WEBVTT - Stocks Get Hit as Weak Treasury Sale Boosts Yields 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.920 --> 0:00:13.240 This is Bloomberg Business Week Daily reporting from the magazine 0:00:13.240 --> 0:00:17.880 that helps global leaders stay ahead with insight on the people, companies, 0:00:17.920 --> 0:00:22.800 and trends shaping today's complex economy. Plus global business finance 0:00:22.840 --> 0:00:26.160 and tech news as it happens. The Bloomberg Business Week 0:00:26.239 --> 0:00:31.760 Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio. 0:00:32.360 --> 0:00:35.400 Thirty year yield starting about five percent sign a dimming 0:00:35.479 --> 0:00:36.120 investor demand. 0:00:36.159 --> 0:00:37.239 We've been talking about this a lot. 0:00:37.280 --> 0:00:39.680 We saw the move equities came down, but it came 0:00:39.720 --> 0:00:43.120 after that treasury auction, sixteen billion dollar treasury sale. Lackluster 0:00:43.159 --> 0:00:46.559 demand moving yields up along the yield curve. But it 0:00:46.600 --> 0:00:49.800 turns out, Tim, investors are worried about a ballooning deficit. 0:00:49.920 --> 0:00:51.879 Yeah, look no further than what's happening on the long 0:00:52.040 --> 0:00:54.720 end as we speak with yield hire by ten basis 0:00:54.720 --> 0:00:58.160 points right now. Michael McKenzie is rates reporter for Bloomberg News. 0:00:58.200 --> 0:01:01.280 He joins us here in the Bloomberg BusinessWeek Studio. You 0:01:01.360 --> 0:01:03.560 were in here on Monday when we spoke about the 0:01:03.800 --> 0:01:06.279 ten year briefly or the thirty or rather briefly heading 0:01:06.319 --> 0:01:09.880 five percent. We've blown past that. What's the signal that's sending. 0:01:10.560 --> 0:01:12.520 Is it about the spending bill? It's about the tax bill. 0:01:12.720 --> 0:01:13.759 A lot of it's due to that. 0:01:13.959 --> 0:01:16.679 I think it's really interesting on a day when stocks 0:01:16.680 --> 0:01:19.640 start to take a hit, you don't see really any 0:01:19.800 --> 0:01:23.679 pullback in the celloff in treasuries. The other reason you 0:01:23.680 --> 0:01:25.880 think to observe today is that the ten year briefly 0:01:25.880 --> 0:01:28.480 got above fall sixty. If you think back to last 0:01:28.480 --> 0:01:31.440 month when Scott Besson stepped in and told Trump, hey, 0:01:31.920 --> 0:01:34.320 let's do a ninety day delay on tariffs because we're 0:01:34.360 --> 0:01:37.320 just hitting close to fall sixty on tens. We edged 0:01:37.360 --> 0:01:40.680 above that just now and again. You know, you can 0:01:40.760 --> 0:01:43.919 jaw burn the market once, but if you then step 0:01:43.959 --> 0:01:46.000 back from all the tariff chaos of last month and 0:01:46.040 --> 0:01:49.040 the highs we saw then today it's about the deficit. Today, 0:01:49.080 --> 0:01:52.680 it's about a Congress that really doesn't think it needs 0:01:52.680 --> 0:01:56.160 to be fiscally disciplined here, and the bomb market is 0:01:56.200 --> 0:01:57.960 telling you that. You know, and it's not just the 0:01:58.040 --> 0:02:01.120 US story. Japan had a twenty year sale this week, 0:02:02.120 --> 0:02:06.400 very badly received. You're seeing thirty year yields in the US, Japan, 0:02:06.720 --> 0:02:11.079 UK Netherlands all pushing higher. And this is a global 0:02:11.120 --> 0:02:14.760 revolt that's beginning to take shape here where investors are saying, 0:02:15.080 --> 0:02:17.560 if I don't need to own long dated bonds, I'm 0:02:17.600 --> 0:02:19.640 not going to own them. And that's why when I 0:02:19.639 --> 0:02:22.959 was talking to investors today and yesterday, they like being 0:02:22.960 --> 0:02:24.519 in the front end of the curve. They like being 0:02:24.560 --> 0:02:27.800 between twos to tens. They don't really like the thirty 0:02:27.840 --> 0:02:30.440 year at all. So if they can they know, if 0:02:30.480 --> 0:02:32.840 they have mandates to say, please buy these bonds, they 0:02:32.840 --> 0:02:34.959 try not to, but they do buy some. By the 0:02:35.080 --> 0:02:37.320 end of the day, they're negative on the long bond, 0:02:37.360 --> 0:02:39.600 and they probably have these steepener trades on where it's 0:02:39.600 --> 0:02:42.720 they're basically earning twos and fives and selling the thirty year. 0:02:43.000 --> 0:02:45.480 So does this have to do with you know, I 0:02:45.639 --> 0:02:47.840 kind of always go back to this, you know, Michael, 0:02:48.200 --> 0:02:51.360 certainly yourself, A lot of folks at Bloomberg, a lot 0:02:51.400 --> 0:02:53.399 of people on last kind of get the treasury trade 0:02:53.440 --> 0:02:55.600 right when things are happening. But I do think about 0:02:55.639 --> 0:02:57.440 the world at large and like what it means, is 0:02:57.480 --> 0:03:00.639 it us non investable? Is it just a sign of 0:03:00.720 --> 0:03:04.280 concerns about the ballooning debt and what it means maybe 0:03:04.320 --> 0:03:07.600 for the government and spending and entitlements, and how it 0:03:07.600 --> 0:03:09.720 plays out in the economy, what it does to economic 0:03:09.800 --> 0:03:12.720 growth if there aren't is in government money to commit 0:03:12.760 --> 0:03:14.200 to programs to kind of help. 0:03:14.280 --> 0:03:17.520 So that's that's that's what we're beginning to look at here, 0:03:17.520 --> 0:03:19.720 because I think what you're seeing here is if you 0:03:19.720 --> 0:03:23.120 look at developed world countries, they have aging populations. There 0:03:23.160 --> 0:03:26.280 is a much greater need now for fun for retirement 0:03:26.600 --> 0:03:28.600 and medical costs. If you look at a lot of 0:03:28.639 --> 0:03:30.600 the issue with the US budget at the moment, they 0:03:30.639 --> 0:03:34.520 don't really want to start attacking and reducing the entitlement 0:03:34.600 --> 0:03:38.120 spending now because it's just such a huge vote loser. 0:03:38.360 --> 0:03:41.160 You can understand why Congress doesn't want to do this. 0:03:42.200 --> 0:03:44.760 But at some point, you know, taxes will have to 0:03:44.800 --> 0:03:47.200 go up. You can't say, oh, yes, we're looking for 0:03:47.280 --> 0:03:49.880 sources of revenue. This administration is looking for tarots. They're 0:03:49.880 --> 0:03:52.400 simply not going to get enough revenue from taros that 0:03:52.520 --> 0:03:56.080 can sort of offset the plans for cutting taxes in 0:03:56.120 --> 0:03:59.320 the future. Then we're already starting at one hundred percent 0:03:59.480 --> 0:04:01.680 that you know, you know, the federal debt is one 0:04:01.720 --> 0:04:03.960 hundred percent of the economy. It's the same in the UK, 0:04:04.040 --> 0:04:07.280 it's two hundred percent in Japan. So again, investors are 0:04:07.280 --> 0:04:09.760 looking at the world and going, well, I would rather 0:04:09.840 --> 0:04:12.800 lend to triple A rated corporates. I'd rather lend to 0:04:12.880 --> 0:04:15.200 companies that actually don't really need to borrow and probably 0:04:15.200 --> 0:04:18.440 only really boring in order to fund buybacks, rather than 0:04:18.520 --> 0:04:22.040 to really well established countries like the UK, like Japan, 0:04:22.120 --> 0:04:24.920 and certainly the US falls into that boat unfortunately. I mean, 0:04:24.960 --> 0:04:27.440 this is and I think the other thing that's concerning 0:04:27.520 --> 0:04:29.400 is that when I was asking people this week, okay, 0:04:29.680 --> 0:04:32.200 we get thirties above five percent, is that worth the trade? 0:04:33.240 --> 0:04:37.200 Not necessarily anymore, because again, you know, there's this real 0:04:37.240 --> 0:04:39.800 trepidation now in the bomb market of the margins. They're 0:04:39.839 --> 0:04:43.119 saying this, this conquerors deal on the budget just isn't 0:04:43.160 --> 0:04:46.039 really making any stems. It's not going to alleviate the problem. 