WEBVTT - Leveraged Loans Offering Better Risk-Reward: Finke 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg PENL Podcast. I'm Paul Swinge. You, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor, find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:26.400 at Bloomberg dot com. Well, since December, global markets have 0:00:26.640 --> 0:00:31.280 rallied significantly and broadly across asset classes and geographies. Do 0:00:31.280 --> 0:00:33.400 you get a sense of where they're still maybe value? 0:00:33.400 --> 0:00:36.000 We turned to our next guest, Tom Fink Thomas, chairman 0:00:36.040 --> 0:00:39.040 and CEO of Bearings based in Charlotte, North Carolina. But 0:00:39.120 --> 0:00:41.440 Tom comes to us today from the Milk and Institute 0:00:41.440 --> 0:00:45.159 Conference in Los Angeles. Tom, thanks so much for joining us. 0:00:45.600 --> 0:00:49.280 Um As you look about globally, where do you see 0:00:49.400 --> 0:00:52.560 opportunities right now? Well, first of all, thanks for having 0:00:52.560 --> 0:00:55.600 me on, Paul, It's been my golden be on the 0:00:55.680 --> 0:01:00.680 on the radio with you. But um, yeah, when you 0:01:00.720 --> 0:01:03.840 look at it, yes, we did have a very uh 0:01:04.120 --> 0:01:07.199 significant sell off in most markets in the fourth quarter. 0:01:07.959 --> 0:01:11.840 Slowly that's worked its a back uh that said, I 0:01:11.959 --> 0:01:16.640 think the you can find value in any market, but 0:01:16.720 --> 0:01:20.640 I think because emerging markets equity and and and emerging 0:01:20.680 --> 0:01:23.840 market debt have been down for so long, there's probably 0:01:23.880 --> 0:01:28.920 more upside value on a general basis UH than you 0:01:29.040 --> 0:01:34.360 might expect on the more development markets. So let's talk specifics. 0:01:34.640 --> 0:01:37.760 In particular in Asia, I know that Bearings is focused 0:01:37.800 --> 0:01:40.280 on building out the business there, and I'm just wondering 0:01:40.600 --> 0:01:43.480 which nations in particular and which businesses, how are you 0:01:43.520 --> 0:01:46.880 going about it. So when you look at our business overall, 0:01:47.319 --> 0:01:51.920 we're fairly broadly diversified ASCID manager UM in Asia, we've 0:01:51.920 --> 0:01:55.920 actually been there through the our legacy business on the 0:01:56.000 --> 0:01:59.919 on the Bearing side, in the equity and fixed income 0:02:00.040 --> 0:02:04.400 markets and the fund markets in Hong Kong, you know, Taiwan, UH, 0:02:04.480 --> 0:02:08.520 Tokyo and Korea for a very long time UM half 0:02:08.520 --> 0:02:12.040 a century in Hong Kong. In terms of our growth, 0:02:12.480 --> 0:02:16.720 last year we UH did receive our licensing and established 0:02:17.080 --> 0:02:21.480 a presence in Shanghai UH. But we've also been in 0:02:21.800 --> 0:02:26.400 some of the private markets and in particular direct leverage 0:02:26.520 --> 0:02:31.520 lending UH in areas like Australian Singapore UM, where we've 0:02:31.560 --> 0:02:35.560 done a lot of transactions over the last ten years. So, Tom, so, 0:02:35.919 --> 0:02:39.160 thinking about your Asia business and continuing to invest in Asia, 0:02:39.160 --> 0:02:42.080 how important to your business that the US and China 0:02:42.160 --> 0:02:48.359 forge meaningful trade agreements. I think it's very important, you know. Frankly, 0:02:48.440 --> 0:02:51.600 I think it was an error by US UH both 0:02:51.680 --> 0:02:57.440 parties during the sixteen election to basically ignore UH TPP. 0:02:58.200 --> 0:03:02.440 You know, the reality is you need agreements to provide 0:03:02.440 --> 0:03:06.120 the basis for trade at the end of the day. 0:03:06.280 --> 0:03:10.040 And you know, is it a distraction this uncertainty between 0:03:10.040 --> 0:03:14.480 the US and China? Sure? Are Are we hopeful that 0:03:14.520 --> 0:03:18.520 they come up with some resolution, Yes, because it probably 0:03:19.160 --> 0:03:23.600 allows more clarity for businesses to invest and if you will, 0:03:23.639 --> 0:03:25.880 get on with it. Um So, I do think it's 0:03:25.919 --> 0:03:31.320 important for the global economy and ultimately the markets. So 0:03:31.440 --> 