Supply Chain, Fixed Income, CVS, and Private Credit (Podcast)

for all the supply chain stuff. But he does that for Bloomberg Intelligence. And I was just telling him, I just read this book book Everything, which is a book basically about the global container shipping business. And it was a summer beach read on the Jersey Shore because you look at these big ships off the coast of the Jersey Shore and you think about it, and it got me thinking, that's a tough business. Boy, I mean, that is a tough business. And I saw that Marsk, you know,

one of the biggest container shipping companies. They reported some numbers today. Lee, talk to us about Marsk and then help us think about where we are in this global supply chain challenge that really is a global sure shures omarics because like the number one and number two global container liner depending on the day in the month. Um. But you know, they reported great earnings and a lot of that had to do with going on their ocean business, which is really cool to what they are, and that's

been driven by really really strong contractual rates. Um. You know. What we have seen though, is that you know, we're probably at peak earnings for these kind of container liner companies and rates are gonna get a lot weaker. And the spot market rates are down around seventy eight percent year of a year, where at levels that we haven't

seen since they move a lot, don't they do. It's it's and its because it's it's a really common I mean, the liners won't tell you this, but it's a commoditized business. You know. They they ship a box from point A to point b uh, and the lower price, the lowest price, that's the new price. And so it's it happens to be a very irrational market because a lot of the players are are subsidized if you will, by uh, you know,

the country of origin of where they are. Because most of the players are the major players are based out of Asia. There's a couple of large European players that are a little more I would call them disciplined and rational when it comes to pricing. So you know, we expect like we're sailing past peak earnings. Uh, and you know next year is going to be a lot more

challenging because of that irrational behavior. There's a great chart rolling around in the Bloomber terminal somewhere the shows these container freight rates just completely making a U turn and they're now back to I want to say, pre pandemic levels are almost there. Um what happened to where in a supply chain crisis Bush, by the way, has not been fixed yet as far as I as far as I understand, So why are these freight rates coming down if there's still this premium in theory to to bring

things from abroad? Yeah, I mean it really has. It stems first and foremost from demand. So demand is off. So typically around now is what we call the peak season for freight as like retailers get ready for Christmas UH and the holidays, and as you know, a lot of like large big box retailers are complaining about their inventory is a little too high. Uh and then you have that you throw on top of that high inflation. Uh. So the you know, the consumer has been relatively uh resilient.

But the reality is is this peak season is going to be very muted. There might be a little bit of of of a benefit not for the liner industry, but maybe for the trucking industry, um, you know in December. But you know, all expectations are is the peak is pretty much a wash this year. And some of that has to do with, um, you know, the demand trends that I talked about, but also a lot of it has to do with last year. The comparables were just

off the chart. So all right, you covered not only you cover the whole transportation supply chain, if you will, the big uh ocean going ships that the railroads, the trucks, the whole thing. Let's talk about the railroads here. I get my container into a port, Um, are the rails prepared to get it to where it needs to go in a timely fashion and in a way that they can make money. Yeah? So the rails are you know, one of the one of the best businesses in my opinion,

with freight transportation. You know, they have really high margin business. I've to see the barrier's entry are pretty high. No one, no one laying down track in North America. But what the Rails they're the problems that they were facing really has to do with labor. Uh. You know, a they had a tentative agreement that wasn't ratified by two unions and there's a true there's a real risk of of of a of a strike in mid November. We think

that risk is pretty darn low. Um. And what the Rails have been doing over the last i'd say, since the depth of the pandemic, is trying to resource their networks through hiring and training new employees. And what they found is, you know, in in cycles passed, they would, uh, they would furlough their employees and they call them back up and the employees whould want to come back. But this time around, for some reason, the employers are like, yeah,

I've had enough of being a railroader. I'm gonna go work in a warehouse, or I'm gonna go do something else, or maybe I'm gonna retire early. Who knows, because you know, you know, it is a hard job. It's outside, so you're in the hundred degree heat, the zero a degree cold, UM, but you know it is is a very well paid, unionized, unionized job. Thank you, Paul coming to my rescue with the mike. UM. Some of these issues that haven't been solved yet from from the rail strike perspective that UM

that we were just talking about. I believe, correct me if I'm wrong. I think November nine, the next day that we're looking for. Um, if the kind of voting and negotiations don't fully go through, what are the ripple effects here? How bad could it get? I mean, you know the stats that I've seen, and I'm sure a lot of people have seen that are listening to this, it's it could cost the economy two billion dollars a day.

