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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day, we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. You know, m n A,

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Speaker 1: it's merger Monday, It's back today. I got a couple

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Speaker 1: of pretty big deals, including Goodyear Tire buying Cooper Tire,

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Speaker 1: which I thought was a pretty interesting. Uh deal. There,

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Speaker 1: there's I didn't you know, there's still deals to be

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Speaker 1: done out there in despite the pandemic, was a big

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Speaker 1: year for m n A. Let's get the latest. We

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Speaker 1: do that with Rob Brown. He's a managing director and

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Speaker 1: CEO of North America Fort Lincoln International based in Chicago. Rob,

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Speaker 1: thanks so much for joining us here. You know, when

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Speaker 1: I was a banker, it was all about hopping on

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Speaker 1: a plane going to see companies, see clients, get deals done.

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Speaker 1: That's how deals really got done. And so I'm wondering,

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Speaker 1: in that world of pandemic, how are you guys doing business?

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Speaker 1: Talk to us about that, Well, it pretty incredibly Uh.

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Speaker 1: The M and A world went uh much more virtual,

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Speaker 1: in some cases totally virtual, uh, with very little interruption.

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Speaker 1: Because I I agree with you when when the pandemic

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Speaker 1: really forced the economy to shut down. Um, the M

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Speaker 1: and A market shut down for a period of time,

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Speaker 1: and they went from kind of a slow saw at

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Speaker 1: the end of the second quarter to the floodgates opening

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Speaker 1: up when you got in a third and fourth quarter. UM.

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Speaker 1: But specific to your question, you know, overnight everybody had

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Speaker 1: to become very comfortable with some form of video technology.

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Speaker 1: A lot of due diligence was moving virtual anyway through

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Speaker 1: virtual data rooms. But UM, you know, it became clear

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Speaker 1: that the need to put money to work by private

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Speaker 1: equity groups, the need to continue to grow by strategic acquirers. UM,

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Speaker 1: these companies were not going to let the inability to

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Speaker 1: meet in person get in their way of getting deals done.

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Speaker 1: In fact, we had several deals in any where the

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Speaker 1: buyer never saw the company, never met anybody in person.

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Speaker 1: They were done totally virtually. And yet UM was a

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Speaker 1: pretty hot year for deals. I mean it wasn't far

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Speaker 1: off what we saw UM pre COVID. What do you

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Speaker 1: expect from one I expected to continue. And if you

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Speaker 1: look at you know, when you look at coming into

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Speaker 1: and you um, we have an annual growth conference we

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Speaker 1: do at the end of the year, and at the

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Speaker 1: end of two thousand nineteen, we surveyed hundreds of private

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Speaker 1: equity groups and said, what's your number one goal coming

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Speaker 1: into The number one goal was to put capital to

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Speaker 1: work at a faster clip. So you came into the

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Speaker 1: year with that as your goal. You had several months

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Speaker 1: where there was an inability to put capital to work.

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Speaker 1: And so what happened at the end of the year,

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Speaker 1: and as you know, why the M and A market

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Speaker 1: picked up is anybody that had a good COVID story

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Speaker 1: to tell. There were investors willing to listen to the

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Speaker 1: story and invest in it. And that continued into this year.

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Speaker 1: And so we're still, by the way, rob, where where

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Speaker 1: is all that money coming from? Is this stimulus money

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Speaker 1: that's flooding the market? I mean, if I look at

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Speaker 1: the average premium last year, it rose back to bonkers

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Speaker 1: like well over what we saw in the three years

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Speaker 1: before that. Yeah, I think where a lot of it's

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Speaker 1: coming from our institutional investors with interest rates that essentially zero. Right,

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Speaker 1: people are more willing to put money into private equity funds.

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Speaker 1: Look at SPACs. Look at the amount of SPACs that

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Speaker 1: have been raised in the last year. It's it's mind boggling.