0:04:46.320 --> 0:04:49.120 So do we need to send a bigger message to Washington? 0:04:49.440 --> 0:04:51.800 Yes there's an issue. And you guys are kind of 0:04:52.160 --> 0:04:54.400 walking past the graveyard and just whistling along. 0:04:54.560 --> 0:04:57.040 We Askir Eric Wahlson, Congressional reporter up on the hill 0:04:57.080 --> 0:05:00.080 watching this big, massive, big, beautiful Bell make its way 0:05:00.120 --> 0:05:00.880 through Congress. 0:05:01.080 --> 0:05:03.240 He said, you know, despite what you might be hearing 0:05:03.240 --> 0:05:03.560 from the. 0:05:03.480 --> 0:05:07.080 White House, it's a defit deficit increasing package, and so 0:05:07.240 --> 0:05:10.440 netnet folks, it's going to add to the deficit. Michael, 0:05:10.440 --> 0:05:13.000 thank you really appreciate it. Checking in on that treasury 0:05:13.000 --> 0:05:15.800 trade are on. Michael mackenzie follows the rates market here 0:05:15.800 --> 0:05:16.840 at Bloomberg News. 0:05:16.880 --> 0:05:18.239 Joining us here in studio. 0:05:18.800 --> 0:05:22.680 You're listening to the Bloomberg Business Week Daily Podcast. Catch 0:05:22.720 --> 0:05:25.360 us live weekday afternoons from two to five eas during 0:05:25.400 --> 0:05:28.200 this listen on Apple Karplay and Android Auto with the 0:05:28.279 --> 0:05:30.359 Bloomberg Business app, or watch. 0:05:30.279 --> 0:05:31.560 Us live on YouTube. 0:05:34.440 --> 0:05:36.479 The worries that we are seeing play out once again 0:05:37.000 --> 0:05:39.880 along the treasury market, the treasury curve. 0:05:40.400 --> 0:05:42.680 We had an auction that didn't go so well. 0:05:43.360 --> 0:05:45.880 Demand was weak there and so you are looking at 0:05:46.040 --> 0:05:48.320 really the longer end of the year curve bopping up 0:05:48.320 --> 0:05:50.240 in a big way. We hit about four point six 0:05:50.240 --> 0:05:52.839 percent on that ten year note. Got a two year 0:05:52.920 --> 0:05:56.320 note that has been trading around four percent as well, 0:05:57.160 --> 0:05:59.839 and so there are concerns again about this massive spending 0:06:00.400 --> 0:06:03.800 that's making its way through Congress has some ways to go, 0:06:03.920 --> 0:06:05.919 but it also will add to the deficit, and so 0:06:06.480 --> 0:06:08.960 deficit hawks are not happy about it. Investors on Wall 0:06:08.960 --> 0:06:11.000 Street aren't happy about it as well. They're concerned. 0:06:11.120 --> 0:06:13.920 Yeah, also checking out what's happening. As you peel back 0:06:13.960 --> 0:06:16.880 the layers of the S and P five hundred, you 0:06:16.960 --> 0:06:19.839 actually see Apple as the biggest drag on the S 0:06:19.880 --> 0:06:22.440 and P five hundred right now, followed by Nvidia down 0:06:22.480 --> 0:06:26.000 one point eight percent, Microsoft, Amazon, Tesla, United Health Group 0:06:26.360 --> 0:06:29.440 among the biggest decliners as well. I want to bring 0:06:29.440 --> 0:06:33.400 in Sandy Villary, portfolio manager for Villary and Co. Joining 0:06:33.520 --> 0:06:39.520 us from New Orleans. This is a four generation family 0:06:39.600 --> 0:06:40.160 run firm. 0:06:40.240 --> 0:06:40.560 Carol. 0:06:41.000 --> 0:06:43.320 We speak with Sandy all the time. Sandy, good to 0:06:43.360 --> 0:06:45.359 have you with us. How are you good? 0:06:45.400 --> 0:06:47.479 Thanks Jim, Thanks Carol. Good to hear from you. 0:06:47.680 --> 0:06:50.120 Yeah, good to have you join us today. I just 0:06:50.120 --> 0:06:52.640 want to get your thoughts on how you're looking at 0:06:52.720 --> 0:06:56.520 what's happening in Washington, because that's really what we're seeing 0:06:57.080 --> 0:06:59.720 with the market reaction today, at least with that bond auction, 0:06:59.800 --> 0:07:03.120 that tencent equities tumbling today. What's your view there? 