Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot com, and of course on the Bloomberg. The
Speaker 1: story in the equity market front end center is Twitter
Speaker 1: right now down in the pre market with a Facebook
Speaker 1: style disappointment. Joining me to discusses, Paul Sweeney, Bloomberg Intelligence,
Speaker 1: Director of North American Research pull what went wrong? Users?
Speaker 1: Monthly average active users declined in the quarter, and the
Speaker 1: company is talking about the more declines on the third quarter,
Speaker 1: and you know, they're they're talking up to their trying
Speaker 1: to clean up the platform of you know, some bad accounts,
Speaker 1: of fake accounts, some accounts that are just troublemakers. And
Speaker 1: so the you know, the monthly active users has been
Speaker 1: a metric that investors focus on for Twitter, you know,
Speaker 1: it's it's it's kind of struggled to gain scale we
Speaker 1: need we need compared to Facebook with a couple of
Speaker 1: billion users and um, and so I think people are
Speaker 1: concerned that ge if this, if the company is not
Speaker 1: growing its user based then it's going to become less
Speaker 1: attractive to advertisers, and that's kind of the concern going forward. So, UM,
Speaker 1: you know, the monthly active users was disappointing here and
Speaker 1: trying to understand the bullish view on this stalk this morning.
Speaker 1: Monthly three active users stalled. They stall because they're cleaning
Speaker 1: up the platform. They reset revenue expectations. Is there a
Speaker 1: good story out there associated with this over the long term, pool, Well,
Speaker 1: the good story is that you know, there are three
Speaker 1: thirty five million users roughly, and they are a very active,
Speaker 1: passionate users. UM. There's some influencers there if if you will, uh,
Speaker 1: including uh Donald Trump. UM. So you know, if advertisers
Speaker 1: want to reach a you know, a audience of over
Speaker 1: three million, UM, passionate audience uh tends to be younger demos. Uh,
Speaker 1: then this is a good audience. Uh. The problem, however,
Speaker 1: in digital media is it's it seems to be if
Speaker 1: you have less than a billion users, you're just not relevant. So,
Speaker 1: you know, the good news for Facebook because they have
Speaker 1: four platforms with Facebook and Messenger and WhatsApp and Instagram
Speaker 1: all north of a billion users. UM. Obviously uh, Google
Speaker 1: and and and even at Amazon Uh, you know, have
Speaker 1: have that kind of scale, but anything sub a billion
Speaker 1: users tends to be deemed not really an effective advertising
Speaker 1: by for for advertising. What's your point called You've got
Speaker 1: Facebook with four franchises with a billion users plus and
Speaker 1: Twitter are struggling to get past the five hundred million mark.
Speaker 1: There is a question mark about the whole sect of
Speaker 1: the whole space today in social media. I notice his
Speaker 1: Facebook pad it's gains after these Twitter results came out.
Speaker 1: Are we finding out there's just limitations to growth in
Speaker 1: terms of social medi idea? You know, it's um probably,
Speaker 1: I mean there's certainly from a user perspective, you know,
Speaker 1: there's some close to matrization in some of the more
Speaker 1: mature markets such as the North American Western Europe, but
Speaker 1: there's a you know, a lot of growth, uh and
Speaker 1: and other parts of the world. But what we're seeing
Speaker 1: is I still think the long term bowl case for
Speaker 1: digital advertising is still very much intact because we see
Speaker 1: across all me including Twitter today, their daily active users
Speaker 1: are actually up eleven So people are spending more and
Speaker 1: more time on the Internet, including social media, and the
Speaker 1: advertisers are are are following. And I put a personal
Speaker 1: note on this. I mean, I'm looking here at the
Speaker 1: bold letters of the fabulous Bloomberg top live blog on Twitter. Folks,
Speaker 1: I can't say enough about this. If you have a terminal,
Speaker 1: these top live streams are unreal. And they say we
Speaker 1: have made we wait, Twitter says, reflecting impact from decisions
Speaker 1: we have made to prioritize the health of the platform.