So no one wants that. I mean, the unions don't want that, the railroads don't want that, our politicians don't want that. I don't want that. UM. You know, so it will really muck up supply Chaine, just at a time when supply chains are trying to normalize, UM, and the speed of that normalization is really being driven by labor availability. And you know that's why we're you know, uh, you know, Paul, we're talking off the air before like why We're not using the R word. It is because

you know, the consumer is still pretty resilient. Um. You know, you might get a recession that is shallow uh and short, but the end of the day, you know, freight demand doesn't look terrible. Over the next twelve months, it may not be as great as it was last year, which again right reopening, it was a real, real tough comp Alright, Lee, great Stuff has always loved getting you here in our

Bloomberg Interactor broken studio. Even better to get a gold star for that, Lee Glasgow, sector head senior annalys He comes all the freight transportation logistics, think freight containers, railroads, trucks and everything uh in between. He does that for Bloomberg Intelligence to be doing that on Wall Street four decades, so we appreciate getting his insights here. All right, this is what you do or this is what I do? What I want to talk fixed income? I go, I end,

go on the Bloomberg terminal. That gets me the Bloomberg Index browser. I scrolled down to the Bloomberg u S Aggregate Total return Value unhedged index four bonds. It's a fifteen point five percent this year and fixed income nerves tell me that has never happened. So of course I feel like I got to jump in the deep end of the pool both feet and start buying. But let me check with the professional before I do that. Natalie treviorth I, head of investment grade credit Strategy of Paident

and Regal, joins us. So, Natalie, it's got to be the mother of all times to buy fixed income today? Am my writer wrong on that one? I think you're absolutely right. It's never been more attractive. The only issue is that keeps getting more and more attractive every day, so you continue to see these negative returns roll in. So what's kind of just give us as we now have you know, nine ten months of hindsight here for the fixed income market. How did we get to this

point here and how did it become like? Again, smart people like you tell me we've never seen this in fixed income before. Yeah, so we are priced for the perfection and credit at the end of two thousand and twenty one, weet very anemic credit spread, particularly in the front end of the curve. It was hard to even get half a percent and yield, and this forced some investors down the credit spectrum from investment grade down to

high yield to clos. But what we see now is really a rate driven move by all of the said hikes so far that has driven these negative returns, and I think it's gone a lot further than people were anticipating at the beginning of the year. And as we get closer to the end of the hiking cycle, it feels like investors are getting a little bit more confident about wanting to redip their toes into the fixed income market. To know, the two year at four and a half

to send is looking pretty attractive. Natalie, I love that you brought up the negative yielding debt because it really wasn't that long ago. Is only a year and year and a half ago. Now you can actually make money by having the privilege of lending to a lot of these sovereign at governments. But I have to ask, in this year and year and a half the amount of bond volatility, is that not discouraging in itself to hop

into the bond market. Yeah, that bond volatility that we've seen in spreads has been a little bit discouraging, But you would think that as the absolute yield rise as an underlying treasury rates that investors should demand a higher risk premium for dipping down from treasuries into corporate. So I mean, I look at the two year here four point five. There's no real reason to take any extra

risk by going out on the yield curve? Is there? Well, there is if you think things are going to get better and with the said is able to walk a straight of soft landing because you can get six percent by staying in pretty high quality front and investment, great corporate. So if we were to get a pause soon in the SuDS hiking cycle, and if credit spreads were to um tight and next year, you could actually get incremental positive return by taking that extra risk by moving into

credit as opposed to treasuries alone. Well, Paul brings up the two year, and if actually look at the two year in the ten year and they kind of overlay it would say the terminal rates of what five percent, which is now being priced in peak in March three, it kind of seems like there's still a long way to go when it comes to the yield. How high

