WEBVTT - LGBTQ Authentic Inclusion In Advertising 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.319 at Bloomberg dot com slash podcast. We are gonna be 0:00:22.400 --> 0:00:26.240 joined right now by Rich Ferrarro, chief communications officer for GLAD, 0:00:26.280 --> 0:00:29.160 the Gay and Lesbian Alliance Against Defamation. I know it's 0:00:29.200 --> 0:00:32.720 Pride Week in New York, and I think it's Pride 0:00:32.720 --> 0:00:35.480 month generally. We have UH flags all over the place. 0:00:35.520 --> 0:00:38.400 I've got a lapel pin that I was given um 0:00:38.479 --> 0:00:43.240 a couple of weeks ago, and visibility is just huge here. Um. 0:00:43.280 --> 0:00:46.440 I think that not only on Wall Street, and not 0:00:46.520 --> 0:00:49.040 only on the coast, but really across the middle of 0:00:49.080 --> 0:00:51.760 the country and now on to at least this continent 0:00:52.159 --> 0:00:56.240 here in Europe, people are really recognizing and selling and 0:00:56.320 --> 0:01:00.560 celebrating gay pride. Rich Um, am I wrong in that 0:01:00.680 --> 0:01:04.480 this has become just just a massive event? Um? Is it? 0:01:04.640 --> 0:01:09.160 Is it completely Uh? I don't want to say completely accepted, 0:01:09.200 --> 0:01:12.080 but is it is it celebrated now by a majority 0:01:12.160 --> 0:01:15.920 of the people across the Western world. Yeah, we've definitely 0:01:15.920 --> 0:01:20.520 seen lgbt Q acceptance grow over recent years. You can see, uh, 0:01:20.600 --> 0:01:23.840 the NFL player Karl from the Las Vegas Raiders, as 0:01:23.840 --> 0:01:26.559 he came out earlier this week, there wasn't a backlash 0:01:27.160 --> 0:01:30.280 from his teammates or from the NFL. There was acceptance 0:01:30.600 --> 0:01:32.880 and that's a great Everybody wanted to buy the jersey 0:01:33.120 --> 0:01:37.280 right best selling jersey this week. That was great news UM, 0:01:37.720 --> 0:01:39.920 and I think pride is that moment when you see 0:01:39.959 --> 0:01:43.080 the community stand up and be very visible throughout the year, 0:01:43.200 --> 0:01:45.360 but you also see our allies stand up. And what's 0:01:45.400 --> 0:01:48.240 great about UM this year as we're seeing allies from 0:01:48.360 --> 0:01:52.440 all areas of business, whether it's financial or B two 0:01:52.480 --> 0:01:55.560 C companies, UM companies are stepping up, and I think 0:01:55.600 --> 0:01:58.280 that's because not only our community expects to see that, 0:01:58.520 --> 0:02:01.600 but the allies of our community expect to see brands 0:02:01.680 --> 0:02:05.520 that UM stand with and for LGBTQ people. Yeah. Rich, 0:02:05.520 --> 0:02:07.120 that's kind of where I wanted to go. I've spent 0:02:07.200 --> 0:02:10.320 my career studying the media industry, so I'm fascinating by 0:02:10.400 --> 0:02:13.799 your visibility project that you launch with Procter and Gamble 0:02:14.200 --> 0:02:17.920 looking at advertising and marketing towards this community. What are 0:02:17.960 --> 0:02:20.720 some of the big findings you guys had. Yeah, and 0:02:21.040 --> 0:02:23.400 so I've been with GLAD since two thousand and eight, 0:02:23.440 --> 0:02:26.480 and GLAD does a lot of work creating public campaigns 0:02:26.520 --> 0:02:28.560 for ways people could take action, but most of our 0:02:28.560 --> 0:02:31.880 workers behind the scenes with media companies, with Hollywood and 0:02:32.240 --> 0:02:35.480 more and more, with brands and advertisers to leverage that 0:02:35.560 --> 0:02:38.800 reach of media and the power of media to affect change, 0:02:38.840 --> 0:02:41.040 to tell the stories that are going to create a difference. 