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Speaker 1: So I think the alternative asset class of which private

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Speaker 1: equity debt fund and spact, with interest rates where they're at,

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Speaker 1: and the returns that these funds have consistently driven, they're

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Speaker 1: able to continue to raise money. And then you put

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Speaker 1: on top of it the amount of cash sitting on

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Speaker 1: the balance sheets of the fortune five hundred. There is

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Speaker 1: still more capital that wants to be put to work

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Speaker 1: to buy companies than there are companies to buy. And

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Speaker 1: when you have that imbalance, you're going to have a

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Speaker 1: high level of activity at high values. So interesting you

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Speaker 1: mentioned SPACs. Rob, talk to us about how you, as

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Speaker 1: an M and a bank or think about spack. I

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Speaker 1: mean it's if I'm a business owner, that's another exit

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Speaker 1: for me. If you will, UM, how do you talk

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Speaker 1: to your clients about specs? UH? It is, well, first

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Speaker 1: of all, we're talking to them more and more about

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Speaker 1: spects because the number of SPACs and the amount of

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Speaker 1: money going into SPACs UH is incredible, and and so

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Speaker 1: for the right seller. It's a it's a it's a

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Speaker 1: good alternative. If you're a business that's looking to sell,

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Speaker 1: you need additional growth capital, you can access the public

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Speaker 1: markets afterwards. Um, it can be the right seller. And

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Speaker 1: they can pay high prices too, because if you if

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Speaker 1: you look at their cost to capital, you look at

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Speaker 1: the expectation of kind of the post trading and the

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Speaker 1: public markets, they've performed well. So it is a it

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Speaker 1: is another alternative for the right seller. It can take

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Speaker 1: a little bit longer, right, there's a little more regulatory

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Speaker 1: hurdles to go through. So if if speed and certainty

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Speaker 1: are really important to you, a spact may not be

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Speaker 1: the right alternative. However, if you accessing public equity and

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Speaker 1: public that post a deal is important to you, they

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Speaker 1: could be a very good by Are you, on the

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Speaker 1: other hand, are you making sure like your nut is

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Speaker 1: safe and you have a bugout bag next to the bed,

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Speaker 1: Because if people are willing to give um, you know,

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Speaker 1: Kaepernick a couple of hundred million dollars in the spack,

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Speaker 1: this market may not last much longer. Yeah, I I personally,

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Speaker 1: I don't know how all that s back money is

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Speaker 1: going to be put to work. But I think the

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Speaker 1: institutional investors that are putting money to these they're not

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Speaker 1: They're not dumb. I think what they're saying is will

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Speaker 1: interest rates to zero? If I put the money into

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Speaker 1: this back, This back has two years to find a company.

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Speaker 1: If they don't find a company, I get the money back,

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Speaker 1: and you know I didn't lose a lot of interest.

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Speaker 1: The issue will be is if they feel pressure to

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Speaker 1: put the money to work and they stretch and do

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Speaker 1: on the economics things. So real quickly, Rob, just give

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Speaker 1: us your thoughts. What are some of the hot sectors

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Speaker 1: we should be looking at for EM and activity this year?

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Speaker 1: So you know, from our perspective UM, and you know,

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Speaker 1: we had a we had a record year last year,

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Speaker 1: we had a huge back while coming to this year.

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Speaker 1: The two areas of the firm where we're seeing the

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Speaker 1: most activity broadly are in technology and in healthcare, where

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Speaker 1: you have the most secular growth the most need for capital.

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Speaker 1: Although I will say with that said, if I look

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Speaker 1: at our industrial group, our consumer group, our business services group,

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Speaker 1: they all have record backlogs. But but as a firm,

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Speaker 1: as a just level of activity, UM, technology and healthcare

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Speaker 1: UM are our areas where We're seeing tremendous growth, and

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Speaker 1: some of that secular growth, some of its bounced back,

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Speaker 1: bounced back from particularly the healthcare services side, where you know,

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Speaker 1: things may have slowed down and now there's a there's

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Speaker 1: kind of a makeup right on. Rob, Thanks so much

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Speaker 1: for your insight. It was great having you on the program.

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Speaker 1: Rob Brown is managing director and he runs North America

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Speaker 1: as CEO for Lincoln International. Now I want to bring

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Speaker 1: in Kevin Tynan. He's our senior auto's analyst at Bloomberg Intelligence.

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Speaker 1: And I feel kind of guilty Kevin, because I think

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Speaker 1: Paul is more excited for the Mustang mack one than

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Speaker 1: I am. Um, he's definitely put his down payment at

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Speaker 1: his local deal, already waiting or his car to arrive.

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Speaker 1: Is he going to be disappointed? No? I don't think so.

