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Microsoft Rises to Record; Tiffany Rallies on Takeover Talks · 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
• 0:07
  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
• 0:12
  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. Tiffany shares surging the most on record,
• 0:23
  Speaker 1: more than thirty percent, on the heels of this bid
• 0:26
  Speaker 1: by Louis Vutan's parent company for fourteen and a half
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  Speaker 1: billion dollars. A question is who are the other potential
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  Speaker 1: suitors that could step up to buy Tiffany or is
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  Speaker 1: it just going to be on LVMHU to raise their bid.
• 0:41
  Speaker 1: Kim Fassine is joining us now. He's a Bloomberg News
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  Speaker 1: US luxury reporter. I want to start with the price tag.
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  Speaker 1: What is the implied path forward by the premium that
• 0:51
  Speaker 1: we're seeing baked into Tiffany shares currently at one thirty
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  Speaker 1: dollars plus versus the one share price that the fourteen
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  Speaker 1: and a half billion dollars tag would imply. Right, So
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  Speaker 1: it's a fourteen and a half billion dollar proposal from LVMH.
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  Speaker 1: That's one twenties share and um some analysts are speculating
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  Speaker 1: that they might have to go up to as much
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  Speaker 1: as one sixty and uh. They're also speculating that Tiffany
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  Speaker 1: could attract bids for other suitors. Now, so there's companies
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  Speaker 1: that have been mentioned, our Richment, which owns Cartier and Caring,
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  Speaker 1: which is LVMH's biggest fashion rival that owns it owns
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  Speaker 1: brands like Gucci and Salt Laurent. So can what's the
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  Speaker 1: strategy for LVMH and perhaps other suitors to uh, you know,
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  Speaker 1: go after Tiffany? What are they looking for? Tiffany makes
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  Speaker 1: a lot of sense for l v m H because
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  Speaker 1: it fills a pretty big gap in its portfolio. Of course,
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  Speaker 1: it has numerous very strong European fashion labels like Louis
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  Speaker 1: Utton and dir Selene, Fendi and jewelry. It owns Bulgari,
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  Speaker 1: which is much more high end than Tiffany. But Tiffany
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  Speaker 1: would be away into the US jewelry market and American shoppers. Uh. Jewelry,
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  Speaker 1: particularly branded jewelry, has been performing particularly well in luxury lately,
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  Speaker 1: and it's a relatively small segment of LVM age compared
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  Speaker 1: with fashion and leather goods. Can I talk about the
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  Speaker 1: timing why now? I'm not sure why now, but the
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  Speaker 1: tivity has been on the rebound in recent years. So
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  Speaker 1: CEO Alessandro Boliolo has been very busy. He's overhauled Tiffany's
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  Speaker 1: marketing hoping, hoping to attract younger shoppers. Uh. He entered
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  Speaker 1: into India after reaching what they called a critical mass
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  Speaker 1: of demand to warrant moving in there. It vowed to
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  Speaker 1: make its more supply, its supply chain more transparent, and
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  Speaker 1: hired thousands of new diamond industry workers and executives. Right
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  Speaker 1: now are super focused on growing the business in China,
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  Speaker 1: and because by opening their own stores there, rather than
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  Speaker 1: waiting for tourists to come abroad, you avoid the volatier
• 2:53
  Speaker 1: volatility of tourist flows. So let's talk about the luxury
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  Speaker 1: market in China. Know, China has been an Asian general
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  Speaker 1: has in a big driver of the growth and luxury
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  Speaker 1: over the last ten plus years. But so the trade
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  Speaker 1: uncertainty here can't be good for luxury. So what are
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  Speaker 1: some of the companies that you covered? What? What are you?
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  Speaker 1: What are they saying? About trade wars and luxury. Well,
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  Speaker 1: let's start with Tiffany, which is in an interesting situation.