Speaker 1: I went down over two thousand followers, you know, in
Speaker 1: my puny world, not not Donald Trump's world, but I
Speaker 1: want to down two thousand followers one day. Is they
Speaker 1: cleaned up the health of their platform. I would suggest
Speaker 1: the the m a you miss there's a lot to
Speaker 1: do with them getting these idiot bots and computer stuff off.
Speaker 1: I think you're probably You're probably right. And I think, um,
Speaker 1: you know, the bullish call here is this is for
Speaker 1: the long term benefit of the platform and advertisers will
Speaker 1: ultimately reward this platform down the road. Um so, And
Speaker 1: I think you know what, I think what investors are
Speaker 1: saying is g where where where? Where is the end
Speaker 1: of this? We we saw it here in the second
Speaker 1: quarter where they they kind of talked about it in
Speaker 1: the third quarter. So again, I think concerns for it
Speaker 1: for Twitter have been you know, you know, scale, it's
Speaker 1: one of scale. Will they ever have scale to be
Speaker 1: relevant to advertisers? And anytime you you talk about re
Speaker 1: reducing the amount of users on there, I think that
Speaker 1: just heightens the concern. And John, you've got a followers
Speaker 1: size like area on a grand Did you lose like
Speaker 1: seven year eight tho? I lost nothing, Seriously, I lost nothing.
Speaker 1: I don't know I lost seriously. I was like one
Speaker 1: oh seven, one oh eight and all of a sudden
Speaker 1: boom and at one oh five, just one day. Help us.
Speaker 1: Have you've seen this before? Facebook hysteria, Amazon omg, phenomenal,
Speaker 1: Twitter hysteria. What's next? You know, I think the uh,
Speaker 1: you know, what we're seeing out there in the tech
Speaker 1: world is very high valuations. The stocks have been just
Speaker 1: phenomenally just think about this like mar one hopefully not
Speaker 1: hopefully not um although that was a good year for me,
Speaker 1: but um. I think the you know, the Fank stocks
Speaker 1: and and tech stocks in general, you know, they have
Speaker 1: been one of the very few consistent areas of growth
Speaker 1: that investors could feel confident about. And and and to
Speaker 1: the extent that there's any miss there, whether it's a
Speaker 1: you know, even you know, on users are on revenue
Speaker 1: or EPs, the stocks get get hit hard. But let's
Speaker 1: talk about the A and fang for most people. Amazon.
Speaker 1: Amazon did this really interesting thing yesterday where they said,
Speaker 1: don't look at that, Look how vega UM. We've been
Speaker 1: looking at revenue and growth there for a long long time,
Speaker 1: and that all of a sudden they said, look, we
Speaker 1: can make big profits. How did they disappoint on revenue
Speaker 1: but beat on profits. You know, it's it's an interesting story.
Speaker 1: You're right. For for years and years and years that
Speaker 1: the company has done a wonderful job of conditioning at
Speaker 1: shareholder base to say, don't worry about profits, just focus
Speaker 1: on the top line growth because we're playing this long
Speaker 1: game for the growth of e commerce, and we are
Speaker 1: the play in e commerce globally. UM. But every once
Speaker 1: in a while they will dial down their expenses in
Speaker 1: terms of opening up new fulfillment centers and distribution centers
Speaker 1: and R and D and so on and so forth,
Speaker 1: on all the crazy things they invest in, whether it's
Speaker 1: groceries or whatever, they will dial that back a little bit,
Speaker 1: and then the EPs will just explode and and and
Speaker 1: really surprise people. And that's what happened again. Yesterday. So
Speaker 1: you know, the the drivers for the improved profitability of
Speaker 1: Amazon today versus just even two years ago are really
Speaker 1: two areas. One is the cloud business, the Amazon Web
Speaker 1: services business that has operating margins in the mid thirty
Speaker 1: percent range versus low single digits for the core Amazon business. Uh.
