Alibaba Splits Into Six Units

plans to split into six units. So we want to get to the news and the impact it's having on the overall Chinese names at trade here in the United States. With more on the news, let's bring in Bloomberg News Equities reporter that follows the Chinese ADRs. The trade in the US is chen is here in our Bluemberg interactive broker studio. Ishan tell us about the news. First of all, I feel like it's interesting that Jack Mak comes back after missing for a year. That was yesterday and then

we get this news today. So walk us through the news and maybe the significance of it. Yeah, great, great. First, thanks for having me today and you know, it's definitely

a very interesting week for Ali Baba. Today. The news is showing it like a radical restructure and plan for Ali Blabba because and now it's going to split the whole business unit Empire into six individeo units including e commerce, cloud and also media, and it potentially pays the road for them to raise funds and eventually explore the IPOs

of individeo units. So unlock's value that investors sees potentially right, and I think it's more than a lock value because you know what analysts and investors are telling me, they see it as a wing wing situation for Ali Baba and Beijing. So first of all, it's for sure like a lock value for investors if you look at do like a mass on the you know, some of parts of each individ units is treating like it should be

way higher than currently where it is trading now. But also thinking about from the regulatory perspective, as we all know that Beijing over the past two years have been having this sweeping crackdown on the tag industry and the main concern was that, you know, the concentrated power of Ali Baba and many tag firms is not helpful or healthy in terms of competition or innovation in the industry.

So now that Ali blahbla what is doing is to break the big empire into pieces, so in a way that should potentially is the concern from Beijing from the regulators, and this is a move also should you know, get the blessing from them. And it's great to have you hear each and because obviously you're one of our star reporters on the Equis team, but I also know this is a rare move right when you're thinking about technology

companies specifically based in China. So what do you think this means for the industry and could potentially be template for other companies to follow. Yeah, that's a great question. Actually, I have seen analysts and investors saying this as a game changer for the industry going forward, and it could serve as a blueprint for other firms such as like JD dot Com, Tenson or bay Do to explore a

similar paths. And Tenson could be a most most reasonable candidate here for a breakup because it has huge influence just as bah Bah, and it has different business lines. Actually, I already started to divestis some of the units, but still there are romantic entities could become standard long segments. Hen would Jack might have done this without the Chinese

government kind of putting pressure on the internet sector. And I'm wondering if this if Ali Baba was in the United States, would US regulators you think, similarly been saying we've got to push for a breakup. I'm curious what analysts how they're weighing in on that, if they are, I'm I haven't seen enough reporting there, but it's a very good question. And I was saying, you brought up

Jack Mah. I think it's interesting because this news today also callincidized with the news we saw yesterday that Jack mar was spotted back in China again after a year more than a year of like traveling or staying abroad.

Right um, the market of course took that also as a very positive sign because Beijing right now is pushing and saying that it wanted to support private enterprise to revive its economy, but it really needs to gain the confidence from the companies and investors after you know, a series of crackdowns of different industries. So now that Jack Mall is coming back and then with this split plan appeared to you know, pay road for you know, the

company's future. These are all like a turning the sentiment of Ali blah blah, but also Chinese ado US in general. Yeah, they were all up today, right, or a lot of them were. And I know you've also covered different calls, say like with Marco Kolonovic over at JP Mortgage, he was talking about buying the dip on Chinese equities in this particular back even during right in early October, during that whole reopening type trade, and some of that had

paid off. But are you seeing any other analysts kind of still calling for maybe still continuing to buy this or do you think it's run its course? Because it's interesting if you're looking at the right as far as how they've performed so far this year more probably kind of flat, not not really obviously so the big rally in the fil quarter right because on the JPM call we walked together on a story jazz and at that time I think the call the mancisis is about the reopening.

