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Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 2: my co host Matt Miller.
Speaker 1: Every business day we bring you interviews from CEOs, market pros,
Speaker 1: and Bloomberg experts, along with essential market Moven News.
Speaker 2: I'm the Bloomberg Markets podcast called Apple Podcasts or wherever
Speaker 2: you listen to podcasts, and at Bloomberg dot com Slash podcast.
Speaker 3: All right, let's talk stocks.
Speaker 2: Let's talk stocks that pay dividends, and we do that
Speaker 2: with David Bonson. He's a founder and chief investment officer
Speaker 2: at the Bonson Group.
Speaker 3: David, We've got.
Speaker 2: Probably since the last time we talked had a nice
Speaker 2: move up and rates kind of you know, and I
Speaker 2: guess the question is, you know, dividend paying stocks. How
Speaker 2: do you think about dividen paying stocks in the context of, Hey,
Speaker 2: I can sit in a two year treasury and get
Speaker 2: four point ninety six percent here.
Speaker 4: Yeah, it's a very good question. And I think that
Speaker 4: when the two year is at zero percent for fifteen years,
Speaker 4: people got a feel for what my answer is going
Speaker 4: to be. The two year is not going to stay
Speaker 4: at four point nine cents, right, And if let's say
Speaker 4: you buy it and then in two years it's still
Speaker 4: at four point nine to six, it won't be and
Speaker 4: it isn't growing. That's the issue of dividend growth is
Speaker 4: the growth. Not only do you get something that is
Speaker 4: consistently going to be at the level which you enter,
Speaker 4: it's going to grow year over year. With fixed income.
Speaker 3: They hopefully right.
Speaker 1: I mean, there have been companies like BP or Disney
Speaker 1: that have cut dividends.
Speaker 4: It would be very very important for a dividen growth
Speaker 4: manager to not allow dividen cuts to have and so
Speaker 4: in twenty five years, we've never had one, and I
Speaker 4: intend to go to the rest of my career without one.
Speaker 4: But there are certainly companies that cut dividends, and we
Speaker 4: really don't recommend people.
Speaker 5: You don't get blindsided by something like BP.
Speaker 4: I mean, yeah, BP gave plenty of forecast that what
Speaker 4: was happening. You had both President Obama and the former
Speaker 4: candidate John McCain recommending the same thing that they ring
Speaker 4: fenced twenty billion of liability damage around it. There was
Speaker 4: no way they were going to do that and keep
Speaker 4: the dividend, So it gave people months of time to
Speaker 4: sell before the dividend was cut.
Speaker 5: That's why I needed something like him, because I didn't know.
Speaker 3: I didn't know that a career maker for me was
Speaker 3: City Group.
Speaker 4: In two thousand and seven, they came out announced that
Speaker 4: they were continuing to pay the dividend. At that point,
Speaker 4: it was up to about seven percent yield.
Speaker 3: The stock was down, and.
Speaker 4: Then they borrowed eleven billion dollars from the Kuwaitis and
Speaker 4: Saudi Arabian Sovereign Wealth Fund. And I said, I don't
Speaker 4: think people taking advance on their credit card to pay
Speaker 4: a dividend counts. It has to come from free cash flow.
Speaker 4: They have to have lower leverage, you have to have
Speaker 4: a good balance sheet, you have to have a business
Speaker 4: model that leads to sustainable free cash flow. That's why
Speaker 4: we have to be actively managing.
Speaker 3: So how many names are in your portfolio right now?
Speaker 4: Thirty three names?
Speaker 5: Thirty three?
Speaker 4: I never had more than thirty five in my home.
Speaker 2: And again and you're focusing exclusively on dividend growth, right
Speaker 2: and what's how do you define what's a good policy
Speaker 2: if I'm a CFO to plan my dividends?
Speaker 6: Ash?
Speaker 2: Is it a percentage of earnings? Is a percentage free
Speaker 2: cash flow?
Speaker 3: Is it?
Speaker 7: How?
Speaker 5: Is It's interesting?
Speaker 4: Did payout ratios refer to a percentage of earnings that
Speaker 4: are paid out? But we like to look at the
Speaker 4: free cash flow and what percentage of that's being paid out.
Speaker 4: And I think most CFOs in America are used to
Speaker 4: annualizing a dividend, even if earnings or free cash flow
Speaker 4: may be somewhat lumpy throughout the year. I think it's
Speaker 4: a much better way to do it and affect their
Speaker 4: growth one time a year as opposed to kind of
Speaker 4: going up and down. We have I think three companies
Speaker 4: in the portfolio and then it's Blackstone, Apollo, and Blue Out.
Speaker 4: They're asset managers that get carry and carry is intrinsically lumpy,
Speaker 4: so they tend to pay it a little lumpier, but
Speaker 4: most just pay it in a systematic quarterly way.