0:03:36.320 I'm wondering, Tom, the challenge in delving into leverage lending, 0:03:36.400 --> 0:03:40.000 in particular in areas that are you know, if not 0:03:40.080 --> 0:03:45.520 emerging more susceptible to rapid investor flows at this point 0:03:45.600 --> 0:03:47.560 in the cycle. How do you go about doing it? 0:03:47.640 --> 0:03:50.400 Are you seeing any warning signs? Well, you know, the 0:03:50.680 --> 0:03:52.640 the leverage loan market is something that was a big 0:03:52.680 --> 0:03:55.240 part of my career before they made you know, I 0:03:55.720 --> 0:03:59.200 got into more the management side, and I've seen the 0:03:59.240 --> 0:04:02.320 cycles from the late eighties. Uh, you know when the 0:04:03.400 --> 0:04:06.200 junk bond market and drugs will blew up, through the 0:04:06.280 --> 0:04:10.040 nineties and nine eleven, and of course the financial crisis. 0:04:11.520 --> 0:04:13.800 When you talk about the leverage loan in the market, 0:04:13.840 --> 0:04:16.640 for instance, so that how your bond market. Yes, it 0:04:16.720 --> 0:04:18.800 has grown, but you also have to look at the 0:04:18.839 --> 0:04:23.280 fact that the amount of if you will enterprise value 0:04:23.400 --> 0:04:27.320 in private companies has grown dramatically. We've seen, um, you know, 0:04:27.360 --> 0:04:30.320 over thirty years many companies go private or stay private. 0:04:30.440 --> 0:04:33.680 So just the growth of a market itself doesn't mean 0:04:33.720 --> 0:04:38.320 it's overheated. That being said, we have a long recovery 0:04:38.320 --> 0:04:41.760 and long cycle. UH, it's prudent to approach the market 0:04:41.800 --> 0:04:45.120 assuming that you know you're later in the cycle. So 0:04:45.200 --> 0:04:48.040 you just have to be more selective uh in the 0:04:48.080 --> 0:04:52.080 deals you do, UH to be prepared for what will 0:04:52.120 --> 0:04:56.159 eventually be UH an increase in default in a credit 0:04:56.200 --> 0:04:59.440 cycle at some point. What's interesting to me, I'm wondering Tom, 0:04:59.480 --> 0:05:02.240 if you act we are seeing more opportunities in leverage 0:05:02.279 --> 0:05:04.520 lending right now because there has been so much bad 0:05:04.520 --> 0:05:07.200 press around loans and we have seen loans laking behind 0:05:07.560 --> 0:05:10.599 high yield bonds to the point where actually loans in 0:05:10.680 --> 0:05:13.680 some in some respects yield more than high old bonds, 0:05:13.680 --> 0:05:15.560 which is an unusual confluence. I mean, is this sort 0:05:15.560 --> 0:05:19.239 of an opportunity, Yeah, it is an opportunity. In fact, 0:05:19.240 --> 0:05:22.640 the way we are built our high yield loan business, 0:05:22.680 --> 0:05:26.280 it's all integrated, right, and a lot of our strategies 0:05:26.640 --> 0:05:29.120 can move between the bond and loan market, between the 0:05:29.200 --> 0:05:33.840 US and European markets because the relative data value does 0:05:34.520 --> 0:05:37.800 EBB and flow over time. There's times that bonds are 0:05:37.839 --> 0:05:41.000 cheap to loans and and times where you know, loans 0:05:41.040 --> 0:05:44.839 are are cheap demands based on risk return. And so 0:05:45.640 --> 0:05:48.400 it's not that we go all into one or the other, 0:05:48.520 --> 0:05:51.240 but we may overweight at a time when, for instance, 0:05:51.720 --> 0:05:56.000 you know, loans appear more attractive on a risk adjusted basis, 0:05:56.640 --> 0:06:00.120 you know, we may allocate more there. So, Tom were 0:06:00.120 --> 0:06:03.120 at the Milk and conference in Los Angeles. What has 0:06:03.120 --> 0:06:06.160 been maybe the most surprising takeaway you've had so far? There? 