1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:33,440 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. He 7 00:00:33,600 --> 00:00:39,120 Speaker 1: writes in the recent Insights from TCW that failing to 8 00:00:39,280 --> 00:00:43,480 Speaker 1: prepare is preparing to fail. Tad Ravel is the chief 9 00:00:43,520 --> 00:00:47,560 Speaker 1: investment Officer for fixed income for TCW, helping to manage 10 00:00:47,560 --> 00:00:51,000 Speaker 1: more than a hundred and eighty billion dollars based in 11 00:00:51,040 --> 00:00:54,000 Speaker 1: Los Angeles. Tad Ravel, thank you very much for spending 12 00:00:54,040 --> 00:00:56,040 Speaker 1: time with us. What do you mean by this that 13 00:00:56,160 --> 00:01:00,880 Speaker 1: failing to prepare is preparing to fail. Well, what we're 14 00:01:00,880 --> 00:01:04,520 Speaker 1: speaking to is that there is an asset price cycle. 15 00:01:04,560 --> 00:01:07,160 Speaker 1: There is a credit cycle. Unless this is the first 16 00:01:07,240 --> 00:01:09,800 Speaker 1: one that isn't actually going to be a cycle. We 17 00:01:09,800 --> 00:01:15,319 Speaker 1: should expect that the relatively placid environment of the last 18 00:01:15,440 --> 00:01:18,640 Speaker 1: seven or eight years is ultimately going to have its 19 00:01:18,680 --> 00:01:22,720 Speaker 1: come up in and that it's imperative that investors understand 20 00:01:22,800 --> 00:01:28,240 Speaker 1: that strategies that focused on risk taking and yield emphasis 21 00:01:28,600 --> 00:01:31,920 Speaker 1: will probably have very disappointing results if in fact we 22 00:01:31,959 --> 00:01:34,600 Speaker 1: are in the late stages of the asset price cycle, 23 00:01:34,959 --> 00:01:38,600 Speaker 1: which we do view ourselves as being. So how do 24 00:01:38,680 --> 00:01:42,840 Speaker 1: you respond to people that point to the sort of 25 00:01:42,959 --> 00:01:45,200 Speaker 1: I guess you would call it the disintegration of a 26 00:01:45,280 --> 00:01:51,520 Speaker 1: connection between asset prices and growth in GDP. Right, Well, 27 00:01:51,600 --> 00:01:55,800 Speaker 1: you know that is probably the most consequential place that 28 00:01:55,880 --> 00:01:58,440 Speaker 1: people ought to be looking in terms of understanding where 29 00:01:58,480 --> 00:02:00,560 Speaker 1: you are in the cycle. As we would put it, 30 00:02:01,000 --> 00:02:04,440 Speaker 1: the disconnect that what you alluded to, the disconnect in 31 00:02:04,480 --> 00:02:09,200 Speaker 1: which asset prices are so robust against the backdrop where 32 00:02:09,200 --> 00:02:12,040 Speaker 1: GDP has been growing at very muted rates for a 33 00:02:12,160 --> 00:02:14,720 Speaker 1: very long period of time, suggests that there is in 34 00:02:14,800 --> 00:02:18,880 Speaker 1: fact that disconnect, as you say, between asset prices and income. 35 00:02:19,240 --> 00:02:24,840 Speaker 1: If you disaggregate asset prices into their constituent pieces, obviously 36 00:02:24,880 --> 00:02:28,880 Speaker 1: what you have is equities, real estate, bonds, et cetera. 37 00:02:29,240 --> 00:02:32,400 Speaker 1: And when you have this large disparity between asset prices 38 00:02:32,400 --> 00:02:35,320 Speaker 1: and GDP, which you're really saying is that one or 39 00:02:35,400 --> 00:02:39,360 Speaker 1: all of the following are true. Pe ratios are being stretched. 40 00:02:39,760 --> 00:02:43,000 Speaker 1: Cap rates in real estate are very low, or bond 41 00:02:43,200 --> 00:02:47,040 Speaker 1: yields and bond spreads are also quite quite compressed. What 42 00:02:47,160 --> 00:02:49,600 Speaker 1: it also means, of course, and just thinking about it 43 00:02:49,800 --> 00:02:53,200 Speaker 1: in an equity formulation, if asset prices are high, if 44 00:02:53,320 --> 00:02:57,760 Speaker 1: asset multiples are or pe multiples are high, ordinarily as 45 00:02:57,880 --> 00:03:01,679 Speaker 1: enterprise multiples left, so do debt multiples. If debt multiples 46 00:03:01,680 --> 00:03:04,040 Speaker 1: are lifting at the same time that income and GDP 47 00:03:04,200 --> 00:03:06,000 Speaker 1: is muted, sooner or later, you're going to have a 48 00:03:06,000 --> 00:03:10,000 Speaker 1: debt servicing problem. Well, then speak about this debt servicing 49 00:03:10,040 --> 00:03:15,400 Speaker 1: problem in the context of low discount rates that were 50 00:03:16,120 --> 00:03:19,240 Speaker 1: available at one time but may not be available in 51 00:03:19,280 --> 00:03:23,440 Speaker 1: the future. Right so to to a very great degree, 52 00:03:23,680 --> 00:03:27,359 Speaker 1: maybe this also speaks to another kind of disconnect I'll 53 00:03:27,400 --> 00:03:30,640 Speaker 1: call it the central bankers disconnect. Is that traditionally you 54 00:03:30,680 --> 00:03:33,960 Speaker 1: think of capitalism this way that when your labor and 55 00:03:34,040 --> 00:03:37,840 Speaker 1: capital are efficiently configured in your economy, your profits are 56 00:03:37,880 --> 00:03:39,920 Speaker 1: going to be growing, your wages are going to be growing, 57 00:03:39,920 --> 00:03:42,560 Speaker 1: your GDP is going to be growing. That's just another 58 00:03:42,600 --> 00:03:47,160 Speaker 1: way of saying that prosperity should naturally lift asset prices. Instead. 59 00:03:47,200 --> 00:03:49,400 Speaker 1: What the central banks in effect have done over the 60 00:03:49,440 --> 00:03:52,560 Speaker 1: course of this cycle is they short circuited the process. 61 00:03:52,600 --> 00:03:56,760 Speaker 1: They forced rates lower through quantitative easing, through zero rates, 62 00:03:56,840 --> 00:03:59,440 Speaker 1: negative rates in Europe and so forth, and by driving 63 00:03:59,440 --> 00:04:03,280 Speaker 1: the discount rates down. Uh, the result has been a 64 00:04:03,760 --> 00:04:08,080 Speaker 1: surge in asset prices. But the surgeon asset prices. It's 65 00:04:08,120 --> 00:04:11,520 Speaker 1: not the case that high asset prices create the prosperity. 