can it go? Well, we think the curve can remain inverted for a while, so it wouldn't be too surprising to see the two year move up higher to that five percent, particularly, we think that that's gonna pause at this higher range. But we are seeing some investors who are anticipating cuts eventually, maybe not next year but the following year, and think locking in four percent on the ten year plus adding some credit spread on top of that is still attractive to locking longer term higher yields

rather than before the reinvesting in a couple of years. Natalie, I started my career and as a credit research guy at the Chase Manhattan Bank. Do I have to break out some of my old credit models if I'm worried about a recession here and credit quality and all that stuff. Well, the good news is credit fundamentals are still actually pretty strong. Some of the negative news that we're seen in the equity market, such as dividend cuts are slowing down a

share buybacks are actually positive for bondholders. Companies are really focused on managing their balance sheets and want to keep leverage and checked, so we don't think there's actually going to be a big downgrade wave here um as companies really want to make sure that they're maintaining their investment grade ratings. I thought we were done. We're not. Let me ask you about simply the high yield market here, there seems to be some divergence in terms of the

commodity moves and commodity forecasts. If you are perhaps forecasting a recession, a lot of these oil prices and oil contracts were the first to fall, of the first to collapse. What does that do to high yield? Yeah, we think that could be a little bit challenging for high yield, but we are not forecasting the collapse. And the energy prices we think they stay kind of in this a D range or higher, and at this level of these companies are still are still throwing off quite a bit

of free cash flow. We do think a lot of energy bonds of already priced in these um strong markets, So we think there could be some potential downside, but we don't think there's gonna be another wave of down grades like you saw immediately post the pandemic. All right, Natalie, great stuff. Really appreciate getting some of your time this morning, Natalie. Natalie Trevis, head of investment grade credit strategy at Paid and Regals. All right, let's talk technology here. You know,

we had tech earnings over the last week. Broadly defined, they were disappointing particularly have any advertising exposure. And it kind of got me thinking, is there's gonna be a little bit of a reset in this market about how the market thinks about technology. So let's bring an Anora Rana. He's a senior software I T Services animlysts for Bloomberg Intelligence, joining us here in our Bloomberg Interactive Broker studio. So you know, I think really antorwag. Since the Great Financial Crisis,

tech broadly defined has led this market higher. It's been the leader. It's had the premium valuation, the premium performance. Is that narrative? Is that changed in the last week to ten days. Yes, I think the biggest thing is way does it welcome from evaluation interview. We have seen massive spending in technology over the last five years. The pandemic spread it up, so companies were spending quite a bit on that. Then now when you see a recession on the horizon, you do pull back a little bit.

Now you pull back, you sage, you put back hardware, equipment upgrades, you pull back software. All of those things happened. But you know, one of the things we would say is our biggest thing has been in the last six months we saw no revision estimates. That was our biggest complaint going in that we have not seen any revision

of estimates. And one of the numbers I will highlight is in November of last year, when market was really at top, market was expecting let's say, for Microsoft, two thirty six billion dollars in revenue for calendar of three Tell about a month ago. Tell about I would say three weeks ago. They were still expecting that number too to be there. And I checked it last night. It's gone down to ten billion dollar reduction about a four.

So so we are seeing numbers come down now. I think this is the time when side is going to take the numbers down, and I think that's what will drive the reset. Well, if you what does what does the reset look like? Then? I mean, are we looking at valuations that are coming back to I wanna perhaps even then we were thought that tech was borderline in

a bubble. What does it look like? I would argue that now we are well below our pre pandemic levels at this point for all the technology stocks, including software, you know, Microsoft, Apple, all these companies. The thing that I do want to highlight is, let's say, for the

sake of argument. For a company like Microsoft that has grown three to five years at about fifteen six in constant currency, they're still going to grow eight to ten percent over the next twelve months too, and then the year after that when it rebound comes back, it's going to come back actually stronger, because you just cannot live without upgrading some of this stuff. So it's a pause we're going to see for the next twelve months, but you know, I'll be a very optimistic about a bounce back.