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  Speaker 1: They make their jewelry here in the US, so they
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  Speaker 1: do everything backwards. UH them. The big luxury company is
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  Speaker 1: the American Ones. So let's take UH Tapestry, which owns
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  Speaker 1: Coach and Kate Spade and Stuart Whitespan. They used to
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  Speaker 1: make a lot of goods in China fifteen years ago,
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  Speaker 1: but they've spent the last decade or so diversifying their
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  Speaker 1: supply chains. So in UH in Coaches case, UM, fewer
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  Speaker 1: less than five percent of their goods are made in
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  Speaker 1: China now because they've moved to places like Vietnam and
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  Speaker 1: the Philippines in India. And this is what we're seeing
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  Speaker 1: across the industry. I'm looking right now LVMH's shares in
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  Speaker 1: Paris and they're up just slightly or basically flat. I
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  Speaker 1: find this really interesting. Basically people saying this is a
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  Speaker 1: good move. Yeah, I think that is people saying it
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  Speaker 1: is it is a good move because it does fill
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  Speaker 1: that fill that gap. Tiffany is basically flat in the
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  Speaker 1: US now. UH. It used to be a more that's
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  Speaker 1: brand used to be stag here like people didn't it
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  Speaker 1: was less relevant to two young shoppers, which are so
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  Speaker 1: so valuable. But these moves lately seem to have to
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  Speaker 1: have worked. I'm just wondering about sort of whether this
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  Speaker 1: will also diversify Tiffany outside of the US much more
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  Speaker 1: because of LVMH's footprint. The push in recent over the
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  Speaker 1: past year or so has been to physically go to
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  Speaker 1: where the shoppers are and not rely so much on
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  Speaker 1: on tourists going abroad, you know, Paris or London or
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  Speaker 1: New York where their biggest stories. They're spending two hundred
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  Speaker 1: and fifty million dollars to renov eight their flagship store.
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  Speaker 1: Uh they're currently they're about to move next door, move
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  Speaker 1: their whole selling floor next door to their to their
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  Speaker 1: old place, so they can they can spend all this,
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  Speaker 1: all this time and money because that is the their
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  Speaker 1: their crown jewel of of their business. Like as much
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  Speaker 1: as ten percent of their global business comes from this
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  Speaker 1: one store in New York on Fifth Avenue. Kimbasine, thanks
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  Speaker 1: so much for joining us. Kimmassin is a luxury reporter
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  Speaker 1: for Bloomberg News covering all things luxury. Let's gears and
• 5:48
  Speaker 1: talk about the story that really is raising so many eyebrows.
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  Speaker 1: Microsoft shares jumping to an all time high today, the
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  Speaker 1: battle over cloud services with Amazon dot Com heating up.
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  Speaker 1: Joining us right now, James Back of Bloomberg Intelligence. Uh,
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  Speaker 1: Microsoft one a Pentagon cloud contract that was much disputed. Uh,
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  Speaker 1: there could still be appeals. But can you give us
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  Speaker 1: a sense of why this is being viewed by the
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  Speaker 1: market as such an important development? Well, I think that
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  Speaker 1: it is a confirmation that Microsoft has essentially made it
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  Speaker 1: in the infrastructure as a service market. It's long trail
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  Speaker 1: Amazon dot Com, and now we're starting to really see
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  Speaker 1: that it has kind of forged its role as the
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  Speaker 1: number two player, and with with the Department of Defense,
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  Speaker 1: with all of it's you know, very very rigorous security requirements,
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  Speaker 1: very highly sensitive workloads. Going with Microsoft over Amazon, the
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  Speaker 1: larger player, it's a pretty big statement about where Microsoft
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  Speaker 1: is in the cloud market. So, James, I know you
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  Speaker 1: follow these federal contracts and government contracts very closely. Clearly
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  Speaker 1: a surprise to the marketplace. How about the folks inside
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  Speaker 1: the Beltway to see, uh, you know, Amazon displaced here.
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  Speaker 1: How much for a surprise was that? It depends on
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  Speaker 1: here you're talking to, Uh, the market may be a
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  Speaker 1: little taken aback by it and some other people who
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  Speaker 1: may have felt that Amazon was positioned well to win this.
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  Speaker 1: Certainly we felt that they were the favorite, just given
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  Speaker 1: that they have experience with the c I A, given
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  Speaker 1: that they have the largest offering in cloud infrastructure in
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  Speaker 1: the market. Um, but Microsoft was always a formidable competitor
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  Speaker 1: in this competition, So it shouldn't come as too much
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  Speaker 1: as of a surprise that they did end up displacing Amazon,
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  Speaker 1: or not to say displacing Amazon, but did kind of
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  Speaker 1: you know, score an upset here. I don't think this
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  Speaker 1: is a stunning of an upset as some may believe
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  Speaker 1: it to be. So I wonder how much politics really
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  Speaker 1: played in here because Amazon dot Com Jeff Bezos has
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  Speaker 1: a stake in the Washington Post, and we know that
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  Speaker 1: President Trump has been pretty vocal against Jeff Bezos in
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  Speaker 1: part for that was that a driver behind this decision
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  Speaker 1: in anyway? I think that papers over It's it's a
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  Speaker 1: fun story to kind of speculate about whether Trump had
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  Speaker 1: influence on how this was you know, awarded, but it
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  Speaker 1: really kind of papers over the capabilities that Microsoft did have.
