capacity
22:20
Speaker 1: as we continue to develop new entry entry level workers
22:24
Speaker 1: into the broad spectrum of the industry. So the money
22:27
Speaker 1: would come, the current workforce would step up, and additional
22:31
Speaker 1: workers would enter, and we would start to see changes
22:35
Speaker 1: in our infrastructure within the next three to five years.
22:37
Speaker 1: But overall, to bring the grades from a D plus
22:40
Speaker 1: to everyone at a B, it's going to take us decades.
22:44
Speaker 1: We didn't get here in a matter of a short
22:46
Speaker 1: time frames, and we're not going to get out of
22:48
Speaker 1: it in a short time frame either. It's going to
22:51
Speaker 1: take time. What's the position of the American Society of
22:54
Speaker 1: Civil Engineers on increasing the the federal gasoline tax in
22:58
Speaker 1: order to add more money to the Highway Trust Fund.
23:02
Speaker 1: We've supported increasing the federal gas tax for years. It
23:06
Speaker 1: hasn't been in increase since n It's buying power is
23:11
Speaker 1: significantly decreased as a result. Additionally, we know Carls cards
23:15
Speaker 1: have become more fuel efficient, so we need to find
23:17
Speaker 1: a way to increase investment today. And we're excited about
23:22
Speaker 1: the fact that the US Chamber and even I heard
23:24
Speaker 1: yesterday the President support the concept of or increase in
23:29
Speaker 1: the gas tax that will help us meet the needs
23:31
Speaker 1: today but also modernize and improve our system for the
23:35
Speaker 1: twenty one century. Christina, I'm just wondering. You said that
23:40
Speaker 1: this problem has taken decades to happen, and we will
23:44
Speaker 1: take probably decades to fix, even with some substantial appropriations
23:48
Speaker 1: in the near term. Whose fault was it that there
23:52
Speaker 1: wasn't more real time investment made? I think that that
23:57
Speaker 1: we're we all share a little bit of that. I
23:59
Speaker 1: think there's the concept that when the infrastructure was built,
24:02
Speaker 1: there wasn't a lot of thought about the long term
24:05
Speaker 1: ongoing maintenance. It was we built it, and it was
24:08
Speaker 1: a great success. You think about the major construction of
24:12
Speaker 1: of the early twentieth century and how successful those were,
24:15
Speaker 1: but then but nobody was really thinking about the long
24:18
Speaker 1: term maintenance of those projects, or even though a project
24:21
Speaker 1: that was built in the early d with would would
24:25
Speaker 1: be expected to be still functioning today a century later.
24:28
Speaker 1: I visited a lock system in Seattle that celebrated its
24:31
Speaker 1: centennial last summer. So there's a lot of pieces of this.
24:35
Speaker 1: We weren't thinking about the long term maintenance. We weren't
24:38
Speaker 1: expecting the projects to have to last as long as
24:41
Speaker 1: they were, and so we've underinvested for a full generation.
24:45
Speaker 1: And now it's time that we all at all levels
24:48
Speaker 1: of government and private step up and start increasing that
24:52
Speaker 1: investment and modernize our system. Um. One of the things
24:56
Speaker 1: we we've been focused on is also the combination of
25:00
Speaker 1: spending but also the goals. In other words, whether there
25:04
Speaker 1: is a specific economic goal other than saying all right,
25:07
Speaker 1: yes we want better roads, we want better bridges. But
25:10
Speaker 1: for example, in the Mississippi, the idea that you would
25:14
Speaker 1: have a specific goal that would either cut weight times
25:17
Speaker 1: for soybean farmers and exporters in order to be able
25:20
Speaker 1: to get their products to market. Is there any specific
25:24
Speaker 1: economic goal that you can point to that we would
25:27
Speaker 1: then focus on so that we would know whether we're
25:29
Speaker 1: spending the money on the right kinds of infrastructure projects.
25:34
Speaker 1: Each project is going to have to have its own
25:37
Speaker 1: its own goals, but on a national level, we know
25:40
Speaker 1: that if we don't invest the additional two trillion dollars
25:42
Speaker 1: needed between now and our economy will suffer three point
25:47
Speaker 1: nine trillion dollar loss in our GDP. So there is
25:50
Speaker 1: definitely an economic impact to this. It's not just a
25:54
Speaker 1: public health and safety issue, which we talk about a
25:57
Speaker 1: lot in terms of the water systems and the bridges,
26:00
Speaker 1: but it also impacts our economy and we need to invest.
26:04
Speaker 1: I mean that's not it's not just the GP that
26:05
Speaker 1: will be impacted. Seven trillion dollars in lost business sales,
26:09
Speaker 1: two and a half million million jobs lost in alone.
26:14
Speaker 1: There are economic impacts to under investing in our infrastructure.
26:18
Speaker 1: I want to thank you very much for joining us.
26:21
Speaker 1: Christina Swallow, president of the American Society of a Civil Engineers.
26:26
Speaker 1: They are based in Rest in Virginia. We want to
26:41
Speaker 1: visit now with Robert Langrity as our senior healthcare reporter
26:45
Speaker 1: for Bloomberg and Robert just to set out a little
26:48
Speaker 1: bit about Amazon and the healthcare industry. Amazon does about
26:52
Speaker 1: a hundred and seventies seven billion dollars worth of business
26:56
Speaker 1: a year, and on its most recent inference call, the
27:00
Speaker 1: earnings call, one of the executives spoke about the Amazon
27:05
Speaker 1: business offering. This was in October, and they were saying
27:09
Speaker 1: that the one of the institutions, one of the areas
27:12
Speaker 1: that they are targeting with this offering, along with schools, laboratories,
27:15
Speaker 1: government agencies, is the healthcare industry for dentists, doctors, hospitals.
27:21
Speaker 1: We're talking about gloves, syringes, other kind of healthcare items.
27:27
Speaker 1: What is Amazon doing and who is going to feel
27:30
Speaker 1: the heat? Well, so, like you know, there's been a
27:35
Speaker 1: lot of buzz about what is Anmazon at last several
27:38
Speaker 1: months about what is Amazon going to do in healthcare?
27:40
Speaker 1: Are there has been uh talk uh And they've I
27:43
Speaker 1: guess been quietly looking at, you know, for years what
27:46
Speaker 1: to do in the in the drug sector. Uh, and
27:48
Speaker 1: certainly that's affected lots of drug related stocks. But what
27:51
Speaker 1: they appeared to already be doing and they have been
27:55
Speaker 1: kind of working on for a couple of years, is
27:57
Speaker 1: in their Amazon business. They want to expand it b
27:59
Speaker 1: to be and this is a way. Of course, there's
28:02
Speaker 1: a huge market for health care supply, so they are
28:06
Speaker 1: kind of starting in healthcare and I guess a small
28:10
Speaker 1: way on kind of basic supplies. And what our sources
28:12
Speaker 1: has said is you're one way to start to penetrate
28:15
Speaker 1: the supply market is UH for you know, medical good.
28:18
Speaker 1: UH is before you get to the high tech, highly
28:21
Speaker 1: regulated stuff like medical devices and drugs, which are complicated
28:24
Speaker 1: sometimes of special delivery requirements, lots of regulations, you can
28:28
Speaker 1: start with the simple stuff, you know, grov's bandages, stutors
28:31
Speaker 1: stuff that, and and and you can start with doctors
28:35
Speaker 1: offices and and that is a market that is from
28:41
Speaker 1: sources we talked to say are underserved compared to UH.
28:45
Speaker 1: You know that the the more and more acute hospital
28:48
Speaker 1: market and hospitals and buying up lots of doctors offices
28:52
Speaker 1: and now they have lots lots of far flung offices
28:55
Speaker 1: and the distribution isn't as efficient because you know they're
28:59
Speaker 1: distribut and systems are built for the central hospital. So
29:02
Speaker 1: Amazon is trying to you know, get into this sector
29:04
Speaker 1: in a big way, establish a foothold. Uh, you know,
29:08
Speaker 1: in the big medical supplies market, and it's I've been
29:11
Speaker 1: talking to hospitals or with the focus on our patient
29:14
Speaker 1: clinics and uh and that could potentially threaten you know,
29:19
Speaker 1: medical supply companies. There's a company, Henry Shine that has
29:24
Speaker 1: calls on doctors off his veterinarians, dentist. There's another company
29:28
Speaker 1: owns and minor. Uh and they acknowledge in a conference
29:31
Speaker 1: call yesterday, Hey, I was talking to our customers. Uh
29:35
Speaker 1: and so far, you know, Amazon is more in the
29:37
Speaker 1: doctor office, but they're talking to our big hospital customers. Uh.
29:41
Speaker 1: So this is a way for Amazon to start to
29:43
Speaker 1: get into the medical supply market. But uh and if
29:47
Speaker 1: this works, I would imagine they would ramp up two
29:51
Speaker 1: more expensive, higher tech stuff eventually, Robert, is this stuff
29:55
Speaker 1: mostly those sort of gloves and the sutures and the
29:57
Speaker 1: band aids? And are these things low profit margin types
30:02
Speaker 1: of goods? In other words, are they starting Is this
30:04
Speaker 1: an experiment for them or is this lucrative in its
30:08
Speaker 1: own right? Well, I mean it's just looking you know,
30:12
Speaker 1: Henry Shine itself, that's one company with supplies and stuff.
30:15
Speaker 1: They they alone of a few billion dollars in sales,
30:18
Speaker 1: and you know, medical supply and several more billion dollars
30:22
Speaker 1: in dental supply. So they're like, I think around I
30:26
Speaker 1: probably you know, somewhere around ten billion dollars in revenue company. Uh,
30:31
Speaker 1: and you're not just one company, so I'm sure it's
30:34
Speaker 1: nowhere near as the Other thing about Amazon is that
30:37
Speaker 1: it's been about revenue growth, and investors have wanted to
30:41
Speaker 1: see you know, uh sterling a revenue growth kind of
30:44
Speaker 1: profits come later and they've been rewarded for the revenue
30:47
Speaker 1: growth and new markets, and they're looking for new markets
30:49
Speaker 1: to get into. And you know, healthcare is one of
30:52
Speaker 1: the big, big big markets there not in now and
30:55
Speaker 1: in much of a way, rob You know, the the
31:01
Speaker 1: issue of Amazon taking over other businesses is not brand new.
31:05
Speaker 1: Where have all these I mean, Robert, where have all
31:08
Speaker 1: these businesses been? Are they waiting for Amazon to come
31:11
Speaker 1: in and give them competition? Because doesn't this apply to
31:14
Speaker 1: just about any kind of product and service that's delivered
31:17
Speaker 1: to your door? Um? Yeah, potentially does. But and the
31:22
Speaker 1: one reason that that you know, doctor's offices, didental clinics,
31:26
Speaker 1: outpatient surgery clinics. Uh uh, these types of clinics and
31:31
Speaker 1: smaller operations were because you know, they also have to
31:34
Speaker 1: order office supplies and basic stuff too, and so they can.
31:38
Speaker 1: It works very well because some of them may already
31:40
Speaker 1: be lading to office supply supplies from Amazon business. And
31:43
Speaker 1: if you throw advantage and sutures and other basic medical
31:46
Speaker 1: supplies that don't have to refrigerator, it aren't being implanted
31:49
Speaker 1: in the patients. There's not complicated the regulation there. They
31:53
Speaker 1: can combine order. It fits very well. And this stuff,
31:57
Speaker 1: you know, it's businesses. Basic stuff can be stored in
31:59
Speaker 1: the warehouse with refrigeration. It's not not the high tech
32:02
Speaker 1: stuff you have, and they can build up to the
32:03
Speaker 1: higher tech stuff. So it's a good starting point, uh
32:07
Speaker 1: for Amazon. The one thing and they've been you know
32:10
Speaker 1: talking to some major hospital systems, uh, you know over
32:15
Speaker 1: about you know, what they can do in health over
32:18
Speaker 1: the past several months to a year. We talked to
32:21
Speaker 1: one that's been talking to Amazon for a year, another
32:24
Speaker 1: one that's been talking to Amazon for you know, three
32:26
Speaker 1: or six months. Uh. And Amazon would be a big
32:30
Speaker 1: change from the way things are done because they would
32:33
Speaker 1: have ordered the hospitals and health systems because a lot
32:36
Speaker 1: of the supplies are in a contract basis. Now it's
32:39
Speaker 1: kind of fixed price at my last or six months
32:41
Speaker 1: a year. Amazon really built up that relationship with hospitals.
32:47
Speaker 1: Thank you so much. Unfortunately have to leave it there.
32:48
Speaker 1: Robert Langworth, health care reporter, Senior health reporter for Bloomberg News.
32:56
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
32:59
Speaker 1: You can some scribe and listen to interviews at Apple Podcasts, SoundCloud,
33:03
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox, I'm
33:07
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
33:10
Speaker 1: abramowits one before the podcast. You can always catch us
33:13
Speaker 1: worldwide on Bluebirg Radio