How about you know, I know the backbone of Bloomer Intelligence research is the data. We have the best data on Wall Street. We spend a lot of money for this data. And for you guys in the tech space, one of your sources, I knows I d C and they've got just kind of industry leading data as it relates to all amounts of spending across the technology stack. What are they saying over the next several years in terms of tech tech span given what we've just experienced

over the last few years. So, I mean, I've built my own mental model which I can explain, and I think I DC is, you know, somewhere plus or minus two percent on that. The way I look at it. If the if the global world is going to grow at two to three, technology spending is going to be two to three times. So that so let's say four to nine pc um in that hardware is going to be low single digits. Software is going to be ten percent plus, and service is going to be around five

to seven percent. So software is the key driver there in double digits. And and in fact, you could look at any company today's salesforce service now you will still see estimates above for this service now above, so we have a long way to go before we reach maturation in the software growth rates. What about kind of great sensitivity here? A lot of these big tech names were kind of the poster child of if the Fed hikes,

these are the first names you sell. And and although that made sense when you have these massive balance sheets and all this cash and all this liquidity, what happens now some of that cash has been deployed and the rates market is kind of peeking and kind of stalling out. Doesn't that mean that tech should be now? I would say that the day we get this news that the pivot is there, we're gonna have one hell of a

tech rally. Now, I don't know when that day. I mean, I don't know, I don't That's the thing I cannot predict. But um, that's gonna happen. I mean, it may not happen now, six months, twelve months, even longo, but that's the day we're going to have this conversation because all these companies are very resistant to any kind of a downtown and because of the work that they do. But we're already there. If you're looking at the market expectations,

they're already stalling out at five in March. And there's an argument here that that's going to create some sort of floor for the equity market. But does that mean that tech leads that, Oh, it has to there is no no other way because that has the highest beta. Those are the ones that were killed more. That's where the discount rate really, you know, completely demolished the valuations

of it. But I think, in in conjunction with what I said to Paul earlier, the revenue estimates and and and profit estimates needs to come down, and I think they started to come down. I think, you know, it could be another month or so when we see a bottom for that. I think that couple with the rates

is what drives the market. Opted all right, let's talk about Microsoft um sat Natla Nadella, I think is one of the most under believe it or not, you know, the undervalued or under recognized folks out in silicon value what he's done with that company. But I'm looking at the f A function for Microsoft and a little bit of a slow down and growth in the twenty three consensu assessments eight and a half percent, presumably bacon in some type of recession. But then you look at six

Wall Streets still predicting thirteen percent revenue growth. That's pretty darn good, is that. I would argue that it's going to be better than that, because it's going to be close to six. If I do not look at any effects headwinds at that point, we are assuming, you know, dollar cannot get stronger, you know, forever at that at

that end. But even if I was to exclude this, because we saw this during the pandemic, if you were to go look at the data during the pandemic, and we published a note on this yesterday, that cloud growth rates dipped quite a bit in the four quarters since the pandemic started, and the year after that growth rates picked up. In that cloud business, which is very unusual because the size of that business is very large. So for growth rates to accelerate, and we think that's going

the same thing is going to happen going into twenty four. Well, talking about cloud adoption here because I think, um, your colleague Man deep Thing actually talked about the fact that this is a market. I don't want to mess up the numbers here, but this is a market that has I want to like four or five, like a billion or trillion or some sort of big, big, big number, but that only a fraction of it has really been unlocked. But a lot of that is because a lot of

these companies haven't actually adopted it fully. About thirty seconds here, how long is it gonna take to adopt fully? It's it's just going to be taken a lease to decade to get dinner. So we are looking at a decade of very strong cloud growth. The growth rates will be decelerate, but but it's going to take at least to decade. All right, I don't know great stuff, appreciate it always. We let to getting the overview of the text base

