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Bank Earnings, Flexible Investing and ESG · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you,
• 0:05
  Speaker 1: along with my co host Lisa Brahma wits. Each day
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  Speaker 1: we bring you the most noteworthy and useful interviews for
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  Speaker 1: you and your money, Whether at the grocery store or
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  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
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  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. Well, folks here at the Bloomberg
• 0:21
  Speaker 1: offices in New York, I've spent the morning watching Alison
• 0:23
  Speaker 1: Williams run, literally run back and forth between her desk,
• 0:27
  Speaker 1: Bloomberg Television Studio and now the Bloomberg Radio Studio. Why
• 0:30
  Speaker 1: you may ask, It's because it seems like every major
• 0:33
  Speaker 1: bank reported earnings this morning, so she is in great demand.
• 0:36
  Speaker 1: Alison Williams covers all things financials for Bloomberg Intelligence, joining
• 0:41
  Speaker 1: us here on our Bloomberg and Act the Broker studio.
• 0:43
  Speaker 1: So Goldman, Sachs, JP, Morgan City, Wells, Fargo. You know,
• 0:48
  Speaker 1: you've had a couple of hours kind of cut through
• 0:50
  Speaker 1: all the details. As you step back, how do you
• 0:53
  Speaker 1: view kind of the current environment for the big banks
• 0:56
  Speaker 1: that you've been covering for so many years. So I
• 0:59
  Speaker 1: think the right a new environment remains a big question,
• 1:02
  Speaker 1: right and that relates to trade and tariffs, bregsit all
• 1:06
  Speaker 1: the geopolitical uncertainty. Uh. We sort of knew we wouldn't
• 1:09
  Speaker 1: get an answer on that today, but I think where
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  Speaker 1: we did get an answer is who has some levers
• 1:13
  Speaker 1: to pull? And I think that's um one place where
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  Speaker 1: JP Morgan is executing return on tangible equity pretty impressive.
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  Speaker 1: That's the best among the banks. And they showed uh,
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  Speaker 1: you know, gaining share and trading doing well on loan growth,
• 1:29
  Speaker 1: so that helps to offset some of the margin pressure
• 1:32
  Speaker 1: and then cost um flexibility the guidance coming down there.
• 1:36
  Speaker 1: So those were all positive. If we look across the
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  Speaker 1: other companies, you know, WELLS Fargo, I think it's sort
• 1:43
  Speaker 1: of the the earnings are less important than the incoming CEO.
• 1:46
  Speaker 1: But they took a big litigation charge clearing the decks
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  Speaker 1: for Charlie Sharfs, So that's a positive city group. I think,
• 1:53
  Speaker 1: you know, that's the questions are rising regard to the
• 1:56
  Speaker 1: returns for next year. It looks like they're going to
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  Speaker 1: be able to make their target this year, but next
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  Speaker 1: year as a question, um, you know, twelve percent versus
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  Speaker 1: the eighteen percent that that JP Morgan did this quarter.
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  Speaker 1: City is executing around a twelve percent, hoping to make
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  Speaker 1: that target for this year. UM. So I think costs
• 2:12
  Speaker 1: remain the question for them. And then on Goldman Sachs,
• 2:16
  Speaker 1: you know, fees coming in weaker, that equity income coming
• 2:21
  Speaker 1: in a little bit weaker, just due to what's happening
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  Speaker 1: on the market, the ip A pause, etcetera, UM, and
• 2:28
  Speaker 1: cost a little bit higher for them. I wanted to
• 2:31
  Speaker 1: sort of go and drill into the consumer because a
• 2:34
  Speaker 1: lot of the banks Weapen Moregan included are expanding in
• 2:37
  Speaker 1: their consumer lending businesses and people have been looking for
• 2:41
  Speaker 1: signs of a possible slowdown amid the consumer strength that
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  Speaker 1: we continue to see. What was the reading there, So
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  Speaker 1: I don't think that we're seeing a slowdown so far. Uh.
• 2:54
  Speaker 1: And in fact, you know City Group talking about the
• 2:56
  Speaker 1: fact that you know, even though UM, you know they're
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  Speaker 1: keep being a tight rate no cost, but they also think, UM,
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  Speaker 1: they can have revenue growth and part of that is
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  Speaker 1: the consumer. Keep in mind, they have a much bigger
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  Speaker 1: credit card business UM than many of the other competitors. UM.
