WEBVTT - DOJ Said to Open Probe Into Archegos Blowup 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.480 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanovik. We're here every day bringing 0:00:07.320 --> 0:00:09.799 you the latest news from the world to business and finance, 0:00:09.840 --> 0:00:13.680 clus technology, politics, economics, all parnessing the power of Business 0:00:13.680 --> 0:00:17.160 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:19.640 analysts in more than one and twenty countries. You can 0:00:19.640 --> 0:00:23.239 download Bloomberg Business Week on iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.400 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.200 --> 0:00:27.880 pm Eastern Time on Bloomberg Radio, or watch us on 0:00:27.920 --> 0:00:31.240 YouTube search Bloomberg Global News. Well. It's one of the 0:00:31.280 --> 0:00:33.519 most read stories on the Bloomberg terminal today, and it's 0:00:33.520 --> 0:00:36.440 also the cover of the new issue of Bloomberg Business 0:00:36.479 --> 0:00:39.040 Week magazine. It's available in newsstands and at Bloomberg dot 0:00:39.040 --> 0:00:41.919 com slash business Week. It's all about Kathy Wood, who 0:00:41.920 --> 0:00:44.400 has become a star both in and outside of the 0:00:44.440 --> 0:00:46.880 world of ets. They call her Money Tree in South 0:00:46.960 --> 0:00:50.440 Korea and the Godmother in Hong Kong. Joining us now 0:00:50.479 --> 0:00:53.080 is Joel Webber, editor at Bloomberg Business Week, and Ben 0:00:53.120 --> 0:00:58.040 Steve Berman, personal Finance editor at Bloomberg News Joel Uh. 0:00:58.360 --> 0:01:01.680 People may know about Kathy Would over the last year 0:01:01.720 --> 0:01:05.800 because she has become this celebrity inside and outside of finance, 0:01:06.319 --> 0:01:10.319 but she got started at arc relatively late in her 0:01:10.360 --> 0:01:15.000 career and she's been at this for years. Yeah, And 0:01:15.040 --> 0:01:16.640 what we really tried to do. I think we talked 0:01:16.640 --> 0:01:19.800 about Kathy Would almost every day in general at Bloomberg 0:01:19.840 --> 0:01:22.199 News because it's become just one of the most remarkable 0:01:22.240 --> 0:01:24.959 stories of the past year. UM. But we what we 0:01:25.000 --> 0:01:27.880 tried to do and what Ben in Um, Claire Valentine 0:01:27.920 --> 0:01:30.200 and any Massa did with this cover story was really 0:01:30.240 --> 0:01:32.880 tried to tell a bigger story about who Kathy Wood is, 0:01:32.920 --> 0:01:35.800 where she came came from, how she's up ended investing 0:01:36.400 --> 0:01:38.880 and and maybe pull you know, pull some things that 0:01:39.360 --> 0:01:42.360 out that nobody had ever really known about her. And 0:01:42.440 --> 0:01:44.760 they did that, and you know, it's really rooted in 0:01:45.520 --> 0:01:48.280 her I think having a really deep understanding of the 0:01:48.320 --> 0:01:52.960 financial industry. UM. Before she started arc Um, she she 0:01:53.080 --> 0:01:55.880 had an active the idea of doing an actively managed 0:01:55.880 --> 0:02:00.640 g E T F at um Alliance Bernstein, which basically said, 0:02:00.800 --> 0:02:02.400 we don't want you to do that, and she went 0:02:02.480 --> 0:02:05.680 out and did it anyway. And that's made her basically 0:02:05.720 --> 0:02:07.960 one of the biggest names in in finance at the 0:02:08.000 --> 0:02:10.600 moment um And and Ben, as you just started to 0:02:10.800 --> 0:02:14.040 you know, working on this story, what what stuck out 0:02:14.040 --> 0:02:18.560 to you? What makes Cathy different and special? So I 0:02:18.600 --> 0:02:22.040 think that you know, in the last year, the pandemic 0:02:22.160 --> 0:02:26.520 has created UM a lot of frenzies, Like we've seen 0:02:26.560 --> 0:02:28.480 a lot of frenzies in the stock market, and we've 0:02:28.520 --> 0:02:32.079 seen a lot of people promoting themselves and promoting their SPACs, 0:02:32.080 --> 0:02:35.720 and we've seen a lot of that phenomenon of almost 0:02:35.720 --> 0:02:40.160 celebrity culture coming into finance and investing. And so I 0:02:40.600 --> 0:02:43.679 approached Cathy would as maybe part of that. But now, 0:02:44.040 --> 