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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily

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Speaker 1: we bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Right

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Speaker 1: Now our interview of the day without question, on the

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Speaker 1: future of Global Wall Street. He was the first kid

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Speaker 1: in his family to go to college. He ended up

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Speaker 1: landing at Xerox, went on to Columbia University with the

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Speaker 1: usual NBA and landed at a small investment shop a

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Speaker 1: million years ago, and there he built their investment research department,

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Speaker 1: the II winner for I believe it was nine even

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Speaker 1: ten years in a row. Leon Cooperman joins us, this

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Speaker 1: could be a four hour conversation. We don't have that,

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Speaker 1: so let's get to it with a gentleman from Omega. Leon,

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Speaker 1: I want to talk right now about the future of

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Speaker 1: Golden Sex. You have a beloved relationship with it. You

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Speaker 1: and I have talked about this many times before. I

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Speaker 1: guess they're trying to be a retail bank. We went

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Speaker 1: from Lloyd over to David. How is your Golden Sex doing.

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Speaker 1: I think they're doing very well. I didn't expect this question,

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Speaker 1: and I retired from Golden Sex excuse me at the

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Speaker 1: end of so I'm gone for what twenty years? Um,

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Speaker 1: so maybe more than twenty years, to be closer to

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Speaker 1: thirty years, and so things have changed. But I have

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Speaker 1: an extraordinary high requ off for the firm to have

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Speaker 1: a great culture. They're they're they're terrific people. But in

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Speaker 1: all honesty, uh, I'm not current. What do you point? Okay,

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Speaker 1: that's diplomat. I made a big mistake when I got

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Speaker 1: my stock when they went public. I gave it all

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Speaker 1: to charity, and that I should have given a cash

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Speaker 1: and kept a stock we Okay, that's a good way

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Speaker 1: to put it. But Leon Cooperman, what's so important here

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Speaker 1: is this experiment of trying to do investment banking, trying

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Speaker 1: to do investment research and strategies you did and Golden

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Speaker 1: successet management, and also trying to be a bank. Do

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Speaker 1: you think that can be a successful strategy. I'm sure

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Speaker 1: if Goldman Sacks Persuser will be successful strategy. What can

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Speaker 1: I say? You know, I don't run the shop. When

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Speaker 1: I was there, we were a private partnership. We used

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Speaker 1: to laugh about the banks uh, and then what happened

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Speaker 1: during the financial crisis in two thousand and eight, we

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Speaker 1: were they were forced to survive, and you know, they'll

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Speaker 1: go with the they'll go with the float. You know,

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Speaker 1: when I was dead, they were very reluctant get into

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Speaker 1: money management. Now that in my management with two feet,

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Speaker 1: so you know, they adapt to the environment. They're smart people,

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Speaker 1: they're good people, and I would have great confidence in

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Speaker 1: the farm. Leon Cooperman Jerome Power will speak at Jackson

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Speaker 1: Hole today a virtual jackson Hole this week. Rather, I

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Speaker 1: should say, tell me how you perceive the interest rate

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Speaker 1: structure that the FED has set. What is the FED

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Speaker 1: rant on Global Wall Street? They have created a real

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Speaker 1: speculative bubble. In my opinion, I have to admit that

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Speaker 1: I'm uncomfortable at the present time because not because of

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Speaker 1: the virus, it's a factor. Uncomfortable because focus on something

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Speaker 1: the market isn't focused on, and that is the amount

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Speaker 1: of debt that's being created. Who pays for the party

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Speaker 1: when the party is over? You know, we just celebrate

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Speaker 1: our two and forty fourth birthday. And basically it took

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Speaker 1: us two and forty four years to go from zero

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Speaker 1: national debt to twenty one trillion will probably end this

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Speaker 1: year trillion. That is a growth rate in debt far

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Speaker 1: in excess of what the economy is growing at. And

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Speaker 1: I think that that's going to be a problem down

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Speaker 1: the road. And I think they they've created a real

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Speaker 1: speculative environment. You know, I was just looking give me

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Speaker 1: some statistics. Apple announced their fourth one split on July.

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Speaker 1: The twenty day average call volume at that time with

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Speaker 1: seven and one calls. Okay. This past Friday, Apple traded

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Speaker 1: two point one million calls, three times the average of

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Speaker 1: twenty days okay, And the stock is up sevent since

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Speaker 1: the announcement of the split. Next before this morning, Tesla

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Speaker 1: announced their five for one split August eleven. Same thing,

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Speaker 1: big increase in call volume. The stock is up forty

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Speaker 1: nine percent since the stock split was announced against the

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Speaker 1: SMP up one. Now, the last time I checked, if

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Speaker 1: somebody gave me five singles for five dollar bill, it

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Speaker 1: didn't create a new wealth, right, did not create Well,

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Speaker 1: that was the old calculation. Now this is the new calculation.

