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Speaker 1: Brought you by Bank of America Mary Lynch. Investing in

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Speaker 1: local communities, economies and a sustainable future. That's the power

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Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated

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Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best in economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and

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Speaker 1: of course, on the Bloomberg Brian Levitt joins us in

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Speaker 1: our Bloomberg eleven three studios. He's a senior strategist at

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Speaker 1: Oppenheimer Funds Bart and great to see you. Good morning

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Speaker 1: here in New York. Let me ask you, first of all,

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Speaker 1: just how you're paying attention to what's going on in

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Speaker 1: watching I'm sure that you, like the rest of us,

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Speaker 1: just cure it's what's going to happen here. But from

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Speaker 1: an investment perspective, what do you make of what's going on? Well,

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Speaker 1: we're all obviously trying to read the teed leaves, and

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Speaker 1: everybody's paying attention probably a little bit more to to

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Speaker 1: how bills become a law you remember that from our

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Speaker 1: what was that song we used to sing? Um And

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Speaker 1: so I I like to look at things from the

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Speaker 1: perspective of the bond market. UM. I think that you know,

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Speaker 1: early on there was a reflation trade in the aftermath

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Speaker 1: of the Trump election, and ten year rates were going higher,

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Speaker 1: and and the composition of returns and the equity markets

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Speaker 1: favored small caps, that favored value, and that was all

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Speaker 1: on the expectation of pro growth policies. And you've seen

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Speaker 1: that reverse, David, And obviously it's reversed as we deal

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Speaker 1: with the realities of governing. Ten year yields in UM

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Speaker 1: growth out performing value, emerging markets out performing the US

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Speaker 1: large caps out performing small caps. So that's the market

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Speaker 1: dealing with the realities of governing. And as an investor,

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Speaker 1: we have to pay attention to this. You mentioned the

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Speaker 1: bond market. We've seen the equities market pull back a

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Speaker 1: little bit this week, like the equities markets reevaluating what's

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Speaker 1: going on, what's happening in the bond space. Is it

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Speaker 1: paying us close attention to to d C. Yeah, the

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Speaker 1: bond markets paying a lot of attention not only to

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Speaker 1: policy um coming out of legislation, coming out of Congress,

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Speaker 1: but also what the f o m C is going

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Speaker 1: to do, because you know, we've we've had a federal

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Speaker 1: reserve that's been a very accommodative for a long time.

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Speaker 1: And when they tried to raise interest rates, or when

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Speaker 1: they did raise interest rates at the end of Tift,

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Speaker 1: long rates came crashing in down to one thirty five,

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Speaker 1: and UM investors were concerned about a recession. And as

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Speaker 1: soon as the f o m C backed off, long

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Speaker 1: rates started to go back up again, the dollar abated, UM,

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Speaker 1: the economy started to do well, and then when Trump won,

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Speaker 1: rates went up to two sixties. So short term rates

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Speaker 1: have been going up on expectations of of of a

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Speaker 1: tightening fed stance, long term rates down a little bit.

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Speaker 1: So we have to pay attention to that because if

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Speaker 1: this is a reflation trade, if we're gonna get pro

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Speaker 1: growth policy, we shouldn't see a flattening yield curve. You

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Speaker 1: should see a stepening yel curve. Is this an f

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Speaker 1: OMC that that wanted to raise rates or had to

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Speaker 1: raise rates, Well, they were able to raise rates, is

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Speaker 1: the way I think we should put it. They were

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Speaker 1: they were comfortable with a four point eight or four

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Speaker 1: point seven percent unemployment rate. Um, you had inflation expectations

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Speaker 1: behaving and you know, break evens on tips climbing. Um.

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Speaker 1: You had credit spreads that were generally behaving, and you

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Speaker 1: had a dollar that was relatively stable. So you know,

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Speaker 1: if Janet Yellen wants to leave her predecessor ample room

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Speaker 1: to lower rates if we ever have another session in

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Speaker 1: this country or or another disruption and economic activity, this

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Speaker 1: was the window to do it. The problem now is, um,

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Speaker 1: if you extend out the dot plots to where uh

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Speaker 1: the Fed governors believe it will be in in ten um,

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Speaker 1: and tenure rates don't move, it signals the Fed will

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Speaker 1: likely have to back off from the three rate hikes

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Speaker 1: this year or the four rate hikes next year, or

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Speaker 1: whatever they're they're signaling. We were talking with Tony Dwyer

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Speaker 1: yesterday if candicalor genuity about the prospect for a correction

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Speaker 1: in the equity space? Are we seeing one now? Are

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Speaker 1: we near seen? What? What are you seeing when you

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Speaker 1: look at the equities market? Well? I I think, I

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Speaker 1: mean corrections are obviously very hard to time. Um. You

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Speaker 1: know a lot of investors are asked me, how can

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Speaker 1: we haven't had a correction for so long, it's actually

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Speaker 1: not true. Um, we did have a pretty meaningful correction

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Speaker 1: from UH from the summer often into February. SMP five

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Speaker 1: hundred was down about fift If you excluded Facebook, Amazon, Netflix, Google,

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Speaker 1: you're probably down. So we have had a correction. Um,

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Speaker 1: they are hard to time. What we've been telling investors

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Speaker 1: since the beginning of the year is that there's going

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Speaker 1: to be a pause in markets, UM, primarily as we

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Speaker 1: deal with the realities of governing. There was simply too

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Speaker 1: much excitement around tax cuts, fiscal spending, and you know,

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Speaker 1: all of a sudden, we're sitting here, it's March, we're

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Speaker 1: dealing with healthcare, and we're gonna start thinking about the

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Speaker 1: midterm elections pretty soon, right, So it it's the markets

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Speaker 1: are dealing with that reality to realize we're right back

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Speaker 1: to it. You've got a whole note that centers on

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Speaker 1: what you tell clients who are fearful of getting into

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Speaker 1: this market right now because they're worried about getting into later.

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Speaker 1: We're facing the kind of correction we were just talking about,

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Speaker 1: What is the advice that you give them? Well, I

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Speaker 1: think the first thing is that investors always believe that

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Speaker 1: they're living in the most uncertain times, and they always

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Speaker 1: come up with a variety of reasons to not be

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Speaker 1: invested in markets. And and as we were saying earlier,

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Speaker 1: you know, at the beginning of the of the recovery,

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Speaker 1: it was China's too strong, dollars too week, we don't

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Speaker 1: have enough oil, I don't like the president. And today

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Speaker 1: it's China's too slow. Um, the dollars too strong, we

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Speaker 1: have too much oil, and I don't like the president. Right,

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Speaker 1: so um, they always come up with ration. Now whatever, mind, people,

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Speaker 1: Even if you got a big if you inherited a

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Speaker 1: big sum of money in October on the eve of

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Speaker 1: the massive correction, Um, if you had put that money

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Speaker 1: in that day, that put a hundred thousand dollars in

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Speaker 1: the next day, you have seventy five thousand today it's

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Speaker 1: worth one point three million. If you had put in

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Speaker 1: a few thousand dollars every month, you would be worse

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Speaker 1: off than had you just put it in on the

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Speaker 1: day of that correction. A couple of ways to segue

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Speaker 1: into ku about energy here. Just want to flag that

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Speaker 1: Trans Canada has gotten a presidential permit for the Keystone

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Speaker 1: Excel pipeline that crossing the Bloomberg right now. That's something

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Speaker 1: that President Trump had promised we were expecting to happen,

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Speaker 1: So that news official today. I'm looking at Brent right

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Speaker 1: now as well at a barrel. How are you watching?

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Speaker 1: How are you regarding energy right now? Lack of energy exact.