Speaker 1: And then the second thing is advertising. You know, they
Speaker 1: they're advertising was up over a hundred percent last quarter.
Speaker 1: We think advertising will be an eight billion dollar business
Speaker 1: for them in two thousand and eighteen versus three billion
Speaker 1: last year. That's a profitable business. So they are in
Speaker 1: fact growing businesses that are profitable. Uh. So this is
Speaker 1: a business that, whether investors wanted or not, are going
Speaker 1: to show increased profitability. So um, the narrative is changing
Speaker 1: a little bit here on Amazon is great to have
Speaker 1: you with it, Seanna, You and I are really on
Speaker 1: the same page. On Friday as a time to collect
Speaker 1: your thoughts, particularly in the summer, and drive forward a
Speaker 1: weekend thinking and getting to Monday. We have a guest
Speaker 1: who can jump start the Yes, Steve Asman. It's always
Speaker 1: great to catch up with Steve, of course, famed for
Speaker 1: the big Shot I Sman's groups, new Berger Berman Signior
Speaker 1: portfolio manager Stevis grab to catch up with you a
Speaker 1: couple of shorts that you mentioned on TV a little
Speaker 1: bit earlier. But for the benefit of our listeners, let's
Speaker 1: begin with Tesla. It's kind of one of those stocks,
Speaker 1: one of those stories that just separates the longs, which
Speaker 1: are sort of called fans, and the shorts, which are
Speaker 1: called the haters. Um, you're sort of in the latter
Speaker 1: category right now, walk me through it. I'm not a hater,
Speaker 1: I'm a lover. That's a joke. Um. Look, people who
Speaker 1: love tests are like the point. They like to say,
Speaker 1: he's a genius, and he's in my experience over the years,
Speaker 1: there are a lot of smart people this world. Um,
Speaker 1: But just because you're smart doesn't mean you're execute well.
Speaker 1: And so far he's not executing well. Um. He's building
Speaker 1: a whole bunch of cars in a tent. He's negative
Speaker 1: cash flow, he's at war with his safety regulator after
Speaker 1: the the unfortunate crash for his autonomous driving car. Um,
Speaker 1: and he's and he's lost a tremendous number of executives
Speaker 1: over the last two years. Those are all negative signs. Now,
Speaker 1: maybe he can pull it out, but as of now,
Speaker 1: it seems to me all the fundamentals are pointing negatively
Speaker 1: and some really peculiar behavior elsewhere. Do you factor that
Speaker 1: in when you have to create short thesis or is
Speaker 1: that separate to what you're walking us through at the
Speaker 1: moment um? I don't I factor some of that in.
Speaker 1: I factor more in that. After the autonomous driving accident,
Speaker 1: he announced two weeks later that he was no longer
Speaker 1: cooperating with the National Safety Board. I thought that was
Speaker 1: a very poor decision. And the other stuff I listened to,
Speaker 1: but I don't pay that much attention to. Let's talk
Speaker 1: about the execution of this short. How difficult is it
Speaker 1: to execute? How expensive is it? Just walk us through this?
Speaker 1: It's the fundamental short. It's a very liquid stock. You know,
Speaker 1: you can put the position on before you go out
Speaker 1: and get a cup of coffee and come back. So
Speaker 1: it's for the easiest thing in the world, either by
Speaker 1: tesla or short. It must talks about storemy weather and
Speaker 1: short phil Quite often it's there a risk that you
Speaker 1: do get that surprise to the upside and all of
Speaker 1: a sudden the position gets wiped out, Steve, is that
Speaker 1: something you account for? That's of course, I mean you
Speaker 1: have to assize it appropriately. It's a very very volatile stock,
Speaker 1: So it's not the biggest short my portfolio. Um, but
Speaker 1: you know, I I think the stock could go down
Speaker 1: about Is there a biggest short out there for you?
