1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,560 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,319 Speaker 1: at Bloomberg dot com slash podcast. We are gonna be 7 00:00:22,400 --> 00:00:26,240 Speaker 1: joined right now by Rich Ferrarro, chief communications officer for GLAD, 8 00:00:26,280 --> 00:00:29,160 Speaker 1: the Gay and Lesbian Alliance Against Defamation. I know it's 9 00:00:29,200 --> 00:00:32,720 Speaker 1: Pride Week in New York, and I think it's Pride 10 00:00:32,720 --> 00:00:35,480 Speaker 1: month generally. We have UH flags all over the place. 11 00:00:35,520 --> 00:00:38,400 Speaker 1: I've got a lapel pin that I was given um 12 00:00:38,479 --> 00:00:43,240 Speaker 1: a couple of weeks ago, and visibility is just huge here. Um. 13 00:00:43,280 --> 00:00:46,440 Speaker 1: I think that not only on Wall Street, and not 14 00:00:46,520 --> 00:00:49,040 Speaker 1: only on the coast, but really across the middle of 15 00:00:49,080 --> 00:00:51,760 Speaker 1: the country and now on to at least this continent 16 00:00:52,159 --> 00:00:56,240 Speaker 1: here in Europe, people are really recognizing and selling and 17 00:00:56,320 --> 00:01:00,560 Speaker 1: celebrating gay pride. Rich Um, am I wrong in that 18 00:01:00,680 --> 00:01:04,480 Speaker 1: this has become just just a massive event? Um? Is it? 19 00:01:04,640 --> 00:01:09,160 Speaker 1: Is it completely Uh? I don't want to say completely accepted, 20 00:01:09,200 --> 00:01:12,080 Speaker 1: but is it is it celebrated now by a majority 21 00:01:12,160 --> 00:01:15,920 Speaker 1: of the people across the Western world. Yeah, we've definitely 22 00:01:15,920 --> 00:01:20,520 Speaker 1: seen lgbt Q acceptance grow over recent years. You can see, uh, 23 00:01:20,600 --> 00:01:23,840 Speaker 1: the NFL player Karl from the Las Vegas Raiders, as 24 00:01:23,840 --> 00:01:26,559 Speaker 1: he came out earlier this week, there wasn't a backlash 25 00:01:27,160 --> 00:01:30,280 Speaker 1: from his teammates or from the NFL. There was acceptance 26 00:01:30,600 --> 00:01:32,880 Speaker 1: and that's a great Everybody wanted to buy the jersey 27 00:01:33,120 --> 00:01:37,280 Speaker 1: right best selling jersey this week. That was great news UM, 28 00:01:37,720 --> 00:01:39,920 Speaker 1: and I think pride is that moment when you see 29 00:01:39,959 --> 00:01:43,080 Speaker 1: the community stand up and be very visible throughout the year, 30 00:01:43,200 --> 00:01:45,360 Speaker 1: but you also see our allies stand up. And what's 31 00:01:45,400 --> 00:01:48,240 Speaker 1: great about UM this year as we're seeing allies from 32 00:01:48,360 --> 00:01:52,440 Speaker 1: all areas of business, whether it's financial or B two 33 00:01:52,480 --> 00:01:55,560 Speaker 1: C companies, UM companies are stepping up, and I think 34 00:01:55,600 --> 00:01:58,280 Speaker 1: that's because not only our community expects to see that, 35 00:01:58,520 --> 00:02:01,600 Speaker 1: but the allies of our community expect to see brands 36 00:02:01,680 --> 00:02:05,520 Speaker 1: that UM stand with and for LGBTQ people. Yeah. Rich, 37 00:02:05,520 --> 00:02:07,120 Speaker 1: that's kind of where I wanted to go. I've spent 38 00:02:07,200 --> 00:02:10,320 Speaker 1: my career studying the media industry, so I'm fascinating by 39 00:02:10,400 --> 00:02:13,799 Speaker 1: your visibility project that you launch with Procter and Gamble 40 00:02:14,200 --> 00:02:17,920 Speaker 1: looking at advertising and marketing towards this community. What are 41 00:02:17,960 --> 00:02:20,720 Speaker 1: some of the big findings you guys had. Yeah, and 42 00:02:21,040 --> 00:02:23,400 Speaker 1: so I've been with GLAD since two thousand and eight, 43 00:02:23,440 --> 00:02:26,480 Speaker 1: and GLAD does a lot of work creating public campaigns 44 00:02:26,520 --> 00:02:28,560 Speaker 1: for ways people could take action, but most of our 45 00:02:28,560 --> 00:02:31,880 Speaker 1: workers behind the scenes with media companies, with Hollywood and 46 00:02:32,240 --> 00:02:35,480 Speaker 1: more and more, with brands and advertisers to leverage that 47 00:02:35,560 --> 00:02:38,800 Speaker 1: reach of media and the power of media to affect change, 48 00:02:38,840 --> 00:02:41,040 Speaker 1: to tell the stories that are going to create a difference. 49 00:02:41,320 --> 00:02:44,040 Speaker 1: And with Procter and Gamble, the world's largest advertiser, We've 50 00:02:44,080 --> 00:02:45,840 Speaker 1: been working with them for the last few years, and 51 00:02:46,280 --> 00:02:49,840 Speaker 1: UM last month launched the Visibility projects because they've stepped 52 00:02:49,880 --> 00:02:52,679 Speaker 1: up as a corporate allied to LGBTQ people to say 53 00:02:52,680 --> 00:02:56,200 Speaker 1: we want to create resources for the advertising industry and 54 00:02:56,240 --> 00:02:59,240 Speaker 1: for brands to get lgbt Q inclusion. Right when I 55 00:02:59,240 --> 00:03:01,440 Speaker 1: started a Glass, there was a lot of hesitation from 56 00:03:01,440 --> 00:03:05,440 Speaker 1: brands to include gay dads in in an ad or 57 00:03:05,480 --> 00:03:09,400 Speaker 1: to include LGBTQ people in public communications because people brands 58 00:03:09,400 --> 00:03:13,520 Speaker 1: were worried about an anti lgbt Q backlash. This year, 59 00:03:14,120 --> 00:03:16,520 Speaker 1: we released research with Proctor and Gamble that found that 60 00:03:17,320 --> 00:03:21,639 Speaker 1: we we surveyed brand executives and exacts at ad agencies 61 00:03:21,919 --> 00:03:24,520 Speaker 1: and found that the exects were not worried about that 62 00:03:24,600 --> 00:03:27,920 Speaker 1: anti lgbt Q backlash. They were worried about the community 63 00:03:28,040 --> 00:03:32,320 Speaker 1: seeing their um, their campaigns, and their ads as authentic. 