But remember that reopened rally we have staying froll November last year, have fizzle outs a bit, especially after a quarter of you know, like Earning's prey. There's quite a bounce off of that low right, casino stocks in hotels, yeah, also like a travel related names, but it has already played out, so investors now at the point of they wanted to see, all what is the fundamental value of

these companies. They are focused on the regulatories, certainty and certainty, but this news definitely help in terms of, you know, the regulatory perspect that's what I want to escation because I do feel like depending on I felt like we went through a period of even we start with the pandemic, you know, shut down, open up, like it was just

kind of startling. And even with the tech sector, China has been very clear about wanting to be performing in the global economy on a higher tech level, like this is important to the global growth and the growth in China specifically, but there's a lot of oversight about privacy

and data gathering. And I do wonder does a move like this come tech entrepreneurs in China and investors when it comes to investing in these names, or is it a reminder that China and Chinese officials could at any moment be like, you know what, I still don't like how big this company is or the impact it is and that they could move in. I'm just wondering if things are settling down in terms of that, right, I think that's a very good question. And back to the

news here. I think one question investors are asking on today's news is where are like this potential in the video units or Spain offs of Ali Babago into a list in Hong Kong or in China the domester market because ever since you know, did the IPO debacle in New York, right, Beijing has been calling for the so called homecoming listing of Chinese companies. So these are reasonable speculations that even they break up and eventually list some of the units, maybe they offer the shares or it

should the shares closer to home. So if they do that, what regulation absolutely say? What kind of message does that sense? Right? I think it's in line with where Beijing is pushing for more regulations in terms of the listing share offering, and they also wanted to give access to domestic investors to all them trade and all these you know national

bit like bit tech firms. So maybe no listings in the US potential, Yeah, that's no. I just think it's really interesting in terms of the sector and how it's been playing out. Rye No, definitely, so really we don't have a ton of details yet right as well as the timetable could be moving forward on this because I'm

sure investors are eaching to know. Yeah, yeah, I like today's I think the first step in terms of splitting up and couldn't potentially paved the road for a wave of IPOs, But we haven't seen any details in terms of timeline or you know what, what is the IPO plans for the individual units and still doing cost cutting to share up the bottom line, so that that's business as usual. Um, thank you so much. It's an important sector and I love talking about those Chinese names that

trade here in the United States. Ishanshen, thank you so much. She's Bloomberg News Equities reporter. She follows the Chinese ADRs that trade in the US. Jenning us here in our Bloomberg Interactive broke or studio looking at shares of Ali Baba right now, still higher on the day, just off their best levels of the session again of about thirteen point eight percent. And we did talk earlier about the

Nasdack Golden Dragon. That index also higher on the day, largely because of the moves that we saw in Ali Baba, that index is up about three point four percent. Just so definitely that whole sector, as we talked about earlier,

definitely some outperformance. It's definitely for sure and something that investors are definitely going to keep their eyes on, especially like we're talking about as far as when it comes to even with these Chinese listed US stocks in the US, how they've been outperforming at last quarter but obviously underperforming this year. You're listening to the Bloomberg Business Week podcast. Catch US live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the Ion Radio app, and

the Bloomberg Business or watch US live on YouTube. Jess, here's the startling statistics about one profession. For those in it, some forty six percent would not recommend it as a career. Only thirty three percent feel fairly compensated. Ninety three percent think the shortage in their field will only get worse. So those are pretty rough numbers. They are. And when I know what profession you're about to talk about, and this is something that was pivotal, especially it always is pivotal,

but especially in the wake of the pandemic. Absolutely, we're talking about nursing, which, as you said, we were reminded was so crucial to get us through the COVID pandemic. So let's get more on the state of nursing. Great to have back with us, Doctor aman Abuse. She's CEO and co founder at Incredible Health. Her company connects hospitals with nurses and other healthcare workers. She joins us via zoom from Austin, Texas. Doctor Abuse, Nice to be checking

in with you again. How are you. I'm good. Thank you so much for having me. Hey, so listen, I shared with our audience and viewers some of us totistics. Tell us about your State of the Nursing Report, which I believe was just released today. Yeah, I was released

to date. It's our fourth annual report, and we use hiring data from over seven hundred thousand nurses in our in our network on the Incredible Health platform, and then we surveyed an additional three thousand two So as far as just the main findings, I'd love to start off with some good news. Actually, there's been some improvements since last year. So eighty percent of nurses plan to stay in the in their field until retirement, which is a

big increase. It was only at fifty five percent last year. And then there's also been a ten percent degrease in the number of nurses who are planning to leave their current roles this year. So that's that means that turnover will hopefully be improving in the next twelve months too. Can we can we ask you why that good news?