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Speaker 1: You know, I believe we're in a secular bull market

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Speaker 1: for equities, and we're in a you know, a malaise

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Speaker 1: for commodities UM where there's certainly no no shortage of

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Speaker 1: supply UM. And you know, the dollars relatively strong and

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Speaker 1: in a in a strong dollar world, particularly given the

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Speaker 1: commodities generally trade in dollars UM, it's a it's a

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Speaker 1: head win to commodity prices. Six oh yeah, Thomas in

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Speaker 1: a march madness, malaise, his my my Wolverines last night,

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Speaker 1: that was not a good night for either. Heading for

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Speaker 1: a final two and a final Good morning everyone, Yeah, Kansas,

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Speaker 1: Good morning, serious X Time Channel one nine, Lawrence Laurence, Kansas,

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Speaker 1: getting it done, Huge Perdue boilered down. That's it. I'm

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Speaker 1: done with the practice. David continued, UNC continues, Dominant tries

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Speaker 1: to pull himself back together. We're looking ahead the next Wednesday,

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Speaker 1: that's when the UK is expected to trigger Article fifty

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Speaker 1: and you've been thinking a lot about just what happens

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Speaker 1: next here, UH sort of working with them on on

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Speaker 1: an exit from the the opinion, but also trade deal

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Speaker 1: as well. How how mammoth and undertaking is this quad?

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Speaker 1: I think it's very mammoth, and they're we're trying to

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Speaker 1: do a lot in a very very short period of time.

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Speaker 1: So even negotiating the exit and the cost of the exit,

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Speaker 1: and when what does it mean for EU citizens living

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Speaker 1: in the UK, and how are they going to be

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Speaker 1: able to fill out those eighty five pages to maintain

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Speaker 1: UH rights to live in the UK and it it

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Speaker 1: is just massive. And then trying to negotiate access whether

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Speaker 1: it's the Single market or in a free trade agreement,

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Speaker 1: and what does that mean for the mobility of people?

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Speaker 1: Also at a time when we're gonna have elections in

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Speaker 1: France and elections in Germany. This is very difficult to

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Speaker 1: two and the attempt is to complete it by the

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Speaker 1: fall into nineteen. What is the opportunity in European equities,

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Speaker 1: let's review this. They give me a bigger dividend. Is

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Speaker 1: a general state? That's a general state? They don't do

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Speaker 1: share buy backs a general statement like we do so

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Speaker 1: the all in cash on cash yield day one January

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Speaker 1: one of every year. What is it about the same

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Speaker 1: as we are or is it less? Well? Blending dividend

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Speaker 1: and share buy backs are they? Are they the same

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Speaker 1: or they less? Well, they've been less and it's been

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Speaker 1: problematic for investors. But what you also have to recognize

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Speaker 1: is that cyclically Europe is in a good part of

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Speaker 1: the cycle. Um. If it wasn't for some of this

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Speaker 1: political risk, I think European equities would be higher from here. Um.

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Speaker 1: You know, weaker currencies have been helpful, particularly you think

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Speaker 1: about the UK and investors asked why the foot See

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Speaker 1: do so well in the aftermath of Brexit, and a

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Speaker 1: lot of those companies are exporters UM, and weaker pound,

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Speaker 1: weaker euro has been beneficial to export oriented companies. UM. Again, Um,

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Speaker 1: the cycle's helpful, policies accommodative and expectations are lower, so

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Speaker 1: you know, international markets don't necessarily always have to underperform. UM.

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Speaker 1: I think investors over the last number of years have

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Speaker 1: come around to the idea that the US is the

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Speaker 1: only game in town, and that's not necessarily true. Did

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Speaker 1: you watch the game last night time? I watched a

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Speaker 1: little bit report from our executive producer. She was keeping

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Speaker 1: you a prize basket by dunk by dunk. It was

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Speaker 1: like a Dunkelberg game talking n I b expert as well.

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Speaker 1: You know it'll be fun. I mean this weekend, when

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Speaker 1: does North Carolina tonight seven? So you don't have to

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Speaker 1: stay up too late for me? Is that like a

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Speaker 1: Madison I know that Madison Square Garden. I think that's right. Yeah,

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Speaker 1: you're gonna head down. I don't know. I don't know.

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Speaker 1: Brian Leavitt with us with Oppenheimer Funds, what's the mystery

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Speaker 1: now for investors? Is it? You and I talked earlier

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Speaker 1: about investing without a risk free rate, investing within a

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Speaker 1: great distortion central banks, the massive yield divergence worldwide? What's

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Speaker 1: the mystery out there that we haven't talked about. I

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Speaker 1: think the biggest mystery for investors is whether or not

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Speaker 1: we can actually do better than two percent real GDP

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Speaker 1: growth in the United States? And um, you know the

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Speaker 1: on the on the campaign trail, the idea of of

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Speaker 1: make America great again. I mean, I had the opportunity

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Speaker 1: to see Donald Trump speak at the Economic Club of

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Speaker 1: New York and and one of the comments was, we're

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Speaker 1: gonna have four or five six percent GDP growth, right

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Speaker 1: and and how do you get there? Um? I mean,

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Speaker 1: I joked you. You either have to have a lot

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Speaker 1: of thirty year olds, um, big gains and productivity, or

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Speaker 1: some policy that could be a catalyst forward. So, um,

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Speaker 1: are we do we remain in this slow growth world,

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Speaker 1: no cycle, no monetary tightening, or do we actually have

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Speaker 1: a catalyst to drive drive the economy and markets higher?

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Speaker 1: There's the mystery. What do you think about it? Well?

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Speaker 1: I think we're struggling with the realities of it. And

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Speaker 1: um my, I don't believe that this is the end

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Speaker 1: of a bull market. In my mind, bull markets don't

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Speaker 1: end with most Americans not liking equities. Now we've become

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Speaker 1: more optimistic lately, but that's only after eight years of

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Speaker 1: hating this um And so I don't believe that bull

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Speaker 1: markets are gonna end with most Americans not participating. Leading

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Speaker 1: indicators of the U s okay actually been pretty good.

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Speaker 1: Um in Federal Reserve that's gonna probably do this at

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Speaker 1: a more measured pace. To me, that's not how cycles end. Um.

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Speaker 1: I just think that we're now taking back some of

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Speaker 1: the optimism um that we had experienced in the aftermath

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Speaker 1: of the election. How are you about political risk? And

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Speaker 1: you look to Europe, had the election the Netherlands, looking

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Speaker 1: ahead to the election in France. What is the the

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Speaker 1: election the Netherlands. Tell you about the election in France,

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Speaker 1: and indeed, how big a risk is that? Well, I

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Speaker 1: think is different election. I think the election in the

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Speaker 1: Netherlands was the first um of its kind, of first

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Speaker 1: major hallmark vote that didn't go in the direction of

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Speaker 1: less Europe or national populism um. And so from Brexit

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Speaker 1: to Donald Trump, the natural extension was the Netherlands and

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Speaker 1: now France. To make an outlier or does it tell

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Speaker 1: you there's a river, Well, we'll find out. I mean,

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Speaker 1: I think we've all gotten to the point now where

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Speaker 1: we don't want to make predictions on politics anymore. In

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Speaker 1: the after method Brexit and Trump's victory, Uh, we will see.

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Speaker 1: I mean, Marine Lapin in France has pulled high. It's

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Speaker 1: higher in the polls um. Obviously, it remains to be

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Speaker 1: seen if if she can win a runoff in the

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Speaker 1: French elections, and and she's not running to be dictator

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Speaker 1: of France, right, so she we we'll have to work

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Speaker 1: within the system there, the same way Donald Trump is

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Speaker 1: working in the system in the United States. So there

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Speaker 1: are checks and balances. But clearly the election of Lapin

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Speaker 1: more euroskeptic um would be viewed negatively by markets, at

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Speaker 1: least than in your term. Do you have to diversify

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Speaker 1: as much internationally? Or do you diversify a companies? Is

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Speaker 1: its sector bets or is it still you know, investment

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Speaker 1: one on one that we knew twenty years ago, where

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Speaker 1: you pick a country. Well, I think investors for the

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Speaker 1: first The first thing investors should do is if they

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Speaker 1: do have a plan, they should be consistent because far

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Speaker 1: too often investors are trying to chase performance in a

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Speaker 1: particular size, style region. And what you find we find

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Speaker 1: we run the largest Emerging markets fund UM in the industry.