66 00:04:11,560 --> 00:04:15,880 Speaker 1: The causation is completely reversed. And so now we believe 67 00:04:15,920 --> 00:04:19,080 Speaker 1: you're in a late cycle type of environment, and ultimately 68 00:04:19,240 --> 00:04:22,839 Speaker 1: you're going to have to resolve this disparity, this wedge 69 00:04:22,880 --> 00:04:26,640 Speaker 1: between high asset prices and low GDP growth against the 70 00:04:26,680 --> 00:04:31,479 Speaker 1: backdrop of substantially expanded leverage in the system that was 71 00:04:31,520 --> 00:04:35,480 Speaker 1: incentivized by these low discount rates that you allude to. Well, 72 00:04:35,640 --> 00:04:39,760 Speaker 1: does resolving this disparity? Is that a diplomatic way of 73 00:04:39,800 --> 00:04:45,280 Speaker 1: saying that we are headed for some real problems? Yes, 74 00:04:46,800 --> 00:04:49,440 Speaker 1: I guess you said it much more directly that there's 75 00:04:49,480 --> 00:04:52,960 Speaker 1: only one of two possibilities, as as the Great Lord 76 00:04:53,080 --> 00:04:57,480 Speaker 1: Kine's put it, Uh, if a trend is unsustainable, then 77 00:04:57,520 --> 00:05:00,920 Speaker 1: at some point it will stop. This idea asset prices 78 00:05:00,960 --> 00:05:05,039 Speaker 1: can permanently disconnect and continue it um or work in 79 00:05:05,080 --> 00:05:09,039 Speaker 1: a in a dynamic that's completely disconnected from the income economy, 80 00:05:09,080 --> 00:05:12,760 Speaker 1: the wealth economy. That is what I'm referencing. It's it's absurd. 81 00:05:12,880 --> 00:05:16,040 Speaker 1: So either we're going to get just a massive surge 82 00:05:16,080 --> 00:05:20,200 Speaker 1: in GDP growth going forward to validate and justify the 83 00:05:20,240 --> 00:05:24,720 Speaker 1: increase in asset prices, or in most most probably you're 84 00:05:24,760 --> 00:05:28,240 Speaker 1: going to have to see a reduction in asset prices 85 00:05:28,279 --> 00:05:32,720 Speaker 1: to uh correspond back to the GDP. And the mechanism 86 00:05:32,839 --> 00:05:36,720 Speaker 1: by which you get there is probably already being laid 87 00:05:36,720 --> 00:05:39,360 Speaker 1: out in front of us. It's the FED tightening, it's 88 00:05:39,360 --> 00:05:42,680 Speaker 1: the quantitative tightening as well as the actual rise in 89 00:05:42,720 --> 00:05:46,040 Speaker 1: the overnight rate. So does that mean that tad Rivella 90 00:05:46,120 --> 00:05:49,120 Speaker 1: is talking himself into a job of managing cash for 91 00:05:49,160 --> 00:05:56,280 Speaker 1: a while? Well, that that's probably an unnecessary, um uh 92 00:05:56,720 --> 00:06:00,800 Speaker 1: extreme step, although maintaining a proper level of liquidity is 93 00:06:00,800 --> 00:06:03,039 Speaker 1: probably always a smart thing to do. But in a 94 00:06:03,120 --> 00:06:05,640 Speaker 1: late cycle environment, what it really means is that you're 95 00:06:05,640 --> 00:06:09,599 Speaker 1: supposed to recall what Benjamin Graham said a long time 96 00:06:09,640 --> 00:06:12,919 Speaker 1: ago that bond selecting is a negative art. Uh. It 97 00:06:13,000 --> 00:06:15,159 Speaker 1: may not be a negative art in the early and 98 00:06:15,240 --> 00:06:18,600 Speaker 1: mid stages of the cycle, when leverage is increasing and 99 00:06:18,680 --> 00:06:21,480 Speaker 1: almost everything that you do. UM, everything that you do 100 00:06:21,560 --> 00:06:24,200 Speaker 1: from a risk seeking point of view tends to do 101 00:06:24,320 --> 00:06:27,000 Speaker 1: rather well in the late stages of the cycle. You 102 00:06:27,080 --> 00:06:30,920 Speaker 1: have to be very careful about not selecting assets that 103 00:06:31,000 --> 00:06:33,440 Speaker 1: we would deem breakable in the sense that they're going 104 00:06:33,520 --> 00:06:36,800 Speaker 1: to give you a permanent impairment of principle. And so 105 00:06:36,880 --> 00:06:40,400 Speaker 1: that means that when you survey your allocations to things 106 00:06:40,520 --> 00:06:43,039 Speaker 1: like high yield and in some of the more leveraged 107 00:06:43,040 --> 00:06:45,880 Speaker 1: area of the corporate market, is be careful. There are 108 00:06:45,920 --> 00:06:50,400 Speaker 1: ways to continue to capture yield premium even in a 109 00:06:50,400 --> 00:06:53,840 Speaker 1: asset price come up and bear market. In in in 110 00:06:54,040 --> 00:06:56,479 Speaker 1: risk there are plenty of things that work out, but 111 00:06:56,520 --> 00:06:59,360 Speaker 1: there's a lot of things that may be very disappointing 112 00:06:59,640 --> 00:07:02,920 Speaker 1: in terms of where where they end up. Where do 113 00:07:02,960 --> 00:07:06,640 Speaker 1: you believe you'd see the first indications of these problems. 114 00:07:06,680 --> 00:07:08,880 Speaker 1: Would it be and let's say the leverage loan market, 115 00:07:08,920 --> 00:07:13,080 Speaker 1: would it be in high yield debt? Well, the places 116 00:07:13,120 --> 00:07:16,960 Speaker 1: that are probably most vulnerable UM would be in the 117 00:07:17,040 --> 00:07:19,720 Speaker 1: part of the high yield market, particularly that part of 118 00:07:19,760 --> 00:07:24,160 Speaker 1: the market that has been so overgrown with covenant light 119 00:07:24,200 --> 00:07:27,520 Speaker 1: debt issuance. And although covenant light sounds like a sort 120 00:07:27,560 --> 00:07:30,760 Speaker 1: of a technical, almost obscure term. What it really comes 121 00:07:30,800 --> 00:07:34,240 Speaker 1: down to is we're always supposed to remember that a 122 00:07:34,280 --> 00:07:38,400 Speaker 1: corporate management has a fiducial obligation to its shareholders, but 123 00:07:38,480 --> 00:07:42,040 Speaker 1: a contractual one to its bondholders. So what that means 124 00:07:42,120 --> 00:07:46,760 Speaker 1: is that a business can have uh good potential as 125 00:07:46,800 --> 00:07:51,080 Speaker 1: a business, but without a properly constructed set of