0:06:08.720 --> 0:06:11.720 You know, it's a great conference in part because it 0:06:12.080 --> 0:06:14.800 is not just about sitting around talking about the economy 0:06:14.839 --> 0:06:18.160 and the markets. And um I was on a panel 0:06:18.200 --> 0:06:22.479 with a lot smarter people than me yesterday and uh uh, 0:06:22.560 --> 0:06:27.359 and we followed Madame Legarde and one she was fabulous 0:06:27.560 --> 0:06:31.200 listened to and and just just very impressive views. But 0:06:31.320 --> 0:06:35.640 what was interesting is we moved from talking about what 0:06:35.760 --> 0:06:39.560 you would expect markets and and economies and things like that, 0:06:40.400 --> 0:06:44.440 really started talking about the issues of workforce and about 0:06:44.560 --> 0:06:48.360 education and you know, in essence, I think the skills 0:06:48.400 --> 0:06:51.599 gap is underscores a lot of the challenges of the 0:06:51.640 --> 0:06:53.880 future and and how do you deal with that. So 0:06:53.960 --> 0:06:56.240 there's there's a number of panels focused on that, and 0:06:56.720 --> 0:06:59.920 I think that's a very relevant and important topic. Tell 0:07:00.080 --> 0:07:01.920 thank thank you so much for being with us, and 0:07:02.200 --> 0:07:04.800 best of luck to you throughout the rest of the conference. 0:07:04.839 --> 0:07:08.360 Tompan chairman and chief executive officer of Bearings, which oversees 0:07:08.440 --> 0:07:25.720 three d and billion dollars from Cholotte, North Carolina. Last week, 0:07:25.800 --> 0:07:29.360 City Group CEO Michael Corbett said one thing that's keeping 0:07:29.400 --> 0:07:32.200 him up most at night is the widening income gap 0:07:32.560 --> 0:07:34.640 in the United States, saying that it has led not 0:07:34.680 --> 0:07:36.240 just the US but around the world, and said that 0:07:36.240 --> 0:07:40.120 it has led to increasingly polarized politics. The question is 0:07:40.720 --> 0:07:43.160 what do you do about that? And right now joining 0:07:43.240 --> 0:07:46.520 us here in our Interactive Broker Studios is Nell Abernathy, 0:07:46.840 --> 0:07:51.280 vice president of Strategy and Policy at the Roosevelt Institute. Now, 0:07:51.400 --> 0:07:54.040 you just put out a new report, New Rules for 0:07:54.080 --> 0:07:57.480 the Century, Corporate Power, Public Power, and the future of 0:07:57.520 --> 0:08:01.720 the American economy. Digging into some of these issues before 0:08:01.760 --> 0:08:04.760 we get into the details, why is it important to 0:08:05.160 --> 0:08:09.720 bridge the gap the inequality the income inequality gap right now? 0:08:10.640 --> 0:08:12.800 Thanks so much for having me. That's a great question, 0:08:13.320 --> 0:08:16.440 and I think we've seen that there are people all 0:08:16.480 --> 0:08:19.000 around the world, but focusing even on the US, who 0:08:19.040 --> 0:08:22.920 feel very disconnected from the growth that's occurring that we 0:08:22.960 --> 0:08:27.320 see in the headline numbers, GDP growth, stock market growth, 0:08:27.560 --> 0:08:31.200 and in the reality is these actually aren't reflecting the 0:08:31.280 --> 0:08:34.720 real experience that Americans have who are trying to put 0:08:34.760 --> 0:08:38.959 their kids through college, get health insurance, stay on health insurance, 0:08:39.120 --> 0:08:43.040 pay for housing. And that's becoming not only an economic problem, 0:08:43.040 --> 0:08:47.520 but a political problem as well. So, what created or 0:08:47.559 --> 0:08:50.920 how did this income equality become so pronounced, and maybe 0:08:50.920 --> 0:08:54.560 what current policies, whether the government policies are, you know, 0:08:55.000 --> 0:08:58.000 corporate policies that are supporting this or sustaining this issue. 0:08:59.240 --> 0:09:01.880 We argue and this most recent report that we need 0:09:01.920 --> 0:09:05.480 to fundamentally rethink our approach to markets and our approach 0:09:05.559 --> 0:09:08.440 to government. We need markets to do what they can 0:09:08.480 --> 0:09:13.439 do well, create jobs, innovate, provide valuable goods and services. 0:09:13.520 --> 0:09:17.120 But that's not how markets are functioning today. Due to 0:09:17.200 --> 0:09:20.400 this market fundamentalism, where we thought if we just let 0:09:20.400 --> 0:09:22.839 markets do what they do, they'll take care of everything. 0:09:23.559 --> 0:09:27.880 We've really created an enormous set of opportunities for corporations 0:09:27.920 --> 0:09:31.520 and the wealthy to extract value instead of create value. 