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Speaker 1: What we find is UM outflows when things are getting

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Speaker 1: better UM and inflows when things have already got you know,

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Speaker 1: gotten good. So we tell investors to be consistent with

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Speaker 1: their plan. If I look at the world UM and

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Speaker 1: I look at world market capitalization, I want to think

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Speaker 1: about core allocation to equities. Emerging markets are about fift

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Speaker 1: of that international markets depending on where we are thirty

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Speaker 1: of that. So to only invest in the United States

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Speaker 1: would be akin to only investing east or west of

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Speaker 1: the Mississippi. It doesn't make a lot of sense. And

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Speaker 1: we think there's great companies all around the world, and

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Speaker 1: we we like to take a view on those companies

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Speaker 1: all around the old. When you look at too emerging

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Speaker 1: markets in specific, what what stands out to you right now?

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Speaker 1: What's attractive in that space which we can paint with

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Speaker 1: such a broad brush. Well, I mean when you're if

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Speaker 1: you're gonna paint it with a broad brush, what stands

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Speaker 1: out is that cyclically those economies are improving. Um. You know,

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Speaker 1: you've seen a massive policy response from China and you've

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Speaker 1: seen growth trend higher. They are growth trend higher in

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Speaker 1: places like India and Russia and others. Um, you've seen

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Speaker 1: inflation come down, you have positive real yields. I mean

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Speaker 1: people often say to me, how could I be in

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Speaker 1: emerging markets if the Fed's gonna raise rates and scale

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Speaker 1: back their balance sheet. When they attempted to do that

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Speaker 1: in sixteen, EM sold off, But that was when e

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Speaker 1: M was in the worst part of the cycle. That

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Speaker 1: was when real yields weren't positive in the emerging markets.

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Speaker 1: It's a very different story today, and emerging markets have

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Speaker 1: been powering through even as the Fed signals three interest

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Speaker 1: rate hikes this year. Thank you for the Thank you

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Speaker 1: with Oppenheimer Funds. This morning brought you by Bank of America.

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Speaker 1: Mary Lynch. Dedicated to bringing our clients insights and solutions

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Speaker 1: to meet the challenges of a transforming world. That's the

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Speaker 1: power of global connections. Mary Lynch. Pierce fetneran Smith Incorporated

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Speaker 1: member s I p C joining us now. Thoughtful discussion

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Speaker 1: on a Friday with Peter Tay. We're just gonna stop things,

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Speaker 1: stop with the news flow, maybe actually talk about the

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Speaker 1: longer perspective. How many miles do you fly a year

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Speaker 1: across this nation looking for deals? Do you have a number?

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Speaker 1: I don't, but I fly probably a hundred and fifty

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Speaker 1: or two hundred days a year. Yeah, I mean you're

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Speaker 1: out there. I don't want to talk about Warren Buffett size.

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Speaker 1: I don't want to talk about the size that gets

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Speaker 1: you in the headlines of Wall Street, M and A.

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Speaker 1: I want to talk about an average industrial company out there.

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Speaker 1: Nobody listening knows the name of it. They've decided they've

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Speaker 1: got to do a transaction to better everyone, the shareholders.

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Speaker 1: Probably there's some senior officials that want to cash out,

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Speaker 1: if you will. Is the dialogue the same now as

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Speaker 1: it was ten years ago or twenty years ago. That's

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Speaker 1: a really good question. UM. I would argue that I

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Speaker 1: would argue that at some level it's identical, which is

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Speaker 1: that I think of all emin A transactions are driven

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Speaker 1: by some strategic comparative, which genuinely makes sense. Uh. I

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Speaker 1: do think that in an environment where we have so

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Speaker 1: much volatility and so much uncertainty, uh, and that change

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Speaker 1: and surprise has become a backdrop we all have to

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Speaker 1: deal with. I think parts of the dialogue have changed.

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Speaker 1: And that company has their competitors publicly traded competitors, private

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Speaker 1: equity and you know how dumb they are, and foreign

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Speaker 1: investors as well. Right, So you've got you've got like

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Speaker 1: eight more phone calls to make then you have to

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Speaker 1: make twenty years ago. There's there's plenty of there's plenty

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Speaker 1: of competition for assets, um. And there is there are

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Speaker 1: plenty of assets coming to market. So one of the

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Speaker 1: things that I was actually just discussing with the client yesterday.

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Speaker 1: Actually is that we we are in a world today

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Speaker 1: where every single asset, every single opportunity for an amity taste,

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Speaker 1: is effectively auctioned. The market has become so efficient. I

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Speaker 1: was making a joke there about private equities. You have

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Speaker 1: death threats now, but but seriously, private equity could be

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Speaker 1: a very shrewd skill based expertise. How have they changed

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Speaker 1: the dialogue for publicly traded companies if you're competing against

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Speaker 1: just to take a name, Carlisle, Well, I think I

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Speaker 1: think that I think there was a period of time

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Speaker 1: where private equity, frankly had a pretty easy time of

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Speaker 1: it um companies, and I'm I'm able to go back

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Speaker 1: to the eighties and not companies had had a great

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Speaker 1: deal of of opportunity for for cost cutting, for restructuring,

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Speaker 1: financial engineering. These days, the degree of sophistication in the

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Speaker 1: way these companies are run. We were talking earlier time

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Speaker 1: about the sophistication of the management teams in today's today's

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Speaker 1: Fortune five companies so much higher. I think they've got

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Speaker 1: a much tougher job making money. And we obviously have

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Speaker 1: a very very friendly financing backdrop, but we haven't seen

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Speaker 1: uh financial sponsor M and A dominate the market. Here

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Speaker 1: we are four months in two thousand seventeen. You've given

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Speaker 1: us a peek at the landscape. How does it look

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Speaker 1: for for M and A. How's as the M and

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Speaker 1: A business doing four months in? Well, if if we

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Speaker 1: just take a look at the activity levels, January was

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Speaker 1: smoking hot, February really went into a lull and the

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Speaker 1: first part of March. In the first two weeks of March,

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Speaker 1: we made up all the February volumes. So it's it

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Speaker 1: it Uh, it's been fairly volatile. Um, it's been. We're

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Speaker 1: running at volume levels that are roughly ten percent ahead

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Speaker 1: of last year, so a little bit ahead. UM. Overall

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Speaker 1: activity levels in terms of number of transactions roughly flat UM,

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Speaker 1: So I would say that it's it's steady. Um. We

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Speaker 1: have seen some bigger transactions come through, and probably the

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Speaker 1: thing that surprised me more than anything else has been

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Speaker 1: how prominent cross border deals have been in the Let's

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Speaker 1: come back and talk about that. Peter take with US

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Speaker 1: City Group taking a look at the more international landscape.

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Speaker 1: I mentioned Mr Buffett earlier with his assistance from Brazil

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Speaker 1: Capital among others. That's a theme that's clearly out there,

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Speaker 1: he Peter take with us with City Group in mergers

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Speaker 1: and acquisitions. Uh, when when foreign money comes in, how

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Speaker 1: do they acquire management expertise? How do they make smart decisions?

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Speaker 1: Given they got a million or a ga jillion dollars?

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Speaker 1: How do they affect a smart review to choose what

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Speaker 1: to do with all that money? Well? I think uh,

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Speaker 1: I think that management teams and talent generally has become

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Speaker 1: a theme in has become a theme in M and A,

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Speaker 1: and I think companies, I'm speaking broadly, companies have have

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Speaker 1: become aware of the importance of both operational talent and

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Speaker 1: managerial talent in terms of making transactions successful. So it

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Speaker 1: ends up where today and you you asked me earlier

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Speaker 1: time about differences between the market today and the market

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Speaker 1: of yesterday. I think one of the things that has

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Speaker 1: really changed is the focus which our clients have on

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Speaker 1: talent um and how that can make a difference in

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Speaker 1: successor failure in a transaction. Talk about the role of

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Speaker 1: the elections played this new administration in Washington, d C.