0:02:41.320 --> 0:02:44.040 And with Procter and Gamble, the world's largest advertiser, We've 0:02:44.080 --> 0:02:45.840 been working with them for the last few years, and 0:02:46.280 --> 0:02:49.840 UM last month launched the Visibility projects because they've stepped 0:02:49.880 --> 0:02:52.679 up as a corporate allied to LGBTQ people to say 0:02:52.680 --> 0:02:56.200 we want to create resources for the advertising industry and 0:02:56.240 --> 0:02:59.240 for brands to get lgbt Q inclusion. Right when I 0:02:59.240 --> 0:03:01.440 started a Glass, there was a lot of hesitation from 0:03:01.440 --> 0:03:05.440 brands to include gay dads in in an ad or 0:03:05.480 --> 0:03:09.400 to include LGBTQ people in public communications because people brands 0:03:09.400 --> 0:03:13.520 were worried about an anti lgbt Q backlash. This year, 0:03:14.120 --> 0:03:16.520 we released research with Proctor and Gamble that found that 0:03:17.320 --> 0:03:21.639 we we surveyed brand executives and exacts at ad agencies 0:03:21.919 --> 0:03:24.520 and found that the exects were not worried about that 0:03:24.600 --> 0:03:27.920 anti lgbt Q backlash. They were worried about the community 0:03:28.040 --> 0:03:32.320 seeing their um, their campaigns, and their ads as authentic. 0:03:32.400 --> 0:03:34.960 So with Procter and Gamble, we said, let's create some resources. 0:03:35.000 --> 0:03:38.640 Because advertising is very powerful and reaches people that need 0:03:38.720 --> 0:03:41.760 to see LGBTQ people and here our stories. That's the 0:03:41.800 --> 0:03:44.720 power of brands and ads. But let's create create some 0:03:44.840 --> 0:03:47.960 resources and best practices to do it right. Bottom line 0:03:48.000 --> 0:03:51.960 is you've got really a tail wind here in two 0:03:51.960 --> 0:03:54.920 thousand Where are we two thousand twenty one? But glad 0:03:55.000 --> 0:03:58.200 was found because the New York Post and really a 0:03:58.240 --> 0:04:02.240 lot of media had to samatory ins and stationalized h 0:04:02.240 --> 0:04:05.400 IVY and AIDS coverage. What are the biggest problems that 0:04:05.440 --> 0:04:10.840 you're fighting today, Rich Um, biggest problems right now? So 0:04:10.920 --> 0:04:13.720 our our team is exhausted this year because we have 0:04:13.840 --> 0:04:17.960 been battling back against over two hundred anti LGBTQ pieces 0:04:17.960 --> 0:04:22.000 of legislation introduced just this year in states around the country. 0:04:22.160 --> 0:04:26.600 Eight states moved to ban transgender youth from participating in sports, 0:04:26.680 --> 0:04:31.040 even though every leading medical association said that was not necessary, 0:04:31.080 --> 0:04:34.839 and teachers groups and brands also spoke out against those 0:04:34.880 --> 0:04:37.159 bills as well. And then our community has been pushing 0:04:37.160 --> 0:04:40.800 for decades for the Equality Act, which is now installed 0:04:40.839 --> 0:04:44.000 in the Senate, largely because of the filibuster. The Equality 0:04:44.040 --> 0:04:48.280 Act would write non discrimination um and protect LGBTQ people 0:04:48.320 --> 0:04:51.440 against discrimination on a federal level. Right now, there's this 0:04:51.560 --> 0:04:55.320 patchwork of laws around the country that determine whether or 0:04:55.400 --> 0:04:57.640 not we can be served a piece of cake, whether 0:04:57.720 --> 0:05:00.320 or not our families can be turned to way from 0:05:00.320 --> 0:05:02.320 a doctor just because of who we are. And we 0:05:02.400 --> 0:05:07.200 need that Equality Act to create one non discrimination law 0:05:07.279 --> 0:05:09.920 on a federal level. And Rich, thanks so much for 0:05:10.040 --> 0:05:12.160 taking the time to join us. We really appreciate getting 0:05:12.200 --> 0:05:14.960 your thoughts. Rich Ferraro, he's the chief communications officer for 0:05:15.040 --> 0:05:18.359 GLAD that's a gay and Lesbian Alliance against a defamation 0:05:18.480 --> 0:05:20.800 doing some important work there and as he said, kind 0:05:20.839 --> 0:05:25.320 of exhausting year dealing with the various legislations across various 0:05:25.400 --> 0:05:28.040 states here, but it's good to get some time from rich. 0:05:31.800 --> 0:05:35.719 Really rich people in America don't have to pay taxes, 0:05:35.800 --> 0:05:38.520 they figure their way out of it usually, but those 0:05:38.560 --> 0:05:40.320 of us in the middle class end up working for 0:05:40.440 --> 0:05:43.920 Uncle Sam pretty much half the