Latest / Bloomberg Intelligence / Short-Term Debt Is Best Fixed-Income Bet: BlackRock’s Rosenberg

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Short-Term Debt Is Best Fixed-Income Bet: BlackRock’s Rosenberg · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  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. Where
• 0:33
  Speaker 1: have we come from and where are we going? Within
• 0:36
  Speaker 1: the fixed income markets? Here to tell us Jeffrey Rosenberg,
• 0:39
  Speaker 1: chief fixed income strategist at black Rock, talking about their
• 0:44
  Speaker 1: mid year investment outlook. Jeffrey, thank you so much for
• 0:47
  Speaker 1: being with us. I want to start with a statistic
• 0:50
  Speaker 1: that got my attention that the trading range of the
• 0:53
  Speaker 1: tenure treasury yield is currently the narrowest that it's been
• 0:57
  Speaker 1: in more than four decades. In other words, it's not moving.
• 1:00
  Speaker 1: We have a flat line. Does this indicate that we're
• 1:03
  Speaker 1: about to break out with yields rising sharply or falling
• 1:06
  Speaker 1: sharply in the next few months, You know, it's an
• 1:09
  Speaker 1: interesting question. You're talking about the trend line of the
• 1:13
  Speaker 1: ten year interest rates and if we've had a breakout,
• 1:17
  Speaker 1: and if there's really a breakout to talk about. It's
• 1:20
  Speaker 1: not the ten year interest rate, It's it's what's happening
• 1:22
  Speaker 1: on the shorter end of the curve. And there, Uh,
• 1:25
  Speaker 1: you had had remarkably low volatility. How low you had
• 1:30
  Speaker 1: zero volatility because it was zero interest rate policy, and
• 1:34
  Speaker 1: so you had this anchoring of interest rates, and now
• 1:37
  Speaker 1: you're significantly breaking out. You have the two year well
• 1:41
  Speaker 1: above two and a half preyway. I'm sorry to break in, Jeffy,
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  Speaker 1: but what I'm trying to figure out is the ten
• 1:45
  Speaker 1: year treasury out because as we are seeing more volatility
• 1:47
  Speaker 1: and a breakout and doubling of two year treasury yields
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  Speaker 1: in the past year, I'm just wondering. I mean, people
• 1:52
  Speaker 1: are looking at that ten year benchmark is sort of
• 1:54
  Speaker 1: an indicator of global growth and of sort of the
• 1:57
  Speaker 1: view of the U. S economy right now and inflation,
• 2:00
  Speaker 1: and it's going nowhere, and I'm just wondering, what's the
• 2:02
  Speaker 1: setting us up for. Well, so where we're kind of
• 2:05
  Speaker 1: between me wanting to focus on the two year and
• 2:08
  Speaker 1: you wanting to focus on the tenure, we're ending up
• 2:11
  Speaker 1: talking about the yield curve, which I was hoping to
• 2:13
  Speaker 1: avoid because that's the only thing people want to talk about.
• 2:15
  Speaker 1: Let's talk about it because it's it's important. And so, yes,
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  Speaker 1: you and I thought you were going to split the
• 2:19
  Speaker 1: difference and talk about the five year. We could do that.
• 2:23
  Speaker 1: We can certainly do that too, But there is a difference,
• 2:25
  Speaker 1: and and and the flattening has got a lot of
• 2:27
  Speaker 1: attention and and you know, one of the important points
• 2:29
  Speaker 1: and Powell raised this in his testimony, and the set
• 2:32
  Speaker 1: has been been talking about this for a while, and
• 2:33
  Speaker 1: it's important for the listeners because you know, people get
• 2:36
  Speaker 1: focused on the what's happening to the ten year and
• 2:39
  Speaker 1: the ten years going lower and the two years going higher?
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  Speaker 1: And is that a sign of imminent recession? And the
• 2:45
  Speaker 1: level of the difference, which is part of your question,
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  Speaker 1: you know, it's highly influenced. It's much lower in today's
• 2:51
  Speaker 1: environment because of the role of unconventional monetary policy that
• 2:56
  Speaker 1: is happening the world over. And so we want to
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  Speaker 1: just take that level of the difference in the curve
• 3:02
  Speaker 1: and put a little asterix on it and say, yes,
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  Speaker 1: it's important, but we also have to recognize it's very
• 3:07
  Speaker 1: different than what we've seen historically because of that unconventional
• 3:11
  Speaker 1: monetary policy. Quantitative easing the world over, which the point
• 3:15
  Speaker 1: of which was to flatten that relationship. So we want
• 3:19
  Speaker 1: to just sort of think about that. It decreases some
• 3:22
  Speaker 1: of the concerns, doesn't eliminate them, but it it takes
• 3:25
  Speaker 1: the temperature down a bit. Phim I hear what Jeffrey
• 3:28
  Speaker 1: is trying to say, very very politely, that yes, yield
• 3:31
  Speaker 1: curve matters, but perhaps not as much as it has
• 3:33
  Speaker 1: in the past. Jeffrey, I want to ask you about
• 3:38
  Speaker 1: liquidity and specifically the relationship between the rising value of
• 3:43
  Speaker 1: the US dollar, the repatriation of corporate profits that have
• 3:48
  Speaker 1: been sitting overseas, and any constraints on dollar funding. Any thoughts. Yeah, so, um, Well,
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  Speaker 1: for first, the dollar strength is big deal. It's a
• 4:00
  Speaker 1: big story. We've seen this before. It's an important development,
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  Speaker 1: and you're seeing part of that about growth differentials the US.