0:07:04.480 --> 0:07:07.400 Yeah, I mean very we're very stock focused, but I 0:07:07.440 --> 0:07:10.120 will say it's impossible not to pay attention to it 0:07:10.200 --> 0:07:13.040 because just you look at what happened in twenty twenty 0:07:13.120 --> 0:07:15.360 five so far, all about the tariffs. Now we've got 0:07:15.360 --> 0:07:19.000 the new bill that's going to certainly increase deficits a 0:07:19.040 --> 0:07:21.880 little bit. And to your point, we had a you know, 0:07:22.320 --> 0:07:25.360 the twenty year auction was certainly weaker, and now we're 0:07:25.360 --> 0:07:27.200 seeing yields back to where we started the year on 0:07:27.280 --> 0:07:28.040 a four to sixty. 0:07:28.160 --> 0:07:31.440 So it's hard to start. 0:07:31.280 --> 0:07:34.400 To avoid a lot of what's going on and trying 0:07:34.440 --> 0:07:36.240 to focus on individual names. 0:07:37.320 --> 0:07:41.160 Yeah, exactly. And you've got your villary equity fund. I'm 0:07:41.160 --> 0:07:43.840 looking at it up about one point six percent on 0:07:43.920 --> 0:07:46.080 the year. If I look at your balanced fun it 0:07:46.200 --> 0:07:48.760 is up about three point four percent year to date. 0:07:49.080 --> 0:07:51.520 How much movement have you guys been making in and 0:07:51.560 --> 0:07:52.360 out at this point. 0:07:53.560 --> 0:07:57.000 Yeah, we started the year very defensive after a really 0:07:57.000 --> 0:07:59.520 good twenty three and twenty four, especially for the S 0:07:59.560 --> 0:08:02.960 and P. It's so tech heavy, so we were more 0:08:03.160 --> 0:08:05.880 defensively positioned. We had some cash, and then when we 0:08:05.880 --> 0:08:09.120 got into the lows, those early April lows, we started 0:08:09.120 --> 0:08:11.480 to buy and we got about twenty percent through what 0:08:11.520 --> 0:08:13.520 we wanted to before the market just v shaped and 0:08:13.560 --> 0:08:15.560 went right back up. So now we're back to where 0:08:15.560 --> 0:08:17.640 we started the year, and we're getting more defensive again. 0:08:18.480 --> 0:08:20.280 And I think if I look at the SMP and 0:08:20.320 --> 0:08:22.640 how it may end the year, I see about fifty 0:08:22.640 --> 0:08:24.760 five hundred or so on the SMP, and I think 0:08:24.800 --> 0:08:27.280 it's going to be carried down by a lot of 0:08:27.320 --> 0:08:29.960 the larger cap tech names. So I think defense is 0:08:29.960 --> 0:08:32.360 going to win championships in the rest of twenty twenty five. 0:08:32.400 --> 0:08:34.720 All Right, so let's talk about kind of where you 0:08:34.760 --> 0:08:37.280 are committing money. And I'm assuming these picks are something 0:08:37.320 --> 0:08:39.200 that have been recent buys, but you can correct me 0:08:39.640 --> 0:08:42.520 if I'm wrong or right on that. Republic Services, we're 0:08:42.520 --> 0:08:44.760 talking about a seventy eight billion dollar market cap company. 0:08:44.800 --> 0:08:46.160 We're talking about waste management. 0:08:46.640 --> 0:08:49.000 Stock has had quite a run this year, twenty six 0:08:49.080 --> 0:08:53.240 percent recent buy adding to it lay it out for us. 0:08:53.720 --> 0:08:56.200 Yeah, I would still buy it. 0:08:56.640 --> 0:08:59.079 This is an incredible business that just as long as 0:08:59.080 --> 0:09:01.319 people continue to get their garbage collected, we feel good 0:09:01.320 --> 0:09:01.720 about it. 0:09:02.080 --> 0:09:05.160 A mid single digit free cash flow compounder. 0:09:05.240 --> 0:09:07.439 They just had a great quarter and they're getting more 0:09:07.480 --> 0:09:11.760 into recycling. They've got two polymer centers, so fundamentally they're. 0:09:11.520 --> 0:09:12.480 Doing everything right. 