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Speaker 1: I think yeah, as I was looking at the numbers,

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Speaker 1: you know, the the internal combustion Mustang might not be

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Speaker 1: that much, you know, more long for this world though. Um,

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Speaker 1: you know I could see that drive train, you know,

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Speaker 1: being in that nameplate all the way across you know,

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Speaker 1: and not just this sort of suv thing that they're making,

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Speaker 1: but even into the sports cars over time. So, Kevin,

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Speaker 1: you you've told me and others you know, over the years.

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Speaker 1: You know, you know where Detroit really makes its money

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Speaker 1: is on trucks, uh in the U s here, so

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Speaker 1: is the EV market at niche market until the four

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Speaker 1: decides it wants to put it f one fifty e

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Speaker 1: V out on the market. I think, so, yeah, And

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Speaker 1: and and the other thing to Paul, you gotta remember

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Speaker 1: is that there's really been no automaker, you know, other

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Speaker 1: than Tesla advancing the e V narrative at all. So

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Speaker 1: you know, when cyber truck starts to come for that

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Speaker 1: full size pickup segment, and Ford and General Motors and

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Speaker 1: whoever else have an answer for that, and they actually

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Speaker 1: want to sell the product, you're gonna get a lot

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Speaker 1: of marketing might behind the technology that just hasn't been

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Speaker 1: there yet. Right, nobody's really talking about e vs other

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Speaker 1: than you know, media and Tesla fans. But you know

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Speaker 1: that's a lot of money that will come behind, right

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Speaker 1: because if if you think about it, full size pickup

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Speaker 1: is the largest segment in the US by revenue, not

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Speaker 1: by accident, it's because it's what's marketed to us. And

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Speaker 1: I think if you get some of that money. Going

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Speaker 1: after different segments or different druve train technologies, you'll get

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Speaker 1: a similar result is what you got with pick up.

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Speaker 1: I mean, I hope they're full size though, because I

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Speaker 1: look at the Rivan pickup truck and I look at

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Speaker 1: the Cyber truck. Um. I think the Bolinger is probably

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Speaker 1: the coolest electric option that's coming out. None of them

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Speaker 1: are really big. You know what, I want to move

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Speaker 1: back to America because I want to buy a giant truck.

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Speaker 1: I want to ram power wagon, you know, I want

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Speaker 1: something legit, maybe with a six point seven leader turbo diesel.

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Speaker 1: You can't get that from these millennials. No, But the

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Speaker 1: reality is, though, Mas that you know, I just had

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Speaker 1: a two fifty Super Duty that I was testing, and

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Speaker 1: you know, I took it to the used record store

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Speaker 1: in Princeton. I couldn't get in the parking garage, you know.

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Speaker 1: So so you know, you have to there's a time

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Speaker 1: and a place for that kind of vehicle, and there's

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Speaker 1: a lot of the United States where it is appropriate.

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Speaker 1: But you know, it's it's going to be difficult, considering

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Speaker 1: congestion and infrastructure the way it is now for that

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Speaker 1: to be you know, the daily driver for most people,

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Speaker 1: was it a tremor? Was it a tremor, Kevin, tremor packs,

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Speaker 1: It was just a regular super duty Matt. You're you're

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Speaker 1: in Europe, You're in Berlin. Are there any pickup trucks

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Speaker 1: in Europe? There are, but they're they're far few and

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Speaker 1: far between. You know, I um love to get one here,

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Speaker 1: but they just are too big to fit through your

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Speaker 1: your average road. They just won't fit through the street, Kevin.

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Speaker 1: And that's a that's a really interesting point too, because

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Speaker 1: you know, as as Ford and General Motors, you know,

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Speaker 1: Ford especially talking about going fully e V and you know,

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Speaker 1: making e vs for Europe. You know, that's been a

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Speaker 1: problem over the years, even with internal combustion, is that

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Speaker 1: the vehicle architecture that works in Europe doesn't work in

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Speaker 1: the United States, you know. So where Ford was doing

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Speaker 1: small cars for Europe, that never really translated here, and

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Speaker 1: that's why you've seen those companies just get out of

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Speaker 1: those regions altogether. So it's gonna be interesting to see

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Speaker 1: how to sort of globalize the platform where it works

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Speaker 1: in Europe, where you have congestion and infrastructure issues that

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Speaker 1: are very different than what we buy here. In the

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Speaker 1: United States, and I hope we get the Bronco over here.