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Speaker 1: Aside for the regulatory space, what that's meaning for for

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Speaker 1: M and A. Right now you see someone like Apie

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Speaker 1: being named to head the FCC. How's that changing the

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Speaker 1: possibility for form and the people who are put in

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Speaker 1: place not to approve these these deals necessarily, but just

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Speaker 1: to sort of set the set the landscape in Washington. Yeah,

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Speaker 1: I think I think some of the names that have

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Speaker 1: been put forward in the in the regulatory landscape are

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Speaker 1: broadly seen as more constructive for the transactional environment than

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Speaker 1: than the prior administration's choices. Uh. That said, um, it

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Speaker 1: remains to be seen how how things play out, and

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Speaker 1: I'm quite confident that things are always going to get

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Speaker 1: evaluated on a case by case basis. Did you see

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Speaker 1: how Smoothie ones? It's amazing how you can insult President

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Speaker 1: Obama without sounds like an insult? Is there much continuity

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Speaker 1: though between administrations? In other ways? How radical is the

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Speaker 1: change usually when you have a different administration coming in. Well,

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Speaker 1: of course, most of the people that work in justice

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Speaker 1: or attorneys or their their staff and they're still there.

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Speaker 1: And uh and frankly, we're all glad of that because

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Speaker 1: the expertise is is specific and we we depend on

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Speaker 1: that knowledge and expertise because as we affect transactions. If

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Speaker 1: if a new administration meant you had to have a

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Speaker 1: whole new group get completely re educated, nothing would ever

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Speaker 1: get done. So we're quite pleased by that continuity. You know,

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Speaker 1: we hear a lot about the soft data across the

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Speaker 1: board and small companies to big companies. As you talk

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Speaker 1: to clients and executives, what are they saying about the

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Speaker 1: prospects for for the economy going forward. I think there's

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Speaker 1: an awful lot of optimism right now about about the

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Speaker 1: prospects for the economy. I'm the basic principles of the

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Speaker 1: Trump administration h platform has been fiscal stimulus, deregulation, and

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Speaker 1: tax reform, all of which are broadly good for business,

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Speaker 1: and all of which broadly are are good for M

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Speaker 1: and A. How big a variable is is what the

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Speaker 1: federal serve is doing. How concerned are your clients about

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Speaker 1: rights going up? Honestly, not very concerned. I mean the

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Speaker 1: you know, I guess the current betting is on three

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Speaker 1: rate rises for the year um. But frankly, hikes of

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Speaker 1: that nature are barely We ought to start interviewing M

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Speaker 1: and A guys to do economics, you know, just because

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Speaker 1: we're so far from any neutral right, we're so far

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Speaker 1: from to uh and and and such. Help me with

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Speaker 1: with the CFO reality. If we finally get a vector

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Speaker 1: of higher rates. What is your experience of how CFOs

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Speaker 1: act when we begin to see rising rates, is that

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Speaker 1: everybody's on the phone, Let's go, let's go, let's go.

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Speaker 1: Is it? Is it lemmings off the cliff? Do they

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Speaker 1: become defensive? What do they do? No? I think it's UH.

430
00:23:26,240 --> 00:23:28,439
Speaker 1: As long as as long as the rate rises and

431
00:23:28,520 --> 00:23:33,280
Speaker 1: the rate environment is reasonably predictable, I don't think it

432
00:23:33,400 --> 00:23:34,960
Speaker 1: changes much at all. In other words, I think we

433
00:23:35,000 --> 00:23:37,719
Speaker 1: can we can see a much higher rate environment frankly,

434
00:23:37,800 --> 00:23:40,320
Speaker 1: and still expect that we would have a fairly robust

435
00:23:40,600 --> 00:23:43,760
Speaker 1: M and a backdrop to that. That's because it all

436
00:23:43,800 --> 00:23:46,320
Speaker 1: boils into valuation, it all boils into planning. And as

437
00:23:46,320 --> 00:23:50,440
Speaker 1: long as what what What crushes our business is uncertainty

438
00:23:50,960 --> 00:23:55,160
Speaker 1: and UH and unpredictability. And so I think what we're

439
00:23:55,160 --> 00:23:58,200
Speaker 1: looking at right now is an environment which is which

440
00:23:58,240 --> 00:24:05,560
Speaker 1: is broadly predictable. So come on, this President's predictable diminishes uncertainty.

441
00:24:06,200 --> 00:24:09,040
Speaker 1: But you raise a good point. Of course, I was

442
00:24:09,080 --> 00:24:13,280
Speaker 1: specifically talking about the rate environment making a job. But

443
00:24:13,359 --> 00:24:15,440
Speaker 1: I do think I don't think that. I do think

444
00:24:15,480 --> 00:24:19,960
Speaker 1: that that UM again, if, if the if this president

445
00:24:20,040 --> 00:24:24,160
Speaker 1: can affect change off the platform that he is articulated,

446
00:24:24,160 --> 00:24:27,399
Speaker 1: and so far, I think he is working hard to

447
00:24:27,520 --> 00:24:29,840
Speaker 1: make that happen. I think that's going to be a

448
00:24:29,840 --> 00:24:32,600
Speaker 1: good environment for for business and for eminent. Just right,

449
00:24:32,640 --> 00:24:34,440
Speaker 1: a headline a few minutes ago about soft Bank in

450
00:24:34,480 --> 00:24:37,840
Speaker 1: this new hundred billion dollar Vision fund that it's it's created.

451
00:24:38,080 --> 00:24:39,960
Speaker 1: When a variable like that is introduced, how does that

452
00:24:40,040 --> 00:24:44,840
Speaker 1: change them and space? Well, there have been uh, some

453
00:24:45,040 --> 00:24:48,520
Speaker 1: very large pools of capital formed over the last five

454
00:24:48,920 --> 00:24:52,320
Speaker 1: pretty much print since the crisis. We've had an astonishing

455
00:24:52,400 --> 00:24:56,280
Speaker 1: rise of some very large pools of capital. It absolutely

456
00:24:56,320 --> 00:24:59,639
Speaker 1: affects the market in the sense that whether it's very

457
00:24:59,720 --> 00:25:02,080
Speaker 1: large I have it, equity funds, very large sovereign wealth funds,

458
00:25:02,240 --> 00:25:05,480
Speaker 1: the Vision fund, um, those pools of capital are looking

459
00:25:05,520 --> 00:25:08,320
Speaker 1: to go to work. That has definitely had an impact

460
00:25:08,400 --> 00:25:10,919
Speaker 1: on valuations. That has definitely had an impact on the

461
00:25:10,920 --> 00:25:14,480
Speaker 1: way we think about auctioning assets and others, broadening the

462
00:25:14,480 --> 00:25:19,680
Speaker 1: base of potential acquirers for assets. But frankly, I wouldn't

463
00:25:19,720 --> 00:25:22,080
Speaker 1: say that it has been catalytic in the sense that

464
00:25:22,440 --> 00:25:24,440
Speaker 1: I don't think that's the reason why we've had a

465
00:25:24,480 --> 00:25:26,320
Speaker 1: strong m and a market for the last few years,

466
00:25:26,320 --> 00:25:29,240
Speaker 1: not that alone anyway, When someone says the word said

467
00:25:29,280 --> 00:25:32,080
Speaker 1: one final question, when someone says the word synergy, which

468
00:25:32,119 --> 00:25:34,720
Speaker 1: is a word I hate. What does synergy mean to

469
00:25:34,800 --> 00:25:38,840
Speaker 1: a grizzled prolem You're sitting in some office and some

470
00:25:39,000 --> 00:25:40,919
Speaker 1: you're exhausted. You had to go through a hair and

471
00:25:40,960 --> 00:25:43,000
Speaker 1: sit on the runway for three. You don't have a

472
00:25:43,000 --> 00:25:47,639
Speaker 1: golf stream to you. You could use well, we have

