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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. Catch us live weekdays

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Speaker 2: at seven am Eastern on applecar Player, Android Auto with

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Speaker 2: the Bloomberg Business App. Listen on demand wherever you get

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Speaker 2: your podcasts, or watch us live on YouTube.

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Speaker 3: Julian Emmanuel with us right now.

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Speaker 4: I can't let me frame this for you folks about

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Speaker 4: how I cheat every day is as widely understood. I

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Speaker 4: don't have an original thought. I read and read and read,

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Speaker 4: and when earning season starts, there's not a second or

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Speaker 4: a third read. Julian Emmanuel is the first read of

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Speaker 4: the moment is he parses out earnings. It's what it's like,

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Speaker 4: an evercore ISI thing. It's like two paragraphs log. That's

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Speaker 4: all he speaks English. It's great, he joins us in

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Speaker 4: the studio. Right now, everybody's double digit earnings twelve present.

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Speaker 4: But come on, it always ends in tears. You're beneath that?

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Speaker 4: How beneath double digit earnings forward?

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Speaker 3: Are you?

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Speaker 5: So we're forecasting nine point six percent.

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Speaker 6: But the good news is is that when you look

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Speaker 6: at the way things tend to progress, you're always over

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Speaker 6: optimistic in terms of bottom up estimates at the start

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Speaker 6: of the year or the year prior, and they tend

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Speaker 6: to fall. They haven't the last few years because of

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Speaker 6: sort of close pandemic effects. But we think this is

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Speaker 6: going to be part of the return to normal.

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Speaker 7: Paul wants to.

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Speaker 4: Jump in here, but I gotta ask, were you at

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Speaker 4: ten point one and Hymen got out the black the

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Speaker 4: little black panem just crossed it out and rode it

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Speaker 4: nine point six?

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Speaker 5: We don't round.

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Speaker 7: We don't round, all right.

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Speaker 8: So, Julian, given that kind of earnings, I know you

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Speaker 8: just I'm sure you put out your twenty twenty five

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Speaker 8: out look.

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Speaker 7: Put you're kind of your twenty twenty five SMP.

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Speaker 8: Target sixty eight hundred, and how do we get And

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Speaker 8: that's just how do we get there?

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Speaker 6: We get their combination of things, the things that have

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Speaker 6: led this bull market cycle are going to continue to lead,

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Speaker 6: albeit with more volatility than we've seen because at twenty

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Speaker 6: five times earnings in the aggregate index, there's going to

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Speaker 6: be more volatility. By definition, the Trump administration will cause

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Speaker 6: more volatility as they did in twenty eighteen when we

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Speaker 6: were talking about taxes, tariffs and the border and small caps.

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Speaker 6: For US small caps are under loved, overlooked. There have

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Speaker 6: been flows. We think there's further to go.

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Speaker 4: So like at sixty one hundred year, you're going to

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Speaker 4: sixty eight hundred. How does your equity analysis dovetail in

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Speaker 4: to Edward S. Hymen's economic analysis right now?

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Speaker 6: So ed is basically been very consistent on his inflation call.

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Speaker 6: He continues to think that the trend of inflation is

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Speaker 6: lower now. The way we'd think about the day of

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Speaker 6: the last couple months, and you'll remember, going back to

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Speaker 6: March and April, you had that spicky, sticky patch where

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Speaker 6: there was skepticism that inflation would continue to move lower.

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Speaker 6: It royaled the stock market briefly. That's how we see

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Speaker 6: the next number of weeks evolving. But that course is

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Speaker 6: set towards two percent.

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Speaker 8: Did you guys change your alter your outlook the date

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Speaker 8: after the election? Did that change anyway you're thinking about

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Speaker 8: twenty twenty five?

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Speaker 7: We did, Okay, we did.

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Speaker 6: And it's less about Republican or Democrat, though you know,

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Speaker 6: the evidence is relatively clear that certainly from the deregulation standpoint,

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Speaker 6: that the Trump administration is likely to be more business friendly.

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Speaker 6: But the biggest thing for us was the clarity of

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Speaker 6: the outcome, the fact that we weren't having contested politics

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Speaker 6: or anything that freed up the animal spirits.

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Speaker 8: What sectors do I need to lead? I've had two

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Speaker 8: years where the SMP has grown twenty percent. I mean,

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Speaker 8: do we not take a brether or do the AI

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Speaker 8: tech continue to lead us forward?

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Speaker 6: So we think that what has led will continue to

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Speaker 6: lead consumer discretionary communications services and info tech.

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Speaker 5: It is part if you.

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Speaker 6: Think about how bull markets developed. What this bullmarket is

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Speaker 6: missing that you have in every bull market is a

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Speaker 6: sense of, you know, sort of wild eyed enthusiasm. You

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Speaker 6: can argue that there are parts of the market that

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Speaker 6: we've seen in recent weeks that have had that kind

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Speaker 6: of wild eyed enthusiasm, certainly anything to do with cryptocurrencies

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Speaker 6: or anything like that, but those are small in market cap.

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Speaker 6: And a way to think about that is like the

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Speaker 6: meme stocks, spas and profitless tech in twenty twenty one,

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Speaker 6: those can top, but the bull market leaders continue to

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Speaker 6: lead through thea which.

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Speaker 4: Fact, don't give me this momentum stuff. Julian Emmanuel's is

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Speaker 4: far away from momentum as I've ever seen. Is there

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Speaker 4: a factor that sticks out right now or is just

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Speaker 4: earnings and cash flow.

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Speaker 6: So actually the factor work that we've done on is

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Speaker 6: the biggest sort.

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Speaker 5: Of long term theme is.

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Speaker 6: Stocks that are able to buy their stock back, but

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Speaker 6: high buy back, because if you think about it, is

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Speaker 6: regardless of how this landing unfolds, if it becomes your shares,

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Speaker 6: it works right and you have the cash to actually support,

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Speaker 6: you know, cushion the volatility in your stock.

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Speaker 4: Julian Emmanuel darkened the door and had the privilege of

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Speaker 4: working for Bill Priest years ago. How does he treat

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Speaker 4: free cash flow versus different from your mortals?

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Speaker 6: It is literally the bible of the rationale for investing

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Speaker 6: in corporate America. And it's actually more than that when

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Speaker 6: you think about it. I worked at a company called

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Speaker 6: Bea Associates, which Bill Priest was one of the founding

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Speaker 6: partners in the late nineteen nineties. And the interesting confluence

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Speaker 6: of that is you've had two back to back twenty

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Speaker 6: percent plus years for the first time since the late

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Speaker 6: nineteen nineties. And that's the kind of environment that we're in,

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Speaker 6: and that's the kind of environment that dictates an even

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Speaker 6: greater focus on the idea of free cash flow.

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Speaker 4: How do you tell good free cash flow from bad

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Speaker 4: free cash flow that basically is one third of his book.

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Speaker 6: Well, in my opinion, is the way you do it

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Speaker 6: goes back to buybacks. If companies are actually making the

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Speaker 6: statement that they're able to buy back their stock, then

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Speaker 6: you know that the quality of the cash flow in

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Speaker 6: aggregate is better than not.

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Speaker 8: Which brings me to my interesting free cash flow buyback conundrument.

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Speaker 8: If from Apple computer and i got gobs and gobs

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Speaker 8: of free cash flow, yet I've got a dividend yield

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Speaker 8: less than one percent?

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Speaker 7: What's up with that? What's Tim Cook thinking over there?