64 00:03:32,400 --> 00:03:34,960 Speaker 1: So with Procter and Gamble, we said, let's create some resources. 65 00:03:35,000 --> 00:03:38,640 Speaker 1: Because advertising is very powerful and reaches people that need 66 00:03:38,720 --> 00:03:41,760 Speaker 1: to see LGBTQ people and here our stories. That's the 67 00:03:41,800 --> 00:03:44,720 Speaker 1: power of brands and ads. But let's create create some 68 00:03:44,840 --> 00:03:47,960 Speaker 1: resources and best practices to do it right. Bottom line 69 00:03:48,000 --> 00:03:51,960 Speaker 1: is you've got really a tail wind here in two 70 00:03:51,960 --> 00:03:54,920 Speaker 1: thousand Where are we two thousand twenty one? But glad 71 00:03:55,000 --> 00:03:58,200 Speaker 1: was found because the New York Post and really a 72 00:03:58,240 --> 00:04:02,240 Speaker 1: lot of media had to samatory ins and stationalized h 73 00:04:02,240 --> 00:04:05,400 Speaker 1: IVY and AIDS coverage. What are the biggest problems that 74 00:04:05,440 --> 00:04:10,840 Speaker 1: you're fighting today, Rich Um, biggest problems right now? So 75 00:04:10,920 --> 00:04:13,720 Speaker 1: our our team is exhausted this year because we have 76 00:04:13,840 --> 00:04:17,960 Speaker 1: been battling back against over two hundred anti LGBTQ pieces 77 00:04:17,960 --> 00:04:22,000 Speaker 1: of legislation introduced just this year in states around the country. 78 00:04:22,160 --> 00:04:26,600 Speaker 1: Eight states moved to ban transgender youth from participating in sports, 79 00:04:26,680 --> 00:04:31,040 Speaker 1: even though every leading medical association said that was not necessary, 80 00:04:31,080 --> 00:04:34,839 Speaker 1: and teachers groups and brands also spoke out against those 81 00:04:34,880 --> 00:04:37,159 Speaker 1: bills as well. And then our community has been pushing 82 00:04:37,160 --> 00:04:40,800 Speaker 1: for decades for the Equality Act, which is now installed 83 00:04:40,839 --> 00:04:44,000 Speaker 1: in the Senate, largely because of the filibuster. The Equality 84 00:04:44,040 --> 00:04:48,280 Speaker 1: Act would write non discrimination um and protect LGBTQ people 85 00:04:48,320 --> 00:04:51,440 Speaker 1: against discrimination on a federal level. Right now, there's this 86 00:04:51,560 --> 00:04:55,320 Speaker 1: patchwork of laws around the country that determine whether or 87 00:04:55,400 --> 00:04:57,640 Speaker 1: not we can be served a piece of cake, whether 88 00:04:57,720 --> 00:05:00,320 Speaker 1: or not our families can be turned to way from 89 00:05:00,320 --> 00:05:02,320 Speaker 1: a doctor just because of who we are. And we 90 00:05:02,400 --> 00:05:07,200 Speaker 1: need that Equality Act to create one non discrimination law 91 00:05:07,279 --> 00:05:09,920 Speaker 1: on a federal level. And Rich, thanks so much for 92 00:05:10,040 --> 00:05:12,160 Speaker 1: taking the time to join us. We really appreciate getting 93 00:05:12,200 --> 00:05:14,960 Speaker 1: your thoughts. Rich Ferraro, he's the chief communications officer for 94 00:05:15,040 --> 00:05:18,359 Speaker 1: GLAD that's a gay and Lesbian Alliance against a defamation 95 00:05:18,480 --> 00:05:20,800 Speaker 1: doing some important work there and as he said, kind 96 00:05:20,839 --> 00:05:25,320 Speaker 1: of exhausting year dealing with the various legislations across various 97 00:05:25,400 --> 00:05:28,040 Speaker 1: states here, but it's good to get some time from rich. 98 00:05:31,800 --> 00:05:35,719 Speaker 1: Really rich people in America don't have to pay taxes, 99 00:05:35,800 --> 00:05:38,520 Speaker 1: they figure their way out of it usually, but those 100 00:05:38,560 --> 00:05:40,320 Speaker 1: of us in the middle class end up working for 101 00:05:40,440 --> 00:05:43,920 Speaker 1: Uncle Sam pretty much half the year. That's why Congress 102 00:05:43,960 --> 00:05:46,800 Speaker 1: gave us the roth I r A. It allows us 103 00:05:47,320 --> 00:05:49,640 Speaker 1: a little bit of a break when the taxman cometh, 104 00:05:49,839 --> 00:05:54,080 Speaker 1: and poor people like Peter Thiel have figured out a 105 00:05:54,200 --> 00:05:56,400 Speaker 1: great way to use it. Let's bring in Ben Steberman 106 00:05:56,520 --> 00:06:01,360 Speaker 1: right now. Personal finance reporter Fort Bloomberg News. Um, poor 107 00:06:01,480 --> 00:06:06,360 Speaker 1: Peter put some worthless shares in his roth IRA and 108 00:06:06,480 --> 00:06:08,320 Speaker 1: now he's got a little bit of a nest egg 109 00:06:08,360 --> 00:06:12,120 Speaker 1: a Ben. Yeah, it's it's it's it's a it's a 110 00:06:12,279 --> 00:06:16,719 Speaker 1: small one. Um. Yeah, he he really has has seems 111 00:06:16,720 --> 00:06:18,919 Speaker 1: to have played the system here. Um. You know, Pro 112 00:06:19,040 --> 00:06:21,880 Speaker 1: Publica got these tax records, so they're able to tell 113 00:06:21,960 --> 00:06:25,560 Speaker 1: this story that stretches back to when PayPal was a 114 00:06:25,640 --> 00:06:29,280 Speaker 1: privately a private company. It was a startup, and what 115 00:06:29,440 --> 00:06:33,000 