• 4:09
  Speaker 1: We're gonna get second quarter GDP next week. In the
• 4:12
  Speaker 1: first iteration, you see the tracking estimates somewhere up towards
• 4:17
  Speaker 1: five percent. That's not a sustainable level, but the U
• 4:20
  Speaker 1: s economy is powering ahead and the rest of the
• 4:23
  Speaker 1: world's economies are not doing so well. Part of that
• 4:26
  Speaker 1: economic growth of confidence again he heard it from Powell
• 4:29
  Speaker 1: that just re emphasizes the outlook that US interest rates
• 4:33
  Speaker 1: are going to continue an upward drift. UH short interest rates,
• 4:38
  Speaker 1: the Fed policy rates, and that interest rate differential to
• 4:41
  Speaker 1: the rest of the world is another factor behind dollar strength.
• 4:45
  Speaker 1: One factor that is not behind dollar strength is repatriation.
• 4:49
  Speaker 1: It's a very misunderstood notion that repatriating UH foreign corporate
• 4:56
  Speaker 1: earnings results in dollar perch just is and the source
• 5:01
  Speaker 1: of the misunderstanding is that most of the foreign held
• 5:06
  Speaker 1: UH earnings are held in dollars. The notion of them
• 5:10
  Speaker 1: being foreign is not the currency, but rather the legal entity,
• 5:13
  Speaker 1: and so it doesn't really create a bid for for
• 5:16
  Speaker 1: for dollars. So that's a little bit misunderstood. The big
• 5:19
  Speaker 1: fundamental drivers behind the dollar appreciation, there's really those two
• 5:22
  Speaker 1: that growth in that intra st rate piece. So Jeffrey,
• 5:25
  Speaker 1: look into the Chrystal ball for us, what do you
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  Speaker 1: think is going to be the best performing asset the
• 5:28
  Speaker 1: fixed income world in the second half. You know, It's
• 5:31
  Speaker 1: where I was kind of taking the conversation. We we
• 5:34
  Speaker 1: really like the front end of the yield curve, so
• 5:37
  Speaker 1: we're talking about shorter maturities. I'll bracket that one of
• 5:41
  Speaker 1: the three year kind of maturities. You can leak out
• 5:44
  Speaker 1: the curve a little bit, but as you do, duration
• 5:47
  Speaker 1: starts to perhaps become a little bit of a drag.
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  Speaker 1: And if I add a bit of investment grade credit,
• 5:51
  Speaker 1: where spreads of widen and we and we don't see
• 5:54
  Speaker 1: a lot of credit risk in the next six months.
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  Speaker 1: To undermine that outlook, you're looking at three three and
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  Speaker 1: a half kind of yields. That's on an annual basis um,
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  Speaker 1: so certainly six months returns will be lower than that,
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  Speaker 1: but that will probably be one of the best performing
• 6:10
  Speaker 1: asset classes, and it's certainly one of the areas we
• 6:12
  Speaker 1: we think is the most attractive in the fixed income universe.
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  Speaker 1: Jeff Rosenberg, thank you very much for being with us.
• 6:18
  Speaker 1: Jeff Rosenberg is the chief fixed income strategist for a
• 6:21
  Speaker 1: black Rock Investment Institute, giving us details about the black
• 6:26
  Speaker 1: Rocksen midyear investment outlook. Helsinki Summit trade negotiations Russians. Let's
• 6:49
  Speaker 1: bring in Richard Kahn. He is managing partner of Eurasia Advisors,
• 6:54
  Speaker 1: formally serving as an advisor to major Russian companies for
• 6:58
  Speaker 1: initial public offerings, also sourcing financing for Russian real estate
• 7:03
  Speaker 1: development of fluent Russian speaker, so he has a background
• 7:06
  Speaker 1: and understanding exactly the relationship between the United States and
• 7:09
  Speaker 1: Russia on a business level as well as politics. Richard,
• 7:12
  Speaker 1: thank you very much for coming into this studio. What
• 7:15
  Speaker 1: can you tell us based on your experience about the
• 7:19
  Speaker 1: Russian reaction to the Helsinki Summit. I think from the
• 7:23
  Speaker 1: Russian perspective, they are truly thrilled. They witnessed the our
• 7:28
  Speaker 1: goalie continually kicking the ball into his own goal. Um.