year. That's why Congress 0:05:43.960 --> 0:05:46.800 gave us the roth I r A. It allows us 0:05:47.320 --> 0:05:49.640 a little bit of a break when the taxman cometh, 0:05:49.839 --> 0:05:54.080 and poor people like Peter Thiel have figured out a 0:05:54.200 --> 0:05:56.400 great way to use it. Let's bring in Ben Steberman 0:05:56.520 --> 0:06:01.360 right now. Personal finance reporter Fort Bloomberg News. Um, poor 0:06:01.480 --> 0:06:06.360 Peter put some worthless shares in his roth IRA and 0:06:06.480 --> 0:06:08.320 now he's got a little bit of a nest egg 0:06:08.360 --> 0:06:12.120 a Ben. Yeah, it's it's it's it's a it's a 0:06:12.279 --> 0:06:16.719 small one. Um. Yeah, he he really has has seems 0:06:16.720 --> 0:06:18.919 to have played the system here. Um. You know, Pro 0:06:19.040 --> 0:06:21.880 Publica got these tax records, so they're able to tell 0:06:21.960 --> 0:06:25.560 this story that stretches back to when PayPal was a 0:06:25.640 --> 0:06:29.280 privately a private company. It was a startup, and what 0:06:29.440 --> 0:06:33.000 Peter Field did was take a less than two million, 0:06:33.080 --> 0:06:37.000 almost two million shares of that private company. They were 0:06:37.120 --> 0:06:40.200 valued to just a tenth of a cent at that time, 0:06:40.440 --> 0:06:42.400 and he was able to put them in an IRA 0:06:42.640 --> 0:06:45.040 and say, oh, it's only you know, less than two 0:06:45.080 --> 0:06:47.600 thousand dollars which was a contribution limit at that time 0:06:48.000 --> 0:06:50.040 less than two thousand dollars. It's this legal, I can 0:06:50.080 --> 0:06:53.400 put this money into it a roth ira um. The 0:06:53.520 --> 0:06:58.160 next year, the value of those share sword um to 0:06:58.480 --> 0:07:02.360 like four million. I get. Some observers would say they 0:07:02.400 --> 0:07:04.599 were always worth more than that. This is an artificially 0:07:04.720 --> 0:07:08.440 low valuation he was using. And now he he sort 0:07:08.480 --> 0:07:13.240 of moved that those investments from from PayPal, which paid 0:07:13.280 --> 0:07:17.760 off handsomely, and then into Facebook, and then into palent 0:07:17.880 --> 0:07:22.040 here and into all these other investorsments that he's gotten 0:07:22.160 --> 0:07:24.920 rich on, and he now has this five billion dollar 0:07:25.040 --> 0:07:28.080 pool of money that he never has to pay taxes on. Wow. 0:07:28.160 --> 0:07:29.920 I was looking at my I RAS and four one 0:07:30.000 --> 0:07:33.400 case recently and feeling pretty good about myself until I 0:07:33.440 --> 0:07:36.080 saw your story. Ben. I'm like, all right, Peter Teal's 0:07:36.120 --> 0:07:38.280 got me be here. When I first read your story, Ben, 0:07:38.400 --> 0:07:40.600 I said, all right, there's a scam here. This is 0:07:40.680 --> 0:07:42.160 something that the I R S is going to have 0:07:42.240 --> 0:07:44.800 to take a look at. But in reality, it doesn't 0:07:44.840 --> 0:07:48.480 seem like he did anything wrong. Umber the valuation. I 0:07:48.520 --> 0:07:50.600 want to point out, Ben, it wasn't the tenth of 0:07:50.640 --> 0:07:54.840 a cent those PayPal shares were valued at one one 0:07:55.000 --> 0:08:00.400 thousand of assent um. So the question is was that 0:08:00.520 --> 0:08:04.440 a fair valuation for the one point seven million shares 0:08:05.080 --> 0:08:08.000 of PayPal that he put into his wrath R I 0:08:08.240 --> 0:08:10.400 R A and a reminder to listeners, I mean, we 0:08:10.520 --> 0:08:14.640 all know, sadly, because it's so painful, you can contribute 0:08:14.680 --> 0:08:17.480 at most two thousand dollars a year to this vehicle. 