Speaker 1: Peter Field did was take a less than two million, 116 00:06:33,080 --> 00:06:37,000 Speaker 1: almost two million shares of that private company. They were 117 00:06:37,120 --> 00:06:40,200 Speaker 1: valued to just a tenth of a cent at that time, 118 00:06:40,440 --> 00:06:42,400 Speaker 1: and he was able to put them in an IRA 119 00:06:42,640 --> 00:06:45,040 Speaker 1: and say, oh, it's only you know, less than two 120 00:06:45,080 --> 00:06:47,600 Speaker 1: thousand dollars which was a contribution limit at that time 121 00:06:48,000 --> 00:06:50,040 Speaker 1: less than two thousand dollars. It's this legal, I can 122 00:06:50,080 --> 00:06:53,400 Speaker 1: put this money into it a roth ira um. The 123 00:06:53,520 --> 00:06:58,160 Speaker 1: next year, the value of those share sword um to 124 00:06:58,480 --> 00:07:02,360 Speaker 1: like four million. I get. Some observers would say they 125 00:07:02,400 --> 00:07:04,599 Speaker 1: were always worth more than that. This is an artificially 126 00:07:04,720 --> 00:07:08,440 Speaker 1: low valuation he was using. And now he he sort 127 00:07:08,480 --> 00:07:13,240 Speaker 1: of moved that those investments from from PayPal, which paid 128 00:07:13,280 --> 00:07:17,760 Speaker 1: off handsomely, and then into Facebook, and then into palent 129 00:07:17,880 --> 00:07:22,040 Speaker 1: here and into all these other investorsments that he's gotten 130 00:07:22,160 --> 00:07:24,920 Speaker 1: rich on, and he now has this five billion dollar 131 00:07:25,040 --> 00:07:28,080 Speaker 1: pool of money that he never has to pay taxes on. Wow. 132 00:07:28,160 --> 00:07:29,920 Speaker 1: I was looking at my I RAS and four one 133 00:07:30,000 --> 00:07:33,400 Speaker 1: case recently and feeling pretty good about myself until I 134 00:07:33,440 --> 00:07:36,080 Speaker 1: saw your story. Ben. I'm like, all right, Peter Teal's 135 00:07:36,120 --> 00:07:38,280 Speaker 1: got me be here. When I first read your story, Ben, 136 00:07:38,400 --> 00:07:40,600 Speaker 1: I said, all right, there's a scam here. This is 137 00:07:40,680 --> 00:07:42,160 Speaker 1: something that the I R S is going to have 138 00:07:42,240 --> 00:07:44,800 Speaker 1: to take a look at. But in reality, it doesn't 139 00:07:44,840 --> 00:07:48,480 Speaker 1: seem like he did anything wrong. Umber the valuation. I 140 00:07:48,520 --> 00:07:50,600 Speaker 1: want to point out, Ben, it wasn't the tenth of 141 00:07:50,640 --> 00:07:54,840 Speaker 1: a cent those PayPal shares were valued at one one 142 00:07:55,000 --> 00:08:00,400 Speaker 1: thousand of assent um. So the question is was that 143 00:08:00,520 --> 00:08:04,440 Speaker 1: a fair valuation for the one point seven million shares 144 00:08:05,080 --> 00:08:08,000 Speaker 1: of PayPal that he put into his wrath R I 145 00:08:08,240 --> 00:08:10,400 Speaker 1: R A and a reminder to listeners, I mean, we 146 00:08:10,520 --> 00:08:14,640 Speaker 1: all know, sadly, because it's so painful, you can contribute 147 00:08:14,680 --> 00:08:17,480 Speaker 1: at most two thousand dollars a year to this vehicle. 148 00:08:19,920 --> 00:08:23,559 Speaker 1: The PayPal was already getting going at this point. Deel 149 00:08:23,600 --> 00:08:27,560 Speaker 1: head Um are already lent. He'd lent like a hundred 150 00:08:27,600 --> 00:08:30,840 Speaker 1: thousand dollars to start up. It's hard to believe that 151 00:08:31,000 --> 00:08:33,959 Speaker 1: that that was what the shares were worth, given the 152 00:08:34,080 --> 00:08:36,440 Speaker 1: fact that you know, just a few months later they 153 00:08:36,480 --> 00:08:39,880 Speaker 1: attracted a bunch of investors. I think the value the 154 00:08:39,960 --> 00:08:42,640 Speaker 1: firm at millions of dollars. So so yet that is 155 00:08:42,800 --> 00:08:46,120 Speaker 1: the part that's a little fishy. The problem is that um, 156 00:08:46,200 --> 00:08:49,280 Speaker 1: the I R S just doesn't have hasn't had the 157 00:08:49,360 --> 00:08:53,040 Speaker 1: resources to go in and and argue with rich people 158 00:08:53,040 --> 00:08:55,679 Speaker 1: about what the valuations of these things should be, so 159 00:08:55,920 --> 00:08:58,920 Speaker 1: that they're just completely outgunned and they just just don't 160 00:08:58,920 --> 00:09:02,760 Speaker 1: have the resources. So is this something that the I 161 00:09:02,960 --> 00:09:05,720 Speaker 1: R S is looking at? I mean, again, it seems 162 00:09:05,720 --> 00:09:09,120 Speaker 1: like a one off. It seems like a good trade. 163 00:09:09,320 --> 00:09:13,520 Speaker 1: I mean, what are you hearing from the I R S. Well, 164 00:09:14,480 --> 00:09:18,840 Speaker 1: there is, um the I R S has limited tools, 165 00:09:18,920 --> 00:09:20,559 Speaker 1: Like I think the I R S has started to 166 00:09:20,720 --> 00:09:24,360 Speaker 1: track this more at least and figure out exactly how many. 167 00:09:25,080 --> 00:09:28,720 Speaker 1: Like six seven years ago, they had no idea how 168 00:09:28,840 --> 00:09:31,160 Speaker 1: many of these accounts were out there. Now they actually 169 00:09:31,200 --> 00:09:34,720 Speaker 1: have some rewarding requirements. So so they've they've They've started 170 00:09:34,760 --> 00:09:38,760 Speaker 1: to compile some data. What what the real forum that 171 00:09:38,840 --> 00:09:42,280 Speaker 1: I'm watching is Congress, because um, there's a chance that 172 00:09:42,440 --> 00:09:45,920 Speaker 1: Congress could um try to rein these in by saying 173 00:09:46,160 --> 00:09:49,079 Speaker 1: okay over a certain limit, a roth Ira is no 174 00:09:49,200 --> 00:09:52,599 Speaker 1: longer no longer avoids taxes and tries to force some 175 00:09:52,720 --> 00:09:55,640 Speaker 1: of these back onto the tax books. I just want 176 00:09:55,679 --> 00:09:58,760 Speaker 1: to point out, Ben, if you uptake this story. So 177 00:09:59,400 --> 00:10:03,280 Speaker 1: uh So, Peter Teal partnered with others to start PayPal. 