• 3:12
  Speaker 1: JP Morgan also showing some health and we did see
• 3:14
  Speaker 1: in the government data sort of a pick up in
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  Speaker 1: consumer loans, especially in auto lending. Um, we're gonna hear
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  Speaker 1: I think more about that broadly from the banks as
• 3:23
  Speaker 1: they come in this week. So Elson, you mentioned JP
• 3:25
  Speaker 1: Morgan had to I guess you said return on tangible
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  Speaker 1: equity about eight. That seems like if I remember back
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  Speaker 1: almost pre financial crisis, like and I was, I know,
• 3:34
  Speaker 1: the bear case coming through the Financial crisis was a
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  Speaker 1: whole new set of regulations. They're never going to generate
• 3:39
  Speaker 1: those kind of returns. Give us a sense of kind
• 3:41
  Speaker 1: of the profitability and the returns we're seeing from some
• 3:44
  Speaker 1: of the big banks you cover. Yeah, and and so
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  Speaker 1: to your point, Um, you know they're they're executing sort
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  Speaker 1: of top of their game, and I think what's impressive
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  Speaker 1: is that they're doing that in an environment where they
• 3:54
  Speaker 1: are holding more more capital um and in fact on
• 3:58
  Speaker 1: a sort of the interesting side notes, what's been going
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  Speaker 1: on in the repo market that's coming up on the
• 4:03
  Speaker 1: calls and JP Morgan talking about the fact that because
• 4:06
  Speaker 1: of restrictions, they weren't perhaps as active um and in
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  Speaker 1: that marketplace as they might have been in the past,
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  Speaker 1: so sort of you know, an eye towards regulation there um,
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  Speaker 1: but in general if you look at return on assets,
• 4:20
  Speaker 1: so that adjusts for some of the some of the
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  Speaker 1: leverage and some of the changes. We are executing at
• 4:26
  Speaker 1: a very high level, and that's what we'd expect to
• 4:29
  Speaker 1: be because we are late cycle, and so as much
• 4:32
  Speaker 1: as we talk about the revenue concerns, keep in mind
• 4:35
  Speaker 1: that credit very solid. We could just continue to see
• 4:38
  Speaker 1: very strong results across the backs. Alison Williams, thank you
• 4:42
  Speaker 1: so much for being with us. Alison Williams, who is
• 4:44
  Speaker 1: the hardest working woman in Bloomberg this morning. Alison Williams,
• 4:49
  Speaker 1: intelligence analyst covering all things bank. It is no secret
• 5:08
  Speaker 1: people are searching for income. This has been a theme
• 5:11
  Speaker 1: for the oh, I don't know, past decade uh and
• 5:13
  Speaker 1: increasingly they have been turning two convertible bonds. These are
• 5:17
  Speaker 1: bonds that have an option to convert into securities into
• 5:21
  Speaker 1: stocks given certain figures. Joining us now. Dave King, Senior
• 5:24
  Speaker 1: portfolio manager with Columbia Thread Needle Investments based in Boston. Dave,
• 5:29
  Speaker 1: you focus on convertible debt and your funds. I was
• 5:32
  Speaker 1: looking at one of them. It's up more than fient
• 5:35
  Speaker 1: year to date doing really well. What's been sort of
• 5:38
  Speaker 1: the winning aspects of convertible bonds this year In the
• 5:43
  Speaker 1: current year, it's been the recovery and equities UM. Convertibles
• 5:47
  Speaker 1: are typically issued by companies with growth opportunities. So when
• 5:51
  Speaker 1: the market bounced back, the equity market, I mean from
• 5:55
  Speaker 1: a bad queue for leadership has been smaller, grow your
• 6:00
  Speaker 1: stocks and our world is that world. Those are the
• 6:05
  Speaker 1: underpinnings of the bonds and preferreds that we buy. So
• 6:08
  Speaker 1: it's been good equity performance in areas like software or
• 6:13
  Speaker 1: rebound and semiconductors, and then just isolated good performers in
• 6:17
  Speaker 1: other areas that have led to charge for us and
• 6:19
  Speaker 1: for the market. So Dave, when bankers go in and
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  Speaker 1: they're pitching a convert to a corporate issuer, you know
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  Speaker 1: sometimes I guess you know that maybe the argument could be,
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  Speaker 1: we'll just sell equity here. What's the what's the real
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  Speaker 1: advantage to an issuer? Uh By issuing a convertible bond,
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  Speaker 1: well compared to issuing equity directly, the process is much
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  Speaker 1: quicker to do a convertible. They can be issued under
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  Speaker 1: Rule one A and just sold to qualified institutions. So
• 6:50
  Speaker 1: companies can get transactions done in the hundreds of millions
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  Speaker 1: of dollars in one day's time or overnight without the
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  Speaker 1: lengthy registration process. Says In terms of the contrast to
• 7:02
  Speaker 1: issuing a bond, you often find that the bond market
• 7:07
  Speaker 1: is a backward looking market that favors the old economy.
• 7:10
  Speaker 1: So companies in areas like biotechnology or sas are challenged
• 7:16
  Speaker 1: when it comes to dealing with the high yield market
• 7:18
  Speaker 1: dynamics and find the convertible market much more friendly. I'm
• 7:21
  Speaker 1: looking right now at the market value of the Bloomberg
• 7:23
  Speaker 1: Parclay's US Convertibles Index, and it's about two hundred and
• 7:28
  Speaker 1: nineteen billion dollars of securities. And the reason why I
• 7:31
  Speaker 1: ask is because there was a problem in the past
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  Speaker 1: bunch of years where convertible bonds were more popular with
• 7:37
  Speaker 1: investors than they were by issuers to sell them. And
• 7:41
  Speaker 1: I'm wondering how that dynamic has evolved today. Yeah, that's
• 7:45
  Speaker 1: a great observation. It remains a problem as far as
• 7:48
  Speaker 1: I'm concerned. To put it in perspective, twenty years ago,
• 7:51
  Speaker 1: the high yield market and the convertible market were similar
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  Speaker 1: in size. In two thousand, sixteen, new issuance in the
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  Speaker 1: high yield market exceeded the total size of a convertible market.
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  Speaker 1: So we've been a dwarf here because of the government
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  Speaker 1: focusing on very low yields, um quantitative easing and so forth.
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  Speaker 1: But can you hash that out? What exactly is the
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  Speaker 1: reticence on the part of companies to sell these bonds. Well, um,
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  Speaker 1: they can get cheaper money elsewhere as yields have been
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  Speaker 1: forced down dramatically. I mean, what we discuss as being
• 8:30
  Speaker 1: the quote unquote high yield market is a five handle
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  Speaker 1: market that used to be a seven or eight handle market.
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  Speaker 1: So even in the context of a strong stock market,
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  Speaker 1: it's like, why give away a call option on your
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  Speaker 1: equity when you can finance so cheaply. So that's been
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  Speaker 1: the reticence. But the good news, as I said, is
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  Speaker 1: that last year was a record year for issuance, and
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  Speaker 1: this year actually through nine months was running ahead of
• 8:54
  Speaker 1: last year. So there is a recovery in convertible issuance,
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  Speaker 1: but nowhere near where I think it will be if
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  Speaker 1: rates normalize at levels they were in the past. So Dave,
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  Speaker 1: I remember back in a financial crisis, some industries and
• 9:07
  Speaker 1: companies that were really struggling, like airlines and autos, they
• 9:11
  Speaker 1: went to the convert market. Um, is that kind of
• 9:14
  Speaker 1: you know, saving the company type of financing? Is that?
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  Speaker 1: Do we still see that in the market today. Well,
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  Speaker 1: it hasn't been as necessary after ten years of economic recovery,
• 9:24
  Speaker 1: but it's absolutely one of the functions of our market.
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  Speaker 1: The main uses of the convertible market are to finance
• 9:31
  Speaker 1: disruptive growth companies, to finance M and A, and to
• 9:35
  Speaker 1: finance survival of the enterprise. So when I think back
• 9:38
  Speaker 1: to joining Columbia about ten years ago, as you point out,
• 9:42
  Speaker 1: there were a lot of airline issues, home building issues.
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  Speaker 1: Ford Motor was a big issuer. They wisely did converts
• 9:48
  Speaker 1: instead of having to file bankruptcy. So, yes, the economy cyclical.
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  Speaker 1: When the cycle heads down, will see a lot of
• 9:55
  Speaker 1: issue ins in areas where the economy is struggling. Just
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  Speaker 1: a quick Dave, would you buy we were convertible bonds
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  Speaker 1: if they were to be sold, Um, well, they have
• 10:06
  Speaker 1: to have a stock first of all. We can't convert
• 10:10
  Speaker 1: into nothing but the community adjusted stock. Conceptually, it would
• 10:16
  Speaker 1: be a very typical issuer in our market if it
• 10:19
  Speaker 1: was a public company and if they had a balance
• 10:21
  Speaker 1: sheet problem. Um, but could make the case, and this
• 10:25
  Speaker 1: is hypothetical, they could make the case that they have
• 10:28
  Speaker 1: a working business model. They would be welcome with open
• 10:31
  Speaker 1: arms in our market, while skepticism would prevail in the
• 10:34
  Speaker 1: high yield market in other places. Dave King, Senior portfolio
• 10:38
  Speaker 1: manager for Columbia Thread Needle Investments, located in Boston, Thanks
• 10:41
  Speaker 1: so much for joining us. Well, we have a risk
• 10:59
  Speaker 1: on day today, that's for sure. The equity indices up
• 11:01
  Speaker 1: about one percent. And to be honest with you, I'm
• 11:03
  Speaker 1: not really sure why. Maybe a little bit of lift
• 11:06
  Speaker 1: from Brexit, maybe some tech and healthy maybe a little
• 11:11
  Speaker 1: tech little healthcare push pushing the market up. A mixed
• 11:14
  Speaker 1: bag coming out of the big Wall Street banks. But
• 11:16
  Speaker 1: hopefully our next guest can help us provide some color here.
• 11:19
  Speaker 1: Frank Rabinski, chief macro strategist for Eggon USA Asset Management
• 11:24
  Speaker 1: based in Charmed City that be, Baltimore, Maryland. But he
• 11:27
  Speaker 1: joins us here in our Bloomberg Interactor Broker studio. So, Frank,
• 11:30
  Speaker 1: just just today we had a nice move up here. Um,
• 11:33
  Speaker 1: what do you attributed to having me? Yes, I think
• 11:37
  Speaker 1: what you're seeing in part there's a macro story of
• 11:40
  Speaker 1: this bear market in geopolitics which is really bleeding into
• 11:43
  Speaker 1: the economics and and that's affecting markets. Right. So as
• 11:47
  Speaker 1: as you get these oscillations of of of the geopolitical side, um,
• 11:51
  Speaker 1: you know that you can see a quick reaction or
• 11:53
  Speaker 1: you know, from from a day to day perspective on
• 11:55
  Speaker 1: the risk markets. So what do you like? So we
• 12:00
  Speaker 1: are at at this point, you know, lat in the cycle. Uh,
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  Speaker 1: we have been slowly going up in quality. And I'm
• 12:06
  Speaker 1: talking about from a from a fixed income perspective. We think,
• 12:09
  Speaker 1: you know, going too far up in quality, like all
• 12:10
  Speaker 1: the way to treasuries, you know, doesn't make sense. At
• 12:12
  Speaker 1: this point. You've already had say the tenure being you know,
• 12:14
  Speaker 1: the yield cut in half UM and we think it's
• 12:16
  Speaker 1: more of a coupon clip from here at best UM.
• 12:19
  Speaker 1: So we we'd be looking kind of the mid tier
• 12:21
  Speaker 1: corporate credit because we also think, you know, looking at
• 12:24
  Speaker 1: the triple cs uh, you know, kind of the really
• 12:26
  Speaker 1: low end, you're you're not going to have the the
• 12:28
  Speaker 1: the oversized growth that those companies need to really grow
• 12:31
  Speaker 1: grow into their balance sheets. So I do want to
• 12:33
  Speaker 1: bring you a headline just crossing the Bloomberg that we
• 12:36
  Speaker 1: work at the board of WE Companies is reported to
• 12:40
  Speaker 1: be working with Perelo Weinberg Partners. That would suspect suggest
• 12:44
  Speaker 1: at some sort of restructuring. I'm wondering, we work bonds
• 12:48
  Speaker 1: falling to an all time low today, how much of
• 12:52
  Speaker 1: a specific story do you think we work is and
• 12:55
  Speaker 1: how much do you think it represents some broader potholes
• 12:59
  Speaker 1: that we're going to see down the line with other
• 13:02
  Speaker 1: other companies in the up market right now. I always
• 13:04
  Speaker 1: think it's interesting how these types of stories they don't
• 13:07
  Speaker 1: tend to happen at the start of a cycle, right,
• 13:09
  Speaker 1: you get these late cycle when when capital is looking
• 13:13
  Speaker 1: for return, looking for yields, um, and you get these
• 13:16
  Speaker 1: misallocation of capital. You know, if they think of the
• 13:19
  Speaker 1: nineties tech, right, I mean, and I think this is
• 13:21
  Speaker 1: on a macro level, this is similar to to that
• 13:24
  Speaker 1: type of thesis. Um. So again, I this is where,
• 13:27
  Speaker 1: especially when you get into these low liquid uh type
• 13:30
  Speaker 1: you know, you know, really low quality names. Um, the
• 13:34
  Speaker 1: the credit analysis really becomes important because if you're just
• 13:38
  Speaker 1: passive investing, it's really hard from a price discovery standpoint. Um.