0:09:12.760 --> 0:09:15.160 And it's where I want to be, which is you know, 0:09:15.320 --> 0:09:18.160 larger cap defensive. So I think it's going to I 0:09:18.160 --> 0:09:19.880 think it's going to do well throughout the duration of 0:09:19.880 --> 0:09:20.880 twenty twenty five. 0:09:22.040 --> 0:09:25.160 Another name that you like on holding, I own their footwear, 0:09:25.520 --> 0:09:29.560 their sneakers full disclosure. Full disclosure is not where I'm 0:09:29.600 --> 0:09:32.400 talking about there, you know, SEEFO like we've had them on, 0:09:32.440 --> 0:09:34.840 We've talked with them. This stock has been on a 0:09:34.880 --> 0:09:39.440 tear you're talking about, up about fifty seven percent twenty 0:09:39.480 --> 0:09:42.920 twenty three, up about one hundred and three percent in 0:09:43.200 --> 0:09:45.679 twenty twenty four. This year it's up to shy of 0:09:45.800 --> 0:09:48.920 nine percent. Here again, how long have you owned it? 0:09:49.160 --> 0:09:50.600 Have you been adding to the position? 0:09:50.800 --> 0:09:53.280 Have you where? What are you doing on this one? 0:09:53.520 --> 0:09:56.760 Yeah, we bought it frankly, not much longer after the IPO, 0:09:56.840 --> 0:09:59.120 which is all the way back in twenty twenty one, 0:09:59.160 --> 0:10:00.839 So we've had it for some time and that's kind 0:10:00.840 --> 0:10:03.439 of our styles to buy and hold, you know, over time. 0:10:03.720 --> 0:10:08.000 We did add to it not too long ago, and 0:10:08.040 --> 0:10:09.320 we still think it's going to do well. 0:10:09.360 --> 0:10:09.520 Now. 0:10:09.559 --> 0:10:13.319 If you do have a choppy market and things are weaker, 0:10:13.640 --> 0:10:16.640 this is a great name to add on any weakness. 0:10:17.080 --> 0:10:20.160 They're just getting started still, in my opinion, probably grow 0:10:20.200 --> 0:10:23.080 earnings at twenty five percent over the next three years, 0:10:23.440 --> 0:10:25.319 and they're starting to get into a pail. They're getting 0:10:25.360 --> 0:10:28.120 more stores out there, probably closer to one hundred, and 0:10:28.120 --> 0:10:30.679 if you're worried about supply chains, they get about eighty 0:10:30.679 --> 0:10:31.480 percent through. 0:10:31.400 --> 0:10:33.280 Vietnam as opposed to China. 0:10:33.679 --> 0:10:36.240 So I just feel like it's still going to be 0:10:36.480 --> 0:10:39.240 moving in the right direction. And if you get some weakness, 0:10:39.280 --> 0:10:40.600 you get an opportunity to add to it. 0:10:40.640 --> 0:10:43.960 And I would did you buy in early April after 0:10:44.000 --> 0:10:44.439 it was hit? 0:10:45.280 --> 0:10:49.240 This wasn't one that we bought in April, unfortunately, but we. 0:10:49.320 --> 0:10:52.080 It's up about sixty percent since there. I didn't either, 0:10:52.200 --> 0:10:54.400 so I'm with you, but yeah, okay, you didn't. 0:10:55.240 --> 0:10:56.000 Yeah we did. 0:10:56.160 --> 0:11:00.400 We bought two other names. But what an opportunity anytime 0:11:00.400 --> 0:11:03.240 you can buy a great company like this, there's still 0:11:03.280 --> 0:11:06.880 just running on all cylinders. And you know, in our opinions, 0:11:06.920 --> 0:11:09.160 you just you just you buy it on on weakness. 0:11:09.640 --> 0:11:11.280 We just we had other names we wanted to add 0:11:11.320 --> 0:11:11.720 at the time. 0:11:11.920 --> 0:11:14.280 What you said, you added two other names off of 0:11:14.480 --> 0:11:18.560 the April sell off? What what were they? I'm just curious. 0:11:18.600 --> 0:11:19.240 It's interesting. 0:11:19.280 --> 0:11:23.240 One one is a company called Pinnacle Financial that is, uh, 0:11:23.679 --> 0:11:25.719 you know, a bank in Nashville that we really like, 0:11:25.760 --> 0:11:28.480 and our intention was to take a larger position. We 0:11:28.640 --> 0:11:33.160 just never got the opportunity to do so. Unfortunately, just 0:11:33.200 --> 0:11:35.040 because of the V shape, all of a sudden it 0:11:35.080 --> 0:11:36.880 was traded, you know, just got to a multiple it 0:11:36.960 --> 0:11:38.559 was a little bit too high, and we added to 0:11:38.600 --> 0:11:41.239 a little bit of Striker, just knee replacement, hip replacement, 0:11:41.480 --> 0:11:44.320 probably on the safer side of what was going on 0:11:44.360 --> 0:11:49.120 at the time. So liked both names, but unfortunately didn't 0:11:49.120 --> 0:11:52.600 get a chance to fill uh, at. 0:11:52.559 --> 0:11:53.280 Least the Pinnacle. 