178 00:10:03,400 --> 00:10:06,000 Speaker 1: Elon Musk was one of those others, right, And I 179 00:10:06,120 --> 00:10:10,040 Speaker 1: remember back in this is when they were valuing the 180 00:10:10,120 --> 00:10:15,040 Speaker 1: shares at a cent. Elon Musk bought a million dollar 181 00:10:15,200 --> 00:10:19,400 Speaker 1: McLaren F one supercar at the time with his with 182 00:10:19,559 --> 00:10:22,559 Speaker 1: his PayPal riches, So there were already some people that 183 00:10:22,679 --> 00:10:25,760 Speaker 1: were giving the business a fair value because there were 184 00:10:25,800 --> 00:10:27,959 Speaker 1: only sixty two of those cars in the world and 185 00:10:28,280 --> 00:10:30,880 Speaker 1: he got one somehow. You knew that, Matt. Yeah, you 186 00:10:31,040 --> 00:10:33,599 Speaker 1: tell everything to that, McLaren. All right, Ben, thanks so 187 00:10:33,720 --> 00:10:36,640 Speaker 1: much for that. We appreciated. Ben Stephen, personal finance editor 188 00:10:36,720 --> 00:10:41,920 Speaker 1: for Bloomberg Musical. Alright, Matt, let's talk technology here. We 189 00:10:42,000 --> 00:10:43,840 Speaker 1: know we've it's kind of gotten a little bit under 190 00:10:43,840 --> 00:10:45,880 Speaker 1: the radar in terms of performance as people have been 191 00:10:45,960 --> 00:10:49,000 Speaker 1: rotating into some of the cyclical names on the reopening. 192 00:10:49,120 --> 00:10:51,240 Speaker 1: But for me, for I kind of feel like you 193 00:10:51,320 --> 00:10:53,600 Speaker 1: can't take your eye off the technology ball because that's 194 00:10:53,640 --> 00:10:57,520 Speaker 1: the long term future in our next guest is an expert. 195 00:10:57,600 --> 00:11:00,360 Speaker 1: Why do I say expert? Is I remember this guest 196 00:11:00,400 --> 00:11:02,800 Speaker 1: when she was a young analyst as I was back 197 00:11:02,880 --> 00:11:05,280 Speaker 1: at Pain Webber way back in the day. We're talking 198 00:11:05,320 --> 00:11:08,000 Speaker 1: to eighties man, So we go way back. Erica Clark 199 00:11:08,080 --> 00:11:12,040 Speaker 1: Technology Equity portfolio manager Jennison Associates, one of the best 200 00:11:12,120 --> 00:11:14,160 Speaker 1: firms on the street for a long time. Erica, thanks 201 00:11:14,160 --> 00:11:16,439 Speaker 1: so much for joining us here. Um, I know you 202 00:11:16,480 --> 00:11:19,000 Speaker 1: don't remember, but again, we started way back in today 203 00:11:19,000 --> 00:11:21,439 Speaker 1: at Pain Webber you were doing technology there, I was 204 00:11:21,520 --> 00:11:26,240 Speaker 1: doing actually transportation, but Paul was wearing suspenders with slicked 205 00:11:26,280 --> 00:11:28,840 Speaker 1: back hair. Absolutely, that was the day of Gordon Gecko, 206 00:11:29,120 --> 00:11:31,640 Speaker 1: so we were doing that. Erica talked to us about 207 00:11:31,800 --> 00:11:35,679 Speaker 1: your view of technology. Where should that be in the 208 00:11:35,800 --> 00:11:38,760 Speaker 1: average investor's portfolio, because it had been such a driver 209 00:11:39,400 --> 00:11:42,320 Speaker 1: for portfolios really since the financial crisis, But let's take 210 00:11:42,320 --> 00:11:45,560 Speaker 1: a little bit of a back seat recently. Well, gosh, 211 00:11:45,640 --> 00:11:48,679 Speaker 1: thanks so much for such a warm welcome. UM, I'm 212 00:11:48,760 --> 00:11:51,760 Speaker 1: delayed to be chatting with you today. And you know, 213 00:11:51,880 --> 00:11:54,719 Speaker 1: technology is really, I think the place to be. And 214 00:11:54,920 --> 00:11:58,439 Speaker 1: what's interesting from my perspective is that every company has 215 00:11:58,480 --> 00:12:02,640 Speaker 1: become a technology company, whether you're a transportation company, whether 216 00:12:02,760 --> 00:12:06,280 Speaker 1: you're a consumer company. Every company has to use technology 217 00:12:06,400 --> 00:12:10,600 Speaker 1: today to be relevant and disrupted in the marketplace. UM, 218 00:12:10,720 --> 00:12:14,400 Speaker 1: and those that are not effectively using technology are not 219 00:12:14,600 --> 00:12:17,400 Speaker 1: keeping up. And we see this time and time again, 220 00:12:17,640 --> 00:12:20,160 Speaker 1: UM as we meet with companies that the companies that 221 00:12:20,200 --> 00:12:23,719 Speaker 1: are really reaching out to use technology do tend to 222 00:12:23,840 --> 00:12:27,439 Speaker 1: be share gainers and disruptors and have greater positioning in 223 00:12:27,520 --> 00:12:32,760 Speaker 1: the marketplace relative to their peers. So UM Peter Oppenheimer 224 00:12:33,480 --> 00:12:35,800 Speaker 1: last week, I think in a no doubt of Goldman 225 00:12:35,840 --> 00:12:40,480 Speaker 1: Sachs said that this disinflationary secular trend that we've been 226 00:12:40,520 --> 00:12:44,599 Speaker 1: watching for the past couple of decades has contributed to 227 00:12:45,000 --> 00:12:48,959 Speaker 1: a concentration