Why do you think those numbers have improved, because I know they were pretty dismal when we were talking to you before they were think, I think the main reason is that the pandemic and the intensity of it has subsided a bit. And then we're also through the tridemic. You know, there was r RSB flu time period two, so you know they're looking their nurses are a little more optimistic about the long term in the future, their

future careers. It was a nurse in my neighborhood, m a neighbor who she was like, I'm done, I'm done, wouldn't go like just because it was just too much UM coming at her. So I can totally relate. UM walk us through some of the numbers though that weren't

so great. Yeah, I know. So now having said that, even with that, some of that good news that's a little bit more longer term looking that they want to stay in their careers in the long term, there there's still a lot of frustration about what's going on currently with understaffing, would burnout and with pay. So, you know, more than sixty two percent of the nurses say they're not hopeful for the next generation of nurses and forty

six percent would actually not recommend a career in nursing. Um. When asked about, you know, staffing shortages, ninety three percent of the respondent said that they expect they are experiencing the nursing shortage getting even worse and so and they have all set over seventy percent have pointed to inadequate staffing being one of their top concerns. What I'm wondering about, Oh, I was curious about as far as what could be

done to help healthcare workers feel more supported. Yeah, there's there's quite a bit that all of us can that all of us can do for for the hospital executives in particular, they can definitely invest more in career advancement, that more training opportunities for nurses so they're encouraged to

stay in their health system. There's also quite a bit more work that needs to happen with providing more flexible scheduling, so allowing nurses to pick pick not just full time roles, but also part time roles, and not only twelve hour shifts but also four hours and eight hour shifts and weekend shift options, just so they can fit work into their into their into their lives a little easier. And then you know there of course, like the other big

trend that we're seeing is with wages. You know, wages has increased overall. We're seeing a fourteen percent increase in sign on bonuses, in the use of sign on bonuses overall, and the actual amount of sign on bonuses has also was that ever a thing. Years ago. I had a sister who was a nurse. I don't remember her. I we're talking about a sign on bonus. It wasn't a thing at all. We've also seen the actual hourly rate increase.

I think the reason it's become a thing is because, you know, there's a huge supply shortage here right There's a huge demands supply demand and balance, and as a result, because we don't have enough workers, wages will go up. So as far as kind of piecing all of this together.

Are there more nurses that are planning now to actually stay in this rule a year from now versus obviously before, because you were explaining all those statistics now, So if they are planning to stay, does that potentially bode well, Yeah, it bodes well that they're more likely to stay. Now, keep in mind the turnover still high, right, the turnover annually is at twenty two percent, but thankfully much smaller percentage of nurses are looking to leave the field altogether.

You know, one of the things that I remember, doctor obvious Dade from I think we talked last time, what's the average I hate that word, what's the average nurse make? But what's the average salary in nursing? It's about ninety three thousand naturally okay, natural average obviously varies dramatically by state. Yeah, no, I right, lots of variations. And I know we've talked about, as you said, there's not necessarily a lot of people

coming into this profession. Once again, is it, you know, opening up immigration and I know we've talked about this in the past. Is that the fix? What's the fix in terms of encouraging people to enter and I often find that it's a lot of people from other countries that are nursing. So there's two keyball nucks that are happening in the US. Number one is that nursing school.

So there's there's tens of thousands of Americans on wait lists to get into nursing schools, but the nursing schools cannot handle more capacity, and so we need to expand nursing full capacity in this country and train more nurses. And then there's another ball in that happening right after nursing school. And then there's not enough programs at hospitals and other other employers that train nurses to become more specialized.

And so both of those are the two huge ball in next that we have just got about thirty seconds. We've talked with you about this before. Any progress that we're making on this, Are you seeing it? Not? Honestly, not yet not it's not showing up in the data yet. But I know, I know that many nursing leaders and HR leaders and nursing education leaders are actively working on it. They have to be stressed out because if you think about an aging population, we're all going to just need

more of certainly healthcare services overall, but definitely nursing in particular. Eman, good to check in with you again. Doctor iman Abu's age. She's co founder and chief executive officer at Incredible Health JOININGSVA Zoom from Austin, Texas. Yeah, I mean, I think

