WEBVTT - How to Tweak the 60/40 Portfolio to Boost Yield: Ritholtz 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:09.200 we bring you interviews from CEOs, A market pros, and 0:00:09.400 --> 0:00:12.799 Bloomberg experts, along with essential market moving news kind the 0:00:12.800 --> 0:00:16.320 Bloomberg Markets Podcast on Apple Podcasts or wherever you listen 0:00:16.360 --> 0:00:22.200 to podcasts and on Bloomberg dot com focusing on markets here, 0:00:22.239 --> 0:00:25.120 you know, you've got the interest rates and incredibly low. 0:00:25.280 --> 0:00:27.200 It seems like if you listen to the Fed chairman 0:00:27.240 --> 0:00:30.720 pal lower for longer. That calls into a question a 0:00:30.800 --> 0:00:35.840 lot of folks about the traditional sixty forty portfolio stocks 0:00:35.880 --> 0:00:37.600 and bonds. Is that dead? Is that a thing of 0:00:37.680 --> 0:00:40.800 the past. I'm gonna put that to Barry Ridholt's Bloomberg 0:00:40.880 --> 0:00:44.600 opinion columnists and host of Masters in Business on Bloomberg Radio, 0:00:44.600 --> 0:00:48.080 also founder in chief investment officer of Riddholt's Wealth Management. Barry, 0:00:48.080 --> 0:00:50.840 thanks so much for joining us here. So the sixty 0:00:50.920 --> 0:00:55.480 forty portfolio is that kind of a thing in the past. Yeah, 0:00:55.560 --> 0:00:58.280 you know, I always feel like a doctor who's telling 0:00:58.320 --> 0:01:02.760 people they need to exercise and watch what they eat 0:01:02.880 --> 0:01:09.880 when we discuss these traditional portfolios. Um no, these portfolios 0:01:09.959 --> 0:01:14.520 are are not dead. And look no further than the 0:01:14.560 --> 0:01:18.720 folks who had an all equity portfolio heading in to 0:01:18.959 --> 0:01:23.240 March of this year, all that panic selling we saw 0:01:23.959 --> 0:01:28.440 after a thirty percent drop, I'm pretty confident that most 0:01:28.520 --> 0:01:33.320 of those people did not have the sort of diversified 0:01:33.360 --> 0:01:38.160 portfolio where thirty or forty of your holdings are fixed 0:01:38.200 --> 0:01:43.199 income that operate as a volatility dampener. And and it's 0:01:43.319 --> 0:01:47.400 not just about yield. Well exactly, it wouldn't want to 0:01:47.400 --> 0:01:50.560 be these days, what barries So you're saying it's it's 0:01:50.600 --> 0:01:55.000 purely for the volatility dampening of of bonds that you'd 0:01:55.000 --> 0:02:00.080 have a bonds right now. Well, you know, consider it 0:02:00.080 --> 0:02:03.720 at a fairly conservative portfolio. Depending on your age, your 0:02:03.800 --> 0:02:09.480 risk tolerance, that could be seventy thirty six if you're 0:02:09.560 --> 0:02:12.400 young and you could tolerate the swings that we've seen 0:02:12.400 --> 0:02:16.359 in the market. Something like eight is certainly viable if 0:02:16.360 --> 0:02:19.639 you have a forty fifty year even a thirty year 0:02:20.000 --> 0:02:24.200 time horizon. You know, the problem that we always seem 0:02:24.240 --> 0:02:28.480 to encounter is that people look at low yields and 0:02:28.639 --> 0:02:32.160 what is it. A decade ago people were complaining that's 0:02:32.160 --> 0:02:35.000 the ten year had fallen to a four percent yield, 0:02:35.680 --> 0:02:39.040 people would people would kill for four percent. Now, uh, 0:02:39.080 --> 0:02:42.120 that you cannot get blood from a stone, you cannot 0:02:42.280 --> 0:02:45.840 create something out of nothing, and you have to accept 0:02:46.440 --> 0:02:50.239 that your options are limited and there's only so much 0:02:50.280 --> 0:02:54.480 you can do. Now, there are things you can do UM, 0:02:54.560 --> 0:02:57.280 and there are are different structural changes you can make 0:02:57.280 --> 0:02:59.519 in different holdings you can have, but you have to 0:02:59.600 --> 0:03:03.320 be real realistic that if you're looking for higher rates 0:03:03.360 --> 0:03:07.520 in a low rate environment, you are