and narrow in a narrower group of these 228 00:12:49,040 --> 00:12:51,640 Speaker 1: kind of must own stocks. We all know what they 229 00:12:51,679 --> 00:12:54,360 Speaker 1: are right, and there was a similar group in the 230 00:12:54,880 --> 00:12:58,080 Speaker 1: in the in the seventies with the nifty fifty UM, 231 00:12:58,520 --> 00:13:01,640 Speaker 1: but that this kind of leadership might change if we 232 00:13:01,920 --> 00:13:05,880 Speaker 1: see a secular change towards an inflationary environment. What do 233 00:13:05,920 --> 00:13:09,640 Speaker 1: you think about that? Well, first, I would say I 234 00:13:09,760 --> 00:13:13,400 Speaker 1: don't think that there has been any change in our 235 00:13:14,080 --> 00:13:18,160 Speaker 1: belief that technology is the ultimate inflation fighter. And I 236 00:13:18,280 --> 00:13:22,439 Speaker 1: think there's two real legs behind that. One is that 237 00:13:22,640 --> 00:13:28,120 Speaker 1: technology does drastically improved productivity. It helps people do the 238 00:13:28,200 --> 00:13:30,319 Speaker 1: things in their lives that they want to do more 239 00:13:30,559 --> 00:13:35,240 Speaker 1: efficiently UM. And then secondly, I think that the cost 240 00:13:35,320 --> 00:13:39,240 Speaker 1: side of the equation continues to be brought down by technology, 241 00:13:39,320 --> 00:13:41,880 Speaker 1: whether it be just bring it down the cost of 242 00:13:42,160 --> 00:13:46,120 Speaker 1: inputs or even labor. So for example, we've seen the 243 00:13:46,160 --> 00:13:50,000 Speaker 1: elimination of the broker value in so many different sectors, 244 00:13:50,080 --> 00:13:54,000 Speaker 1: whether it be buying a plane ticket, planning a trip, 245 00:13:54,559 --> 00:13:57,800 Speaker 1: finding a taxi or getting a ride share UM, or 246 00:13:57,880 --> 00:14:00,640 Speaker 1: even finding someone to do small jobs owns your house. 247 00:14:00,720 --> 00:14:05,440 Speaker 1: You're able to really price those out using technology avenues UM, 248 00:14:05,600 --> 00:14:10,320 Speaker 1: and that ultimately does bring down inflation. So, Erica, where 249 00:14:10,600 --> 00:14:12,920 Speaker 1: are you and your team doing the most work here? 250 00:14:12,960 --> 00:14:16,559 Speaker 1: Where do you find the most opportunities the most value 251 00:14:16,960 --> 00:14:22,000 Speaker 1: in that text stack? Well, you mentioned before that there 252 00:14:22,120 --> 00:14:26,360 Speaker 1: were the bigger caps names and then you know one, 253 00:14:26,600 --> 00:14:29,440 Speaker 1: and how does that relate to some of the smaller names. 254 00:14:29,480 --> 00:14:32,480 Speaker 1: I think it's better to look at the end markets 255 00:14:32,600 --> 00:14:35,560 Speaker 1: and find opportunities there, and I would draw your attention 256 00:14:35,640 --> 00:14:39,440 Speaker 1: to three that I think are particularly important. The number one, 257 00:14:39,480 --> 00:14:42,600 Speaker 1: I would say would be artificial intelligence. And what that 258 00:14:42,760 --> 00:14:46,360 Speaker 1: really is is looking at big realms of data and 259 00:14:46,480 --> 00:14:50,280 Speaker 1: being able to quickly identify trends within those big realms 260 00:14:50,320 --> 00:14:54,560 Speaker 1: of data. And that can be using everything from cybersecurity 261 00:14:54,640 --> 00:14:59,320 Speaker 1: to identify security breaches to drug companies that are looking 262 00:14:59,360 --> 00:15:03,040 Speaker 1: at trend is in data to find new drugs. UM. 263 00:15:03,680 --> 00:15:05,920 Speaker 1: You've seen some of the big drug companies come up 264 00:15:06,000 --> 00:15:09,240 Speaker 1: with drugs much much more quickly than they have in 265 00:15:09,320 --> 00:15:13,400 Speaker 1: the past by using AI. So AI is artificial intelligence 266 00:15:13,520 --> 00:15:16,240 Speaker 1: is one of the most important sectors to look at 267 00:15:16,400 --> 00:15:19,240 Speaker 1: right now. I would say the second is e commerce. 268 00:15:19,320 --> 00:15:22,520 Speaker 1: We're still at a very early phase and e commerce 269 00:15:22,600 --> 00:15:25,280 Speaker 1: and all the digital payments associated with that and the 270 00:15:25,360 --> 00:15:30,000 Speaker 1: advertising opportunities associate with e commerces. That's still a very 271 00:15:30,200 --> 00:15:34,360 Speaker 1: big global opportunity with many companies position to do very 272 00:15:34,440 --> 00:15:37,120 Speaker 1: well in that segment. And the third segment I would 273 00:15:37,280 --> 00:15:42,120 Speaker 1: mention would be energy efficiency, not just utilities moving away 274 00:15:42,160 --> 00:15:45,320 Speaker 1: from using coal to alternative energies, whether it be solar 275 00:15:46,120 --> 00:15:51,560 Speaker 1: or hydrogen, but also the actual appliances, whether they're used 276 00:15:51,600 --> 00:15:54,680 Speaker 1: in the home or in the office or in any 277 00:15:54,760 --> 00:15:58,360 Speaker 1: kind of commercial space, moving to more efficient ways of 278 00:15:58,520 --> 00:16:02,200 Speaker 1: using energy, to bring down ergy costs, by using sensors, 279 00:16:02,240 --> 00:16:04,960 Speaker 1: by using robotics. These are the areas that we see 280 00:16:05,560 --> 00:16:09,480 Speaker 1: as having the best long tails for growth over the 281 00:16:09,560 --> 00:16:13,560 Speaker 1: next decade. Erica great to get your take on tech. 282 00:16:13,720 --> 00:16:19,280 Speaker 1: Erica Clower is technology equity portfolio manager over at Jennison Associates. 