Speaker 1: So you're so the ETF is TBG, the Bonson Group
Speaker 1: pretty easy to remember, and so I click TBG Equity
Speaker 1: DS into the Bloomberg and then I can click the
Speaker 1: holdings tab and I see Simon Properties as your top holding.
Speaker 5: Now, Paul and I, I don't.
Speaker 1: Know exactly what's in Simon Property's portfolio, but Paul and
Speaker 1: I talk about commercial real estate with angst and fear
Speaker 1: every day.
Speaker 4: Well, that's you're making a really bullish argument, by the way,
Speaker 4: for a contrarian investor, which is to say, a good investor.
Speaker 4: But let me explain what's going on with Simon Property.
Speaker 4: It's two hundred and seventy two of the best malls
Speaker 4: in America. They have given the keys back for four
Speaker 4: of them. They were non recourse, so they lost a
Speaker 4: little bit of equity and the lenders had to go fight. Okay,
Speaker 4: right now, they have the highest occupancy in the history
Speaker 4: of Simon Property, at the highest per foot in the
Speaker 4: history of Simon Property. The ninety six point nine percent.
Speaker 4: They've taken positions and some of the retailers that have failed,
Speaker 4: there are going to be more that fail. Now they've
Speaker 4: learned to monetize that. They took jp Jcpenny for five
Speaker 4: hundred thousand dollars a box. It was trading at twenty
Speaker 4: million a box. They're selling some to Amazon, They're reconverting
Speaker 4: some into condos and mixed use. It's this massive collection
Speaker 4: of real estate that can be repurposed, monetized into something
Speaker 4: more valuable. While they do that, we get over seven
Speaker 4: percent yield entirely covered by net operating income, and the
Speaker 4: leverage is at about forty seven percent. It was sixty
Speaker 4: five percent before the financial crisis.
Speaker 5: All right. Number two is Verizon.
Speaker 1: That makes total sense to me, obviously as a dividend play.
Speaker 1: Number three International business machine Big Blue.
Speaker 4: One of the great names people could buy.
Speaker 5: And this is an idea of a model.
Speaker 4: We like a lot. You have old businesses that don't
Speaker 4: grow a lot paying you a ton of free cash
Speaker 4: flow with new businesses that are sort of not priced
Speaker 4: in the represent a free call option. Will they become
Speaker 4: a real leader in artificial intelligence? I don't know. I
Speaker 4: think they will, but I do know this, it's not
Speaker 4: priced in the stock at all. The stock is entirely
Speaker 4: priced off a multiple of its book value of a
Speaker 4: kind of more old, stodgier businesses. But they have basically
Speaker 4: turned most of the business into software and consulting recurring revenue.
Speaker 4: So we love IBM. You get five percent dividend yield.
Speaker 4: The Red Hat acquisition was expensive, but they're monetizing it,
Speaker 4: so IBM's a great dividend grower for years to come.
Speaker 2: All Right, I'm heading down to Duke University this afternoon,
Speaker 2: and I may or may not bump into Tim Cook,
Speaker 2: CEO of Apple.
Speaker 3: If I were to get you two guys.
Speaker 2: In a room talking dividends, what would you tell him?
Speaker 4: Well, I would not tell him anything that others much
Speaker 4: smarter and more prestigious than me have not also told him,
Speaker 4: And they have failed, and so I'm sure I would fail.
Speaker 4: But what Apple's doing is shameful, and the inability to
Speaker 4: monetize that level of enterprise value I think is unacceptable.
Speaker 4: They will not do something with that two hundred billion
Speaker 4: as profitable as returning it to shareholders. They bought Doctor
Speaker 4: J's headphone company for three billion dollars. It wasn't worth
Speaker 4: nine hundred millions, soaking wet, But who cares.
Speaker 3: It's Apple.
Speaker 4: They make it in five minutes. My point is, in aggregate,
Speaker 4: you can set money on fire when you don't have
Speaker 4: an adequate shareholder return policy. They are a victim of
Speaker 4: their own success. This cannot be set as a criticism.
Speaker 4: They generate too much free cash flow to reinvest all
Speaker 4: of it. It has to be returned to shareholders. There
Speaker 4: ought to be a very large, juicy dividend coming back
Speaker 4: to shareholders. Now here's the thing. They're gonna do it.
Speaker 4: Steve Jobs wouldn't do it. Tim Cook did end up
Speaker 4: doing a small one. Yep, they grew so much the
Speaker 4: yield is now half of a percentage point. I don't
Speaker 4: know if it's in a year or ten years, but
Speaker 4: every one of these arrogant cool tech companies finds out
Speaker 4: that at some point you have a higher return on
Speaker 4: equity returning this to shareholders.
Speaker 5: So all of the.
Speaker 4: Companies from the nineties that didn't do it, Cisco, Microsoft, Qualcom,
Speaker 4: they all became great dividend growers later Apple will as well.
Speaker 5: They're just not there yet. You're gonna you said you're
Speaker 5: gonna talk to them. I'm going to talk to them,
Speaker 5: and you're going to tell them.