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  Speaker 1: They definitely had an offering that was capable of taking
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  Speaker 1: on this job. Um, And I think it might be
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  Speaker 1: you know, misleading, or it might be you know, overthinking
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  Speaker 1: it to say that Trump's uh, you know, his his
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  Speaker 1: his kind of bad blood he may have with Jeff
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  Speaker 1: Bezos or the Washington Posted anything to do with how
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  Speaker 1: this was awarded. You know, the whole you know, acquisition
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  Speaker 1: bureaucracy and procurement bureaucracy is much larger than anyone president. UM.
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  Speaker 1: So it'd be hard to see this being something that
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  Speaker 1: Trump was able to influence, um, really in any big
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  Speaker 1: meaningful way. So James, does Amazon have any recourse here?
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  Speaker 1: I seem to have heard that maybe they might be
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  Speaker 1: able try to stop this. Yeah, they can go to
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  Speaker 1: and this is just kind of standard procedure for any
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  Speaker 1: large contract. They can go to the Government Accountability Office
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  Speaker 1: uh and file a bid protest um if they feel
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  Speaker 1: there was any problems with the overall procurement. UM. That
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  Speaker 1: would delay the program by about a hundred days. And
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  Speaker 1: that's to say they don't you know, even take this
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  Speaker 1: maybe to the Court of Federal Claims. Um. There's a
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  Speaker 1: lot of different options they can pursue now to potentially
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  Speaker 1: you know, change the procurement or try to get this
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  Speaker 1: back from Microsoft. I want to go back to something
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  Speaker 1: you said, which is, perhaps people are are making too
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  Speaker 1: much of this in terms of uh, Amazon dot Com
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  Speaker 1: losing its dominance over the cloud business. Why do you
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  Speaker 1: think that, Well, the federal market, and this is also
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  Speaker 1: a kind of our our our look at the commercial
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  Speaker 1: market to cloud is a very big, um growing piece
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  Speaker 1: of the I T sector. So, you know, one loss
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  Speaker 1: is about you know, ten billion dollar contract over ten years.
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  Speaker 1: These are two companies that have both very large cloud businesses.
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  Speaker 1: One contract isn't going to really change too much for
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  Speaker 1: any of them, um. But at the same time, it
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  Speaker 1: is a big statement for Microsoft and where they are
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  Speaker 1: in the cloud market. For people who some observers who
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  Speaker 1: may have thought that this was a slam dunk for Amazon.
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  Speaker 1: I think it's a surprise. But at the same time,
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  Speaker 1: there's a lot of cloud uh, there's a lot of
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  Speaker 1: I TA modernization that's going to happen in the federal market,
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  Speaker 1: and it's it's very you know, it's it's not hard
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  Speaker 1: to see that Amazon and Microsoft, regardless of this contract,
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  Speaker 1: are going to be a part of that in some way.
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  Speaker 1: And there's been some pushback within Microsoft employees about that.
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  Speaker 1: How common is that in terms of well, I mean
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  Speaker 1: in terms of the I guess doing business with the
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  Speaker 1: government and you know, with whether it's the Defense Establishment
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  Speaker 1: or the c I A. Yeah, we saw this with
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  Speaker 1: Google um and it's ultimately Google was in the running
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  Speaker 1: for JEDI at one point and dropped out because of
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  Speaker 1: kind of an employee revolt. So it is something that
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  Speaker 1: happens in some cases. The difference here is, you know,
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  Speaker 1: Microsoft has been with the federal government for a pretty
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  Speaker 1: long time. They've been at d O D for about
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  Speaker 1: three decades. It's hard to imagine that any kind of
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  Speaker 1: big employee revolt is going to take place and is
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  Speaker 1: going to stop Microsoft from operating in the Defense Department.