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Speaker 1: I hope Ford doesn't jip me on this because you know,

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Speaker 1: ever since they started this one Ford strategy and said

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Speaker 1: they were going to bring everything over here, but there's

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Speaker 1: no there's no Rapture over here, you know, they f

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Speaker 1: one fifty. Rapture has long been my favorite car of

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Speaker 1: all time. Um. I'm excited for the Broncho to this

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Speaker 1: place that when they finally put a V eight in it. Yeah, well,

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Speaker 1: you know again, and that's the that's the inconsistency across

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Speaker 1: the regions, right, you know, and and historically you know,

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Speaker 1: fuel prices there versus here, and it just you can't

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Speaker 1: have a global product that works everywhere. Um. And it'll

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Speaker 1: be interesting to see if that means that it's e

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Speaker 1: vs that work everywhere. But I still think you're gonna

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Speaker 1: need bigger vehicles, um, you know, to work in the US.

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Speaker 1: That is going to be difficult sell in in Europe.

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Speaker 1: All right, So, Kevin, I'm looking at the auto stocks

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Speaker 1: for GM and whatever the new uh Chrysler is whatever

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Speaker 1: over the trailing twelve months. What's the what's the bull

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Speaker 1: case here? Yeah? I think you know, they're they're what

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Speaker 1: you're gonna get or what you would start to think

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Speaker 1: what happen would be that either the Tesla Neo you know,

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Speaker 1: Rivians of the world would come back down to earth

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Speaker 1: in terms of valuation, or you're going to get the legacy.

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Speaker 1: Automakers who have global engineering, design, production distribution, after sales

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Speaker 1: scale already in place will get recognized, you know, for that.

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Speaker 1: And I think Volkswagen is a perfect example is that,

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Speaker 1: you know, if they hit their e V target, they'll

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Speaker 1: sell five hundred thousand units about you know, eighteen months

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Speaker 1: after really starting or committing to it, you know, and

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Speaker 1: Tesla took eight years to get there. So I think

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Speaker 1: that when the big automakers they start, they will start

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Speaker 1: to have to get recognized for that ability to do

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Speaker 1: the same thing. Okay, when when the time comes and

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Speaker 1: profitabilities there, we can do evs. By the way, By

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Speaker 1: the way, how sick will it be a VW spins

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Speaker 1: off Porsche? Because that is a unit they own that

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Speaker 1: is worth more than their entire market cap. Yeah, well

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Speaker 1: that you know, evaluations get a little funny right now.

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Speaker 1: So um, all right, Kevin, we'll be on the outlook

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Speaker 1: for that. But Kevin Tyne and Senior Auto's animals for

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Speaker 1: Bloomberg Intelligence. We appreciate that as always. Now let's learn

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Speaker 1: more about what's going on in markets. As you heard

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Speaker 1: from Greg, stocks are down, and the reason I thought

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Speaker 1: was that UM rates are up, but they're not really

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Speaker 1: rates are pretty flat right now. UM. The big gainers

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Speaker 1: that we see in these markets are really the metals

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Speaker 1: and other commodities. Let's bring in Sarah Ponzac, she's Bloomberg

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Speaker 1: Cross Asset reporter for US and UM. Sarah, is it

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Speaker 1: is it really the rates even though right now they're

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Speaker 1: still pretty flat UM that have pushed stocks back a

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Speaker 1: little bit. It does seem to be the case. I mean,

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Speaker 1: overnight we did see tenure yields make run towards one forty.

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Speaker 1: We did have Christine Legard of the e c B

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Speaker 1: come out and say that the e c B is

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Speaker 1: closely monitoring longer term nominal bond yield That is just

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Speaker 1: around the time, right. I love when the central bankers say,

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Speaker 1: we are doing our job. We're still at work. We're

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Speaker 1: still we're still working even though there's a global pandemic.