about it, right. We just know that an aging population is just going to need a lot of healthcare going foe and you do wonder whether the doctors will be there, the nurses will be there, absolutely, but then hearing about the wage gains signing bonuses, will that be enough to continue to get workers in that field as long as the pool of workers right there? All right, you're listening and watching Bloomberg Business Week. This is Bloomberg Radio. You're

listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty. Okay, I'm just gonna say it. This is one of my favorite stories

of the day. It's one that will be in the new issue of Bloomberg BusinessWeek on newstands later on this week, already online at Bloomberg dot com Sash Business Week, and it's of course on the Bloomberg terminal. It's about how China has become the lender of last resort for developing countries. Why you should care because it has lots of implications geopolitically and more. With more, let's head to Washington, DC. That's where we find Sean don And is Bloomberg News

senior economics writer. He is on zoom and then in our Bloomberg a director broker studio, we have Bloomberg Business wee get or Joel Webber. Joel. I feel like China's involvement around the globe, especially in the developing world, has grown a lot. We know a lot of it by way of its Belt and Road initiative. This story by Sean now takes it up a notch. Yeah, and it actually looks at sort of the soft power and you're right about this epic project building spree that China has

been been on. This is a little different and it actually shows that basically China has been in a quiet little fight with IMF and and the amount of money here is really the crazy part. So, Sean, what how did you find this story and what stands out to

about these numbers. Yeah, look, this is really the results of some really great work by some economists at an outfit called AID Data, which is at William and Mary in Virginia, the World Bank, the Keel Institute in Germany, and Carmen Reinhardt up at Harvard, who is one of the world's leading experts on the kind of history and

politics of debt and their impact on crises. They did this amazing work where they dived into really central bank records and other records around the world and identified this two hundred and forty billion dollars that had been loaned out by China over the last twenty years to twenty two countries. And these are twenty two countries in the

developing world. And this is a different kind of lending from China in that what we've grown used to is China financing big infrastructure projects like ports in the developing world. This is actually what we would call rescue lending. These are bailouts to countries that have gotten into trouble, to their central banks to try and help them ride out crises.

And that takes China into a whole different area of lending and, as you say, starts to establish it in its central bank as a lender of last resort in the global economy and the potential rival to institutions that have been around for since the end of World War two, really like the International Monetary Fund and that have become

the normal way that we respond to crises. So you write that exact comparisons are difficult, but China's one hundred and eighty five billions surpassed one hundred and forty four billion dispersed by the IMF over this same period. What period are we talking in? Why is it so difficult to compare? Yeah, So, look, the IMF gives out concessional emergency loans with a lot of conditions attached, requiring reforms.

The type of lending that we're talking about in this period, which is between two thy sixteen and twenty twenty one, which catches the lead up too in the first couple of years pandemic and some of the economic turmoil that we've seen since then. The type of lending you get from the People's Bank of China comes via these swaps to central bank reserves and it sometimes comes from state owned banks with higher interest rates and different ten years.

The kind of terms of lending are difficult to compare,

and that's what we're talking about there. But the total sum that we're talking about there, and this is the amount that's drawn down on credit lines rather than the amount that's committed by either China or the IMF, means that the one hundred and eighty five billion dollars that China sent out over that period these just these twenty two countries, remember, is comparable to the one hundred and forty four billion dollars that the IMF sent out dispersed

to member countries that we're dealing with various economic crises in the same period. Okay, Sean, So what kind of countries are we talking about here and what do we know about why they've needed it? And turned to China. Yeah, so look, we're talking about countries like Pakistan, We're talking about countries like Argentina, Sri Lanka. We're talking largely about the poorer countries in the world and countries that have

run into debt problems over the years. Some critics would charge that a lot of those debt problems have come as a result of Chinese lending. In fact, that's what the Biden administration and previous administrations would claim. This kind of this this incredible flow of funds that's come out through the Belton Road Initiative into the developing world to help build infrastructures, sometimes at terms that were, in hindsight,

maybe too generous or irresponsible. This is and these are debts that have built up and as we hit the pandemic, As we hit the term, a lot of countries ran into trouble and they want to bolster their foreign exchange reserves. They need to bolster their government budgets to try and ride the stuff in the past. These are things that they would go to the IMF for or other land.

