WEBVTT - Retail Sales Numbers Are Just Wrong: Craig Johnson 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.960 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.480 at Bloomberg dot com. We got terrible December retail sales 0:00:23.560 --> 0:00:26.040 numbers that came in four weeks late due to the 0:00:26.040 --> 0:00:29.480 government shutdown. But before you get all barished the way 0:00:29.480 --> 0:00:32.440 that many traders have, we have the economic advisor to 0:00:32.479 --> 0:00:36.360 President Trump, Larry Cudlow, saying this about the data. Take listen. 0:00:37.000 --> 0:00:39.840 First of all, you had ten days of government shutdown. 0:00:40.240 --> 0:00:44.200 I regard that as a temporary glitch, as you know. Uh. Secondly, 0:00:44.920 --> 0:00:48.840 shoppers were very late. According to the National Retail Federation, 0:00:48.880 --> 0:00:52.040 shoppers came in very late. I wouldn't be surprised if 0:00:52.120 --> 0:00:55.400 January was revised up because of that. That was Larry 0:00:55.440 --> 0:00:58.840 Cudlow speaking to a gaggle of reporters in Washington, d C. 0:00:59.040 --> 0:01:01.760 Joining us here our Bloomberg Getta Active Broker Studios Coror 0:01:01.800 --> 0:01:04.759 Kadana Chief you as economist for Bloomberg Economics and joining 0:01:04.800 --> 0:01:08.480 us by phone. Craig Johnson, president of Customer Growth Partners, Carl, 0:01:08.560 --> 0:01:12.560 let's start with you. Was this data glitchy? I don't 0:01:12.600 --> 0:01:15.160 think there were glitches there in terms of a collection 0:01:15.200 --> 0:01:18.200 of the data and whatnot. However, to the extent that 0:01:18.480 --> 0:01:21.880 we had a government shutdown, probably those government workers were 0:01:22.120 --> 0:01:24.679 kind of absentees in the later part of the holiday 0:01:24.760 --> 0:01:27.080 shopping season, so that could have had an impact. I 0:01:27.120 --> 0:01:29.960 don't really buy into what a weather story there because 0:01:30.520 --> 0:01:32.840 one of the most weather sensitive categories tends to be 0:01:32.880 --> 0:01:34.760 motor vehicle sales. If there's two feet of snow in 0:01:34.760 --> 0:01:36.600 the dealership lot, you tend to not go for a 0:01:36.600 --> 0:01:39.360 test drive U. And actually that was the rare bright 0:01:39.400 --> 0:01:41.640 spot in this report, with the motor vehicle sales up 0:01:41.840 --> 0:01:45.760 one percent UH in the month h. The other factor there, obviously, 0:01:46.480 --> 0:01:49.600 is the equity market and financial market turmoil that we 0:01:49.680 --> 0:01:52.600 saw in you know, we we knew about in December, 0:01:52.680 --> 0:01:55.560 not fully, but that was definitely scaring people away or 0:01:55.640 --> 0:01:59.760 leading to some sense of, uh, you know, conservativism with 0:01:59.800 --> 0:02:03.080 their back to spending habits. So in light of this report, 0:02:03.200 --> 0:02:06.040 we have trimmed our GDP forecast for Q four. Right, 0:02:06.120 --> 0:02:09.000 consumers are very important part of that forecast. So we've 0:02:09.040 --> 0:02:11.760 taken growth down from to nine to two and a 0:02:11.840 --> 0:02:15.800 quarter UH for the UH for that's a very substantial 0:02:15.800 --> 0:02:20.520 revision that shows how bad this report actually was. UH. Nonetheless, UH, 0:02:20.600 --> 0:02:23.400 you know, we're not changing our outlook for consumers over 0:02:23.400 --> 0:02:27.720 the course of beware. I think there's some sticker shock 0:02:27.800 --> 0:02:31.240 as people are getting smaller than expected tax refunds as 0:02:31.240 --> 0:02:35.440 they're filing. But the labor market is on very sound footing. 0:02:35.960 --> 0:02:39.040 Personal income growth is strong. That means consumers will be 0:02:39.080 --> 0:02:41.119 back in the game, but maybe not until Q two. 0:02:41.240 --> 0:02:43.760 So Craig Johnson love to bring you on in this discussion. 