0:08:19.920 --> 0:08:23.559 The PayPal was already getting going at this point. Deel 0:08:23.600 --> 0:08:27.560 head Um are already lent. He'd lent like a hundred 0:08:27.600 --> 0:08:30.840 thousand dollars to start up. It's hard to believe that 0:08:31.000 --> 0:08:33.959 that that was what the shares were worth, given the 0:08:34.080 --> 0:08:36.440 fact that you know, just a few months later they 0:08:36.480 --> 0:08:39.880 attracted a bunch of investors. I think the value the 0:08:39.960 --> 0:08:42.640 firm at millions of dollars. So so yet that is 0:08:42.800 --> 0:08:46.120 the part that's a little fishy. The problem is that um, 0:08:46.200 --> 0:08:49.280 the I R S just doesn't have hasn't had the 0:08:49.360 --> 0:08:53.040 resources to go in and and argue with rich people 0:08:53.040 --> 0:08:55.679 about what the valuations of these things should be, so 0:08:55.920 --> 0:08:58.920 that they're just completely outgunned and they just just don't 0:08:58.920 --> 0:09:02.760 have the resources. So is this something that the I 0:09:02.960 --> 0:09:05.720 R S is looking at? I mean, again, it seems 0:09:05.720 --> 0:09:09.120 like a one off. It seems like a good trade. 0:09:09.320 --> 0:09:13.520 I mean, what are you hearing from the I R S. Well, 0:09:14.480 --> 0:09:18.840 there is, um the I R S has limited tools, 0:09:18.920 --> 0:09:20.559 Like I think the I R S has started to 0:09:20.720 --> 0:09:24.360 track this more at least and figure out exactly how many. 0:09:25.080 --> 0:09:28.720 Like six seven years ago, they had no idea how 0:09:28.840 --> 0:09:31.160 many of these accounts were out there. Now they actually 0:09:31.200 --> 0:09:34.720 have some rewarding requirements. So so they've they've They've started 0:09:34.760 --> 0:09:38.760 to compile some data. What what the real forum that 0:09:38.840 --> 0:09:42.280 I'm watching is Congress, because um, there's a chance that 0:09:42.440 --> 0:09:45.920 Congress could um try to rein these in by saying 0:09:46.160 --> 0:09:49.079 okay over a certain limit, a roth Ira is no 0:09:49.200 --> 0:09:52.599 longer no longer avoids taxes and tries to force some 0:09:52.720 --> 0:09:55.640 of these back onto the tax books. I just want 0:09:55.679 --> 0:09:58.760 to point out, Ben, if you uptake this story. So 0:09:59.400 --> 0:10:03.280 uh So, Peter Teal partnered with others to start PayPal. 0:10:03.400 --> 0:10:06.000 Elon Musk was one of those others, right, And I 0:10:06.120 --> 0:10:10.040 remember back in this is when they were valuing the 0:10:10.120 --> 0:10:15.040 shares at a cent. Elon Musk bought a million dollar 0:10:15.200 --> 0:10:19.400 McLaren F one supercar at the time with his with 0:10:19.559 --> 0:10:22.559 his PayPal riches, So there were already some people that 0:10:22.679 --> 0:10:25.760 were giving the business a fair value because there were 0:10:25.800 --> 0:10:27.959 only sixty two of those cars in the world and 0:10:28.280 --> 0:10:30.880 he got one somehow. You knew that, Matt. Yeah, you 0:10:31.040 --> 0:10:33.599 tell everything to that, McLaren. All right, Ben, thanks so 0:10:33.720 --> 0:10:36.640 much for that. We appreciated. Ben Stephen, personal finance editor 0:10:36.720 --> 0:10:41.920 for Bloomberg Musical. Alright, Matt, let's talk technology here. We 0:10:42.000 --> 0:10:43.840 know we've it's kind of gotten a little bit under 0:10:43.840 --> 0:10:45.880 the radar in terms of performance as people have been 0:10:45.960 --> 0:10:49.000 rotating into some of the cyclical names on the reopening. 0:10:49.120 --> 0:10:51.240 But for me, for I kind of feel like you 0:10:51.320 --> 0:10:53.600 can't take your eye off the technology ball because that's 0:10:53.640 --> 0:10:57.520 the long term future in our next guest is an expert. 0:10:57.600 --> 0:11:00.360 Why do I say expert? Is I remember this guest 0:11:00.400 --> 0:11:02.800 when she was a young analyst as I was back 0:11:02.880 --> 0:11:05.280 at Pain Webber way back in the day. We're talking 0:11:05.320 --> 0:11:08.000 to eighties man, So we go way back. Erica Clark 0:11:08.080 --> 0:11:12.040 Technology Equity portfolio manager Jennison Associates, one of the best 0:11:12.120 --> 0:11:14.160 firms on the street for a long time. Erica, thanks 0:11:14.160 --> 0:11:16.439 so much for joining us here. Um, I know you 0:11:16.480 --> 0:11:19.000 don't remember, but again, we started way back in today 0:11:19.000 --> 0:11:21.439 at Pain Webber you were doing technology there, I was 0:11:21.520 --> 0:11:26.240 doing actually