• 7:32
  Speaker 1: And I think at some point they're probably concerned that
• 7:36
  Speaker 1: people on the team are gonna wonder whose side he
• 7:38
  Speaker 1: is on. But from their perspective, this has been a
• 7:42
  Speaker 1: a major propaganda victory for Putin himself. He cemented control
• 7:47
  Speaker 1: in Russia and nobody there can possibly take him on.
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  Speaker 1: At this stage. He has a free hand to go
• 7:51
  Speaker 1: after the opposition. But more importantly, they see the weakness
• 7:55
  Speaker 1: of the US. They see that, you know, what Trump
• 7:57
  Speaker 1: has done has put us at odds with our ally,
• 8:00
  Speaker 1: as is shown, he's not going to stand up for
• 8:01
  Speaker 1: our values. Um. All of that is is a huge
• 8:04
  Speaker 1: win for Russia as they try to assert greater leadership
• 8:07
  Speaker 1: in the Middle East and in the world generally. So
• 8:10
  Speaker 1: President Trump has said repeatedly it's good for the US
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  Speaker 1: to have a constructive relationship with Russia or the two
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  Speaker 1: biggest nuclear superpowers. We don't want war. Was anything achieved
• 8:21
  Speaker 1: that was positive for the US in the summit? Well,
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  Speaker 1: first of all, I I fully agree with those goals personally,
• 8:29
  Speaker 1: we and I've spent my life working to help resolve
• 8:32
  Speaker 1: issues between Russia and the US and to bring the
• 8:34
  Speaker 1: countries closer together. But that's a long term process. It
• 8:38
  Speaker 1: has to be based on reality and on a recognition
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  Speaker 1: of our different values. And that's what your age advisors
• 8:44
  Speaker 1: is about as well. Uh. And every president I think
• 8:47
  Speaker 1: you know, and certainly since the Cold War, has been
• 8:49
  Speaker 1: trying to achieve that too. Uh. But I never heard
• 8:53
  Speaker 1: anything articulated by this current president in terms of what
• 8:56
  Speaker 1: his goals actually were in the summit, other than saying
• 8:59
  Speaker 1: he wanted to have low expectations. Um. I think his
• 9:03
  Speaker 1: goals were achieved, which was to have a one on
• 9:05
  Speaker 1: one communication with his co conspirator regarding what took place
• 9:10
  Speaker 1: during the election, and to figure out how to handle
• 9:12
  Speaker 1: things now in a manner that helps Trump protect himself
• 9:17
  Speaker 1: give us some idea of the actual strength and weaknesses
• 9:21
  Speaker 1: of the Russian economy. Look, the base aggression economy is
• 9:26
  Speaker 1: out of of an oil and gas state. It has
• 9:30
  Speaker 1: other natural resources, but uh, the best way to think
• 9:34
  Speaker 1: of it is that although it tries to expand into
• 9:37
  Speaker 1: other areas, including high tech industries, it doesn't have the
• 9:42
  Speaker 1: infrastructure legally and culturally to allow people to safely invest
• 9:48
  Speaker 1: and develop businesses. Uh. So it really is run more
• 9:52
  Speaker 1: like a what I would call either a medieval empire
• 9:55
  Speaker 1: or a mafia state, where certain assets are of the
• 9:57
  Speaker 1: state are controlled by clicks and those who cooperate with
• 10:02
  Speaker 1: them do well, and the rest are either eliminated in
• 10:07
  Speaker 1: some fashion or they are basically, um invited to leave
• 10:13
  Speaker 1: the country. You're allowed to leave a country. So, Richard,
• 10:15
  Speaker 1: I want to go back to something you said that
• 10:17
  Speaker 1: President Trump was meeting with his quote co conspirator, Uh,
• 10:22
  Speaker 1: with respect to what happened during the Russian election. Obviously
• 10:25
  Speaker 1: this has not been proven yet. Uh. This is very
• 10:28
  Speaker 1: much what Robert Muller is investigating. So we don't know
• 10:31
  Speaker 1: that for a fact in any way. UM, But I
• 10:34
  Speaker 1: do want to get to something, which is the broader
• 10:36
  Speaker 1: political implication of this where you have a hardening of
• 10:39
  Speaker 1: people who are anti the president, who are trying to say, look,
• 10:43
  Speaker 1: this just shows that he's not fit for office. And
• 10:45
  Speaker 1: then you have a supporters coming out and saying, look,
• 10:48
  Speaker 1: he's trying to create peace. Uh, you don't have anything
• 10:51
  Speaker 1: on him yet. At some point this will come to
• 10:54
  Speaker 1: a head. The sides are getting increasingly angry and agitated,
• 10:58
  Speaker 1: and I'm trying to figure out, you know, what's the
• 11:00
  Speaker 1: risk that we have some kind of dnue mall that
• 11:04
  Speaker 1: is somewhat damaging on many levels here. Well, look, first,
• 11:09
  Speaker 1: you know, I make that statement regarding co conspiracy because
• 11:14
  Speaker 1: I think one we saw some of that playing out
• 11:16
  Speaker 1: in the summit itself. I also think there is plenty
• 11:19
  Speaker 1: of evidence of that in emails and other communications that
• 11:21
  Speaker 1: took place during the campaign, as well as in the
• 11:23
  Speaker 1: indictments that we've seen. I think it's going to be
• 11:26
  Speaker 1: extremely difficult for Trump and his supporters to contend that
• 11:30
  Speaker 1: he was not at the very least of where and
• 11:32
  Speaker 1: receiving support and conjunction with the campaign and cooperating with that.