283 00:16:19,320 --> 00:16:22,320 Speaker 1: Talking to us about really the stocks I think that 284 00:16:23,080 --> 00:16:28,520 Speaker 1: we all know and seemingly everyone owns and everyone thinks 285 00:16:28,560 --> 00:16:33,160 Speaker 1: of when you when you talk about the finishing over 286 00:16:33,160 --> 00:16:35,120 Speaker 1: the last nine months, though it's they've kind of fallen 287 00:16:35,160 --> 00:16:36,960 Speaker 1: a little bit below the redar screens. People have been 288 00:16:37,000 --> 00:16:39,200 Speaker 1: playing the reopening trade, but man, the long term growth 289 00:16:39,200 --> 00:16:42,000 Speaker 1: story still there is. Erica said, yeah, absolutely great to 290 00:16:42,080 --> 00:16:44,240 Speaker 1: get your take. Erica, thanks for joining us. Hoping get 291 00:16:44,280 --> 00:16:51,960 Speaker 1: you back again. This is Bloomberg after the closed. Today 292 00:16:52,040 --> 00:16:56,400 Speaker 1: the Federal Reserve will release the results of its stress tests, 293 00:16:56,440 --> 00:16:58,680 Speaker 1: and you think about the financial crisis coming out of that. 294 00:16:58,800 --> 00:17:00,840 Speaker 1: These were really really big deals and I think they're 295 00:17:00,880 --> 00:17:02,720 Speaker 1: still kind of important because it goes to the issue 296 00:17:03,480 --> 00:17:07,080 Speaker 1: of returning cash the shareholders, and these stress tests are 297 00:17:07,080 --> 00:17:09,600 Speaker 1: are pretty important. So when we talk about anything on 298 00:17:09,680 --> 00:17:12,479 Speaker 1: the banking front, we go to our expert. That's Alison Williams. 299 00:17:12,520 --> 00:17:15,960 Speaker 1: She's in a senior banks analysts for Bloomberg Intelligence. He 300 00:17:16,040 --> 00:17:19,000 Speaker 1: covers all the financials. She has for decades, both on 301 00:17:19,560 --> 00:17:22,640 Speaker 1: for Bloomberg Intelligence and then before that Morgan Stanley Investment 302 00:17:22,720 --> 00:17:25,760 Speaker 1: Management in New York, where she was an analyst there. Allison, 303 00:17:26,400 --> 00:17:29,719 Speaker 1: what are the key things here that bank investors are 304 00:17:29,760 --> 00:17:32,159 Speaker 1: looking for when the stress tests are released? Here for 305 00:17:32,200 --> 00:17:35,840 Speaker 1: the clothes today, So the key thing we'll be looking 306 00:17:35,920 --> 00:17:39,959 Speaker 1: for today along with um other investors and analysts. UM, 307 00:17:40,200 --> 00:17:44,800 Speaker 1: are you know, what are the stressed capital losses in 308 00:17:44,880 --> 00:17:49,320 Speaker 1: the test? So they these tests have evolved and UM 309 00:17:49,520 --> 00:17:53,560 Speaker 1: basically what happens with the test now is UM the 310 00:17:53,680 --> 00:17:58,040 Speaker 1: regulators look at what that stress capital losses, UH, you 311 00:17:58,119 --> 00:18:01,120 Speaker 1: know sort of bucket is, so basically, how does your 312 00:18:01,240 --> 00:18:05,600 Speaker 1: capital change from today to the worst point right? And 313 00:18:05,720 --> 00:18:09,560 Speaker 1: then based on that they set a requirement and then 314 00:18:09,600 --> 00:18:12,760 Speaker 1: as long as you meet that requirement, you can basically, 315 00:18:13,280 --> 00:18:15,320 Speaker 1: you know, do as you like. So it's a lot 316 00:18:15,440 --> 00:18:19,040 Speaker 1: different than in the previous test where the banks had 317 00:18:19,080 --> 00:18:21,960 Speaker 1: to ask for a dividend and a very specific buyback program. 318 00:18:22,040 --> 00:18:25,960 Speaker 1: And in fact, we already have buyback programs across several banks. 319 00:18:26,040 --> 00:18:28,920 Speaker 1: So really what we learned today is, you know, will 320 00:18:29,000 --> 00:18:32,760 Speaker 1: banks be able to execute on those programs? UM, and 321 00:18:33,040 --> 00:18:34,760 Speaker 1: we may get you know, sort of a signal in 322 00:18:34,880 --> 00:18:37,200 Speaker 1: terms of how much capital they can return from here. 323 00:18:38,119 --> 00:18:40,320 Speaker 1: How much that was gonna be my question? How much 324 00:18:40,359 --> 00:18:42,000 Speaker 1: do we expect? I think I saw a number on 325 00:18:42,040 --> 00:18:46,240 Speaker 1: a hundred sixty billion dollars yesterday, Yeah, so I think 326 00:18:46,480 --> 00:18:49,639 Speaker 1: um so. Arnold Cucuta, who covers the credit side of 327 00:18:49,680 --> 00:18:53,639 Speaker 1: the banks UH, calculates about a hundred and fifty billion 328 00:18:54,200 --> 00:18:57,840 Speaker 1: of excess capital um. When we look at that amount UM, 329 00:18:58,400 --> 00:19:01,919 Speaker 1: we agree with his calculation obviously, but we would also 330 00:19:02,080 --> 00:19:06,560 Speaker 1: note that when we look at what Dember, you can 331 00:19:06,600 --> 00:19:10,359 Speaker 1: have disagreements' work is very good. We we can we 332 00:19:10,520 --> 00:19:14,120 Speaker 1: can disagree, but we actually agree in this in this instance. 