Latest / Bloomberg Intelligence / It's A Borrower's Bond Market, As Amazon Scores Record Low Rates.

Transcript

It's A Borrower's Bond Market, As Amazon Scores Record Low Rates. · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you.
• 0:05
  Speaker 1: Along with my co host Lisa Brahmas. Each day we
• 0:07
  Speaker 1: bring you the most noteworthy and useful interviews for you
• 0:10
  Speaker 1: and your money. Whether at the grocery store or the
• 0:12
  Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast
• 0:16
  Speaker 1: or wherever you listen to podcasts, as well as at
• 0:18
  Speaker 1: Bloomberg dot Com. We talked about the lack of coherence
• 0:22
  Speaker 1: in markets. We're seeing that across the board at a
• 0:24
  Speaker 1: time when America's cities are dealing with the unrest, the
• 0:29
  Speaker 1: likes of which we have not seen since the late
• 0:31
  Speaker 1: nineties sixties. We also see split fates among corporate America,
• 0:35
  Speaker 1: with the haves and the have nots, the haves being
• 0:38
  Speaker 1: able to borrow virtually for free, and the have nots
• 0:42
  Speaker 1: going bankrupt. Joining us right now is Molly Smith, the
• 0:45
  Speaker 1: corporate finance reporter for Bloomberg News, the latest Amazon dot
• 0:48
  Speaker 1: Com borrowing money basically for free for three years. I
• 0:52
  Speaker 1: mean really, I'm paying what twenty basis points above treasuries
• 0:57
  Speaker 1: to borrow this amount of money? Molly, what do we
• 1:00
  Speaker 1: know so far about this amount? So this is Amazon
• 1:04
  Speaker 1: actually set a few records yesterday, not just on the
• 1:07
  Speaker 1: three year, also for seven, ten, and forty year debt
• 1:10
  Speaker 1: that these premiums are just mean, I feel weird calling
• 1:14
  Speaker 1: it a premium. There's hardly one of any there. This
• 1:16
  Speaker 1: is more or less a treasury bond, or perhaps even
• 1:20
  Speaker 1: less in some cases. So it's uh, it's pretty impressive
• 1:24
  Speaker 1: to see how Amazon was able to do this yesterday.
• 1:27
  Speaker 1: But again, like you said, so just really speak to
• 1:29
  Speaker 1: the divide in the market right now that Amazon Convertual
• 1:33
  Speaker 1: can borrow for basically nothing, while you know, there are
• 1:36
  Speaker 1: so many companies that don't have any bond market access
• 1:38
  Speaker 1: at all right now. So Molly, you have a great
• 1:41
  Speaker 1: chart in your article kind of looking at the high
• 1:44
  Speaker 1: grade barring costs, and it's almost back to where it
• 1:47
  Speaker 1: was pre pandemic. Is this just simply the market saying,
• 1:52
  Speaker 1: you know, the Federal Reserve has our back here very much.
• 1:56
  Speaker 1: So yes, so we can think that said for not
• 1:58
  Speaker 1: only the rally here in spreads, which is the reflection
• 2:01
  Speaker 1: of the demand and the secondary market, but also for
• 2:04
  Speaker 1: all the issuance we've seen in the primary market that
• 2:07
  Speaker 1: last week we hit the one trillion dollar annual issue,
• 2:11
  Speaker 1: and for the fastest rate ever last year. We didn't
• 2:14
  Speaker 1: get through that until November. So, uh, the said has
• 2:17
  Speaker 1: been there for both supply and demand, and it's really
• 2:20
  Speaker 1: just opened up a ton of issuance on this Matthew rally.
• 2:23
  Speaker 1: So the trillion dollars that investment grade corporate corporations have
• 2:28
  Speaker 1: borrowed in the first couple of months of the year,
• 2:32
  Speaker 1: I'm wondering what people think. Is this to continue or
• 2:34
  Speaker 1: is this just basically the largest best capitalized companies creating
• 2:39
  Speaker 1: war stashes of cash just in case things deteriorate. So
• 2:43
  Speaker 1: it's a lot of that, a lot of companies, like
• 2:46
  Speaker 1: you said, capitalizing on these low interest rates. It's also
• 2:49
  Speaker 1: been a lot of companies that genuinely do need the
• 2:51
  Speaker 1: money and are still investment grade rated, like Carnival and
• 2:55
  Speaker 1: Marriott UM hardly a borrower of an Amazon kind of status,
• 3:00
  Speaker 1: but nonetheless are still rated investment grade and that they've
• 3:03
  Speaker 1: come to the market as well. But uh, most strategies
• 3:06
  Speaker 1: are seeing that this is going to slow down a
• 3:08
  Speaker 1: lot in the second half of the year. That so
• 3:10
  Speaker 1: much of what we've seen largely been pulled forward from
• 3:14
  Speaker 1: what would have been uh in the second half of
• 3:16
  Speaker 1: the year. So we're probably going to see issuance slow
• 3:19
  Speaker 1: down some say, I think of America maybe even just
• 3:22
  Speaker 1: two hundred billion dollars of issuance in the last six
• 3:25
  Speaker 1: months smally in terms of use of proceeds, are most
• 3:28
  Speaker 1: companies here refinancing existing debt or are they just as
• 3:32
  Speaker 1: at least with steching, you know, taking down debt bolstering
• 3:36
  Speaker 1: up putting cash on their balance sheet. Here, it's a
• 3:38
  Speaker 1: little bit of both. So we've seen a ton of
• 3:41
  Speaker 1: companies to liability management exercises in UH in tandem with
• 3:47
  Speaker 1: these bond offerings, so they'll issue new debts hopefully and
• 3:51
  Speaker 1: use those proceeds to take out debt that's coming up
• 3:55
  Speaker 1: in UH in new in upcoming years. So we've seen
• 3:58
  Speaker 1: a lot of those concurrent bond offerings and tender offers together.