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Speaker 6: So the academic literature is mixed. Okay, you can and

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Speaker 6: you can make the case that an environment where the

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Speaker 6: FED has restored a price of money, that there may

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Speaker 6: be a greater premium in the future for dividends, at

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Speaker 6: least psychologically, But that's not the case for now. And again,

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Speaker 6: when we think about it, and we think about what

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Speaker 6: the last couple of years have entailed, and that has

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Speaker 6: been twenty twenty three, we all thought the recession was coming.

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Speaker 6: It didn't twenty twenty four. It seems like there's soft lending,

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Speaker 6: is the mantra. But we know that recessions happen cyclically,

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Speaker 6: whether you're in the Roaring nineteen twenties, the nineteen fifties,

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Speaker 6: the nineteen nineties really the only period where you had

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Speaker 6: a prolonged time without a recession. That's where you want

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Speaker 6: to know that you're able to buy your stock back,

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Speaker 6: that you're able to be creative in the ways that

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Speaker 6: you compensate shareholders.

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Speaker 8: Is AI still a trade for you? And if so,

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Speaker 8: had he a play it or has it already been

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Speaker 8: played out with envidiaes Alord? But Broadcoms kind of showing

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Speaker 8: you less few days it maybe there's still lenks to it.

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Speaker 6: Well, so our view is it actually isn't a trade.

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Speaker 6: It is buy and hold secular theme. And what the

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Speaker 6: interesting thing is is that if you look at the

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Speaker 6: last year or two, we've had this bump in productivity

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Speaker 6: that really hasn't been attributable to AI.

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Speaker 5: And it's our view that when you think about twenty twenty.

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Speaker 6: Five, the upside surprise is likely to come by how

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Speaker 6: much and in what kind of creative ways corporate America

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Speaker 6: actually deploys AI.

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Speaker 8: So is it still kind of I mean, some people

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Speaker 8: are just feeling like, all right, I kind of got

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Speaker 8: the efuria of boy, that people are gonna spend a

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Speaker 8: lot of money on this AI thing, and there's a

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Speaker 8: lot of capex. But now the question is are some

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Speaker 8: of these companies getting a return on this capital spending

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Speaker 8: that could that be a headwind for just the theme.

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Speaker 6: Well, when you think about our thesis of volatility in

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Speaker 6: and up market, there will be times when the perception

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Speaker 6: is that and the AI leader, the leading stock as

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Speaker 6: we all know, has really not been performed Waring terribly

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Speaker 6: well the last couple of months, so that encourages that

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Speaker 6: kind of psychology. We think those are temporary potholes with

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Speaker 6: a long term trend that's got a lot further to run.

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Speaker 4: Brian Belskin the other day, like you you have to

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Speaker 4: participate in the market.

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Speaker 3: You've got to be in the market, You've got to

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Speaker 3: enjoy the bull market.

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Speaker 4: Belski OFBIMO makes the distinction of a cyclical bull market

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Speaker 4: versus something most people without gray hair don't know, which

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Speaker 4: is a structural bull market. Ed Heiman and I of

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Speaker 4: a vintage remember structural bull markets?

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Speaker 3: Do you agree there's a permanence to this?

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Speaker 4: Just based on American GDP, our nominal GDP and the

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Speaker 4: productivity that Lisa Monteo just mentioned, So.

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Speaker 6: It is certainly what the ongoing tailwind into twenty twenty five.

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Speaker 6: But I will say that a lot of our client

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Speaker 6: conversations center around, you know.

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Speaker 5: The durability of the.

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Speaker 6: American pre eminence and how and when do you reallocate

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Speaker 6: towards the rest of the.

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Speaker 4: World international, How could you do that with a strong

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Speaker 4: dollars that we've got, Well, because I'd say.

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Speaker 5: Can't, you can't. We are waiting for two things. A

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Speaker 5: turn in the.

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Speaker 6: Dollar, which perhaps a geopolitical resolution between Russian Ukraine catalyzes.

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Speaker 6: The other thing that we're waiting for is a turn

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Speaker 6: higher in China bond yields. China bond yields should be

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Speaker 6: worrying people because it looks a lot like Japan in

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Speaker 6: the nineties.

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Speaker 4: I retweeted that last night it was shocking, the second

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Speaker 4: derivative of the deflation. Mohammedalarian featured it this morning at Cambridge.

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Speaker 4: I mean, what does the China second derivative of yields

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Speaker 4: signal to Julian Emmanuel.

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Speaker 6: Well, Well, in fact, as it's been for the most

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Speaker 6: part for a number of years, it could actually be

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Speaker 6: the thing that causes the catalyst that causes the resumption

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Speaker 6: of inflation to continue falling in this country, although you

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Speaker 6: know in in large part to us, it really is

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Speaker 6: something that's more concerning because it's clearly we'll get one

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Speaker 6: more spot.

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Speaker 3: All right.

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Speaker 7: Do I have a valuation concern here? Is that a

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Speaker 7: headwind for me? Or do I strip out the mag

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Speaker 7: seven and them? I'm okay.

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Speaker 6: If you don't have evaluation concern, that's where we want

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Speaker 6: to start being defensive.

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Speaker 7: Okay.

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Speaker 6: A lot of our clients are really focused on that,

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Speaker 6: as they should be, as they should have been the

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Speaker 6: entire year. But again, valuation alone doesn't end the bull.

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Speaker 6: It's either recession or irrational exuberance, and we don't see

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Speaker 6: either of those on the horizon.

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Speaker 3: This has been great, don't be a stranger. Thank you

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Speaker 3: so much for all your work for.

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Speaker 4: Surveillance, and sure Julian Emmanuel I can't say enough about

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Speaker 4: his work. We protect the copyright of all of our guests.

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Speaker 4: Evercore Isi literature.

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Speaker 3: From Hymen and Emmanuel. Go to them for it.

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Speaker 4: They are the great, great shop over there in the

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Speaker 4: vicinity of Fifth Avenue.

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Speaker 3: You go from Julian Emmanuel to William Priest.

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Speaker 4: Is what's it's about. Mister Emmanuel. He's chairman at td Epic.

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Speaker 4: I don't know if he's emeritus or whatever. You know,

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Speaker 4: he's like Bill Priest. I can't see Bill Priest doing

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Speaker 4: anything but working your basic seventy hour work week.

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Speaker 3: I mean, that's the.

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Speaker 9: Way he rolls.

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Speaker 4: But I just put the book out on Twitter, on LinkedIn,

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Speaker 4: free cash flow and shareholder yield. It is a rite

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Speaker 4: of passage. It's short.

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Speaker 3: It's not, you know, eight hundred.

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Speaker 4: Pages of Fibosi calculus. It's really short, really direct, and

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Speaker 4: also somewhat controversial. I really want to point that that out.

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Speaker 3: But to have Bill.

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Speaker 4: Priest with us after Julian Emmanuel is what the show's about.

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Speaker 2: You're listening to the Bloomberg Surveillance Podcast. Catch us live

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Speaker 2: weekday afternoons from seven to ten am Easter Listen on

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Speaker 2: or watch us live on YouTube.

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Speaker 4: Megan Robinson has no idea Who robbed Thomas is her

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Speaker 4: Matchbox twenty and joins us some BMB perry by today.

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Speaker 4: Your note clearly doesn't say six percent. We're here at

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Speaker 4: higher yields. What events would it take to get a breakout?

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Speaker 4: Really back to two thousand, two thousand and four yields.

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Speaker 3: What would be that cataclysmic event?

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Speaker 10: Good well, first of all, good morning, thanks for having me.

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Speaker 10: I think that the scenario. I haven't read the report.

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Speaker 6: But.

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Speaker 4: It's Bloomberg surveillance we don't read.

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Speaker 10: I think that you know, we're looking a lot at

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Speaker 10: the risks of potential tariffs, and I think that seeing

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Speaker 10: a reacceleration of inflation if we see a spike in

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Speaker 10: in break even yields as a result of new tariffs.