0:02:45.560 you know, the more I looked at her, the more 0:02:45.600 --> 0:02:49.680 I realized that she's actually been this same person for 0:02:49.680 --> 0:02:53.520 for for decades, Like she is obsessed with innovation and 0:02:53.560 --> 0:02:56.920 the future, and and what she was saying, you know, 0:02:57.000 --> 0:02:59.679 five years before the pandemic is the same thing she 0:02:59.760 --> 0:03:03.280 saying now more or less. Maybe the timeline has accelerated 0:03:03.320 --> 0:03:06.880 a bit in terms of the the changes she sees 0:03:06.919 --> 0:03:10.040 in the economy and the stock market. But um, I 0:03:10.080 --> 0:03:15.040 really think that UM investing in these these future technologies 0:03:15.120 --> 0:03:18.919 is more is almost more about her her like philosophy 0:03:18.960 --> 0:03:21.200 of life than it is about making money. I mean, 0:03:21.200 --> 0:03:23.040 of course she's in to make money, but I think 0:03:23.080 --> 0:03:25.800 she has broader goals in mind. Well then to that point, 0:03:25.800 --> 0:03:27.600 and among the many many new things that I learned 0:03:27.600 --> 0:03:30.240 about Cathy would in this cover story about you and 0:03:30.320 --> 0:03:34.400 Claire and Annie has has been that she talked about. 0:03:34.960 --> 0:03:37.640 She had this rarely prescient comment back in February of 0:03:37.640 --> 0:03:41.080 twenty nineteen when she told a podcast it's the best 0:03:41.080 --> 0:03:42.680 thing that can happen for us. And this is going 0:03:42.720 --> 0:03:45.640 to sound odd, is a crisis. It's usually when innovation 0:03:46.080 --> 0:03:48.880 takes root and gains traction. So so how did that 0:03:48.920 --> 0:03:50.800 play out during the pandemic? How did this five year 0:03:50.840 --> 0:03:53.120 time arise and that she talks about so much, trunk 0:03:53.160 --> 0:03:58.080 had accelerate. Yeah, I mean she it's incredible if you 0:03:58.120 --> 0:04:00.920 look at the numbers on her fag ship et F. 0:04:01.000 --> 0:04:05.400 I mean we're talking about a hundred fifty return. She 0:04:05.600 --> 0:04:09.440 was right on. She she she she captured the mood 0:04:09.600 --> 0:04:12.360 of the market in that moment, and then it continued 0:04:12.400 --> 0:04:17.120 to go up all the way into February. Now since then, um, 0:04:17.200 --> 0:04:19.520 she's lost about a third of the value in in 0:04:19.600 --> 0:04:22.760 her fund because you know, as the economy has reopened, 0:04:23.320 --> 0:04:25.120 the market has been shifting towards a little bit more 0:04:25.160 --> 0:04:29.279 boring stocks of the broader the rally is broadened out, 0:04:29.440 --> 0:04:31.719 and she says that's actually good for her because it 0:04:31.760 --> 0:04:35.040 means that means that this is actually a sustainable bull market. 0:04:35.440 --> 0:04:40.280 And she's keeps telling her investors, who's mostly stuck with 0:04:40.320 --> 0:04:43.360 there that, um, that she has a five year time 0:04:43.400 --> 0:04:47.200 horizon and she still expects her portfolio to triple over 0:04:47.240 --> 0:04:49.840 those five years. Honey, of people don't believe that. I 0:04:50.120 --> 0:04:52.840 gotta say um. And so we try to reflect a 0:04:52.839 --> 0:04:55.320 debate in the story about you know, is she right, 0:04:55.480 --> 0:04:58.719 is she wrong? Um? You know, is this a real 0:04:58.960 --> 0:05:02.800 grounded opinion or or she just really hoping against hope? 0:05:03.080 --> 0:05:06.960 But um, but she's she seems pretty unruffled by what's 0:05:06.960 --> 0:05:10.960 happened recently. This is Bloomberg Business Week with Carol Masser 0:05:11.200 --> 0:05:15.760 and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, 0:05:15.880 --> 0:05:18.799 just a few months ago that we learned about the 0:05:18.839 --> 0:05:22.960 market rattling meltdown of Bill Wong's Archigo's Capital Management. It 0:05:23.000 --> 0:05:25.120 was a debaccle that left big banks in Europe Asia 0:05:25.160 --> 0:05:28.600 and the US nursing more than ten billion dollars in losses. 0:05:29.120 --> 0:05:31.919 Now our own street Are not Orajan reports the Justice 0:05:31.960 --> 0:05:34.680 Department is said to open a probe into the blow up. 0:05:34.800 --> 0:05:37.560 He joins us now from the Bloomberg Interactive Broker studio. 