WEBVTT - Single Best Idea with Tom Keene: Michael Darda & Cam Dawson

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news, single.

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<v Speaker 2>Best idea and just a little vignette into how we

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<v Speaker 2>do the show. The dirty secret is we do the

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<v Speaker 2>show because our guests really liked come on. That is

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<v Speaker 2>the foundational thing we learned over two decades ago was

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<v Speaker 2>if you make it fun and smart, Jim Bianco will

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<v Speaker 2>get up at six am in California when he's on

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<v Speaker 2>vacation to do the show. And we really appreciate effort

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<v Speaker 2>from mister Bianco like that and from so many others.

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<v Speaker 2>Michael Darta not so strenuous this morning with Roth Capitol.

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<v Speaker 2>Michael Darta on where we are now looking at the past,

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<v Speaker 2>the good news of double digit in a new world.

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<v Speaker 3>I think it's going to be really hard to maintain

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<v Speaker 3>that double digit growth. I mean, if you just do

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<v Speaker 3>a super basic Tom Keen scatterplot regression on forward pees

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<v Speaker 3>in ten year future returns, you know, coming into the

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<v Speaker 3>year with the forward pe twenty two x, you know,

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<v Speaker 3>typically that's a level where you see very weak, potentially

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<v Speaker 3>even negative ten year forward returns. So the higher the valuations,

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<v Speaker 3>the lower the longer term forward returns are. And you

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<v Speaker 3>know that's a little bit of a different game than

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<v Speaker 3>the chase that's been on with momentum, and then more broadly,

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<v Speaker 3>I do think that these disruptions to the supply side

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<v Speaker 3>eat away at the earnings expectations.

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<v Speaker 2>Michael Dartera. There is just brilliant throughout the entire conversation

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<v Speaker 2>of talking about the geopolitical shocks, the international shocks, is

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<v Speaker 2>supply side shocks, which just put a damp or put

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<v Speaker 2>a weight on everything. And of course that mystery of

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<v Speaker 2>where is forward GDP growth right now? Is it sub

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<v Speaker 2>two percent? Atlanta GDP a negative statistic right now? That's

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<v Speaker 2>at least right now that could subject change as we

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<v Speaker 2>stagger out to March thirty one, which is next Monday.

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<v Speaker 2>Cam Dawson knows that she too is trying to consider

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<v Speaker 2>the uncertainties that are out there. Cam Dawson a new

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<v Speaker 2>edge on her double digit take.

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<v Speaker 4>Yeah, I think that that's very very likely. Is that

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<v Speaker 4>we've been in this world of very strong double digit

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<v Speaker 4>returns the last two years. Investors got conditioned to expecting that,

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<v Speaker 4>which is why you saw these estimates for seven thousand

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<v Speaker 4>plus in the S and P five hundred. That's very

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<v Speaker 4>hard to do when you start the year at twenty

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<v Speaker 4>two point six times forward earnings. You start the year

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<v Speaker 4>at the ninetieth percent tile of positioning. So our best

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<v Speaker 4>case scenario for twenty twenty five is that you get

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<v Speaker 4>growth upside that's equivalent to earnings growth. But that assumes

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<v Speaker 4>that multiple stay constant. And we're not sure if you

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<v Speaker 4>get multiple stay in constant in a world where you're

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<v Speaker 4>cutting earning sestaments and there's some risk off flavor review.

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<v Speaker 2>That again, Kim Dawson. A new edge when multiples stay constant.

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<v Speaker 2>I think I talked about this yesterday or the day before.

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<v Speaker 2>I forget, but let's do it again. A multiple is

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<v Speaker 2>a ratio, a numerator and down below a denominator, and

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<v Speaker 2>they both move. They move somewhat correlated, but also move separately.

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<v Speaker 2>So there's four outcomes. The numerator goes up, the numerator

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<v Speaker 2>goes down, the denominator, the numerator goes up, the denominator

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<v Speaker 2>goes down. So there can be movement or dynamics in

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<v Speaker 2>your study of any given ratio that you look at.

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<v Speaker 2>I'll be honest. They spend less time on PE and

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<v Speaker 2>much more on a study a free cash flow. What

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<v Speaker 2>we know is we've studied the impact of the show

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<v Speaker 2>digitally in America, in Canada, in Mexico, around the world,

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<v Speaker 2>and we're just humbled by it. Subscribe to us out

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<v Speaker 2>at Bloomberg Podcasts and on YouTube podcasts. This is a

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<v Speaker 2>single best idea m