0:09:31.960 --> 0:09:34.480 So what can you do about it? We talk about 0:09:34.800 --> 0:09:38.720 antitrust policy. Let's reduce the power of corporations over workers 0:09:38.760 --> 0:09:42.880 and their competitors. We talk about corporate governance reform. Let's 0:09:42.960 --> 0:09:46.320 ensure that firms aren't only focused on returning funds to 0:09:46.360 --> 0:09:50.320 their shareholders. Let's talk about labor policy reform and ensure 0:09:50.360 --> 0:09:53.240 that workers can actually bargain for some of the shaff 0:09:53.280 --> 0:09:56.320 profits they're creating. In practical terms, does this mean breaking 0:09:56.360 --> 0:10:00.240 up the big tech companies and limiting share buybacks? Is 0:10:00.280 --> 0:10:03.280 that you're calling for? Absolutely? Those are two examples of 0:10:03.280 --> 0:10:05.880 the kinds of things that would address the roots of 0:10:05.880 --> 0:10:08.400 the problem. One thing a lot of people have pushed backs, 0:10:08.400 --> 0:10:10.600 and so that share buy backs is simply that the 0:10:10.640 --> 0:10:13.559 reason why companies are buying back shares is because they 0:10:13.559 --> 0:10:15.760 don't have better projects to invest in, and if they 0:10:15.760 --> 0:10:18.679 were just to invest in other things, it would make 0:10:18.720 --> 0:10:21.960 for a bad business model. So I think that argument 0:10:22.000 --> 0:10:24.840 looks at ending share buy backs in a vacuum, and 0:10:25.000 --> 0:10:27.480 I would argue it's only one tool of the many 0:10:27.559 --> 0:10:30.160 that we need to promote. So for example, Yeah, if 0:10:30.160 --> 0:10:33.840 you don't need to compete to stay innovative as a firm, 0:10:33.960 --> 0:10:37.720 why would you be investing. But if you have a 0:10:37.720 --> 0:10:41.680 competition policy that forces firms to actually invest in innovate, 0:10:42.080 --> 0:10:44.880 then you won't need to you you will have to 0:10:44.920 --> 0:10:49.160 put money into investment in order to maintain long term viability. 0:10:49.320 --> 0:10:51.880 So we head towards the election, a lot of the 0:10:51.960 --> 0:10:55.680 Democratic candidates Senator Warren for example, Bernie Sanders, have talked about, 0:10:56.000 --> 0:10:59.560 you know, radically altering the tax structure, the tax policy 0:10:59.559 --> 0:11:03.559 of this country to in part to address this income inequalities. 0:11:03.600 --> 0:11:06.960 That's something that your report dealt with absolutely. I think 0:11:06.960 --> 0:11:09.600 that we need to start thinking about taxes the way 0:11:09.640 --> 0:11:12.920 they've talked about, as well as not simply about raising revenue, 0:11:12.960 --> 0:11:18.480 but actually structuring economic policy and incentivizing different kinds of behaviors. 0:11:18.559 --> 0:11:22.319 And right now, our tax structure again incentivizes a lot 0:11:22.360 --> 0:11:26.880 of extractive corporate behaviors and and speculation and tax dodging 0:11:27.000 --> 0:11:29.840 or evasion. And so we can think about how we 0:11:30.200 --> 0:11:33.520 come up with a pro growth, pro investment, pro democracy 0:11:33.600 --> 0:11:37.240 tax policy. So just to give us a sense of 0:11:37.400 --> 0:11:40.640 how feasible some of these proposals are, can you give 0:11:40.679 --> 0:11:43.360 the sense of what your contacts are with politicians and 0:11:43.400 --> 0:11:46.240 how mainstream these views are versus sort of up more 0:11:46.400 --> 0:11:49.559 on the left leaning side of the Democratic Party. Absolutely, 0:11:50.160 --> 0:11:56.000 these policies are actually becoming increasingly mainstream, and I think 0:11:56.040 --> 0:11:59.680 that's because two reasons. First, the crisis is such that 0:11:59.720 --> 0:12:02.880 people will understand the kinds of tweaks around the edges 0:12:03.480 --> 0:12:07.560 are just not gonna work. But also, this is not 0:12:07.760 --> 0:12:11.360 a radical view of government. This is a level of 0:12:11.400 --> 0:12:15.640 government intervention and regulation that Franklin Roosevelt would be very 0:12:15.640 --> 0:12:22.640 comfortable with, that was common in American politics before the nineties. 