Speaker 2: I'm want to say, I talked to this guy, David Bonson.
Speaker 2: He has a firm, it's his firm, Yeah, in Newport Beach, California.
Speaker 8: That's the beach.
Speaker 7: Yeah.
Speaker 2: Yet he spends three weeks a month here in New York.
Speaker 2: What are you doing, my man, it's your company. It's
Speaker 2: three weeks there, maybe a week here to talk to
Speaker 2: the eggheads.
Speaker 3: In New York.
Speaker 4: I really love to work and I think you'll find
Speaker 4: the work ethic is a little more impressive in Manhattan
Speaker 4: the Newport Beach.
Speaker 2: Are there other people that do like this intensive dividend
Speaker 2: strategy that you do?
Speaker 4: There are other divnent growth managers? There are not You
Speaker 4: mentioned this ETF that is active. Most ETFs that people
Speaker 4: own in the divid and growth space are passive, and
Speaker 4: I vehemently disagree with that approach. I think it's better
Speaker 4: than nothing. But we have built quite a business around
Speaker 4: active dividend growth and it's what I built my career around.
Speaker 4: I believe in it very much.
Speaker 5: Sold us the boxing.
Speaker 1: I'm trying to get him on the ETF OQ program.
Speaker 7: Do it.
Speaker 3: I think, do a little remote out there in l.
Speaker 5: We should definitely do it from Newport Beach.
Speaker 3: No, but instead we're going downtown to lower Manhat.
Speaker 7: You're listening to the Team Ken's are Live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,
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Speaker 7: on demand wherever you get your podcasts.
Speaker 2: Disney reported numbers last night. I thought pretty good. They're
Speaker 2: cutting costs, so the stocks up. But quite frankly, folks,
Speaker 2: I've been doing this media stuff for almost thirty years.
Speaker 2: I have no idea how these companies are going to
Speaker 2: transition to this new streaming model.
Speaker 3: But that who cares because we have somebody.
Speaker 2: Who's really, really smart on this stuff, Michael Nathanson. He's
Speaker 2: a founding partner and senior research channelist Moffatt Nathanson. Michael,
Speaker 2: thanks so much for joining us here. Again, I'm like
Speaker 2: most investors like I don't know where to go with
Speaker 2: these media stocks. What did you hear from Disney last night?
Speaker 8: Well, I think what we heard from Disney that made
Speaker 8: a difference was they gave you cash flow guidance that
Speaker 8: many people feel more comfortable with the valuation, and you
Speaker 8: also heard that they're going to spend less on content
Speaker 8: going forward, and again, like it feels, and you said
Speaker 8: this before bout streaming, there is just over spending on streaming.
Speaker 8: People are throwing money at it left and right, and
Speaker 8: it feels to me that there's some rationality coming back
Speaker 8: and that Disney is going to spend less on cash
Speaker 8: content spend and that's going to basically drive free casheling.
Speaker 8: And to me, if you look at the Disney's earnings,
Speaker 8: it's essentially a parks company, So I don't want them
Speaker 8: blowing money on streaming if there's no return on capital.
Speaker 8: So I'm pretty happy with this outcome because we've been
Speaker 8: saying forever like this is a parks company and media
Speaker 8: is becoming less and less important because it's going down
Speaker 8: every day and in terms of profitability, as you know
Speaker 8: very well.
Speaker 1: So is it important to you to know whether they're
Speaker 1: in or out of streaming. A lot of people have
Speaker 1: said I want to know their strategy in regards to streaming.
Speaker 1: Netflix obviously also spends like a drunken salor on content creating,
Speaker 1: but Netflix rules the roost, right, So I mean, what's
Speaker 1: the point of spending less?
Speaker 5: Why not just be out of it.
Speaker 8: We can't at this point, they can't be out of it.
Speaker 8: They you know, their view is that Disney Plus, that
Speaker 8: Disney should have a direct relationship with consumers as they
Speaker 8: do in the theme parks, right, and the long history
Speaker 8: of media, Disney never knew it's true consumer right. It
Speaker 8: was always a third party was doing distribution. So I
Speaker 8: think Disney can't be out of it. The question is
Speaker 8: how much should Disney be in it? Right, should they
Speaker 8: be competing with Netflix or should they be a smaller,
Speaker 8: more targeted service for Disney super fans. And that's been
Speaker 8: our contention all along. You don't have to be Netflix.
Speaker 8: You have to make a Disney Plus product for your
Speaker 8: core fans. There's less of them, you can charge more money.
Speaker 8: That's probably a better business. And we've been saying that
Speaker 8: they do not be Netflix. It's not a business you
Speaker 8: want to be in it, And they're listening. I think
Speaker 8: I think they're realizing that they have a great, great
Speaker 8: business model as is, and they need to basically just
Speaker 8: make sure their fans are being nourished, you know, and
Speaker 8: not overspend when things that are not core.
Speaker 2: All right, So if they're going to be focusing on
Speaker 2: their core fans, primarily through their parks business.