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Speaker 10: But then additionally that causing the FED to either pause

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Speaker 10: or resume a hiking cycle would cause even rise in

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Speaker 10: rise in real yields. So I think that's really the bear,

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Speaker 10: the bear case for next year. At B and P.

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Speaker 10: We're not as severe as that, but I think we

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Speaker 10: are out of consensus. We're calling for a pause and

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Speaker 10: FED rate hikes all throughout twenty twenty five.

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Speaker 3: I want to make some news.

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Speaker 4: A pause on Wednesday, please help, Not.

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Speaker 10: A pause on Wednesday. So we still think a twenty

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Speaker 10: five basis point cut, but they set the stage for

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Speaker 10: an extended pause into twenty twenty five. I do think

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Speaker 10: that this would be cause a credit spread widening, but

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Speaker 10: one that we would buy, whereas the other scenario you

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Speaker 10: painted would likely be the start of a new bear

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Speaker 10: market for credit if we did see rates that high.

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Speaker 8: US corporate high yield up eight point eight five percent

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Speaker 8: year to day total return. US leverage loan indexes are

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Speaker 8: the Bloomberg indexes in which we paid good money for

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Speaker 8: eight point six y nine percent. Man, that's great returns

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Speaker 8: in the high yield leverage loan market. Does that continue

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Speaker 8: in twenty five?

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Speaker 7: Do you think so?

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Speaker 10: We don't think that you're going to duplicate that positive

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Speaker 10: of returns, but we do think it's a carry year

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Speaker 10: for credit. So I think that you have a couple

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Speaker 10: of tailwinds that you're back. The first is still this

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Speaker 10: yield story, So yields are high. We're forecasting the four

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Speaker 10: to sixty five on the ten year next year. That

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Speaker 10: means that yield demand, pension funds, insurance companies, some foreign

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Speaker 10: buyers are still going to come into the credit market.

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Speaker 10: At the same time, you can see supply accelerate as

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Speaker 10: a result of some of these pro business policies we've

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Speaker 10: seen from Trump, but not to a degree that you

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Speaker 10: really see in it ambalance. So carry story I think

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Speaker 10: continues for next year.

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Speaker 3: You sound like you're from Brown and Columbia. Nobody understands it.

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Speaker 10: What is a carry year carry so yield? I think

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Speaker 10: you know spreads. We're forecasting just to go slightly wider

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Speaker 10: ten basis points and investment grade to a level of

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Speaker 10: eighty five yield. Take the yields, so clip the coupon.

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Speaker 7: You know.

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Speaker 10: Places in credit, like leverage loans where you have an

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Speaker 10: elevated level of yields right now compared to high yield

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Speaker 10: and IG we think are a great spot to be

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Speaker 10: We also like long duration investment grade, so ten years

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Speaker 10: and beyond, where you'll have this elevated yield and issuers

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Speaker 10: will still be hesitant to cell supply with longer dated maturities.

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Speaker 10: We think those those two spots are a great place

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Speaker 10: to step into yield next year.

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Speaker 8: Know in your notes, I've read something that I don't

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Speaker 8: think I've seen and I can't remember how long globally

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Speaker 8: we like Europe to outperform in the US.

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Speaker 10: Why yes, So this is it does seem an out

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Speaker 10: of consensus view. I think that in Europe we have

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Speaker 10: slower growth obviously, but that will allow the ECB to

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Speaker 10: continue to be dubbish and a lot of the bad

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Speaker 10: news is priced into European credit spread, So we're trading

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Speaker 10: a lot wider in Europe compared to the US, and

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Speaker 10: then US were at all time tights and spreads, and

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Speaker 10: then you have this risk of reacceleration, the FED potential

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Speaker 10: has to pause. We think that's not priced danger.

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Speaker 4: Your economistcy inflation out there. I mean, you got a

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Speaker 4: government in Germany Toast, a government in BMP Perry Baz,

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Speaker 4: Paris and France sort of kind of like Toast. I

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Speaker 4: got the shock or Christian Friedland in Canada yesterday going

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Speaker 4: to a possible election early next year. I mean, with

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Speaker 4: all that tumult, can we really give way to a

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Speaker 4: new inflation regime?

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Speaker 10: I think it's I think it's certainly possible in the US.

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Speaker 10: I think it will depend a lot on what we

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Speaker 10: see happening with with with President Alex Trump's policies, and

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Speaker 10: if we do get some of the tariffs that he's

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Speaker 10: talked about, I think that could be certainly a catalyst

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Speaker 10: for a reacceleration in inflation.

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Speaker 7: Sectors.

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Speaker 8: Are there sectors that screen well for you guys from

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Speaker 8: a credit perspective these days?

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Speaker 10: So we like we do like taking some pro growth policy.

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Speaker 10: We think that you know, less regulation next year does

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Speaker 10: warrant stepping into some of those areas. But where where

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Speaker 10: you can also avoid the tariff risk. So we like

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Speaker 10: transportation and investment grade, and then in high yield. Our

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Speaker 10: favorite sector is still cruise lines where you're you have

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Speaker 10: low exposure.

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Speaker 4: What's your favorite cruise line, I mean size on a

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Speaker 4: celebrity cruises.

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Speaker 10: Okay, so you have you have low exposure to lower

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Speaker 10: income consumer where we have seen risk and it's a

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Speaker 10: leisure it's a leisure sector. So if we do see tariffs,

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Speaker 10: we can see that that sector is less vulnerable to

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Speaker 10: to goods goods risks.

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Speaker 4: Some question of the day our airlines Investment Grade, Delta United.

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Speaker 4: We've got Jeff Blues executive coming up here today, I believe.

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Speaker 10: Yeah, yep, so we have we have airlines in bo

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Speaker 10: in both markets, but but in in investment grade also

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Speaker 10: we have rail, so rail transportation a major part of

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Speaker 10: the sector, and then a handful of airlines as well.

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Speaker 7: How about my old stomping arounds cable cable Yeah, so

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Speaker 7: harder issued debt by the bolot. I made a small fortune.

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Speaker 9: With those guys.

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Speaker 10: So this is sector continue. I think we have to

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Speaker 10: be a lot more selective, more selective industries what she said,

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Speaker 10: despite despite the fact that IG spreads are very tight,

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Speaker 10: that is a sector where we've seen more single name volatility.

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Speaker 10: So that's a place we'd be cautious. Another place we'd

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Speaker 10: be cautious is is in building products. I think there

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Speaker 10: you see sort of a trifecta of risks in twenty

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Speaker 10: twenty five immigration, So building products, home building, it's a

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Speaker 10: sector that really relies more so on undocumented labor. If

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Speaker 10: President elect Trump is going to go after that issue

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Speaker 10: in a hard way, I think that home building home

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Speaker 10: builders would be very vulnerable there. And then also this

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Speaker 10: risk of rates high for longer could still sort of

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Speaker 10: damp in some demand in housing.

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Speaker 4: My chart of the year is the price recovery of

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Speaker 4: the blended Bloomberg bark Lace Lehmann Index. I don't think

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Speaker 4: anybody saw this coming, where we've really migrated from a

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Speaker 4: horrific six standard deviation move up into a better place.

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Speaker 4: Can you actually say price appreciation within bonds for the

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Speaker 4: next twelve months.

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Speaker 10: We're not expecting that. So when we talk about coon,

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Speaker 10: when we take about clipping coupons, exactly I think the

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Speaker 10: story is you just want to protect your capital, and

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Speaker 10: a good place to do that, we think is investment

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Speaker 10: grade the long end leverage loans. But to find price appreciation,

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Speaker 10: I think is much more challenging just giving the starting

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Speaker 10: point for valuations.