0:12:23.160 --> 0:12:27.040 And so we're really not talking about, uh, some kind 0:12:27.080 --> 0:12:32.280 of either market fundamentalism or government does everything approach. It's 0:12:32.320 --> 0:12:36.400 a both, And it sounds like this, let me ask you, 0:12:36.480 --> 0:12:40.920 is this more of a public private type of cooperative 0:12:40.960 --> 0:12:43.360 type move or do you think the government needs to 0:12:43.400 --> 0:12:45.680 take a much heavier hand here in implementing some of 0:12:45.720 --> 0:12:48.760 these changes. So we argue in this report that we 0:12:48.840 --> 0:12:53.479 need to tackle reforms long two levels. One is restructuring 0:12:53.520 --> 0:12:56.640 markets so that markets do what they do well. And 0:12:56.679 --> 0:13:00.320 the other then is a more robust version of public 0:13:00.360 --> 0:13:04.360 power or public intervention where the government actually does some 0:13:04.440 --> 0:13:08.079 things better than markets, and that's something we've forgotten. We 0:13:08.240 --> 0:13:11.160 default to thinking that markets are always going to be 0:13:11.200 --> 0:13:13.400 more effective than government, and there are some things that 0:13:13.440 --> 0:13:16.000 government can actually do more effectively. So when you talk 0:13:16.040 --> 0:13:18.960 about I want to go to the antitrust issues that 0:13:19.040 --> 0:13:21.040 you raise, because this is something that we've heard from 0:13:21.040 --> 0:13:24.280 other guests, the idea that perhaps people should look at 0:13:24.280 --> 0:13:26.680 breaking up or at least limiting the growth, particularly in 0:13:26.720 --> 0:13:30.360 technology or say Amazon. And I'm just wondering, what do 0:13:30.400 --> 0:13:34.240 you say to people who argue that these companies have 0:13:34.360 --> 0:13:37.880 lower costs and improved the quality of life for people 0:13:37.880 --> 0:13:42.080 who can have easier access to goods, cheaper access to them, uh, 0:13:42.120 --> 0:13:45.440 as well as you know, more media and other things. Absolutely, 0:13:45.520 --> 0:13:48.920 so I think there are two important things to remember 0:13:48.960 --> 0:13:53.280 about antitrust policy. One, it's not simply about breaking things up. 0:13:53.800 --> 0:13:57.400 That is one option that in certain industries does make 0:13:57.440 --> 0:14:00.480 sense in others. For example, with platforms, where you see 0:14:00.480 --> 0:14:04.160 the kind of benefits that come from having a large network, 0:14:04.480 --> 0:14:08.400 you wouldn't necessarily break up that network. You might just 0:14:08.559 --> 0:14:12.040 impose some kind of oversight to make sure, for example, 0:14:12.360 --> 0:14:17.599 they can't sell all your data to add buyers um. 0:14:17.880 --> 0:14:21.760 Second of all, one of the challenges we've seen in 0:14:21.800 --> 0:14:25.600 antitrust policy is that everything is defined by the value 0:14:25.600 --> 0:14:29.360 to the consumer. And what we're what most reformers are 0:14:29.480 --> 0:14:32.320 arguing is we need to consider more than just consumers. 0:14:32.320 --> 0:14:35.760 We also need to consider competitors and workers. And it 0:14:35.800 --> 0:14:37.480 doesn't make a lot of sense if you can get 0:14:37.560 --> 0:14:40.800 cheap goods, if there's no other no job for you, 0:14:40.920 --> 0:14:43.720 no opportunities to build well through starting your own business, 0:14:44.200 --> 0:14:48.680 and a really dysfunctional democracy. Interesting, No, Lapathy, thank you 0:14:48.720 --> 0:14:50.680 so much for joining us nell as the vice president 0:14:50.760 --> 0:14:53.280 Strategy and Policy for the Roosevelt Institute. Joining us live 0:14:53.280 --> 0:15:13.480 here in our Bloomberg Interactive Broker studio. Well, we continue 0:15:13.520 --> 0:15:16.200 to get more data points on big tech. This week, 0:15:16.280 --> 0:15:19.560 we had Google report disappointing numbers. After the closed last 0:15:19.680 --> 0:15:23.520 night and tonight after the clothes we have Apple reporting results. 0:15:24.080 --> 0:15:26.520 So to get more details on what is going on 0:15:26.680 --> 0:15:28.760 with the world with big tech, we bring in David Garrity. 