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Speaker 1: When you've got a big component of robin hood investors,

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Speaker 1: that sort of one theory out there, what's risk your

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Speaker 1: right now? The high flying stocks or bonds. Well, I

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Speaker 1: think no question that bonds to me present the return

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Speaker 1: free risk. Uh, and that's what's work in favor of

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Speaker 1: the stock market. What I have not fully appreciated is

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Speaker 1: the what a zero interest rate environment does for stocks.

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Speaker 1: I was focused on the fact that we've had zero

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Speaker 1: interest rates in Japan and Europe and their stocks are

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Speaker 1: five or six multiple points below the United States market.

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Speaker 1: So I think low interest rates are indicative of a

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Speaker 1: problem economy. You know, we've had artificial support for the

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Speaker 1: economy since two thousand and eight. You know, it's thirteen years.

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Speaker 1: And uh, I don't look at that as being the positive.

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Speaker 1: I look at that as possibly being a negative. You're

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Speaker 1: you're Stephen Ratner, close to Mike Bloomberg, who I have

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Speaker 1: enormous respect for, basically wrote an article this morning in

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Speaker 1: The Times preach the economic recovery that isn't you know? Um,

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Speaker 1: I think that the zero rates is creating a very

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Speaker 1: speculative tone to the market. I have said for months

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Speaker 1: now that we're really dealing with three markets, not one market.

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Speaker 1: The first market is the fang market. And frankly, uh,

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Speaker 1: these are very fine companies, these technology companies whose demand

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Speaker 1: has been pulled forward by at least five years due

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Speaker 1: to the virus. They're not cheap, but by the historical

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Speaker 1: standards of the nifty fifty of nineteen seventy two and

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Speaker 1: UH the technology bubble of two thousand, they're not in

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Speaker 1: any way expensive, and people could conjure up with I

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Speaker 1: want to come up, Leon, I want to go through this,

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Speaker 1: and we should mention to all of you on our simulcast,

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Speaker 1: we welcome you to Bloomberg Radio and Television. We are

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Speaker 1: with Leon Cooperman of Omega. Of course he's mentioned Mr Bloomberg,

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Speaker 1: the founder of Bloomberg LP, this radio and TV property

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Speaker 1: as well, and also Mr Rattner writing today an essay

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Speaker 1: on the market, Steve Rattner of course managing uh some

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Speaker 1: of the assets of Mr Bloomberg, And of course he's

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Speaker 1: appeared with this many times before. Leon Cooperman, to the

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Speaker 1: world of Stephen Ratner. You learned a Columbia business school

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Speaker 1: of a sixty forty or a six efficient market and

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Speaker 1: proper asset allocation? What is the Cooper theory Cooperman theory?

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Speaker 1: Given the distortions that we have now, can you stay

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Speaker 1: with with original investment science or do you have to

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Speaker 1: invent something new for the next ten years. Book of

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Speaker 1: seventy seven years of age. I have no clients. I

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Speaker 1: retired at the end of twenty eighteen, and I do

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Speaker 1: what makes me comfortable. Right now. I have very, very

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Speaker 1: very few bonds. I think bonds represent a return free risk. Uh,

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Speaker 1: and I don't. I was beginning to explain to you

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Speaker 1: there three markets out there. There's the fang market, richly

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Speaker 1: appraised but not ridiculously appraised. Okay, then the Robintive market,

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Speaker 1: which is ridiculous, totally ridiculous. Regrettably, I said this on

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Speaker 1: TV about a month ago, that that mark would end

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Speaker 1: in tears, and the very next day, some young man,

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Speaker 1: yes seven creating, committed suicide. Okay, when you carl i

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Speaker 1: con is as bright as they come. He liquidates his position,

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Speaker 1: hurts at seventy two cents a share in three weeks later,

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Speaker 1: his training of five dollars. And you check into what's

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Speaker 1: going on in the Robin hood uh, platform Eastman, Kodak Robin,

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Speaker 1: the platform, Tesla, Robin and platform. So you know that's

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Speaker 1: gonna end in tears. I have no interest in that market.