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Speaker 3: I brought this up. I didn't even know how to

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Speaker 3: do this on the Bloomberg. The munich key. Yeah you know.

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Speaker 4: Fred Corkoran taught me to Munich key on the Bloomberg

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Speaker 4: with Charlie Gogelac. And the answer here is I brought

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Speaker 4: up the Delta Airlines LaGuardia Airport Terminals CND redevelopment piece.

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Speaker 4: By it, you get a five percent coupon. I don't

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Speaker 4: have a price. I can't figure out how to read

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Speaker 4: the screen. But you get to pick up your Uber

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Speaker 4: closer to the gate than if you don't own this credit.

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Speaker 3: That's that's worth doing it.

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Speaker 4: Megan Robinson, thank you so much to BMP perie By

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Speaker 4: on transportation and investment grade quality.

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Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 2: starting at seven am Eastern on applecar Play and Android

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00:20:55,200 --> 00:20:58,040
Speaker 2: Auto with the Bloomberg Business app. You can also listen

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Speaker 2: live on Amazon Alexa from our flagship New York station,

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Speaker 2: Just say Alexa playing Bloomberg eleven thirty Joiningston.

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Speaker 4: William Priest identified with Epoch for Hears You Just hear

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Speaker 4: Julian Emmanuel with Raves about.

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Speaker 3: The privilege of working with mister Priest years ago. In

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Speaker 3: two thousand and.

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Speaker 4: Seven, Bill Priest released the definitive short read on free.

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Speaker 3: Cash flow in Shareholder Yield.

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Speaker 4: It's in English, it's short. DiCaprio was awesome in the

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Speaker 4: movie Unbelievable. In two thousand and seven, Apple was five

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Speaker 4: dollars a share, It's now two hundred and fifty dollars

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Speaker 4: a share. The growth of Apple revenue iPhone, this and

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Speaker 4: all that it was mostly Bill Priest, just growth the

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Speaker 4: free cash flow.

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Speaker 9: Right, that's the truth.

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Speaker 11: They also had a lot of new products that took

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Speaker 11: big market shares.

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Speaker 4: How do you determine good free cash flow in twenty

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Speaker 4: twenty five from troubled free cash flow?

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Speaker 11: Well, it all starts with the allocation of free cash

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Speaker 11: flow and the methodology thereof. So, for example, in any

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Speaker 11: business that could be a lemonade stand, who don't left

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Speaker 11: time go through the lemonades stand?

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Speaker 9: Example, But at the end of the day, you have

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Speaker 9: to define it.

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Speaker 11: So free cash flow is the cash available for distribution

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Speaker 11: to shareholders after all planned capital expenders and all cash taxes. Now,

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Speaker 11: once you get that number, there's only five things you

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Speaker 11: can do with it. And if you cannot earn an

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Speaker 11: amount of money above your cost of capital. Let's say

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Speaker 11: for the sake of argument, your cost of capital is eight, nine,

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Speaker 11: ten percent, you have to earn more than that otherwise

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Speaker 11: you are taking value away from your entity. So there's

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Speaker 11: only five things you can do with this dollar cash flow.

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Speaker 11: You can pay a dividend, buy backstock, pay down debt.

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Speaker 11: Those are forms of capital return to the owners of

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Speaker 11: the business. Or you can reinvest in acquire. Now, we

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Speaker 11: built two products around this. One was our shareholder Yield product,

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Speaker 11: which the book was all about. That was the identification

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Speaker 11: of those companies who basically say, you know what, we

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Speaker 11: can't earn our cost of capital with all of the

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Speaker 11: cash flow that we have, and we're giving it back

444
00:22:55,800 --> 00:22:59,359
Speaker 11: through one of these three forms. That became right, that

445
00:22:59,400 --> 00:23:00,920
Speaker 11: became a any billion of dollar product.

446
00:23:00,920 --> 00:23:03,520
Speaker 4: I mean, Paul's to getting We're having a duke love fest,

447
00:23:03,560 --> 00:23:06,639
Speaker 4: your folks, priest and Paul Paul jump in here. But

448
00:23:06,720 --> 00:23:09,600
Speaker 4: the heart of the matter is Bill Priest was lonely

449
00:23:09,960 --> 00:23:11,920
Speaker 4: when that book came out in seven.

450
00:23:11,800 --> 00:23:14,560
Speaker 8: Well, being a former corporate lender. Free cash flow is

451
00:23:14,600 --> 00:23:19,440
Speaker 8: important because that's what pays me back. So are there companies.

452
00:23:19,640 --> 00:23:22,080
Speaker 8: What's a company that in your career has been really

453
00:23:22,119 --> 00:23:24,639
Speaker 8: good about managing their free cash flow?

454
00:23:26,320 --> 00:23:27,840
Speaker 9: Well, it comes and goes.

455
00:23:27,880 --> 00:23:30,640
Speaker 11: There are times when a company should be giving back

456
00:23:30,680 --> 00:23:32,919
Speaker 11: the money because they don't have the reinvestment or the

457
00:23:32,920 --> 00:23:38,960
Speaker 11: acquisition targets that make sense or it's fantastic.

458
00:23:38,359 --> 00:23:39,240
Speaker 9: For them to do acquire.

459
00:23:39,320 --> 00:23:41,919
Speaker 11: We we did the other side of this recently. We

460
00:23:41,960 --> 00:23:45,200
Speaker 11: have what we call a capital reinvestment product where those

461
00:23:45,280 --> 00:23:48,800
Speaker 11: companies who you can identify and the secret sauce there

462
00:23:48,880 --> 00:23:52,119
Speaker 11: is this. We have data on thousands and thousands of

463
00:23:52,160 --> 00:23:55,200
Speaker 11: companies and the trick is to look at the return

464
00:23:55,359 --> 00:23:59,560
Speaker 11: on incremental capital what's called ROIC ROHIC, and look at

465
00:23:59,560 --> 00:24:03,719
Speaker 11: that compared to the cost of capital, the WHACK weighted

466
00:24:03,760 --> 00:24:07,240
Speaker 11: average cost of capital, the spread between rock and whack.

467
00:24:08,080 --> 00:24:11,239
Speaker 11: It turns out in a good company, it persists and

468
00:24:11,280 --> 00:24:13,000
Speaker 11: you can look at it all the data we have

469
00:24:13,040 --> 00:24:16,840
Speaker 11: we have going back decades, those companies continue to be

470
00:24:16,960 --> 00:24:17,880
Speaker 11: top quarto.

471
00:24:17,640 --> 00:24:19,399
Speaker 4: Okay, so we do that in the Bloomberg on the

472
00:24:19,520 --> 00:24:22,159
Speaker 4: WACC screen. We're not going to turn this into a

473
00:24:22,200 --> 00:24:25,560
Speaker 4: CFA lesson. But the bottom line, Bill pres is everyone

474
00:24:25,640 --> 00:24:29,760
Speaker 4: listening and watching is living. MAG seven they didn't exist

475
00:24:30,000 --> 00:24:33,159
Speaker 4: in two thousand and seven. You got let's say you

476
00:24:33,240 --> 00:24:36,959
Speaker 4: got the eighth edition coming out your chapter on MAG seven,

477
00:24:37,119 --> 00:24:40,359
Speaker 4: Free cash flow, WACC and ROC.

478
00:24:40,760 --> 00:24:41,840
Speaker 3: Can they sustain that?

479
00:24:42,720 --> 00:24:43,480
Speaker 9: Many of them? Can?