473
00:25:47,640 --> 00:25:50,760
Speaker 1: a g three. It's that's okay, But you know you're

474
00:25:50,800 --> 00:25:53,320
Speaker 1: you're on a plane delayan o hair. You finally get

475
00:25:53,320 --> 00:25:56,520
Speaker 1: to where you're going, You're gonna do a transaction and

476
00:25:56,680 --> 00:26:01,840
Speaker 1: they're like, synergy is how do you handle that question

477
00:26:02,160 --> 00:26:05,600
Speaker 1: about we need synergies? Well, there's a short answer and

478
00:26:05,600 --> 00:26:08,400
Speaker 1: there's a long answer. The short answer is synergy if

479
00:26:08,400 --> 00:26:11,480
Speaker 1: that broadly is defined as the benefits associated with pushing

480
00:26:11,520 --> 00:26:15,479
Speaker 1: two companies together. If there wasn't a benefit, we wouldn't

481
00:26:15,520 --> 00:26:18,760
Speaker 1: be doing the transaction and that would certainly curtail my

482
00:26:18,880 --> 00:26:22,000
Speaker 1: level of personal activity. Isn't it just French for cost cutting?

483
00:26:22,359 --> 00:26:25,560
Speaker 1: It can be um, but I'm not I'm not gonna

484
00:26:26,800 --> 00:26:29,400
Speaker 1: I'm not going to get behind the notion that that's

485
00:26:29,400 --> 00:26:32,560
Speaker 1: all it means. Okay, Well, we've had a number of interviews,

486
00:26:32,560 --> 00:26:35,120
Speaker 1: particularly in Davos about that. I mean, Sir Martin sorrels

487
00:26:35,160 --> 00:26:38,199
Speaker 1: on this. The religion of cost cutting is the be

488
00:26:38,320 --> 00:26:41,639
Speaker 1: all and end all, not only the transactions to be fair,

489
00:26:41,920 --> 00:26:44,800
Speaker 1: but just to modern business. Do you see that cost

490
00:26:44,840 --> 00:26:47,159
Speaker 1: cutting is the religion? I think cost cutting has been

491
00:26:47,200 --> 00:26:50,120
Speaker 1: the religion of modern business since the financial crisis. UM.

492
00:26:50,160 --> 00:26:53,760
Speaker 1: I think cost cutting in environment where many many companies

493
00:26:54,040 --> 00:26:57,879
Speaker 1: pulled in their horns decided they needed d leverage transactional

494
00:26:57,960 --> 00:27:01,840
Speaker 1: activity was sharply curtailed by the crisis. UM. I think

495
00:27:01,880 --> 00:27:04,120
Speaker 1: cost cutting became the watchword, and I think it has

496
00:27:04,359 --> 00:27:08,800
Speaker 1: remained a watchword. But that said, I think the inability

497
00:27:09,000 --> 00:27:12,600
Speaker 1: of many companies to continue indefinitely to drive cost cutting

498
00:27:12,720 --> 00:27:14,080
Speaker 1: is one of the things that's been very, very good

499
00:27:14,119 --> 00:27:15,840
Speaker 1: for the M and A markets over the last several years.

500
00:27:15,920 --> 00:27:18,080
Speaker 1: It strikes me where there is uncertainty is in the

501
00:27:18,119 --> 00:27:20,720
Speaker 1: tax space and in the trade space that we hear

502
00:27:20,760 --> 00:27:23,439
Speaker 1: Washington talking about doing certain things, but retaliation there might

503
00:27:23,480 --> 00:27:26,000
Speaker 1: be as a result of that. How weird are you

504
00:27:26,080 --> 00:27:29,200
Speaker 1: about that effecting cross border deals going forward? I agree

505
00:27:29,240 --> 00:27:31,160
Speaker 1: with you I think I think those are the two

506
00:27:31,400 --> 00:27:35,760
Speaker 1: the two biggest question marks for my business. UM, what

507
00:27:35,840 --> 00:27:38,560
Speaker 1: I would say is, right now, the market hasn't seen

508
00:27:38,640 --> 00:27:43,399
Speaker 1: anything or heard anything, um that is close enough on

509
00:27:43,400 --> 00:27:47,280
Speaker 1: the horizon and definite enough for it to take specific action.

510
00:27:48,040 --> 00:27:50,480
Speaker 1: I do think that if if we get to a

511
00:27:50,560 --> 00:27:53,800
Speaker 1: point later in this year or next year where tax

512
00:27:53,840 --> 00:27:57,639
Speaker 1: reform has firmed up in a way, that it is

513
00:27:57,720 --> 00:28:00,199
Speaker 1: easier to identify what the changes are that are going

514
00:28:00,240 --> 00:28:02,560
Speaker 1: to get made, and it really it starts to be

515
00:28:02,640 --> 00:28:05,120
Speaker 1: close enough that it's in the it's it's right over

516
00:28:05,320 --> 00:28:07,280
Speaker 1: it's right in the near term landscape. It could really

517
00:28:07,960 --> 00:28:10,840
Speaker 1: the business. Very generous of yours, Peter Teg. Thank you

518
00:28:10,880 --> 00:28:13,160
Speaker 1: so much, Sia. We don't do enough of this book

519
00:28:13,240 --> 00:28:16,560
Speaker 1: just to talk about mergers and acquisitions, and I much

520
00:28:16,600 --> 00:28:20,040
Speaker 1: more like the phrase transactions and combinations, which I think

521
00:28:20,080 --> 00:28:23,639
Speaker 1: goes much more to the behavioral aspect, as companies actually

522
00:28:23,640 --> 00:28:25,920
Speaker 1: have to talk to each other to get this done.

523
00:28:25,920 --> 00:28:40,960
Speaker 1: It's not as clinical as amine. Um. It is very

524
00:28:41,000 --> 00:28:44,840
Speaker 1: important to regroup at nine thirty on a Friday, get

525
00:28:44,880 --> 00:28:47,240
Speaker 1: ready for the thinking of the weekend. David Garre one

526
00:28:47,240 --> 00:28:49,520
Speaker 1: of the great moments coming up, not this weekend. Is

527
00:28:49,600 --> 00:28:52,200
Speaker 1: John Tucker the opening of the four oh wind k

528
00:28:52,320 --> 00:28:58,240
Speaker 1: ample to see the agony and had no, well, my

529
00:28:58,240 --> 00:29:01,120
Speaker 1: my four own case a double leveraged all cash fun

530
00:29:01,560 --> 00:29:03,840
Speaker 1: which is fine. But tuckers like, actually in the market,

531
00:29:04,360 --> 00:29:06,520
Speaker 1: we'll see what his agony is, which means it's a

532
00:29:06,520 --> 00:29:09,280
Speaker 1: good time to talk to Julian Emmanuel of UBS on

533
00:29:09,680 --> 00:29:13,400
Speaker 1: the use of synthetics, derivatives and also within the equity market.

534
00:29:13,720 --> 00:29:18,560
Speaker 1: Just as a general rule, Julian, we've heard interview after

535
00:29:18,680 --> 00:29:21,720
Speaker 1: interview over the last five or six years. It's a

536
00:29:21,800 --> 00:29:26,320
Speaker 1: single digit world. Troll Bones trailing, the Dow up eighteen percent,

537
00:29:26,880 --> 00:29:31,760
Speaker 1: the SP five hundred up, the nasdack cop up, Apple

538
00:29:31,840 --> 00:29:35,040
Speaker 1: infected you all that that's not a single digit world,

539
00:29:35,120 --> 00:29:39,000
Speaker 1: is it? No? And the whole concept of markets being

540
00:29:39,400 --> 00:29:41,960
Speaker 1: single digit world. You look at the long run average

541
00:29:42,160 --> 00:29:45,160
Speaker 1: the numbers eight percent or whatever, but gains tend to

542
00:29:45,240 --> 00:29:49,080
Speaker 1: come in clusters. And you know that's why to us,

543
00:29:49,600 --> 00:29:53,040
Speaker 1: despite the fact that we think the market is probably

544
00:29:53,120 --> 00:29:55,880
Speaker 1: not on as a firm aground in the near term

545
00:29:55,920 --> 00:29:58,120
Speaker 1: because of a number of things, you need to stay

546
00:29:58,480 --> 00:30:00,800
Speaker 1: invested here. So I know you don't like to talk

547
00:30:00,840 --> 00:30:03,640
Speaker 1: individual stocks. There's a compliance issue in general council and

548
00:30:04,520 --> 00:30:08,040
Speaker 1: all that. But if I look at a major toothpaste company,

549
00:30:08,280 --> 00:30:12,120
Speaker 1: it's trading at a multiple. If you gross out this year,

550
00:30:12,200 --> 00:30:16,960
Speaker 1: maybe it's a twenty five multiple. Is that nifty fifty? Like?