333 00:19:14,240 --> 00:19:16,480 Speaker 1: So I think we agree on the access capital and 334 00:19:16,520 --> 00:19:18,439 Speaker 1: I think we also agree that if you look at 335 00:19:18,480 --> 00:19:22,840 Speaker 1: the December tests, UM, you know, Goldman performed much better 336 00:19:22,920 --> 00:19:25,520 Speaker 1: in that test. Morgan Stanley perform much better in that test. 337 00:19:25,960 --> 00:19:28,040 Speaker 1: This test is going to look a bit more like 338 00:19:28,240 --> 00:19:29,960 Speaker 1: that test in the sense that we're going to be 339 00:19:30,680 --> 00:19:33,280 Speaker 1: much it's it's a much harsher test of things like 340 00:19:33,320 --> 00:19:36,000 Speaker 1: commercial real estate and credit cards. So that's that's not 341 00:19:36,160 --> 00:19:38,720 Speaker 1: sort of where those banks are focused. And if we 342 00:19:38,840 --> 00:19:43,159 Speaker 1: do mirror that test, Goldman, Sachs and Morgan Stanley are 343 00:19:43,240 --> 00:19:47,360 Speaker 1: both going to see their UM you know, requirement drop 344 00:19:47,600 --> 00:19:51,440 Speaker 1: and so they should be able to return capital shareholders. 345 00:19:51,560 --> 00:19:53,560 Speaker 1: And and again, so Arnold and I aren't the only 346 00:19:53,600 --> 00:19:56,239 Speaker 1: ones thinking this. I think a lot of people are 347 00:19:56,320 --> 00:19:59,920 Speaker 1: expecting Goldman to get some relief, and so if they don't, 348 00:20:00,040 --> 00:20:02,639 Speaker 1: that would obviously be a negative surprise. And and by 349 00:20:02,680 --> 00:20:05,280 Speaker 1: the way, Goldman and Morgan Stanley should both get relieved. 350 00:20:05,320 --> 00:20:07,640 Speaker 1: It's just a little bit more critical for Goldman because 351 00:20:07,680 --> 00:20:12,280 Speaker 1: Morgan Stanley has much more excess capital. So elsewhere are 352 00:20:12,840 --> 00:20:14,800 Speaker 1: you know, dividend yields now for some of these big 353 00:20:14,840 --> 00:20:18,399 Speaker 1: banks and where do you think they should be? So 354 00:20:18,560 --> 00:20:22,520 Speaker 1: that's a great question because we really think that, um, 355 00:20:22,880 --> 00:20:24,879 Speaker 1: you know, Bank of America is sort of going to 356 00:20:25,160 --> 00:20:28,520 Speaker 1: set the standard, if you will, going forward. So Ever, 357 00:20:28,680 --> 00:20:31,359 Speaker 1: since the Global financial crisis, we've had banks sort of 358 00:20:31,440 --> 00:20:34,600 Speaker 1: marching up their dividends and you know, someone like Wells 359 00:20:34,680 --> 00:20:38,440 Speaker 1: Fargo had gotten to sort of payout right, and that 360 00:20:38,600 --> 00:20:41,439 Speaker 1: was similar to what we saw prior to the Global 361 00:20:41,520 --> 00:20:45,280 Speaker 1: financial crisis. However, Bank of America said, you know, we're 362 00:20:45,280 --> 00:20:47,359 Speaker 1: gonna walk up our dividends, but we never want to 363 00:20:47,400 --> 00:20:50,760 Speaker 1: cut our dividends again. Uh, you know, and we've done 364 00:20:50,800 --> 00:20:54,399 Speaker 1: the work in UM. Dividend payout looks to us like 365 00:20:54,600 --> 00:20:57,399 Speaker 1: something that's you know, on the safer side of things. 366 00:20:57,920 --> 00:21:01,280 Speaker 1: And what we saw on this UM pandemic, we did 367 00:21:01,359 --> 00:21:04,000 Speaker 1: see limiting of dividends and we did see Wells Fargo 368 00:21:04,080 --> 00:21:07,440 Speaker 1: have to cut their dividend. As the fed UM basically 369 00:21:07,520 --> 00:21:10,680 Speaker 1: set a precedent by saying you know what and until, 370 00:21:11,080 --> 00:21:14,000 Speaker 1: you know, until things get better. We appreciate that you've 371 00:21:14,040 --> 00:21:16,040 Speaker 1: cut the buybacks, but we also want you to limit 372 00:21:16,080 --> 00:21:19,680 Speaker 1: your payout too for quarter trailing earnings. So Wells Fargo 373 00:21:19,760 --> 00:21:22,879 Speaker 1: had to cut UM, and so I think and a 374 00:21:23,000 --> 00:21:25,120 Speaker 1: lot of regionals. You know, it was also a little 375 00:21:25,119 --> 00:21:28,520 Speaker 1: bit of a nail bier, but with all the stimulus 376 00:21:28,640 --> 00:21:31,119 Speaker 1: and the fast recovery, things turned out great. But we 377 00:21:31,240 --> 00:21:33,359 Speaker 1: think that banks are going to sort of factor this 378 00:21:33,560 --> 00:21:37,000 Speaker 1: into their forward thinking in terms of, you know, no 379 00:21:37,119 --> 00:21:39,200 Speaker 1: one wants to be in a position to cut their dividend, 380 00:21:39,320 --> 00:21:42,520 Speaker 1: and so we do expect Wells Fargo is gonna have 381 00:21:42,640 --> 00:21:45,560 Speaker 1: the biggest increase, right but they're coming from you know, 382 00:21:45,760 --> 00:21:47,840 Speaker 1: sort of their cut levels, so they're still catching up 383 00:21:47,840 --> 00:21:51,520 Speaker 1: a little bit. So still healthy dividend deeald Um. You 384 00:21:51,600 --> 00:21:53,960 Speaker 1: know city group we think could could have a three 385 00:21:54,000 --> 00:21:57,800 Speaker 1: percent yields um. You know some that's sort of similar 386 00:21:57,880 --> 00:22:00,520 Speaker 1: to that's basically where they are today. Um. We don't 387 00:22:00,560 --> 00:22:03,199 Speaker 1: think that's going to change much. JP Morgan City smaller 388 00:22:03,320 --> 00:22:07,159 Speaker 1: increases UM Morgan Staion, Goldman Sachs. Maybe walking it up 389 00:22:07,200 --> 00:22:10,119 Speaker 1: a little bit UM to get closer to that, you know, 390 00:22:10,240 --> 00:22:13,520 Speaker 1: to Jewish percent level. JP Morgan, by the way, is 391 00:22:13,560 --> 00:22:16,800 Speaker 1: the only bank that's a little bit over that um. 392 00:22:16,880 --> 00:22:19,240 Speaker 1: And we expect again just sort of a nudge up there. 