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  Speaker 1: James bad thank you so much for joining us. We we
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  Speaker 1: we really appreciate your insight here. James back covers all
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  Speaker 1: things in terms of the federal contracts and the government
• 11:07
  Speaker 1: and procurements and all that stuff. He does have for
• 11:09
  Speaker 1: Bloomberg Intelligence. So really giving Bloomberg clients a real sense
• 11:12
  Speaker 1: of what it means, what companies are at risk, what
• 11:15
  Speaker 1: companies are doing, what types of business with the US
• 11:18
  Speaker 1: government on days like today, really valuable to get his thoughts.
• 11:38
  Speaker 1: This is a very big week for interest rates and
• 11:41
  Speaker 1: certainly the outlook going forward. The Pleasure Reserve meets Tuesday
• 11:44
  Speaker 1: and Wednesday releasing what everyone expects to be a rate cut.
• 11:48
  Speaker 1: That is not what people are watching for. What they're
• 11:50
  Speaker 1: watching for is what they're going to signal in terms
• 11:52
  Speaker 1: of whether this is one and hold for the time being,
• 11:56
  Speaker 1: or whether they expect to cut rates yet again in
• 11:59
  Speaker 1: twenty nineteen. Join us now. R J. Gallo, senior portfolio
• 12:02
  Speaker 1: manager focused on fixed income at Federated Investors Are J
• 12:06
  Speaker 1: what are you expecting them to signal on Wednesday in
• 12:09
  Speaker 1: terms of future rate cuts? Good morning, UM. I think
• 12:13
  Speaker 1: it's important to realize that although you know sort of
• 12:16
  Speaker 1: the one and done phrases being talked about, this is
• 12:19
  Speaker 1: really the third right. This is the mid cycle adjustment
• 12:22
  Speaker 1: language which was invoked by Chairman Powell UM around the
• 12:25
  Speaker 1: time of the first ease, may in fact be realized
• 12:28
  Speaker 1: by what we see now. The other periods of mid
• 12:31
  Speaker 1: cycle adjustment have typically entailed more than one ease, oftentimes
• 12:35
  Speaker 1: two or three. This looks like the third in a series,
• 12:38
  Speaker 1: and our bet here at Federated is that imminent recession
• 12:42
  Speaker 1: is not most likely, and the FED may in fact
• 12:44
  Speaker 1: layer in its third ease and see what happens next.
• 12:47
  Speaker 1: That what happens next is probably a deceleration and economic growth.
• 12:51
  Speaker 1: We're going to see some data this week on that
• 12:52
  Speaker 1: on the GDP front. But the FED, I think, is
• 12:54
  Speaker 1: probably a little less eager to signal further easing right away.
• 12:57
  Speaker 1: It's becoming states contingent or data dependent in their terminology. Yeah,
• 13:01
  Speaker 1: it's interesting r J. You mentioned the data dependency. You know.
• 13:04
  Speaker 1: I think if I were to go down to the
• 13:06
  Speaker 1: f O m C this wee can argue for Hey,
• 13:09
  Speaker 1: the data is not supporting this easing environment. I think
• 13:11
  Speaker 1: you guys need to sit on the sidelines. Will they
• 13:13
  Speaker 1: throw me out of the room. UM, I don't know
• 13:17
  Speaker 1: if they'd throw you out of the room. I'll tell
• 13:18
  Speaker 1: you this. I think that the FED, or at least
• 13:21
  Speaker 1: the core of the FED, the leadership of the FED,
• 13:23
  Speaker 1: you know, the the New York FED President, the vice chairman,
• 13:26
  Speaker 1: the chairman. UM, they're interested in being forward looking and
• 13:30
  Speaker 1: proactive at this point in time. UM, they feel as
• 13:33
  Speaker 1: if the United States is being sort of one of
• 13:35
  Speaker 1: the strongest pillars of an otherwise slowing global economy. That
• 13:39
  Speaker 1: they can afford to be proactive because the risk of
• 13:42
  Speaker 1: being wrong, namely we ease and we shouldn't have doesn't
• 13:45
  Speaker 1: produce an inflationary spiral. Inflation continues to disappoint. So what's
• 13:50
  Speaker 1: the problem with being proactive on growth? That's that's how
• 13:52
  Speaker 1: I think they think of it. UM. Those out there
• 13:55
  Speaker 1: like a Laretta Laretta Master who are arguing but data
• 13:58
  Speaker 1: doesn't support it, UM, well, that's the ackward looking data.