480
00:24:43,640 --> 00:24:45,880
Speaker 11: CAM don't know for sure all of them. The secret

481
00:24:45,920 --> 00:24:49,040
Speaker 11: sauce though, is the substitute of bits for atoms. So

482
00:24:49,160 --> 00:24:51,359
Speaker 11: let's take information it comes to you in the form

483
00:24:51,400 --> 00:24:54,840
Speaker 11: of bits. Atoms would be the desk in front of me,

484
00:24:54,920 --> 00:24:57,919
Speaker 11: this microphone. We're made of atoms. If you run a

485
00:24:57,960 --> 00:25:01,159
Speaker 11: company and you can substitute technology in the form of

486
00:25:01,200 --> 00:25:03,879
Speaker 11: a bit for labor which is a form of an atom,

487
00:25:04,200 --> 00:25:05,480
Speaker 11: and hold your revenue.

488
00:25:05,160 --> 00:25:06,640
Speaker 9: Is constant, your margins go up.

489
00:25:07,040 --> 00:25:09,720
Speaker 11: And if you can substitute a bit think selling something

490
00:25:09,760 --> 00:25:12,639
Speaker 11: over the internet as opposed to a physical store, and

491
00:25:12,680 --> 00:25:15,920
Speaker 11: hold your revenues constant, your sales for dollar assets go up.

492
00:25:16,280 --> 00:25:17,720
Speaker 11: So if you were to go back and just look

493
00:25:17,720 --> 00:25:21,159
Speaker 11: at return on equity, if I can substitute technology for

494
00:25:21,320 --> 00:25:25,080
Speaker 11: labor and physical assets and hold my revenues constant. Myriic

495
00:25:25,280 --> 00:25:28,560
Speaker 11: goes through the roof, and you need every company should

496
00:25:28,560 --> 00:25:31,760
Speaker 11: be focusing on that gap. And how do I substitute

497
00:25:31,800 --> 00:25:34,040
Speaker 11: technology for labor and physical assets.

498
00:25:34,320 --> 00:25:36,840
Speaker 8: Are those returns on invested capital relative to the cost

499
00:25:36,880 --> 00:25:39,760
Speaker 8: capital today enough to support this market? We've had two

500
00:25:39,840 --> 00:25:41,760
Speaker 8: years of twenty percent returns.

501
00:25:42,080 --> 00:25:42,840
Speaker 9: Totally agree with you.

502
00:25:43,119 --> 00:25:47,159
Speaker 11: I think the market has a real valuation issue. We've

503
00:25:47,240 --> 00:25:49,479
Speaker 11: had two back to back years of over twenty percent

504
00:25:49,560 --> 00:25:52,320
Speaker 11: in the market, and I think that's very difficult. So

505
00:25:52,400 --> 00:25:55,280
Speaker 11: the question is can you sustain the discount rate? Is

506
00:25:55,320 --> 00:25:58,120
Speaker 11: a discount rate going to go up or down? It's

507
00:25:58,119 --> 00:26:00,840
Speaker 11: going to be a struggle in my view. For when

508
00:26:00,840 --> 00:26:03,520
Speaker 11: you think of when the Brilliant Wall fell in nineteen

509
00:26:03,560 --> 00:26:06,879
Speaker 11: eighty nine, for over twenty years, we created the most

510
00:26:07,520 --> 00:26:09,880
Speaker 11: efficient supply chain the world has ever known.

511
00:26:10,440 --> 00:26:11,960
Speaker 9: Now we wanted to go to Onshore.

512
00:26:12,080 --> 00:26:16,199
Speaker 11: We want security supply chains, not efficiency. You can't do

513
00:26:16,320 --> 00:26:20,360
Speaker 11: that without inflation. You can't bring all that manufacturing capacity back.

514
00:26:20,200 --> 00:26:21,200
Speaker 9: Here without inflation.

515
00:26:22,040 --> 00:26:24,080
Speaker 11: That's going to be a burden for the new administration

516
00:26:24,160 --> 00:26:25,000
Speaker 11: to deal with as well.

517
00:26:26,040 --> 00:26:29,000
Speaker 8: You've been around the block a few times. Bill, what

518
00:26:29,040 --> 00:26:30,920
Speaker 8: do you make of this crypto stuff. Tom Keen is

519
00:26:30,960 --> 00:26:31,840
Speaker 8: all over bitcoin.

520
00:26:32,000 --> 00:26:34,240
Speaker 7: I mean he's been day one on top of it.

521
00:26:34,520 --> 00:26:37,800
Speaker 11: What do you think, Well, I've always been suspicious and

522
00:26:37,840 --> 00:26:41,520
Speaker 11: I've been wrong with regard to owning bitcoin. I've never

523
00:26:41,680 --> 00:26:44,840
Speaker 11: thought of bitcoin as being money. So there's a really

524
00:26:44,880 --> 00:26:47,160
Speaker 11: good guy you should get on your show sometime. Azuar

525
00:26:47,280 --> 00:26:49,320
Speaker 11: Pissard EESWRPR a.

526
00:26:49,480 --> 00:26:51,360
Speaker 3: Very familiar with. He's been a huge supporter.

527
00:26:51,480 --> 00:26:54,159
Speaker 9: Okay, he's fantastic. He is the best guy in money

528
00:26:54,480 --> 00:26:54,760
Speaker 9: in the.

529
00:26:55,040 --> 00:26:56,680
Speaker 3: Okay he went to Cornell on that Duke.

530
00:26:57,119 --> 00:27:01,399
Speaker 11: Yes, it's perfectly fine, perfectly fine, but money does three things.

531
00:27:01,800 --> 00:27:03,280
Speaker 9: To be money, you have to do three things.

532
00:27:03,400 --> 00:27:10,200
Speaker 11: Medium of exchange, you have a medium of exchange. Value

533
00:27:10,600 --> 00:27:13,520
Speaker 11: has to be a way to measure value. And the

534
00:27:13,600 --> 00:27:16,760
Speaker 11: problem the problem with money it is a unit of

535
00:27:17,080 --> 00:27:19,639
Speaker 11: With bitcoin, it is a unit of account and it

536
00:27:19,720 --> 00:27:22,000
Speaker 11: is a medium of exchange. But it is not a

537
00:27:22,040 --> 00:27:25,960
Speaker 11: store value. That's the problem. And so you're not going

538
00:27:26,000 --> 00:27:29,679
Speaker 11: to see trade, legal trade done much in anything other

539
00:27:29,760 --> 00:27:30,240
Speaker 11: than dollars.

540
00:27:30,240 --> 00:27:33,280
Speaker 4: One of your epic portfolio is number one holding JP Morgan.

541
00:27:33,359 --> 00:27:34,960
Speaker 4: How's mister diamond doing?

542
00:27:35,160 --> 00:27:35,200
Speaker 6: Is?

543
00:27:35,600 --> 00:27:36,919
Speaker 3: JP Morgan is an.

544
00:27:36,880 --> 00:27:41,000
Speaker 4: Entity showing good use a free cash flow in good

545
00:27:41,119 --> 00:27:43,280
Speaker 4: use of shareholder yield.

546
00:27:43,400 --> 00:27:45,480
Speaker 11: Well, I would defer to my analyst to a large

547
00:27:45,520 --> 00:27:47,399
Speaker 11: extent on that, but he probably is one of the

548
00:27:47,400 --> 00:27:51,440
Speaker 11: great managers in the banking business, There's no question about that.

549
00:27:51,960 --> 00:27:54,439
Speaker 11: And anyone that's owned his stock over the last ten

550
00:27:54,520 --> 00:27:55,800
Speaker 11: twenty years very happy.