Speaker 3: What do you do with all the other stuff.
Speaker 2: They've kind of got a big studio operation that kind
Speaker 2: of got a bunch of linear cable and broadcast networks.
Speaker 3: What do you do with all that stuff?
Speaker 8: Okay, well, studio is key because you think about I mean,
Speaker 8: you've known this for your studio is a way to
Speaker 8: refresh the characters in the park, like the flywheel starts YEP,
Speaker 8: with studio and IP.
Speaker 5: It has to happen.
Speaker 1: I watched Cinderella last night, by the way, with my
Speaker 1: three year old daughter, and at one point one mouse says,
Speaker 1: let's lead the sewing to the women, and I thought, oh,
Speaker 1: I should not be showing her the nineteen fifty version.
Speaker 8: Well, there's a long list of movies from that area
Speaker 8: should be showing her for that same reason. But the
Speaker 8: view is, look, we've been debating with the company openly
Speaker 8: that we don't know why ABC and ESPN need to
Speaker 8: be part of that new company, right, and the company
Speaker 8: has not really said what they want to sell. But
Speaker 8: like our theory is at the heart of Disney is
Speaker 8: the IP. Then you have consumer products and theme parks
Speaker 8: and films, but that business is worth a lot, and
Speaker 8: then the other businesses that you see from valuations of
Speaker 8: all the peers doesn't worth that much. Right, They like sports,
Speaker 8: they like ESPN. That sounds like it's staying, but like
Speaker 8: they're still open debate about what do they do with
Speaker 8: ABC or the Fox assets they bought, and that's not
Speaker 8: going to end anytime soon. But our point is being
Speaker 8: it doesn't really much matter because the core is you know,
Speaker 8: Studio Film, Disney Plus and those other assets are so
Speaker 8: lowly valued and it's not going to matter. You really
Speaker 8: need to stop the wasteful spending and streaming and focus
Speaker 8: on the core, which is what we heard last night.
Speaker 3: So another issue Michael is Bob Biger. We love him.
Speaker 3: He's been great for shareholders.
Speaker 2: He's kind of put himself in a box once again
Speaker 2: in terms of timing and succession.
Speaker 3: Anything new there?
Speaker 2: Do we read anything into this new external CFO being heard?
Speaker 3: How do you think about that?
Speaker 7: Now?
Speaker 8: Yeah, that's a good question. The CFO externally is interesting
Speaker 8: because they I don't think there's being an external CFO
Speaker 8: in twenty five thirty in a long long time. So
Speaker 8: I think that person is going to come in. You
Speaker 8: Johnson from a PEPSI don't coming to look at the
Speaker 8: cost structure. I don't see him, I don't know him,
Speaker 8: but I don't see that as an air replacement for Bob.
Speaker 8: I think the question is going to be for the
Speaker 8: new CFO where they're wasteful spending, what can he do
Speaker 8: to bring kind of a Pepsi discipline to Disney. But
Speaker 8: I still think you still have an open, an open
Speaker 8: question about who replaces Bob. It's not easy because of
Speaker 8: the diversity of operations. You know, We've been saying, look,
Speaker 8: maybe break the thing into two again, and I think
Speaker 8: if that's the case, the Parkside will rise in value
Speaker 8: in terms of the management team. But I think as
Speaker 8: the company stays as Disney that it would change the structure.
Speaker 8: It's a hard job to fill. Yeah, I don't think
Speaker 8: the new CFO is on that short list yet because
Speaker 8: he's never worked in this industry before.
Speaker 2: Sure, all right, it looks like everybody's back to work
Speaker 2: in Hollywood, first the writers and now the actors. How
Speaker 2: is this going to play out over the next several
Speaker 2: quarters in terms of production and releases and all that stuff.
Speaker 8: That's a good question. Amazed that it's been personally so
Speaker 8: long that the strike has taken so long to us
Speaker 8: all because it's been really damaging to the ecosystem. I
Speaker 8: think people get back to work in the next well
Speaker 8: Thanksgiving coming up, right, so probably December January. You probably
Speaker 8: get yourself a content slate and output that starts looking
Speaker 8: more normal by the February timeframe. But you basically just
Speaker 8: had six months of training people not to watch broadcast
Speaker 8: TV for content, you know, not to go to the
Speaker 8: theaters anything besides Barbie and Oppenheimer. I think it's just
Speaker 8: really bad. I think people do change behavior and it's
Speaker 8: hard to get them back, and so, yeah, people will
Speaker 8: be back working, but I worry about what happened on
Speaker 8: the other side of this. I really do, all.
Speaker 2: Right, Michael, I always appreciate getting a few minutes of
Speaker 2: your time some of the really, really most thoughtful research
Speaker 2: out there in my opinion on the media entertainment space.
Speaker 2: Michael Nathanson, he's a founding partner and senior research analyst
Speaker 2: with Moffatt Nathanson.
Speaker 3: Good news from Disney last night.