How much of it, too, is about the Chinese currency, because we know that the Chinese would love for the Chinese currency to be the world reserve currency and not the US dollar, and they've tried to kind of put it out there. This is all about influence, right and currency is out there are are about influence as well.

This is about a great geopolitical battle. A lot of these swap lines that were set up by the PBOC over the last twenty years were set up with the idea of financing trade and getting the world to use

the Chinese currency, the rand named a lot more. But in what we've seen in this case, and what they really document in the study, is that these swap lines that were set up for that purpose in fact ended up being used for kind of emergency rescues and in some cases, you know, ended up as as dollar funds going into the foreign reserves are being transferred into dollars and kind of you know, bolstering the dollar system in

a way and in a funny way. But the whole, the whole game here is really you know, when we talk about the US and China and growing rivalries and in this Cold War, we often focus on the trade wars or the battles over technology and things like semiconductors. Well, this is a whole other side that we really need to start paying it to more attention to. And that's debt and what is happening in the world where a lot of poor countries are getting into increasing problems and

they need rescues. And here's China riding to the rescue alongside the International Monetary Fund and some of those US led or US backed institutions that have been the tradition, the traditional responders and sean when you're talking about these swap lines. Obviously, when we think about the Federal Reserve, it's so crucial when they have this to obviously prevent liquidity problems, and they've done some measures in the last few weeks with other central banks to expand the frequency

of that. But when we're talking about China's currency swap agreements kind of set this up, and how exactly could all of this play out, and what's different about this compared with when you're looking at these other global central banks, right, So, I mean, the FED swap lines are with fairly they've become this crisis responsible since the two thousand and seven eight global financial crisis, but there was a pretty limited

set of central banks. These are largely rich world central banks, the European Central Bank, the Bank of England and the Bank of Japan and so on, and they're really about, you know, getting emergency liquidity into the dollar system. They're always be incredibly transparent. You can go out to the New York Federal Reserves website and you can look at individual transactions and who has drawn down and the tenor of those transactions, the interest rate that's that's being paid.

The Chinese here are doing something different. They're using these swap lines as more traditional or different kind of rescue loans. And look, their defenders say, and they're doing something that's needed in the world, and that they're helping out these central banks in developing countries. These are banks that central banks that don't have access to the FED swap lines, and they're helping them at times when they really need to help. Hey, Sean, is this, though, in essence, perhaps

really a Chinese bank bailout? Well, that's the suspicion of the authors, and Carmen reinharden I had this fascinating interview and when she says, look, I think part of this is the PBOC bailing out Chinese banks that got into trouble as a result of Shijianpings Belt and Road initiative that ended up with these bad loans and developing countries.

And if you look, there's a correlation between where these these swap lines are being drawn down and the bad debts that are out there for China um or the high levels of indebtedness to China. But she also says she can't prove that. Then again she also says it doesn't matter because money is fungible, and if you get money in central bank reserves that frees up money elsewhere on government balance sheets. It can help. Uh, you know,

governments use her bolster budgets and uh. And the overall economic position in a country to the US, I amf looking at this. Suddenly there number two or distant more distant than that. How do how does this play out? John? I think from we got to watch. Uh, it's hard to watch because it's opaque. This is you know, again, the genius of this study is that they've they've told us about this, they've documented these something. These are not

things that we can look at easily on the PBOC website. Um. And so we really needed to watch and see where where China established itself in the world and where it sends this money, whether it is just to bail out Chinese banks, in which case that's going to be something that wraps up in just a couple of years, or whether they're establishing themselves as a longer term beneficent power that comes in to help rescue the world's poorer countries

and does so for generations to come. Well, it is kind of interesting and I just think it just shows you how China is just playing on a very very different level here Sean. You know, in terms of these markets, many of them that they're playing into in the emerging world, I mean, they have things that China wants to tap into, whether it's raw materials, raw minerals, if you will. And