0:15:28.840 --> 0:15:31.560 David's a chief market strategist for laid law and Companies, 0:15:31.600 --> 0:15:34.160 also a partner at bt Block. He joins us in 0:15:34.200 --> 0:15:37.240 our Bloomberg Interactive Broker studio. David, thanks so much for 0:15:37.280 --> 0:15:40.000 being with us. Let's start with Google. How concerned are 0:15:40.040 --> 0:15:43.720 you with that slowing revenue growth story there? Well, it's 0:15:43.720 --> 0:15:45.600 been a marketing deceleration. I mean, if you look at 0:15:45.640 --> 0:15:47.960 the progression a year ago, the company was growing its 0:15:48.400 --> 0:15:51.760 revenues by about six percent year every year. Fourth quarter 0:15:51.760 --> 0:15:54.640 of two thousand and eighteen that was this last quarter 0:15:54.760 --> 0:15:57.800 was seventeen, so you basically have seen you know, eleven 0:15:57.840 --> 0:16:01.280 percentage points of deceleration year of year. Obviously, if you 0:16:01.360 --> 0:16:05.720 took this five percent declined quarter over quarter and annualized that, 0:16:05.800 --> 0:16:09.240 you would say that you're actually starting to see accelerating 0:16:09.640 --> 0:16:12.400 deceleration in terms of the growth and to the extent 0:16:12.520 --> 0:16:15.000 that the market tends to, you know, operate off of 0:16:15.040 --> 0:16:18.320 the second derivative in terms of looking at how prices 0:16:18.400 --> 0:16:22.520 go accelerating deceleration. I know exactly what he means. Yes, 0:16:22.560 --> 0:16:24.720 I do too, actually, but it just does. A second 0:16:24.720 --> 0:16:27.720 derivative would call it as em topic to the downside. 0:16:27.760 --> 0:16:30.200 Look at that not necessarily a pretty picture. One thing 0:16:30.240 --> 0:16:32.480 that I'm curious about is who's stealing the share right 0:16:32.640 --> 0:16:36.000 Because Facebook, we saw increase their share marginally of the 0:16:36.040 --> 0:16:39.440 ad revenue, and this is sort of the big deceleration 0:16:39.640 --> 0:16:43.320 with respect to Google, particularly a YouTube platform. Not a 0:16:43.360 --> 0:16:46.960 lot of answers as to why what was behind the 0:16:47.040 --> 0:16:51.800 decline in the ad spending on YouTube in Google's results, 0:16:51.840 --> 0:16:55.600 Alphabet's results. I'm just wondering, is it really a Facebook 0:16:55.600 --> 0:16:59.440 winning Amazon winning Google the big loser here? Well, I 0:16:59.440 --> 0:17:01.400 would certain they say it seems to be shaking out 0:17:01.440 --> 0:17:04.000 that way. We could talk about who has the stickier audience, 0:17:04.119 --> 0:17:06.520 and we could say that, you know, Facebook, despite the 0:17:06.560 --> 0:17:08.840 issues that have been raised around it and which will 0:17:08.840 --> 0:17:12.480 continue to dog the company going forward, hasn't yet really 0:17:12.560 --> 0:17:15.760 seen the rate of attrition off of their platform to 0:17:15.840 --> 0:17:19.399 potentially lose uh an annuity stream, if you will, of 0:17:19.480 --> 0:17:23.520 online advertising revenue. Google really is, we know, never really 0:17:23.520 --> 0:17:27.080 been all that successful in building a social media platform. Yes, 0:17:27.200 --> 0:17:29.800 YouTube has been a wonderful franchise for them. You know, 0:17:29.920 --> 0:17:32.240 one can argue about the quality of the content on 0:17:32.280 --> 0:17:35.399 the site, um, but you know, Google necessary hasn't had 0:17:35.400 --> 0:17:39.199 that stickiness. Amazon, we know consumers are going to at 0:17:39.280 --> 0:17:41.880 least on a daily basis and perhaps even more frequently 0:17:41.880 --> 0:17:45.800 than that. So you know, I look most significantly at 0:17:45.840 --> 0:17:49.479 Amazon's growth in online advertising revenue of thirty four percent 0:17:49.560 --> 0:17:52.159 year every year, basically double the rate we're seeing of 0:17:52.160 --> 0:17:55.480 the seventeen percent for Google. As Amazon, clearly this is 0:17:55.480 --> 0:17:57.600 a game that they're gonna win. I think that they 0:17:57.640 --> 0:18:00.679 take it first from Google Facebook second. It's interesting. One 0:18:00.720 --> 0:18:03.720 of the uh concerns I think I've heard from investors 0:18:03.760 --> 0:18:06.159 really over the last couple of reporting periods, but certainly 0:18:06.200 --> 0:18:09.879 after yesterday, is the lack of disclosure by Google for 0:18:09.960 --> 0:18:13.040 some of their other businesses that investors feel like A 0:18:13.200 --> 0:18:16.080 their big businesses and B we think they're good growth stories. 