covenants 126 00:07:51,120 --> 00:07:55,520 Speaker 1: for the bondholder, it's also possible for management to essentially 127 00:07:55,840 --> 00:08:00,920 Speaker 1: uh spin those assets off the shareholders, pay sell assets, 128 00:08:00,920 --> 00:08:04,640 Speaker 1: and pay special dividends, and essentially leave the bond holder 129 00:08:04,840 --> 00:08:08,320 Speaker 1: holding the bag. So the fact that covenant light issuance 130 00:08:08,520 --> 00:08:11,680 Speaker 1: is essentially off the charts, it's much greater than we've 131 00:08:11,680 --> 00:08:15,800 Speaker 1: ever ever seen it. It's a very um imprudent form 132 00:08:16,000 --> 00:08:19,200 Speaker 1: of lending. So you should expect that when the Fed 133 00:08:19,320 --> 00:08:22,400 Speaker 1: raises rates, it also strengthens the dollar and you start 134 00:08:22,440 --> 00:08:25,120 Speaker 1: to see cracks develop in parts of the emerging market. 135 00:08:25,360 --> 00:08:28,000 Speaker 1: We've seen that just in the last week with Argentina 136 00:08:28,400 --> 00:08:31,560 Speaker 1: and to a slightly lesser degree, Turkey and maybe Indonesia 137 00:08:31,600 --> 00:08:34,760 Speaker 1: as well. Thank you very much, tad Rivell joining us 138 00:08:34,800 --> 00:08:38,040 Speaker 1: as the Chief Investment Officer for fixed Income at the 139 00:08:38,120 --> 00:08:41,160 Speaker 1: tc W group helping to manage more than a hundred 140 00:08:41,200 --> 00:08:59,040 Speaker 1: and eighty billion dollars global value. What is a global 141 00:08:59,320 --> 00:09:02,800 Speaker 1: value investing perspective? Here to help us understand this is 142 00:09:02,840 --> 00:09:07,040 Speaker 1: Thomas Russo, managing member of a gardener Russo and Gardener, 143 00:09:07,160 --> 00:09:10,800 Speaker 1: helping to manage more than ten billion dollars of customer assets. 144 00:09:10,840 --> 00:09:13,760 Speaker 1: Based in Lancaster, Pennsylvania. He joins us here in our 145 00:09:13,800 --> 00:09:16,520 Speaker 1: eleven three oh studios. Tom, it is a pleasure to 146 00:09:16,559 --> 00:09:18,640 Speaker 1: see you. Thank you very much for coming in. I 147 00:09:18,679 --> 00:09:21,600 Speaker 1: want to jump right into it and specifically start about 148 00:09:22,000 --> 00:09:26,520 Speaker 1: talking about tobacco stocks. Because tobacco stocks, let's leave aside 149 00:09:26,559 --> 00:09:31,080 Speaker 1: for the moment. Uh, they're the products in terms of 150 00:09:31,360 --> 00:09:36,080 Speaker 1: whether you are for or again smoking and the health concerns. 151 00:09:36,440 --> 00:09:38,959 Speaker 1: Many people have invested in these stocks because they have 152 00:09:39,080 --> 00:09:44,160 Speaker 1: looked forward to what are many consider rich dividends. Yes, 153 00:09:44,480 --> 00:09:47,280 Speaker 1: do you believe that that's still a valid thesis? Well, 154 00:09:47,320 --> 00:09:50,080 Speaker 1: it certainly has been over the past four or five 155 00:09:50,160 --> 00:09:53,040 Speaker 1: or six years as rates short end and the curve 156 00:09:53,080 --> 00:09:55,760 Speaker 1: have been so low, and so people have sort of 157 00:09:55,800 --> 00:09:59,000 Speaker 1: been pushed into equities and search for yield, and they've 158 00:09:59,000 --> 00:10:02,480 Speaker 1: had the highest the highest levels of yield. Um. Uh, 159 00:10:02,480 --> 00:10:05,280 Speaker 1: and it's in large measure because up until recently they've 160 00:10:05,640 --> 00:10:08,160 Speaker 1: they've lacked the ability to reinvest a lot of money 161 00:10:08,200 --> 00:10:12,320 Speaker 1: in the business. UM historically, um UH, and and the 162 00:10:12,360 --> 00:10:16,800 Speaker 1: dividend yields five percent plus for um Fillmore's International and 163 00:10:17,040 --> 00:10:19,840 Speaker 1: roughly the same for all three have attractive capital historically. 164 00:10:20,440 --> 00:10:22,680 Speaker 1: So do you think that they are still attractive for 165 00:10:22,760 --> 00:10:25,760 Speaker 1: people looking for dividends? No, I think the I think 166 00:10:25,800 --> 00:10:29,200 Speaker 1: the search for yield actually has has already sort of 167 00:10:29,240 --> 00:10:33,480 Speaker 1: begun to reverse because the two year treasury yields close 168 00:10:33,520 --> 00:10:36,480 Speaker 1: to two point seven percent today, and that's fully more 169 00:10:36,520 --> 00:10:39,040 Speaker 1: than many public companies have as as their dividends, and 170 00:10:39,080 --> 00:10:42,680 Speaker 1: so it's adequate. It's adequate to keep people away from equities. 171 00:10:42,679 --> 00:10:45,240 Speaker 1: They don't have to chase after equities just to get yield. 172 00:10:45,240 --> 00:10:49,400 Speaker 1: Two point whatever it is is close enough. The issues 173 00:10:49,480 --> 00:10:53,320 Speaker 1: with them, the three areas that you site tobacco and 174 00:10:53,679 --> 00:10:58,400 Speaker 1: beer and and UH and banking, is that, interestingly all 175 00:10:58,520 --> 00:11:02,600 Speaker 1: three of them stumble and and struggle today because they're 176 00:11:02,600 --> 00:11:06,360 Speaker 1: going through a remarkable period of transition. Those are traditional 177 00:11:06,400 --> 00:11:08,960 Speaker 1: old businesses. You can't imagine anything quite as long standing 178 00:11:08,960 --> 00:11:13,080 Speaker 1: as tobacco, banking, and and UH and beer. Um, But 179 00:11:13,200 --> 00:11:15,560 Speaker 1: each of the business is that we're involved with there 180 00:11:15,640 --> 00:11:19,680 Speaker 1: have new elements that make the future seem more cloudy 181 00:11:19,720 --> 00:11:23,839 Speaker 1: than than the past. Okay, but just final question on 182 00:11:23,960 --> 00:11:25,720 Speaker 1: tobacco stocks and then what we can go on and 183 00:11:25,800 --> 00:11:30,760 Speaker 1: talk about a by shares of Philip Mooreton International are 184 00:11:30,800 --> 00:11:34,000 Speaker 1: down by more than a fifth. Yes, so far