551
00:30:17,280 --> 00:30:20,040
Speaker 1: Is there a parallel? Even before my ute back to

552
00:30:20,680 --> 00:30:24,320
Speaker 1: the glory of Madmen? Are we living in a madmen valuation?

553
00:30:24,840 --> 00:30:30,000
Speaker 1: Toothpaste is expensive at this point. There are lots of

554
00:30:30,000 --> 00:30:34,040
Speaker 1: of pockets in the market that are at historically high valuations,

555
00:30:34,240 --> 00:30:37,080
Speaker 1: and that is part of our concern in the near term,

556
00:30:37,240 --> 00:30:41,320
Speaker 1: particularly since first quarter gt GDP doesn't look as strong

557
00:30:41,480 --> 00:30:44,160
Speaker 1: as UH perhaps the FED would have wanted. But there's

558
00:30:44,240 --> 00:30:49,240
Speaker 1: also areas financial, healthcare technology that are reasonably value and David,

559
00:30:49,280 --> 00:30:53,960
Speaker 1: it brings up because the nifty fifty valuation came out

560
00:30:54,000 --> 00:30:58,640
Speaker 1: of the Eisenhower deflation and disinflation of the early fifties,

561
00:30:59,000 --> 00:31:01,240
Speaker 1: and there's a little bit. I don't want to overplay

562
00:31:01,280 --> 00:31:04,440
Speaker 1: this because it's a completely different world that it used

563
00:31:04,480 --> 00:31:08,520
Speaker 1: to be, but nevertheless, there's that inflation parallel there. If

564
00:31:08,560 --> 00:31:11,000
Speaker 1: you would what's your outlook for inflation? How much is

565
00:31:11,040 --> 00:31:13,320
Speaker 1: that that weighing on the decisions you're making right now?

566
00:31:14,320 --> 00:31:17,360
Speaker 1: We think ultimately you're going to arrive at the feds

567
00:31:17,400 --> 00:31:20,240
Speaker 1: two percent number. We think there's not going to be

568
00:31:20,280 --> 00:31:23,560
Speaker 1: a ton of volatility in terms of inflation. The Fed

569
00:31:23,640 --> 00:31:26,120
Speaker 1: has said that they're they're going to let it creep

570
00:31:26,200 --> 00:31:31,160
Speaker 1: north of tow south of two uh, etcetera. But you know, ultimately,

571
00:31:31,520 --> 00:31:35,240
Speaker 1: for us, the important thing going forward in in a

572
00:31:35,360 --> 00:31:38,800
Speaker 1: world where you know three percent and above g d

573
00:31:38,920 --> 00:31:42,120
Speaker 1: P is just not the glide path anymore. The FEDS

574
00:31:42,160 --> 00:31:44,680
Speaker 1: telling you the number is too we think it's a

575
00:31:44,760 --> 00:31:47,240
Speaker 1: two point four uh this year and two point five

576
00:31:47,320 --> 00:31:50,000
Speaker 1: next year. You need to stick with companies that can

577
00:31:50,040 --> 00:31:52,800
Speaker 1: grow their earnings in that type of environment. This is becoming,

578
00:31:52,800 --> 00:31:54,360
Speaker 1: i think a theme on the show today Tom the

579
00:31:55,040 --> 00:31:58,800
Speaker 1: new expectations for GDP. Of course we heard the Canada

580
00:31:58,840 --> 00:32:03,840
Speaker 1: Trump saying we can see for everyone reevaluating that. Everybody's

581
00:32:03,880 --> 00:32:07,360
Speaker 1: reevaluating it. But I don't mean to interrupt David, but Julian,

582
00:32:07,480 --> 00:32:10,000
Speaker 1: it's a fan distribution. There's a lot of different opinions

583
00:32:10,520 --> 00:32:13,960
Speaker 1: about what GDP is gonna do. Let's be clear on that, no,

584
00:32:13,960 --> 00:32:16,720
Speaker 1: no question about it. And again, part of the concern

585
00:32:16,840 --> 00:32:20,160
Speaker 1: for us right now is the fact that there's this

586
00:32:20,240 --> 00:32:23,320
Speaker 1: unexplained sort of softness in the consumer in the first quarter,

587
00:32:23,600 --> 00:32:26,040
Speaker 1: and you've seen the wobbles in the credit markets, and

588
00:32:26,080 --> 00:32:29,400
Speaker 1: you've seen oil sell off. Is there more to it

589
00:32:29,600 --> 00:32:32,760
Speaker 1: than meets the eye? The FED hasn't intimated that there is.

590
00:32:32,960 --> 00:32:35,200
Speaker 1: But I think that the economic data over the next

591
00:32:35,240 --> 00:32:37,760
Speaker 1: several weeks is going to be very important to watch.

592
00:32:38,000 --> 00:32:41,000
Speaker 1: You say you see opportunities and financials. Is that based

593
00:32:41,000 --> 00:32:44,360
Speaker 1: on evaluations? Is that based on the prospects for regulatory

594
00:32:44,440 --> 00:32:46,720
Speaker 1: that change? Why is the sector attractive? Table? It's really

595
00:32:46,760 --> 00:32:49,800
Speaker 1: it's really in all of the above, And Tom talked

596
00:32:49,800 --> 00:32:53,880
Speaker 1: about our derivatives background for us, the the four or

597
00:32:53,960 --> 00:32:57,480
Speaker 1: five reasons catalyst for financials what we would call is

598
00:32:57,520 --> 00:33:00,880
Speaker 1: sort of a portfolio of call options. It's interest rates,

599
00:33:00,960 --> 00:33:04,680
Speaker 1: it's deregulation. It is the fact that after ten years

600
00:33:04,760 --> 00:33:08,320
Speaker 1: of inherent entrenched barishness on the part of investors in

601
00:33:08,320 --> 00:33:12,080
Speaker 1: the sector, that's unwinding. And that's a slow process. Um

602
00:33:12,200 --> 00:33:15,160
Speaker 1: And despite the fact that the yield curve has come

603
00:33:15,200 --> 00:33:18,760
Speaker 1: in incrementally over the last several months, you're still at

604
00:33:19,440 --> 00:33:22,200
Speaker 1: at the points on on the curve where banks can

605
00:33:22,240 --> 00:33:25,200
Speaker 1: make plenty of money. Your brief is is domestic, of course,

606
00:33:25,240 --> 00:33:26,840
Speaker 1: but I wonder how you're reacting to what we're seeing

607
00:33:26,880 --> 00:33:28,880
Speaker 1: from credit Sueez, from from Deutsche Bank. We're seeing this

608
00:33:29,000 --> 00:33:31,719
Speaker 1: the delusion from them trying to raise money. What how

609
00:33:31,760 --> 00:33:34,320
Speaker 1: do you how do you process what's happening over in Europe? Well,

610
00:33:34,360 --> 00:33:39,200
Speaker 1: I think you know that kind of activity. What it

611
00:33:39,280 --> 00:33:43,240
Speaker 1: tells you is that, if anything, it's trying to prepare

612
00:33:43,560 --> 00:33:47,400
Speaker 1: for a more competitive environment versus the US banks, because

613
00:33:47,480 --> 00:33:51,280
Speaker 1: in a deregulating Washington, the banks in the US are

614
00:33:51,280 --> 00:33:53,200
Speaker 1: going to be on a firmer footing. So it's it's

615
00:33:53,200 --> 00:33:55,360
Speaker 1: really sort of upping the the arms in the in

616
00:33:55,400 --> 00:33:59,320
Speaker 1: the artillery to compete. We'll talk about the regulation in

617
00:33:59,400 --> 00:34:02,600
Speaker 1: Washington with with the broad brush, and I wonder what

618
00:34:02,680 --> 00:34:05,480
Speaker 1: would make a notional difference to you or to these

619
00:34:05,480 --> 00:34:07,760
Speaker 1: banks rather too, You know, if if we see regulations

620
00:34:07,760 --> 00:34:10,160
Speaker 1: scaled back, what's likely to happen, do you think and

621
00:34:10,200 --> 00:34:12,480
Speaker 1: how much of a difference can that make? We don't

622
00:34:12,520 --> 00:34:15,400
Speaker 1: think there's gonna be what I would call an AHA moment.

623
00:34:15,680 --> 00:34:18,640
Speaker 1: They're not rolling back. Dodd frank In in completed too,

624
00:34:18,640 --> 00:34:21,080
Speaker 1: There's no question about it. But what what would be

625
00:34:21,160 --> 00:34:24,719
Speaker 1: interesting would be to see the stop in the bull

626
00:34:24,760 --> 00:34:30,360
Speaker 1: market of hiring of compliance people. Okay, that's that. That

627
00:34:30,560 --> 00:34:33,600
Speaker 1: has been the major bowl market in the financial business

628
00:34:33,680 --> 00:34:35,839
Speaker 1: for the last six or seven years. When I when

629
00:34:35,880 --> 00:34:39,960
Speaker 1: I look, Julian it what to do and what not

630
00:34:40,120 --> 00:34:43,840
Speaker 1: to do within the blur of investment choices. What's the

631
00:34:43,920 --> 00:34:47,000
Speaker 1: thing you want to avoid right now? With long term

632
00:34:47,040 --> 00:34:52,440
Speaker 1: investment money. You absolutely have to have emotional control here, Tom,

633
00:34:52,600 --> 00:34:55,680
Speaker 1: you will hear stories when the market is running like this,

634
00:34:56,080 --> 00:34:59,480
Speaker 1: your neighbor, the guy down the street, whatever, great stories

635
00:34:59,560 --> 00:35:05,319
Speaker 1: this that stock you at at almost nineteen times two

636
00:35:05,360 --> 00:35:09,520
Speaker 1: thousand seventeen. You have to maintain discipline and control. Is

637
00:35:09,520 --> 00:35:13,440
Speaker 1: the dumbest idea to like, actually right down the valuation

638
00:35:13,520 --> 00:35:16,560
Speaker 1: with the bear market eighteen percent moved down and say

639
00:35:16,680 --> 00:35:19,480
Speaker 1: can I live with that? Because a lot of people

640
00:35:19,520 --> 00:35:21,480
Speaker 1: listening don't even know what a bear market is anymore.

641
00:35:21,880 --> 00:35:23,680
Speaker 1: They don't have they don't have a collective memory to

642
00:35:23,719 --> 00:35:28,760
Speaker 1: recall that. Well, we we're not looking for the bear market, agree,

643
00:35:29,160 --> 00:35:33,239
Speaker 1: but you gotta mentally be framed for it. Absolutely. So

644
00:35:33,280 --> 00:35:35,560
Speaker 1: what we're telling people is we're thinking that there's a

645
00:35:35,560 --> 00:35:37,960
Speaker 1: five to ten percent correction in here. What you have

646
00:35:38,040 --> 00:35:40,680
Speaker 1: to do is look at your portfolio now and say

647
00:35:40,719 --> 00:35:44,800
Speaker 1: to yourself. If we're down ten am I a buyer? Okay?

648
00:35:44,880 --> 00:35:47,799
Speaker 1: And if you're not, you need to get to sort

649
00:35:47,840 --> 00:35:50,840
Speaker 1: of the sleeping point, whether it's raising cash or owning

650
00:35:50,840 --> 00:35:53,640
Speaker 1: some put ups. This is a great conversation, particularly Friday,

651
00:35:54,239 --> 00:35:56,400
Speaker 1: John Tucker. I don't know if John Tucker is listening today,

652
00:35:56,440 --> 00:35:58,880
Speaker 1: but uh, Michael Bart is always good. We used to

653
00:35:58,920 --> 00:36:00,839
Speaker 1: date Mr Tucker. We have the opening of the four

654
00:36:00,880 --> 00:36:05,920
Speaker 1: oh one k on and Mr Tucker always good for entertainment.

655
00:36:06,560 --> 00:36:08,239
Speaker 1: We'll be doing that. I believe it's next week. It

656
00:36:08,280 --> 00:36:12,480
Speaker 1: could be the week following with our good colleague John Tucker,

657
00:36:12,600 --> 00:36:16,120
Speaker 1: Jilian Emmanuel with us of UBS as we close out

658
00:36:16,120 --> 00:36:19,399
Speaker 1: here and get to the weekend, that we can help

659
00:36:19,480 --> 00:36:21,759
Speaker 1: me here were the great debate in the UBS is

660
00:36:21,800 --> 00:36:22,880
Speaker 1: so good at this. I mean, I think of the

661
00:36:22,920 --> 00:36:26,360
Speaker 1: heritage of Jonathan Anderson years ago with UBS and China.

662
00:36:26,800 --> 00:36:30,320
Speaker 1: Help me with the decision I have to make to

663
00:36:30,480 --> 00:36:34,800
Speaker 1: do a domestic vanilla value growth portfolio or in the

664
00:36:34,840 --> 00:36:37,600
Speaker 1: old days, I'm going to dip into the foreign markets

665
00:36:37,640 --> 00:36:40,600
Speaker 1: four or five percent. We don't do that anymore. We

666
00:36:40,640 --> 00:36:44,720
Speaker 1: actually go into the foreign markets. Which is which foreign market?

667
00:36:44,880 --> 00:36:50,560
Speaker 1: Where's the witch of Big Blue chip, foreign stocks, emerging markets, China,

668
00:36:50,760 --> 00:36:53,560
Speaker 1: something esoteric, what's the way to go there? So so

669
00:36:53,760 --> 00:36:57,160
Speaker 1: this is one of these times where after hiding in

670
00:36:57,200 --> 00:37:00,440
Speaker 1: the US for as long as people have, should be

671
00:37:00,480 --> 00:37:04,359
Speaker 1: looking elsewhere. Em in general is sort of recovering. If

672
00:37:04,400 --> 00:37:06,759
Speaker 1: you look at China, you know, given the fact that

673
00:37:06,800 --> 00:37:10,359
Speaker 1: you've got a very important party congress this fall, there's

674
00:37:10,360 --> 00:37:12,320
Speaker 1: an argument to be made that things are going to

675
00:37:12,400 --> 00:37:14,400
Speaker 1: stay on the straight and now they're the numbers have

676
00:37:14,480 --> 00:37:17,560
Speaker 1: been pretty good. And then finally there's Europe. We think

677
00:37:17,600 --> 00:37:20,719
Speaker 1: that the gap in terms of valuation and in terms

678
00:37:20,760 --> 00:37:25,040
Speaker 1: of earnings potential in Europe makes it attractive despite the

679
00:37:25,080 --> 00:37:27,920
Speaker 1: political risk. So you know, that's part of building a

680
00:37:27,960 --> 00:37:32,759
Speaker 1: diversified portfolio, particularly at these valuations in the US. Help

681
00:37:32,840 --> 00:37:34,640
Speaker 1: us with the timing of doing that. We were talking

682
00:37:34,640 --> 00:37:37,879
Speaker 1: earlier just about all the potential changes we could see