and then digging down into some individual names. I guess the key issue for a lot of people, is will the tech sector continued to be a leading sector in this equity market when we get a turn upward or has that been rerated? On a Rock still feels bullish about the text space on Rock Ron senior Software and I T Services analyst for Bloomberg in intelligence. I'm gonna mis some ignorance here. C v S Healthcore, not CBS Television, which is a company I've followed forever, but CBS the

healthcare company. I did know how big this company is. I mean it's a hundred and thirty billion in market capitalization. I mean it's got like three hundred thousand employees. Uh. Just a huge company, and it's just a big, big player in the healthcare space. And I need to do some more work on this thing. But anyway, they reported some numbers today, some good numbers. There's also some news out there about an opioid uh tenant to twelve billion dollar opio a pack. So we need to get a

little bit smarter on this company. Uh, And so we asked Jonathan Palmer to come in near. Jonathan Palmer is a senior equity research analysts and team leader for the healthcare team at Bloomberg Intelligence. He's been covering the stock in this sector for decades. Here, Johnathan, give us you know again, I don't know anything about this company. What do I like? One or two sentences? What is this company? Why do I need to know more about it? Sure, Pauls,

thanks for having me on. So CBS has really transformed itself for the last two decades. I mean, traditionally it was a retail pharmacy and that's what I called a PBM to help manage drug benefits. And then a couple of years ago they purchased the big insurre at to now become this three legged stool of healthcare retail PBM insurance.

And really what they're trying to do is become, you know, a provider of healthcare services across the spectrum and and you know, come into people's home and provide them services at these retail locations. And they have a really big push lately, although they haven't executed on this plan. They want to move into primary care visa V like Amazon

and one Medical. Well, what is the difference then, I mean, in our commercial break, you're just talking about how we all kind of think of CVS is still the pharmacy business. It's evolved from from that vision. What could it turn into? Sure?

So I think their their vision is that they want to be a provider of healthcare services across the spectrum and continuum, and you know, they want to have you in their network in one form or another, whether that's in their pharmacy, you know, hopefully down the road in one of their doctor's offices and really help, uh, you know, manage that evolution of a patient's care. So they reported num Is today stock is trading up, uh IT stocks only down like four this year, so out performing the market.

Talk to us about kind of what they reported today and kind of what's the call on the stock. Yeah, so the numbers today were pretty good. There was each of the three businesses performed pretty well, a little bit above expectations. Really, the big question coming into today was, you know, what does their outer year growth profile look like. They have had a plan in place where they expected to get to double digit EPs growth by two thousand

twenty four. They've had a couple of setbacks lately. Uh they had some unfavorable rankings in their medicare plans and um More recently, they lost a big PBM contract u from one of their peers, UH Sentien, And so there was a question whether that double digit EPs targets still stood, and they released guidance this morning on a permanent guidance

on on two thousand, twenty three. Um, they're gonna be high single digit EPs growth, which is in line with what they said, and they still planned to reach that double digit target in twenty four and it might come through a couple different flavors. It might be through acquisitions, or they might be buying back a lot of stock

to get to that. I'm just looking at the f A functional on the Bloomberg terminal kind of gives you the consensus of what's out there from all the sales side UH and four it's eight point seven EPs scrolls in the streets a little bit cautious. They're also a story out today. You want to get your comment on CVS, Walmart, Walgreens reach tentative twelve billion dollar opioid pack. Give us the background here and and kind of this good news for the company. This is great news for the company.

You know, the opioid issue has been overhanging, not so much for the pharmacies but the drug distributors for really the last almost five to ten years, and they were really the first targets of these legal actions. And so the distributors settled at the beginning of this year for about twenty billion dollars between the big three three like their McKesson, Amerisource, Bergen, and Cardinal Health. And so it's interesting to think about, you know, the the d a

s and attorney generals in these various states. You know, we're going after people who could pay. And my thinking always that, well, we have CBS, we have Walgreens, we have Walmart. These are all pretty big companies in their ability to pay is there, And and now we've turned around and we've got a settlement, and so you know, I think what was an overhanging and unknown for a little while now has some clarity and visibility. And for CBS, it's five billion dollars over ten years. That's a very