taking on more 0:03:07.639 --> 0:03:10.760 risk and and that's the key to remember, and risk 0:03:10.800 --> 0:03:13.880 means potential loss. Hey, Barry, I think since the last 0:03:13.919 --> 0:03:17.519 time we all sat down a chat chatted, we've had 0:03:18.280 --> 0:03:21.200 at least a couple of pharmaceutical companies come out with 0:03:21.200 --> 0:03:24.840 a vaccine. Data seems very very promising. Yet at the 0:03:24.919 --> 0:03:29.280 same time we're seeing metrics on the pandemic just go 0:03:29.440 --> 0:03:34.040 the absolute wrong way and certain cities and countries shutting down. 0:03:35.600 --> 0:03:38.160 Is he stepped back here any What are your thoughts 0:03:38.280 --> 0:03:41.520 on that as it relates to the markets. Sure? So, 0:03:42.480 --> 0:03:44.880 there are there are two approaches that you take when 0:03:44.920 --> 0:03:49.440 you're dealing with a pandemic. One is a vaccine that 0:03:49.480 --> 0:03:53.400 will stop UM the spread of this, and and the 0:03:53.560 --> 0:03:59.520 other is the various non pharmaceutical approaches that will allow 0:03:59.600 --> 0:04:04.720 you to to tamp down on the spread of the 0:04:05.000 --> 0:04:09.440 epidemic while you're waiting for the pharmaceutical solution. And it 0:04:09.480 --> 0:04:12.480 pretty much appears like this administration made a bet on 0:04:12.520 --> 0:04:16.320 the former and while ignoring the latter, they went all 0:04:16.360 --> 0:04:19.160 in on vaccines. And listen, these vaccines are going to 0:04:19.200 --> 0:04:22.800 be fantastic when they finally are manufactured in number and 0:04:22.800 --> 0:04:27.280 are widely distributed and of the U S population has 0:04:27.320 --> 0:04:31.080 taken them so that we have full herd immunity. But 0:04:31.320 --> 0:04:34.440 that's you know, six months at the earliest off in 0:04:34.480 --> 0:04:38.760 the future, maybe even more, maybe eight or ten months 0:04:39.600 --> 0:04:43.359 off in the future. And so the idea that we 0:04:43.440 --> 0:04:46.719 could ignore things like social distancing and working from home 0:04:46.760 --> 0:04:51.360 and wearing masks whenever we go outside is folly. And 0:04:51.680 --> 0:04:55.640 you see that in these you know, insane infection rates 0:04:55.680 --> 0:04:58.839 were coming up on two hundred thousand new infections a day. 0:04:59.640 --> 0:05:02.599 It's is horrible. And so on the one hand, you 0:05:02.720 --> 0:05:07.240 see the equity markets looking past that valley, but on 0:05:07.279 --> 0:05:10.920 the other hand, the broader economy is bracing for for 0:05:11.040 --> 0:05:15.039 quite the difficult couple of months. If not quarters, and 0:05:15.160 --> 0:05:20.000 that gets reflected in the bond market. Right But I 0:05:20.040 --> 0:05:21.960 do wonder if you wouldn't be better at all replacing 0:05:22.040 --> 0:05:26.960 some of that allocation with, for example, gold right now, Well, 0:05:27.320 --> 0:05:30.240 it depends on what your purpose. If you're if you're 0:05:30.320 --> 0:05:33.520 looking for a volatility dampen or go back to O 0:05:33.640 --> 0:05:35.960 eight oh nine, go back to other periods of high 0:05:36.000 --> 0:05:40.680 volatility two thousand and of course, and you'll see, you know, 0:05:41.080 --> 0:05:44.040 gold didn't quite fall as much as stocks, but it's 0:05:44.040 --> 0:05:47.799 certainly um got hit when when the market fell. Bonds, 0:05:47.800 --> 0:05:50.400 on the other hand, not only did they not fall, 0:05:50.520 --> 0:05:53.600 but they attracted capital. It's a it's a you know, 0:05:53.680 --> 0:05:56.400 it's it's a safe harbor in a storm on a 0:05:56.480 --> 0:06:01.320 temporary basis. Um, what we've been telling people who were 0:06:01.400 --> 0:06:05.400 looking for yield and are willing to take a little 0:06:05.440 --> 0:06:07.800 bit more risk, there are a couple of options they have. 0:06:08.640 --> 0:06:12.840 Certainly shortening your duration and and not owning a ten 