Speaker 2: The stock is up seven percent here today, although it's
Speaker 2: only a four percent year today, kind of reflecting a
Speaker 2: lot of investors still remain really unsure as to the
Speaker 2: trajectory for this industry as it tries to pivot from
Speaker 2: the traditional.
Speaker 3: Media model that they had all enjoyed over the.
Speaker 2: Last thirty forty years, which is you and me paying
Speaker 2: eighty hundred bucks a month to our cable company and
Speaker 2: that a lot of that flowing right to the media company.
Speaker 2: So that model is no longer in the forefront here.
Speaker 2: It's all about streaming, and there are different economics there
Speaker 2: in these companies and these investors trying to figure out
Speaker 2: how that really plays out over time. Michael Methans and
Speaker 2: really one of the top folks on the street.
Speaker 7: You're listening to The tape cats are live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 2: The market loves AI.
Speaker 3: The market loves ETFs.
Speaker 2: So let's create an ETF because it is on AI.
Speaker 2: And that's what our next guests are doing. Have done,
Speaker 2: will do? Uh, Francis oh apac CEO and head of
Speaker 2: AI E TFS for Craft Technologies A pac A lot
Speaker 2: to go there, Young Child, Director of AI Business Development
Speaker 2: and Strategic Partnerships at l g AI Research. A lot
Speaker 2: of stuff going on here, gentlemen. Thank you for joining
Speaker 2: us here in our Bloomberg Interactive broker studio. What are
Speaker 2: you guys building here? What are you guys launching off
Speaker 2: to let you guys figure it out right right?
Speaker 6: Thank you?
Speaker 9: First of all, thank you for let us sharing our stories.
Speaker 9: Then yeah, yeah, so the Craft techlounches and A and
Speaker 9: LGA Research, we just launched our latest AI powered et AF,
Speaker 9: the Taker l Q a I l Q Tuesday on
Speaker 9: the New York Sticky Change. So this one is special
Speaker 9: because so far we have in the craft we had
Speaker 9: the full et apps in n C, but this one
Speaker 9: is first ETAP that co branded one together with lg
Speaker 9: so retake and leveraging on the LGAI is their own
Speaker 9: AI model combined you so delivering to the a new
Speaker 9: altnative to entering into the Yuslaska markets.
Speaker 2: All right, so young what did you guys at LGAI Research,
Speaker 2: What do you guys do?
Speaker 3: What do you bring to the table here your model exactly?
Speaker 10: Yeah, So we basically power this product LGAI Research. Just
Speaker 10: to give you a little bit of background, we are
Speaker 10: institutional fundamental research for LG Group, which is the holdings
Speaker 10: company for LG Electronics, and we do various different researches
Speaker 10: in areas such as you know, text, image, vision, all
Speaker 10: the good stuff. And on the applied AI side, we
Speaker 10: have what's called a time series forecasting model powered by AI.
Speaker 10: So we are using this model to basically forecast the future,
Speaker 10: and that's essentially the engine that powers this ETF.
Speaker 5: So what do you put into the model?
Speaker 1: I mean, first of all, the ETF invests I'm just
Speaker 1: looking at the description page here minimum of eighty percent
Speaker 1: of its assets in US list large.
Speaker 5: Cap companies, So what like S and P companies.
Speaker 9: Yeah, you can consider these large community verses around five
Speaker 9: hundred to seven hundred names, the largest market cap in
Speaker 9: the stock exchange. And this model is all having the
Speaker 9: different models to screening out one hundred names on a
Speaker 9: four week spasis. So by the process of the screening
Speaker 9: out and the weighting we are leveraging lgised technologies.
Speaker 1: And then so young, what do you put into your
Speaker 1: model in order to forecast how these companies are going
Speaker 1: to do.
Speaker 10: Yeah. So the data inputs are macro level data, fundamental
Speaker 10: ten k's and also the most recent price data and
Speaker 10: UH there are we we take what's called a multivariate
Speaker 10: approach when it comes to the model modeling. So it's
Speaker 10: not just the single model. There are multiple multiple models
Speaker 10: that are specific to a task. So there's a forecasting process,
Speaker 10: there's a ranking process, there's a selecting process, and a
Speaker 10: waiting process and put all those things together where our
Speaker 10: goal is to find hidden alphas using deep learning models.
Speaker 3: Has this been tested yes? So and how how has
Speaker 3: the performance been so?
Speaker 10: Within within the group, we we move a lot of
Speaker 10: goods across the sea, and we have used this technology
Speaker 10: on the supply and demand forecasting side and and have
Speaker 10: seen a lot of good results on the supply chain
Speaker 10: management efficiency efforts and also on the purchasing of raw materials.
Speaker 10: So LG has a pretty big chemical business and they
Speaker 10: also purchased a lot of different raw materials such as
Speaker 10: lithium and and nafta and we UH saved a lot
Speaker 10: of money doing this UH using this AI part AH
Speaker 10: forecasting model. And now we're sort of moving into the
Speaker 10: financial markets where there's very robust and an abundant amount
Speaker 10: of data that will better sort of optimize our our
Speaker 10: forecasting abilities.