0:11:53.640 --> 0:11:56.239 Oh okay, So in other words, you did buy Striker 0:11:56.480 --> 0:11:58.400 at the low, but Pinnacle you saw. 0:11:58.240 --> 0:12:00.680 It, wish you had, but hadn't bought it. You didn't 0:12:00.679 --> 0:12:01.000 buy it. 0:12:01.600 --> 0:12:03.439 So not to get into doing but we bought about 0:12:03.440 --> 0:12:05.360 twenty percent of our position, and then by the time 0:12:05.400 --> 0:12:07.800 it V shaped, we were sort of boxed out from 0:12:07.840 --> 0:12:08.400 finishing it. 0:12:08.520 --> 0:12:11.480 Okay, So we actually kind of sold. 0:12:11.559 --> 0:12:13.880 What we had and we looked at it if we 0:12:13.920 --> 0:12:16.200 do get more choppiness in the next month or two. 0:12:16.760 --> 0:12:19.480 Pool Corporation, you know, I pulled up the dees page 0:12:19.520 --> 0:12:21.640 on the Bloomberg terminal. It's down a little more than 0:12:21.640 --> 0:12:23.360 ten percent this year. I actually was expecting it to 0:12:23.400 --> 0:12:26.440 be lower because I recall late last month the company 0:12:26.480 --> 0:12:30.920 reported earnings that they essentially said, fiscally, your earnings per 0:12:30.960 --> 0:12:34.600 share will come in just about what analysts saw. But 0:12:34.640 --> 0:12:37.360 they did report first quarter earnings per share that came 0:12:37.400 --> 0:12:40.040 in shy of estimates, in first quarter net sales that 0:12:40.120 --> 0:12:42.960 came in shy of estimates. This one was surprising for 0:12:43.000 --> 0:12:45.520 me to see on your list of stocks that you're 0:12:45.559 --> 0:12:49.960 bullish on, because isn't the concern the company essentially said 0:12:49.960 --> 0:12:52.800 the environment was weighing on new pools, So, you know, 0:12:52.880 --> 0:12:55.680 not necessarily a name that you would want to own 0:12:55.760 --> 0:12:57.839 in an environment where consumers aren't spending money. 0:12:57.880 --> 0:12:57.920 No. 0:12:59.120 --> 0:13:01.800 Yeah, So what happened in twenty twenty three they were 0:13:01.840 --> 0:13:05.160 about about seventy to seventy five thousand new pools built, 0:13:05.280 --> 0:13:07.800 and now we're down to about sixty two thousand as 0:13:07.840 --> 0:13:11.080 you closed out twenty twenty four. So about fifteen percent 0:13:11.120 --> 0:13:13.880 of their business is new pool construction. It does carry 0:13:13.920 --> 0:13:17.200 higher margins and it's a great part of their business, 0:13:17.200 --> 0:13:20.240 but two thirds of their business is just repair and maintenance. 0:13:20.240 --> 0:13:21.040 Of your swimming pool. 0:13:21.400 --> 0:13:24.520 So this is a true, you know, long term hold 0:13:24.640 --> 0:13:27.360 where as long as people are putting chemicals and chlorine 0:13:27.400 --> 0:13:31.040 into their swimming pools, they're remodeling and every you know, 0:13:31.080 --> 0:13:34.000 basically every ten to twelve years, you might have to replaster. 0:13:34.480 --> 0:13:37.240 These guys are as big as their top ten competitors combined. 0:13:37.559 --> 0:13:40.400 And so when you get weakness in one little part 0:13:40.400 --> 0:13:43.120 of their business new pool construction, which is important, and 0:13:43.160 --> 0:13:46.439 that kind of pushes the stock down to a reasonable evaluation. 