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Speaker 1: It's not rational to me. I don't spend time on

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Speaker 1: it the third market, the things to be done, and

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Speaker 1: that's everything else. So I give a shout out to

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Speaker 1: my former partner Sam Martini who did great work or

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Speaker 1: something called Mr Cooper c O O P. I own it, Okay,

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Speaker 1: I like it. I would add to it right here,

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Speaker 1: right now. He did work. The work he did was

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Speaker 1: knowable by anybody. Okay, he's a digger, he's a smart

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Speaker 1: on the average guy. The coming three weeks ago reported

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Speaker 1: earnings in the second quarter five hundred million dollars in

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Speaker 1: cash earnings, which was fifty percent of the market value

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Speaker 1: of the company in one quarter. Everybody was thinking about

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Speaker 1: the stocking work twelve or thirteen. Now that you are right,

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Speaker 1: just because the time I want to circle back. We're

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Speaker 1: talking about the future of Goldman Sachs, the future of

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Speaker 1: Global Wall Street. Can you own the banks here? And

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Speaker 1: if Mr Diamond is running the sterling performer of the banks,

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Speaker 1: can you acquire shares in JP Morgan? This morning? I

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Speaker 1: could I own City Bank, and I'm I'm concerned about

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Speaker 1: financial conditions generally, so I'm not adding to my banks.

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Speaker 1: I think they're probably cheap. Uh, They're a cheap group

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Speaker 1: in the market. You keep with perseverating about Goldman. Don't

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Speaker 1: worry about Goldman. Goldman will be just fine. They go

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Speaker 1: with the flow, They'll figure out what they gotta do. Right. Well, well, Leanna,

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Speaker 1: and perhaps don't worry about Goldman. But what about hedge funds?

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Speaker 1: You moved to a family office. If you were starting

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Speaker 1: your career out now, would you start a hedge fund

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Speaker 1: or would you stay in the private realm? Would you

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Speaker 1: say away from that industry? Let me tell you what's happened. Okay, uh,

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Speaker 1: And maybe indirectly, I'll answer you a question. If you

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Speaker 1: came to me in two thousand and eight and said, Lee,

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Speaker 1: I want to invest in your hedge fund, and I

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Speaker 1: said to you, know, you don't want to be in

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Speaker 1: a hedge fund. You want to be in a relative

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Speaker 1: return vehicle. Hedge funds are hedged. Basically, they have a

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Speaker 1: short position. We are now in front of a ten

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Speaker 1: year bull market in the economy, a tenure bull run

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Speaker 1: in the stock market. You don't want to have any

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Speaker 1: hedges on. You want to be bulls out investment. You

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Speaker 1: would have had me arrested. That's exactly what's happened. Okay.

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Speaker 1: Now everybody says, well, the passive index is that beat

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Speaker 1: the hedge funds. We don't want to be in the

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Speaker 1: hedge funds. And you have to ask yourself a question

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Speaker 1: now the time you want to be fully invested on

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Speaker 1: alongside and not have a hedge on and I'd say no,

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Speaker 1: I think hedge funds make sense now. So the people

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Speaker 1: that went into hedge funds in two thousand and eight

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Speaker 1: are disenchanted, But the fact is they made that decision.

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Speaker 1: I retired the top. I retired to do the path right.

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Speaker 1: It's uh and uh, you know, I want to have

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Speaker 1: a life of my own. You know, I'm basically I'm

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Speaker 1: very focused at philanthropy now. You know. I tell the

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Speaker 1: young kids that I meet with it, you know, I

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Speaker 1: give them a quote. I gotta fine, Okay, Leon, we're

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Speaker 1: on a time. All I can say is that's either

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Speaker 1: a phenomenal backdrop in front of three guys on Madison

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Speaker 1: Avenue or the island you're on, Lisa and I want

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Speaker 1: to visit my con February mean, I I am totally

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Speaker 1: illiterate technologically. I pressed a button in my computer that

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Speaker 1: background appeared. I can't get rid of it. Short Hills,

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Speaker 1: New Jersey. I am a Florida resonate. Uh. So you're

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Speaker 1: doing this to get you're doing this to get a

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Speaker 1: tech dodge from the I R S. That's what he's doing, everybody.

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Speaker 1: Leon Cooperman's in Florida today and for the other hundred

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Speaker 1: eighty one days he's gotta be there as well. Mr Cooperman,

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Speaker 1: thank you so much. With Omega as well. Right now,

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Speaker 1: Dr Bremer to just as well. My book of the

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Speaker 1: summer is Richard hass Magisterial The World. It is a

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Speaker 1: primer on our international relations. Of course, Ian Bremer knows

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Speaker 1: every word of that. He joins us now because he

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Speaker 1: is doing one of the coolest things in international relations.

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Speaker 1: Ian Bremer escapes every summer to Nantucket and you think

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Speaker 1: he's leading the big life. But what he's doing is

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Speaker 1: leaned over a desk working like crazy on his next book.