manageable number. Well, you mentioned Walmart as well. Walmart is not the only company to want kind of their their foot in healthcare. We've got Amazon, We've had Berkshire Hathaway as well, JP Morgan. I think at one point, is it fair to compare CBS is kind of broader vision

to some of these um MAYA capped companies. It's interesting because I think everybody who is looking at the consumer is thinking that healthcare is there, you know, next obvious extension, and that's why you have Walmart and Amazon going there. I think CBS sees that that same vision as well, the consumer driven healthcare piece. But I think you know

where they're a little bit different. Is there a more traditional healthcare provider Visa v their PBM and ensure and they look at their peer United Healthcare, which is the biggest insurer, and how they've more moved more to become more ingrained into the healthcare system, buying practices, buying facilities, you know, really managing patient end to end. So real quicker thir thirty seconds. If we're going into a recession,

do I want to own healthcare stocks? You're asking a healthcare analysts health care of the tagline is healthcare is extremely defensive, and I mean, I think we've seen that play out in a number of recessionary environments. You know, people still get sick, they still go to the doctor, they still take drugs. You know that these are all pretty defensive sectors of the healthcare space. All right, good, stuff. Yeah, I mean, you know, Bloomberg Intelligence folks, B I go

on the terminal. If you've got a terminal in front of you, B I go, and what you're gonna get there is world class investment research, equity research, credit research, and lots lots more. And we've got people like Jonathan Palmer, each a season Wall Street anald's standing behind this research, writing this research. They have some of that this best data in the business that informs their research. So, uh, if you need to get real smart on a topic on a stock like I do on CBS, b I

go is your place to go. And we thank Jonathan Palmer. He's a senior equity research channels. He's a team leader leading our healthcare research at Bloomberg Intelligence and ed joined us here in a Bloomberg Interactive broker studio. So what does he get a gold star just talking to Shannali Bassk Bloomberg News. She covers all things Wall Street. Course she would talk on and choose down at Miami to private equity sware down there. So we're talking private equity,

private credit. Uh So our next guest fits right in their Randy Swimmer, co head of Senior Lending and senior managing director at Churchill Asset Management. They do that private credit stuff over there. So, Randy, how does your business perform in a world of rising interest rates? You're in the credit business, So senior dead is floating great instrument. So it improves let's go up, total yields go up. We've been waiting for this moment for a long long time.

But it's also less volatile because these are smaller companies. They don't trade, so it's obviously an improvement with higher rates, but it's also great for the kind of headline volatility that we've been subject to for a long time. That's also something that investors appreciate because when you look at public UH assets such as fixed income in public equities, they have been very correlated, which is not helpful. If

you're sixty forty allocated portfolio. Everything's going down together. And you've seen the other asselete classes performance here today, it's been in the red. It's it's kind of ugly. Private credit in general has been doing really well UM and so that's that's the advantage. Floating rate, less correlated, better structure, security, security, and so forth. Randy, it is FED day, Happy FAED day. UH do we see a pivot today? I don't think so.

There's been so much invested by the Fed in keeping on and and making sure that the market believes that their fight against inflation is real. Um. The data that has been coming out has been pretty bullish in terms of the economic strength. You're you're talking about GDP for the third quarter of two point six percent. That's pretty strong. Yeah, there were some export data that helped that. Job openings continue to go up. Unemployment, you know, still is low,

the labor market is tight, wages are going up. I mean you're talking about you know, I've been calling it a precession all your Well, you're welcome to you that term because yeah, thank you. UM. But because in a precession, we think that a recession is coming. Everybody's predicting something next year. But the economics right now are too strong. So your business, you tend to finance, you know, private equity deals, mid market type of deals. Give us a

kind of typical deal for Churchill Asset Management. Sure, so we have private equity sponsor relationships that come to us for UH to solve multiple of variety of solutions up and down the capital structure. So they'll come to say, hey, we're looking at a very interesting commercial landscaping business. You know,

thirty five million, but the revenues um. The great thing about commercial landscaping is in real estate, even if there's no one in the building, somebody has always got to be cutting the lawn, mowing the grass, hedge hedge clipping, by the way, different kind of hedge fund uh and and uh snow plowing. And so that's a kind of