this year, 185 00:11:34,280 --> 00:11:36,880 Speaker 1: as you say, they currently pay a five percent did 186 00:11:37,160 --> 00:11:40,400 Speaker 1: end um? Is this a stock in your opinion whose 187 00:11:40,440 --> 00:11:44,319 Speaker 1: time has come and gone. No, No, it's a position 188 00:11:44,960 --> 00:11:49,160 Speaker 1: still in my portfolios. Um, it's a it's a stock 189 00:11:49,240 --> 00:11:52,600 Speaker 1: which evidence is the expression at this moment that no 190 00:11:52,679 --> 00:11:56,440 Speaker 1: good deed in life goes unpunished. It's Philip Morris says 191 00:11:56,520 --> 00:11:59,920 Speaker 1: alone in the industry, over the past five years, directed 192 00:12:00,160 --> 00:12:04,080 Speaker 1: over two and a half billion dollars of shareholder money 193 00:12:04,120 --> 00:12:09,720 Speaker 1: to develop a reduced risk product, a cigarette substitute that 194 00:12:09,880 --> 00:12:14,600 Speaker 1: satisfies adult consumers who wish to quit, which are effectively 195 00:12:14,679 --> 00:12:17,720 Speaker 1: half the community of smokers in the world over, probably 196 00:12:17,760 --> 00:12:21,080 Speaker 1: a hundred and fifty million people would love to quit, 197 00:12:21,480 --> 00:12:24,160 Speaker 1: and yet they haven't had something they worked. Philip Morris, 198 00:12:24,240 --> 00:12:27,400 Speaker 1: after having spent invested two and a half billion dollars, 199 00:12:27,840 --> 00:12:30,400 Speaker 1: has a product that works, and in fact, in Japan 200 00:12:30,520 --> 00:12:32,960 Speaker 1: and other markets where it's rolled out, they now have 201 00:12:33,000 --> 00:12:38,240 Speaker 1: close to market share themselves. Uh. In In this in 202 00:12:38,400 --> 00:12:42,840 Speaker 1: what was the tobacco industry is now split with combustible 203 00:12:42,840 --> 00:12:45,720 Speaker 1: cigarettes and the product that Philip Morris invented called the icos, 204 00:12:45,760 --> 00:12:50,280 Speaker 1: which is a non combustible cigarette, and everything's moving along 205 00:12:50,400 --> 00:12:53,520 Speaker 1: swell up until a couple of weeks ago they had 206 00:12:53,520 --> 00:12:56,600 Speaker 1: a stumble in the in the rollout of of a 207 00:12:56,640 --> 00:13:00,960 Speaker 1: new device that's attached to this product, and that caused 208 00:13:01,000 --> 00:13:04,800 Speaker 1: some investor concerned. There was a slowdown in the cigarettes 209 00:13:04,880 --> 00:13:08,240 Speaker 1: that go with that product, and the market became a 210 00:13:08,240 --> 00:13:11,720 Speaker 1: bit uh disenchanted with the near term prospers. The long 211 00:13:11,840 --> 00:13:15,480 Speaker 1: term process of completely unaffected by this UM as far 212 00:13:15,520 --> 00:13:17,480 Speaker 1: as I can tell. And then on top of it, 213 00:13:17,480 --> 00:13:22,400 Speaker 1: it's it's a regulatory thing. The US FDA has resisted 214 00:13:22,720 --> 00:13:27,640 Speaker 1: allowing this product into the market, despite the fact that 215 00:13:27,760 --> 00:13:30,800 Speaker 1: it has helped nearly six million smokers around the world 216 00:13:30,840 --> 00:13:35,080 Speaker 1: in the last two years alone quit forever cigarettes and 217 00:13:35,160 --> 00:13:39,040 Speaker 1: so UM we believe that that relief from the FDA 218 00:13:39,200 --> 00:13:42,880 Speaker 1: will have to come because the product being adopted by 219 00:13:43,160 --> 00:13:46,320 Speaker 1: millions of people overseas, leaves of the US seeming a 220 00:13:46,320 --> 00:13:49,360 Speaker 1: bit of isolationists as it relates to a product that 221 00:13:49,360 --> 00:13:53,000 Speaker 1: has effectively helped people for the first time ever quit Now, 222 00:13:53,040 --> 00:13:55,640 Speaker 1: that's one thing then, and I think at five five 223 00:13:55,679 --> 00:13:59,199 Speaker 1: percent yields at thirteen times that income in this marketplace. 224 00:13:59,600 --> 00:14:03,679 Speaker 1: The investments are in Altria in Philip Morris are quite 225 00:14:03,679 --> 00:14:06,280 Speaker 1: reasonably priced, especially as I do believe that the product 226 00:14:06,360 --> 00:14:08,920 Speaker 1: that both of them will share and we'll finally get 227 00:14:09,160 --> 00:14:12,200 Speaker 1: approved by the U s f D. A. Thank you 228 00:14:12,320 --> 00:14:14,199 Speaker 1: very much, Tom Russo. I look forward to having you 229 00:14:14,240 --> 00:14:16,000 Speaker 1: in the future. You got to talk more about your 230 00:14:16,280 --> 00:14:19,720 Speaker 1: value strategy and get your insight into what's going on 231 00:14:19,760 --> 00:14:22,080 Speaker 1: in the beer industry because, as you say, going through 232 00:14:22,440 --> 00:14:25,520 Speaker 1: lots of changes. Tom Russo is managing member of Gardner 233 00:14:25,600 --> 00:14:28,520 Speaker 1: Russo and Gardner, helping to manage more than ten billion 234 00:14:28,560 --> 00:14:32,960 Speaker 1: dollars based in Lancaster, Pennsylvania, joining us here in our 235 00:14:33,120 --> 00:14:51,680 Speaker 1: eleven three oh studios. Well, if you've been scouring the 236 00:14:51,840 --> 00:14:55,960 Speaker 1: quarterly reports of companies such as Netflix, Microsoft, or Google's 237 00:14:56,000 --> 00:14:59,320 Speaker 1: Alphabet or even Oracle looking for how much cash they 238 00:14:59,360 --> 00:15:03,400 Speaker 1: have held overseas, good luck you won't find it. Brandon 239 00:15:03,520 --> 00:15:06,720 Speaker 1: Couch Codin is a managing editor for Bloomberg News, and 240 00:15:06,800 --> 00:15:10,720 Speaker 1: he joins us now to explain why, all right, Brandon, 241 00:15:10,920 --> 00:15:16,360 Speaker 1: why aren't companies reporting how much money they have held overseas? Yeah, 242 00:15:16,360 --> 00:15:18,800 Speaker 1: I mean, the simple answer is they don't have to. Um. 243 00:15:19,120 --> 00:15:22,920 Speaker 1: The the more complicated one is basically, um, with the 244 00:15:22,960 --> 00:15:26,520 Speaker 1: tax law