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Speaker 1: But that's really what reverse yields. But we have to

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Speaker 1: really take into contact the move that we have seen

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Speaker 1: over the past couple of weeks. If we just look

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Speaker 1: at ten year nominal yields, for example, we've seen a

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Speaker 1: run of about twenty three basis points or so that's

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Speaker 1: the fastest monthly rise since early At the same time,

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Speaker 1: if you look at real yields right now, yes, granted

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Speaker 1: still very deeply negative, but ten year real yields now

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Speaker 1: stand at negative eighty one basis points. That is very

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Speaker 1: close to punching through levels that we saw a few

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Speaker 1: months ago to become the highest since this summer. And

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Speaker 1: this compares too if we look where we closed out

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Speaker 1: the year or where we started the year. On January four,

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Speaker 1: we had a real tenure yield of negative one point

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Speaker 1: one so we have really seen the way how do

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Speaker 1: you so how do you compute that? Exactly? You take

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Speaker 1: the ten year yield one point three four and then

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Speaker 1: you subtract what cp I X food and oil. So

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Speaker 1: this is subtracting out tips to get a sense of

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Speaker 1: inflation expectations going forward. So this calculation would subtract out

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Speaker 1: tenure tips um and that is really the case. I mean,

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Speaker 1: we are seeing inflation expectations rise. Granted, there is still

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Speaker 1: an argument over whether or not we are going to

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Speaker 1: see true rampant inflation. But we also have further discussion,

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Speaker 1: at least in the United States, of another multi trillion

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Speaker 1: dollar fiscal package and then more stimulus down the line.

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Speaker 1: I mean, people talking of another three trillion package down

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Speaker 1: the line. And you also have an economy that is

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Speaker 1: regaining its footing. You have a vaccine rollout that is

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Speaker 1: going pretty well now around the globe. You have to

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Speaker 1: wonder what happens when you have an economy that is

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Speaker 1: doing well on its own. You also have plenty of

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Speaker 1: cash flush in the system. While some are starting to

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Speaker 1: believe now that we will see inflation start to rise, Yes, sir,

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Speaker 1: when you think about the reflation trade that folks are

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Speaker 1: increasingly talking about, and just inflation in general coming back

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Speaker 1: into the economy. I look to the g uh G

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Speaker 1: l c O screen on the Bloomberg terminal, the global commodities,

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Speaker 1: and you know, whether it's energy, whether it's metals, whether

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Speaker 1: it's agricultural products, you see, you know, double digit increases

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Speaker 1: across pretty much across the board on a year to

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Speaker 1: date basis. That's a pretty good indication that we're seeing

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Speaker 1: some inflation coming back into this economy. Oh, certainly it's

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Speaker 1: not just being reflected in break even inflation expectations are

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Speaker 1: in the bond market. We're seeing it reflected in commodities

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Speaker 1: front and center. You think about copper prices, for example,

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Speaker 1: over the weekend, rising above nine thousand dollars for the

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Speaker 1: first time in nine years and knocking on the door

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Speaker 1: really of all time highs that we're set back in.

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Speaker 1: At the same time, I look at my screen right now,

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Speaker 1: and we have an OPEC meeting coming up next week.

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Speaker 1: We we'll just add to the fun. But I look

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Speaker 1: at oil prices right now w T I now above

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Speaker 1: sixty one barrel Brent prices six sixty four, right, which

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Speaker 1: is amazing. Which is amazing because now we're starting to

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Speaker 1: see supplies come back online in the Texas area, right.

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Speaker 1: So now you're gonna start to see supply come back.

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Speaker 1: But I guess the bet that traders are making is

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Speaker 1: that demand is going to come back even stronger. That's

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Speaker 1: exactly the case. And while while the supply side of

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Speaker 1: the equation has certainly had an effect over the past year,

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Speaker 1: when you think about what has really driven oil markets

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Speaker 1: over the past year, it has been the demand side

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Speaker 1: of the equation, especially when we saw oil prices go negative.