• 13:42
  Speaker 1: You know, having that uh, you know you can't focus
• 13:46
  Speaker 1: on the story. It's more about the cap structure and
• 13:48
  Speaker 1: the balance sheet and and the realistic component of that story.
• 13:51
  Speaker 1: So it sounds like JP Moore Bloomberg News is out
• 13:54
  Speaker 1: with the report this morning and news report this morning
• 13:57
  Speaker 1: that the JP Morgan is you might be shopping around
• 13:59
  Speaker 1: a you know, multibillion dollar you know capital structure, bond up,
• 14:05
  Speaker 1: you know, coupon payment and kind in terms we haven't
• 14:08
  Speaker 1: heard about for such a long time. That screams kind
• 14:11
  Speaker 1: of you know, kind of end of cycle. Just give
• 14:13
  Speaker 1: us a sense in your portfolio, how is kind of
• 14:16
  Speaker 1: the credit quality I guess for you know, lack of
• 14:18
  Speaker 1: a better terment. Does it feel late cycle to you
• 14:20
  Speaker 1: their warning signs there or or is the overall the economy,
• 14:24
  Speaker 1: which is still pretty strong kind of supporting most of
• 14:26
  Speaker 1: the credits. Well, so I'll start with the economy side
• 14:29
  Speaker 1: and then go into the portfolio side. So on the
• 14:31
  Speaker 1: economy side, you know, definitely late side. I mean, we're
• 14:34
  Speaker 1: moderating from peak growth, and you know, we see trend
• 14:37
  Speaker 1: growth in the high ones and we think we're going there. Um,
• 14:40
  Speaker 1: we don't see the cycle necessarily ending, you know, next year,
• 14:43
  Speaker 1: So you know, we think from that perspective, you could
• 14:45
  Speaker 1: have kind of trend like growth um, which is not
• 14:47
  Speaker 1: bad for certain parts of credit. Uh. We conversely, but
• 14:51
  Speaker 1: when we talk about the portfolio side, we have been
• 14:54
  Speaker 1: on an up end quality type mode for for quite
• 14:57
  Speaker 1: some time. Um. You know, if we look at the
• 14:59
  Speaker 1: low end of high yield, the triple seas, you know,
• 15:01
  Speaker 1: we're underweight. They're trying to go up. And if you
• 15:04
  Speaker 1: look at at the sharp ratios, I mean, they're they're
• 15:06
  Speaker 1: definitely being maximized and kind of the mid part of
• 15:08
  Speaker 1: the credit structure because you've also been you know, assuming
• 15:11
  Speaker 1: a lot of risk with the volatility you've seen on
• 15:15
  Speaker 1: some of the lower end side of the of the
• 15:17
  Speaker 1: credit space. So we we've definitely been on this up
• 15:20
  Speaker 1: and quality, but as I said before, not going all
• 15:21
  Speaker 1: the way up and quality because we don't think you know,
• 15:24
  Speaker 1: the despite the trade fears, uh, you know, and kind
• 15:27
  Speaker 1: of the uncertainty around that, we don't see the global
• 15:29
  Speaker 1: cycle completely ending. Triple c credits have underperformed. A lot
• 15:34
  Speaker 1: of people agree with you. A lot of people have
• 15:35
  Speaker 1: been doing the same thing. If I were a contrarian,
• 15:37
  Speaker 1: I would go into triple seas and say, well, for
• 15:39
  Speaker 1: not at the end, these things are going to plug
• 15:41
  Speaker 1: plug along. There's a lot of capital and private debt
• 15:43
  Speaker 1: and private equity kinds of structures. So I'll be fine,
• 15:46
  Speaker 1: what would you say to that person, Well, I hope
• 15:49
  Speaker 1: his credit analysis is quite sharp. I mean it's I
• 15:52
  Speaker 1: think it's helpful when you look at this cycle versus
• 15:54
  Speaker 1: prior cycles in the sense of, you know, in the
• 15:57
  Speaker 1: eighties and nineties, you know, nominal growth was is six
• 16:00
  Speaker 1: seven percent. Now you know we're we're happy with three.