Speaker 1: Then if it's not the biggest short in your portfolios,
Speaker 1: but it's it's not the biggest short because of the motility.
Speaker 1: Interstility is wild and the stock tends to move on nonsense.
Speaker 1: So you know, just for I like to sleep at night,
Speaker 1: so I've sized it in a way where it's sleep
Speaker 1: is still possible. Could you explain what you mean by that?
Speaker 1: That's a word I use when I get lecture and
Speaker 1: people go, what what do you mean when you say sized?
Speaker 1: I'm looking at It's called portfolio sizing. But what do
Speaker 1: you mean when you say sized? Well, first of all,
Speaker 1: my philosophy of investing generally longs and shorts is that
Speaker 1: no position should be so large that your career is
Speaker 1: at risk. So you know, as I said on the TV,
Speaker 1: you know, my biggest long position is four and my
Speaker 1: biggest short position is about three and a half percent. Um,
Speaker 1: my smallest short position is about one and a half percent. Position.
Speaker 1: You know, Tesla is is size more towards the smaller
Speaker 1: end of the scale. Um, not because I don't think
Speaker 1: there's a lot There isn't a lot of downside. I
Speaker 1: do think potentially there's a lot of downside, but it
Speaker 1: tends to be an extremely volable stock. And what tends
Speaker 1: to happen with stocks like that is your day gets
Speaker 1: consumed completely by that one stock, And when your day
Speaker 1: is consumed by one stock, you can't think about the
Speaker 1: rest of your portfolio, and so I try to avoid
Speaker 1: situations like so, just to be clear here, the same
Speaker 1: here at bloom Bogs reached down to testa for comment.
Speaker 1: UM represent STIPs for for Tesla have not immediately returned
Speaker 1: a co full comment on this position of yours. Steve,
Speaker 1: Is it about the space that Tesla is operating in
Speaker 1: or is it about Tesla? Do you think there could
Speaker 1: be winners in this space, because quite clearly Elon Muski
Speaker 1: is having a very difficult time rolling this out in
Speaker 1: mass production. Well, look, I think when you look at
Speaker 1: the the car space, the real future is going to
Speaker 1: be autonomous driving. You know, he's gotten big in the
Speaker 1: electric car space, but I really think that we're leap
Speaker 1: frogging now towards autonomous driving, and the two largest players
Speaker 1: in a Toronto's driving are Google and GM, and as
Speaker 1: far as I can tell, um, Tesla is a very
Speaker 1: distant party in that space. Your other short that you
Speaker 1: mentioned to us, and there are longs, including your enthusiasm
Speaker 1: for Mr Bezos and Amazon, was Zillo, which is a
Speaker 1: whole different beast. It's again a smaller single story if
Speaker 1: you would, how do you handle a given short like
Speaker 1: a Zillo Z versus something with notoriety like a Tesla. Well,
Speaker 1: Zilla was a larger short, and the vectors up. I mean,
Speaker 1: you're really going against now, I'm going against I'm going
Speaker 1: against a trend in the sense that Zillo is considered
Speaker 1: to be what's called a platform, and the platform space
Speaker 1: is the hottest space in the Internet, so that I
Speaker 1: have going against me Um. But not all platforms are
Speaker 1: created equal, and this is a platform where I think
Speaker 1: the addressable market is much smaller than the company is saying.
Speaker 1: The growth rate of the company has slowed in its
Speaker 1: basic business enormously over the last year or so. And
Speaker 1: then the thing that really took tilted me over the
Speaker 1: edge with respect to Zillo was when they announced earlier
Speaker 1: this year that they were entering a new business, which
Speaker 1: was they were going to use their own capital to
Speaker 1: buy houses and flip them. And you know, you could
Speaker 1: have arguments about how good or bad the basic businesses,
Speaker 1: but it's definitely a cash flow positive business doesn't require
Speaker 1: a lot of capital. They're now entering into a low
Speaker 1: margin cyclical business where if we go into recession, that
Speaker 1: business will do particularly badly. Steve Osman, it has been
Speaker 1: great to get your thoughts this morning. Thank you very much.