I just feel like the relationship becomes much more intertwined. Absolutely. Look, as we said earlier, this is all about influence in geopolitics, and we're going to be watching this for many years to come. We talked about how this could potentially help out these poorer economies, but what would be the consequences for the global economy with this? Give it the nature of it. Yeah, look, it's there is You know, Carmen Reinhardt is among the skeptics when when she talks about

helping out these poorer economies. You're providing money. But in some ways, one of the things we've seen with China is that they've been reluctant to restructure aircats on debts to really ease the debt burden on a lot of poor countries. And we could get into a cycle where some of these countries just get stuck in debt traps, and that the Chinese while they're they're funneling this money,

they're they're keeping things ticking along. These these countries maybe paying the bills day in and day out, but they may not be getting out from under these debt piles, which drags on their economies, which has social consequences for their people, and they have consequences for people in the rich world as well as we see you know, we've we've seen this at our southern border here in the United States, people from troubled economies in Central America coming

north and you could pay out of Africa and other parts of you know, you mentioned economic problems. You mentioned Sri Lanka there, and that also exact exact example of that, where you have a stable country, stable economy, and all of a sudden it finds itself with you know, just

astronomical amounts of debt that's also linked to China. Um When you think through some of those other names that we've rattled through here, genre there any other ones that jump out to you that we'll be talking about who are linked in the same research. Look, when it comes to debt problems that are very live and the people are looking at right now. It's Sri Lanka, it's Zambia and Africa. It's Ghana, where debt restructuring talks were just getting started. And then there's the one that gives a

lot of people. That is Pakistan, which obviously is a nuclear power, and it also has some incredible debt problems and some big Chinese debt problems that it needs to sort out in the years to come. Hence what we said at the beginning, some you know, potentially this all has implications when it comes to geopolitics. Sean, great story and I'm must read. Sean Donnan is senior economics writer at Bloomberg News via zoom from Washington, d see our thanks to him as well as Jill Webber, editor of

Bloomberg Business Week. He's in our studio this story. By the way, it's going to be the upcoming new issue of Bloomberg Business Week. It'll be out on newstands on Thursday. Already on the Bloomberg terminal, but you can also find it at Bloomberg dot com slash business Week. Really really important and certainly sign of our times, definitely, and especially when we're talking about these currency swap agreements, specifically with China and how that differs when you're thinking about these

other central banks globally. It's really fascinating to see potentially how this plays out, as well as when we talked about these poorer economies that potentially need this help, and then also the potential consequences there. I love how it's kind of like a sly way to get everybody to use the Chinese currency. Rachelburn just you know, hey, look at this. Look at this. We have a we have an app for that too. How did that happen? You're

listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeart Radio app, and the Bloomberg Business app, or watch us live on YouTube. I'm rum journal. But you let me drive? Oh no, no, no, no, who's going home? Honey? Please? I'll do the riding gravels. I want to drive. It's good question. This is the drive to the clothes than well, jog down on Bloomberg Radio.

All right, everybody, let's get to it. You've got about eighteen minutes left today's trading session, getting ready to wrap up the trading day. Thank you lower that, Thank you very much. All Right, equities bouncing around. We're definitely off our best levels of the session, a little bit lower on each of those major equity averages, as you just heard from Charlie Tech the most down on a percentage

basis among those big three indexes. As for the two year note, we're looking at it at four point zero three. Sustain above that four percent marker, right at it. Let's get to it. We want to talk a little bit about the fixed income world. Brian Allen is director of fixed income at the institutional investment manager cs McKey Asset Management. They've got over seven point nine billion dollars in assets as of the end of last year, based in Pittsburgh,

and he joins us via zoom from Jacksonville, Florida. Hey, Brian, good to have you here with us, right person to have Considering what's been going on in the financial markets, what do you make of the environment and your expectations for the fixed income world over the next six to twelve months. Do you have clarity, first of all, or transparency in terms of what comes next? Frankly, no real clarity.

It was certainly the events of the last few weeks pointed out that we've come a long way with respect the FED funds and general market interest rates frankly a little too high. The concern was always the Fed would raise rates until something broke, and it seems we've reached that threshold. We had quickest moved down in rates over a short term time frame that we've seen in at

least since nineteen eighty seven. So I think going forward we may see one more rate high from the Fed, and I don't expect to see the three or four rate cuts the markets discounting, but I think it's safe to say that the Fed will be done after another rate high pick and we'll wait to see what the ripple effects of the banking Not crisis, but concerns we have right now how they play out. Not a crisis, Yeah,