transportation, but Paul was wearing suspenders with slicked 0:11:26.280 --> 0:11:28.840 back hair. Absolutely, that was the day of Gordon Gecko, 0:11:29.120 --> 0:11:31.640 so we were doing that. Erica talked to us about 0:11:31.800 --> 0:11:35.679 your view of technology. Where should that be in the 0:11:35.800 --> 0:11:38.760 average investor's portfolio, because it had been such a driver 0:11:39.400 --> 0:11:42.320 for portfolios really since the financial crisis, But let's take 0:11:42.320 --> 0:11:45.560 a little bit of a back seat recently. Well, gosh, 0:11:45.640 --> 0:11:48.679 thanks so much for such a warm welcome. UM, I'm 0:11:48.760 --> 0:11:51.760 delayed to be chatting with you today. And you know, 0:11:51.880 --> 0:11:54.719 technology is really, I think the place to be. And 0:11:54.920 --> 0:11:58.439 what's interesting from my perspective is that every company has 0:11:58.480 --> 0:12:02.640 become a technology company, whether you're a transportation company, whether 0:12:02.760 --> 0:12:06.280 you're a consumer company. Every company has to use technology 0:12:06.400 --> 0:12:10.600 today to be relevant and disrupted in the marketplace. UM, 0:12:10.720 --> 0:12:14.400 and those that are not effectively using technology are not 0:12:14.600 --> 0:12:17.400 keeping up. And we see this time and time again, 0:12:17.640 --> 0:12:20.160 UM as we meet with companies that the companies that 0:12:20.200 --> 0:12:23.719 are really reaching out to use technology do tend to 0:12:23.840 --> 0:12:27.439 be share gainers and disruptors and have greater positioning in 0:12:27.520 --> 0:12:32.760 the marketplace relative to their peers. So UM Peter Oppenheimer 0:12:33.480 --> 0:12:35.800 last week, I think in a no doubt of Goldman 0:12:35.840 --> 0:12:40.480 Sachs said that this disinflationary secular trend that we've been 0:12:40.520 --> 0:12:44.599 watching for the past couple of decades has contributed to 0:12:45.000 --> 0:12:48.959 a concentration and narrow in a narrower group of these 0:12:49.040 --> 0:12:51.640 kind of must own stocks. We all know what they 0:12:51.679 --> 0:12:54.360 are right, and there was a similar group in the 0:12:54.880 --> 0:12:58.080 in the in the seventies with the nifty fifty UM, 0:12:58.520 --> 0:13:01.640 but that this kind of leadership might change if we 0:13:01.920 --> 0:13:05.880 see a secular change towards an inflationary environment. What do 0:13:05.920 --> 0:13:09.640 you think about that? Well, first, I would say I 0:13:09.760 --> 0:13:13.400 don't think that there has been any change in our 0:13:14.080 --> 0:13:18.160 belief that technology is the ultimate inflation fighter. And I 0:13:18.280 --> 0:13:22.439 think there's two real legs behind that. One is that 0:13:22.640 --> 0:13:28.120 technology does drastically improved productivity. It helps people do the 0:13:28.200 --> 0:13:30.319 things in their lives that they want to do more 0:13:30.559 --> 0:13:35.240 efficiently UM. And then secondly, I think that the cost 0:13:35.320 --> 0:13:39.240 side of the equation continues to be brought down by technology, 0:13:39.320 --> 0:13:41.880 whether it be just bring it down the cost of 0:13:42.160 --> 0:13:46.120 inputs or even labor. So for example, we've seen the 0:13:46.160 --> 0:13:50.000 elimination of the broker value in so many different sectors, 0:13:50.080 --> 0:13:54.000 whether it be buying a plane ticket, planning a trip, 0:13:54.559 --> 0:13:57.800 finding a taxi or getting a ride share UM, or 0:13:57.880 --> 0:14:00.640 even finding someone to do small jobs owns your house. 0:14:00.720 --> 0:14:05.440 You're able to really price those out using technology avenues UM, 0:14:05.600 --> 0:14:10.320 and that ultimately does bring down inflation. So, Erica, where 0:14:10.600 --> 0:14:12.920 are you and your team doing the most work here? 0:14:12.960 --> 0:14:16.559 Where do you find the most opportunities the most value 0:14:16.960 --> 0:14:22.000 in that text stack? Well, you mentioned before that there 0:14:22.120 --> 0:14:26.360 were the bigger caps names and then you know one, 0:14:26.600 --> 0:14:29.440 and how does that relate to some of the smaller names. 