393 00:22:20,320 --> 00:22:25,200 Speaker 1: Now prevalent are buy backs in the banking industry compared 394 00:22:25,240 --> 00:22:29,080 Speaker 1: to other others. And I noticed that, you know, share 395 00:22:29,119 --> 00:22:31,800 Speaker 1: buy backs for the overall market hit a high I 396 00:22:31,840 --> 00:22:35,480 Speaker 1: think two eighteen, but they've come down substantially since then. 397 00:22:35,960 --> 00:22:39,720 Speaker 1: Does that bounce back up after this? So keep in 398 00:22:39,800 --> 00:22:43,800 Speaker 1: mind that these banks um basically we're very conservative with 399 00:22:43,920 --> 00:22:46,480 Speaker 1: capital um. Again, we talked about sort of the plausas 400 00:22:46,560 --> 00:22:50,639 Speaker 1: during the pandemic, so they have access and so and 401 00:22:51,000 --> 00:22:53,520 Speaker 1: and also at least, you know, the bigger banks that 402 00:22:53,640 --> 00:22:56,840 Speaker 1: I cover somewhat limited in their acquisitions. You know, they 403 00:22:56,960 --> 00:22:59,679 Speaker 1: they because of their deposit bases, they can't go out 404 00:22:59,720 --> 00:23:03,119 Speaker 1: and by other depository institutions they have done things like 405 00:23:03,200 --> 00:23:07,480 Speaker 1: by asset management and the like. But we do expect 406 00:23:07,640 --> 00:23:10,840 Speaker 1: that payouts for the big banks, the big universal banks 407 00:23:10,880 --> 00:23:13,320 Speaker 1: that cover, are going to exceed a hundred percent for 408 00:23:13,440 --> 00:23:15,560 Speaker 1: a period of time as they're working down some of 409 00:23:15,640 --> 00:23:19,720 Speaker 1: that excess that they've built up. I would say that again, 410 00:23:19,760 --> 00:23:21,840 Speaker 1: a difference in this year's test is that a lot 411 00:23:21,880 --> 00:23:25,159 Speaker 1: of regionals don't have to participate, but we do expect 412 00:23:25,200 --> 00:23:29,560 Speaker 1: those regionals to pay over again, be a little bit 413 00:23:29,600 --> 00:23:33,040 Speaker 1: more cautious. On the dividend side, UM Herman Chan has 414 00:23:33,040 --> 00:23:35,520 Speaker 1: said that he expects the third to increase their dividend, 415 00:23:35,600 --> 00:23:37,879 Speaker 1: but maybe not anyone else. And then on the trust 416 00:23:37,960 --> 00:23:41,680 Speaker 1: banks covered by Paul Goberg, he's also looking for over 417 00:23:41,760 --> 00:23:46,200 Speaker 1: a dent capital return. So I think investors are are 418 00:23:46,280 --> 00:23:48,520 Speaker 1: are pretty bolish looking at the year ahead. But by 419 00:23:48,560 --> 00:23:51,200 Speaker 1: the way, do you keep your eye on European banks 420 00:23:51,240 --> 00:23:53,280 Speaker 1: because it's been a hot topic over the last few 421 00:23:53,320 --> 00:23:56,480 Speaker 1: weeks for investors, and you know, the idea is that 422 00:23:56,480 --> 00:23:58,960 Speaker 1: they're going to raise payouts as well, which could bring 423 00:23:59,080 --> 00:24:01,960 Speaker 1: them close are to UM the kind of games we've 424 00:24:01,960 --> 00:24:04,640 Speaker 1: seen for US banks. But I look today at UH 425 00:24:05,560 --> 00:24:09,119 Speaker 1: share price to book value, and US banks are trading it. 426 00:24:09,600 --> 00:24:15,840 Speaker 1: You know, European banks still six, right, and so I 427 00:24:15,960 --> 00:24:19,040 Speaker 1: think UM so so again, the banks obviously in the 428 00:24:19,160 --> 00:24:21,760 Speaker 1: US have done very well. UM City Group is still 429 00:24:21,760 --> 00:24:25,040 Speaker 1: trading below book values, so we expect they're gonna skew 430 00:24:25,160 --> 00:24:29,879 Speaker 1: more towards UM buy backs. UM in general more towards 431 00:24:29,920 --> 00:24:32,240 Speaker 1: buy backs. But on the Europeans. I would say so 432 00:24:32,359 --> 00:24:35,720 Speaker 1: two key things. So one, what's interesting in the stress 433 00:24:35,800 --> 00:24:38,240 Speaker 1: test this year, It's going to be the first time 434 00:24:38,480 --> 00:24:41,280 Speaker 1: that banks like Credit Suite and Deutsche Bank don't have 435 00:24:41,440 --> 00:24:45,600 Speaker 1: to worry about a qualitative objective and so that's interesting 436 00:24:45,720 --> 00:24:49,560 Speaker 1: because we've had articles issues at Deutsche Bank. So I 437 00:24:49,640 --> 00:24:51,919 Speaker 1: think they're breathing as of release that they don't it's 438 00:24:52,119 --> 00:24:54,520 Speaker 1: an incremental risk, but one they don't have to worry about, 439 00:24:55,040 --> 00:24:57,199 Speaker 1: all right. Of course they have other issues as well. 440 00:24:57,280 --> 00:25:01,160 Speaker 1: You mentioned Arch and Credit Suites. UH is definitely among 441 00:25:01,240 --> 00:25:05,000 Speaker 1: the most read stories every day here in Europe. Allison Williams, 442 00:25:05,160 --> 00:25:09,000 Speaker 1: Senior bank analyst. This is Bloomberg. Thanks for listening to 443 00:25:09,040 --> 00:25:12,520 Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to 444 00:25:12,600 --> 00:25:16,760 Speaker 1: interviews of Apple Podcasts or whatever podcast platform you prefer. 445 00:25:17,160 --> 00:25:21,120 Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three 446 00:25:21,600 --> 00:25:24,000 Speaker 1: and on Fall Sweeney I'm on Twitter at pt Sweeney. 447 00:25:24,119 --> 00:25:26,720 Speaker 1: Before the podcast, you can always catch us worldwide at 448 00:25:26,760 --> 00:25:27,520 Speaker 1: Bloomberg Radio.