0:02:44.000 --> 0:02:45.600 What do you make of this retail number and does 0:02:45.639 --> 0:02:48.799 it change your view of the consumer and for growth 0:02:48.880 --> 0:02:53.160 in well Answering the second question, first, no, we don't. 0:02:53.280 --> 0:02:56.919 We don't think it UH significantly affects the outlook now 0:02:56.960 --> 0:03:00.880 on SO two. The reason for that is is gets 0:03:00.919 --> 0:03:03.240 to the first question, is that we think there are 0:03:03.440 --> 0:03:08.520 clear anomalies in the data here. UM. Overall retail works 0:03:08.520 --> 0:03:11.000 in a world of year of year sales and total 0:03:11.000 --> 0:03:14.680 sales growth in December per the report, and this is 0:03:14.680 --> 0:03:19.040 excluding autos, gasoline, and restaurants normal exclusions, was up only 0:03:19.080 --> 0:03:23.520 one point UM. But if you look at non store 0:03:23.600 --> 0:03:28.960 retail for December UM, of which is with online sales, 0:03:29.280 --> 0:03:33.600 it's up only three h That is the worst showing 0:03:33.960 --> 0:03:38.280 since the native of the Great Recession uh in in 0:03:38.280 --> 0:03:42.119 in two thousand eight Quality two eight uh And yet 0:03:42.160 --> 0:03:44.320 if you look at online year to d eight sales 0:03:44.320 --> 0:03:49.280 through November, they were up two points ten ten. October 0:03:49.320 --> 0:03:52.520 and November, which is inclusive of the first half of holiday, 0:03:52.680 --> 0:03:55.560 online sales were up again using their data, was up 0:03:55.600 --> 0:03:59.480 thirteen point five And for the thought that suddenly this 0:03:59.760 --> 0:04:03.360 ran up down from thirteen point five percent pace in 0:04:03.400 --> 0:04:07.600 October November is only a three percent pace in December. Holds, 0:04:08.080 --> 0:04:12.160 are you basically saying that the numbers are inaccurate here? Yes? Okay, 0:04:12.200 --> 0:04:14.200 so you don't believe the numbers. You think that they 0:04:14.200 --> 0:04:19.479 are wrong, absolutely, because this would imply a deceleration from 0:04:19.480 --> 0:04:21.760 October December of a of a growth rate of thirteen 0:04:21.800 --> 0:04:24.680 point five percent, only a three percent growth rate in December, 0:04:24.760 --> 0:04:28.279 which has never happened. UM and other other the other 0:04:29.200 --> 0:04:32.279 retail Amazon is almost half of all retail sales. Their 0:04:32.360 --> 0:04:35.240 Q four sales are up eighteen year of a year. 0:04:35.720 --> 0:04:38.800 Wayfarers is which is the second biggest pure play, uh, 0:04:38.880 --> 0:04:43.039 and they'll be up almost this quarter. And so anybody 0:04:43.040 --> 0:04:46.000 who thinks the three percent growth rate for online in 0:04:46.080 --> 0:04:48.440 December is living in a dream world. And and we're 0:04:48.480 --> 0:04:51.279 certainly going to get some more earnings next week to 0:04:51.480 --> 0:04:54.279 confirm or rebut some of this data. But Carl, what 0:04:54.360 --> 0:04:57.280 gives you faith in this data enough to revise downward 0:04:57.320 --> 0:05:00.000 your GDP estimate for this year. Well, the retail sale 0:05:00.320 --> 0:05:02.599 are whether whether the data or right or not. And 0:05:02.640 --> 0:05:06.480 there's definitely a valid case there that maybe there's some distortion. Uh. 0:05:06.520 --> 0:05:10.560 The retail sales data, nonetheless are plucked and put plugged 0:05:10.600 --> 0:05:13.480 into the GDP tabulation. So if there's a mistake in 0:05:13.560 --> 0:05:17.160 retail sales, that gets factored into the GDP numbers as well. 0:05:17.200 --> 0:05:20.400 So it's just really plugging in the actual arithmetic. What 0:05:20.640 --> 0:05:24.520 can happen here is you have sampling issues. So uh, 0:05:24.760 --> 0:05:28.159 some retailers may not be counted in the retail sales survey. 0:05:28.960 --> 0:05:30.520 I don't know if that's the case for Amazon or 0:05:30.560 --> 0:05:35.080 what not. Usually Census doesn't disclose who they're pulling but 0:05:35.160 --> 0:05:36.640 you know, if you if you have a lot of 0:05:36.920 --> 0:05:39.200 retailers that were doing poorly at the end of the year, 0:05:39.279 --> 0:05:41.760 certainly there were lots of headlines about you know, sears 0:05:41.839 --> 0:05:44.360 and and companies of that nature that could be feeding 0:05:44.440 --> 0:05:49.080 some kind of distortion into the survey. So Craig, how 0:05:49.080 --> 0:05:52.480 about I mean, seriously, on the on the do you 0:05:52.600 --> 0:05:55.839 sense that if the data is correct or incorrect, that 0:05:55.880 --> 0:05:59.360 you're the consumers in a good position for Yeah, because 0:05:59.600 --> 0:06:02.960 the airline consumer fundamental. The reason we're sanguine about the 0:06:03.000 --> 0:06:07.320 rest of the year is that whether retail sales or 0:06:07.440 --> 0:06:10.080 consumer spending in general, retail is the biggest segment of 0:06:10.120 --> 0:06:14.600 consumer consumers sixty percented economy is is that the fundamentals 0:06:14.600 --> 0:06:17.599 that drive retail sales is two biggest. The biggest fundamental 0:06:18.080 --> 0:06:22.520 is growth in disposable personal income, and right now that 0:06:22.640 --> 0:06:25.160 depends that in turn is driven by two things. One 0:06:25.200 --> 0:06:28.400 growth and employment, particularly full time employment, which has been 0:06:28.560 --> 0:06:32.440 very robust, and secondly by growth in average wages, which 0:06:32.440 --> 0:06:36.160 are up three percent and change. Those two vectors combined 0:06:36.279 --> 0:06:38.960 to be a major driver, about a five percent driver 0:06:39.880 --> 0:06:43.720 retail sales, and that's why we're sticking with our forecast 0:06:43.880 --> 0:06:47.160 of about somewhere around five percent year of a year 0:06:47.200 --> 0:06:51.160 retail sales growth four two. Craig Johnson, thank you so 0:06:51.240 --> 0:06:53.839 much for being with us. President of Customer Growth Partners, Cardona, 0:06:53.880 --> 0:06:56.560 chief US economist for Bloomberg Economics. Just want to bring 0:06:56.560 --> 0:06:59.760 you this headline just crossing US and China trade teams 0:06:59.760 --> 0:07:02.400 are so to be far apart on reform demands. Looking 0:07:02.400 --> 0:07:04.839 at the Dow, it is off its earlier highs on 0:07:04.920 --> 0:07:07.320 this news, uh, So we are going to keep an 0:07:07.360 --> 0:07:20.480 eye on that as the day progressive we list. It 0:07:20.480 --> 0:07:21.960 seems like you and I are spending more and more 0:07:21.960 --> 0:07:24.640 time talking about gaming. Maybe that's just having met Cantraman 0:07:24.680 --> 0:07:26.400 come in and talk about the big gaming companies and 0:07:26.400 --> 0:07:29.800 their earnings. But one aspect of the gaming businesses e Sports, 0:07:29.840 --> 0:07:32.200 that just fascinates me. This is the business where people 0:07:32.520 --> 0:07:35.080 come to arenas and other public places to watch other 0:07:35.120 --> 0:07:38.000 people game. This is a real business. It is a 0:07:38.080 --> 0:07:41.400 growing business. This is a one billion dollar business four 0:07:41.880 --> 0:07:44.960 million viewers, uh and growing. So to help us kind 0:07:44.960 --> 0:07:47.200 of dig deep into this business and the opportunities here, 0:07:47.200 --> 0:07:49.280 we have a couple of gentlemen on our eleven three 0:07:49.360 --> 0:07:52.800 year studios Ken d Q Bellis CEO of Black Ridge 0:07:52.800 --> 0:07:56.400 Acquisition Company that is a Nasdaq listed spack on a 0:07:56.480 --> 0:07:59.400 the symbol b r A C. And Frank frank Ing 0:07:59.680 --> 0:08:02.160 c year of our Game International and Kennon Frank, I 0:08:02.160 --> 0:08:04.600 guess your companies are are in the process emerging to 0:08:04.720 --> 0:08:08.160 form what will be the new company would be Allied 0:08:08.200 --> 0:08:10.880 E Sports Entertainment. So Frank, maybe if you could just 0:08:10.920 --> 0:08:14.720 give us a sense of E sports. Why E sports? 0:08:15.280 --> 0:08:18.400 What are the opportunities that you guys see in this business? Uh. 0:08:18.480 --> 0:08:21.360 E sports has been around for a long time, but 0:08:21.480 --> 0:08:24.920 as the subset of gaming. But now it becomes an 0:08:24.960 --> 0:08:28.600 industry because in the past few years, streaming becomes extremely 0:08:28.640 --> 0:08:32.439 popular and that really support the growth of the sports, 0:08:32.480 --> 0:08:35.440 and and and and the essence, the core element is 0:08:35.480 --> 0:08:40.200 the viewership. Viewership has grown to a very large number already. 0:08:40.240 --> 0:08:42.800 You know, last year we had about four million on 0:08:42.840 --> 0:08:47.120 the global basis viewers regularly on the sports and it's 0:08:47.160 --> 0:08:52.160 already bigger than many major sports. So um as as 0:08:52.160 --> 0:08:54.440 it develops right now, you know, we we see a 0:08:54.480 --> 0:08:57.800 lot of new business model that is emerging and we 0:08:57.800 --> 0:09:00.319 we really believe this is at the very big getting 0:09:00.360 --> 0:09:04.120 stage off the industry. You know, to monetize from the 0:09:04.360 --> 0:09:08.640 sports activities. So you two are coming together to form 0:09:09.040 --> 0:09:14.040 Allied E Sports Entertainment. Ken dicobilis joining us here as well. 0:09:14.200 --> 0:09:18.880 In your firm, black Ridge Acquisition Company. Didn't it focus 0:09:18.880 --> 0:09:21.760 on oil? That was part of the initial focus. But 0:09:21.840 --> 0:09:25.200 I will tell you when you have a spack, you 0:09:25.200 --> 0:09:27.640 have a finite timeline that you have to get a 0:09:27.640 --> 0:09:30.360 deal done. So it's all about deal flow. And for us, 0:09:30.400 --> 0:09:33.319 we're very fortunate in that a gentleman named Lyle Berman 0:09:33.520 --> 0:09:36.280 took a company called World Poker Tour public in two 0:09:36.360 --> 0:09:39.360 thousand and four. He eventually sold that and then Frank's 0:09:39.400 --> 0:09:43.000 company bought WPT three years ago. As Frank was looking 0:09:43.040 --> 0:09:46.040 at various ways to fund the sports initiative, he heard 0:09:46.080 --> 0:09:48.840 that Lyle had a spack, so he approached Lylan for 0:09:48.880 --> 0:09:51.880 those who don't know his special acquisition company, correct, So 0:09:51.920 --> 0:09:55.480 they approached us, and I can tell you the opportunity 0:09:55.559 --> 0:09:58.240 with this business blows away any we were looking at 0:09:58.280 --> 0:10:00.200 in the energy space. So it's all about sure hold 0:10:00.200 --> 0:10:01.960 a return for us, and we think this is the 0:10:02.040 --> 0:10:04.240 right bet. Okay, So what is the business plan for 0:10:04.280 --> 0:10:05.959 your company and give us a sense of how that 0:10:06.000 --> 0:10:09.000 maybe mirrors what's going on in the sports business in general. 0:10:09.760 --> 0:10:11.959 I would say this this is unique. Okay, if you're 0:10:11.960 --> 0:10:14.480 looking to play the sports today, there's really two ways 0:10:14.520 --> 0:10:17.200 to do it. You are a video game publisher that 0:10:17.240 --> 0:10:19.679 makes the games itself, or a lot of the traditional 0:10:19.720 --> 0:10:23.400 sports franchise owners are buying teams that compete against each other. 0:10:23.640 --> 0:10:27.800 We're a game and team agnostic. The strategy is threefold. 0:10:28.160 --> 0:10:30.319 You hold a live event like at our lux or 0:10:30.360 --> 0:10:34.040 arena in Las Vegas, produce content off of that, and 0:10:34.080 --> 0:10:37.360 then drive viewers from the content piece to an online platform. 0:10:37.400 --> 0:10:39.920 So it's the three pillar strategy that, by the way, 0:10:39.960 --> 0:10:42.960 has been deployed at the World Poker Tour for seventeen years. 0:10:42.960 --> 0:10:45.600 So that's the play here to monetize. So, Frank, talk 0:10:45.679 --> 0:10:48.880 to me about the arena type play because this is 0:10:48.920 --> 0:10:50.920 something I have not seen that much about me. We 0:10:50.960 --> 0:10:54.920 know that watching competitive gamers, that's a very popular thing 0:10:54.960 --> 0:10:57.840 to do. People stream that. But you know what is 0:10:57.880 --> 0:11:01.800 the market like for in person events right now? Well, 0:11:02.280 --> 0:11:05.080 I think the market is growing very rapidly right now. 0:11:05.400 --> 0:11:08.960 A lot of the bigger sports events today they're being 0:11:09.040 --> 0:11:13.719 how that colosseum like you know, Candlestick Park for example. Um, 0:11:13.880 --> 0:11:16.560 you know, but we we're trying to create a new format, 0:11:16.559 --> 0:11:20.360 a dedicated arena just for E sports. Basically, it's just 0:11:20.400 --> 0:11:24.640 like a studio or TV studio with live broadcast capabilities 0:11:24.920 --> 0:11:27.800 that can house a thousand people with those gas, your 0:11:27.800 --> 0:11:30.520 show looks great, and I'll focus instead of you know, 0:11:30.640 --> 0:11:34.720 doing more like a proper organized league or teams. Instead, 0:11:34.800 --> 0:11:38.600 we want to create shows entertainment for e sports that 0:11:38.640 --> 0:11:42.480 can be carried out on a frequent, regular basis, and 0:11:42.520 --> 0:11:45.280 as such, the commercial value that can be created will 0:11:45.320 --> 0:11:48.240 be a lot bigger for our sponsors. So talk about 0:11:48.280 --> 0:11:50.480 where you are in or how how you view the 0:11:50.520 --> 0:11:53.640 model sponsorship advertisers, how critical is that to kind of 0:11:53.640 --> 0:11:56.360 what you guys are thinking about. Well, I would say this, 0:11:56.440 --> 0:11:59.480 the demographic in in the sports of the viewership is 0:11:59.520 --> 0:12:02.920 primary L thirty five and under. That's a highly coveted demographic. 0:12:03.400 --> 0:12:06.400 And the beauty of the ecosystem right now is they 0:12:06.440 --> 0:12:09.679 are all online. So E sports is an online business. 0:12:09.720 --> 0:12:12.400 The content that will be produced from the live events 0:12:12.400 --> 0:12:16.240 that the arenas will be distributed primarily online. So the 0:12:16.320 --> 0:12:20.079 sponsors really covet that demographic and so they want to 0:12:20.120 --> 0:12:23.520 get behind this business. As well. So, Ken, how big 0:12:23.559 --> 0:12:25.960 do you think this? How how how do you sort 0:12:25.960 --> 0:12:30.000 of monetize this in terms of ticket sales? Do you do? Uh? Gear? 0:12:30.280 --> 0:12:33.480 I mean just the practical aspects of this. Yeah, the 0:12:33.600 --> 0:12:37.160 two really big opportunities with this business model is with 0:12:37.240 --> 0:12:40.800 the content to sell sponsorship or spell sell the content 0:12:41.360 --> 0:12:45.040 to distribution networks. Okay number one. But thirdly, which really 0:12:45.280 --> 0:12:48.439 meets up with what Frank's background is, is an online 0:12:48.440 --> 0:12:52.520 subscription based service geared primarily towards gamers. That's what Frank 0:12:52.559 --> 0:12:56.000 has been doing his entire career. Yeah, thank you both 0:12:56.040 --> 0:12:58.800 so much for being here. Kenn D. Cabila's CEO of 0:12:58.840 --> 0:13:02.160 Black Ridge Acquisition Company, seem to be future CFO of 0:13:02.200 --> 0:13:05.720 allied E Sports Entertainment. Frank Young, chief executive of our 0:13:05.800 --> 0:13:10.319 Game Internet National future CEO of allied E Sports Entertainment. 0:13:10.559 --> 0:13:12.839 Both of you here in our Interactive Broker studios. Thank 0:13:12.880 --> 0:13:27.079 you so much for being here with us. Well, the 0:13:27.160 --> 0:13:29.400 number of the day is one point two, as in 0:13:29.480 --> 0:13:32.200 a one point two percent decline in retail sales for 0:13:32.240 --> 0:13:35.480 the month of December just released this morning, certainly impacting 0:13:35.480 --> 0:13:37.360 the markets. To get us give us a sense of 0:13:37.400 --> 0:13:40.240 what this means for the consumer and for markets going forward. 0:13:40.240 --> 0:13:42.760 We bring in Peter Anderson. Peter is the founder of 0:13:42.800 --> 0:13:45.480 Anderson Capital Management. He joins us right here in our 0:13:45.480 --> 0:13:48.920 bloom Bloomberg Interactive Broker studio. So, Peter, this number was 0:13:48.960 --> 0:13:51.720 clearly a surprise for the market. Uh does it change 0:13:51.760 --> 0:13:54.560 your view of the consumer and maybe how you're positioning 0:13:54.559 --> 0:13:57.440 your portfolio. The only thing it does is it really 0:13:57.600 --> 0:14:02.040 reinforces my opinion that last order was such a crazy quarter. 0:14:02.400 --> 0:14:06.640 Nobody really had firm opinions as to what was happening, 0:14:06.880 --> 0:14:09.679 and as a result, I think what you're seeing is 0:14:10.080 --> 0:14:13.960 the consumer just recoiled back and said I'm out for 0:14:14.000 --> 0:14:17.079 the month of December, simply because nobody is giving me 0:14:17.120 --> 0:14:19.480 any pure advice. Nobody is telling me which way the 0:14:19.520 --> 0:14:23.280 markets are going. Everybody seems confused, and when I'm confused, 0:14:23.320 --> 0:14:26.040 I go back into my bunker. Are you confused right now? 0:14:26.800 --> 0:14:32.680 I've never been confused? So so, so what's your take? Well, 0:14:32.760 --> 0:14:36.640 I think that the market has, uh, it needs to 0:14:36.800 --> 0:14:41.120 discount all the political policies that we're we're following. I mean, 0:14:41.280 --> 0:14:45.360 certainly it's very important about the tariffs, the wall breaksit, 0:14:45.640 --> 0:14:48.040 but let's just put it in perspective. You know that 0:14:48.160 --> 0:14:51.960 if you like US stocks, then I would suggest buying 0:14:52.080 --> 0:14:55.520 US stocks based on the fundamentals and not whether the 0:14:55.600 --> 0:14:59.400 tweet of the day by President Trump will actually change 0:14:59.400 --> 0:15:01.600 your mind. Paul, can you believe this? If you like 0:15:01.760 --> 0:15:04.400 US stocks, you should buy US stocks. I have to 0:15:04.440 --> 0:15:06.320 wonder on a day like today, when you see Coca 0:15:06.400 --> 0:15:08.520 Cola shares plunging the most in two thousand and eight, 0:15:08.840 --> 0:15:11.720 if you like the U S economy and you think 0:15:11.760 --> 0:15:14.760 people will keep drinking stuff that doesn't just water, would 0:15:14.760 --> 0:15:16.720 you be a buyer of Coke shares? Well? I don't 0:15:16.720 --> 0:15:19.720 own Coke shares because it's not in my universe of 0:15:19.960 --> 0:15:22.000 stocks that I own. I tend to own stocks are 0:15:22.040 --> 0:15:24.880 a little less followed, actually, because I think Coke is 0:15:24.920 --> 0:15:29.040 followed to death, and in terms of advantages of information, 0:15:29.800 --> 0:15:32.560 it's pretty tough because it's followed so much. But when 0:15:32.560 --> 0:15:34.680 you're looking at other stocks it might have missed their 0:15:34.680 --> 0:15:38.400 earnings that are not followed such as closely. Then I 0:15:38.440 --> 0:15:40.960 think those are buying opportunities if you do have the 0:15:41.040 --> 0:15:44.960 confidence in your own analysis. So we've certainly seen a 0:15:45.000 --> 0:15:49.240 tremendous rate or level of volatility, certainly in December and 0:15:49.240 --> 0:15:51.320 even coming that snap back here we've seen this year 0:15:51.360 --> 0:15:54.600 to date. Do you use volatility as a buying opportunities 0:15:54.640 --> 0:15:56.640 that is that kind of how you're viewing it right now, 0:15:56.760 --> 0:16:00.120 or are using volatility as an excuse to step back? Well, know, 0:16:00.240 --> 0:16:04.520 volatility is probably the most frequently used word in our business, 0:16:04.800 --> 0:16:07.200 and I have to tell you I almost ignore the 0:16:07.240 --> 0:16:10.400 total volatility. I just go ahead. I say to myself, 0:16:10.440 --> 0:16:12.520 if this is a stock that I like, and I've 0:16:12.560 --> 0:16:14.920 liked it for some time, and I still continue to 0:16:15.000 --> 0:16:17.200 like it. If a new client comes in, I don't 0:16:17.280 --> 0:16:19.800 even market time. I usually just jump right into the 0:16:19.840 --> 0:16:22.280 jump rope and don't wait for vall to pick up. 0:16:22.520 --> 0:16:24.400 So I might pick up the stock at a little 0:16:24.440 --> 0:16:26.920 bit more cheaply than I normally would, because it's a 0:16:26.960 --> 0:16:29.560 fool's errand to try to time that. So you'll hear 0:16:29.600 --> 0:16:31.720 a lot of people in my side talking about how 0:16:31.760 --> 0:16:34.640 scary the volatility is. But I'm not afraid of that 0:16:34.680 --> 0:16:36.880 because I don't think it's a major driver. If you're 0:16:36.920 --> 0:16:39.120 in this market for the long run. Sure you might 0:16:39.160 --> 0:16:42.280 pick up some stocks, uh during the high periods of volatility, 0:16:42.320 --> 0:16:44.680 where you might get cheaper prices, but in the end, 0:16:44.720 --> 0:16:47.720 it averages out and you should focus on more technical things. 0:16:47.800 --> 0:16:51.240 All right, So if you are not afraid of making 0:16:51.480 --> 0:16:53.960 statements and making opinions, what do you like? What shares 0:16:54.000 --> 0:16:57.240 do you like? Well? I like, uh, hold your breath 0:16:57.280 --> 0:17:00.400 now in video in video is reporting interesting talk about 0:17:00.600 --> 0:17:03.800 little stock exactly, but he doesn't pay attention to that's right. 0:17:05.440 --> 0:17:07.560 So let me just quickly talk to you about a video. 0:17:07.600 --> 0:17:10.120 You know, I grew up in the world of physics, 0:17:10.119 --> 0:17:13.840 so I feel like I understand uh humbly a little 0:17:13.880 --> 0:17:17.439 bit more than the street about in videos addressable market 0:17:17.480 --> 0:17:20.480 in the future, so certainly it will be lumpy around 0:17:20.520 --> 0:17:23.040 along the way. And it was of course last quarter 0:17:23.400 --> 0:17:26.359 and maybe even this quarter because it's reporting aftermarket. But 0:17:26.480 --> 0:17:29.200 that is a tremendous stock that you can get at 0:17:29.320 --> 0:17:32.280 now a pe of less than twenty times, and if 0:17:32.280 --> 0:17:35.680 you remember, it was trading at a much higher evaluation 0:17:36.040 --> 0:17:39.720 as recently as six months ago. Anything else in tech? 0:17:40.040 --> 0:17:42.520 Does tech scary way? Or do you like? You like 0:17:42.600 --> 0:17:44.919 the growth and you can make the valuation call well, 0:17:45.119 --> 0:17:50.119 I love computer security. So for instance, Palo Alto Networks 0:17:50.680 --> 0:17:54.840 cyber Arc just reported recently. Uh, those two companies will 0:17:55.040 --> 0:18:00.000 never their addressable market. Unlike Coca Cola for instance, there 0:17:59.880 --> 0:18:05.080 addressable market is growing undeniably and as we get more 0:18:05.240 --> 0:18:10.600 complicated and communications and technology and hacking, it's UH an 0:18:10.680 --> 0:18:13.560 arms race. So that will never end except with the 0:18:13.600 --> 0:18:17.679 advent of quantum computing, which is far far away in 0:18:17.720 --> 0:18:20.399 the future. So what about the breakdown between stocks and 0:18:20.440 --> 0:18:23.920 bonds and how are you allocating right now? UH? In 0:18:24.040 --> 0:18:28.439 terms of asset allocation, I would say that it is 0:18:28.560 --> 0:18:32.040 well overdone in our industry to have people come in 0:18:32.080 --> 0:18:35.280 here and talk about a core satellite model which might 0:18:35.480 --> 0:18:39.919 use ten to fifteen asset classes, and some of the 0:18:39.960 --> 0:18:43.440 exposures are two to four per asset class. What does 0:18:43.480 --> 0:18:46.560 that get you It it gets you low conviction. I 0:18:46.840 --> 0:18:49.880 advocate having if you're coming into on cash, for instance, 0:18:49.880 --> 0:18:53.680 so let's UH suspend capital gains issues. If you came 0:18:53.720 --> 0:18:57.600 in on cash, I would advocate as little as three 0:18:57.640 --> 0:19:02.000 to four asset classes. For completely diversified portfolio, I would 0:19:02.280 --> 0:19:05.440 I would do away with the lexicon of tactical allocation 0:19:05.800 --> 0:19:10.520 and strategic allocation. There would be a core UH SMPI 0:19:11.280 --> 0:19:15.399 et F very very cheap core e t F of 0:19:16.119 --> 0:19:20.399 fixed income, and then my twenty stock portfolio which would 0:19:20.640 --> 0:19:23.399 hopefully give you the alpha, and then you are done. 0:19:23.720 --> 0:19:27.800 Your reports come out three line items basically. Yeah, so 0:19:27.920 --> 0:19:30.560 ten seconds here, have you shifted the allocation between stocks 0:19:30.560 --> 0:19:32.080 and bonds or kept it sort of like a sixty 0:19:32.160 --> 0:19:34.520 for type model for most people. I keep it at 0:19:34.520 --> 0:19:38.160 sixty forty and I really don't switch that, and sometimes 0:19:38.160 --> 0:19:40.560 I even let that run, believe it or not, as 0:19:40.600 --> 0:19:44.840 opposed to going back and tactically reallocating. Peter Anderson not 0:19:44.920 --> 0:19:47.280 afraid to give some points of view. Really great having you, 0:19:47.280 --> 0:19:50.240 Peter Anderson, founder of Anderson Capital Management, joining us here 0:19:50.480 --> 0:20:05.360 in our Bloomberg Interactive Broker's studios. Right now, let's focus 0:20:05.440 --> 0:20:09.160 on airplanes, in particular those that have staircases leading from 0:20:09.280 --> 0:20:12.320 one deck to another. They are going out of style 0:20:12.440 --> 0:20:15.400 and off the market. Joining us now to discuss George Ferguson, 0:20:15.640 --> 0:20:20.080 Senior Aerospace, Defense and Airlines analyst for Bloomberg Intelligence. George, So, 0:20:20.240 --> 0:20:24.399 air Bus is scrapping it's unprofitable a three eighty double 0:20:24.520 --> 0:20:28.960 ducker jet. Why? Yeah, So, I mean it just wasn't 0:20:28.960 --> 0:20:32.040 the demand for the airplane. And that's been as you said, 0:20:32.320 --> 0:20:34.720 you know, the same for all sort of four engineer 0:20:34.800 --> 0:20:37.639 planes lately. Um, I mean it's a real move to 0:20:37.640 --> 0:20:42.680 two smaller wide bodies, so airplanes with to two aisles 0:20:42.680 --> 0:20:45.280 in them. You know, smaller airplanes can be deployed to 0:20:45.920 --> 0:20:48.520 more markets, different markets. You don't have to worry about, 0:20:49.280 --> 0:20:52.040 um them being being too large that when you drop 0:20:52.119 --> 0:20:55.560 them into a market you'll you'll hurt fair dramatically. The 0:20:55.600 --> 0:20:58.399 A three eight really was just it was too big 0:20:58.440 --> 0:21:00.919 to fly to most markets. It would just dilute fares 0:21:00.960 --> 0:21:03.640 and her profitability. And I could say, Paul, he says, 0:21:03.720 --> 0:21:05.919 you can drop it into a market and people get hurt, 0:21:06.240 --> 0:21:08.520 a very different image and what he's talking about. Have 0:21:08.560 --> 0:21:11.359 you ever seen one in land? It's amazing fly it 0:21:11.400 --> 0:21:13.960 into Sarah. So I think that's just the challenge is 0:21:14.000 --> 0:21:15.879 too big for most markets. He fled in there, and 0:21:15.880 --> 0:21:20.560 you really dilute fairs and Emirates profitability has been it's 0:21:20.600 --> 0:21:22.560 deteriorated over the last bunch of years. There's a lot 0:21:22.600 --> 0:21:25.320 of competition out there, and they finally, I think, came 0:21:25.359 --> 0:21:26.840 to terms of the fact that it's just too big 0:21:26.840 --> 0:21:29.840 an airplane to operate most places. So, George, how rare 0:21:30.000 --> 0:21:34.080 is it for you know, an airplane manufacturer to cancel 0:21:34.200 --> 0:21:37.680 a whole line of of its plane, argue it's marquee 0:21:37.720 --> 0:21:40.600 line of of a plane after such a short, short 0:21:41.160 --> 0:21:43.280 shelf life. It seems like they really misread the market 0:21:43.280 --> 0:21:46.120 here Airbus did. Yeah, you know, I think I think 0:21:46.160 --> 0:21:49.800 they did. You know, for Airbus, it's not as rare 0:21:49.800 --> 0:21:51.960 as it should be. The A three forty was another 0:21:52.000 --> 0:21:58.639 four engine airplane that had a pretty short lifespan. So, um, 0:21:58.800 --> 0:22:01.520 they've got to sort of misses on the wide body front, 0:22:01.520 --> 0:22:04.160 I would say, in the last couple of decades. Um. 0:22:04.400 --> 0:22:07.480 And you know, I think you just have to stay 0:22:07.520 --> 0:22:11.000 close to customers. I feel like, um, I feel like 0:22:11.040 --> 0:22:12.760 some of their competitors that maybe been a little bit 0:22:12.800 --> 0:22:15.879 close to customers and understand demand a little bit better. 0:22:16.560 --> 0:22:19.359 You know, Boeing built the seven forty seven. It's what 0:22:19.520 --> 0:22:22.240 fifty years old now, right, They built it many many 0:22:22.320 --> 0:22:25.920 many years ago. Um And and in those days, the 0:22:25.960 --> 0:22:28.960 hub and spoke was more of the way airlines went 0:22:29.000 --> 0:22:30.840