0:14:29.480 --> 0:14:32.480 I think it's better to look at the end markets 0:14:32.600 --> 0:14:35.560 and find opportunities there, and I would draw your attention 0:14:35.640 --> 0:14:39.440 to three that I think are particularly important. The number one, 0:14:39.480 --> 0:14:42.600 I would say would be artificial intelligence. And what that 0:14:42.760 --> 0:14:46.360 really is is looking at big realms of data and 0:14:46.480 --> 0:14:50.280 being able to quickly identify trends within those big realms 0:14:50.320 --> 0:14:54.560 of data. And that can be using everything from cybersecurity 0:14:54.640 --> 0:14:59.320 to identify security breaches to drug companies that are looking 0:14:59.360 --> 0:15:03.040 at trend is in data to find new drugs. UM. 0:15:03.680 --> 0:15:05.920 You've seen some of the big drug companies come up 0:15:06.000 --> 0:15:09.240 with drugs much much more quickly than they have in 0:15:09.320 --> 0:15:13.400 the past by using AI. So AI is artificial intelligence 0:15:13.520 --> 0:15:16.240 is one of the most important sectors to look at 0:15:16.400 --> 0:15:19.240 right now. I would say the second is e commerce. 0:15:19.320 --> 0:15:22.520 We're still at a very early phase and e commerce 0:15:22.600 --> 0:15:25.280 and all the digital payments associated with that and the 0:15:25.360 --> 0:15:30.000 advertising opportunities associate with e commerces. That's still a very 0:15:30.200 --> 0:15:34.360 big global opportunity with many companies position to do very 0:15:34.440 --> 0:15:37.120 well in that segment. And the third segment I would 0:15:37.280 --> 0:15:42.120 mention would be energy efficiency, not just utilities moving away 0:15:42.160 --> 0:15:45.320 from using coal to alternative energies, whether it be solar 0:15:46.120 --> 0:15:51.560 or hydrogen, but also the actual appliances, whether they're used 0:15:51.600 --> 0:15:54.680 in the home or in the office or in any 0:15:54.760 --> 0:15:58.360 kind of commercial space, moving to more efficient ways of 0:15:58.520 --> 0:16:02.200 using energy, to bring down ergy costs, by using sensors, 0:16:02.240 --> 0:16:04.960 by using robotics. These are the areas that we see 0:16:05.560 --> 0:16:09.480 as having the best long tails for growth over the 0:16:09.560 --> 0:16:13.560 next decade. Erica great to get your take on tech. 0:16:13.720 --> 0:16:19.280 Erica Clower is technology equity portfolio manager over at Jennison Associates. 0:16:19.320 --> 0:16:22.320 Talking to us about really the stocks I think that 0:16:23.080 --> 0:16:28.520 we all know and seemingly everyone owns and everyone thinks 0:16:28.560 --> 0:16:33.160 of when you when you talk about the finishing over 0:16:33.160 --> 0:16:35.120 the last nine months, though it's they've kind of fallen 0:16:35.160 --> 0:16:36.960 a little bit below the redar screens. People have been 0:16:37.000 --> 0:16:39.200 playing the reopening trade, but man, the long term growth 0:16:39.200 --> 0:16:42.000 story still there is. Erica said, yeah, absolutely great to 0:16:42.080 --> 0:16:44.240 get your take. Erica, thanks for joining us. Hoping get 0:16:44.280 --> 0:16:51.960 you back again. This is Bloomberg after the closed. Today 0:16:52.040 --> 0:16:56.400 the Federal Reserve will release the results of its stress tests, 0:16:56.440 --> 0:16:58.680 and you think about the financial crisis coming out of that. 0:16:58.800 --> 0:17:00.840 These were really really big deals and I think they're 0:17:00.880 --> 0:17:02.720 still kind of important because it goes to the issue 0:17:03.480 --> 0:17:07.080 of returning cash the shareholders, and these stress tests are 0:17:07.080 --> 0:17:09.600 are pretty important. So when we talk about anything on 0:17:09.680 --> 0:17:12.479 the banking front, we go to our expert. That's Alison Williams. 