• 11:38
  Speaker 1: But look, of course we're gonna wait for the Muller
• 11:40
  Speaker 1: indictments to come down and We'll see how all those
• 11:43
  Speaker 1: play out and what all the details are. But I've
• 11:45
  Speaker 1: certainly seen enough and have lived a life involved with
• 11:48
  Speaker 1: Russia to know what this is about at this stage.
• 11:51
  Speaker 1: And I see the conduct of our president and giving
• 11:54
  Speaker 1: up critical US positions and also undermining our country and
• 11:58
  Speaker 1: our alliances, all all serving as I see, at the
• 12:01
  Speaker 1: interests only of Russia in this um So where does
• 12:05
  Speaker 1: this play out look? There will always be people who
• 12:09
  Speaker 1: will pay attention only to the tweets from this president
• 12:13
  Speaker 1: and will take his side. UH. The Russians are also
• 12:17
  Speaker 1: very effective at building additional support, whether it's through the
• 12:20
  Speaker 1: n r A, religious organizations are the groups to support
• 12:24
  Speaker 1: this president. I am very concerned that at the end
• 12:27
  Speaker 1: of the day, regardless of what happens, he is going
• 12:30
  Speaker 1: to take things right to the line in terms of
• 12:33
  Speaker 1: undermining our institutions, as long as he doesn't cross over
• 12:36
  Speaker 1: it to the point where he's obviously acting in a
• 12:39
  Speaker 1: traitor of his fashion. That's what happened at the summit,
• 12:42
  Speaker 1: where he was pushing and pushing, trying to appease and
• 12:46
  Speaker 1: UH and please the Russians and protect himself by doing that.
• 12:50
  Speaker 1: But he got the backlash and realized that, Boy, I've
• 12:53
  Speaker 1: gone over the line now and my base is starting
• 12:56
  Speaker 1: to see who I really am, what I'm really about.
• 12:59
  Speaker 1: So I think it the end of the day, Uh,
• 13:01
  Speaker 1: we will probably find ourselves in a position where we
• 13:04
  Speaker 1: have strong indictments coming down and we're at that point
• 13:08
  Speaker 1: going to face I think some real issues about the
• 13:11
  Speaker 1: strength of our of our institutions in dealing with the President,
• 13:15
  Speaker 1: who I do not think, Uh, we'll hold back and
• 13:17
  Speaker 1: doing anything you possibly can to maintain power. Do you
• 13:21
  Speaker 1: have any comments on the idea that their Germans are
• 13:26
  Speaker 1: held captive by the new pipeline, the North Stream to
• 13:32
  Speaker 1: pipeline that would bring natural gas to Germany from Russia
• 13:37
  Speaker 1: that the President alluded to. I do have a view
• 13:39
  Speaker 1: on that. In my experience, Andrew Merkel and her team
• 13:44
  Speaker 1: have integrity and ethics, and I think that they understand
• 13:48
  Speaker 1: that although they have to have dealings with Russia, that
• 13:51
  Speaker 1: that does not mean that they need to give up
• 13:54
  Speaker 1: their ethical framework in terms of how they deal with Russia. Uh.
• 13:58
  Speaker 1: Having said that, I understand and that UH, certainly the
• 14:02
  Speaker 1: creating alternatives to the pipeline, you know, it might be
• 14:05
  Speaker 1: a good idea in terms of diminishing Russia's influence. But
• 14:09
  Speaker 1: that's just a again more of a business type of issue.
• 14:12
  Speaker 1: I'm not worried about that German leadership becoming like like
• 14:16
  Speaker 1: our current leadership. Richard thirty seconds. Russia's horde of US
• 14:20
  Speaker 1: treasuries plummeted in two months, ended in the end of May. Uh.
• 14:24
  Speaker 1: Do you know why I wouldn't. I wouldn't say that.