0:06:12.960 --> 0:06:18.120 year taking less yield today, Um, you could you can 0:06:18.160 --> 0:06:21.080 own a three month treasury note. It's not that far 0:06:21.360 --> 0:06:25.560 less paying than what the tenure pays. And if eventually, 0:06:25.640 --> 0:06:29.599 if and when rates go up, you can start rolling 0:06:29.600 --> 0:06:33.760 out of that into higher yields down the road. Um, 0:06:33.839 --> 0:06:37.479 we we suggest that for people who have montized portfolios, 0:06:37.520 --> 0:06:40.400 if if you have a larger portfolio, well, you could 0:06:40.400 --> 0:06:45.240 obviously construct a bond ladder, so you have three and 0:06:46.200 --> 0:06:49.200 maturity dates and so on. You ladder that out for 0:06:49.240 --> 0:06:52.680 a decade or longer. And then when each of the 0:06:54.080 --> 0:06:57.039 legs of vote that ladder, each of the rungs of 0:06:57.080 --> 0:07:01.279 that ladder come, do you replace them with ten year 0:07:01.480 --> 0:07:07.120 out paper that is hopefully yielding higher levels. So you're 0:07:07.200 --> 0:07:11.080 you're getting the benefit of edit duration now and if 0:07:11.200 --> 0:07:14.560 yield goes up over time, well as each of these 0:07:14.680 --> 0:07:18.559 wrongs mature, you have the opportunity to swap out higher 0:07:18.640 --> 0:07:21.320 yielding treasury. Yeah, for sure, we're out of time. But 0:07:21.320 --> 0:07:25.720 who is your next Master's Business candidate? UM? So I 0:07:25.840 --> 0:07:28.920 have I have two really interesting people coming up. One 0:07:29.080 --> 0:07:33.600 is Greg Fleming Um who who I'm sure you're familiar 0:07:33.600 --> 0:07:36.760 with from from all of his um all of his 0:07:37.120 --> 0:07:42.160 investment banking work. But the UH this weekend is Dennis 0:07:42.680 --> 0:07:48.640 Lynch who is Morgan Stanley Counterport Global and has put 0:07:48.680 --> 0:07:52.120 together an incredible track record this year. A lot of 0:07:52.160 --> 0:07:55.760 his funds are up nearly double, so that that's a 0:07:55.800 --> 0:08:00.240 fascinating conversation. Yeah, alright, Dennis Lynch, and then Gregory's timing, 0:08:00.240 --> 0:08:03.040 who is now the president CEO of Rockefeller Capital Management, 0:08:03.200 --> 0:08:05.640 coming up on Masters in Business with our guests. I 0:08:05.720 --> 0:08:09.040 remember when Dennis Lynch was my client. He was a young, young, 0:08:09.200 --> 0:08:11.800 young by side analyst at Morgan Stanley. Now he's a 0:08:11.880 --> 0:08:15.320 very successful portfolio manager. They're running that large cap group. 0:08:15.400 --> 0:08:17.440 Putting up just great numbers is very well. I think 0:08:17.440 --> 0:08:19.520 you need to call Barry offline and give him a 0:08:19.520 --> 0:08:22.160 few anecdotes so we can spin them into in business 0:08:22.720 --> 0:08:24.960 always makes for a good introduction if you have a 0:08:24.960 --> 0:08:30.280 little dirt on somebody. We got some economic data this 0:08:30.360 --> 0:08:33.480 morning from the Conference Board. It's leading Economic Index for 0:08:33.520 --> 0:08:37.600 the US increased zero point seven percent in October, following 0:08:37.600 --> 0:08:40.080 a zero point seven percent increase in September and at 0:08:40.120 --> 0:08:42.600 one point six percent increase in August. To help us 0:08:42.840 --> 0:08:45.840 break it down, we welcome again ottoman Azzo Drum, Senior 0:08:45.880 --> 0:08:50.000 Director Economics and Global Research Chair at the Conference Board. Automan, 0:08:50.080 --> 0:08:54.360 thanks for joining us again. A good month. Uh what's 0:08:54.360 --> 0:08:57.080 the takeaways here? Hi? Good morning, Thanks for having me 0:08:57.160 --> 0:09:00.160 on the program. Um. Yes, so the U S l 0:09:00.160 --> 0:09:05.439 Ai Rose again in October. The improvements were widespread among 0:09:05.520 --> 0:09:10.520 leading indicators, despite the weakness from housing permits and the 0:09:10.520 --> 0:09:14.960 consumer's outlook on economic conditions. So the takeaway is that 0:09:15.559 --> 0:09:18.920 there is a recovery and leading indicators which bodes well 0:09:19.320 --> 0:09:24.160 for the economic recovery. Um. But the leading index itself 0:09:24.240 --> 0:09:28.160 has been decelerating in recent months. So that suggests that 0:09:28.800 --> 0:09:33.360 growth will moderate going into the final months of twenty 0:09:33.559 --> 0:09:37.040 and that will slow down from the the very unusual 0:09:37.320 --> 0:09:40.920 rapid pace that we saw in the third quarter. And 0:09:41.000 --> 0:09:43.840 certain things like stock prices helped boy its a little 0:09:43.840 --> 0:09:46.280 bit this month, So you have to wonder if that's 0:09:46.320 --> 0:09:47.959 a good thing for the entire economy, is just for 0:09:48.000 --> 0:09:51.480 a certain portion of the economy. Well, when when you 0:09:51.480 --> 0:09:55.800 look at the leading indicators, uh, you know, over several months, 0:09:57.320 --> 0:10:03.000 especially stock prices, the yield spread components have been supporting 0:10:03.360 --> 0:10:07.560 the improvements in the leading index UM. So you know, 0:10:07.880 --> 0:10:12.439 that is a positive for the economy, But that's not 0:10:12.600 --> 0:10:16.520 the whole of the sort of economic activity, right, so 0:10:16.640 --> 0:10:20.680 there are other weaknesses that we've been seeing in other 0:10:20.800 --> 0:10:25.880 parts of economic activity, and um, you know, you kind 0:10:25.880 --> 0:10:27.880 of have to look at it as a glass full, 0:10:27.960 --> 0:10:33.239 glass half full, half empty situation. It's entering autumn. It's 0:10:33.280 --> 0:10:36.160 you know, the numbers are decent, the economy is recovering, 0:10:36.160 --> 0:10:39.280 but then you know, every Thursday we get these jobs claims. Uh, 0:10:39.320 --> 0:10:41.680 and it just kind of is a you know, shows 0:10:41.679 --> 0:10:44.280 you that there are some serious headwinds still out there 0:10:44.320 --> 0:10:47.720 in the marketplace, perhaps exacerbated by some of these metrics 0:10:47.720 --> 0:10:52.319 for seeing from the virus and closing down. UM, how 0:10:52.360 --> 0:10:55.640 do you think about the labor market as it relates 0:10:55.679 --> 0:11:00.480 to the overall economic outlook. Yeah, the labor market obviously 0:11:00.600 --> 0:11:04.680 is a very important element, especially in this recession, as 0:11:04.720 --> 0:11:07.040 with every recession, but more so this time, I think 0:11:07.440 --> 0:11:12.240 because the impact has been so disruptive for labor markets. UM. 0:11:12.320 --> 0:11:15.400 I went back over several months and looked at so 0:11:15.600 --> 0:11:20.880 the UI claims contributions in the ALII and the improvement 0:11:20.960 --> 0:11:24.400 that we're seeing in the ALI over six months, half 0:11:24.400 --> 0:11:29.120 of that comes from UI claims. UM. But again, UM, 0:11:29.280 --> 0:11:33.120 we are seeing a deceleration in the improvements in labor 0:11:33.160 --> 0:11:36.000 markets and that's going to be concerning, I think looking 0:11:36.040 --> 0:11:40.079 ahead at the recovery, so we had what five six 0:11:40.120 --> 0:11:44.520 months of positive personal income X transfers and it's still positive, 0:11:44.600 --> 0:11:49.079 but it's very very anemic, Aloman. What what is that 0:11:49.559 --> 0:11:54.439 telling us? Yeah? Again, you know, it is really a 0:11:54.480 --> 0:11:58.040 reflection of all these disruptions that we're seeing, uh in 0:11:58.559 --> 0:12:03.760 in the labor markets. People are concerned about their employment status, 0:12:03.880 --> 0:12:07.640 uh ability to you know, keep their jobs. Uh. And 0:12:07.760 --> 0:12:11.640 that has a reflection directly on their income levels. So 0:12:11.720 --> 0:12:15.640 that does create some risk aversion um. And a lot 0:12:15.720 --> 0:12:19.200 of the gains in personal income that we were seeing 0:12:19.320 --> 0:12:23.400 is coming from uh, you know, a component called transfer payments, right, 0:12:23.480 --> 0:12:31.800 so government stimulus programs, unemployment insurance programs have been supporting 0:12:31.800 --> 0:12:36.200 those income levels UM. And you know, without that artificial support, 0:12:36.320 --> 0:12:38.840 I think there is a lot of concern on people's 0:12:38.880 --> 0:12:43.679 minds about again employment and income looking ahead a lot 0:12:43.720 --> 0:12:46.480 about One part of the economy that continues to really 0:12:46.520 --> 0:12:49.840 impress me. Surprised me actually is the housing market. We 0:12:49.880 --> 0:12:53.040 had the existing home sales today, very strong numbers. Uh. 0:12:53.080 --> 0:12:57.000 News starts yesterday, very strong numbers. Um. How does that 0:12:57.160 --> 0:13:02.000 factor into your economic work and your outlook? Yeah? They 0:13:03.040 --> 0:13:06.640 Uh there has been uh you know, more positive news 0:13:06.720 --> 0:13:12.360 coming from the construction housing construction uh factor over the 0:13:12.840 --> 0:13:16.040 last several months. That's good news for the economy because 0:13:16.080 --> 0:13:21.000 it is a leading sector for overall economic activity UM. 0:13:21.040 --> 0:13:25.199 In the leading index UM, we use a related component 0:13:25.280 --> 0:13:29.360 which is building permits. Uh. That's highly correlated with starts, 0:13:29.400 --> 0:13:31.400 but it tends to be a little bit smoother, So 0:13:31.480 --> 0:13:34.160 it gives us a better view on a smoother view 0:13:34.160 --> 0:13:39.400 on the business cycle and building permits UH contribution in 0:13:39.520 --> 0:13:43.000 October war zero UM, So that could be a little 0:13:43.040 --> 0:13:46.640 bit concerning. And I'd been watching that very carefully. Yeah, 0:13:46.679 --> 0:13:48.520 we were looking at yesterday a month of a month, 0:13:48.800 --> 0:13:51.000 it's flat and economist we're looking for it to be 0:13:51.080 --> 0:13:53.920 up one point four and you have to wonder if 0:13:53.960 --> 0:13:57.360 this isn't going to be a blip in the future 0:13:57.800 --> 0:14:00.840 of housing starts. I mean, yes, how's the stars themselves 0:14:00.920 --> 0:14:03.520 are still really strong at four point present in October, 0:14:03.600 --> 0:14:08.040 but the permits aren't going in there, are they? Rights? Right? Uh? 0:14:08.120 --> 0:14:10.520 So you know the weakness and permits of course is 0:14:10.559 --> 0:14:14.679 related to the future activity and uh you know whether 0:14:14.760 --> 0:14:18.560 you actually will start construction and whether the the good 0:14:18.600 --> 0:14:21.920 news will continue or not. And uh, I think that 0:14:22.040 --> 0:14:27.360 just highlights some, uh, some of the risks in economic recovery. AM. 0:14:27.520 --> 0:14:32.440 We had the president of the Cleveland Fed on this morning, UH, 0:14:32.480 --> 0:14:34.640 and one of the things she spoke about was the 0:14:34.720 --> 0:14:39.600 continued need for fiscal stimulus. Uh, we haven't gotten that 0:14:39.800 --> 0:14:42.200 fourth round that a lot of people in the market 0:14:42.200 --> 0:14:45.640 were looking for a How do you think that's going 0:14:45.680 --> 0:14:48.800 to play out with our the new uh newly elected 0:14:48.800 --> 0:14:51.280 officials and and be what is it in your base 0:14:51.320 --> 0:14:56.120 case at all? Um? You know, in our base case, 0:14:56.600 --> 0:15:00.800 we haven't allowed for a lot more stimul us coming in. 0:15:01.040 --> 0:15:03.480 But you know, as we know, at the end of 0:15:03.520 --> 0:15:07.160 the year, a lot of these unemployment support programs are 0:15:07.240 --> 0:15:11.320 going to expire. UM, So that does have an impact 0:15:11.400 --> 0:15:15.160 on our projections. You know, over the next couple of quarters. UH, 0:15:15.720 --> 0:15:21.480 without a large degree of government government stimulus, we're projecting 0:15:21.480 --> 0:15:25.280 around two point two percent growth for the final quarter 0:15:26.120 --> 0:15:28.960 UM and slowing growth in the first quarter of the 0:15:29.000 --> 0:15:32.720 next year. I think just about all points seven percent 0:15:32.800 --> 0:15:37.040 for GDP growth, Ottoman, you know, explain why all this 0:15:37.240 --> 0:15:40.160 is happening. And at the same time, consumers seem to 0:15:40.200 --> 0:15:42.800 be spending because we saw that in the retail learnings, 0:15:42.880 --> 0:15:45.560 we saw in some other data, you know, in the 0:15:45.680 --> 0:15:51.360 last few weeks. UM. Yeah again, Um, you know, personal 0:15:51.400 --> 0:15:56.360 income has been doing well, it's deported by unemployment support 0:15:56.840 --> 0:16:03.160 um so that partly explains uh, the good retail spending figures. 0:16:03.760 --> 0:16:07.080 Um but I would be concerned about whether those trends 0:16:07.080 --> 0:16:11.480 are going to be sustainable, especially now we have this 0:16:11.600 --> 0:16:15.280 deceleration and the improvement in labor markets, and we're also 0:16:15.560 --> 0:16:20.200 being faced by a second wave of the COVID nineteen outbreaks. 0:16:20.600 --> 0:16:24.680 Um So that is likely to I think constrain a 0:16:24.760 --> 0:16:29.040 consumer spending and that's probably the biggest factor in our 0:16:29.320 --> 0:16:34.280 projections for the slowing growth in the last quarter. Ottoman, 0:16:34.320 --> 0:16:36.080 thank you so much for joining us. As always, we 0:16:36.080 --> 0:16:40.080 appreciate your thoughts. Ottoman also Drum, director of Economic research 0:16:40.160 --> 0:16:42.520 and a global research there at the conference board, and 0:16:42.560 --> 0:16:47.200 we appreciate his thoughts. So now let's get to our 0:16:47.240 --> 0:16:51.640 guests and continue to talk markets. Brian Fairbanks is CEO 0:16:51.840 --> 0:16:54.600 of Tricks, and Brian was listening to some of that. Brian, 0:16:54.800 --> 0:16:57.800 they're just wondering what your takeaway is on coronavirus and 0:16:58.000 --> 0:17:00.920 where we're at as an economy and where corporate America 0:17:01.040 --> 0:17:04.800 is at. Oh, that's an absolute tough cup panel to follow. 0:17:05.600 --> 0:17:09.000 We see great opportunity as we move forward. We're very 0:17:09.080 --> 0:17:14.240 encouraged by the progress being made with the vaccines, as 0:17:14.280 --> 0:17:17.960 well as the actions being taken in various states to 0:17:18.160 --> 0:17:22.320 try to stem the continued spread of the virus. There 0:17:22.359 --> 0:17:26.639 really tres company. We see continued opportunity for people to 0:17:26.760 --> 0:17:31.439 improve their living spaces by buying our eco friendly outdoor decking. 0:17:32.440 --> 0:17:34.960 So Brian, it's you know, we've seen this a lot 0:17:35.040 --> 0:17:37.399 during the pandemic, a lot of folks obviously spending a 0:17:37.440 --> 0:17:39.840 lot more time at home, uh, spending a lot of 0:17:39.840 --> 0:17:43.840 time at Low's getting stuff to improve their home. Talked 0:17:43.920 --> 0:17:47.480 us about how your business evolved, you know, starting that 0:17:47.520 --> 0:17:51.040 February March time frame through today. Sure, we had a 0:17:51.080 --> 0:17:54.520 lot of questions February March time frame of where the 0:17:54.520 --> 0:17:58.040 economy was going to go, how the consumer would behave 0:17:58.800 --> 0:18:02.600 Very quickly by really May, we found that the consumer 0:18:02.720 --> 0:18:06.840 was very resilient and looking to improve their own living space. 0:18:07.400 --> 0:18:09.639 One of the tail winds that we saw is that 0:18:09.720 --> 0:18:12.800 people are interested in having work done outside their house, 0:18:13.119 --> 0:18:15.960 whether they were doing it themselves and buying it one 0:18:15.960 --> 0:18:18.760 of our d I Y partners or having a contractor 0:18:18.840 --> 0:18:21.480 come in and do that. We've continued to see that 0:18:22.080 --> 0:18:26.040 through the entire summer and now into the fall months. Brian, 0:18:26.200 --> 0:18:29.040 where are your biggest areas of demand. I'm assuming that 0:18:29.119 --> 0:18:32.960 in cities where people don't have balconies on us, they 0:18:33.000 --> 0:18:35.679 can afford a balcony, and that you know that that 0:18:35.720 --> 0:18:38.000 wouldn't be where your customer bases. It's more in the 0:18:38.119 --> 0:18:42.399 rural areas. What wouldn't say necessarily rural areas supports so 0:18:42.640 --> 0:18:46.960 in the suburban areas. So outside of your major cities 0:18:47.720 --> 0:18:51.600 we are, our volume tends to dominate in those areas 0:18:51.640 --> 0:18:55.320 where there are large populations. So your suburbs outside of 0:18:55.400 --> 0:18:58.920 New York through Pennsylvania, down into the south, really across 0:18:59.000 --> 0:19:02.520 the country where you see the larger population centers, you 0:19:02.520 --> 0:19:05.960 will see high volume of trecks, decking and railing sales. 0:19:06.840 --> 0:19:09.440 One of the things we've seen from a commodity standpoint 0:19:09.560 --> 0:19:13.439 during this um it has been um the price of 0:19:13.560 --> 0:19:15.879 wood and lumber. Talked to us about that as a 0:19:15.960 --> 0:19:17.520 raw material for you guys, and kind of how you're 0:19:17.520 --> 0:19:21.080 managing it. One of the unique things about Tres Company 0:19:21.240 --> 0:19:25.560 is that our raw materials are recycled content. We are 0:19:25.640 --> 0:19:30.840 buying poly ethylene from distribution centers, grocery stores all over 0:19:30.880 --> 0:19:35.600 the country and then reclaimed wood out of furniture flooring manufacturers, 0:19:36.160 --> 0:19:40.560 so we're not reliant upon the input price of wood 0:19:40.680 --> 0:19:44.080 along the way because we are using those those leftover 0:19:44.160 --> 0:19:46.520 scraps from the other parts of the business. And it's 0:19:46.560 --> 0:19:49.639 a very unique business model that has helped with the 0:19:49.680 --> 0:19:55.080 financial success of trucks over the years. So apparently compressed 0:19:55.160 --> 0:19:59.679 landfill is another um I guess for people to use 0:19:59.720 --> 0:20:04.679 to of there to have some compressed landfill used as decking. 0:20:05.119 --> 0:20:06.920 How does that work and how do you make sure 0:20:07.040 --> 0:20:11.040 that you know it's clean and so on. Our primary 0:20:11.119 --> 0:20:16.400 sources for polyethylene are going to be out of industrial 0:20:16.520 --> 0:20:21.680 protective wraps, grocery bags, other sort of films coming through. 0:20:22.160 --> 0:20:27.760 There are opportunities in using landfill and generally require some 0:20:27.880 --> 0:20:31.840 cleaning and oose are things that we look for opportunities 0:20:31.840 --> 0:20:36.639 in the future. We hope also with some support of local, state, 0:20:36.800 --> 0:20:40.440 and federal basis to help us use some of those 0:20:40.480 --> 0:20:43.960 materials as we move forward. Talk to us about the 0:20:44.000 --> 0:20:47.160 competitive landscape here. I know I'm guessing that with all 0:20:47.160 --> 0:20:50.240 the people out there trying to either replace or build 0:20:50.280 --> 0:20:52.879 new decking, it's not just you guys talked about the 0:20:52.920 --> 0:20:57.439 competitive landscape for your business. There are three major companies 0:20:57.480 --> 0:21:01.720 that make up a relatively consolidated industry. Trucks holds about 0:21:01.760 --> 0:21:04.800 fifty of the share within the industry, and then the 0:21:04.840 --> 0:21:09.280 other two companies the next so I mentioned consolidated. The 0:21:09.320 --> 0:21:13.600 most important opportunity that Tres Company has is conversion of 0:21:13.640 --> 0:21:17.440 market share against the wood industry. Wood accounts for approximately 0:21:18.560 --> 0:21:22.560 of the volume of material sold, and that's our primary focus. 0:21:24.400 --> 0:21:27.120 What are your growth plans? Presumably now be the time 0:21:27.160 --> 0:21:30.480 where you would take advantage of people flying houses and 0:21:30.520 --> 0:21:33.520 suburban and rural areas, and the house prices going up 0:21:33.520 --> 0:21:35.960 and so on. Where do you see yourself scaling too 0:21:35.960 --> 0:21:38.800 over the next few months. Over the past five years, 0:21:38.840 --> 0:21:42.639 we've been growing at about a thirteen percent rate. This year, 0:21:42.720 --> 0:21:45.760 with the midpoint of our fourth quarter guidance, our growth 0:21:45.760 --> 0:21:49.119 would be and as we look to the forward years 0:21:49.240 --> 0:21:53.560 with the wood conversion opportunity, we see no reason why 0:21:53.600 --> 0:21:58.840 that would flow. Our product lines are highly desirable or 0:21:59.080 --> 0:22:04.960 making low maintenance building products and improving the value of 0:22:05.080 --> 0:22:08.320 people's hamet and we continue to see people looking for 0:22:08.400 --> 0:22:12.359 repairing or model especially as the turnover of homes continues 0:22:12.400 --> 0:22:15.160 to increase. So I see your stock is up six 0:22:15.880 --> 0:22:18.280 this year. I'm looking at your balance sheet, not much debt. 0:22:18.920 --> 0:22:21.200 What do you do here with your stock up here yet? 0:22:21.240 --> 0:22:24.760 Any interest in selling stock or are you comfortable with 0:22:24.800 --> 0:22:27.439 your capital structure is right here? Yeah, this is a 0:22:27.520 --> 0:22:31.160 great time to have a conservative capital structure. That's something 0:22:31.200 --> 0:22:34.480 that the Tres company has always prided itself on and 0:22:34.520 --> 0:22:36.879 we received a lot of credit for that as we 0:22:37.000 --> 0:22:40.560 moved through the pandemic phase. As we look forward, our 0:22:40.680 --> 0:22:45.000 key key priorities will be first, organic growth. We're in 0:22:45.000 --> 0:22:48.800 the midst of a two million dollar capacity improvement program 0:22:49.560 --> 0:22:54.080 seventy capacity increase and most of that capacity will start 0:22:54.119 --> 0:23:01.320 coming online in early Additional priorities are share BUYBA accident. Lastly, 0:23:01.400 --> 0:23:07.000 it would be acquisitions that fit are strategic growth acquisitions. 0:23:07.119 --> 0:23:08.800 Just briefly, can you tell us if you have your 0:23:08.840 --> 0:23:13.440 eye on anything, Nothing in particular that we'd be discussing, 0:23:13.520 --> 0:23:17.080 but we're always having discussions out in the marketplace and uh, 0:23:17.520 --> 0:23:20.680 interesting things from time to time. Yeah, sure, Brian, thank you, 0:23:21.040 --> 0:23:23.960 very very interesting and to come back on when you 0:23:24.119 --> 0:23:27.680 get a little more serious about a particular acquisition. We 0:23:27.720 --> 0:23:31.360 would love to hear about a buying. Fairbanks is CEO 0:23:31.560 --> 0:23:35.840 of Tricks the Outdoor Decking Company. Stock is a heck 0:23:35.880 --> 0:23:38.000 of a run again up six, because I guess that 0:23:38.080 --> 0:23:41.080 makes sense. It's one of those um you just stay 0:23:41.119 --> 0:23:43.320 at home place, right, Bunny. Yeah? And I mean, what 0:23:43.400 --> 0:23:45.080 are you going to do if if the only exercise 0:23:45.119 --> 0:23:47.640 you're you're getting is a d I y, Well, there's 0:23:47.680 --> 0:23:50.240 that deck area that you kept meaning to build when 0:23:50.280 --> 0:23:54.320 I building Now. Thanks for listening to the Boomberg Markets podcast. 0:23:54.520 --> 0:23:57.840 You can subscribe and listen to interviews at Apple Podcasts 0:23:58.000 --> 0:24:01.560 or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm 0:24:01.600 --> 0:24:04.199 on Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm 0:24:04.240 --> 0:24:06.840 on Twitter at pt Sweeney. Before the podcast, you can 0:24:06.920 --> 0:24:09.120 always catch us worldwide at Bloomberg Radio