0:17:12.520 --> 0:17:15.960 She's in a senior banks analysts for Bloomberg Intelligence. He 0:17:16.040 --> 0:17:19.000 covers all the financials. She has for decades, both on 0:17:19.560 --> 0:17:22.640 for Bloomberg Intelligence and then before that Morgan Stanley Investment 0:17:22.720 --> 0:17:25.760 Management in New York, where she was an analyst there. Allison, 0:17:26.400 --> 0:17:29.719 what are the key things here that bank investors are 0:17:29.760 --> 0:17:32.159 looking for when the stress tests are released? Here for 0:17:32.200 --> 0:17:35.840 the clothes today, So the key thing we'll be looking 0:17:35.920 --> 0:17:39.959 for today along with um other investors and analysts. UM, 0:17:40.200 --> 0:17:44.800 are you know, what are the stressed capital losses in 0:17:44.880 --> 0:17:49.320 the test? So they these tests have evolved and UM 0:17:49.520 --> 0:17:53.560 basically what happens with the test now is UM the 0:17:53.680 --> 0:17:58.040 regulators look at what that stress capital losses, UH, you 0:17:58.119 --> 0:18:01.120 know sort of bucket is, so basically, how does your 0:18:01.240 --> 0:18:05.600 capital change from today to the worst point right? And 0:18:05.720 --> 0:18:09.560 then based on that they set a requirement and then 0:18:09.600 --> 0:18:12.760 as long as you meet that requirement, you can basically, 0:18:13.280 --> 0:18:15.320 you know, do as you like. So it's a lot 0:18:15.440 --> 0:18:19.040 different than in the previous test where the banks had 0:18:19.080 --> 0:18:21.960 to ask for a dividend and a very specific buyback program. 0:18:22.040 --> 0:18:25.960 And in fact, we already have buyback programs across several banks. 0:18:26.040 --> 0:18:28.920 So really what we learned today is, you know, will 0:18:29.000 --> 0:18:32.760 banks be able to execute on those programs? UM, and 0:18:33.040 --> 0:18:34.760 we may get you know, sort of a signal in 0:18:34.880 --> 0:18:37.200 terms of how much capital they can return from here. 0:18:38.119 --> 0:18:40.320 How much that was gonna be my question? How much 0:18:40.359 --> 0:18:42.000 do we expect? I think I saw a number on 0:18:42.040 --> 0:18:46.240 a hundred sixty billion dollars yesterday, Yeah, so I think 0:18:46.480 --> 0:18:49.639 um so. Arnold Cucuta, who covers the credit side of 0:18:49.680 --> 0:18:53.639 the banks UH, calculates about a hundred and fifty billion 0:18:54.200 --> 0:18:57.840 of excess capital um. When we look at that amount UM, 0:18:58.400 --> 0:19:01.919 we agree with his calculation obviously, but we would also 0:19:02.080 --> 0:19:06.560 note that when we look at what Dember, you can 0:19:06.600 --> 0:19:10.359 have disagreements' work is very good. We we can we 0:19:10.520 --> 0:19:14.120 can disagree, but we actually agree in this in this instance. 0:19:14.240 --> 0:19:16.480 So I think we agree on the access capital and 0:19:16.520 --> 0:19:18.439 I think we also agree that if you look at 0:19:18.480 --> 0:19:22.840 the December tests, UM, you know, Goldman performed much better 0:19:22.920 --> 0:19:25.520 in that test. Morgan Stanley perform much better in that test. 0:19:25.960 --> 0:19:28.040 This test is going to look a bit more like 0:19:28.240 --> 0:19:29.960 that test in the sense that we're going to be 0:19:30.680 --> 0:19:33.280 much it's it's a much harsher test of things like 0:19:33.320 --> 0:19:36.000 commercial real estate and credit cards. So that's that's not 0:19:36.160 --> 0:19:38.720 sort of where those banks are focused. And if we 0:19:38.840 --> 0:19:43.159 do mirror that test, Goldman, Sachs and Morgan Stanley are 0:19:43.240 --> 0:19:47.360 both going to see their UM you know, requirement drop 0:19:47.600 --> 0:19:51.440 and so they should be able to return capital shareholders. 0:19:51.560 --> 0:19:53.560 And and again, so Arnold and I aren't the only 0:19:53.600 --> 0:19:56.239 ones thinking this. I think a lot of people are 0:19:56.320 --> 0:19:59.920 expecting Goldman to get some relief, and so if they don't, 0:20:00.040 --> 0:20:02.639 that would obviously be a negative surprise. And and by 0:20:02.680 --> 0:20:05.280 the way, Goldman and Morgan Stanley should both get relieved. 