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Speaker 1: I mean that feels like years ago now considering we're

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Speaker 1: looking at at a crude prices. Never forget it, right,

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Speaker 1: never forget it. Forget what a moment, But it seems

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Speaker 1: like years ago when you now have crude prices above

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Speaker 1: sixty dollars a barrel, and you have Goldman Sacks saying

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Speaker 1: that we could see crude prices above seventy dollars a

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Speaker 1: barrel in the coming months. We had a Marco Pappach

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Speaker 1: he's from clock Tower on our podcast last Friday, and

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Speaker 1: he said he's expecting us to reach eighty dollars a

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Speaker 1: barrel in a time not too far away. So when

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Speaker 1: you think about how far we've come, and yes, we

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Speaker 1: have seen some demand recover. Uh, the expectation is that

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Speaker 1: as the vaccine rollout goes smoothly, as we start to

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Speaker 1: hit critical mass, you get that feel of her community

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Speaker 1: that people will feel more comfortable. I mean, god forbid

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Speaker 1: going on planes, are getting on a cruise ship and

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Speaker 1: all of a sudden we will see global oil demand

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Speaker 1: not just recover, but you're also going to spee see

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Speaker 1: this immense global economic recovery that's going to see demand

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Speaker 1: just rise further from here. Sarah Ponzac, thank you so

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Speaker 1: much for joining us. We appreciate it as always giving

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Speaker 1: us h an update on all of the financial market.

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Speaker 1: Sarah Ponza, cross asset reporter for Bloomberg News, journey us

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Speaker 1: every day at this time. Matt, you know, I just

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Speaker 1: think it's I agree, it's kind of been a demand

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Speaker 1: driven market there for for oil, but I kind of

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Speaker 1: feel like when we do get that surging demand, I

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Speaker 1: think the supplies can come right back on the marketplace. Yeah,

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Speaker 1: of course, because there is a supply that's been captain.

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Speaker 1: The question is when's the demand going to come, right, Paul,

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Speaker 1: Because we're so much talk about her immunity. If it

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Speaker 1: comes sooner, we're all going to jump in our cars

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Speaker 1: or jump on a plane sooner as well. Right, Yeah, absolutely,

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Speaker 1: And again the Wall Street Journal had this opinion piece

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Speaker 1: over the weekend citing um, you know, a Johns Hopkins

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Speaker 1: professor talking about herd immunity perhaps as quickly as uh April,

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Speaker 1: And boy, I don't think that's necessarily baked into the

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Speaker 1: market place at the moment, but we'll certainly pay attention

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Speaker 1: we'll have more coming up. This is Bloomberg. Now. I

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Speaker 1: want to bring in right now a man who manages

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Speaker 1: one point three billion dollars out of Indiana, Indianapolis UM,

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Speaker 1: but has I think a pretty unique experience in running

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Speaker 1: his company. Greg Han is chief investment officer for Winthrop

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Speaker 1: Capital Management. And Greg, I noticed you founded Winthrop in

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Speaker 1: two thousand seven. So that's like a baptism by fire

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Speaker 1: in terms of running an investment business through UH an

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Speaker 1: incredible recession and out the other side. Do you notice

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Speaker 1: any parallels to what we've just seen with the COVID pandemic.

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Speaker 1: So yeah, a lot of last what thanks Joe. A

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Speaker 1: lot of what we're going through really goes back to

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Speaker 1: the financial crisis of two thousand and eight and I

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Speaker 1: founded Winthrop Capital Management. I describe it as the doorstep

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Speaker 1: of the financial crisis because it was literally the end

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Speaker 1: of October of two thousand and seven, and you could

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Speaker 1: just feel the the vacuum. It's like the air leaving

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Speaker 1: the room. It was like a vacuum that was being

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Speaker 1: created before everything blew up in in UH around Valentine's

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Speaker 1: Day in two thousand and eight. But yeah, it's it's

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Speaker 1: very similar to the and this is where the aggressive

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Speaker 1: monetary policy that we're seeing comes from. Is um the

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Speaker 1: rescue money that came into the market in two thousand

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Speaker 1: and eight really never left the market, and now we're

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Speaker 1: doing right now is piling on top of it. So, Greg,

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Speaker 1: a lot of folks, I think, are increasingly concerned about

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Speaker 1: a bubble, uh financial bubble here. Whether you look at

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Speaker 1: you know, the market's hitting all time highs almost on

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Speaker 1: a daily basis, whether you look at the proliferation of spacks,

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Speaker 1: whether you look at some of the trading we saw

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Speaker 1: on some of the game stops of a few weeks ago,

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Speaker 1: all kind of telltale signs potentially of a market top,

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Speaker 1: a market bubble. How do you think about that? Yeah,

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Speaker 1: and that's a good question. I mean we you know,

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Speaker 1: the scars go back to two thousand after the dot

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Speaker 1: com first and Uh. It's the difference though, is the

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Speaker 1: money that is the bubble that was created back in

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Speaker 1: two thousand had didn't have the aggressive monetary policy supporting it.