• 14:01
  Speaker 1: So in a risk management framework, they can afford to
• 14:03
  Speaker 1: to layer layer in theseasies and see how the market
• 14:06
  Speaker 1: and the economy response. So what does that mean in
• 14:09
  Speaker 1: terms of how you're positioning your portfolio? UM, if you
• 14:13
  Speaker 1: look at my firm, we have spent years being overweight
• 14:16
  Speaker 1: credit and expecting FED policy normalization in the form of
• 14:19
  Speaker 1: higher rates that ultimately occurred. We had a complete flip
• 14:22
  Speaker 1: flop on that last element as the FED has has
• 14:25
  Speaker 1: moved towards easing. As we've been discussing on this call um,
• 14:27
  Speaker 1: we anticipated the economic deceleration that would occur and selectively
• 14:31
  Speaker 1: have been long duration at various points over the last
• 14:33
  Speaker 1: six months. It's been an incremental win. At this point,
• 14:36
  Speaker 1: we've shifted closer to neutral on a lot of our variables,
• 14:38
  Speaker 1: because I think it's not totally clear that that what's
• 14:42
  Speaker 1: going to happen next. If President Trump and President z
• 14:45
  Speaker 1: in China actually strike a meaningful truth phase one deal,
• 14:49
  Speaker 1: then some of the global deceleration, some of the problem
• 14:53
  Speaker 1: with presidential nonresidential investment in the United States make correct,
• 14:56
  Speaker 1: and we can have a nice soft landing if we
• 14:58
  Speaker 1: get that yoke had a little fire. Corporate credit does okay.
• 15:02
  Speaker 1: On the other hand, deal hasn't been struck. Global economy
• 15:05
  Speaker 1: is slowing. Uh, you can't rule out that recession risk
• 15:08
  Speaker 1: is elevated at this point in time. So we're trying
• 15:10
  Speaker 1: to be nimble with almost like sort of a neutral
• 15:12
  Speaker 1: home base on a lot of variables right now. So
• 15:14
  Speaker 1: r J, as it relates to the R word recession,
• 15:17
  Speaker 1: what is kind of your call there at federating base
• 15:20
  Speaker 1: case we think we can have the the fabled soft landing,
• 15:25
  Speaker 1: which you know, which we had in the nineties. For example,
• 15:26
  Speaker 1: Chairman Greenspan was successful at finding that after multi phased
• 15:31
  Speaker 1: tightening that he oversaw um soft landings prolonged by definition
• 15:36
  Speaker 1: the economic expansion, which I think pal is very committed
• 15:40
  Speaker 1: to do. We think he might be able to stick
• 15:41
  Speaker 1: that landing. Let's talk about what a soft landing actually
• 15:45
  Speaker 1: looks like. What's the playbook for a soft landing? Does
• 15:48
  Speaker 1: it mean just a DECELERA is deceleration that's steady but
• 15:52
  Speaker 1: continues with the with the growth or and how long
• 15:56
  Speaker 1: can that continue? Well, if you believe the the the
• 15:59
  Speaker 1: official arbiters of of potential growth, it's somewhere around one
• 16:04
  Speaker 1: point eight maybe even one. Right. Um, we think that
• 16:08
  Speaker 1: GDP is going to have a one handle this week
• 16:10
  Speaker 1: when we see the first read on the third quarter
• 16:13
  Speaker 1: result here in the United States. A soft landing, in
• 16:15
  Speaker 1: my opinion, has to mean that in coming quarters we
• 16:19
  Speaker 1: can grow at potential or higher. Why is that a
• 16:21
  Speaker 1: soft landing? Because that's after the Fed funds rate was
• 16:24
  Speaker 1: increased sharply, it was zero not that long ago. That's
• 16:28
  Speaker 1: after the Fed halted QWI. And what they're doing now
• 16:30
  Speaker 1: is not qui. Anybody who thinks it is is apparently
• 16:33
  Speaker 1: not aware of Federal reserve history. Uh. And that soft
• 16:36
  Speaker 1: landing of a potential or higher growth means corporate assets
• 16:40
  Speaker 1: can do okay. I think that we're in an Arab
• 16:42
  Speaker 1: diminished returns where bond yields are where stocks are. I
• 16:47
  Speaker 1: think investors need to sort of ratchet down return expectations
• 16:50
  Speaker 1: because there's not a lot of easy money. In a
• 16:52
  Speaker 1: soft landing scenario, you don't get a recession, so you
• 16:54
  Speaker 1: probably don't get a crash in terms of stocks. I
• 16:57
  Speaker 1: hope UM, but it's hard to say that there's a
• 16:59
  Speaker 1: lot of a track active undervalued assets right now. R J. Gallo,
• 17:03
  Speaker 1: thank you so much for joining us, giving us your
• 17:05
  Speaker 1: thoughts on the credit markets and the upcoming uh FED
• 17:08
  Speaker 1: meeting and outcome coming tomorrow Wednesday. R J. Gallo, Senior
• 17:12
  Speaker 1: portfolio Manager, fixed to come at Federated Investors Investors joining
• 17:16
  Speaker 1: us on the phone from Pittsburgh where Argentina. Over the
• 17:34
  Speaker 1: weekend we saw a president elect, Alberto Fernandez win the election.