0:20:05.320 --> 0:20:07.640 It's just a little bit more critical for Goldman because 0:20:07.680 --> 0:20:12.280 Morgan Stanley has much more excess capital. So elsewhere are 0:20:12.840 --> 0:20:14.800 you know, dividend yields now for some of these big 0:20:14.840 --> 0:20:18.399 banks and where do you think they should be? So 0:20:18.560 --> 0:20:22.520 that's a great question because we really think that, um, 0:20:22.880 --> 0:20:24.879 you know, Bank of America is sort of going to 0:20:25.160 --> 0:20:28.520 set the standard, if you will, going forward. So Ever, 0:20:28.680 --> 0:20:31.359 since the Global financial crisis, we've had banks sort of 0:20:31.440 --> 0:20:34.600 marching up their dividends and you know, someone like Wells 0:20:34.680 --> 0:20:38.440 Fargo had gotten to sort of payout right, and that 0:20:38.600 --> 0:20:41.439 was similar to what we saw prior to the Global 0:20:41.520 --> 0:20:45.280 financial crisis. However, Bank of America said, you know, we're 0:20:45.280 --> 0:20:47.359 gonna walk up our dividends, but we never want to 0:20:47.400 --> 0:20:50.760 cut our dividends again. Uh, you know, and we've done 0:20:50.800 --> 0:20:54.399 the work in UM. Dividend payout looks to us like 0:20:54.600 --> 0:20:57.399 something that's you know, on the safer side of things. 0:20:57.920 --> 0:21:01.280 And what we saw on this UM pandemic, we did 0:21:01.359 --> 0:21:04.000 see limiting of dividends and we did see Wells Fargo 0:21:04.080 --> 0:21:07.440 have to cut their dividend. As the fed UM basically 0:21:07.520 --> 0:21:10.680 set a precedent by saying you know what and until, 0:21:11.080 --> 0:21:14.000 you know, until things get better. We appreciate that you've 0:21:14.040 --> 0:21:16.040 cut the buybacks, but we also want you to limit 0:21:16.080 --> 0:21:19.680 your payout too for quarter trailing earnings. So Wells Fargo 0:21:19.760 --> 0:21:22.879 had to cut UM, and so I think and a 0:21:23.000 --> 0:21:25.120 lot of regionals. You know, it was also a little 0:21:25.119 --> 0:21:28.520 bit of a nail bier, but with all the stimulus 0:21:28.640 --> 0:21:31.119 and the fast recovery, things turned out great. But we 0:21:31.240 --> 0:21:33.359 think that banks are going to sort of factor this 0:21:33.560 --> 0:21:37.000 into their forward thinking in terms of, you know, no 0:21:37.119 --> 0:21:39.200 one wants to be in a position to cut their dividend, 0:21:39.320 --> 0:21:42.520 and so we do expect Wells Fargo is gonna have 0:21:42.640 --> 0:21:45.560 the biggest increase, right but they're coming from you know, 0:21:45.760 --> 0:21:47.840 sort of their cut levels, so they're still catching up 0:21:47.840 --> 0:21:51.520 a little bit. So still healthy dividend deeald Um. You 0:21:51.600 --> 0:21:53.960 know city group we think could could have a three 0:21:54.000 --> 0:21:57.800 percent yields um. You know some that's sort of similar 0:21:57.880 --> 0:22:00.520 to that's basically where they are today. Um. We don't 0:22:00.560 --> 0:22:03.199 think that's going to change much. JP Morgan City smaller 0:22:03.320 --> 0:22:07.159 increases UM Morgan Staion, Goldman Sachs. Maybe walking it up 0:22:07.200 --> 0:22:10.119 a little bit UM to get closer to that, you know, 0:22:10.240 --> 0:22:13.520 to Jewish percent level. JP Morgan, by the way, is 0:22:13.560 --> 0:22:16.800 the only bank that's a little bit over that um. 0:22:16.880 --> 0:22:19.240 And we expect again just sort of a nudge up there. 0:22:20.320 --> 0:22:25.200 Now prevalent are buy backs in the banking industry compared 0:22:25.240 --> 0:22:29.080 to other others. And I noticed that, you know, share 0:22:29.119 --> 0:22:31.800 buy backs for the overall market hit a high I 0:22:31.840 --> 0:22:35.480 think two eighteen, but they've come down substantially since then. 0:22:35.960 --> 0:22:39.720 Does that bounce back up after this? So keep in 0:22:39.800 --> 0:22:43.800 mind that these banks um basically we're very conservative with 0:22:43.920 --> 0:22:46.480 capital um. Again, we talked about sort of the plausas 0:22:46.560 --> 0:22:50.639 during the pandemic, so they have access and so and 0:22:51.000 --> 0:22:53.520