683
00:37:37,880 --> 00:37:40,600
Speaker 1: when it comes to trade policy or tax policy. When

684
00:37:40,600 --> 00:37:42,759
Speaker 1: you look internationally, how much does that way on your

685
00:37:42,760 --> 00:37:46,279
Speaker 1: decision making? It definitely doesn't. So you know, instead of

686
00:37:47,760 --> 00:37:51,200
Speaker 1: you take you take an incrementalist approach. You figure out

687
00:37:51,239 --> 00:37:54,239
Speaker 1: where you want to be in terms of your portfolio allocation,

688
00:37:54,480 --> 00:37:57,520
Speaker 1: and uh, you know, whatever that number is and you

689
00:37:57,880 --> 00:38:00,880
Speaker 1: do it in stages um and and when you have

690
00:38:00,960 --> 00:38:03,680
Speaker 1: patients like that, you can really let the market come

691
00:38:03,719 --> 00:38:05,480
Speaker 1: to you. So if we get a little bit more

692
00:38:05,760 --> 00:38:08,680
Speaker 1: volatility in front of the French elections, that's when you

693
00:38:08,719 --> 00:38:10,719
Speaker 1: add to Europe. How much are you paying attention to

694
00:38:10,760 --> 00:38:12,719
Speaker 1: what's going on in Washington today? I talked about tax

695
00:38:12,760 --> 00:38:15,960
Speaker 1: reform and trade policy. Does this portend anything about what's

696
00:38:15,960 --> 00:38:18,160
Speaker 1: going to happen with those two other things? The debate

697
00:38:18,200 --> 00:38:20,080
Speaker 1: over healthcare, the fact that this this vote has been

698
00:38:20,080 --> 00:38:23,600
Speaker 1: postponed here by twelve fifteen hours. We do not put

699
00:38:23,640 --> 00:38:26,439
Speaker 1: a lot of credence in the idea that if this

700
00:38:26,560 --> 00:38:30,040
Speaker 1: vote doesn't go the President's way, the tax reform is dead.

701
00:38:30,440 --> 00:38:32,960
Speaker 1: If you look at the last year or so, the

702
00:38:33,080 --> 00:38:37,960
Speaker 1: resilience of of of Donald Trump, his ideas, his approach,

703
00:38:38,040 --> 00:38:41,560
Speaker 1: what have you. I mean, we've been surprised constantly. He's

704
00:38:41,560 --> 00:38:43,719
Speaker 1: going to push forward with with tax reform. It's going

705
00:38:43,760 --> 00:38:46,200
Speaker 1: to take a while, but there will be a vote

706
00:38:46,200 --> 00:38:48,240
Speaker 1: at some point. When you say that, does you bs

707
00:38:48,360 --> 00:38:52,560
Speaker 1: assume we will see the benefit of corporate tax reform

708
00:38:52,680 --> 00:38:55,359
Speaker 1: that finally gets our corporations to compete with the rest

709
00:38:55,360 --> 00:38:59,160
Speaker 1: of the world. We're talking personal text. Well, we do

710
00:38:59,280 --> 00:39:01,960
Speaker 1: think that ultimately, if there is going to be a

711
00:39:02,040 --> 00:39:05,640
Speaker 1: past bill um, you know, either late this year or

712
00:39:05,640 --> 00:39:08,800
Speaker 1: early next year, there will will be elements of both.

713
00:39:09,040 --> 00:39:12,200
Speaker 1: The politicians are trying to get it all done. So

714
00:39:12,239 --> 00:39:15,120
Speaker 1: it's like a tax reformat to seventies seventy eight kind

715
00:39:15,120 --> 00:39:19,439
Speaker 1: of feel. Yeah, yeah, it does have the Potential's there's

716
00:39:19,440 --> 00:39:23,759
Speaker 1: a Tip O'Neil down there willing to work h Hawk

717
00:39:23,840 --> 00:39:28,400
Speaker 1: and Dove waiting to the problem that that's the problem

718
00:39:28,520 --> 00:39:32,560
Speaker 1: right now. The problem is is that the Republicans are

719
00:39:32,640 --> 00:39:35,879
Speaker 1: not unified enough, let alone reaching across the aisle. It's

720
00:39:35,880 --> 00:39:39,320
Speaker 1: grid luck good for the stock market at this point,

721
00:39:39,320 --> 00:39:41,839
Speaker 1: I would excuse me, that was the best question. Why

722
00:39:41,840 --> 00:39:43,880
Speaker 1: are you making note? That was the best question of

723
00:39:43,880 --> 00:39:47,640
Speaker 1: the week? Continue So so we at this point we

724
00:39:47,680 --> 00:39:51,080
Speaker 1: would say it isn't okay. There are times when it

725
00:39:51,239 --> 00:39:54,440
Speaker 1: has proven and look again up two hundred and fifty

726
00:39:54,520 --> 00:39:57,719
Speaker 1: percent since the lows in two thousand nine, when you

727
00:39:57,800 --> 00:40:01,759
Speaker 1: went through years of essentially gridlock um on a lot

728
00:40:01,800 --> 00:40:06,040
Speaker 1: of big issues. But now at these valuations, at this

729
00:40:06,200 --> 00:40:09,799
Speaker 1: lower growth trajectory, we've got to find new solutions. The

730
00:40:09,840 --> 00:40:12,200
Speaker 1: fine a minute, We've got let's get a little technical here.

731
00:40:12,360 --> 00:40:18,279
Speaker 1: The pros talk about buying volatility, going long volatility. It's

732
00:40:18,280 --> 00:40:21,279
Speaker 1: awfully quiet out there. Do I just assume there's more

733
00:40:21,320 --> 00:40:26,280
Speaker 1: agitation to come? We think there is. It is really

734
00:40:26,640 --> 00:40:30,600
Speaker 1: that this standoff in volatility is basically predicated, and this

735
00:40:30,680 --> 00:40:33,840
Speaker 1: is now four and a half months since the election

736
00:40:34,120 --> 00:40:37,480
Speaker 1: of the vix not trading above fifteen. Very very rare

737
00:40:37,480 --> 00:40:40,200
Speaker 1: in history. But that is because basically, when you look

738
00:40:40,239 --> 00:40:44,240
Speaker 1: at it, the market has been supported by steady, unspectacular,

739
00:40:44,280 --> 00:40:49,520
Speaker 1: but steady public inflows against a professional investment community that

740
00:40:49,960 --> 00:40:53,319
Speaker 1: is waiting to see whether the plans that have been

741
00:40:53,320 --> 00:40:57,600
Speaker 1: put out there and the ideas can actually execute. Yeah. Okay,

742
00:40:57,600 --> 00:41:07,920
Speaker 1: thank you so much, Julian Manuel, greatly appreciative. Thanks for

743
00:41:08,000 --> 00:41:12,440
Speaker 1: listening to the Bloomberg Surveillance Podcast. Subscribe and listen to

744
00:41:12,600 --> 00:41:17,680
Speaker 1: interviews on iTunes, SoundCloud, or whichever podcast platform you prefer.

745
00:41:18,440 --> 00:41:21,319
Speaker 1: I'm out on Twitter at Tom Keene. David Gura is

746
00:41:21,440 --> 00:41:25,200
Speaker 1: at David Gura. Before the podcast, you can always catch

747
00:41:25,280 --> 00:41:41,360
Speaker 1: us worldwide. I'm Bloomberg Radio, brought you by Bank of

748
00:41:41,360 --> 00:41:45,400
Speaker 1: America Mary Lynch, dedicated to bringing our clients insights and

749
00:41:45,480 --> 00:41:49,640
Speaker 1: solutions to meet the challenges of a transforming world. That's

750
00:41:49,680 --> 00:41:53,279
Speaker 1: the power of global connections. Mary Lynch, Pierce, Feeder and

751
00:41:53,360 --> 00:41:56,719
Speaker 1: Smith Incorporated, Member s I p C