0:13:46.559 --> 0:13:49.360 To us, it's a great opportunity to add if you 0:13:49.400 --> 0:13:52.840 get any strength and new pool construction. And look, today's 0:13:52.880 --> 0:13:55.079 interest rates aren't helping, right, people aren't going out and 0:13:55.120 --> 0:13:57.000 trying to borrow money to put in a new pool. 0:13:57.720 --> 0:13:59.800 But in general, you get you get any sort of 0:14:00.000 --> 0:14:05.520 strength already, you know, diminished expectations from analysts already that 0:14:05.559 --> 0:14:08.360 have taken their numbers down. I think it's got you know, 0:14:08.640 --> 0:14:10.439 it could be a three hundred and fifty dollars stock 0:14:10.800 --> 0:14:11.480 in my opinion. 0:14:11.720 --> 0:14:16.520 Hey, one thing I'm curious stand at this point are 0:14:16.559 --> 0:14:20.440 you hire in terms of your cash allocations and your 0:14:20.440 --> 0:14:21.320 funds right now? 0:14:21.400 --> 0:14:23.800 Kind of keeping some powder dry? 0:14:23.880 --> 0:14:26.520 Lack of a better expression, but often used right in 0:14:26.640 --> 0:14:29.720 environments where we're not quite sure what's happening next. Are 0:14:29.760 --> 0:14:33.000 you keeping more money handy and ready to put to 0:14:33.120 --> 0:14:34.760 work than you normally do. 0:14:35.840 --> 0:14:38.720 Yeah, we do have higher cash levels, and we sort 0:14:38.760 --> 0:14:41.000 of came into twenty twenty five like that, and then 0:14:41.040 --> 0:14:42.840 we tried to We tried to invest what we could. 0:14:42.840 --> 0:14:45.280 We just didn't have long enough. We didn't think the 0:14:45.320 --> 0:14:48.480 whole market malaise would be you know, three days, and 0:14:48.520 --> 0:14:50.240 so we didn't have enough time to put it to work. 0:14:50.440 --> 0:14:53.280 But now we we did raise a little bit more cash, 0:14:53.400 --> 0:14:55.760 and so we are cash heavier than we have been. 0:14:56.120 --> 0:14:59.640 And it wasn't necessarily that we were worried about valuation 0:14:59.760 --> 0:15:02.040 or things like that. We couldn't find new stocks to 0:15:02.720 --> 0:15:05.680 buy that then really met our investment criteria being cheap. 0:15:06.040 --> 0:15:07.360 So we go to the sidelines. 0:15:07.400 --> 0:15:09.520 We will get a little bit over four percent in 0:15:09.560 --> 0:15:12.760 money market and just wait for those opportunities and. 0:15:12.400 --> 0:15:14.320 Ideally we see him, you know, maybe over a week 0:15:14.360 --> 0:15:14.800 or summer. 0:15:15.440 --> 0:15:17.320 I've heard Warren Buffett say the same thing. 0:15:19.080 --> 0:15:21.520 Yeah, no, that's right, and uh it's funny talking about 0:15:21.560 --> 0:15:25.240 Pool Berkshire Hathway digits. Yeah, I saw there's their position 0:15:25.960 --> 0:15:28.160 you know, middle of May by about nine hundred thousand shares, 0:15:28.200 --> 0:15:29.600 so they've become a top five year old. 0:15:29.680 --> 0:15:31.760 So good company with those guys. 0:15:31.760 --> 0:15:34.520 But yeah, what are your well, what are your you know, 0:15:34.800 --> 0:15:38.960 people really try to parse through every single thing Warren 0:15:39.000 --> 0:15:41.400 Buffett has to say at annual meetings and whenever he 0:15:41.440 --> 0:15:43.440 opens his mouth to try to figure out what exactly 0:15:43.480 --> 0:15:45.920 he's going to buy next, what are your you know, 0:15:46.000 --> 0:15:51.000 as a value investor, what are your what's your what 0:15:51.040 --> 0:15:54.120 are your parameters in an environment such as this to say, okay, 0:15:54.160 --> 0:15:56.360 I'm ready to get off the sidelines and buy this 0:15:56.440 --> 0:15:57.440 individual company. 0:15:58.520 --> 0:16:01.800 Yeah, and that's where we were, and that those April lows. 0:16:01.840 --> 0:16:04.600 We've got a laundry list of ten names that that 0:16:04.760 --> 0:16:07.760 really meet our criteria, which are just having a company 0:16:07.760 --> 0:16:11.200 that just absolutely dominates their niche and Pool certainly fits that. 0:16:11.240 --> 0:16:14.000 Build on Semi Republic being the next, you know, the 0:16:14.120 --> 0:16:17.800 number two player behind waste management, but a really dominant franchise. 