551
00:27:55,800 --> 00:27:58,840
Speaker 4: Are we dealing with monopsimistic tendencies in this country? Where

552
00:27:58,840 --> 00:28:01,440
Speaker 4: are just doing a big net will roll up into

553
00:28:01,520 --> 00:28:05,359
Speaker 4: large cap large cap large kip Ola Max seven, Olive Banking,

554
00:28:05,440 --> 00:28:09,200
Speaker 4: dominance of JP Morgan and Bank of America and the rest.

555
00:28:10,200 --> 00:28:15,119
Speaker 11: Consolidation is always if has always been there. The question

556
00:28:15,280 --> 00:28:18,119
Speaker 11: is does it is it value AD to the buyer?

557
00:28:18,720 --> 00:28:21,040
Speaker 11: And if you can demonstrate value AD is probably going

558
00:28:21,080 --> 00:28:23,400
Speaker 11: to continue. But we have lots of new companies being

559
00:28:23,400 --> 00:28:26,280
Speaker 11: formed every year, so we're not without innovation.

560
00:28:26,359 --> 00:28:29,240
Speaker 3: Can you ask Priest how you and s got Belichick and.

561
00:28:29,280 --> 00:28:31,640
Speaker 7: Do you know, I'm happy with our coach.

562
00:28:32,680 --> 00:28:33,200
Speaker 9: I'm happy with it.

563
00:28:34,280 --> 00:28:39,000
Speaker 11: I Belichick going to five years and fifty million dollars

564
00:28:39,120 --> 00:28:44,200
Speaker 11: or something like that. I kept going, Well, I think

565
00:28:44,320 --> 00:28:47,120
Speaker 11: I think what's interesting is will he be able to

566
00:28:47,160 --> 00:28:50,040
Speaker 11: relate to the players. That's a big, big difference relating

567
00:28:50,040 --> 00:28:51,840
Speaker 11: to undergraduates and then.

568
00:28:52,040 --> 00:28:54,680
Speaker 4: Yeah, it's like when Bill Priest with as Julian Emmanuel,

569
00:28:54,760 --> 00:28:55,680
Speaker 4: He's like, who is this tour?

570
00:28:56,200 --> 00:28:57,680
Speaker 3: Get one more question in here?

571
00:28:57,680 --> 00:28:57,880
Speaker 4: Bill?

572
00:28:58,040 --> 00:29:01,440
Speaker 8: Did you and your team change your investment outlook the

573
00:29:01,640 --> 00:29:04,120
Speaker 8: day after the selection? Did anything change for you guys

574
00:29:04,120 --> 00:29:06,600
Speaker 8: in terms of how you think about out asset allocation

575
00:29:06,720 --> 00:29:07,760
Speaker 8: or investment opportunity?

576
00:29:07,760 --> 00:29:09,800
Speaker 9: No, we haven't changed anything yet.

577
00:29:09,840 --> 00:29:12,800
Speaker 11: It's all about finding the companies that are good capital allocators,

578
00:29:12,920 --> 00:29:15,320
Speaker 11: and I think they will see us through good times

579
00:29:15,400 --> 00:29:16,120
Speaker 11: and bad times.

580
00:29:16,200 --> 00:29:18,880
Speaker 4: Missus Keen email said, she goes, how come Bill, Bill

581
00:29:18,920 --> 00:29:20,440
Speaker 4: Priest is so and chiseled.

582
00:29:20,680 --> 00:29:22,560
Speaker 3: What's a secret vitamin D three?

583
00:29:22,880 --> 00:29:23,360
Speaker 9: What do you do?

584
00:29:23,520 --> 00:29:25,440
Speaker 4: You're still working in seventy hour work week.

585
00:29:26,160 --> 00:29:28,320
Speaker 9: I wouldn't say it's seventy anymore, but it's a lot.

586
00:29:29,240 --> 00:29:31,800
Speaker 9: I love the game. The game is. This is incredibly challenging.

587
00:29:31,880 --> 00:29:34,280
Speaker 3: It's a game fair for our listeners and viewers.

588
00:29:36,360 --> 00:29:38,240
Speaker 9: Yes, but you're gonna have to do your homework.

589
00:29:38,360 --> 00:29:40,040
Speaker 11: You're gonna have to do your homework when you get

590
00:29:40,080 --> 00:29:43,400
Speaker 11: into the private equity private credit world. The one thing

591
00:29:43,480 --> 00:29:46,800
Speaker 11: there is the mark the market problem. You're never sure

592
00:29:47,160 --> 00:29:51,840
Speaker 11: what those marks are. And look, having been chairman of

593
00:29:51,880 --> 00:29:55,240
Speaker 11: a number of mutual funds who also did do private placements.

594
00:29:55,840 --> 00:29:59,560
Speaker 11: The accounting firms will never sign off evaluation. What they

595
00:29:59,640 --> 00:30:01,920
Speaker 11: do is they sign off on the process that you

596
00:30:02,120 --> 00:30:06,080
Speaker 11: use for valuation. So they may say yeah, so you

597
00:30:06,520 --> 00:30:08,960
Speaker 11: they can't. They don't want to get sued from his valuations.

598
00:30:09,240 --> 00:30:11,280
Speaker 11: But going way back to my days when Julie and

599
00:30:11,320 --> 00:30:13,040
Speaker 11: I worked together, this is a long time ago, we

600
00:30:13,080 --> 00:30:15,920
Speaker 11: had a number of closed end funds in South America

601
00:30:15,960 --> 00:30:19,320
Speaker 11: and they did private placements. So as chairman of the

602
00:30:19,360 --> 00:30:23,040
Speaker 11: board when we had we were going over values. The

603
00:30:23,080 --> 00:30:26,400
Speaker 11: accountcil committee say, the valuation used by in those days

604
00:30:26,440 --> 00:30:31,520
Speaker 11: be associates, those valuation methodologies are valid, but they never

605
00:30:31,600 --> 00:30:32,720
Speaker 11: signed off in the valuation.

606
00:30:32,760 --> 00:30:34,640
Speaker 9: Smartself smart, Bill Priests, brilliant.

607
00:30:34,680 --> 00:30:37,200
Speaker 4: Thank you so much, folks out on Twitter, out on LinkedIn,

608
00:30:37,280 --> 00:30:41,479
Speaker 4: Free cash Flow and shareholder Yield. DiCaprio will do the

609
00:30:41,480 --> 00:30:44,800
Speaker 4: movie It's Looking two thousand and twenty seven for Bill

610
00:30:44,840 --> 00:30:49,240
Speaker 4: Priest's classic Free cash Flow. Can't say enough about that effort.

611
00:30:54,760 --> 00:30:59,000
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday

612
00:30:59,120 --> 00:31:02,640
Speaker 2: starting at seventy Eastern on applecar Play and Android Auto

613
00:31:02,720 --> 00:31:05,520
Speaker 2: with the Bloomberg Business app. You can also watch us

614
00:31:05,600 --> 00:31:09,640
Speaker 2: live every weekday on YouTube and always on the Bloomberg terminal.

615
00:31:09,840 --> 00:31:13,080
Speaker 4: It is that time, the daily look at the front pages,

616
00:31:13,160 --> 00:31:15,600
Speaker 4: the Lisa Mateo minute, Lisa's on the clock.

617
00:31:15,680 --> 00:31:16,160
Speaker 3: What do you have?

618
00:31:16,480 --> 00:31:19,240
Speaker 1: I have those outlet malls. They're drawing a lot more

619
00:31:19,320 --> 00:31:21,640
Speaker 1: luxury brands. I thought this was interesting and I've seen

620
00:31:21,680 --> 00:31:22,520
Speaker 1: Actually you seen this.

621
00:31:23,160 --> 00:31:24,400
Speaker 7: You did it on Black Friday.

622
00:31:24,520 --> 00:31:25,040
Speaker 5: I did.