Speaker 1: I see, so you developed a model to help l
Speaker 1: G say money in its business, and then you realize
Speaker 1: that this model was also applicable to the investment space,
Speaker 1: and that's where you team up with Craft and now
Speaker 1: you have essentially one hundred names, right, but it's an
Speaker 1: active ETF, so you can move in and things in
Speaker 1: and out exactly of the right now. I see Netflix
Speaker 1: as your biggest holding. You've got Senkora, McKesson, United Health, Intel, Lily, Microsoft,
Speaker 1: these are all your top holdings and they're big, big companies,
Speaker 1: so they're going to be relatively stable.
Speaker 9: I imagine, yes, it is a letther stable, but at
Speaker 9: the same time enough active because out of the US
Speaker 9: lost k unifos, we only choosing the one hundred names
Speaker 9: in every four week spaces, so it is all our
Speaker 9: CAFT hold three hundred and fifty names. This almost will
Speaker 9: be more concentrated on hundred names too, so we are
Speaker 9: expecting the top names are we'll be in and out
Speaker 9: of the every four weeks of time.
Speaker 2: So is the LQAI is the AI ETF, which is
Speaker 2: different from your large cap etf qr FT. Yes, So
Speaker 2: is it focusing on companies that are going to benefit
Speaker 2: from AI?
Speaker 3: No, it's not. It's using AI to pick stocks exactly.
Speaker 2: Boom see all right, I'm it's all coming to me now, yeah, okay,
Speaker 2: So what does the model kind of solve for? Like,
Speaker 2: what is it it solves for? What are some of
Speaker 2: the big variables? Is a sales growth, earnings growth, revenue exactly?
Speaker 1: I mean, are you trying to look at companies like
Speaker 1: who's going to make the most money? Are you trying
Speaker 1: to look at companies you know, which consumers are gonna
Speaker 1: gonna pick this company versus that company?
Speaker 5: Or are you trying to look at you know, the
Speaker 5: stock market is going to.
Speaker 1: Rank this company highest because obviously just because a company
Speaker 1: does well doesn't mean that the stock market is going
Speaker 1: to agree that it's worth more.
Speaker 5: Right, It's it's it's really all weather.
Speaker 9: Right.
Speaker 10: So this AI agent uses neural network, which works like
Speaker 10: a human brain.
Speaker 7: Right.
Speaker 10: So if you if you think about the traditional quant
Speaker 10: approach of investing, it's a bit static, right, But on
Speaker 10: the neural network and deep learning side, the AI model
Speaker 10: chaininges in between cycles, right, so we rebalance every four weeks.
Speaker 10: Depending on the input data and the training that it
Speaker 10: goes through, it has the ability to adjust whether whether
Speaker 10: that's taking more on more risk or less risk. We
Speaker 10: have different scoring systems that does that and depending on
Speaker 10: the cycle it'll it will actively and flexibly adjust the markets.
Speaker 9: So the model is actually the first step for model
Speaker 9: is doing is predicting for a target price for the
Speaker 9: next four weeks of time. In the rebalance, I see
Speaker 9: the same time estimating for volatility of the injurer stocks.
Speaker 9: The model will generating the millions of different path is
Speaker 9: pass for the next four weeks of time. And then
Speaker 9: there's another agent, AI models all trying to find out
Speaker 9: out of millions of a possibility, what will be the
Speaker 9: most likely change at the given the time of the
Speaker 9: now casting. Then we choose the most likely one and
Speaker 9: that will be the basis of the full construction of
Speaker 9: the dismiss.
Speaker 3: Every four weeks it rebalances is our material change every four.
Speaker 9: Weeks, you're expecting on base on our the Baptist state,
Speaker 9: you are expecting around the twenty percent plus in and
Speaker 9: out of the names on every four weeks.
Speaker 3: Wow, fascinating stuff.
Speaker 5: It's only been only been active for two days.
Speaker 2: I know, yes, so l QA all right, so we
Speaker 2: want to once you to come in and maybe three
Speaker 2: to six months and tell us how performance has been.
Speaker 7: You're listening to the tape Catcher Live program Bloomberg Markets
Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune
Speaker 7: in app, Bloomberg dot Com, and the Bloomberg Business App.
Speaker 7: You can also listen live on Amazon Alexa from our
Speaker 7: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
Speaker 1: Eagle Namdar he is the founder of Naandar Realty Group,
Speaker 1: and if you know of him, it's probably because of
Speaker 1: his shopping mall purchases. Heos owns literally hundreds of shopping
Speaker 1: malls across the country. But more and more I've seen
Speaker 1: his name in among a very small list of office buyers,
Speaker 1: especially here in New York City. There's a big concern
Speaker 1: about the excess office inventory that we have and the
Speaker 1: difficulty of repurposing it for anything else. Abigail Doolittle joins
Speaker 1: us as well, because Abigail, you've been talking to EGO
Speaker 1: about this market. Ego, what well, first of all, thanks
Speaker 1: for coming in. What do you think about this this
Speaker 1: office market? What would lead you to buy here when
Speaker 1: it seems like, to use a very cliched phrase, it
Speaker 1: would be an attempt at catching falling knives.