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Speaker 1: So it was it was speculative because everybody was piling

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Speaker 1: into the market. I say everybody, but investors were piling

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Speaker 1: into text stops, tex stocks and valuations were just ignored

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Speaker 1: this go around. We've got not only domestic um money

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Speaker 1: both fiscal and monetary stimulus, but we have global monetary

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Speaker 1: and fiscal stimulus going into the financial markets and it

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Speaker 1: has to find a home. So UH, in aggressive periods

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Speaker 1: of aggressive monetary and fiscal stimulus, we do see extended

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Speaker 1: p evaluations. And that's part of what's being experienced right

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Speaker 1: now is these um these valuations are really extended. These

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Speaker 1: business models though, Jeff, they sup were you know, operating

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Speaker 1: margins that are in excess of six operating margins. So

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Speaker 1: the growth rates when you see layer on eighteen percent

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Speaker 1: growth rates with six profit margins, there's room to grow.

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Speaker 1: Is Are you concerned? Though? I sense a little bit

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Speaker 1: of an Austrian twinge in your UH statement about about

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Speaker 1: the money that came in the TARP money first and

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Speaker 1: then we got a couple of trillion more and now

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Speaker 1: we're getting a couple of trillion more. And you know,

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Speaker 1: does that were you that piled up debt that big

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00:22:30,280 --> 00:22:34,439
Speaker 1: balance sheet at the Fed? Yeah? So the um the

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00:22:34,520 --> 00:22:37,240
Speaker 1: so two things we we we are living through two

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Speaker 1: experiments aggressive monetary policy that goes back to two thousand

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Speaker 1: and eight. This is all an experiment. We can't just

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Speaker 1: take this as normal and too as we're living through

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Speaker 1: a pandemic and we've got developed governments of developed countries

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00:22:49,280 --> 00:22:52,359
Speaker 1: through money into the system to help support the economic

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00:22:52,400 --> 00:22:55,960
Speaker 1: downturn in its worked. Both are experiments though, so the

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00:22:56,000 --> 00:23:00,199
Speaker 1: consequences of that are this elevated level of debt and

439
00:23:00,280 --> 00:23:04,520
Speaker 1: now um and in economies that are are just recovering.

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00:23:04,920 --> 00:23:08,960
Speaker 1: This was all a cost that was um born to

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Speaker 1: make sure that our economies continue to function to mitigate

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00:23:12,920 --> 00:23:17,000
Speaker 1: the downturn. Whether we can pull it off and transition

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00:23:17,560 --> 00:23:22,560
Speaker 1: into a more normalized economic paradigm, that's that's what remains

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00:23:22,600 --> 00:23:25,240
Speaker 1: to be seen. So it's gonna for the next challenge,

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Speaker 1: all right, Greg, So in this market here again hitting

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00:23:28,600 --> 00:23:32,600
Speaker 1: all time highs. Here, where are you guys spending your time?

447
00:23:32,600 --> 00:23:36,240
Speaker 1: Where do you see opportunities? So the opportunities there. I

448
00:23:36,280 --> 00:23:39,359
Speaker 1: think the opportunities are in three areas. One is China.

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00:23:40,040 --> 00:23:42,760
Speaker 1: Um And that's a longer conversation. When we look at

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00:23:42,800 --> 00:23:45,160
Speaker 1: Western democracy against the center, I's gonna say that sounds

451
00:23:45,160 --> 00:23:49,080
Speaker 1: crazy for who's to say that? Uh No, it's but

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00:23:49,240 --> 00:23:51,480
Speaker 1: it's when you search the world over and you look

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00:23:51,520 --> 00:23:53,199
Speaker 1: at what we've got here in the United States with

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00:23:53,240 --> 00:23:56,119
Speaker 1: extended valuations, and you look at what the opportunity is

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00:23:56,440 --> 00:23:59,359
Speaker 1: over in China with UM. You know, it's the second

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00:23:59,400 --> 00:24:02,879
Speaker 1: largest because on me it's got a growing middle class,

457
00:24:03,040 --> 00:24:05,720
Speaker 1: but you know that it has its own barriers to compete.