• 4:03
  Speaker 1: But then there are a lot of companies, like you said,
• 4:04
  Speaker 1: all that are just they need the money and they're
• 4:07
  Speaker 1: just trying to have the war chest now and who
• 4:09
  Speaker 1: knows what's in front of us, So it's a combination
• 4:12
  Speaker 1: of both. Molly, the last time Amazon dot Com borrowed
• 4:16
  Speaker 1: money was ahead of their acquisition of Whole Foods. Now
• 4:19
  Speaker 1: they're raising ten billion dollars at a time when they
• 4:21
  Speaker 1: don't exactly need a ton of cash. It's not as
• 4:24
  Speaker 1: if their business model is struggling right now. Do we
• 4:27
  Speaker 1: have any idea of whether they're planning another acquisition? Uh,
• 4:31
  Speaker 1: they could be, and I believe that's what our analysts
• 4:34
  Speaker 1: at Bloomberg Intelligence uh speculate could be something that they're
• 4:38
  Speaker 1: thinking about. Amazon also did borrow in in um, a
• 4:44
  Speaker 1: smaller offering than this one, but like you said, yes,
• 4:47
  Speaker 1: they've been a pretty infrequent borrower and the one that's
• 4:50
  Speaker 1: really of note was for the Whole Foods acquisition. So
• 4:53
  Speaker 1: it's hard to tell beyond what they said is just
• 4:56
  Speaker 1: general corporate purposes as far as what this ten billion
• 4:59
  Speaker 1: dollars maybe used for. Smally, how far how broad is this?
• 5:03
  Speaker 1: Uh you know kind of uh rallying the bond market,
• 5:06
  Speaker 1: new insurance market going down in terms of credit quality,
• 5:09
  Speaker 1: we're seeing a lot of investment grade issues issuance where
• 5:12
  Speaker 1: does it kind of get dicey here for an issuer?
• 5:16
  Speaker 1: So the high old market has definitely been open to
• 5:19
  Speaker 1: some of those custody or borrowers, like you said, even
• 5:22
  Speaker 1: just today we're seeing some the like MGM uh, which
• 5:27
  Speaker 1: is actually just the reek connected to the casinos is
• 5:30
  Speaker 1: borrowing in the high old market. We also have Sick Goes,
• 5:33
  Speaker 1: the US refinery unit of Pita Vesa so and outside
• 5:37
  Speaker 1: of that, just more largely, we've seen a lot of
• 5:38
  Speaker 1: issuance from hotels, casinos, a lot in the travel leisure
• 5:42
  Speaker 1: sector more broadly. That really speaks to those sectors that, um,
• 5:47
  Speaker 1: that need the cash right now. They're not looking to
• 5:50
  Speaker 1: refinance that, they just need the money wherever they can
• 5:52
  Speaker 1: get it from. Although let's be clear, some of the
• 5:54
  Speaker 1: lower rated borrowers aren't exactly getting the best deals in
• 5:57
  Speaker 1: the world. It's not like they're borrowing for free, right.
• 5:59
  Speaker 1: I mean, we've seen them pledge islands. We've seen them,
• 6:02
  Speaker 1: you know, pledge cruise ships. We've seen them pledge you know,
• 6:05
  Speaker 1: the clothes in their closet. I mean, at a certain point,
• 6:09
  Speaker 1: their ability to borrow isn't necessarily testament to a great
• 6:13
  Speaker 1: desire for their debt correct, correct, you know. And that's
• 6:16
  Speaker 1: a great point at Lisa, And yeah, and that's even
• 6:18
  Speaker 1: and that's what's more remarkable, like you said, is that
• 6:20
  Speaker 1: these are secured offerings, so there is some physical collateral protection, um,
• 6:27
  Speaker 1: you know, like an island in the case of Norwegian. Uh.