623
00:31:25,120 --> 00:31:28,360
Speaker 1: It's the outlet malls because shoppers looking for bargains, right,

624
00:31:28,360 --> 00:31:31,400
Speaker 1: but they still like the luxury goods, so more a

625
00:31:31,400 --> 00:31:34,840
Speaker 1: headed to the outlet malls to get those designer shoes, clothing,

626
00:31:35,000 --> 00:31:39,480
Speaker 1: handbags at more affordable prices. The Wall Street Journal says,

627
00:31:39,480 --> 00:31:42,640
Speaker 1: even though food traffic still below pre pandemic levels, retailers

628
00:31:42,680 --> 00:31:45,880
Speaker 1: are leasing more space at outlet shopping center so they're

629
00:31:45,920 --> 00:31:48,480
Speaker 1: starting to grow. There's more than two hundred.

630
00:31:48,280 --> 00:31:48,960
Speaker 7: Of them in the US.

631
00:31:48,960 --> 00:31:50,520
Speaker 1: I didn't even realize that a lot of the more

632
00:31:50,520 --> 00:31:55,440
Speaker 1: for this affordable luxury we're talking about coach Mark, Jacobs, Gucci, Prada.

633
00:31:55,760 --> 00:31:58,000
Speaker 1: And what I noticed from going to these like Woodbury

634
00:31:58,000 --> 00:32:01,440
Speaker 1: Commons or Jersey Shore outlets is that the longest lines

635
00:32:01,440 --> 00:32:04,800
Speaker 1: are at these stores. I mean just wrapping around outside,

636
00:32:05,320 --> 00:32:06,400
Speaker 1: so more people are doing it.

637
00:32:06,400 --> 00:32:06,840
Speaker 7: They're saying.

638
00:32:06,840 --> 00:32:09,800
Speaker 1: The reason why is because a lot of these luxury

639
00:32:09,840 --> 00:32:14,320
Speaker 1: retailers are selling their excess products to places like TJ Max,

640
00:32:15,200 --> 00:32:18,160
Speaker 1: and people are reals realizing, hey, you know what, I

641
00:32:18,200 --> 00:32:19,719
Speaker 1: can afford this high end stuff.

642
00:32:19,800 --> 00:32:22,560
Speaker 4: The Economist was an article. I actually read every word

643
00:32:22,560 --> 00:32:25,080
Speaker 4: of it, and I think they had Versace. I do

644
00:32:25,120 --> 00:32:26,719
Speaker 4: not have the number in front of me, but I

645
00:32:26,760 --> 00:32:31,400
Speaker 4: was stunned what percentage of Versace is on sale right now?

646
00:32:31,960 --> 00:32:33,880
Speaker 4: Because it used to be they were never on sale

647
00:32:34,360 --> 00:32:35,520
Speaker 4: ever ever, you know.

648
00:32:35,640 --> 00:32:37,960
Speaker 1: Right, sometimes it was so that they wouldn't like shred

649
00:32:38,040 --> 00:32:39,120
Speaker 1: them or do something else.

650
00:32:39,200 --> 00:32:39,920
Speaker 8: They would rather do.

651
00:32:39,880 --> 00:32:42,720
Speaker 1: That than put it on sale. So that was something else.

652
00:32:43,720 --> 00:32:46,280
Speaker 3: Well, still a thing like when you go where they've packed.

653
00:32:46,760 --> 00:32:49,000
Speaker 1: The malls not you know what. I've been to the

654
00:32:49,000 --> 00:32:51,320
Speaker 1: mall even during the holiday and it's not that packed.

655
00:32:51,600 --> 00:32:52,120
Speaker 7: But it's the.

656
00:32:52,120 --> 00:32:54,960
Speaker 1: Outlet malls that people are like flocking to it. It's

657
00:32:55,000 --> 00:32:57,280
Speaker 1: crazy and it's interesting. Next time we have a luxury person,

658
00:32:57,360 --> 00:32:59,960
Speaker 1: I'm got to ask them about this, about the outlet malls,

659
00:33:00,160 --> 00:33:01,240
Speaker 1: luxury cent It's.

660
00:33:01,080 --> 00:33:05,000
Speaker 4: Michael Barber this almost every day, he's a luxury here.

661
00:33:05,080 --> 00:33:08,920
Speaker 4: It is why Lewisviuton is struggling, but Arimez is not.

662
00:33:09,240 --> 00:33:13,880
Speaker 4: Somewhere in here. This is the Economist magazine. There's you

663
00:33:13,920 --> 00:33:16,640
Speaker 4: know how much of Versace's on sale? I was blown away.

664
00:33:17,200 --> 00:33:19,280
Speaker 4: It's like a big deal. Next, what do you got go?

665
00:33:20,120 --> 00:33:23,480
Speaker 1: Since we're sticking with shoppers who love deals. No, we're

666
00:33:23,520 --> 00:33:26,080
Speaker 1: not doing the drones. I still have not seen one

667
00:33:26,120 --> 00:33:28,960
Speaker 1: in New Jersey. But sticking with the shoppers who love deals.

668
00:33:29,000 --> 00:33:32,400
Speaker 1: So Business Insider says, who is the you know, the

669
00:33:32,440 --> 00:33:35,720
Speaker 1: top downloaded app of twenty twenty four, and they say

670
00:33:35,760 --> 00:33:39,800
Speaker 1: it's actually Chinese owned e commerce discount retailer Temu. It's

671
00:33:39,840 --> 00:33:42,680
Speaker 1: the most downloaded for the first ten months of twenty four,

672
00:33:42,760 --> 00:33:47,560
Speaker 1: beating out TikTok chat GPT all that it sells everything tech, gadgets,

673
00:33:47,600 --> 00:33:49,520
Speaker 1: apparel at a cheap cost.

674
00:33:50,520 --> 00:33:51,920
Speaker 7: Owned by PDD Holdings.

675
00:33:52,000 --> 00:33:55,040
Speaker 1: Particular, among the gen Z consumers eighteen to twenty four,

676
00:33:55,080 --> 00:33:59,080
Speaker 1: they love it. They've been downloading it. The big problem though,

677
00:33:59,200 --> 00:34:01,560
Speaker 1: is that president like Donald Trump, you know, threatening with

678
00:34:01,600 --> 00:34:04,479
Speaker 1: the high tariffs on Chinese goods. So people are wondering

679
00:34:04,600 --> 00:34:06,920
Speaker 1: are they going to start raising their prices to kind

680
00:34:06,920 --> 00:34:08,920
Speaker 1: of offset that levy.

681
00:34:09,080 --> 00:34:11,040
Speaker 7: But this is like the big thing.

682
00:34:11,320 --> 00:34:14,600
Speaker 4: Thing where it's Chinese owned and we're worried that Temu

683
00:34:14,719 --> 00:34:16,879
Speaker 4: Timu is gonna know what.

684
00:34:16,880 --> 00:34:17,759
Speaker 3: A checkbook is.

685
00:34:18,560 --> 00:34:19,359
Speaker 7: Not so much.

686
00:34:19,400 --> 00:34:21,440
Speaker 1: They haven't actually brought that up. That's that's true.

687
00:34:21,640 --> 00:34:24,880
Speaker 7: So has invested in millions to market to American shoppers.

688
00:34:25,040 --> 00:34:28,279
Speaker 7: Three tu ads aired it during the Super Bowl. Oh

689
00:34:28,320 --> 00:34:29,000
Speaker 7: you remember those?

690
00:34:29,040 --> 00:34:29,360
Speaker 6: Wow?

691
00:34:29,520 --> 00:34:32,800
Speaker 1: Yes, they did three they're like seven billion busters.