Speaker 8: Yeah.
Speaker 6: Well, for for the first thing, I'll tell you that
Speaker 6: as my philosophy into investments, were like a contrarian investor,
Speaker 6: and we kind of like always buy when everyone's selling,
Speaker 6: and we sell when everyone's buying. So that's our model.
Speaker 6: I agree that this is a right now. There's a
Speaker 6: lot going on in the office market, and I think
Speaker 6: that there will be a recovery. I'm not sure exactly
Speaker 6: if we'll ever go back to pre COVID occupancies, but
Speaker 6: my thoughts are, if you can buy office buildings, avenue buildings,
Speaker 6: corner great light and air, prime sub markets, locations, high
Speaker 6: quality stuff, maybe A or a minus, there's going to
Speaker 6: be a flight to quality where a lot of the B,
Speaker 6: C and D office buildings will probably have to be repurposed.
Speaker 6: And so between the contraction of all that office space
Speaker 6: and being able to people have to move to different buildings.
Speaker 6: As events come down, you start seeing a lot of
Speaker 6: people shifting from different buildings. Between that and hopefully more
Speaker 6: people coming back to the office. It's more big corporations
Speaker 6: will have their employees come back. We think it will
Speaker 6: come back, but I think that.
Speaker 5: But let me just to get it straight.
Speaker 1: Are you buying the AA minus buildings or are you
Speaker 1: looking lower down the ladder in terms of office, And
Speaker 1: then what are you paying compared to what the prices
Speaker 1: were pre pandemic.
Speaker 6: So I would say our first entry into office was
Speaker 6: intoenty twenty and at that point we were buying asset
Speaker 6: and asset that was priced at eight hundred and we
Speaker 6: bought it for four hundred. It was not an a
Speaker 6: it was a great location. But as time goes by,
Speaker 6: we think things have gotten worse since twenty twenty and
Speaker 6: twenty one, and now our focus is more into the
Speaker 6: better quality assets. And of course we want to buy
Speaker 6: it at a steep discount, but you also don't want
Speaker 6: to buy something that's never going to turn around because
Speaker 6: you can get a big discount, and if it's never
Speaker 6: going to turn around as an office, then no matter
Speaker 6: what you paid between your carry and what will the
Speaker 6: time you have to put in it won't be worthwhile.
Speaker 6: So our focus now is the better quality assets. Like
Speaker 6: I said, Avenue Corners and hopefully that's going.
Speaker 11: To rebound so you got you know, your philosophy sound
Speaker 11: a little bit like Warren Buffett when you're saying basically
Speaker 11: that you like to buy when everybody else is running.
Speaker 11: He has a pretty famous statement that the time to
Speaker 11: be greedy is when everybody else is fearful, and be
Speaker 11: fearful when everybody else is greedy. And we talked, you said,
Speaker 11: we said that what you basically just said that you
Speaker 11: make your money where you buy it. So how many
Speaker 11: properties have you bought so far? And in terms of
Speaker 11: the opportunity ahead, one point five trillion of CMBs is
Speaker 11: coming due by the end of twenty twenty five. You know,
Speaker 11: when you put that together with the fact that here
Speaker 11: in New York, working from home, you know the vacancy rates.
Speaker 11: And then we had a conversation with another office investor
Speaker 11: a number of weeks ago. We're talking about the value
Speaker 11: of Third Avenue. He wasn't willing to put a price
Speaker 11: on it because I didn't think he wanted to sell
Speaker 11: out his friends so much. But you basically just said
Speaker 11: that there was a fifty percent haircut on that building.
Speaker 11: From a broad perspective, if you had to give not
Speaker 11: Class A and trophy, what's the opportunity ahead and for
Speaker 11: how long. I guess here in New York.
Speaker 6: I think if you take out the A assets and
Speaker 6: focus on the bn de cs, there will be a tremendous.
Speaker 11: There has been a bit more than fifty percent down.
Speaker 6: Yes, some assets are down seventy percent.
Speaker 11: That's what I've been hearing. On Third Avenue, somebody was
Speaker 11: saying that it's like twenty five cents on the dollar.
Speaker 6: Yeah, Third Avenue, carridor that area in the midtown that's
Speaker 6: been hit the most.
Speaker 11: They have a lot of space, and so are there
Speaker 11: a lot of other investors like you? I mean, I
Speaker 11: guess it's probably for the people who have the money
Speaker 11: and who have the ability to model it out. It's
Speaker 11: a great opportunity. Really, yeah, we just for other.