0:16:18.120 --> 0:16:19.080 That's what we're looking for. 0:16:19.320 --> 0:16:21.640 And many times you have to pay up for those 0:16:21.680 --> 0:16:23.960 types of businesses. But if you get a if you 0:16:24.000 --> 0:16:26.320 get you know, market uncertainty and things that are going 0:16:26.360 --> 0:16:30.280 wrong from a macro or a DC standpoint, and you 0:16:30.320 --> 0:16:32.280 can you can get into one of those businesses. 0:16:32.800 --> 0:16:35.440 That's what we always look for if you. 0:16:35.440 --> 0:16:40.200 Get we've gotten that sandy market uncertainty, questions. 0:16:39.880 --> 0:16:40.600 About the outlook. 0:16:40.640 --> 0:16:42.840 I am curious in a day where we're all, you know, 0:16:42.880 --> 0:16:46.240 seeing nervousness, risk off come back into the equity trade 0:16:46.320 --> 0:16:50.280 and seeing those yields move up again. An argument that 0:16:50.400 --> 0:16:52.960 you know, go back ten twenty years. We had concerns 0:16:53.000 --> 0:16:56.760 about the US federal deficit. So I am curious how 0:16:56.840 --> 0:17:00.400 that factors into I understand your top stock picker looking 0:17:00.440 --> 0:17:04.439 for valuations. Are you anticipating an environment where stocks are 0:17:04.440 --> 0:17:06.720 going to get beaten down even more, maybe we even 0:17:06.760 --> 0:17:10.080 go into recession and that that's an opportunity for you 0:17:10.240 --> 0:17:13.400 or are you a little bit more worried that it's 0:17:13.400 --> 0:17:15.639 something more problematic, or are you saying, you know what, 0:17:15.640 --> 0:17:16.520 this will turn around. 0:17:17.520 --> 0:17:20.280 Yeah, I do think as yields pick up, I mean, 0:17:20.280 --> 0:17:24.080 if yields keep climbing, and you know, I do think 0:17:24.080 --> 0:17:25.719 that's at the end of the day going to dampen 0:17:25.840 --> 0:17:29.439 equity returns as those go a little bit higher. You know, 0:17:29.480 --> 0:17:32.359 I think there's when you look at terrorists and everything 0:17:32.359 --> 0:17:34.720 else that are going on. I think that causes you know, 0:17:34.960 --> 0:17:37.439 boards of directors of publicly traded companies to sort of 0:17:37.480 --> 0:17:39.280 pause on some of the things they may have been doing. 0:17:39.560 --> 0:17:41.680 And I'm not calling for a recession, but I am 0:17:41.680 --> 0:17:43.639 calling for a little bit of a slowdown. And I 0:17:43.680 --> 0:17:46.640 think there's going to be better opportunities as we get 0:17:46.680 --> 0:17:49.680 further into the year than maybe we have right now. 0:17:49.760 --> 0:17:52.320 I mean, it's pretty amazing that the SMP was down 0:17:52.359 --> 0:17:55.240 almost eighteen percent and now we're back to break even. 0:17:56.160 --> 0:17:58.720 I'm sort of looking, you know, towards the end of 0:17:58.720 --> 0:17:59.320 the year where I. 0:17:59.359 --> 0:18:02.240 Think that that if you looked at a Vanguard value index, 0:18:02.320 --> 0:18:05.119 I think it could outperform say Vanguard Growth And if 0:18:05.160 --> 0:18:08.000 you look over the last decade, growth has outperformed value 0:18:08.040 --> 0:18:09.760 by about seven percent annualized. 0:18:09.800 --> 0:18:11.760 I'm also looking for some reversion to the means. 0:18:11.800 --> 0:18:14.880 So in general, I'm trying to find those cheaper dominant 0:18:14.920 --> 0:18:18.399 companies in the market and trying to avoid some of 0:18:18.400 --> 0:18:21.639 the larger cap expensive you know, mag seven names. 0:18:21.920 --> 0:18:25.480 What portion of your assets under management right now do 0:18:25.520 --> 0:18:27.840 you have in cash? 0:18:28.640 --> 0:18:31.959 I'd say in general what probably like fourteen or fifteen percent, 0:18:32.119 --> 0:18:33.919 And what do you typically higher than we normally are 0:18:34.119 --> 0:18:35.000 you so what's your normal? 0:18:36.240 --> 0:18:38.119