• 17:39
  Speaker 1: Mauricio Macrie is out. He was thought to be market friendly.
• 17:42
  Speaker 1: Alberto Fernandez not so much. What will the path be
• 17:46
  Speaker 1: going forward? Joining us now is Michael Bulliger. He is
• 17:49
  Speaker 1: head of Emerging Markets Asset Allocation uh for UBS Global
• 17:53
  Speaker 1: Wealth Management, and Michael, I want to just get your
• 17:56
  Speaker 1: sense of the outcome of this election. Does not seem
• 18:00
  Speaker 1: to be surprising markets all that much. Moves are not
• 18:02
  Speaker 1: that severe, But do you have a feeling that perhaps
• 18:07
  Speaker 1: people are under playing some of the risks that could
• 18:10
  Speaker 1: potentially cause much steeper losses for deadholders. Yeah, I think
• 18:15
  Speaker 1: when it comes to Argentina, I mean the big surprise
• 18:19
  Speaker 1: happened earlier when MARQUEI lost the primary um a few
• 18:24
  Speaker 1: a few weeks back, and now this result actually has
• 18:26
  Speaker 1: been widely expect expected by the markets and the positioning
• 18:32
  Speaker 1: has been a justice already. Now for us, the critical
• 18:35
  Speaker 1: part now is to look forward um. The next few
• 18:37
  Speaker 1: weeks will be critical, so people will be watching for
• 18:41
  Speaker 1: example of what's going to happen on the ethics side
• 18:44
  Speaker 1: and the central Bank, which has increased a couple of controls,
• 18:48
  Speaker 1: avoid another steep devaluation of the piezo. And then crucially
• 18:52
  Speaker 1: also what will the new president elect do between now
• 18:56
  Speaker 1: and it's his integration with regard to which persons will
• 19:01
  Speaker 1: you appoint for you know, the cabinet including Ministry of Finance,
• 19:04
  Speaker 1: central Bank governor, etcetera. And then also we are eagerly
• 19:08
  Speaker 1: awaiting more specific guidance on his economic policies for his
• 19:13
  Speaker 1: upcoming term. So Michael, for investors in Argentina, you know,
• 19:19
  Speaker 1: what is the bulk case for being in Argentina now,
• 19:22
  Speaker 1: it seems like there's just so many unknowns. There's that's true,
• 19:27
  Speaker 1: there's really a lot of question marks at this point
• 19:29
  Speaker 1: in time. One one clear argument why people might hold
• 19:34
  Speaker 1: onto their exposure, and that's also what we, by the
• 19:36
  Speaker 1: way recommend our clients, is that if you look, for example,
• 19:40
  Speaker 1: at the dullity denominated bonds and they offer obviously quite
• 19:45
  Speaker 1: a bit of a discount they tried and the trade
• 19:47
  Speaker 1: in the forties, and so you know, with with Anne
• 19:50
  Speaker 1: this now and Board being part of this upcoming government,
• 19:53
  Speaker 1: the president, he has obviously now incentives to try to
• 19:58
  Speaker 1: come up with a you know, as market friendly um
• 20:02
  Speaker 1: policy program as possible, and that can also involve that
• 20:06
  Speaker 1: maybe the restructuring, if it has to happen, might be
• 20:10
  Speaker 1: even you know, a bit less market and friendly than
• 20:12
  Speaker 1: what one's currently uprising. So Argentina has two hundred and
• 20:16
  Speaker 1: eighty two billion dollars of debt outstanding, people concerned uh
• 20:21
  Speaker 1: that they will default yet again. They are a serial
• 20:23
  Speaker 1: defaulter and this is going to be yet another one.