• 16:05
  Speaker 1: And you know, when you're at a slower nominal growth world, um,
• 16:09
  Speaker 1: it's harder to get the aggregate low end of the
• 16:12
  Speaker 1: credit space because they need growth right to to grow
• 16:15
  Speaker 1: into those balance sheets. So I think, will there be
• 16:17
  Speaker 1: companies that survive and do wal and Trip will see yes.
• 16:20
  Speaker 1: But again, I think buying a bucket of triple cs
• 16:23
  Speaker 1: is going to be you know, you're going to be
• 16:24
  Speaker 1: taking a more risk so that sharp race will be affected.
• 16:27
  Speaker 1: As opposed to having me really experienced and sharp analysts
• 16:30
  Speaker 1: who can you know, really figure out the credit specifics there,
• 16:33
  Speaker 1: you might be buying a bucket of worms. Sorry, I
• 16:36
  Speaker 1: couldn't help myself. It's Tuesday, Fransky. No, it's It's absolutely nothing.
• 16:41
  Speaker 1: It's something I just made up. So um you can.
• 16:43
  Speaker 1: You can write your comments to lebron Woods at Bloomberg
• 16:46
  Speaker 1: dot net. Frank Rabinski, thank you so much for being
• 16:48
  Speaker 1: with us. Frank Robinski as chief macro strategist to Egg
• 16:51
  Speaker 1: on asset management over helping oversee a hundred and three
• 16:55
  Speaker 1: billion dollars of assets from Baltimore. What what what did you
• 16:58
  Speaker 1: call Baltimore? Charm city? Armed city? Who do po? We
• 17:16
  Speaker 1: hear so much about the e s G label, Environmental,
• 17:19
  Speaker 1: social and governance types of filters to invest more selectively
• 17:23
  Speaker 1: and more wholesomely in equities, joining us now as someone
• 17:27
  Speaker 1: who focuses on that all day long. And Marie Washer,
• 17:30
  Speaker 1: founder and chief executive officer of Flat World Partners. Disclosure,
• 17:34
  Speaker 1: she is not a flat earther. That is not the
• 17:37
  Speaker 1: title of her firm. But Marie, why don't you just
• 17:40
  Speaker 1: start with telling us what it does do? Sure? So,
• 17:43
  Speaker 1: Flat World Partners is an investment management firm, and we
• 17:46
  Speaker 1: focused on custom solutions for impact and sustainability that deliver
• 17:50
  Speaker 1: market rate returns. So talk to us about E s
• 17:54
  Speaker 1: G investing in general. Just size up the market force
• 17:57
  Speaker 1: the growth of E s G investing can pep sense
• 18:00
  Speaker 1: of how big this may be? Sure? So if we
• 18:03
  Speaker 1: look at numbers this year, nine trillion of assets are
• 18:06
  Speaker 1: already an E s G or s RI I negatively
• 18:09
  Speaker 1: uh screen funds and public markets and sr I negatively screened.
• 18:14
  Speaker 1: Isn't s R Yeah exactly. There's so many acronyms. I
• 18:18
  Speaker 1: think that's part of the challenges of the market. But
• 18:20
  Speaker 1: it's a socially responsible investing when you screen out tobacco
• 18:24
  Speaker 1: or oil and gas. The markets growing so significantly right
• 18:29
  Speaker 1: now over a d annually uh in terms of the
• 18:33
  Speaker 1: flood of types of funds that are launching in fun flows.
• 18:36
  Speaker 1: So it give us a sense of performance. Um do
• 18:39
  Speaker 1: I sacrifice performance if I integrate E s G into
• 18:43
  Speaker 1: my investment process? Right? Um? No, The good news is
• 18:46
  Speaker 1: you don't. In fact, more and more studies show out performance.
• 18:49
  Speaker 1: When you look at E s G data providers, you
• 18:52
  Speaker 1: see that there's larger and larger gaps between UM traditional
• 18:56
  Speaker 1: indexes and those indexes that are E s G because
• 18:59
  Speaker 1: you're mitigating risks. Can you give us an example of
• 19:03
  Speaker 1: kind of a hallmark E s G compliant or s
• 19:06
  Speaker 1: RI I negative plus absolutely x three uh that you
• 19:13
  Speaker 1: know that that you focus on. Sure. I mean if
• 19:15
  Speaker 1: we look at public markets, you can use an example
• 19:18
  Speaker 1: like pg N and the outages last week, So that
• 19:21
  Speaker 1: has been available in E s G data providers, and
• 19:24
  Speaker 1: you've actually seen the risk assessments on E s G
• 19:27
  Speaker 1: data increase over time, which would have given us an
• 19:30
  Speaker 1: indication that the stock would collapse. Um, and then you
• 19:33
  Speaker 1: have opportunities actually back up on that when I dig
• 19:37
  Speaker 1: in a little bit more. So please explain a little
• 19:40
  Speaker 1: bit more what indicators would you be looking at that
• 19:42
  Speaker 1: you would have been able to say. So, Bloomberg Terminal
• 19:45
  Speaker 1: actually has E s G data on it, and you
• 19:48
  Speaker 1: can see momentum scoring on whether E s or G
• 19:51
  Speaker 1: factors are increasing or declining. That often shows an indication
• 19:55
  Speaker 1: that stock may collapse if the scores are declining. Okay,
• 19:59
  Speaker 1: so was declining the most when it comes to pg N,
• 20:02
  Speaker 1: So that often falls under governance or environmental factors because
• 20:07
  Speaker 1: where the fire start in California are literally where they
• 20:10
  Speaker 1: have utility centers. So you mentioned the data. A lot
• 20:14
  Speaker 1: of times, we've had E s G investors in here
• 20:17
  Speaker 1: portfolio managers and they bemoan the lack of data or
• 20:20
  Speaker 1: the lack of consistent data on E s G. It's
• 20:22
  Speaker 1: not like going to an income statement or a balance
• 20:24
  Speaker 1: sheet where it's you know, gap kind of data and
• 20:26
  Speaker 1: everybody's kind of got it. You mentioned a Bloomberg terminal.
• 20:28
  Speaker 1: We do on the terminal have tons of E s
• 20:31
  Speaker 1: G data, But just give us a sense of if
• 20:33
  Speaker 1: I wanted to incorporate it E s G into my
• 20:36
  Speaker 1: investing kind of where do I get data? What's Yeah,
• 20:40
  Speaker 1: the E s G data market is incredibly tricky. There's
• 20:43
  Speaker 1: about different a D there's about a D data providers
• 20:46
  Speaker 1: in the market now, and the score is really exkew significantly,
• 20:50
  Speaker 1: there's no consensus scores. And so we're really working on
• 20:53
  Speaker 1: technology to integrate platforms and incorporate unique data sets like
• 20:58
  Speaker 1: green peace, ocean and plastic contribution. This is one of
• 21:02
  Speaker 1: my troubles with the E s G label. I'm gonna
• 21:03
  Speaker 1: be really honest, it's struggle with how vague it is.
• 21:07
  Speaker 1: I mean, to be socially responsible can mean fourteen million
• 21:12
  Speaker 1: different things to different people, and to have good governance,
• 21:15
  Speaker 1: I mean again there are different screens and and really
• 21:18
  Speaker 1: what does it mean to be good to the environment
• 21:20
  Speaker 1: is if you have carbon offset but you're pumping carbon, uh,
• 21:23
  Speaker 1: you know, into the into the environment. I mean, how
• 21:26
  Speaker 1: how how confident are you with these screens? Really are
• 21:30
  Speaker 1: something significant? Yeah, So it's really about understanding how those
• 21:34
  Speaker 1: screens are put together, that that E s G data,
• 21:36
  Speaker 1: and understanding the managers that are building those products and
• 21:39
  Speaker 1: how they incorporate it. All of our clients care about
• 21:41
  Speaker 1: different things, whether it's water or education or the environment,
• 21:45
  Speaker 1: and we want to really think about what are the
• 21:47
  Speaker 1: key points that we need to highlight in an investment.
• 21:49
  Speaker 1: You can't do it all. You can't incorporate everything in
• 21:52
  Speaker 1: every investment. So I can see how a pension fund
• 21:56
  Speaker 1: um or maybe even a big mutual fund would care
• 22:00
  Speaker 1: about incorporate E s G. How about the hedge fund community?
• 22:03
  Speaker 1: Do they care? Are pretty cold hearted people will just
• 22:06
  Speaker 1: look for Well, we're starting to make them care. We
• 22:10
  Speaker 1: actually just sign a partnership with Titan Advisors to evaluate
• 22:14
  Speaker 1: UH sixty hedge fund managers and some of the larger
• 22:16
  Speaker 1: ones on diversity issues, social issues and whether they're incorporating
• 22:19
  Speaker 1: e s G and working with them to actually launch
• 22:22
  Speaker 1: integrated E s G processes into their investment decision making,
• 22:26
  Speaker 1: because again we believe it will remove risks from the
• 22:29
  Speaker 1: portfolio and force them to make real changes. You know,
• 22:33
  Speaker 1: when you came in, I asked you know how much
• 22:34
  Speaker 1: is private? You said, impact investing tends to be private
• 22:37
  Speaker 1: investments and E s G tends to be public markets.
• 22:41
  Speaker 1: I'm wondering, in five years from now, do you expect
• 22:45
  Speaker 1: the shift in money to be different than it is
• 22:48
  Speaker 1: now in terms of where it's allocated, because the impact
• 22:51
  Speaker 1: side of things is pretty small, even though that's really
• 22:53
  Speaker 1: what's going to building you know, water sustainability in Africa
• 22:56
  Speaker 1: and things like that, versus trying to to encourage companies
• 23:02
  Speaker 1: to behave Well. Yeah, I actually think E s G
• 23:05
  Speaker 1: and Impact won't exist in the future as a label
• 23:07
  Speaker 1: because it will be incorporated in every investment decision that
• 23:11
  Speaker 1: has made. Regulations around carbon tax is being innovated, mifit
• 23:17
  Speaker 1: to change regulations for e s G. Beyond me is
• 23:20
  Speaker 1: an impact company. It's one of the first to truly
• 23:22
  Speaker 1: go public, and so you'll see impact flood into public
• 23:26
  Speaker 1: markets where stock exchanges also now require E s G
• 23:29
  Speaker 1: standards before listing. I first heard about e s G
• 23:32
  Speaker 1: maybe ten years ago, mostly from European investors. Yes, did
• 23:36
  Speaker 1: it kind of start in Europe and then came over
• 23:38
  Speaker 1: here to the US. It actually started with the nuns
• 23:40
  Speaker 1: and Catholic pension planning Greeks exactly, shout out to the nuns.
• 23:45
  Speaker 1: Mr Sweetie Church exactly. Catholic school. Interesting. So, but it's
• 23:51
  Speaker 1: now becoming more and more embraced kind of globally. It has,
• 23:55
  Speaker 1: I think because people do see that the data providers
• 23:57
  Speaker 1: have improved the analyst work that's being on, and there's
• 24:01
  Speaker 1: responsibility and transparency of data. Right. If Enron happened today,
• 24:06
  Speaker 1: you know, news coverage from you guys would have happened
• 24:08
  Speaker 1: in seconds, not later or Twitter feeds. All of that
• 24:11
  Speaker 1: data and innovation has created more transparency and responsibility. Right.
• 24:15
  Speaker 1: Fascinating discussion. Emrie Washer, thanks so much for joining us,
• 24:18
  Speaker 1: giving us some more content and color on E S
• 24:21
  Speaker 1: G Investing and Marie Washer, she's a foundered CEO Flat
• 24:24
  Speaker 1: World Partners, joining joining us here in our Bloomberg Interact
• 24:26
  Speaker 1: their broker studio, giving us some thoughts and at least
• 24:29
  Speaker 1: I was saying, you know, we probably have an E
• 24:31
  Speaker 1: S G fund manager or someone like that in our studios.
• 24:34
  Speaker 1: You know, every couple of weeks. It's becoming a bigger
• 24:36
  Speaker 1: part of the investment. Thanks for listening to the Bloomberg
• 24:39
  Speaker 1: P and L podcast. You can subscribe and listen to
• 24:41
  Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.
• 24:45
  Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa
• 24:47
  Speaker 1: Abram Woyds. I'm on Twitter at Lisa Abram Woyd's One
• 24:50
  Speaker 1: before the podcast. You can always catch us worldwide on
• 24:53
  Speaker 1: Bloomberg Radio