0:18:16.119 --> 0:18:20.440 I'm thinking the cloud business, um, YouTube, and they're concerned 0:18:20.440 --> 0:18:22.439 they're just not getting any disclosure from the company. Help 0:18:22.480 --> 0:18:25.879 concerning is that to you? Well, it's always been concerning 0:18:25.880 --> 0:18:28.600 ever since the company went public back in two thousand four. 0:18:28.640 --> 0:18:30.760 They came out with this mantra of do no evil, 0:18:31.040 --> 0:18:34.560 you know, followed by an investor relations uh mantra of 0:18:34.640 --> 0:18:37.880 saying trust us. Uh. Well, clearly what's going on here 0:18:37.880 --> 0:18:41.600 in all this opacity is not something that's encouraging to investors. 0:18:41.920 --> 0:18:44.520 You know. Certainly we have great uncertainty is to when 0:18:44.560 --> 0:18:47.600 do we actually see the payoff from these new initiatives, 0:18:47.640 --> 0:18:51.080 whether it's way most self driving cars, um, you know, 0:18:51.400 --> 0:18:53.760 that could be five to ten years or more out 0:18:53.760 --> 0:18:56.000 in the future, and they may not necessarily be successful 0:18:56.040 --> 0:18:59.000 in this regard. So clearly we see billions of dollars 0:18:59.040 --> 0:19:04.160 you know, going you not really a well defined opportunity. 0:19:04.240 --> 0:19:06.199 So I want to shift gears a little bit because 0:19:06.240 --> 0:19:08.960 we did get off bed after the bell yesterday. Today, 0:19:09.000 --> 0:19:11.120 after the bell, we're going to get Apple a lot 0:19:11.160 --> 0:19:13.600 of people looking for some sort of gauge on the 0:19:13.680 --> 0:19:17.040 smartphone market and also just how well Apple is diversifying 0:19:17.359 --> 0:19:20.400 into services and even uh and I know you're gonna 0:19:20.400 --> 0:19:23.480 get excited media and what could potentially happen there. So 0:19:23.960 --> 0:19:25.800 I'm just curious, what are you looking for? What do 0:19:25.840 --> 0:19:28.640 you think could potentially be the biggest surprise today? I mean, 0:19:28.680 --> 0:19:31.080 certainly the big thing that the company is going to 0:19:31.160 --> 0:19:34.360 have to address is the expectation of a ninetent decline 0:19:34.760 --> 0:19:37.280 year of year and smartphone sales. And then certainly that 0:19:37.359 --> 0:19:40.159 in many ways is driven by you know, weakness in 0:19:40.200 --> 0:19:43.280 the Chinese economy, but also the fact that consumers have 0:19:43.440 --> 0:19:45.920 gotten to a point where the affordability of a handset 0:19:46.320 --> 0:19:48.240 um has gotten to the point where people are saying, look, 0:19:48.280 --> 0:19:51.000 if I don't necessarily feel confident about my spending, this 0:19:51.040 --> 0:19:53.359 is a durable good and I'm just gonna hold on 0:19:53.400 --> 0:19:55.639 to what I have longer. So you know, clearly, at 0:19:55.680 --> 0:19:57.840 the end of the day, it says for Apple, you know, 0:19:57.960 --> 0:20:00.760 they better see accelerating growth in term of services. I 0:20:00.800 --> 0:20:04.560 think the streaming media announcement that they had earlier, uh 0:20:04.720 --> 0:20:07.919 certainly plays into see an acceleration and services growth as 0:20:07.960 --> 0:20:10.840 we go out towards. But you know, Apple is a 0:20:10.880 --> 0:20:15.040 stock up from its lows u most recently, you know, 0:20:15.119 --> 0:20:18.240 certainly in a position to continue to return cash to investors. 0:20:18.520 --> 0:20:20.160 This is the point of the year, will receive their 0:20:20.160 --> 0:20:23.840 dividend decision being made typically something that serves to sustain 0:20:23.880 --> 0:20:28.280 the stock. So you know, unlike obviously Google, where there's opacity, 0:20:28.720 --> 0:20:31.280 certainly when you look at Apple, despite the fact that 0:20:31.320 --> 0:20:34.000 they narrowed the scope of their disclosure around what actual 0:20:34.040 --> 0:20:38.800 iPhone shipments they were making. Uh, certainly provides better relative disclosure. 0:20:39.080 --> 0:20:40.879 Do you think they should be more Apple should be 0:20:40.880 --> 0:20:43.399 more aggressive returning cash? They've got over two or billion 0:20:43.400 --> 0:20:46.560 dollars worth of cash. Um. I you know, certainly they've 0:20:46.600 --> 0:20:48.600 got the wherewithal if that's a decision that they wish 0:20:48.680 --> 0:20:50.800 to make. But one might argue that, you know, in 0:20:50.880 --> 0:20:53.480 contrast to other names, one could say that Apple has 0:20:53.480 --> 0:20:56.440 done a far better job in terms of providing clarity 0:20:56.480 --> 0:21:00.520 around the expected expected returns on their investment, as well 0:21:00.560 --> 0:21:03.000 as a better I think return on invested capital overall. 0:21:03.560 --> 0:21:05.760 David Garritty, thank you so much as always for being 0:21:05.840 --> 0:21:08.840 with us. David Garrity, chief market strategist for laid Law 0:21:08.920 --> 0:21:26.080 and Company, also partner at bt Block. Well, it has 0:21:26.119 --> 0:21:29.439 been a big earnings day from big Pharma today. We 0:21:29.440 --> 0:21:32.520 had Mark, Eli, Lily and fires Are all reported earnings 0:21:32.520 --> 0:21:35.280 this morning. To get the latest returned to Sam Fazelli. 0:21:35.320 --> 0:21:38.040 Sam is director of research for Bloomberg Intelligence. He joins 0:21:38.119 --> 0:21:41.520 us on the phone from London. Sam, thanks so much 0:21:41.680 --> 0:21:44.480 for joining us. It seems like, your company's had a 0:21:44.520 --> 0:21:47.879 pretty good quarter here, most beating estimates, raising some estimates. 0:21:47.880 --> 0:21:51.439 What's the bottom line? Yeah, so high Pool and Lisa 0:21:51.520 --> 0:21:58.040 the three companies reported today in and in order of performance, Uh, 0:21:58.160 --> 0:22:01.760 Lily then Fisa, then Mark Mark having the best beats 0:22:01.760 --> 0:22:05.159 on sales and EPs for the first quarter and basically 0:22:05.960 --> 0:22:09.960 underlying business is doing well. But in all three cases called, 0:22:10.000 --> 0:22:13.720 there were some issues and questions that would raise some 0:22:13.880 --> 0:22:18.520 angst um for US at least, so angst I want 0:22:18.520 --> 0:22:21.200 to talk about Eli Lily in particular, because that seemed 0:22:21.200 --> 0:22:24.520 to have the one small miss at least when it 0:22:24.600 --> 0:22:28.080 came to revenues, I believe, and I'm trying to figure 0:22:28.119 --> 0:22:32.840 out how important it is that their actual prices declined 0:22:33.000 --> 0:22:37.000 in certain drugs. Yeah, so that's that's obviously the focus 0:22:37.000 --> 0:22:40.359 over here when we're looking at these numbers. Um. You know, 0:22:41.000 --> 0:22:45.400 drug pricing US drug pricing is an issue that everyone's 0:22:45.440 --> 0:22:49.800 focused on, So it's not surprising that everyone's highper sensitive 0:22:49.840 --> 0:22:51.960 to when a company says that they had lower net 0:22:52.000 --> 0:22:55.080 realized pricing. On the call, they did actually say that 0:22:55.160 --> 0:22:57.760 part of the issue for this big drug that they 0:22:57.800 --> 0:23:00.880 have with analyzing it over about four billion dollars Trulicity 0:23:01.280 --> 0:23:05.000 for diabetes, and that's obviously a big, big growth driver 0:23:05.080 --> 0:23:07.280 for them, and and and a significant chunk of their 0:23:07.280 --> 0:23:10.320 overall revenues. So everyone's very very focused on it. And 0:23:10.359 --> 0:23:13.040 they said that actually what one of the key drivers 0:23:13.080 --> 0:23:17.000 of that missing consensus in this first quarter was inventory 0:23:17.040 --> 0:23:21.520 down downturn in the first quarter, so one assumes that 0:23:21.520 --> 0:23:25.120 that would return back to normal into Q. The problem 0:23:25.200 --> 0:23:28.879 for Lily is to a degree, it's really high PE. 0:23:29.080 --> 0:23:32.160 So at the moment the sitting despite the share price drop, 0:23:32.400 --> 0:23:36.480 at the second highest PE multiple evaluation amongst large pharma. 0:23:37.200 --> 0:23:40.119 So that doesn't leave much room for error. So switching 0:23:40.160 --> 0:23:41.840 gears to Mark. When I when I think of Mark, 0:23:41.880 --> 0:23:44.960 I think of the drug Truda. What happened with that 0:23:45.080 --> 0:23:47.399 drug this quarter? Is that's still the growth driver for 0:23:47.440 --> 0:23:51.440