0:05:37.880 --> 0:05:40.599 Street Are is a finance reporter right here at Bloomberg News. 0:05:41.000 --> 0:05:44.120 Congratulations on the scoop. Street Are take us through what 0:05:44.200 --> 0:05:47.800 exactly the Justice Department is looking for. It's really preliminary 0:05:47.839 --> 0:05:51.040 at this stage them, but we understand that federal prosecutors 0:05:51.080 --> 0:05:53.839 in Manhattan have cent requests for information to at least 0:05:53.880 --> 0:05:57.200 some of the banks that dealt with the firm Archegos 0:05:57.200 --> 0:06:00.800 Capital Management that was Bill Hong's family office, and we 0:06:00.920 --> 0:06:04.480 believe they're trying to better piece together what really happened, 0:06:04.480 --> 0:06:06.240 because at the end of the day, you had a 0:06:06.279 --> 0:06:09.840 situation that left global banks with more than ten billion 0:06:09.880 --> 0:06:14.280 dollars in losses. Banks across Europe, Asia and the US 0:06:14.320 --> 0:06:16.839 suffered losses that, you know, the kind of losses we 0:06:17.000 --> 0:06:20.800 generally don't see, especially tied to one client. And on 0:06:20.880 --> 0:06:23.679 top of that, one man alone loss nearly twenty billion 0:06:23.720 --> 0:06:26.360 dollars and wells, So, like you said, it certainly was 0:06:26.400 --> 0:06:29.520 a market rattling event, and now it looks like the 0:06:29.600 --> 0:06:32.359 DJ is certainly sniffing around to see if there was 0:06:32.400 --> 0:06:35.400 something more malicious. Shoot, are you do point out in 0:06:35.440 --> 0:06:39.320 your piece that r K Ghost has not been accused 0:06:39.640 --> 0:06:42.560 by authorities or its banks of breaking any laws in 0:06:42.600 --> 0:06:46.560 their dealings. It has still drawn public criticism from regulators. 0:06:47.680 --> 0:06:51.320 What is it specifically that the regulators are concerned about? 0:06:51.360 --> 0:06:52.680 Is it? Is it the fact that they were able 0:06:52.720 --> 0:06:57.400 to build these positions and companies without being transparent about 0:06:57.400 --> 0:06:59.960 it in ways that public companies we usually know who 0:07:00.040 --> 0:07:05.719 the owners are anytimes. Anytime, important institutions like these large 0:07:05.760 --> 0:07:09.680 global banks can feel so completely blindsided. That is a 0:07:09.720 --> 0:07:13.720 matter of concern for regulators. You have a situation here where, 0:07:13.760 --> 0:07:16.560 really in two parts, you have this firm that from 0:07:16.720 --> 0:07:20.360 nowhere amassed so much wealth so quickly, which is an 0:07:20.440 --> 0:07:24.320 incredible story in itself, from next to obscurity to have 0:07:24.400 --> 0:07:27.240 more than twenty billion dollars in net assets, where a 0:07:27.360 --> 0:07:31.440 hundred billion dollar exposure in markets. That's an incredibly faster 0:07:31.560 --> 0:07:34.480 rise in less than seven years that this family office 0:07:34.520 --> 0:07:37.920 was around. That is the first most incredible thing here. 0:07:38.080 --> 0:07:40.239 But then what happened right after that, in a matter 0:07:40.280 --> 0:07:44.440 of days, that entire wealth vanished. Banks had to move 0:07:44.480 --> 0:07:48.440 to liquidate the position because some of his most concentrated bets, 0:07:48.680 --> 0:07:51.520 Bill Hong's bets moved against him, and banks are trying 0:07:51.520 --> 0:07:53.800 to save their skin. Some of them managed to do 0:07:53.920 --> 0:07:57.120 just fine and escape the burning building. Others did not, 0:07:57.320 --> 0:07:59.720 and that's why you had such big losses, and regulators 0:07:59.760 --> 0:08:02.360 are really trying to figure out a how could this 0:08:02.400 --> 0:08:05.880 possibly happen? B We we do know that part of 0:08:05.920 --> 0:08:10.239 the problem here was he had built concentrated positions across 0:08:10.240 --> 0:08:13.960 a number of stocks without all his prime brokers really 0:08:14.040 --> 0:08:17.880 having good visibility into it. And that kind of made 0:08:18.000 --> 0:08:21.480 sense because if you have a relationship with Goldman Sachs 0:08:21.800 --> 0:08:25.480 and Morgan Stanley, Goldman Sachs knows what it is holding 0:08:25.720 --> 0:08:28.760 for its client. It really cannot call up Morgan Stanley 0:08:28.800 --> 0:08:31.280 and say, hey, can you also tell us every single 0:08:31.320 --> 0:08:34.480 position that he has, So the concentration was certainly a surprise. 