changes, Um, every company how to pay these 245 00:15:26,560 --> 00:15:29,360 Speaker 1: this mandatorily? How to pay this tax? Already they can 246 00:15:29,360 --> 00:15:31,000 Speaker 1: space it out over eight years, but they have to 247 00:15:31,000 --> 00:15:33,880 Speaker 1: pay this tax on their fore and holdings. So cash 248 00:15:33,960 --> 00:15:36,720 Speaker 1: anywhere in the world is basically fungible. Now. Yeah, but 249 00:15:36,800 --> 00:15:39,600 Speaker 1: why wouldn't they want to report that they had, let's say, 250 00:15:39,600 --> 00:15:42,160 Speaker 1: brought the money back to the United States, if indeed 251 00:15:42,160 --> 00:15:45,880 Speaker 1: they did so. And that's the question that tax experts 252 00:15:45,880 --> 00:15:49,400 Speaker 1: we talked to are asking. Um, they're looking for, you know, 253 00:15:50,000 --> 00:15:52,040 Speaker 1: changes in disclosure right now because they haven't gotten a 254 00:15:52,040 --> 00:15:54,280 Speaker 1: lot of guidance from the I R S. All Right, 255 00:15:54,400 --> 00:15:57,360 Speaker 1: So if the company doesn't bring back the cash from 256 00:15:57,400 --> 00:16:00,360 Speaker 1: the United States, there's no way to know this now, 257 00:16:01,320 --> 00:16:03,360 Speaker 1: at least not from their quarterly reports. We might see it, 258 00:16:03,520 --> 00:16:06,160 Speaker 1: um through other filings, some of them are actually disclosing. 259 00:16:06,200 --> 00:16:08,040 Speaker 1: I mean, we have an example in there from Google 260 00:16:08,080 --> 00:16:11,560 Speaker 1: I believe that they told us how much UM tax 261 00:16:11,600 --> 00:16:13,520 Speaker 1: they paid, so from there you can kind of back 262 00:16:13,640 --> 00:16:15,440 Speaker 1: end it and get a sense of how much they 263 00:16:15,440 --> 00:16:17,920 Speaker 1: brought back. But it's up to them, I mean, otherwise 264 00:16:17,960 --> 00:16:20,320 Speaker 1: we're not going to know. And what about other companies. 265 00:16:20,360 --> 00:16:25,440 Speaker 1: I mean I mentioned Microsoft, Netflix, Alphabet the parent company 266 00:16:25,440 --> 00:16:28,160 Speaker 1: of Google, as well as Oracle and Apple. They don't 267 00:16:28,520 --> 00:16:31,200 Speaker 1: report this and in some cases I should just mention 268 00:16:31,280 --> 00:16:35,160 Speaker 1: that it isn't something that's just happened, correct exactly. So 269 00:16:35,240 --> 00:16:39,040 Speaker 1: Apple stopped last year at the end of their I 270 00:16:39,040 --> 00:16:41,400 Speaker 1: guess their fiscal first quarter whatever whatever it was. They're 271 00:16:41,480 --> 00:16:44,520 Speaker 1: back in October UM and then you know, the same thing. 272 00:16:44,520 --> 00:16:47,560 Speaker 1: I think Cisco stopped a little bit earlier. Otherwise we're 273 00:16:47,600 --> 00:16:49,840 Speaker 1: seeing them stop at this first quarter recording after tax 274 00:16:49,920 --> 00:16:52,840 Speaker 1: law went into effect. And what about other companies? Are 275 00:16:52,920 --> 00:16:55,760 Speaker 1: other companies like Coca Cola, for example, are they still 276 00:16:55,800 --> 00:16:58,600 Speaker 1: reporting how much money they have? That's that's sort of 277 00:16:58,600 --> 00:17:01,040 Speaker 1: the interesting part to us right now is seeing who's 278 00:17:01,040 --> 00:17:03,760 Speaker 1: reporting and who is and so Coke and Pepsi both are, 279 00:17:04,040 --> 00:17:08,439 Speaker 1: g Caterpillar both are um. Facebook is some of the 280 00:17:08,480 --> 00:17:10,800 Speaker 1: interesting things to get to see now is someone like 281 00:17:10,880 --> 00:17:13,479 Speaker 1: Facebook there you actually have more cash overseas now than 282 00:17:13,520 --> 00:17:17,439 Speaker 1: they did before, so it's not quite having the effect 283 00:17:17,480 --> 00:17:20,000 Speaker 1: we thought it would. The question is whether how much 284 00:17:20,040 --> 00:17:22,560 Speaker 1: it is just how much it matters now the new 285 00:17:22,680 --> 00:17:24,760 Speaker 1: rule is at a one time rate of what like 286 00:17:24,840 --> 00:17:27,920 Speaker 1: fifteen and a half percent for the cash and eight 287 00:17:28,040 --> 00:17:32,640 Speaker 1: percent for non cash or illiquid assets exactly, And and 288 00:17:32,680 --> 00:17:36,199 Speaker 1: they have that's on what they were holding. Um. They 289 00:17:36,240 --> 00:17:38,080 Speaker 1: have eight years to pay that, though they can space 290 00:17:38,119 --> 00:17:41,280 Speaker 1: it out, so there's sort of that um opacity right 291 00:17:41,280 --> 00:17:43,200 Speaker 1: now in terms of when they're paying it. And that's 292 00:17:43,359 --> 00:17:44,960 Speaker 1: something we're all gonna care about because it's going to 293 00:17:45,000 --> 00:17:49,120 Speaker 1: have an impact. So this would then make the actual 294 00:17:49,480 --> 00:17:52,840 Speaker 1: cash amount that is listed in the quarterly report a 295 00:17:53,000 --> 00:17:57,120 Speaker 1: total obviously for the entire company, and it would be 296 00:17:57,160 --> 00:18:01,960 Speaker 1: treated the same as if it was in the United States. Yeah, exactly, 297 00:18:02,000 --> 00:18:04,120 Speaker 1: So what they held overseas, that's what's going to get 298 00:18:04,119 --> 00:18:07,160 Speaker 1: taxed at those rates for this one time sort of 299 00:18:07,280 --> 00:18:11,880 Speaker 1: um you know, repatriation holiday, we want to call it that, um. Otherwise, 300 00:18:11,920 --> 00:18:14,840 Speaker 1: now it's all being treated the same. The questions are 301 00:18:14,880 --> 00:18:17,760 Speaker 1: becoming now, um around if if we're going to see, 302 00:18:17,800 --> 00:18:19,760 Speaker 1: you know, what the global minimum rates going to be 303 00:18:19,800 --> 00:18:23,680 Speaker 1: and if this is a permanent situation, or if companies 304 00:18:23,680 --> 00:18:26,480 Speaker 1: are keeping it overseas just in case something changes, and 305 00:18:26,480 --> 00:18:28,360 Speaker 1: and that there might be an advantage down the road 306 00:18:28,440 --> 00:18:30,880 Speaker 1: because previously they had to pay what a thirty five 307 00:18:30,920 --> 00:18:33,040 Speaker 1: percent tax if they wanted to bring the money back 308 00:18:33,040 --> 00:18:35,480 Speaker 1: into the United exactly. And so that was always the 309 00:18:35,520 --> 00:18:39,679 Speaker 1: rationale for why I was saying, quote locked overseas um 310 00:18:39,720 --> 00:18:42,160 Speaker 1: you know, like we see we see it in the article. 311 00:18:42,200 --> 00:18:44,600 Speaker 1: We have tax experts that are that are saying, you know, look, 312 00:18:44,640 --> 00:18:46,640 Speaker 1: we tried this before in two thousand four. We didn't 313 00:18:46,640 --> 00:18:49,320 Speaker 1: see a ton come back. You know, we're doing it now, 314 00:18:49,840 --> 00:18:52,440 Speaker 1: expected to be sort of tactical, and don't expect this 315 00:18:52,520 --> 00:18:54,479 Speaker 1: all to all of a sudden, you know, come on 316 00:18:54,560 --> 00:18:57,960 Speaker 1: to us accounts. And one of the reasons why investors 317 00:18:57,960 --> 00:19:01,439 Speaker 1: would look at the cash position of a company is 318 00:19:01,520 --> 00:19:05,200 Speaker 1: that when you do a total valuation of the company's stock, 319 00:19:05,640 --> 00:19:07,320 Speaker 1: you want to back out, or at least you want 320 00:19:07,320 --> 00:19:09,320 Speaker 1: to make note of how much cash they have on 321 00:19:09,359 --> 00:19:11,480 Speaker 1: their books, because that would then be something you could 322 00:19:11,520 --> 00:19:15,520 Speaker 1: deduct from the actual share price. Yeah, of course, all right, 323 00:19:15,680 --> 00:19:19,000 Speaker 1: And any word from the Internal Revenue Service as to 324 00:19:19,280 --> 00:19:23,000 Speaker 1: whether they're going to make this kind of filing, uh, 325 00:19:23,280 --> 00:19:26,000 Speaker 1: you know, mandatory in the future in order to sort 326 00:19:26,040 --> 00:19:28,480 Speaker 1: of see or check to see whether the law itself 327 00:19:28,600 --> 00:19:31,760 Speaker 1: was was effective. Everyone we've talked to is said that 328 00:19:31,800 --> 00:19:33,680 Speaker 1: there's you know, the problem right now is the lack 329 00:19:33,680 --> 00:19:35,520 Speaker 1: of guidance from the I R S. So there hasn't 330 00:19:35,520 --> 00:19:38,159 Speaker 1: been anything to that effect yet. All right, well, thanks 331 00:19:38,480 --> 00:19:42,760 Speaker 1: for the guidance. Appreciate it. Brandon Couch Cotton is managing 332 00:19:42,840 --> 00:19:45,760 Speaker 1: editor for a Bloomberg News on the story that the Apple, 333 00:19:45,800 --> 00:19:49,360 Speaker 1: along with a variety of other companies such as Netflix, Microsoft, 334 00:19:49,760 --> 00:19:53,800 Speaker 1: as well as Oracle, uh not reporting how much money 335 00:19:53,920 --> 00:19:58,160 Speaker 1: or cash they have on their books outside the United States, 336 00:20:12,720 --> 00:20:17,080 Speaker 1: go public or get sold. Well, there may be an 337 00:20:17,080 --> 00:20:21,520 Speaker 1: advantage to being acquired. Sandy Miller is the general partner 338 00:20:21,600 --> 00:20:25,720 Speaker 1: at Institutional Venture Partners i v P, based in San Francisco, 339 00:20:26,080 --> 00:20:28,520 Speaker 1: and Sandy joins us now to explain what's going on 340 00:20:28,560 --> 00:20:31,639 Speaker 1: in the world of technology and initial public offerings and 341 00:20:31,840 --> 00:20:34,400 Speaker 1: mergers and acquisitions. Sandy, thank you very much for being 342 00:20:34,720 --> 00:20:36,920 Speaker 1: with us. You know, one of the things and preparing 343 00:20:36,960 --> 00:20:38,960 Speaker 1: for this, I was taking a look at Snap, which 344 00:20:39,040 --> 00:20:42,960 Speaker 1: was a headline grabbing initial public offering. It came public 345 00:20:43,000 --> 00:20:46,879 Speaker 1: at seventeen. It currently trades around ten dollars a share. 346 00:20:47,560 --> 00:20:49,880 Speaker 1: UH that's a decline of a little bit more than 347 00:20:49,960 --> 00:20:55,199 Speaker 1: forty percent. On the other hand, mule Soft was acquired 348 00:20:55,440 --> 00:20:58,480 Speaker 1: by Salesforce dot Com in March of this year for 349 00:20:58,560 --> 00:21:03,080 Speaker 1: a price of five point six billion dollars. And also 350 00:21:03,119 --> 00:21:05,879 Speaker 1: looking at the number of technology initial public offerings, I 351 00:21:05,880 --> 00:21:08,720 Speaker 1: think they are about six that are currently trading year 352 00:21:08,800 --> 00:21:11,520 Speaker 1: to date. Give us your overview of what is going 353 00:21:11,560 --> 00:21:14,960 Speaker 1: on in the world of funding for a large technology 354 00:21:15,040 --> 00:21:19,040 Speaker 1: companies such as the Sandy sure Well's first. It's a 355 00:21:19,119 --> 00:21:22,320 Speaker 1: very healthy environment. The i p O s for for you. 356 00:21:22,400 --> 00:21:25,920 Speaker 1: I'm looking here at US technology companies have really been 357 00:21:25,960 --> 00:21:28,679 Speaker 1: working well. The last three that have gone Carbon Black 358 00:21:29,080 --> 00:21:33,000 Speaker 1: Smartsheet Docum sign all raised the range from the initial 359 00:21:33,000 --> 00:21:37,000 Speaker 1: filing range, priced adder above the range and traded up 360 00:21:37,000 --> 00:21:41,239 Speaker 1: an average of Actually the nets consistent. It's actually been 361 00:21:41,320 --> 00:21:44,480 Speaker 1: fifteen US tech i p O so far this year, 362 00:21:44,760 --> 00:21:48,399 Speaker 1: which is running well ahead of and they're up an 363 00:21:48,400 --> 00:21:51,919 Speaker 1: average of the most prominent one. The biggest name of 364 00:21:51,920 --> 00:21:55,240 Speaker 1: the group was Dropbox. UH was an i VP portfolio 365 00:21:55,320 --> 00:21:59,240 Speaker 1: company which has traded up over so deals are working 366 00:21:59,760 --> 00:22:02,960 Speaker 1: Um it's not really that a surprise because there's a 367 00:22:03,119 --> 00:22:05,600 Speaker 1: there's great companies as a backlog of great companies that 368 00:22:05,640 --> 00:22:09,240 Speaker 1: are expecting to see more I p O s. UM. 369 00:22:09,280 --> 00:22:13,520 Speaker 1: They're benefiting from obviously deals perform and money managers are 370 00:22:13,520 --> 00:22:16,480 Speaker 1: looking to add to the these companies to their portfolio 371 00:22:16,560 --> 00:22:19,320 Speaker 1: to you know, as a form of alpha. And they're 372 00:22:19,359 --> 00:22:23,320 Speaker 1: benefiting from a favorable regulatory environment because the Jobs Act, 373 00:22:23,320 --> 00:22:26,760 Speaker 1: which wanted to affect several years ago, has been expanded 374 00:22:26,800 --> 00:22:30,760 Speaker 1: to include larger tech companies. Uh and some of these 375 00:22:30,800 --> 00:22:33,040 Speaker 1: new I p O s are pretty mature companies that 376 00:22:33,040 --> 00:22:36,040 Speaker 1: that didn't meet the standards of the Emerging market UM 377 00:22:36,480 --> 00:22:39,400 Speaker 1: qualifications for the job back but now they too. All 378 00:22:39,440 --> 00:22:41,439 Speaker 1: the all the companies, not just tech of course, but 379 00:22:41,480 --> 00:22:45,280 Speaker 1: all the companies can can use the confidential filing and 380 00:22:45,320 --> 00:22:48,000 Speaker 1: the test the waters features of the Jobs Act, which 381 00:22:48,040 --> 00:22:50,320 Speaker 1: has been a great boon to the I p O 382 00:22:50,440 --> 00:22:53,600 Speaker 1: market because it gives CEO is much more confidence that 383 00:22:53,680 --> 00:22:55,960 Speaker 1: if they go through the process that it's going to 384 00:22:56,000 --> 00:22:59,040 Speaker 1: be successful. UM. So I think it's a very healthy 385 00:22:59,119 --> 00:23:01,720 Speaker 1: environment for ips. But one of the things that I 386 00:23:01,760 --> 00:23:04,399 Speaker 1: wanted to mention really was the M and A market. 387 00:23:04,480 --> 00:23:07,159 Speaker 1: You mentioned the mule Soft acquisition happened to be one 388 00:23:07,200 --> 00:23:10,840 Speaker 1: of our portfolio companies as well, the very very successful 389 00:23:10,880 --> 00:23:15,200 Speaker 1: after going after a successful IPO. But many cases, companies 390 00:23:15,240 --> 00:23:18,280 Speaker 1: are going to be acquired prior to going I P O. 391 00:23:18,359 --> 00:23:20,720 Speaker 1: And this isn't new. But I think, you know, people 392 00:23:20,760 --> 00:23:23,840 Speaker 1: sometimes think the M and A market people buy when 393 00:23:23,880 --> 00:23:26,000 Speaker 1: things or prices are low or whatever, that it's going 394 00:23:26,080 --> 00:23:29,520 Speaker 1: to be counter cyclical to the I p O market, 395 00:23:30,240 --> 00:23:33,359 Speaker 1: But just isn't true. It's been consistently the case that 396 00:23:33,440 --> 00:23:36,199 Speaker 1: I p O s and M and A, certainly in 397 00:23:36,200 --> 00:23:40,959 Speaker 1: the tech sector cycled together. Well, what ap app Dynamics, 398 00:23:40,960 --> 00:23:43,600 Speaker 1: which was purchased by Cisco. Would that be an example, 399 00:23:44,520 --> 00:23:47,320 Speaker 1: it's a particularly vivid example. Happened to be another IPP 400 00:23:47,440 --> 00:23:51,439 Speaker 1: portfolio company, the very successful one. They got to the 401 00:23:51,240 --> 00:23:54,720 Speaker 1: they took it to the brink. They were required really 402 00:23:54,800 --> 00:23:58,440 Speaker 1: almost at the eleventh hour and fifty nine minute by Cisco, 403 00:23:58,640 --> 00:24:00,960 Speaker 1: even though they had market the road show was going 404 00:24:01,000 --> 00:24:05,440 Speaker 1: to be clearly successful, very well received offering, but Cisco 405 00:24:05,560 --> 00:24:08,199 Speaker 1: just made a bid that you know, you just couldn't 406 00:24:08,200 --> 00:24:11,040 Speaker 1: say no to. I guess the but we'll see others. 407 00:24:11,040 --> 00:24:12,680 Speaker 1: There are you know, two I p O s I'm 408 00:24:12,720 --> 00:24:15,720 Speaker 1: sorry to M and A transactions this past week both 409 00:24:15,760 --> 00:24:19,320 Speaker 1: our companies that could have gone public and UH recruit 410 00:24:19,960 --> 00:24:24,960 Speaker 1: bought glass Door, the online review for employees company, for 411 00:24:25,080 --> 00:24:28,159 Speaker 1: one point two billion, and Walmart brought flip Guard, the 412 00:24:28,200 --> 00:24:32,000 Speaker 1: big Indian e commerce giant, for well, they paid sixteen 413 00:24:32,040 --> 00:24:34,440 Speaker 1: billion for seventy seven percent of the company that you 414 00:24:34,600 --> 00:24:37,639 Speaker 1: applies to twenty one billion dollar company value. Those are 415 00:24:37,640 --> 00:24:40,720 Speaker 1: two companies could have gone public but are being acquired instead. 416 00:24:40,760 --> 00:24:42,879 Speaker 1: And we'll see we'll see more of that once companies 417 00:24:43,240 --> 00:24:47,480 Speaker 1: get on either on file or gearing up publicly on file, 418 00:24:47,640 --> 00:24:50,359 Speaker 1: or are preparing for an IPO and have made a 419 00:24:50,400 --> 00:24:53,520 Speaker 1: confidential filing. And sometimes companies announced that they've made a 420 00:24:53,520 --> 00:24:57,520 Speaker 1: confidential filing. You're actually allowed to do that. Um, the 421 00:24:57,520 --> 00:25:01,160 Speaker 1: they become it kind of, it becomes a cattle for 422 00:25:01,359 --> 00:25:03,920 Speaker 1: the big tech companies that probably have been tracking them 423 00:25:03,920 --> 00:25:07,040 Speaker 1: for a while to move in and make an acquisition 424 00:25:07,080 --> 00:25:09,879 Speaker 1: if it makes strategic sense for them. Do you see 425 00:25:10,040 --> 00:25:14,960 Speaker 1: more untraditional types of money raising activity? And I'm thinking 426 00:25:15,000 --> 00:25:17,879 Speaker 1: for example of Spotify, which went public but not in 427 00:25:17,880 --> 00:25:21,479 Speaker 1: a traditional way. Yeah, of course it wasn't money raising 428 00:25:21,520 --> 00:25:25,480 Speaker 1: for Spotify because they did a so called direct listing. Uh, 429 00:25:25,760 --> 00:25:28,920 Speaker 1: they didn't need the money, they didn't need the visibility 430 00:25:28,960 --> 00:25:30,960 Speaker 1: of an IPO road show because the company was so 431 00:25:31,040 --> 00:25:33,040 Speaker 1: well known has been you know, it's an eleven year 432 00:25:33,080 --> 00:25:38,080 Speaker 1: old company that's very prominent, very certainly very extensive, you know, 433 00:25:38,160 --> 00:25:41,760 Speaker 1: consumer base and the so they did a direct listing. 