• 20:26
  Speaker 1: They already have defaulted on some of it. I guess
• 20:28
  Speaker 1: the question is what a recovery is going to be
• 20:31
  Speaker 1: A number of people have been saying around forty cents
• 20:33
  Speaker 1: on the dollar. Seems like that might be the most likely.
• 20:37
  Speaker 1: Where do you come in on this? Yeah, I think
• 20:41
  Speaker 1: you know, as as said before, there's really a lot
• 20:44
  Speaker 1: of unknowns. Um there's a wide range of indications on
• 20:48
  Speaker 1: where a possible recovery value could be. But again, just
• 20:51
  Speaker 1: to retrate what I said before, I think current prices
• 20:54
  Speaker 1: do reflect quite a dire outcome on such a restructuring,
• 20:59
  Speaker 1: a possible structuring. And you know, we're not advising people
• 21:02
  Speaker 1: to now buy into Argentine paper, but rather sort of
• 21:06
  Speaker 1: holding a market weight to exposure at this point in time,
• 21:08
  Speaker 1: So broadening out to Latin American in general, we've seen
• 21:11
  Speaker 1: a series of situations that vote to even more unrest,
• 21:16
  Speaker 1: whether it's Chile, whether it's Ecuador, uh, and the prospect
• 21:20
  Speaker 1: of yet another default there. What do you make of
• 21:23
  Speaker 1: all this? Are you recommending people get out of Latin
• 21:26
  Speaker 1: American assets? No, that's not what we're recommending. Actually. I mean,
• 21:30
  Speaker 1: first of all, it's worth noting that you know, you
• 21:33
  Speaker 1: mentioned Chile, you mentioned Ecuador, we talked about Argentina. But
• 21:37
  Speaker 1: this is not a topic that is specific alone to
• 21:40
  Speaker 1: Latin America. You remember the Chile shown in France, You
• 21:44
  Speaker 1: remember uh, you know, current protests in Spain, the crisis
• 21:48
  Speaker 1: in Lebanon um. So this is almost a global phenomenon.
• 21:53
  Speaker 1: And you know what many of these protests have in
• 21:55
  Speaker 1: common is that people point towards, you know, issues of
• 21:59
  Speaker 1: inequality te people point to you know, a lack of
• 22:02
  Speaker 1: perceived quality of what their government is doing. And you know,
• 22:06
  Speaker 1: for us as investors, what we tell people is to
• 22:09
  Speaker 1: look at, you know, each each country, each market individually
• 22:13
  Speaker 1: to assess the likelihood of such an unrest to happen,
• 22:16
  Speaker 1: and then also what can the government to to resolve
• 22:20
  Speaker 1: that situation. Now, looking at a Chile, which has been
• 22:23
  Speaker 1: a posted child for liberal policies for economic reform, which
• 22:27
  Speaker 1: is very strong depth credits fundamentals were not concerned at
• 22:31
  Speaker 1: all that you know, for example, the Chilean government or
• 22:33
  Speaker 1: some of the Chilean corporates that we cover will see
• 22:37
  Speaker 1: issues servicing their depth. So there we see that as
• 22:40
  Speaker 1: a temporary about of volatility, whereas elsewhere, you know, the
• 22:43
  Speaker 1: situation might look more challenging. Michael Baldner, thanks so much
• 22:47
  Speaker 1: for joining us. Michael's ahead of Emerging Market Asset Allocation
• 22:50
  Speaker 1: for Ubs Global Wealth Management. Thanks for listening to the
• 22:54
  Speaker 1: Bloomberg PL podcast. You can subscribe and listen to interviews
• 22:57
  Speaker 1: at Apple Podcasts or whatever podcast platform you prefer. I'm
• 23:00
  Speaker 1: Paul Sweeney. I'm on Twitter at pt Sweeney. I'm Lisa
• 23:03
  Speaker 1: Abram Wohits. I'm on Twitter at Lisa Abram Woits. One.
• 23:06
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• 23:09
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