0:08:34.760 --> 0:08:37.120 There was the use of swaps and derivatives here, which 0:08:37.480 --> 0:08:40.120 kept him anonymous. So it was a whale just under 0:08:40.160 --> 0:08:43.760 the surface and really came to light when everything blew up. 0:08:44.040 --> 0:08:47.480 So let's say there are no regulatory changes, nothing happens 0:08:48.320 --> 0:08:52.199 in the Justice Department opens a probe and and potentially 0:08:52.240 --> 0:08:55.040 nothing comes a bit. How do the banks change the 0:08:55.040 --> 0:08:57.520 way that they deal with risk as a result of this, 0:08:58.120 --> 0:09:01.960 We actually have already seen some elements of change across banks. 0:09:02.600 --> 0:09:05.400 We don't know how long that behavioral change will lost. 0:09:05.600 --> 0:09:08.000 Is it because this is so close to the event 0:09:08.040 --> 0:09:12.559 that everyone's saying, we need to have heightened levels of awareness, 0:09:13.040 --> 0:09:15.520 We need to demand more margin, we need to demand 0:09:15.720 --> 0:09:18.959 more collateral. We just need to be more cautious than 0:09:19.040 --> 0:09:21.960 we have been. The problem with all these things, and 0:09:22.000 --> 0:09:24.520 if you look at the root cause of the problem here, 0:09:24.800 --> 0:09:28.720 leverage or borrowed money. That has been the same case 0:09:28.800 --> 0:09:30.719 in any crisis you go back to whether it was 0:09:30.760 --> 0:09:34.520 the implosion of LTCM now going over twenty years ago, 0:09:34.920 --> 0:09:37.559 even during the Global Financial Crisis in two thousand eight, 0:09:37.760 --> 0:09:41.240 leverage really was the root cause out there as well. 0:09:42.640 --> 0:09:45.880 All these banks might want to act and behave like 0:09:45.920 --> 0:09:50.320 they've learned their lessons, but without any real regulatory change, 0:09:50.559 --> 0:09:54.400 they may all slip into bad behavior because everyone's out 0:09:54.440 --> 0:09:56.680 there trying to make a little more money. Street are 0:09:56.760 --> 0:09:59.360 not a in finance report at Bloomberg News, joining from 0:09:59.360 --> 0:10:02.000 the interactive broke your studios, Thank you so much. This 0:10:02.320 --> 0:10:06.040 is Bloomberg Business Week with Carol Messer and Bloomberg Quick 0:10:06.120 --> 0:10:10.200 Takes Tim Stinovic on Bloomberg Radio. Well, yesterday it was 0:10:10.280 --> 0:10:13.400 all about Amazon paying eight point four or five billion 0:10:13.400 --> 0:10:16.720 dollars to buy MGM Studios, the studio behind Bond and 0:10:16.800 --> 0:10:20.760 other franchises. Today it's about anti trust Amazon, anti trust 0:10:20.880 --> 0:10:24.679 risk deepening is more states AG's way action. Join is 0:10:24.720 --> 0:10:27.640 now is Spencer Soaper, technology and e commerce reporter for 0:10:27.679 --> 0:10:30.440 Bloomberg News. He joins us on the phone from Seattle. 0:10:30.520 --> 0:10:34.840 Spencer take us through what the attorneys general are getting 0:10:34.840 --> 0:10:37.480 at when it comes to anti trust with with Amazon. 0:10:37.559 --> 0:10:41.920 Because anti trust and Amazon, it doesn't necessarily go with 0:10:41.960 --> 0:10:47.400 the traditional definition of consumer harm right, Well, it can, 0:10:47.559 --> 0:10:52.400 and that's where UM, we're just seeing more attorneys generals 0:10:52.600 --> 0:10:57.760 getting involved and poking its potentially working collaboratively to learn 0:10:57.800 --> 0:11:01.080 more about it. Um. And in terms of consumer harm 0:11:01.160 --> 0:11:06.480 we had um the Washington d c. Attorney General actually 0:11:06.480 --> 0:11:08.880 fall the lawsuit is making the allegation that it is 0:11:09.320 --> 0:11:12.800 Amazon's practices are driving prices up for consumers. And that's 0:11:12.800 --> 0:11:18.200 a very traditional anti trust argument. So Um, and you're correct. 0:11:18.240 --> 0:11:20.440 There's been a lot of debate about how to go 0:11:20.520 --> 0:11:23.600 after Amazon on anti trust grounds and just this notion 0:11:23.679 --> 0:11:25.760 of like do the do any trust laws need to 0:11:25.800 --> 0:11:29.280 be updated for the digital age and these various platforms 0:11:29.280 --> 0:11:31.839 like Google and Facebook and Amazon. But some of these 0:11:31.840 --> 0:11:35.000 complaints are pretty traditional any trust complaints about consumer harm 0:11:35.040 --> 0:11:39.040 and higher prices. So with these attorneys general, I mean, 0:11:39.040 --> 0:11:42.000 are they looking at specific elements of Amazon's business? Do 0:11:42.080 --> 0:11:44.559 we know what parts of Amazon's business they're looking at? 0:11:44.760 --> 0:11:48.040 Is there part of Amazon business, Amazon's business that would 0:11:48.040 --> 0:11:50.440 fit that traditional definition of antitrust more than other parts? 0:11:50.480 --> 0:11:54.600 I mean, the company has its hands in so much yes, 0:11:54.720 --> 0:11:57.880 so uh. A lot of it is pointed at the marketplace, 0:11:57.960 --> 0:12:01.000 Amazon's marketplace, and this is where amaz On basically plays 0:12:01.040 --> 0:12:05.040 a digital matchmaker between you know, shoppers around the world 0:12:05.360 --> 0:12:07.680 and merchants around the world. They have millions of merchants 0:12:07.760 --> 0:12:13.400 on their platform. Um, and so what the problems there 0:12:13.480 --> 0:12:17.959 is Amazon can it doesn't explicitly tell merchants what to do, 0:12:18.000 --> 0:12:20.520 but it can entice them to do certain things in 0:12:20.600 --> 0:12:23.839 exchange for greater visibility on the website. Because if you're 0:12:23.840 --> 0:12:26.560 invisible on Amazon, you're not going to get the sale. 0:12:26.600 --> 0:12:28.959 You have to be prominent in search results on the site. 0:12:29.280 --> 0:12:32.200 And that's where if if Amazon discovers that you have 0:12:32.240 --> 0:12:34.880 a lower price on another site like Walmart or something, 0:12:35.240 --> 0:12:38.120 they can bury you in search results on Amazon. And 0:12:38.120 --> 0:12:41.400 and that's where Amazon is so powerful. Some merchants will 0:12:41.400 --> 0:12:44.760 simply go back to Walmart and raise the price, uh, 0:12:44.840 --> 0:12:46.920 you know, rather than lower it on Amazon to save 0:12:46.920 --> 0:12:48.920 those Amazon sales. And that would be an example of 0:12:49.480 --> 0:12:53.480 consumer harm where Amazon's weight in online shopping is actually 0:12:53.520 --> 0:12:56.440 forcing prices up on other sites. So shares, as you 0:12:56.480 --> 0:12:58.440 point out in your piece, felt nine tents of one 0:12:58.480 --> 0:13:00.800 percent of premer trading. They were little change. Just as 0:13:01.080 --> 0:13:03.800 of this morning, shares down now by just about eight 0:13:03.800 --> 0:13:06.320 tenths of one percent. I'm wondering. I'm wondering about the 0:13:06.320 --> 0:13:09.600 regulatory risk that Amazon faces when it comes to shareholders 0:13:09.679 --> 0:13:11.440 and what could be the ultimate outcome of something like this, 0:13:11.520 --> 0:13:14.400 because yes, you know, investors certainly sending us talk lower 0:13:14.440 --> 0:13:19.520 today but not but not significantly. Yeah, the investors have 0:13:19.640 --> 0:13:23.839 pretty much written off the antitrust risk for Amazon um 0:13:23.920 --> 0:13:25.679 and and I don't know if that's going to heat 0:13:25.720 --> 0:13:28.240 up or not with the new administration and new people 0:13:28.360 --> 0:13:31.480 being appointed to the FTC. But Amazon has really been 0:13:31.480 --> 0:13:35.760 able to kind of snow cloud through most regulatory challenges 0:13:35.800 --> 0:13:39.160 and kind of adapt and evolved. If we think way 0:13:39.160 --> 0:13:41.959 back when you know, they used to uh not collect 0:13:41.960 --> 0:13:44.960 sales tax on transactions and that was a big deal. 0:13:45.000 --> 0:13:47.559 They were able to successfully navigate that and mature their 0:13:47.559 --> 0:13:51.520 business around collecting sales tax without a huge blow to 0:13:51.600 --> 0:13:55.199 its momentum. So I think investors just we figure that 0:13:55.240 --> 0:13:58.000 Amazon will find a way around this. There are some 0:13:58.080 --> 0:14:01.200 extreme calls, like Senator Liza that Warren has called for, 0:14:01.360 --> 0:14:05.040 like breaking it up. You can't only a marketplace and 0:14:05.120 --> 0:14:08.160 simultaneously sell your own products. Those would be the more 0:14:08.200 --> 0:14:10.760 extreme solutions that have been called for out there, But 0:14:10.760 --> 0:14:13.680 I guess investors just see those as as long shots 0:14:13.679 --> 0:14:15.520 and it's more likely going to be you know, maybe 0:14:15.559 --> 0:14:18.480 paying some fines or finessing some of its some of 0:14:18.520 --> 0:14:22.280 its business practices would be the ultimate solution that they 0:14:22.280 --> 0:14:24.600 could that they could weather. So so we're not to 0:14:24.640 --> 0:14:28.400 the point where observers, analysts, investors are are thinking about 0:14:28.680 --> 0:14:32.200 the potential breaking up of Amazon, of the Amazon potentially 0:14:32.440 --> 0:14:37.680 divesting from Amazon Web Services or spinning it out yeah. 0:14:37.720 --> 0:14:40.000 I mean that's always a question. That's always been a 0:14:40.080 --> 0:14:43.320 question of you know, whether they've spent off a WS 0:14:43.400 --> 0:14:47.160 Amazon Web Services. Um, there's any trust concerns around that 0:14:47.200 --> 0:14:49.680 part of the business as well. And and like you say, 0:14:49.720 --> 0:14:51.640 it's like you look at Amazon, this would be the 0:14:51.680 --> 0:14:54.680 non traditional way, any trust way of looking at Amazon, 0:14:54.680 --> 0:14:57.520 where it's just rolling in so many different directions, you know, 0:14:57.600 --> 0:14:59.720 could does it have to be reined in some other way? 0:14:59.800 --> 0:15:03.000 These I'm just looking at consumer harm but the AWS thing, 0:15:03.120 --> 0:15:05.200 investors have just been wondering about that as well. And 0:15:05.440 --> 0:15:08.240 as long as the other parts of Amazon's businesses are 0:15:08.320 --> 0:15:12.080 growing quickly and are profitable UM and a WS is 0:15:12.120 --> 0:15:14.800 and bankrolling some languishing part of the business, the at 0:15:14.880 --> 0:15:16.920 least the investor side, the pressure isn't there to spend 0:15:16.920 --> 0:15:19.320 it off. So I opened our conversation Spencer by referring 0:15:19.360 --> 0:15:23.360 to the news yesterday that the company was going official 0:15:23.440 --> 0:15:25.920 with buying MGM Studios for eight point four or five 0:15:25.960 --> 0:15:28.960 billion dollars. Do do antitrust concerns? And look at this 0:15:29.000 --> 0:15:31.120 was the second biggest acquisition that Amazon has ever made, 0:15:31.120 --> 0:15:33.520 after Whole Foods. But very briefly, does it does this 0:15:33.560 --> 0:15:35.720 type of scrutiny change the way that Amazon thinks about 0:15:35.800 --> 0:15:39.800 potential further acquisitions. We have about twenty seconds. Well, we 0:15:39.880 --> 0:15:42.600 have heard that the anti trust concerns have made Amazon 0:15:42.720 --> 0:15:47.240 wary about acquisitions, but this is one where that market 0:15:47.280 --> 0:15:49.560 is so fragmented and there's so much competition. I don't 0:15:49.600 --> 0:15:52.640 see that being a being a big deal or adding 0:15:52.960 --> 0:15:55.000 adding to any concerns because it is in this kind 0:15:55.000 --> 0:15:59.240 of distinct business line. Spencer Soper, technology and e commerce 0:15:59.280 --> 0:16:03.040 reporter at Bloomberg News joining us on the phone from Seattle. Spencer, 0:16:03.080 --> 0:16:05.920 thank you so much for taking the time. Spencer story 0:16:05.920 --> 0:16:08.440 can be found on the Bloomberg terminal. It's called Amazon 0:16:08.440 --> 0:16:12.520 Anti Trust risk deepens as more state ages way action. 0:16:13.040 --> 0:16:15.760 Attorney's general from Massachusetts and Pennsylvania have joined a list 0:16:15.760 --> 0:16:19.119 of officials looking at Amazon for potential anti trust violations, 0:16:19.200 --> 0:16:22.040 which include California, New York, Washington State, and the ftcat 0:16:22.200 --> 0:16:29.040 That's according to people familiar with the matter. Rock Journal. 0:16:30.040 --> 0:16:35.320 Yeah but you let me drive. Oh no, no, no no, no, honey, please, 0:16:35.440 --> 0:16:38.840 I'll do the riding revels. I want to try it. 0:16:41.520 --> 0:16:54.640 Just drive, baby, good questions trying. This is the drive 0:16:54.720 --> 0:16:59.720 to the globe thanks. We'll try us down on Bloomberg Radio. 0:16:59.840 --> 0:17:03.120 It certainly is. We are just under just a little 0:17:03.160 --> 0:17:05.439 over ten minutes from the close of trading on this 0:17:05.600 --> 0:17:09.080 second to last trading day of the month. Joanna Barton 0:17:09.280 --> 0:17:12.159 is co director of Growth Equities at Eton Vance and 0:17:12.280 --> 0:17:14.840 joins us now on the phone from Boston. Janna, it's 0:17:14.840 --> 0:17:16.800 great to have you back on the show. How you doing. 0:17:17.800 --> 0:17:20.040 I'm doing great. Thank you for having me back. Well, 0:17:20.040 --> 0:17:24.000 we're glad to have you. How do you describe where 0:17:24.040 --> 0:17:26.640 we are in today's market? For because by so many 0:17:26.640 --> 0:17:32.080 different measures, stocks are expensive. I would agree with that. 0:17:32.320 --> 0:17:35.440 I would also say that for investors there are multiple 0:17:35.480 --> 0:17:39.040 waste to when, particularly if one is focused on long 0:17:39.119 --> 0:17:42.800 term opportunities. UM. You've talked about a couple of themes 0:17:43.440 --> 0:17:46.679 reopening trade beneficiaries. I think that continues to be a 0:17:46.680 --> 0:17:50.879 place that we find, UM intriguing. Obviously, I don't have 0:17:50.960 --> 0:17:53.920 to give you the statistics, but in the US, nearly 0:17:53.960 --> 0:17:57.399 fifty of our own population has gotten at least one shots. 0:17:57.480 --> 0:18:01.320 So the global economic recovery is in school swing. UM. 0:18:01.359 --> 0:18:03.919 And while the cyclical areas of the market have benefited, 0:18:03.960 --> 0:18:05.959 I think one area of the market that has been 0:18:06.040 --> 0:18:09.119 less be dead is the consumer Again, particularly in the 0:18:09.200 --> 0:18:12.320 U S where a majority of our economic activity is 0:18:12.359 --> 0:18:16.679 consumption driven. We've got something like over two trillion of 0:18:16.720 --> 0:18:21.920 excess savings that consumers are spending on UM, and let 0:18:21.960 --> 0:18:23.840 me tell you, they're ready to spend. So that's why 0:18:23.880 --> 0:18:27.720 we like specialty retail. We like UM some areas within 0:18:27.840 --> 0:18:31.880 the food distributors UM area of the market against beneficiaries 0:18:31.960 --> 0:18:36.119 from that restaurant parks and entertainment recovery. So I wonder 0:18:36.160 --> 0:18:38.920 though the you know you you you said you don't 0:18:38.920 --> 0:18:41.040 have to tell me when you when you rattled off 0:18:41.040 --> 0:18:43.520 the statistics about vaccines, and it leads me to to ask, 0:18:43.520 --> 0:18:46.119 to what extent are these trades already priced into the 0:18:46.119 --> 0:18:48.280 market right now? If people are betting on that reopening, 0:18:48.600 --> 0:18:51.480 where are you finding the value? In other words, that's 0:18:51.480 --> 0:18:55.679 a fair question. I think you're absolutely right where you know. Listen, 0:18:55.680 --> 0:18:58.879 we're spitting here with nearly twelve percent we turn on 0:18:58.960 --> 0:19:02.040 the STP FIP under average stock is actually up even 0:19:02.080 --> 0:19:05.439 more so, and the market as a whole, to your point, 0:19:05.480 --> 0:19:08.880 is trading in excessive twenty times and next year's earnings. 0:19:09.320 --> 0:19:12.480 That being said, the consumer side of the equation again 0:19:12.520 --> 0:19:14.879 I mentioned to you the consumer stables has been the 0:19:14.920 --> 0:19:19.000 second worst area of the market and underperformed the market, 0:19:19.080 --> 0:19:22.639 and consumer discretionary is not that far behind. So I 0:19:22.680 --> 0:19:25.000 guess the point is one has to look on an 0:19:25.040 --> 0:19:30.360 industry in stock specific basis in those laggards, UM and UM. 0:19:30.520 --> 0:19:34.840 Fortunately for investors that plenty of names that haven't yet 0:19:34.920 --> 0:19:38.359 benefited from this one of the themes, which is reopening trade. 0:19:38.400 --> 0:19:41.480 Another theme, as you know, is higher inflation that we 0:19:41.520 --> 0:19:44.600 shall see if it's transitory or not. In the last 0:19:44.640 --> 0:19:48.160 theme is just being garky. That's that's the question, transitory 0:19:48.280 --> 0:19:51.200 or not. Well, let's start with the reopening trade. Among 0:19:51.200 --> 0:19:55.680 the top holdings in in your fund include Amazon, Microsoft, Visa, 0:19:55.920 --> 0:20:01.560 United United Health Group, Alphabet, PayPal, among others. UM. How 0:20:01.560 --> 0:20:02.920 do you see this playing out in terms of the 0:20:02.920 --> 0:20:07.840 reopening UM? Again, I think there are multiple waste to 0:20:07.920 --> 0:20:10.400 kind of think through the reopening. I think I would 0:20:10.480 --> 0:20:14.800 again UM ask investors to go into areas in the 0:20:14.800 --> 0:20:17.919 market they wouldn't necessarily go to. So industrial there's one 0:20:18.040 --> 0:20:20.600 area of the market that would continue to be intrigued 0:20:20.640 --> 0:20:24.600 by and actually within commercial services and waste area if 0:20:24.640 --> 0:20:28.119 reopening has taken place. There's more trash and there's more waste. 0:20:28.200 --> 0:20:31.520 And guess what, those companies have a really neat business 0:20:31.560 --> 0:20:35.680 model where there is a constant inflationary reset that their 0:20:35.680 --> 0:20:39.720 contracts are map too. So it's a double when Um, 0:20:39.760 --> 0:20:42.760 you know, you've got obviously in the macroeconomic recovery with 0:20:42.840 --> 0:20:46.240 a nice inflationary hedge, and it's a consolidating industry with 0:20:46.440 --> 0:20:49.200 m and a momentum behind it. So that's one area 0:20:49.320 --> 0:20:52.160 that one might not find its sexy as the other 0:20:52.240 --> 0:20:56.199 ones that we've talked about in other areas within healthcare, UM, 0:20:56.240 --> 0:20:58.280 I know I've talked about this area of the market, 0:20:58.720 --> 0:21:01.600 but I really think it's one of those hybrids. Right. Um, 0:21:01.640 --> 0:21:05.040 it is still inexpensive. We talked about high valuations health 0:21:05.080 --> 0:21:08.919 carerustrating something like discount when you look at next twelve 0:21:08.920 --> 0:21:13.320 months earnings with double digit earnings growth expectations for in 0:21:13.359 --> 0:21:17.040 the next twelve months. When you look one step deeper, 0:21:17.160 --> 0:21:20.119 which is within the biotech and the farmer side of 0:21:20.119 --> 0:21:23.800 the equation, those um, those companies are trading at twelve 0:21:23.840 --> 0:21:26.639 to fourteen times and they both of those areas have 0:21:26.680 --> 0:21:29.720 been laggards. And again, if you think about just the 0:21:30.760 --> 0:21:33.120 thing that we just went through. I think those companies 0:21:33.119 --> 0:21:36.240 are going to continue to benefit from CAPEX and procedure 0:21:36.280 --> 0:21:40.239 recovery as well as just genomic sequencing, how we go 0:21:40.320 --> 0:21:44.960 about therapy UM and finding drugs and drug discovery as 0:21:44.960 --> 0:21:48.120 a whole. So we're really excited about those two areas 0:21:48.119 --> 0:21:51.200 of the market. I'm here you mentioned inflation, so I 0:21:51.720 --> 0:21:57.439 gotta ask about inflation, um yelling Uh. Jenny Yellen was 0:21:57.480 --> 0:22:00.960 Treasury Secretary testifying earlier today, and she did mention inflation, 0:22:01.040 --> 0:22:03.680 but but said it would be transitory. And and I'm 0:22:03.680 --> 0:22:08.480 wondering how you would define transitory and what signs would 0:22:08.560 --> 0:22:11.800 point you to saying, wait a second, this is not temporary, 0:22:11.800 --> 0:22:17.159 This is not transitory. The unfortunate answer to the question 0:22:17.240 --> 0:22:22.240 is we won't know until we know until it's too late. Perhaps, 0:22:22.840 --> 0:22:25.600 But I think investors could be doing all the things 0:22:25.640 --> 0:22:28.879 that I'm talking about, which is being balanced in their 0:22:28.920 --> 0:22:33.280 allocation decisions to ensure that they're protected. Should this be 0:22:33.440 --> 0:22:38.840 more than just the transitory pool on the veralu asseid prices? Right? 0:22:38.880 --> 0:22:40.760