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00:24:05,800 --> 00:24:07,639
Speaker 1: But when you look at you know, we looked at

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00:24:07,680 --> 00:24:11,440
Speaker 1: corporate earnings last year. You look at Talk Proctor and Gamble,

460
00:24:11,840 --> 00:24:14,480
Speaker 1: Starbucks their earnings. The reason that earnings held up well

461
00:24:14,480 --> 00:24:16,080
Speaker 1: in the large part was because of the business they

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00:24:16,080 --> 00:24:20,040
Speaker 1: did in China. So that's one area. Second is there's

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00:24:20,080 --> 00:24:23,160
Speaker 1: a still a recovery basket. Even though we've seen UM,

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00:24:24,080 --> 00:24:25,920
Speaker 1: you know, the stock market's done really, really well, there's

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Speaker 1: still areas that are COVID affected that we think, UM

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00:24:31,000 --> 00:24:35,359
Speaker 1: it includes gaming, leisure, travel, entertainment, convention. Actually now everyone's

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00:24:35,359 --> 00:24:38,679
Speaker 1: talking about her immunity. Yeah, well we had so we

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00:24:38,760 --> 00:24:43,240
Speaker 1: added Southwest air to the portfolio this UM this last quarter. UM,

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00:24:43,320 --> 00:24:46,119
Speaker 1: we think that it's the airlines. I'm not ready to

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00:24:46,119 --> 00:24:48,800
Speaker 1: go all in, but there's going to be some growth

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00:24:48,840 --> 00:24:52,560
Speaker 1: and it's already g would be another example, UM of

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00:24:52,920 --> 00:24:58,879
Speaker 1: how to play the recovery. So, Greg, I guess seconds

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00:24:58,920 --> 00:25:01,840
Speaker 1: left here are are you in that rotation trade. Do

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00:25:01,840 --> 00:25:05,240
Speaker 1: you feel like the cyclicals are also place to look. No,

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00:25:05,600 --> 00:25:08,200
Speaker 1: we're not at I'm not into that. We we buy

476
00:25:08,200 --> 00:25:10,440
Speaker 1: good companies. We just want to buy really really good

477
00:25:10,440 --> 00:25:13,000
Speaker 1: companies and invest alongside of them to be able to

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00:25:13,000 --> 00:25:15,040
Speaker 1: move in and out. I mean, we struggle right now

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Speaker 1: that one of the great plays right now is in

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00:25:16,640 --> 00:25:19,040
Speaker 1: the commodity markets. We're not getting investors. But when you

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00:25:19,040 --> 00:25:22,320
Speaker 1: look at the man from copper Um right now because

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00:25:22,320 --> 00:25:24,919
Speaker 1: of what's happening in silver with the five G roll

483
00:25:24,960 --> 00:25:28,240
Speaker 1: out and just that that's a real demand. So Freeport

484
00:25:28,320 --> 00:25:30,240
Speaker 1: mcmaran would be something we would be looking at, but

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00:25:30,280 --> 00:25:33,120
Speaker 1: it's something that we normally that's not our sweet pot.

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Speaker 1: Got you okay, Hey, great, Thanks so much for joining us.

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Speaker 1: We appreciate it. As always. Greg Han, chief investment officer

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Speaker 1: for Winthrop Capital Management based in Indianapolis, giving us his

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Speaker 1: thoughts here as the markets again pulling back a little

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Speaker 1: bit today, but you know, making ever higher highs on

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Speaker 1: in large part on the reopening trade and again the

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Speaker 1: metrics on the pandemic very supportive right now. Thanks for

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Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and

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00:25:59,320 --> 00:26:02,920
Speaker 1: listen to intervi us an Apple Podcasts or whatever podcast

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00:26:02,920 --> 00:26:06,480
Speaker 1: platform you prefer. I'm Matt Miller, I'm on Twitter at

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00:26:06,520 --> 00:26:10,320
Speaker 1: Matt Miller. And I'm fall Sweeney. I'm on Twitter at

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00:26:10,359 --> 00:26:13,199
Speaker 1: pt sweeney. Before the podcast, you can always catch us

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00:26:13,240 --> 00:26:14,640
Speaker 1: worldwide at Bloomberg Radio