Speaker 1: Iisman Group Newberger Berman, Senior portfolio manager. Why don't you
Speaker 1: bring in mr rupt Gear as we see the the
Speaker 1: yield come in a solid basis point two point nine
Speaker 1: six Chris Rapki joining us NATCHI financial economist m uf
Speaker 1: G a Union bank. You thought, she really thoughts Chris, Yeah,
Speaker 1: it looks like a pretty terrific number. As they say,
Speaker 1: it had a four handle. I was surprised by the
Speaker 1: strength of consumers spending because it didn't look like car
Speaker 1: and light truck sales were all that strong. I guess
Speaker 1: we're of the teen point four million annual rate in June.
Speaker 1: Um exports look like they're pretty strong. I still think
Speaker 1: you can say that you can make the case that
Speaker 1: this is the high water mark for growth here certainly
Speaker 1: this year, and that everything clicked this quarter, um, and
Speaker 1: we'll see what happens in the future. I think some
Speaker 1: of the trade uncertainty is still a problem, even with
Speaker 1: the agreement with the European Union. Well, Chris Let's unpacks
Speaker 1: that first of all, as Tom says, going beneath the
Speaker 1: headline number you've picked up on that trade story, how
Speaker 1: much of a contribution did we get from a build
Speaker 1: up ahead of tariffs being introduced that will likely not
Speaker 1: be in the number in the back half. Just trying
Speaker 1: to get my Bloomberg screen going here, Well, better get
Speaker 1: going net ex Well, exports add at one point one
Speaker 1: percentage point, and the drag from imports was minimal. So
Speaker 1: does look like certainly, uh you know, they people we
Speaker 1: exported more to the rest of the world to get
Speaker 1: ahead of some of these made tariff uncertainty that one
Speaker 1: percentage point. Yeah, I've got a first look at seven
Speaker 1: point four percent current g d P. That's a whow statistic.
Speaker 1: I've had a search here to figure out what that
Speaker 1: gives us. US goes back to is seven point four
Speaker 1: percent boom nominal GDP A healthy condition. Well, yeah, I
Speaker 1: mean you can do the same thing by saying, uh,
Speaker 1: you know, for some reason, inventories was a huge drag.
Speaker 1: I mean, first off, we revised the data back to
Speaker 1: um I wasn't there, so we'll have to study this
Speaker 1: a little more. But I was surprised that inventories subtracted
Speaker 1: one percentage point. So even though we missed at four
Speaker 1: point one percent, it was actually five point one percent.
Speaker 1: Which also, you know, if we take out inventories, which
Speaker 1: are just you know, they go back and forth every quarter.
Speaker 1: Uh so the underlying potential rate real growth is like five. Really,
Speaker 1: the economy is quite strong with I think the Trump
Speaker 1: administration has a reason to crow about it. I don't
Speaker 1: know if they'll be crowing quite the same way. No,
Speaker 1: but still real final sales John Ferrell or five and
Speaker 1: that's a that's around statistic that uh is just absolutely
Speaker 1: absolutely extraordinarius. Another way, overwhelmingly, the consensus view now is
Speaker 1: this is as good as it gets. Chris, tell me
Speaker 1: why this can't be self fulfilling. Why these kind of
Speaker 1: numbers can inspire confidence in the economy and drive things
Speaker 1: forward even more? Well, I mean it comes down to
Speaker 1: the battle between the Trump administration. Remember the famous US
Speaker 1: Treasury one page economic growth forecast that came out with
Speaker 1: to justify the tax cuts. Now, the administration is looking
Speaker 1: for three percent growth starting in two thousand and twenty
Speaker 1: forever as far as the eye can see. But the
Speaker 1: economics profession, as shown by FED official forecasts, have GDP
Speaker 1: being two in two thousand and twenty. So the tax
Speaker 1: cuts that economists see is one year phenomenon in trailing
Speaker 1: out in two thousand nineteen. So the economics world say
Speaker 1: has two percent growth starting two thou administrations say is three.