business that is steady eddy throughout any season and any cycle. Um. And with a good sponsor that's going to put in fifty equity into the deal below you, it's an attractive investment for our investors because they're protected and then the debt itself has covenants, so if the performance deteriorates, we're

back at the table negotiating. Plus, the private equity sponsors that we deal with, they focus and specialized in defensive sectors, so healthcare, technology, business services, all of which have been doing very very well through COVID and we expect would do well during recession. So just ask this Questiontionale, but I'm gonna ask it to you is won't get your take. I believe there's a consensus that the private markets operated a little bit of a lag relative to the public markets.

If there is a reckoning in the public markets, which arguably there already has been for the past ten months of equity carnage, does that mean the private markets are due for one as well. Yeah. I don't think it's so much a lag. It's that it's operating um with with different parameters. Because these companies are private, unrated, and the debt doesn't trade, you don't see the obvious reaction.

So if you know the markets public equity markets are down, you see an instant reaction in the bond markets, for example, you don't see that. It's not that it's lagging, it's

just that it responds to different things. Because these companies are private, and the advantage of private credit, which is what the issuers and investors are seeing right now, is headline risk will go up and down, and you'll see the public equity markets, for example, go up five hundred points one day, down five the next day with no

discernible diff for instant data. The private private credit markets and private equity are much more stable, so they tend to respond more to long term changes in the economy in markets um but that makes them in this world of high voltility of very favorite asset class. Um. You know, we look at our portfolio right now, it's actually doing

really well. We have we're three hundred companies in the portfolio and and the vast majority of them are performing well in terms of revenues and earnings, again because of the sectors that they're in, which are defensive. I hear. Maybe it's just me, but it seems like over the last couple of years, I've heard more and more and more about the private credit business and how it's such a good business. Um, what's the fundraising environment out that.

I'm not sure if you guys are in a fundraising mode or not, but what's the environment out there for raising private credit capital? So we just publicly issued pressure release saying that we had raised twelve billion dollars over the last twelve eighteen months. So the fund fundraising environment for us has been very good. Um. Look right now,

investors like you all are cautious. They're looking at the signs, the kinds of signs that we talked about with the economy potential recession, and so everyone's kind of taking that extra layer of due diligence of time and thinking, hey, what's the rush to do this? Now? We're not market timers. We're basically we've been doing this, you know, close to twenty years at Churchill or the long track records successfully

over many cycles are are basically stories. Do this with us for the long run because we don't know and you don't know when the next recession is going to come. So want to you know, hit your wagon to affirm and to an asset class that is going to be here for the long run, that performs well during all the downturns. You know, we had positive returns during the

o idline crisis. Why not you know, be in that and then benefit right now to what I think is the best market and private credit for over a decade. We're seeing yield to leverage at record highs. We're seeing um structures tighter, we're seeing leverage or by a turn or more of the Badah. I actually think this is a great time to be investing, but you have to do it with someone who's been through the downturns before successfully. Well, speaking of downturns, go about thirty seconds here, when do

we see the next one? Well, we were not in the business of predicting. We have to predicts. Now. We we are always saying it's coming next year. In fact, we model a recession in every deal we do for next year. So in our investment committee, and we've got one this afternoon, I'm sure that will show we're going to be intercession next year. If it doesn't happen. My personal belief is that it's going to be a softer

recession than a harder recession. I think it's gonna be more like two thousand, two thousand one than O eight oh nine. Because the banks and the finishing systems good shape. We'll be in good shape no matter what kind of recession it is. All right, Randy, good stuff is always really appreciate. Making the long commute, oh from your office is over here to seven thirty one Lex Randy strmercoh Had of Senior Lending. He's a senior managing director Churchill

Acts Asset Management. Talking about the private credit business, and again maybe it's to me, but I've been hearing a lot more about the private credit business. It's a good business, it's attracting a lot of capital. I'm seeing more and more big names kind of get into that space. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at

Matt Miller three. On Fall Sweeney, I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio