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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. Now we have with

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Speaker 1: us one of the most respected names on the street

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Speaker 1: when it comes to analyzing companies in terms of I

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Speaker 1: guess um future cash flows, and he's done the pretty

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Speaker 1: much the best as far as I can see across

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Speaker 1: the industry in terms of his returns. Dan Ives joins

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Speaker 1: us from web Bush Securities, where he's managing director of

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Speaker 1: Equity Research. Dan, I'm gonna kind of rip up the

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Speaker 1: script here because I know we want to talk about

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Speaker 1: the China tech crackdown, and I definitely want to hit

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Speaker 1: on Tesla as well in a moment, because Elon Musk

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Speaker 1: is here with me, not with me personally and physically,

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Speaker 1: but you know, within a twenty mile radius in Berlin

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Speaker 1: at his Big A factory. But we just got a

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Speaker 1: consumer sentiment number that um the U miss Director Richard

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Speaker 1: curtain called stunning. The loss of confidence, he said, was stunning.

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Speaker 1: He said over the past half century, the sentiment index

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Speaker 1: has only recorded larger losses in six other surveys, and

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Speaker 1: it's dropped the most since two thousand eleven. What is

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Speaker 1: going on in the U S economy? OK, I think

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Speaker 1: what we're starting to see really coming down of COVID,

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Speaker 1: it's very uneven in terms of this recovery and and

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Speaker 1: I think it really is cause almost more and more

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Speaker 1: of a move to some of these safety blanket names,

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Speaker 1: especially in tech by the large cab names, because investors

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Speaker 1: right now they almost have a flashlight in a dark

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Speaker 1: tunnel that they're still trying to figure out what the

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Speaker 1: fundamental stories look like consumer as well as enterprised second

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Speaker 1: half of the year, and and we continue weave this

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Speaker 1: is going to be uneven, but you have to focus

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Speaker 1: on the secular winners, and we've we've tech. It's still

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Speaker 1: a risk on train a green light to intact and

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Speaker 1: to your end. Dan, on that note, we're taking look

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Speaker 1: at shares of Microsoft right some of the big tech

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Speaker 1: companies that you cover that are trading at record highs,

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Speaker 1: and I am curious how much of this is a

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Speaker 1: defensive move wherewith yields falling, we like the discount cash

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Speaker 1: flows or these valuations really justified in your opinion, Yeah,

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Speaker 1: it's a great question. I think there's definitely a bit

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Speaker 1: defensive on some of these tech names, like a Microsoft,

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Speaker 1: But a lot of it really comes down to we

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Speaker 1: are in the midst of a fourth in DSHA revolution.

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Speaker 1: I mean two trillion of digital transformations spend on the

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Speaker 1: enterprise and on consumer. When you look at what they're

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Speaker 1: doing in Redmond, when the Delawad and the Charge, Microsoft

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Speaker 1: continue to gain more and more share in the cloud,

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Speaker 1: and that what we're seeing is just a further rereading

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Speaker 1: of the stock from Microsoft, but you're seeing across the

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Speaker 1: whole tech sphere in terms of names like Apple, names

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Speaker 1: across cybersecurity and cloud because in so just starting realized

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Speaker 1: this wasn't just to pull forward we've seen the last

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Speaker 1: eighteen months. It's called first second inning of what really

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Speaker 1: what's going to be a transformation in terms of the

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Speaker 1: tech sector. You have a thousand dollar price target. I

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Speaker 1: believe on Tesla you have as an outperform. You've done

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Speaker 1: much better than your peers in terms of rating the

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Speaker 1: stock with a nine percent return. Your peers average return

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Speaker 1: is down. What is happening though, in terms of boosting production,

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Speaker 1: in terms of getting out the solar cell business, in

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Speaker 1: terms of you know, achieving all that he's promised, Like

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Speaker 1: the mack truck, I guess it's an eighteen wheeler that

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Speaker 1: he that he wants to bring out. I mean, can

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Speaker 1: you really do all this stuff? Or does that not

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Speaker 1: matter to you know, it's this kind of cashlow is

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Speaker 1: also not matter to Tesla. Yeah, I think for right

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Speaker 1: now in Tesla they almost have a high class problem

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Speaker 1: because every car that they meet they sell. It's really

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Speaker 1: more of a supply capacity issues, which is why he's

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Speaker 1: in Berlin right now, and which is why there's such

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Speaker 1: a focus on the build out of Berlin, having that

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Speaker 1: flagpole in Europe instead of just shipping cars from China,

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Speaker 1: which is a logistical disaster, as well as Austin. Because

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Speaker 1: right now we're in the green title leave, we're just

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Speaker 1: in the early stages of it. And Tesla when Musk

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Speaker 1: is looking out, of course, we have cyber Truck talking

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Speaker 1: about long haul talking as well. These are aspirations. I

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Speaker 1: don't I don't think they're just aspirations. I think these

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Speaker 1: are models that we will continue to see come out,

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Speaker 1: But for now, for the street, it's about Model three,

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Speaker 1: Model Y and of course the rebound in China for Tesla,

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Speaker 1: that is what will continue driving stock A part of

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Speaker 1: the overrang on Testa this year after Cinderella Story last year.

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Speaker 1: It's more competition from GMS two v ws to the

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Speaker 1: pure place and that's been I want to see the

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Speaker 1: cyber truck what I want to see on the street, Dan,

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Speaker 1: you know, speaking of China, go out there for us,

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Speaker 1: but but go broader. I think what is fascinating is

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Speaker 1: the rewriting that you've had to see on change it,

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Speaker 1: you know, with a stroke of a pen. Beijing has

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Speaker 1: told us in the last month that they can entirely

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Speaker 1: change the rules. How do you evaluate that on a

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Speaker 1: fundamental basis? With all the headline risk of China tech

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Speaker 1: crackdown well right now and for investors not just in

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Speaker 1: the US but globally, you really can't go in China

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Speaker 1: tech here. I mean, the rules continue get changed, and

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Speaker 1: it's really been a horror movie. You know, for investors

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Speaker 1: in China tax factor more and more that money is

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Speaker 1: routine to US tech, even though there's regulatory risk of

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Speaker 1: course within the Beltway, this just doesn't compare the scale

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Speaker 1: and scope of what Beijing is doing with this crackdown.

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Speaker 1: And it's something where you know, if you own these

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Speaker 1: names on Friday, you don't know what's going to happen

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Speaker 1: Monday morning. And it's really the risk off in the

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Speaker 1: China sectors. One. It's hard for us to look someone

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Speaker 1: in the mirror and own some of these broader themes

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Speaker 1: have regulatory risk, like to Baba's, the d d S

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Speaker 1: and others. All right, thanks so much for joining us.

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Speaker 1: Dan is always a pleasure to get you on and uh,

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Speaker 1: I think you had a lot of insight for our investors,

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Speaker 1: also for our listeners. Also point out to people that

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Speaker 1: they can check out the A and our page for

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Speaker 1: Dan Ives and just see um how he has crushed

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Speaker 1: it in terms of picking stocks and setting targets. So

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Speaker 1: always good to talk to web Bush Securities Managing Director

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Speaker 1: Dan Ives. We're gonna continue to cover this massive drop

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Speaker 1: in consumer sentiment for you. The you Miss index falling

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Speaker 1: to a reading of seventy. We were looking for more

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Speaker 1: than eighty. This is Bloomberg. Now. There is a lot

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Speaker 1: going on in Washington. Despite the fact that I believe

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Speaker 1: they're currently in recess. Um. They need to figure out

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Speaker 1: if they're gonna pass this one point two trillion dollar

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Speaker 1: spending bill before they look at the three and a

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Speaker 1: half trillion dollar resolution moves or reconciliation moves or um.

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Speaker 1: If they're gonna, I guess hold hostage is a bad term,

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Speaker 1: but basically, um make sure they can get the reconciliation

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Speaker 1: passed before they agree on the bipartisan bill. Nonetheless, it

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Speaker 1: looks like we're gonna get a lot more money spent

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Speaker 1: on infrastructure eventually, she tell Prasade Joins, a small and

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Speaker 1: MidCap growth portfolio manager, as well as equity research analyst

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Speaker 1: Jennison Associates to talk to us about where investors can

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Speaker 1: take advantage if we do, and she tall this is

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Speaker 1: an interesting market because it does look like there's gonna

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Speaker 1: be a lot more money spent, at least for now.

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Speaker 1: We do face the possibility of a fiscal cliff in

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Speaker 1: the future, and there are supply chain issues that are

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Speaker 1: really jamming things up a little bit. How do you

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Speaker 1: see the investment environment? Well, it's great to be heroris

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Speaker 1: to thanks for having me, so I guess what I

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Speaker 1: would say on the Infrastructure Bill specifically, is I think

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Speaker 1: it's meaningful that for the first time as you as

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Speaker 1: you talked about things in DC, that we're actually able

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Speaker 1: to get something done. Uh. It does show that we've

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Speaker 1: got bipartisan support for investing in our own infrastructure. And

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Speaker 1: I think there's some parts of that bill that are bipartisan.

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Speaker 1: As I mentioned that, you know, whether it's UM investing

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Speaker 1: in bridges and roads, high speed internet for rural communities,

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Speaker 1: electric vehicle charging stations, etcetera. Having said that, you know,

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Speaker 1: on our team, UM and even I think the markets

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Speaker 1: are not really assuming that this will go through. There's

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Speaker 1: still a lot of wood to chop UM from the

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Speaker 1: House in terms of getting this passed. And we've maybe

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Speaker 1: been burned once before on the promise of an infrastructure package.

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Speaker 1: So I don't think we are getting in over our

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Speaker 1: skis on this spending specifically. Having said that, so UM,

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Speaker 1: I think that's a pandemic and just what we've seen

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Speaker 1: in terms of the supply chain clunches that you mentioned,

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Speaker 1: UM companies want to have their supply chains closer, and

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Speaker 1: I think we're about to embark on a real onshoring, reshoring,

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Speaker 1: capital investment renaissance. In this country. I hate to try

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Speaker 1: to bring a a contrary opinion here, though it was

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Speaker 1: interesting yesterday one of them was one of the first

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Speaker 1: times I finally heard someone say, uh, except taxes have

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Speaker 1: to go up if we're going to pay for all

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Speaker 1: of this, and the markets haven't yet priced that in well,

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Speaker 1: or growth could pay for it. Yes, if we can

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Speaker 1: grow our way out of our debt. But if we can,

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Speaker 1: you know, how are we are there are the markets

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Speaker 1: prepared for potentially higher taxes in order to pay for this.

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Speaker 1: I don't believe that the markets are ready for higher

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Speaker 1: taxes now. Certainly the Biden and Is station is saying

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Speaker 1: that there is enough pay force for the infrastructure bill

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Speaker 1: by you know, some of the COVID relief funds and

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Speaker 1: unused you know, assistance to the states, etcetera. But I

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Speaker 1: think we know from I think the CBO scoring that's

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Speaker 1: it's going to cost a lot of money. Um, And

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Speaker 1: I don't think and you know, and I think that

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Speaker 1: certainly some members of Congress are really resistant to increase

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Speaker 1: in taxes, whether it's gas taxes, usage taxes, etcetera. So

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Speaker 1: that almost seems like a non starter quite frankly, to

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Speaker 1: pay for it. But um, you know, again, even without

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Speaker 1: the one point two trillion UM, I think that the

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Speaker 1: the you know, the doors open, the gates are open,

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Speaker 1: and we're just going to see a lot more investment

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Speaker 1: in the country, regardless of what happens in the US.

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Speaker 1: You know, from from the government standpoint, you know, the

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Speaker 1: the best way that the government throughout history you found

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Speaker 1: to get out of debt is inflating their way out.

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Speaker 1: As someone who looks at you know, especially small and

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Speaker 1: MidCap stocks, what's your take on inflation. I so we've

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Speaker 1: just come off of a second quarter earning season, and

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Speaker 1: I can tell you almost universally, every single company is

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Speaker 1: talking about inflation, and that inflation is are there in

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Speaker 1: the form of raw materials, it's in the form of wages,

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Speaker 1: it's in the form of freight and logistics, and and

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Speaker 1: for some companies they can you know, pass it through

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Speaker 1: to customers and whether that's consumers or whether that's you know,

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Speaker 1: business to business customers. And so I do think that

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Speaker 1: inflation is real. And you know what I'm perhaps a

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Speaker 1: bit more concerned about is that the alleviation that many

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Speaker 1: companies were hoping for in the back half of this

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Speaker 1: year and into two seems to be maybe being pushed

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Speaker 1: off to the right. And the reason I say that is,

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Speaker 1: you know, the delta variant um. You know, for for

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Speaker 1: certain companies that have supply chains still in Southeast Asia

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Speaker 1: where plants are being shut down for weeks. Uh, you know,

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Speaker 1: they're just not yet seeing the looseness in the supply

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Speaker 1: chains that we would hope for. So I do think

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Speaker 1: that inflation is there. I do believe that companies are

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Speaker 1: going to price it through as much as possible, and

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Speaker 1: it could, as you said, inflate the economy higher. All right,

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Speaker 1: I think that's all we have time for unfortunately, but

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Speaker 1: hopefully we can get you back Schtel, because it's fascinating,

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Speaker 1: um to get your take on this, especially as you know,

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Speaker 1: typically people come on here and talk only about the

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Speaker 1: big cap stocks. UM. I guess in this market it's

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Speaker 1: all about Mega tex, right, So it's great to hear

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Speaker 1: from a small and MidCap growth portfolio manager. Sheetile Prasad

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Speaker 1: from Jennison Associates talking to us about the expected impact

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Speaker 1: of the infrastructure deal, the possibility of more taxes. I think, sadly,

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Speaker 1: that's always almost an inevitability, um, right. So I mean

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Speaker 1: sadly for those of us who don't like to pay taxes. Well,

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Speaker 1: and with the evaluations, I think she had a good

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Speaker 1: point of the markets might not be ready for and

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Speaker 1: she had a good point. With the five fifty billion

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Speaker 1: dollar bill, we're not looking at it, but with the

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Speaker 1: three and a half trilling dollar bill, we could be

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Speaker 1: looking at higher taxes. And it's just all a matter

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Speaker 1: of how the markets can be prepared for that. Mad

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Speaker 1: absolutely um, and I think that's one of the problems

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Speaker 1: that a lot of Congress people have with it. Like

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Speaker 1: James Rosst Joins, a ce IO and founding partner of

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Speaker 1: Coast Capital and James Bitcoin. You know, everyone is calling

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Speaker 1: for a crash at thirty grand and now we're back

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Speaker 1: up at forty six thousand, three thirteen. What's going on?

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Speaker 1: I nice to do, nice to be with you. Look,

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Speaker 1: I really wouldn't call myself an expert on bitcoin. We

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Speaker 1: really are focused on gold and gold miners where we

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Speaker 1: have some very specific thoughts journey and so far as

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Speaker 1: inflation is concerned. The problem we have with bitcoin is

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Speaker 1: um It's adopted by a lot of people who really

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Speaker 1: want to see go up, but there really are no

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Speaker 1: natural buyers for it. I don't think over and above

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Speaker 1: financial speculators, um. And there seems to be a lot

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Speaker 1: of financial speculators, more than ever before, and the amount

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Speaker 1: of capital in the hand of speculators is much greater

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Speaker 1: than ever before. And you can probably blame very low

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Speaker 1: interest rates for that. The problem with with Bitcoin rather

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Speaker 1: than things like etherium or other coins is it's just flawed.

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Speaker 1: It seems to us destined to be worth if not

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Speaker 1: worth less, then worth certainly a lot less than where

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Speaker 1: it is today, simply because you know, it's a very

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Speaker 1: inefficient still mechanism for for the transfer of value from

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Speaker 1: one person to another, which is what you need as

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Speaker 1: a currency, and that is the store of value. You know.

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Speaker 1: I just don't think that Bitcoin is the best blockchain

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Speaker 1: based cryptocurrency will ever come up with. You know, Etherium

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Speaker 1: is already a superior um platform um. And so why

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Speaker 1: would I want to buy bitcoin when I know that,

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Speaker 1: you know, and also at the point with a better

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Speaker 1: technology is guaranteed to be developed, already has been developed,

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Speaker 1: and let's all that bitcoin too or ethereum, and I

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Speaker 1: know that something even better will be developed. Why does

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Speaker 1: anybody want to buy gold? Uh? Well, people look a

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Speaker 1: number of reasons. First of all, have you ever, you know,

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Speaker 1: gone to a really nice dinner with you know, like

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Speaker 1: like like you know, someone who were very nice jewelry

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Speaker 1: and that makes a certain impact. Have you ever gone

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Speaker 1: to Paris and marvel that how beautiful it is? And

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Speaker 1: have you noticed how the rooftops are guilded? Have you

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Speaker 1: you know, when you got married? What did you you know?

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Speaker 1: If you if you are married, and and and anyone

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Speaker 1: who's married has my sympathies man or woman. By the way,

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Speaker 1: when you got married, what is the how did you

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Speaker 1: convey your love? You know, gold is and has been

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Speaker 1: and will doubtless remain the one that commodity that has

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Speaker 1: been a store of value that has been chair is

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Speaker 1: by people around the world for millennia and will continue

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Speaker 1: to be. And guess what Central bankers who know a

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Speaker 1: whole lot more about um um financing stores of value

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Speaker 1: than than I do. Certainly you know, are not buying bitcoins.

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Speaker 1: They're buying goal and they're maybe they're they're doing their

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Speaker 1: best to outlaw bitcoin, you know. And I think that

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Speaker 1: from never mind uhum the concerns that I just expressed,

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Speaker 1: but from environmental concerns perspective, and also because central banks

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Speaker 1: want to have an ever tight equip on their local economies.

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Speaker 1: From that perspective as well, I think that they will

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Speaker 1: want to see people certainly not adopt bitcoin or not

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Speaker 1: adopt you know, these blockchain based currencies with which to

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Speaker 1: conduct transactions in the countries. I mean and just yeah,

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Speaker 1: there are so many hurdles that bitcoin, blockchain based currencies, uh,

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Speaker 1: cryptocurrencies face. Um, but tas you know, you know, Matt's

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Speaker 1: not going to be happy. I'm going to digress a

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Speaker 1: little bit from bitcoin and blockchain. You mentioned inflation when

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Speaker 1: you're talking talking about gold. We've had a lot of

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Speaker 1: moves in the commodities as of late. You had lumber

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Speaker 1: up and lumber down, copper up and copper down. What

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Speaker 1: are the moves and commodities telling you about that inflation? Well,

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Speaker 1: inflation is upon us and it's real. I have I

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Speaker 1: have a lot of land in upstate New York that

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Speaker 1: I bought a long time ago, and I have a

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Speaker 1: lot of trees. And the prices that I'm getting for

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Speaker 1: the offered, Um, I'm fancy myself and environmentally, so I'm

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Speaker 1: not selling my trees, but the prices that I'm getting offered.

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Speaker 1: You know, are are are getting to be very attractive.

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Speaker 1: Um So, even now with lumber prices having come down,

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Speaker 1: they're so meaningfully above stating what I'm getting offered is

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Speaker 1: meaningfully above where where I was maybe about two years ago. Um.

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Speaker 1: You know, I think that inflation is upon us. You

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Speaker 1: come up, have the most important injection of money into

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Speaker 1: global systems and not have it impact the prices of

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Speaker 1: goods that are limited and supplying limited and production you

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Speaker 1: just cannot. And here's where I think that gold, if

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Speaker 1: I may have just finished up on that topic, is

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Speaker 1: specifically interesting. Gold has been the barometer often creation for

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Speaker 1: a long time. It certainly isn't acting like it now.

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Speaker 1: And I think that that's because one of the main

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Speaker 1: mechanisms of that clock currently is out of order. That

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Speaker 1: mechanism being industry of demand for gold and consumer demands

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Speaker 1: for gold. Seventy percent of the gold that is produced

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Speaker 1: around the world goes into the jewelry market. People. Um uh,

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Speaker 1: And you know I would, I mean give me I'm

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Speaker 1: from you know, but like mostly women by gold, you know,

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Speaker 1: to to as as as part of the way that

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Speaker 1: you know to to basically in the form of jewelry

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Speaker 1: which they like to wear, and you buy jewels and

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Speaker 1: you wear jewelry when you're interacting with others. Um uh.

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Speaker 1: And because of lockdowns still in effect. Um if not

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Speaker 1: formally then at least personally around the world. You know,

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Speaker 1: jewelry sales are down up to you know, depending on

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Speaker 1: the geography year over year, right, And so I think

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Speaker 1: that when we come out of this and people begin

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Speaker 1: to circulate, you have a double whammy of It's it's

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Speaker 1: a stounding if you think about it, that the gold

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Speaker 1: price hasn't crashed, given the fact that like over fifty

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Speaker 1: of sales going to a sector where demand is down

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Speaker 1: like year over year. So we've been thinking about I've

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Speaker 1: been thinking about getting a grill myself, but I wasn't

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Speaker 1: able to get out and I might do it now.

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Speaker 1: It's not just the women, you know, sometimes I like

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Speaker 1: some big gold chains. You could pull it off, you know,

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Speaker 1: maybe in Jesus with the ruby eyes. That's always a

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Speaker 1: good look that never goes out of stop. But all

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Speaker 1: joking aside, I mean, it's astounding to me. You can

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Speaker 1: buy you can go to Subby's or Christy's or auction

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Speaker 1: houses and you can buy big admittedly gaudy you know,

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Speaker 1: gold jewelry or whatever, for like less than the cost

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Speaker 1: of the actual medal um. And so I think that

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Speaker 1: there's anyway with cold. I do think that the one

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Speaker 1: part there are two things people don't think about. A

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Speaker 1: jewelry demand down has been weighing, and we'll continue to

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Speaker 1: weigh until we basically come out of this and decide,

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Speaker 1: you know, and have her the immunity, or basically get

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Speaker 1: to a point where we at to full circulation, whatever

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Speaker 1: it is. I think they will get there over the

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Speaker 1: next couple of years, and I'm not on the hurry

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Speaker 1: for us to get there, because the longest gold prices

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Speaker 1: the press that happier I am becau I'm buying amazing

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Speaker 1: companies that I'm buying at two times cash you're buying

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Speaker 1: the I'm buying miners at two times cash flow. But

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Speaker 1: I'm assuming that I only get fifteen hundred pounds of coal.

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Speaker 1: We're at eighteen hundred now at fifteen hundred, I'm buying

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Speaker 1: them at two times cash flow. So but the other

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Speaker 1: thing that people don't understand about gold is, you know,

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Speaker 1: quite like bitcoin, although in the case of bitcoin it's artificial.

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Speaker 1: In the case of goal. It's it's it's got made

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Speaker 1: um if you believe in God. That's a whole lot

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Speaker 1: of discussion perhaps for as getting dangerous. We're getting dangerous here. Look,

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Speaker 1: by the time you talk about grills and heavy chains,

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Speaker 1: you've already already waked right on tread on. Davis there soory,

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Speaker 1: So I'm just following your cues. But with gold, what

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Speaker 1: people don't understand is production of gold is declining around

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Speaker 1: the world, is declined by fifty over the next ten years.

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Speaker 1: For every ounce of gold that we're taking out of

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Speaker 1: the ground. Were only discovering your point two ounces. So

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Speaker 1: the companies that have long reserves, long mine life and

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Speaker 1: safe jurisdictions, these are ever more precious assets whose prices

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Speaker 1: and valuations have never been as low as they are today.

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Speaker 1: It's it's a you know, so we're huper excited about

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Speaker 1: the work we're doing in the space. It's a it's

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Speaker 1: a technically very difficult space to get your hands around,

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Speaker 1: thinking about five years to put together our internal due

387
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Speaker 1: diligence competencies. But but avoid it's it's super attractive sector. James,

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Speaker 1: go cross asset with me, and let's get away from

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Speaker 1: some of the gold in the commodities and take a

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Speaker 1: look at Europe. I think what always stands out to

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Speaker 1: me is the lower valuations in Europe. And people come

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Speaker 1: on the program and they say, yeah, but valuations are

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Speaker 1: lower there for a reason. Some of that is the

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Speaker 1: tilt towards cycle goals and value. As we know in

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Speaker 1: the US you have more of a growth weaiting with

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Speaker 1: this delta variant sort of creeping up. Do you buy

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Speaker 1: Europe just because it's value cheaper or is it cheaper

398
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Speaker 1: for reason? Well be the important question, you know, some

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Speaker 1: of the most look we I've been investing in Europe

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Speaker 1: for most of my for twenty five years now, um

401
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Speaker 1: um uh, and that's what I live in even breathe.

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Speaker 1: And here's one sort of unofficial answer to the reason

403
00:22:12,760 --> 00:22:15,200
Speaker 1: why you buy Europe. So much more fun to business

404
00:22:15,200 --> 00:22:18,159
Speaker 1: companies in Italy than in Idaho or Iowa. And no

405
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Speaker 1: offense to my friends and Idaho and Iowa. But I

406
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Speaker 1: think everybody aprees that it least just a much more

407
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Speaker 1: fun part of the world to go to. But there

408
00:22:25,320 --> 00:22:27,760
Speaker 1: are a lot here are a couple of things. So

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Speaker 1: the most sophistically investors we point the fact is European

410
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Speaker 1: markets have never treated at this kind of discount to

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Speaker 1: the US markets. Right, since the American New York Stock

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Speaker 1: Exchange was was created in seventeen two, valuation discrepancy has

413
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Speaker 1: never been as high as it is today. It was

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Speaker 1: a little bit higher earlier this year. I think you

415
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Speaker 1: peaked in January, but it's declined by five percent since.

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Speaker 1: And so some of the most thoughtful people will come

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Speaker 1: back and say, well, that's just because America is just

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Speaker 1: much more greatly weighted towards technology and faster world and companies. Right,

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Speaker 1: But in fact, if you look at cross industry analysis,

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Speaker 1: but we've done, you look at there is there isn't

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Speaker 1: a single industry where the average company in Europe is

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Speaker 1: trading at a tent or lower discount compared with its

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Speaker 1: peers in North America. And by the way, margins, tax rates,

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Speaker 1: cash flow profiles very comparable at this point. So I

425
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Speaker 1: think that's from that perspective in the world that like

426
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Speaker 1: it or not, as ever more uh integrated globally. We're

427
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Speaker 1: buying some of the biggest waste management companies in the

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Speaker 1: world that happened to be based in Europe at like,

429
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Speaker 1: you know, single digit multiples of EBITA here in North

430
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Speaker 1: In the US, we're buying the same companies at twenty

431
00:23:40,160 --> 00:23:44,159
Speaker 1: times plus. You know. It's it's just so there's a

432
00:23:44,240 --> 00:23:47,680
Speaker 1: valuation arbitrage that is impossible to ignore. And I think

433
00:23:47,680 --> 00:23:50,160
Speaker 1: that for us, there are so many ways to answer

434
00:23:50,200 --> 00:23:52,400
Speaker 1: your question, but for us, the answer ends up being

435
00:23:52,400 --> 00:23:55,000
Speaker 1: a micro one. It depends on the company are there

436
00:23:55,000 --> 00:23:58,000
Speaker 1: and to release value back to investors. Maybe the company

437
00:23:58,080 --> 00:23:59,760
Speaker 1: is just kind of you know, we're buying tech companies

438
00:23:59,800 --> 00:24:02,280
Speaker 1: in like re baring some of the leading software companies

439
00:24:02,280 --> 00:24:05,320
Speaker 1: in the world and fields that are going a year

440
00:24:05,440 --> 00:24:08,600
Speaker 1: wind them at three times revenues, ten times mortalized arts.

441
00:24:08,880 --> 00:24:11,480
Speaker 1: You know, these companies, if they just dealist in Europe

442
00:24:11,480 --> 00:24:14,320
Speaker 1: and read US in North America, you could see theoretically

443
00:24:14,320 --> 00:24:17,679
Speaker 1: a tenfold increase in evaluation. So it's it's just it's

444
00:24:17,720 --> 00:24:20,960
Speaker 1: pretty nutty, and it's as nutty as it's ever been, James,

445
00:24:21,400 --> 00:24:24,320
Speaker 1: and it's been nutty having you on, but fantastic, Thank

446
00:24:24,320 --> 00:24:26,240
Speaker 1: you so much for joining us. It's want of the

447
00:24:26,240 --> 00:24:28,920
Speaker 1: point out that I once interviewed Mr T on Bloomberg

448
00:24:28,960 --> 00:24:31,920
Speaker 1: Television and that guy was wearing like forty pounds of

449
00:24:32,040 --> 00:24:39,560
Speaker 1: gold chains. So news you can use man now let's

450
00:24:39,560 --> 00:24:43,639
Speaker 1: get over to Bloomberg Intelligence senior US retail analyst Pooam Goyle.

451
00:24:43,760 --> 00:24:47,760
Speaker 1: She joins us on the phone from the Garden State Punham.

452
00:24:48,560 --> 00:24:51,360
Speaker 1: Let's let's talk about the consumer sentiment number. I mean,

453
00:24:52,000 --> 00:24:55,399
Speaker 1: was it a shocker to you to see consumer sentiment

454
00:24:55,520 --> 00:24:58,440
Speaker 1: fall by this much? Yeah, I mean it was definitely

455
00:24:58,520 --> 00:25:01,600
Speaker 1: a surprise, But if you put thing thanto perspective, we

456
00:25:01,640 --> 00:25:05,479
Speaker 1: are dealing with high inflation right now and the delta

457
00:25:05,600 --> 00:25:08,199
Speaker 1: variant is rising, so it's not too much of a

458
00:25:08,200 --> 00:25:10,840
Speaker 1: surprise to see that the consumers are getting worried what's

459
00:25:10,880 --> 00:25:13,480
Speaker 1: coming next? You know, do they have to worry about

460
00:25:13,800 --> 00:25:17,679
Speaker 1: not having things and stuff again? Because shipment delays around

461
00:25:17,760 --> 00:25:21,360
Speaker 1: the globe are dealing deliveries of some essential some non

462
00:25:21,440 --> 00:25:24,840
Speaker 1: essential items, So there's a lot still moving that the

463
00:25:24,840 --> 00:25:28,600
Speaker 1: consumer is not sure about. That said, we do think

464
00:25:28,640 --> 00:25:31,600
Speaker 1: that the consumer is still spending. I mean, we're seeing

465
00:25:31,600 --> 00:25:34,880
Speaker 1: people travel more, We're seeing people eat out more. We

466
00:25:34,960 --> 00:25:38,320
Speaker 1: are seeing people spend more, whether it's in stores or

467
00:25:38,400 --> 00:25:43,120
Speaker 1: even online. You know, it was interesting this week when

468
00:25:43,119 --> 00:25:45,640
Speaker 1: we had Disney earnings come out, we were thinking of

469
00:25:46,560 --> 00:25:51,440
Speaker 1: how well that portrays where the consumer is right now.

470
00:25:51,440 --> 00:25:54,320
Speaker 1: Whether we're staying home or literally going out in to

471
00:25:54,440 --> 00:25:57,440
Speaker 1: theme parks. How are you taking that as we push

472
00:25:57,480 --> 00:26:03,160
Speaker 1: forward to t J Max, Walmart, Ross, Target, Lows, Home

473
00:26:03,240 --> 00:26:06,040
Speaker 1: Depot next week. I know, of course in your coverage

474
00:26:06,040 --> 00:26:10,160
Speaker 1: you're keenly focused on t J Max and Amazon and others.

475
00:26:11,040 --> 00:26:13,320
Speaker 1: Where is the health of the consumers? We think about

476
00:26:13,320 --> 00:26:16,320
Speaker 1: retail sales and where they are shopping and what that

477
00:26:16,520 --> 00:26:19,800
Speaker 1: is telling us. Sure, So I think there's two things

478
00:26:19,840 --> 00:26:23,080
Speaker 1: to think about as these retailers report next week. One

479
00:26:23,800 --> 00:26:26,920
Speaker 1: is the tougher comparisons that they're all up against from

480
00:26:27,000 --> 00:26:29,960
Speaker 1: last year, because last year and two Q was when

481
00:26:30,080 --> 00:26:35,000
Speaker 1: online shopping surge, especially for retailers like Home Depot and

482
00:26:35,520 --> 00:26:37,640
Speaker 1: Lows where you did a lot of do it yourself

483
00:26:37,640 --> 00:26:39,560
Speaker 1: and a lot of home renovation. So they're up against

484
00:26:39,560 --> 00:26:42,520
Speaker 1: a very tough comparison. In light of that, though still

485
00:26:42,600 --> 00:26:45,800
Speaker 1: we do see spending being robust and that people are

486
00:26:45,840 --> 00:26:48,359
Speaker 1: still continuing to spend on their home So while things

487
00:26:48,400 --> 00:26:51,080
Speaker 1: may dip a little on a relative basis, there is

488
00:26:51,119 --> 00:26:55,080
Speaker 1: still strengthened that's space, partly driven by inflation also, where

489
00:26:55,080 --> 00:26:57,280
Speaker 1: we have seen prices go up. So when you move

490
00:26:57,359 --> 00:26:59,760
Speaker 1: forward and you look at like a Walmart and a Target.

491
00:27:00,119 --> 00:27:01,960
Speaker 1: I think it's a little bit of a mixed situation

492
00:27:02,320 --> 00:27:05,480
Speaker 1: where online sales will be pressured because of the tougher

493
00:27:05,520 --> 00:27:08,200
Speaker 1: comparisons that they have from last year, but we do

494
00:27:08,320 --> 00:27:12,280
Speaker 1: still expect to see sales um rise and that's predominantly

495
00:27:12,359 --> 00:27:16,119
Speaker 1: driven by increased trafficking stores and also as consumers go

496
00:27:16,200 --> 00:27:18,919
Speaker 1: out and spend more on discretionary items, which is a

497
00:27:19,000 --> 00:27:23,280
Speaker 1: parallel home toys, etcetera, and back to school, all categories

498
00:27:23,320 --> 00:27:25,680
Speaker 1: that have a higher margin element to it. So it

499
00:27:25,680 --> 00:27:27,879
Speaker 1: will be interesting to see the dynamics and how they

500
00:27:27,880 --> 00:27:30,320
Speaker 1: play out between a wal Mart and the Target UM.

501
00:27:30,359 --> 00:27:33,080
Speaker 1: But we do think that you will still see underlying

502
00:27:33,119 --> 00:27:35,840
Speaker 1: consumer strength on an overall basis. And then when you

503
00:27:35,880 --> 00:27:38,480
Speaker 1: look at TJ Max and Ross there it's not a

504
00:27:38,520 --> 00:27:41,600
Speaker 1: story of tougher comparisons because last year in two Q

505
00:27:41,840 --> 00:27:45,119
Speaker 1: their stores were actually closed, so they're expected to post

506
00:27:45,119 --> 00:27:49,639
Speaker 1: some very robust, robust numbers, not just over but even

507
00:27:49,680 --> 00:27:53,720
Speaker 1: over For example, at t j X, we're actually expecting

508
00:27:53,760 --> 00:27:56,959
Speaker 1: to see an acceleration in the pace of games versus

509
00:27:56,960 --> 00:28:01,479
Speaker 1: one Q in two Q. TJ Max here in Europe

510
00:28:01,520 --> 00:28:05,880
Speaker 1: is actually called t K max. That is correct, It's

511
00:28:05,920 --> 00:28:07,440
Speaker 1: kind of weird until you get used to it. I

512
00:28:07,440 --> 00:28:10,040
Speaker 1: don't know why, because I think t J max works well.

513
00:28:10,080 --> 00:28:12,480
Speaker 1: It's like someone's name t J max, but t K max.

514
00:28:12,560 --> 00:28:15,920
Speaker 1: What's that? I guess you don't spend as much time

515
00:28:15,920 --> 00:28:19,080
Speaker 1: thinking about it as I do. In any case, Um, Punam,

516
00:28:19,119 --> 00:28:20,960
Speaker 1: thank you so much for joining us, Punam going out

517
00:28:20,960 --> 00:28:25,439
Speaker 1: senior US retail analysts covering those companies as we await

518
00:28:26,000 --> 00:28:31,000
Speaker 1: a slew of retail earnings and we see what consumer sentiment,

519
00:28:31,240 --> 00:28:34,920
Speaker 1: what what inflation expectations? Due to consumer sentiment, I will

520
00:28:34,920 --> 00:28:37,760
Speaker 1: point out that, you know three, I feel like that's

521
00:28:37,800 --> 00:28:41,280
Speaker 1: still bang in line with the historical average, right, so

522
00:28:42,040 --> 00:28:44,920
Speaker 1: we're just used to such low inflation of the past

523
00:28:44,960 --> 00:28:47,080
Speaker 1: decade til I'm still trying to get over the hard

524
00:28:47,160 --> 00:28:53,800
Speaker 1: questions you asked, Punam, t k X t those questions,

525
00:28:53,800 --> 00:28:56,520
Speaker 1: why is it t K max? Anyway, I'll find out.

526
00:28:57,160 --> 00:29:00,280
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can

527
00:29:00,320 --> 00:29:04,080
Speaker 1: subscribe and listen to interviews of Apple podcasts or whatever

528
00:29:04,160 --> 00:29:07,840
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

529
00:29:08,080 --> 00:29:11,600
Speaker 1: at Matt Miller three pt On Fall Sweeney, I'm on

530
00:29:11,600 --> 00:29:14,560
Speaker 1: Twitter at pt Sweeney. Before the podcast. You can always

531
00:29:14,560 --> 00:29:16,440
Speaker 1: catch us worldwide at Bloomberg Radio