okay TBD Brian. With all of this uncertainty that's swirling around, how are you advis clients to position in this type of environment. For our clients in particular, we are very much quality and liquidity focus that certainly will serve them well. Now we have concerns about the rising odds of a ridge session and what that may do to credit, not only to the consumer, the borrowers. But the performance of

corporate credit for our investments. One thing one I guess blessing in disguise from the spike and volatility we've seen as a deep discount and very attractive spread levels on agency issues that frankly now are yielding comparable to investment great treasuries without the same economic cyclicality exposure that our corporate credit has the same type of risk. There well, you certainly have exposure to volatility, and a little more so than you find in corporate credit when you're just

focused on market volatility. We've seen such a spight, though we've now gone back. We've exceeded the levels seen during the first quarter of twenty and twenty with COVID, and we were on par with the worst levels. The highest levels in volatility is seen in two thousand and eight, So that really has chief in those securities and made

them very attractive. And the one thing you can bet the beds obviously desire is to bring inflation under control, but to certainly do their part to establish liquidity in the markets and market function, and therefore we think it's a safe bet that market volatility won't stay at these unusually elevated levels for too long. Hey what about real estate? And I bring it up something just crossed on Twitter.

This is from the Real Deal, which follows the real estate sector, but they talk specifically about dead on Blackstone buildings forty seven percent more than the portfolio's worth. This is coming from Moodies. The rating agency downgrades the debt, setting eleven properties quote declining performance. And they're just talking about a couple of months after Blackstone secured a two hundred and seventy million dollars loan secured by eleven Manhattan

multi family buildings went to special servicing. So Moody's downgraded the CMBs debt, citing cash flow that wouldn't cover the debt service. How are you looking at real estate specifically, which we all keep wondering post pandemic, certainly here in the United States, a lot of people are still working from home. I look at a major city like New York and there are still a lot of empty buildings.

How are you looking at commercial real estate specifically? A very small portion of the universal the securities that we look at and in years past, certainly post two thousand and eight, we're very heavily invested in the evaluations were rock bottom at that point in time. I do have concern now about the elevated prices. One of the benefits are now risks that came from unusually historically low interest

rates for so long. And the real concern, frankly, is not only but downrays that have occurred to funds like black Rock, but the refire risk when these bonds come, when loans come due, whether they can underwrite them at anywhere near the same value they have before. Certainly the terms won't be as attractive, and we certainly know the interest rate levels are much higher than they have been the last three or four years. So it's a challenge. In the office space historically was one that you could

bet on. Frank they had concerns about twenty twenty. It was really a hotel space, then a man travel and leisure related but now long term effects. Certainly one of the largest subcomponents of the commercial real estate market is office space, and it's I think you'd be very selective and look more towards suburban and sunbelt properties then in downtown New York Chicago, some of the old Brian can I just ask you, is it a manageable problem in your view or maybe not, but I think it'll take

equity infusion. Certainly. I think the properties continue to come back over time. I think places like New York do have a sort of migration problem, if you will, certainly seen a number of Wall Street firms and locates on the back office in Florida and Texas. And then of the years have gone by the last two years joined by more of the sales side trading side moving out of New York, either again for tax reasons, why the reasons, certainly, and evaluations in New York and in Chicago, I think

will continue to be pressured. And there's only I think only so much conversion they con from office space into residential and the sort of teenat in Pittsburgh. But at some point they saturated the market with respect to new residential modifications to old office space. Brian, we only have about a minute left, but I want to ask you do you think the FED should raizor rates, pause or cut rates at its next meeting in May about fifty fifty. I frankly think they want to send a message of

inflation really is their first concern. They have to be in the offs are aware of what's going on. In the banking world. I do think that ultimately, whether they do or don't, the message will be relatively clear that they're done or at least on pause after the May meeting. And again, I do think that the financial conditions industries they pay attention to, they've seen now. Credit card balances have gone up, loan delinquencies have certainly be under rise,

debt to income ratios on mortgages. There is definite signs of the consumer is tapped out and have really worked through the majority of not all, of the excess income. Yeah, well feels like a sober or sober in tone. Brian, great to check in week you. Brian Allen, the director of fixed Income at Csukey Asset Management based in Pittsburgh, were joining SPASO from Jacksonville, Florida. These is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else

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