• 6:29
  Speaker 1: But it's like you said, most of these deals, they're
• 6:32
  Speaker 1: coming at double digit interest rates. We've seen some think,
• 6:35
  Speaker 1: off the top of my head, up to fourteen percent
• 6:38
  Speaker 1: yields on some of these, which was I believe that
• 6:41
  Speaker 1: was Landry's, which is the operator of a casino and
• 6:44
  Speaker 1: restaurant empire. So we've seen well into the double digit
• 6:48
  Speaker 1: interest rates, and like you said, these are hardly coming
• 6:50
  Speaker 1: for free for some of the more challenge companies. Molly Smith,
• 6:54
  Speaker 1: thanks much for joining us. Molly Smith is a corporate
• 6:56
  Speaker 1: finance reporter for Bloomberg News. Brings us up to day
• 6:59
  Speaker 1: on what has just been in a short and your
• 7:00
  Speaker 1: new issue market, particularly in the investment grade market. Lisa
• 7:03
  Speaker 1: a year today hitting that trillion dollar mark, uh, the
• 7:06
  Speaker 1: earliest on record just recently. So again, if you need
• 7:10
  Speaker 1: cash in your investment grade rated uh, boy, now is
• 7:14
  Speaker 1: the time. Yeah. I can just already hear people saying
• 7:16
  Speaker 1: bur like the cash printing machine that the Federal Reserve
• 7:20
  Speaker 1: is making. I mean, that's essentially what a lot of
• 7:23
  Speaker 1: people are attributing this to. Given how much the Feds
• 7:26
  Speaker 1: actions stepping in saying that they're going to buy corporate
• 7:29
  Speaker 1: debt for the first time in its history, pushing down
• 7:33
  Speaker 1: yields considerably near their all time lows now for investment
• 7:36
  Speaker 1: grade companies. Still, however, the question in my mind is
• 7:40
  Speaker 1: at what point do investors start to price in the
• 7:43
  Speaker 1: fact that the FEDS actions will not prevent certain companies
• 7:46
  Speaker 1: from going bankrupt? Yeah? Absolutely, Looking at just the ten
• 7:49
  Speaker 1: year yield on the treasures right now, the it's down
• 7:51
  Speaker 1: three thirty seconds, pushing to yield up just slightly to
• 7:54
  Speaker 1: uh point six. Let's call it point six on the
• 7:58
  Speaker 1: tenure treasure just extraordin. We have been wondering about the
• 8:05
  Speaker 1: disparities that we have been seeing in the job market,
• 8:08
  Speaker 1: with some of the job losses in the wake of
• 8:10
  Speaker 1: the coronavirus hammering the Black and Latino communities disproportionately. This
• 8:15
  Speaker 1: just has come to the fore as the unrest in
• 8:18
  Speaker 1: America cities gets harder and harder to combat. Joining us
• 8:22
  Speaker 1: right now is John Stroyer, chief executive officer of Calvert
• 8:25
  Speaker 1: Research and Management. I want to know from your perspective,
• 8:28
  Speaker 1: you say that ending racism is the responsibility of corporations.
• 8:33
  Speaker 1: Why do you say that? Thanks for having me on
• 8:36
  Speaker 1: and and certainly we've given corporations a significant amount of
• 8:40
  Speaker 1: power in the United States. They inform innumerable social and
• 8:46
  Speaker 1: environmental outcomes. So as a result of having that power,
• 8:50
  Speaker 1: which has been something they've acquired over time, they have
• 8:54
  Speaker 1: a responsibility to help solve these types of issues. Additionally,
• 9:00
  Speaker 1: their ability to take action and to drive positive social
• 9:04
  Speaker 1: change is a significant driver for their brand value and
• 9:09
  Speaker 1: their attractiveness and reputation as a provider of products and
• 9:13
  Speaker 1: services as also as an employer. So they have that responsibility,
• 9:19
  Speaker 1: they've taken it, and they've got to take action to
• 9:22
  Speaker 1: help solve this. John, how about the counter argument that
• 9:25
  Speaker 1: the responsibility of a company is to maximize shareholder profits. Well,
• 9:31
  Speaker 1: I think there's a tie in here, because you know,
• 9:34
  Speaker 1: society that is destabilized as results of civil and rest,
• 9:38
  Speaker 1: which is an outcome of excessive inequality GDP, is suboptimal.
• 9:46
  Speaker 1: So I do think that companies working to solve this
• 9:50
  Speaker 1: problem will be able to see a benefit to long
• 9:55
  Speaker 1: term value creation. I don't really think there's a conflict here,
• 9:59
  Speaker 1: although markets may disagree, and I'm thinking of Facebook and
• 10:02
  Speaker 1: Twitter in particular, and not necessarily on the racism question,
• 10:06
  Speaker 1: but certainly on interfering and sort of making a judgment
• 10:09
  Speaker 1: call when it comes to how people are using their platforms.
• 10:13
  Speaker 1: Facebook aired on the side of not really interfering, and
• 10:16
  Speaker 1: Twitter has loved a number of labels with warnings on
• 10:19
  Speaker 1: it for a number of different leaders recently including President Trump.
• 10:23
  Speaker 1: How can this not necessarily be what we're looking at
• 10:27
  Speaker 1: longer term in terms of the benefit and attractions and interfering,
• 10:30
  Speaker 1: because right now it seems like Facebook is one and
• 10:32
  Speaker 1: Twitter is lost. Well, certainly in the short term, anything
• 10:36
  Speaker 1: can happen with with security prices. UM. What we think
• 10:40
  Speaker 1: about is long term value creation and what happens over
• 10:44
  Speaker 1: a slightly longer time period. And I think it also
• 10:47
  Speaker 1: extends well beyond social media. UM. Two companies that are
• 10:52
  Speaker 1: doing business in in in every community. And I'm not
• 10:55
  Speaker 1: sure that you know Twitter has won or lost or
• 10:58
  Speaker 1: Facebook and Water loss. It's way too soon to tell. So, John,
• 11:02
  Speaker 1: this discussion, your argument per se, seems to fit into
• 11:05
  Speaker 1: the E s G kind of discussion environmental, social and
• 11:09
  Speaker 1: governance that a lot more investors are paying attention to
• 11:12
  Speaker 1: in their securities analysis. How do you think this fits
• 11:15
  Speaker 1: into kind of E s G and overall analysis? Well,
• 11:19
  Speaker 1: companies today UM are all striving to prove their capabilities
• 11:25
  Speaker 1: on diversity and inclusion, whether that's t E s G
• 11:29
  Speaker 1: investors or whether that's to the workplace of today in
• 11:33
  Speaker 1: the future. So this is uh. This is a square
• 11:36
  Speaker 1: on E s G issue, and investors and asset owners
• 11:42
  Speaker 1: really expect companies to provide the necessary information so we
• 11:47
  Speaker 1: know how they're really doing. And let me relate this
• 11:50
  Speaker 1: to financial returns. Today, the demographics of the country that
• 11:55
  Speaker 1: really shifted and changed. We have a much larger Black population,
• 11:59
  Speaker 1: of much larger Hispanic population, and educational attainment across the
• 12:03
  Speaker 1: board in minority groups is going up. So we want
• 12:08
  Speaker 1: companies to be able to draw from a broad labor pool.
• 12:12
  Speaker 1: We want companies to be able to achieve the benefits
• 12:15
  Speaker 1: of diversity and inclusion. From an E s G investor's perspective, though,
• 12:20
  Speaker 1: we need data from companies to really assess how they're
• 12:24
  Speaker 1: doing and for companies to be able to be attractive
• 12:28
  Speaker 1: workplaces for Blacks, Force band X, for Asians, for all
• 12:33
  Speaker 1: people of color, and for everybody. They have to do
• 12:36
  Speaker 1: a good job helping to actually use their voice and
• 12:40
  Speaker 1: solve these larger social issues. So it's a square on
• 12:44
  Speaker 1: E s G issue. By the way, I think the
• 12:47
  Speaker 1: E s G investing community needs to do a lot
• 12:51
  Speaker 1: more to push companies to help solve these problems and
• 12:55
  Speaker 1: provide us the data that we need to know what
• 12:59
  Speaker 1: outcomes are really achieving through these diversity and inclusion programs. John,
• 13:04
  Speaker 1: your position a top Calvert Research Management which was acquired
• 13:07
  Speaker 1: by eat Advance and overseas nearly twenty billion dollars with
• 13:10
  Speaker 1: this focus on E s G is admirable, and I
• 13:14
  Speaker 1: would love to see some of the things that you're
• 13:15
  Speaker 1: talking about come to fruition. What are you looking for
• 13:19
  Speaker 1: with respect to corporations steps that are meaningful towards ending racism?
• 13:23
  Speaker 1: What can they actually do well? Racism is tied up
• 13:28
  Speaker 1: with inequality, and inequality in this country is deeply embedded
• 13:34
  Speaker 1: and starts with inequality of opportunity at every level. So
• 13:39
  Speaker 1: there are a number of things that companies are responsible
• 13:42
  Speaker 1: for doing. And they said a first thing is disclosure,
• 13:46
  Speaker 1: providing us the real information about the demographics of their workplace,
• 13:52
  Speaker 1: who has what jobs, so that we know how well
• 13:55
  Speaker 1: the company is doing there. Next, creating attractive training and
• 14:00
  Speaker 1: development programs for people of color and for um people
• 14:06
  Speaker 1: who have not had those opportunities in the educational system
• 14:10
  Speaker 1: is critical. Being able to develop talent across the board
• 14:15
  Speaker 1: is essential UM. I think also working with the educational
• 14:19
  Speaker 1: system in the communities where these companies draw from and
• 14:23
  Speaker 1: helping to create equal opportunity in the educational system is
• 14:28
  Speaker 1: also critical. And if you think about it, companies in
• 14:31
  Speaker 1: America need to have a well educated workforce across every demographic.
• 14:38
  Speaker 1: So there are a number of things that companies need
• 14:41
  Speaker 1: to do in order to secure their place in the
• 14:45
  Speaker 1: labor market and to help improve the workforce. So it
• 14:49
  Speaker 1: isn't just what they should do, it's what they need
• 14:51
  Speaker 1: to do. Hey, John, thanks so much for joining us.
• 14:53
  Speaker 1: We appreciate that John Strayer uh CEO of Calvert Research
• 14:57
  Speaker 1: and Management with that nineteen billion dollar dollars in assets
• 15:00
  Speaker 1: on the management based in Bethesda, talking about racism and
• 15:03
  Speaker 1: the role that corporations have Lisa, and it kind of
• 15:06
  Speaker 1: goes back to that E s G discussion, is we
• 15:08
  Speaker 1: think about UM companies holistically and their impact on their environment.
• 15:11
  Speaker 1: It also goes to some of the comments that we've
• 15:13
  Speaker 1: heard out of the chief executives from everyone from City
• 15:16
  Speaker 1: Group to JP Morgan to black Rock in response to
• 15:19
  Speaker 1: the protests really coming out in solidarity with the cause,
• 15:23
  Speaker 1: certainly not the violence, but the cause. Then everything that's
• 15:30
  Speaker 1: been going on, Paul, we have not discussed one area
• 15:33
  Speaker 1: of the market that was super hot a couple of
• 15:35
  Speaker 1: years ago, and that is the crypto assets sector, and
• 15:38
  Speaker 1: it has actually been on fire, with Bitcoin rallying above
• 15:41
  Speaker 1: ten thousand dollars once again and it has gained forty
• 15:46
  Speaker 1: percent more than that so far this year. Let's talk
• 15:49
  Speaker 1: about digital gold with maltolm Demers, chief strategy officer with
• 15:52
  Speaker 1: coin Shares Group, which has about seven fifty million dollars
• 15:55
  Speaker 1: in the digital space, joining us from London, Maltham, thank
• 15:58
  Speaker 1: you so much for being with us. Can you talk
• 16:00
  Speaker 1: about bitcoin and it's use or just a crypto assets
• 16:03
  Speaker 1: sector in general. It's use is digital gold right now, absolutely,
• 16:08
  Speaker 1: and thanks for having me on. So it's really interesting
• 16:11
  Speaker 1: to be living in this time right now. Bitcoin with
• 16:14
  Speaker 1: a product of the last financial crisis. As some of
• 16:18
  Speaker 1: us who been the been in the space for a
• 16:19
  Speaker 1: while they know, the Bitcoin white paper was written in
• 16:23
  Speaker 1: two thousand nine and the network launched in two thousand ten.
• 16:27
  Speaker 1: We're now eleven years into sort of the Bitcoin story
• 16:32
  Speaker 1: and we're seeing bitcoin really come of age. And mature
• 16:35
  Speaker 1: in this financial crisis we're going through right now, particularly
• 16:38
  Speaker 1: as we've seen over the last three months, a lot
• 16:41
  Speaker 1: of risk, a lot of uncertainty, and investors really starting
• 16:45
  Speaker 1: to look at the investing landscape and reevaluating how they
• 16:49
  Speaker 1: want to be allocated going into the next year and beyond.
• 16:53
  Speaker 1: So the investment community obviously still has a lot of
• 16:57
  Speaker 1: mixed views on bitcoin. Some and assement firms and investment
• 17:01
  Speaker 1: managers have made big strides into the sector and are
• 17:04
  Speaker 1: offering products and services to their clients. Where one example,
• 17:08
  Speaker 1: we come from the commodity space as a team that
• 17:11
  Speaker 1: have been in the digital assets space for the last
• 17:13
  Speaker 1: seven years now. Other firms, most notably Goldman's wealth management team,
• 17:18
  Speaker 1: have been less than hot on crypto assets. But one
• 17:22
  Speaker 1: thing is sure, every investor is talking about bitcoin, getting
• 17:26
  Speaker 1: smart on crypto assets and starting to develop a perceptive
• 17:29
  Speaker 1: and really trying to figure out where bitcoin might fit
• 17:33
  Speaker 1: into their portfolio going forward. So it's an exciting time.
• 17:37
  Speaker 1: It's been a really wild time, and we're really excited
• 17:41
  Speaker 1: about the intelligent conversation we see developing around bitcoin, digital assets,
• 17:47
  Speaker 1: and this technology more broadly. So, maltime you mentioned the
• 17:50
  Speaker 1: Golden Report, I remember when I came out and caused
• 17:52
  Speaker 1: some waves here sometize what Goldman was saying there and
• 17:54
  Speaker 1: whether kind of what if you agree or disagree with them? Absolutely,
• 17:59
  Speaker 1: so it's import to know. UM. The report was issued
• 18:02
  Speaker 1: by one of Goldman's chief investment officers, who has been
• 18:05
  Speaker 1: an analyst of a lot of different trends in the
• 18:08
  Speaker 1: investing space UM, and I think it was an interesting
• 18:11
  Speaker 1: summary because it really used what's happening in macro markets
• 18:14
  Speaker 1: was happening in gold as a way to flame why
• 18:17
  Speaker 1: they felt bitcoin was not a great investment, UM, not
• 18:21
  Speaker 1: a great long term value investments for investors. The way
• 18:24
  Speaker 1: they described bitcoin, which I think was an interesting characterization.
• 18:28
  Speaker 1: They talked a lot about issues pertaining to money laundering,
• 18:32
  Speaker 1: and as we know, Goldman has itself been dealing with
• 18:35
  Speaker 1: a number of issues related to money launderings following the
• 18:38
  Speaker 1: fallout of the one MDB scandal and the other aspects.
• 18:42
  Speaker 1: That was interesting is in this report they not only
• 18:44
  Speaker 1: mentioned that they felt bitcoin was really just purely speculative
• 18:48
  Speaker 1: and not really fundamental value investment, they also made a
• 18:52
  Speaker 1: similar assessment of gold, where they stated they did not
• 18:55
  Speaker 1: feel that gold was a significant investment opportunity for investors,
• 19:00
  Speaker 1: and as we look at what's happened to those, both
• 19:02
  Speaker 1: the price Schoold and the price of bitcoin, I think
• 19:05
  Speaker 1: here is an interesting instance where the market certainly is
• 19:08
  Speaker 1: indicating it's not in agreement with that particular assessment. But then,
• 19:14
  Speaker 1: to be fair, though, I think they're not alone in
• 19:16
  Speaker 1: saying that right there especially, I mean, I leave gold decide,
• 19:19
  Speaker 1: But when it comes to crypto assets, Colman sacs Uh
• 19:22
  Speaker 1: certainly has plenty of company and saying it's a speculative asset.
• 19:25
  Speaker 1: Considering the fact that people are not using it the
• 19:27
  Speaker 1: way that they would another currency, what's the counter argument
• 19:31
  Speaker 1: to why this has staying power in a way that
• 19:35
  Speaker 1: goes beyond what some people are saying. Sure, I think
• 19:39
  Speaker 1: there's been a lot of great rebuttals written by the
• 19:42
  Speaker 1: industry that use a great set of data. I think
• 19:46
  Speaker 1: there's a lot of evidence to the contrary, and we
• 19:48
  Speaker 1: have coined share and a lot of time surfacing that
• 19:50
  Speaker 1: data and sharing it with our investors, our clients in
• 19:54
  Speaker 1: the market. But I think there are a few key
• 19:56
  Speaker 1: trends here on bitcoin is being used and the way
• 19:59
  Speaker 1: it's being used by people. It's being used as a
• 20:02
  Speaker 1: hedge against inflation and as a long term store values.
• 20:05
  Speaker 1: There are more people than ever that whold bitcoin in
• 20:08
  Speaker 1: their investment accounts, whether that's through a structured product like
• 20:12
  Speaker 1: our xbt provider products or the gray Scale GBTC products.
• 20:16
  Speaker 1: Here in the US, there are a lot of bitcoin
• 20:19
  Speaker 1: wallets that have been created and that number continues to increase.
• 20:23
  Speaker 1: The bitcoin that's held in those wallets of staying dormant,
• 20:26
  Speaker 1: meaning people aren't speculating on it, they're really holding it.
• 20:30
  Speaker 1: And then most importantly, we've seen just a tremendous number
• 20:33
  Speaker 1: of inflows into bitcoin over the last two months alone.
• 20:37
  Speaker 1: One interesting fact over the last two months, the demand
• 20:41
  Speaker 1: for bitcoin has outpaced its supply. Uh So, as you know,
• 20:46
  Speaker 1: bitcoin has a daily production of new bitcoins through an
• 20:50
  Speaker 1: activity is called mining. And in the last two months alone,
• 20:53
  Speaker 1: the amount of investor demands for bitcoin through things like
• 20:57
  Speaker 1: squares cash app, Gray Scales, GBTC product US, and our
• 21:01
  Speaker 1: XPT Provider products, which is an exchange traded product, there
• 21:04
  Speaker 1: has been a hundred and fifty per cent demand for
• 21:07
  Speaker 1: bitcoin that exceeds the supply being produced, which to me,
• 21:11
  Speaker 1: again is a very bullish indicator. We're also seeing investors
• 21:15
  Speaker 1: on the trading side, taking a lot of interest. H
• 21:18
  Speaker 1: The Ciene Bitcoin futures contrast broke all time high in
• 21:22
  Speaker 1: the last month in terms of outstanding up an interest
• 21:25
  Speaker 1: on the platform, and at the end of May we
• 21:27
  Speaker 1: saw one day where we had over a billion dollars
• 21:29
  Speaker 1: of traded volume, which is an all time high for
• 21:32
  Speaker 1: that particular product. Meltem thank you so much for joining us.
• 21:35
  Speaker 1: Meltem demere she's a chief strategy officer for coin Shares
• 21:38
  Speaker 1: group of seven million dollars in digits in the digital space,
• 21:41
  Speaker 1: based in London, giving us the latest on Bitcoin which
• 21:45
  Speaker 1: is rolling as Lisa mentioned earlier, and all things in
• 21:49
  Speaker 1: the crypto space. Trying to get greater credibility in financial markets.
• 21:53
  Speaker 1: It looks like they're having some success. Looking at the
• 21:55
  Speaker 1: price of bitcoin, busy, busy, moreing here. We're taking a
• 22:00
  Speaker 1: look here at an interesting story that we are seeing
• 22:04
  Speaker 1: from Bloomberg Business Week about private equity firms. They've been
• 22:08
  Speaker 1: really big investors in the hospital business, and they've also
• 22:11
  Speaker 1: been beneficiaries of some of the bailout money. David Kaczynski,
• 22:16
  Speaker 1: Bloomberg Business Week reporter, joins us. David, thanks so much
• 22:18
  Speaker 1: for joining us. I think he's getting up right now.
• 22:23
  Speaker 1: But it really is an interesting focal point because private
• 22:25
  Speaker 1: equity was sort of carved out of a lot of
• 22:28
  Speaker 1: the programs passed by the federal government, with them saying
• 22:32
  Speaker 1: that they do not want these firms to be beneficiaries,
• 22:35
  Speaker 1: and yet they have been such huge investors in the
• 22:37
  Speaker 1: healthcare industry and hospitals in particular, that there's been an
• 22:41
  Speaker 1: extra emphasis Paul on on on how to parse out
• 22:45
  Speaker 1: the healthcare considerations with the efforts on the part of
• 22:49
  Speaker 1: lawmakers and others to keep money away from private equity. Yeah,
• 22:52
  Speaker 1: so let's welcome David and David Kozski. Bloomberg business Week reported, David,
• 22:56
  Speaker 1: thanks so much for joining us here. Lisa and I
• 22:58
  Speaker 1: were just talking about your story here. Private equity really
• 23:02
  Speaker 1: investing in the hospital business and they've received some bailout money.
• 23:06
  Speaker 1: Give us a sense of kind of the scope and
• 23:08
  Speaker 1: scale of this, Well, well, the scope is still being
• 23:12
  Speaker 1: we're still kind of digging through the numbers. Um. You know,
• 23:15
  Speaker 1: there was concern when the administration and amongst some lawmakers
• 23:19
  Speaker 1: about private equity not getting bailout money and trying to
• 23:21
  Speaker 1: target that money towards the needier healthcare companies. However, we
• 23:26
  Speaker 1: found there's this tranch of loans. It was a hundred
• 23:28
  Speaker 1: billion dollars in uh interest free loans that hhs UM
• 23:34
  Speaker 1: decided to give out in late March and early April,
• 23:37
  Speaker 1: and well none of it wouldet went directly to private
• 23:40
  Speaker 1: equity companies. UM. The portfolio medical care companies they owned
• 23:45
  Speaker 1: got more than one point five billion dollars. So can
• 23:48
  Speaker 1: you walk us through how they managed to get this
• 23:51
  Speaker 1: where the money went, especially given some of the sentiment
• 23:55
  Speaker 1: that you talked about trying to keep money away from
• 23:57
  Speaker 1: private equity back firms. Well, all the big boys got it,
• 24:01
  Speaker 1: you know, Apollo Global, KKR, UM, Cerebrius, UH, you know
• 24:06
  Speaker 1: those those UM private equity firms have been buying huge
• 24:11
  Speaker 1: stakes in medical care companies and in physicians staffing companies
• 24:15
  Speaker 1: over the past few years. UM, and it was easy
• 24:18
  Speaker 1: for them to get it. UM. You know. Hhs I
• 24:20
  Speaker 1: interviewed them of Verma, who is the administrator of CMS,
• 24:24
  Speaker 1: which is the eight the Health and Human Services department
• 24:28
  Speaker 1: that the administer the loans, and she said they didn't
• 24:31
  Speaker 1: ask who the who the ultimate owners are anyone who
• 24:34
  Speaker 1: wanted money and said, hey, we're gonna be losing UM
• 24:38
  Speaker 1: We're gonna be losing uh some income because of the
• 24:41
  Speaker 1: elective surgery being banned during the COVID crisis. You just
• 24:44
  Speaker 1: put an application and they FEDS would send them, um,
• 24:48
  Speaker 1: you know, in some cases hundreds of millions of dollars
• 24:51
  Speaker 1: to the subsidiaries of the private equity firms. David, I'm
• 24:55
  Speaker 1: curious there has been an emphasis by private equity firms
• 24:57
  Speaker 1: to take stakes in hospitals that provide lucrative, lucrative operations
• 25:03
  Speaker 1: such as the elective procedures that have been put on
• 25:06
  Speaker 1: halt by the pandemic. Has this been one of the
• 25:10
  Speaker 1: main sources of hurt at a time when hospitals are
• 25:12
  Speaker 1: there at the very epicenter of treating and caring for
• 25:15
  Speaker 1: a lot of the people out there who are struggling
• 25:17
  Speaker 1: with the effects of COVID. Yeah, you know, elective surgery
• 25:21
  Speaker 1: as a profit center for every uh, you know, for
• 25:24
  Speaker 1: most medical providers. UM, you know. But what's interesting about
• 25:28
  Speaker 1: this is that, you know, it also hurts some of
• 25:30
  Speaker 1: the safety net hospitals, you know, the ones who deal
• 25:33
  Speaker 1: with you know, who don't have the billions of dollars
• 25:37
  Speaker 1: in cash reserve that Apollo does or that KKR does. Um.
• 25:41
  Speaker 1: So some of these safety net hospitals actually were unable
• 25:44
  Speaker 1: to apply because the money was gone so many that
• 25:47
  Speaker 1: so many of the big UM for profit UM hospital
• 25:51
  Speaker 1: companies UM, the corporate owns and the and the private
• 25:54
  Speaker 1: equities got in there, got all the money and they
• 25:56
  Speaker 1: struggling providers weren't able to get money in time. So,
• 26:01
  Speaker 1: UM it is a problem. And unfortunately HHS didn't do
• 26:06
  Speaker 1: much to target the money towards those who needed it
• 26:08
  Speaker 1: the most. So how have they done just overall in
• 26:12
  Speaker 1: the hospital business of private equity firms? You know, UM,
• 26:17
  Speaker 1: I think they're they're in the past ten years, they've
• 26:20
  Speaker 1: made a lot of money. I think in the last
• 26:21
  Speaker 1: year or so, there's been some problem with KKR and
• 26:24
  Speaker 1: black Stone because they're under fire for the surprise billing
• 26:28
  Speaker 1: scandal UM or surprise building issue where the staff um
• 26:33
  Speaker 1: network in network emergency rooms and surgical centers with out
• 26:37
  Speaker 1: of staff out of network doctors. So if you go
• 26:40
  Speaker 1: and get a surgery, may think you're covered for the room,
• 26:43
  Speaker 1: but you'll later get a surprise bill for you know,
• 26:45
  Speaker 1: sometimes tens of thousands of dollars from the surgeon who
• 26:48
  Speaker 1: was out of network. There's been such a public outcry
• 26:51
  Speaker 1: about that that Congress has been pushing to ban it,
• 26:54
  Speaker 1: and KKR and Blackstone, who are the two biggest um
• 26:59
  Speaker 1: UH companies. They own Team Health and Envision, which are
• 27:03
  Speaker 1: the companies which are at the center of this. They
• 27:05
  Speaker 1: spent millions of dollars trying to fight that off UM
• 27:08
  Speaker 1: that they have been struggling because there is a sense
• 27:10
  Speaker 1: that the public outcry is going is going to UM
• 27:13
  Speaker 1: lead to a restriction on that. But overall they've made
• 27:16
  Speaker 1: UM it's been a hugely profitable sector for private equity.
• 27:20
  Speaker 1: We're speaking with David Kochanski, reporter for Bloomberg business Week,
• 27:23
  Speaker 1: and David just sort of tie this all together. Why
• 27:27
  Speaker 1: is there so much opposition to private equity among hospital ownerships.
• 27:31
  Speaker 1: I'm just trying to figure out whether they have acted
• 27:34
  Speaker 1: worse than any other hospital operator or investor given the
• 27:38
  Speaker 1: fact that these issues have been considered endemic throughout the
• 27:42
  Speaker 1: entire industry. Well, I think it's hard to paint things
• 27:47
  Speaker 1: with a broad brush UM, but I do think if
• 27:50
  Speaker 1: you look at the actions of the individual companies, some
• 27:54
  Speaker 1: of them have been at the forefront of the biggest
• 27:57
  Speaker 1: UM and what are considered the most predatory UM actions
• 28:01
  Speaker 1: like the like this surprise billing UH situation. UM. We
• 28:05
  Speaker 1: also mentioned Cerebraus, which owned which got tens of millions
• 28:09
  Speaker 1: of dollars in UM low interest loans. You know they
• 28:12
  Speaker 1: have bought UH. There's a hospital in eastern Pennsylvania that
• 28:16
  Speaker 1: they have been trying to sell and in the middle
• 28:18
  Speaker 1: of the COVID crisis they threatened to close it down
• 28:21
  Speaker 1: unless they were given millions of dollars from the government
• 28:24
  Speaker 1: of Pennsylvania. UM. So there isn't there is a sense that, well,
• 28:29
  Speaker 1: you know that the healthcare UH system in the US
• 28:33
  Speaker 1: has been UM, you know, been costs of reason above
• 28:37
  Speaker 1: the costs of inflation for years, that private equity has
• 28:41
  Speaker 1: in some instances used more um hard hardball tactics in
• 28:47
  Speaker 1: terms of billing and in terms of suing low income
• 28:50
  Speaker 1: people who can't pay the bills. Yeah, Davidki, thank you
• 28:54
  Speaker 1: so much for being with US reporter for Bloomberg Business
• 28:56
  Speaker 1: Week talking about a story about private equities involved meant
• 29:00
  Speaker 1: with the hospital system and the receiving of some of
• 29:03
  Speaker 1: the bailout money that the US has provided, even though
• 29:05
  Speaker 1: there was a whole effort to have private equity firms
• 29:08
  Speaker 1: not benefit from that. But Paul really highlighting one of
• 29:11
  Speaker 1: the key flashpoints heading into the election and beyond, which
• 29:15
  Speaker 1: is the rise of private equity, the rise of the alternative,
• 29:18
  Speaker 1: alternative investment community, where in some ways the lending the
• 29:23
  Speaker 1: risk the shadow banking system has expanded as the traditional
• 29:26
  Speaker 1: investment banks continue to pull back in terms of size
• 29:29
  Speaker 1: and risk taking. So a lot of questions going forward
• 29:33
  Speaker 1: about how that will be translated into policy as well
• 29:35
  Speaker 1: as some of the political backdrop. Thanks for listening to
• 29:39
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 29:42
  Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
• 29:45
  Speaker 1: you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney.
• 29:48
  Speaker 1: I'm Lisa abram Woyds. I'm on Twitter at Lisa A.
• 29:51
  Speaker 1: Bramwoit's one before the podcast. You can always catch us
• 29:53
  Speaker 1: worldwide on Bloomberg Radio.