Speaker 1: So I mean there's quite a difference. And the reason
Speaker 1: between the two is the the economists have come down
Speaker 1: on the idea of demographics are very big. They ignored
Speaker 1: it for years now. They think the graying of society,
Speaker 1: low birth rate, that's gonna doom economic growth, or at
Speaker 1: least keep it down at load percent range. Chris Rob, you,
Speaker 1: what's your run rate for for US GDP. I think
Speaker 1: we're gonna get close to three percent, not quite in
Speaker 1: the next couple of years. I haven't like two point
Speaker 1: eight two point nine. I'm not quite as bearish as
Speaker 1: some of the set official forecasts, but not quite as
Speaker 1: uh as Blue Skies for the economy, I don't I
Speaker 1: don't see the administration forecast is being that good either.
Speaker 1: Thanks so much, Chris ROPPI greatly appreciate it, And for
Speaker 1: the record, I would note that Mr Rupprie has been
Speaker 1: an optimist on the American economy. Margie Battell looks at
Speaker 1: the same day that we look at uh in a
Speaker 1: high yield in bonds, in dividend, paying in dividend, and
Speaker 1: growing equities at Wells Fargo Asset Management. Margat I happened
Speaker 1: to be looking at contribution to g d P. Exports
Speaker 1: is jaw dropping goods, boom services not bad, but export,
Speaker 1: the export char coming off of two thousand and fifteen
Speaker 1: and particularly coming off the election, is extraordinary. You are
Speaker 1: very optimistic on the markets. Is it because we're an
Speaker 1: export juggernaut? Uh? Well, really it's everything everything. US business
Speaker 1: is extremely productive, globally competitive. Global growth is at least
Speaker 1: okay to picking up a little bit. So conditions here
Speaker 1: are great. Our manufacturers in particular have lowered their costs.
Speaker 1: They have such a flexible cost structure they can compete
Speaker 1: with anybody even if the dollar moves up, which of
Speaker 1: course it has I mean the dollar dynamics are tangible.
Speaker 1: Is a kind of report today in the interior data
Speaker 1: of the report enough to shift the bond market priced down,
Speaker 1: yield higher, Not as long as you have inflation so
Speaker 1: well behaved, and not as long as the treasury market
Speaker 1: is still has a competitive yield compared to yields of
Speaker 1: other developed countries. It's incredible that our yields are so
Speaker 1: much hard and say your yields in Europe. So I
Speaker 1: think that for a safe haven for investors to get
Speaker 1: something like a three percent is going to keep a
Speaker 1: lid on how fast rates can go up, assuming inflation
Speaker 1: days where it is. Have you changed your portfolio a
Speaker 1: lot in the last ninety days? I mean the toxic
Speaker 1: not toxic, the cocktail rather of booming economic growth four
Speaker 1: point one percent with a real final sales folks nicely
Speaker 1: above five. I mean, do does that make you change
Speaker 1: your portfolio? Have you been you vacationing in Iceland? No?
Speaker 1: I've been thinking for a long time that the market
Speaker 1: is set up under estimating how strong and how sustainable
Speaker 1: the growth is. And I think that a lot of
Speaker 1: market players still are geared as if tomorrow is going
Speaker 1: to be two thousand and eight. Again in the market's
Speaker 1: going to drop. Where do you wrong on rates too?