Speaker 6: People, but absolutely so. I'm not an institution. It's all
Speaker 6: my own family money, so it's all sweat equity. So
Speaker 6: I really pay attention and I analyze deals and I
Speaker 6: look at the downside, and I think, like you said,
Speaker 6: the money is made in real estate on your purchase
Speaker 6: and if you can buy good assets at a good
Speaker 6: discount and you just have patient capital to wait for
Speaker 6: market to turn around, and hopefully I think the rates
Speaker 6: have a lot to do with it, because once the
Speaker 6: rates hopefully will go down, then you're going to see
Speaker 6: the asset values hopefully increasing.
Speaker 3: Well, do rates have to go down?
Speaker 1: Like if we're in a new normal and rates are
Speaker 1: going to stay where they are and Japowell is going
Speaker 1: to actually stick by higher for longer, at what point
Speaker 1: does that cause any break?
Speaker 6: Well, I mean the rates. My own humble opinion is
Speaker 6: they would have to go down in the future. It's
Speaker 6: just I don't know if they will be back to
Speaker 6: zero rates. I think it would be somewhere in between
Speaker 6: the five and a quarter that was raised and what
Speaker 6: it was before that. But I can't see the rates
Speaker 6: never going down. I mean home mortgages where people are
Speaker 6: paying to some percent another at seven percent. How could
Speaker 6: the average person survive with a five percent increase in
Speaker 6: the rates?
Speaker 11: I mean is called the nineteen eighties, Yeah, and eighties.
Speaker 11: You know something that we talked about also is so you,
Speaker 11: of course are known as a big distressed mall investor
Speaker 11: based on some of my work. You're known as one
Speaker 11: of the two big mall distressed investors. And you told
Speaker 11: me that people know when they have to sell something
Speaker 11: quickly without due diligence and turn around. That you are
Speaker 11: known as somebody who can do a cash deal pretty quickly.
Speaker 11: But you were saying that for some of these properties
Speaker 11: that don't work out that you sometimes will then build,
Speaker 11: you know, tear the building down and read development. But
Speaker 11: that right now, because rates are so high, it's really
Speaker 11: hard to do construction. So what does that piece of
Speaker 11: your business look like.
Speaker 6: So regarding our mall business, I wouldn't say we're focused
Speaker 6: in distressed malls. I think we're focused on distressed loans,
Speaker 6: which are over leveraged. Our best purchases are maturity default
Speaker 6: loans that the assets are on their own doing well,
Speaker 6: but there's just too much data on it and the
Speaker 6: owner can't refinance unless they put a ton of equity. Therefore,
Speaker 6: the lenders are taking them back and they just want
Speaker 6: it off their books. And again the opportunity to buy
Speaker 6: at the right basis we go in there. So we're
Speaker 6: focused on having that, and our main focus on our
Speaker 6: malls is to keep them as malls because we believe
Speaker 6: there's a future for brick and mortar. And in some
Speaker 6: events where obviously do some malls do go down, then
Speaker 6: we look at that as a redevelopment into something else.
Speaker 6: And in our case, since we have patient capital, if
Speaker 6: we have to wait a little longer for the rates
Speaker 6: to go down, or find the right av partner to
Speaker 6: come and join us, or potentially sell it to another group,
Speaker 6: and then we do that.
Speaker 1: But you in malls, at least as far as I broad,
Speaker 1: you haven't been focused on the higher end properties.
Speaker 5: Right.
Speaker 1: It seems like you have a slightly different strategy in
Speaker 1: New York office than you do in your big mall business.
Speaker 8: So in.
Speaker 6: The mall business, again, when we started back in twenty twelve,
Speaker 6: we didn't know much about it. We were buying the
Speaker 6: c's ent ds as it categorized it. But I would
Speaker 6: say in the last four or five years, our strength
Speaker 6: is really B market.
Speaker 3: A malls are just overpriced.
Speaker 9: And it's just it's just not what we do.
Speaker 6: But our focus is more towards that B. Maybe maybe
Speaker 6: it's the best mall in in a smaller market. Maybe
Speaker 6: it's just you know, second mall in town. But we
Speaker 6: look at their sales and the health ratios of tenants,
Speaker 6: and we look at occupancy and kind of project out.
Speaker 6: You know, we want to buy assets that we feel
Speaker 6: have a longer, long term, you know, potential for to
Speaker 6: stay at some wall.
Speaker 1: All right, well, we're gonna talk to you on Bloomberg
Speaker 1: TV in just about an hour's time, so I'm really
Speaker 1: looking forward to that.
Speaker 5: Appreciate you coming in. And Abigail do a little as well.
Speaker 1: Abigail do little there, and Eagle Namdar, he's the founder
Speaker 1: of the Namdar Realty Group, talking to us about New
Speaker 1: York office. Thanks for listening to the Bloomberg Markets podcast.
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
Speaker 1: on Twitter at Matt Miller nineteen seventy three. And I'm
Speaker 1: Fall Sweeney. I'm on Twitter at pt Sweeney.
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