434 00:25:41,840 --> 00:25:43,439 Speaker 1: I don't think we'll see a lot of it, but 435 00:25:43,520 --> 00:25:46,600 Speaker 1: I'm glad to see it because I'm all for alternatives 436 00:25:46,600 --> 00:25:49,080 Speaker 1: for companies, and we just see the Hong Kong market 437 00:25:49,560 --> 00:25:52,520 Speaker 1: is getting more lively, so obviously that's going to be 438 00:25:52,520 --> 00:25:55,639 Speaker 1: more for the Chinese companies. But shallow be going public 439 00:25:55,840 --> 00:25:58,960 Speaker 1: plans in UM in Hong Kong. So I think it's 440 00:25:59,000 --> 00:26:02,359 Speaker 1: good to have alternatives. But the direct listing doesn't raise 441 00:26:02,400 --> 00:26:06,199 Speaker 1: any money UM, but it does get you, get you public. 442 00:26:06,480 --> 00:26:08,760 Speaker 1: I don't think it's that biggest savings. You know. The 443 00:26:08,760 --> 00:26:12,040 Speaker 1: reason why people want to do it is there's jealousy 444 00:26:12,080 --> 00:26:15,760 Speaker 1: over who gets the gains from the first day pop 445 00:26:15,800 --> 00:26:17,920 Speaker 1: of an I p O. That's really what it's all about. 446 00:26:18,119 --> 00:26:20,520 Speaker 1: They're not so much looking to save the underwriting fees. 447 00:26:20,880 --> 00:26:23,520 Speaker 1: They're looking to redirect the pop of the first day 448 00:26:23,640 --> 00:26:27,640 Speaker 1: to their own share existing shareholders rather than a new 449 00:26:27,680 --> 00:26:31,159 Speaker 1: set of hand picked investors from an investment bank, you know, 450 00:26:31,240 --> 00:26:34,160 Speaker 1: occurrying favor with their best clients. Want you to get 451 00:26:34,160 --> 00:26:36,600 Speaker 1: specific if you can right now, because I know that 452 00:26:36,720 --> 00:26:38,399 Speaker 1: you have a lot of well you've got a lot 453 00:26:38,440 --> 00:26:41,040 Speaker 1: of history in the in the in the industry, but 454 00:26:41,320 --> 00:26:44,639 Speaker 1: telematics and and the logistics industry, and what if you 455 00:26:44,680 --> 00:26:48,560 Speaker 1: could just comment on what you see, what you see happening. Sure, 456 00:26:48,640 --> 00:26:51,960 Speaker 1: well it's an area that I've personally been pretty involved in. 457 00:26:52,000 --> 00:26:55,560 Speaker 1: We're back to uh, we're back three companies so far, 458 00:26:55,640 --> 00:27:00,520 Speaker 1: one right, Fleet Maddox was one of them. Yes, I 459 00:27:00,600 --> 00:27:02,880 Speaker 1: was on the board of Fleet Maddics. We've backed at 460 00:27:02,960 --> 00:27:07,360 Speaker 1: road Um, which you know was acquired very very successfully, 461 00:27:07,800 --> 00:27:11,240 Speaker 1: the Fleet Maddics which went public and then was later 462 00:27:11,280 --> 00:27:14,359 Speaker 1: required and most recently a company called keep truck and 463 00:27:14,440 --> 00:27:17,119 Speaker 1: based here in San Francisco, which has sort of turned 464 00:27:17,119 --> 00:27:19,280 Speaker 1: the business on its head. And it's a it's a 465 00:27:19,680 --> 00:27:23,359 Speaker 1: rather than a system that's kind of imposed by the 466 00:27:23,520 --> 00:27:29,080 Speaker 1: fleet owner, is actually a telematic system and uh, combined 467 00:27:29,119 --> 00:27:32,480 Speaker 1: with a lot of other functionality that the truckers that 468 00:27:32,600 --> 00:27:35,600 Speaker 1: have adopted themselves. And then you know, much like most 469 00:27:35,680 --> 00:27:39,000 Speaker 1: technology today, you know, it starts with the users, then 470 00:27:39,040 --> 00:27:42,160 Speaker 1: the company picks up on it. So it's it's gotten 471 00:27:42,280 --> 00:27:47,119 Speaker 1: very very broad positive acceptance from the actual truck driver community. 472 00:27:48,480 --> 00:27:51,199 Speaker 1: I think it's an area really right. You know, this 473 00:27:51,320 --> 00:27:54,520 Speaker 1: is a massive amount of our Our whole industry moves 474 00:27:54,560 --> 00:27:59,399 Speaker 1: by truck uh. It's a very old fashioned industry. The 475 00:27:59,440 --> 00:28:04,440 Speaker 1: information and available is remarkably limited historically, and it's really 476 00:28:04,520 --> 00:28:08,400 Speaker 1: right for you know, technology improvements and people like Keep 477 00:28:08,440 --> 00:28:11,520 Speaker 1: Talking and others are providing that. Thanks very much for 478 00:28:11,560 --> 00:28:15,240 Speaker 1: being with us. Sandy Miller's general partner for Institutional Venture 479 00:28:15,280 --> 00:28:19,040 Speaker 1: Partners i v P, based in San Francisco, and you 480 00:28:19,080 --> 00:28:25,600 Speaker 1: can follow them at i v P on Twitter. Thanks 481 00:28:25,600 --> 00:28:28,199 Speaker 1: for listening to the Bloomberg P and L podcast. You 482 00:28:28,240 --> 00:28:32,040 Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud 483 00:28:32,160 --> 00:28:35,600 Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm 484 00:28:35,640 --> 00:28:39,640 Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. 485 00:28:39,760 --> 00:28:42,360 Speaker 1: It's one before the podcast. You can always catch us 486 00:28:42,400 --> 00:28:44,000 Speaker 1: worldwide on Bloomberg Radio.