Speaker 1: They're not going to go up, that asked. Okay, they're
Speaker 1: on rates as well, which means price stability. But what
Speaker 1: does it mean for dividend growth? And where can you
Speaker 1: find intelligent dividend growth backed by free cash flow? I
Speaker 1: think in just about all sectors except for those that
Speaker 1: are under structural pressure because of global forces. Um. I
Speaker 1: think retailing is a sector that is continuing to suffer
Speaker 1: because of the Internet trend. And I think, really you
Speaker 1: look at a sector like autos. Yes, people have more
Speaker 1: money to buying more cars, but too much global competition,
Speaker 1: too much capacity. We have a headline out now Margie
Speaker 1: Patel to speak on the American economy at eight one am,
Speaker 1: and just behind that Bloomberg headline, President Trump will speak
Speaker 1: to the nation a m this morning, uh New York
Speaker 1: time on the US economy. Pim Fox, Why don't you
Speaker 1: jump in here as we speak with Margie Patel, Wells Fargo, PIM.
Speaker 1: I mean this is this is this is an economy
Speaker 1: Pim from years in my childhood. Well, well, well we
Speaker 1: won't go there. This is big numbers. These are big
Speaker 1: numbers and market. One point to you is how much
Speaker 1: do you believe the investors smart investors are willing to
Speaker 1: pay for every dollar of earnings? Now do you think
Speaker 1: that's changing? I think they should be willing to pay
Speaker 1: a bit more um. If you say that, you know,
Speaker 1: going forward, PE is roughly seventeen is. I see no
Speaker 1: reason why they can't go up a turn or two.
Speaker 1: You know, the argument that well as rates go up,
Speaker 1: pees gets compressed. Again. I'm skeptical of the naysayers on
Speaker 1: how well the economy is going to do, how all
Speaker 1: the equity market is going to do. Is that because
Speaker 1: they're going to have to be competitive in terms of
Speaker 1: trying to actually purchase shares some companies. In other words,
Speaker 1: why would they be willing to pay more? Because you
Speaker 1: can see this cycle is different because it really doesn't
Speaker 1: look cyclical, It looks more secular um. Just as Milton
Speaker 1: Friedman said, if you have a passive monetary authority, you
Speaker 1: can allow for more sustainable growth. And we're finally seeing
Speaker 1: once again he's being true, and I think that's it.
Speaker 1: And you're not going to see the kind of inflation
Speaker 1: that would really cram down equity values or or put
Speaker 1: the financial pressure on sectors. Financial sector, Do you believe
Speaker 1: that that is going to be one industry group that's
Speaker 1: going to perform. I'm extremely lukewarm on the financial sector
Speaker 1: again because unless you have a boom and bus lending cycle,
Speaker 1: I just do not see where the growth is coming from.
Speaker 1: And this whole recovery has not been grown by increased leverage,
Speaker 1: so I have very minimal exposure. That's really interesting in
Speaker 1: the sense of how you get to that decision. You're
Speaker 1: talking about lower rates than people expect, you're talking about
Speaker 1: a better economy. Those those those bring on this ambiguity
Speaker 1: within banks, and that's distilled to yield curve. Is it
Speaker 1: just they can't make net margin, they don't have to
Speaker 1: spread between long and short well exactly. That was a
Speaker 1: big case for I think all the macro stories are
Speaker 1: are pretty pretty wobbly. But just as far as what
Speaker 1: sector is going to borrow, it doesn't look like housing,
Speaker 1: it doesn't look like it's consumers, it doesn't look like
Speaker 1: it's business. So who's left I didn't see much Markie.
Speaker 1: One more question. I want to go to pim Fox
Speaker 1: in this in a moment, if you look at the
Speaker 1: first quarter corporate profits. It's amazing the tax effect, the
Speaker 1: legislation effect. Can you say that this quarter was based
Speaker 1: off Mr Trump's tax reform legislation. I think we're only
Speaker 1: beginning to see the positive benefits of that on the
Speaker 1: corporate side and then flowing ultimately over into consumers. So
Speaker 1: I think this has very, very long life at the
Speaker 1: beginning of it. Markt Ptel, thank you so much, greatly
Speaker 1: appreciate it with her optimism on the American the County.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keene before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.