• 14:28
  Speaker 1: I know why. I have my suspicions why I think
• 14:31
  Speaker 1: that there is concerned that there's going to be a
• 14:33
  Speaker 1: greater round of sanctions against Russia. I think that, Uh,
• 14:39
  Speaker 1: there's a point at which Putin and Trump and those
• 14:42
  Speaker 1: around Trump are are overplaying their hand and they have
• 14:46
  Speaker 1: to expect to backlash. And we saw some of that
• 14:48
  Speaker 1: backlash after the summit. Richard Khn. We could go on
• 14:52
  Speaker 1: four hours, Richard con managing partner of eur Asia Advisors,
• 14:56
  Speaker 1: joining us on the fallout from the Russia U S
• 14:59
  Speaker 1: summit by President Trump and President of Vladimir Putin in
• 15:18
  Speaker 1: focus today very much the Chinese un It's been falling dramatically.
• 15:23
  Speaker 1: Today's fall is accelerating against the dollar now at the lowest,
• 15:28
  Speaker 1: the weakest versus the green back in about a year.
• 15:31
  Speaker 1: Joining US now is win Thin Global Head of Emerging
• 15:33
  Speaker 1: Markets ffx UH and when we're so glad that you
• 15:36
  Speaker 1: could join us. This is really an important story for today.
• 15:39
  Speaker 1: How concerned should investors be about this decline? And frame
• 15:44
  Speaker 1: it for us? Is this a is this a tool
• 15:46
  Speaker 1: in the trade war? Is this? Uh? Something more significant
• 15:50
  Speaker 1: about a slowdown in the Chinese economy and easing to
• 15:53
  Speaker 1: respond to it? Well, first all, thanks for having It's
• 15:57
  Speaker 1: always a pleasure. Um. There's lots of lots of of
• 16:00
  Speaker 1: factors rolling the markets right now. But I'm gonna try
• 16:03
  Speaker 1: and be the sort of voice of reason and say, look,
• 16:06
  Speaker 1: there a lot of things to worry about, but Chinese
• 16:08
  Speaker 1: evaluations is simply just not one of the major things
• 16:10
  Speaker 1: we should be worried about. Um. Why is that? Well? Look, um,
• 16:14
  Speaker 1: if the longest time over the year's last several years,
• 16:16
  Speaker 1: not decades, the US UH I m F also the
• 16:20
  Speaker 1: Western powers of press China to give a greater market
• 16:23
  Speaker 1: role to the exchange rate and lo and behold that's
• 16:26
  Speaker 1: what we're seeing. If you look at the UM You're
• 16:30
  Speaker 1: wonderful w c RS page. If you look over the
• 16:32
  Speaker 1: last twelve months, UM, the Chinese want is actually one
• 16:35
  Speaker 1: of the better uh, performing EM currencies. So if you
• 16:38
  Speaker 1: look at year to date, it's smacked in the middle
• 16:40
  Speaker 1: of the impact, down four percent year to date. My
• 16:43
  Speaker 1: view and as and as this for a long time,
• 16:46
  Speaker 1: is that that the recent weakness and you want to
• 16:49
  Speaker 1: simply reflecting a broad based dollar rally, EM sell off,
• 16:53
  Speaker 1: it's it's really trading with the rest of EM and
• 16:55
  Speaker 1: I think that's the sort of what we should be saying.
• 16:57
  Speaker 1: It's it's more market based, uh more UM being driven
• 17:01
  Speaker 1: by by global factors. Could you speak a little bit
• 17:05
  Speaker 1: about the shadow banking system that exists in China and
• 17:09
  Speaker 1: the efforts on the part of the Chinese government to
• 17:12
  Speaker 1: try to spur economic growth, specifically among small and medium
• 17:17
  Speaker 1: sized businesses. Yeah, you know, listen, this is you know,
• 17:21
  Speaker 1: we have seen this kind of going back and forth
• 17:23
  Speaker 1: for the last several years. So you know, look, we
• 17:26
  Speaker 1: know I mentioned the factors going on. China's particulous juggling
• 17:30
  Speaker 1: a lot of balls. Uh. They're trying to deal with
• 17:33
  Speaker 1: the slowdown and economy as well as sort of stresses
• 17:37
  Speaker 1: in the financial sector, and they've been trying to de
• 17:39
  Speaker 1: leverage the last several quarters. The time that we always
• 17:42
  Speaker 1: see is when they try and deleverage loan. Behold the
• 17:45
  Speaker 1: constats weekend, they get nervous and they start pushing UH
• 17:48
  Speaker 1: loan growth up again. So it's sort of like two
• 17:51
  Speaker 1: steps forward, one step back my bottom lines. I think
• 17:54
  Speaker 1: that you know, it's it's a sort of black box.
• 17:56
  Speaker 1: The financial system is understressed. We've had just had a
• 18:00
  Speaker 1: huge I think the fault UM one of the Chinese issuers.
• 18:03
  Speaker 1: I think you guys carry that story overnight. Right Well,
• 18:06
  Speaker 1: they're they're like twenty they've been twenty corporate bond the
• 18:09
  Speaker 1: faults so far in the No. I mean interestingly, I
• 18:13
  Speaker 1: think we want to see that cost EM. You know,
• 18:15
  Speaker 1: it's not just China, you know, EM and Channel took
• 18:17
  Speaker 1: advantage of low barring cost globally. They issued debt like
• 18:20
  Speaker 1: there's no tomorrow and now sort of the it's time
• 18:23
  Speaker 1: to pay the piper. So, Um, do I think there's
• 18:26
  Speaker 1: gonna be a systemic problem. No. I think that the
• 18:29
  Speaker 1: system is in stresses, But I don't see something sort
• 18:32
  Speaker 1: of huge sort of uh leave a moment for for
• 18:34
  Speaker 1: the China or for for the global economy. Um, when
• 18:37
  Speaker 1: I understand what you're saying with respect to China being
• 18:40
  Speaker 1: sort of lumped in with the rest of emerging markets,
• 18:42
  Speaker 1: and that its currency is actually one of the better
• 18:44
  Speaker 1: performers against developed marker competitors, or basically appears. But what
• 18:50
  Speaker 1: I'm struggling with is China is the world's second biggest economy.
• 18:54
  Speaker 1: It can't really be lumped in with much lesser economies
• 18:58
  Speaker 1: based on how significant it is for the world economy.
• 19:01
  Speaker 1: And meanwhile, you have the trade war or at least
• 19:03
  Speaker 1: the threat of an escalating trade or with the US,
• 19:07
  Speaker 1: and China is uh easing policies. It's sort of backtracking
• 19:11
  Speaker 1: on some of the tightening that had done based on
• 19:13
  Speaker 1: what you were talking about and pain was talking about.
• 19:15
  Speaker 1: I guess what I'm trying to understand is because as
• 19:18
  Speaker 1: you were saying, China such a black box. Could this
• 19:21
  Speaker 1: be that China's economy is slowing much more than official
• 19:25
  Speaker 1: data are letting on and they feel the need to
• 19:27
  Speaker 1: reverse policy now to counter that, Well, you know, we
• 19:31
  Speaker 1: go back to the age old debate. But how reliable
• 19:33
  Speaker 1: are there Chinese data? And something I've always looked at
• 19:35
  Speaker 1: as more qualitative assessment. Look, we know, maybe it's not
• 19:39
  Speaker 1: really growing tacks and um, but we can't sort of
• 19:42
  Speaker 1: use benchmarks as well it's it's a little bit slower
• 19:44
  Speaker 1: than was a year ago, you know, and so comparedive
• 19:47
  Speaker 1: of uh matters now you know to me, um, and
• 19:52
  Speaker 1: you're right that because it's such a large economy, it
• 19:54
  Speaker 1: does take a special place in that sense. It makes
• 19:56
  Speaker 1: me believe that they will not do anything that's going
• 19:58
  Speaker 1: to upset or the royal markets. You know, we saw
• 20:00
  Speaker 1: that back in the talks fifteen they devalued and uh,
• 20:04
  Speaker 1: not only the domestic investors flee and we had to
• 20:07
  Speaker 1: you know, had cap ouphas out of China, but you know,
• 20:09
  Speaker 1: the developed markets emerge, other emerging marketstop markets really felt
• 20:13
  Speaker 1: the pain. And I think China doesn't want to go
• 20:16
  Speaker 1: down that path again. You know, they've seen that it's
• 20:18
  Speaker 1: a very dangerous path to go through again. They're already, um,
• 20:22
  Speaker 1: you know, dealing with all sorts of different stresses in
• 20:24
  Speaker 1: the economy. I think some sort of currency crisis is
• 20:27
  Speaker 1: sort of the last thing they want to deal with
• 20:28
  Speaker 1: right now. So again, I don't see the human lines
• 20:32
  Speaker 1: out of line, out of you know, sort of out
• 20:33
  Speaker 1: of line with the moves of the rest of the world. Um.
• 20:36
  Speaker 1: I think they will continue to manage the currency. Remember,
• 20:39
  Speaker 1: it's not a floating currency. It's managed currency, but they'll
• 20:42
  Speaker 1: manage it within these parameters and that will they'll prevent
• 20:44
  Speaker 1: any sort of mass hysterical move of some sort. And
• 20:47
  Speaker 1: in global markets, can you do Turkey and twenty seconds
• 20:51
  Speaker 1: or less? H yes, I would stay stay away. Um.
• 20:55
  Speaker 1: You know we had Urdwan when he was VICTI, but
• 20:58
  Speaker 1: he put his soun in law in charge of the treasury.
• 21:00
  Speaker 1: In finance industry, E clipped the central bank independence. So
• 21:03
  Speaker 1: it's going down to pastoral, which I think is bad.
• 21:06
  Speaker 1: Next week we're very tunneling. Central bank meets inflation jumped
• 21:10
  Speaker 1: up in June. They need to hike at least a
• 21:11
  Speaker 1: hundred fifty basis points. Let's see if they do it
• 21:13
  Speaker 1: and they don't, I think we go back up. We
• 21:15
  Speaker 1: take dollar you want to dollar era above five? He
• 21:19
  Speaker 1: did it. Win Thin, Global Head of Emerging Markets FX
• 21:23
  Speaker 1: speaking to us about the Chinese yuan and the Turkish lira.
• 21:27
  Speaker 1: He's with Brown Brothers Harriman the Future of healthcare and
• 21:43
  Speaker 1: healthcare costs. Joining us now is Susan Duvore, the chief
• 21:47
  Speaker 1: executive of Premier Inc. They are based in Charlotte, North Carolina.
• 21:51
  Speaker 1: Susan joins us here in our eleven three, Oh studios.
• 21:54
  Speaker 1: Thank you very much for being here. Before we begin
• 21:58
  Speaker 1: in this sort of general content next of what's happening
• 22:01
  Speaker 1: with healthcare and healthcare pricing. Could you just offer an
• 22:04
  Speaker 1: example of some of the work that you're doing, and
• 22:07
  Speaker 1: I'm thinking most recently maybe of the Physician Enterprise Collaborative
• 22:12
  Speaker 1: and how Premiere works with healthcare providers, because I think
• 22:16
  Speaker 1: it's more than thirty eight hundred hospitals around the country. Yeah,
• 22:21
  Speaker 1: so Premiere works with plus and a hundred fifty other
• 22:24
  Speaker 1: providers like doctors, nursing home, surgery centers, this kind of thing.
• 22:28
  Speaker 1: Think about us as a national network of providers, the
• 22:32
  Speaker 1: people delivering healthcare to patients um and we are in
• 22:36
  Speaker 1: infrastructure to help them lower their costs, improve their quality,
• 22:41
  Speaker 1: improve their safety, improve their outcomes. And so in the
• 22:45
  Speaker 1: pharma world, for example, we aggregate their buying of drugs,
• 22:49
  Speaker 1: We create competitive friction between suppliers, and the inflation in
• 22:54
  Speaker 1: the cost of drugs that we help them negotiate is
• 22:57
  Speaker 1: half what the industry inflation is. So that's an example
• 23:01
  Speaker 1: of how Premiere works and what we're trying to do
• 23:03
  Speaker 1: with these health care systems. We do similar things where
• 23:06
  Speaker 1: we help them improve their safety, you know, lowering infection
• 23:10
  Speaker 1: rates in hospitals, lowering mortality in hospitals. And so it's
• 23:14
  Speaker 1: two sides of an equation, which is a cost reduction
• 23:17
  Speaker 1: side and a quality improvement side. So uh, we had
• 23:20
  Speaker 1: some guests on a few weeks ago who are talking
• 23:23
  Speaker 1: about the Indian UH system healthcare system and how the
• 23:27
  Speaker 1: U S could learn something from the hub, hub and
• 23:30
  Speaker 1: spokesmodel that they have where they have hubs that really
• 23:33
  Speaker 1: specialize in specific services and that are experts and then
• 23:36
  Speaker 1: the spokes that kind of provide provide the other services.
• 23:40
  Speaker 1: Have you ever recommended to any of your clients you guys,
• 23:43
  Speaker 1: this whole center should probably be shrunk immensely or are
• 23:48
  Speaker 1: cut uh and really rely more on these people for services.
• 23:52
  Speaker 1: What's your thought on that? Yeah, when you think about
• 23:54
  Speaker 1: the evolution of the health care system, Premiere has systems
• 23:57
  Speaker 1: of all kinds around the country. A lot of them
• 24:00
  Speaker 1: are integrated delivery systems. They are hub and spoke, but
• 24:03
  Speaker 1: we may have more of them in a market than
• 24:06
  Speaker 1: we long term need. And so the real question is
• 24:09
  Speaker 1: how do we take the services and optimize the volume
• 24:13
  Speaker 1: and optimize the cost performance and optimize the quality outcomes.
• 24:18
  Speaker 1: But yeah, we have we have a lot of markets
• 24:20
  Speaker 1: that have moved into that integrated delivery system model. Several
• 24:25
  Speaker 1: large pharmaceutical companies such as Novartis and Viser have said
• 24:30
  Speaker 1: that they are going to freeze drug prices. This seems
• 24:34
  Speaker 1: to be in response to the tweets and the comments
• 24:37
  Speaker 1: by President Donald Trump. Do you think that that's an
• 24:41
  Speaker 1: effective way to manage healthcare pricing? You know, I actually
• 24:46
  Speaker 1: think that the Drug Blueprint and Scott Gottlieb and the
• 24:50
  Speaker 1: things that he's trying to push forward with the administration
• 24:53
  Speaker 1: are things that are pointed in the right direction. Speed
• 24:57
  Speaker 1: up the approval of generics, get rid of some of
• 25:00
  Speaker 1: the loopholes for extending the life of a branded drug company.
• 25:03
  Speaker 1: I don't think anybody just saying we're going to freeze
• 25:06
  Speaker 1: prices for a period of time. I mean, the truth
• 25:09
  Speaker 1: is you've got to have market forces and competition every day,
• 25:13
  Speaker 1: all the time UM to actually have a sustainable, UM,
• 25:17
  Speaker 1: you know, managing factor for drug pricing. Do you think
• 25:21
  Speaker 1: that Medicare should play a more active role in negotiating
• 25:24
  Speaker 1: with pharmaceutical We think at Premier that Medicare should continue
• 25:28
  Speaker 1: to implement these value based payment programs. So you take
• 25:33
  Speaker 1: the delivery system, you have them own the risk of
• 25:35
  Speaker 1: the total cost of the patient, and then you create
• 25:39
  Speaker 1: you allow for market forces and competition to have the
• 25:42
  Speaker 1: health care system try to lower the cost of the
• 25:45
  Speaker 1: care that they're delivering to patients. We think the government
• 25:48
  Speaker 1: directly intervening in the decisions about which drugs at what
• 25:52
  Speaker 1: price patients will have access to will be will be
• 25:56
  Speaker 1: very problematic. Okay, But if the government is the one
• 26:01
  Speaker 1: that's ultimately paying the bill, shouldn't the payer be allowed
• 26:06
  Speaker 1: to negotiate prices, particularly when they are such a big
• 26:11
  Speaker 1: force in the market. You know, the last time I
• 26:13
  Speaker 1: was on the show, which was about a month ago,
• 26:15
  Speaker 1: I talked about employers getting directly involved with providers and
• 26:21
  Speaker 1: consumers in the cost of healthcare. So, if you think
• 26:24
  Speaker 1: about Medicare, Medicare is a payer, they are the implement
• 26:27
  Speaker 1: or of and they are in a sense the employer
• 26:31
  Speaker 1: too because these are Medicare, these are Medicare patients. So yes,
• 26:35
  Speaker 1: we think that they should be directly involved, but we
• 26:38
  Speaker 1: think the way that they ought to do it is
• 26:40
  Speaker 1: to go directly to the provider delivery system because that's
• 26:44
  Speaker 1: where the decisions are being made, and that's where you
• 26:46
  Speaker 1: want the decisions to be made. So create models that
• 26:50
  Speaker 1: that take that provider system and help them manage the
• 26:54
  Speaker 1: cost of the care. You know, a month ago I said,
• 26:57
  Speaker 1: I thought employers were getting a lot more active. Since then,
• 27:01
  Speaker 1: we've got JP Morgan, Amazon in Berkshire who've hired now
• 27:03
  Speaker 1: they're CEO. You've got a coalition of employers who are
• 27:07
  Speaker 1: now attacking some of the high cost procedures. Amazon bought
• 27:11
  Speaker 1: pill Pack. Amazon bought pill Pack. Amazon is reportedly talking
• 27:15
  Speaker 1: to ex Health and so these are all initiatives that say,
• 27:19
  Speaker 1: maybe there's an insurance company in the middle of this
• 27:23
  Speaker 1: that that actually isn't lowering the cost of healthcare and
• 27:27
  Speaker 1: isn't delivering the best clinical outcomes. I think the same
• 27:30
  Speaker 1: is true for the medicare world, and maybe it'll be
• 27:33
  Speaker 1: disintromedd it disintermediated. Unfortunately we have to leave there. Susan Divore,
• 27:37
  Speaker 1: thank you so much. We love having you on. It's
• 27:38
  Speaker 1: an important perspective. This is an important industry to keep tracking,
• 27:41
  Speaker 1: especially given all of the pressure to try to make
• 27:45
  Speaker 1: it more efficient to deliver healthcare in the US. Susan Divore,
• 27:48
  Speaker 1: chief executive Officer of Premier Inc. Normally based in Charlotte,
• 27:51
  Speaker 1: North Carolina, but joining us here in our eleven three
• 27:53
  Speaker 1: oh studios in New York. Thanks for listening to the
• 27:59
  Speaker 1: Bloomberg an L podcast. You can subscribe and listen to
• 28:02
  Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 28:07
  Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm
• 28:11
  Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast,
• 28:14
  Speaker 1: you can always catch us worldwide on Bloomberg Radio