692
00:34:33,160 --> 00:34:34,320
Speaker 7: Yeah, exactly, it's.

693
00:34:34,200 --> 00:34:35,680
Speaker 3: Crazy to seven billion.

694
00:34:35,960 --> 00:34:37,480
Speaker 7: Okay, next, okay.

695
00:34:37,800 --> 00:34:42,000
Speaker 1: The world's busiest airline routes in twenty twenty four. This

696
00:34:42,040 --> 00:34:44,000
Speaker 1: is a travel comeback for Asia. This is actually a

697
00:34:44,000 --> 00:34:47,960
Speaker 1: report on Bloomberg Aviation data provider o a G. Seven

698
00:34:47,960 --> 00:34:51,480
Speaker 1: of the world's ten busiest international routes are largely in Asia.

699
00:34:51,600 --> 00:34:54,680
Speaker 1: This was taken from January to December of twenty twenty four,

700
00:34:55,200 --> 00:34:58,439
Speaker 1: only included the round trip flights. The busiest international flight

701
00:34:58,520 --> 00:35:02,400
Speaker 1: route was Hong Kong to Taipei six point eight million

702
00:35:02,480 --> 00:35:06,040
Speaker 1: available seats. Then you had Cairo to Jetta of Saudi Arabia.

703
00:35:06,080 --> 00:35:09,160
Speaker 1: We talked about Saudi Arabia yesterday. That's the second place,

704
00:35:09,200 --> 00:35:12,040
Speaker 1: and then third place sold to Tokyo Narita.

705
00:35:12,320 --> 00:35:13,240
Speaker 7: That was third place.

706
00:35:13,600 --> 00:35:16,120
Speaker 1: But it's like it's a mix. It's a mix of leisure,

707
00:35:16,239 --> 00:35:19,920
Speaker 1: a mix of business destinations. So they're starting to see that.

708
00:35:20,000 --> 00:35:22,680
Speaker 1: And if you want to look trans atlantic, the only

709
00:35:22,800 --> 00:35:25,680
Speaker 1: place in that top ten was actually New York JFK

710
00:35:25,800 --> 00:35:28,960
Speaker 1: to London Heathrow. But it just does show.

711
00:35:28,960 --> 00:35:31,319
Speaker 8: Well, see what I what I don't think we're seeing

712
00:35:31,400 --> 00:35:35,479
Speaker 8: yet is just broader China to the US. I still

713
00:35:35,480 --> 00:35:37,040
Speaker 8: think those you know, you don't you hear from the

714
00:35:37,080 --> 00:35:40,400
Speaker 8: luxury folks that you're still not seeing the Chinese consumers

715
00:35:40,400 --> 00:35:42,960
Speaker 8: coming here into the US and shopping. And I think

716
00:35:43,000 --> 00:35:45,040
Speaker 8: part of that is because there's just not a lot

717
00:35:45,080 --> 00:35:47,640
Speaker 8: of flights, you know, it's kind of a post pandemic thing.

718
00:35:47,760 --> 00:35:48,160
Speaker 7: I don't know.

719
00:35:48,600 --> 00:35:51,520
Speaker 4: And those fascinating yesterday with Stephen Trent of City Group,

720
00:35:51,560 --> 00:35:55,120
Speaker 4: people's leading Delta but he's got Panama.

721
00:35:55,239 --> 00:35:55,839
Speaker 7: Yeah, this is.

722
00:35:57,600 --> 00:35:58,520
Speaker 3: Yep, you got one more?

723
00:35:58,840 --> 00:35:59,040
Speaker 4: I do?

724
00:35:59,120 --> 00:35:59,319
Speaker 6: I do?

725
00:35:59,400 --> 00:36:00,560
Speaker 1: Okay, so start January.

726
00:36:00,560 --> 00:36:02,400
Speaker 3: I say, oh, whoa, whoa, whoa, whoa.

727
00:36:02,520 --> 00:36:05,200
Speaker 7: Yes, is it the red one with the rock? No

728
00:36:05,280 --> 00:36:05,719
Speaker 7: it is not.

729
00:36:06,080 --> 00:36:08,720
Speaker 1: I have to I actually fell asleep during the movie.

730
00:36:09,320 --> 00:36:14,000
Speaker 7: It's really bad, and.

731
00:36:13,960 --> 00:36:14,719
Speaker 6: I love the rock.

732
00:36:15,600 --> 00:36:18,320
Speaker 1: But this is about your other, your other favorite topic,

733
00:36:18,320 --> 00:36:21,399
Speaker 1: people coming back to the office, right, So starting January second,

734
00:36:21,400 --> 00:36:23,239
Speaker 1: A lot of companies are doing that five days a week.

735
00:36:23,239 --> 00:36:26,440
Speaker 1: Everybody has to come in, including Amazon. But Amazon is

736
00:36:26,480 --> 00:36:29,720
Speaker 1: running into a problem. They actually don't have enough space

737
00:36:29,760 --> 00:36:32,160
Speaker 1: in the office for all these people to come back,

738
00:36:33,000 --> 00:36:35,120
Speaker 1: So they're running into this problem. It was seen in

739
00:36:35,160 --> 00:36:39,000
Speaker 1: this like internal memo. You have workers Atlanta, Houston, Nashville,

740
00:36:39,080 --> 00:36:42,799
Speaker 1: and New York. They're saying they can continue following the

741
00:36:42,800 --> 00:36:46,120
Speaker 1: three day rule until they can find enough space for them,

742
00:36:46,239 --> 00:36:47,720
Speaker 1: and these delays could go.

743
00:36:47,600 --> 00:36:48,399
Speaker 11: Out to like May.

744
00:36:48,600 --> 00:36:51,879
Speaker 1: That's what they're saying. So this is the problem they're having.

745
00:36:51,920 --> 00:36:54,320
Speaker 1: It's actually not the first time when they actually announced

746
00:36:54,320 --> 00:36:56,479
Speaker 1: the three day week coming back.

747
00:36:56,840 --> 00:37:00,000
Speaker 8: So just take me clear, just be clear. We're not hybrid,

748
00:37:00,040 --> 00:37:01,880
Speaker 8: are we? We're back every day, aren't we.

749
00:37:03,080 --> 00:37:06,800
Speaker 1: We're that's a good question for you and I are here.

750
00:37:06,560 --> 00:37:10,520
Speaker 8: And I Truman hasn't missed a day like since the pandemic.

751
00:37:11,600 --> 00:37:13,920
Speaker 8: I mean the kid came in every day.

752
00:37:13,840 --> 00:37:17,640
Speaker 3: Talker took a day off. I think it was after Lehman.

753
00:37:17,960 --> 00:37:18,960
Speaker 9: Okay, you know that.

754
00:37:19,080 --> 00:37:22,600
Speaker 4: Was like just twenty ten, is well, Lisa Mateo, thank

755
00:37:22,640 --> 00:37:23,160
Speaker 4: you so much.

756
00:37:23,440 --> 00:37:24,400
Speaker 3: The newspapers.

757
00:37:24,560 --> 00:37:29,000
Speaker 2: This is the Bloomberg Surveillance podcast available on Apple, Spotify,

758
00:37:29,160 --> 00:37:33,280
Speaker 2: and anywhere else you get your podcasts. Listen live each weekday,

759
00:37:33,360 --> 00:37:36,440
Speaker 2: seven to ten am Eastern on Bloomberg dot Com, the

760
00:37:36,560 --> 00:37:40,319
Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You

761
00:37:40,360 --> 00:37:43,680
Speaker 2: can also watch us live every weekday on YouTube and

762
00:37:43,800 --> 00:37:45,400
Speaker 2: always on the Bloomberg terminal