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Speaker 1: And that next book. We are in anticipation of the

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Speaker 1: crisis we need. What is the crisis, Dr Bremer, that

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Speaker 1: we need? And you'd like to believe that it's coronavirus, right,

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Speaker 1: because it's the biggest of our lifetimes. As we all know,

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Speaker 1: crises do give us the opportunity to respond to things

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Speaker 1: that are deeply broken. Uh. It is hard to see. Uh,

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Speaker 1: in this environment that we are taking advantage of the

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Speaker 1: opportunities this crisis affords us. So the book is all

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Speaker 1: about that and other such opportunities on our horizon. What

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Speaker 1: we have right now is we jump from news item

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Speaker 1: to news item. This morning, Dr bremer It is a

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Speaker 1: Secretary of State making a convenient trip to Israel so

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Speaker 1: he can speak from Jerusalem to support his president with

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Speaker 1: his evangelical base. Comment on the appropriateness of a Secretary

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Speaker 1: of State speaking at a convention from Jerusalem. Uh, there's

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Speaker 1: not much that this administration is concerned about in terms

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Speaker 1: of symbolic appropriateness. Uh. I've never seen anyone in the

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Speaker 1: White House state we couldn't do that because it wouldn't

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Speaker 1: be appropriate. That's that's not the way they being UM,

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Speaker 1: and frankly, it's not the way their base wants them

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Speaker 1: to be. But let's be clear that the US relationship

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Speaker 1: with Israel UM is one of Trump's best in the world.

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Speaker 1: His foreign policy successes are more about Israel than just

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Speaker 1: about anywhere else. Remember, they moved the embassy to Jerusalem,

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Speaker 1: so you wouldn't be surprised if Pompeo is speaking from

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Speaker 1: the new US embassy that many administrations had supported but

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Speaker 1: no one had done. You also have now normalization of

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Speaker 1: relations between the Israelis and the UA, something actually facilitated

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Speaker 1: by the Trump administration. And it looks like Pompeo is

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Speaker 1: going to Sudan after that. I think that that my

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Speaker 1: expectation is Sudan is also going to normalize. This is

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Speaker 1: not going to stop with the U a E. It's

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Speaker 1: actually quite something. And since we usually beat up on

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Speaker 1: Trump in terms of foreign policy failings and how different

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Speaker 1: leaders don't like him, this is one way they do

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Speaker 1: forgetting about the way they do it, or the this

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Speaker 1: course or the tone. What is the distinction between a

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Speaker 1: Biden foreign policy in a second term Trump foreign policy?

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Speaker 1: The biggest difference is probably Europe. President Trump and the

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Speaker 1: entire administration believes that the EU is bad for the

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Speaker 1: United States. They want to deal individually with European governments.

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Speaker 1: They strongly supported Brexit. President Biden if he became, if

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Speaker 1: he won, would be the antithesis of that. He would

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Speaker 1: support a stronger EU. Um he would clearly and build

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Speaker 1: up the multilateral aspects of that relationship, where Trump there's not.

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Speaker 1: On China, Tom the Biden administration and the Trump administration

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Speaker 1: would be almost identical. And it's so interesting from the

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Speaker 1: d n C last week, you didn't hear anyone talking

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Speaker 1: about China, despite the fact that that's probably the single

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Speaker 1: issue that exercises and animates President Trump the most internationally.

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Speaker 1: And it's because quietly, when you talk to Biden's national

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Speaker 1: security and foreign policy team don't have problems with the

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Speaker 1: way that Trump does some of these things. But actually,

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Speaker 1: in terms of you know, Taiwan, Hong Kong, South China,

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Speaker 1: CE technology based one trade deal, all of that, Biden

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Speaker 1: and Trump were nearly identical. All Right, Ian Bremer of

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Speaker 1: eur Asia Group joining US right now, let's talk about China.

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Speaker 1: President Trump has come out saying that he was going

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Speaker 1: to ban all transactions of US businesses with the likes

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Speaker 1: of ten Cent and TikTok's parent company. We're seeing him

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Speaker 1: perhaps dial back some of those threats, at least in

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Speaker 1: private conversations. Where are we on that and how pivotal

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Speaker 1: is that to the relationship between China and the US.

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Speaker 1: Um it's it's significant. I wouldn't say it's pivotal. UM.

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Speaker 1: I would say Huawei is more pivotal. Huawei is the

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Speaker 1: most important technology company for China. It is their national champion.

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Speaker 1: They're using it to drive five G, which is their

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Speaker 1: effort to control the Internet of things and all of

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Speaker 1: the data and the monetization of that data, and and

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Speaker 1: the advance is an AI that come from it, and

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Speaker 1: the United States is not all dialing back. In fact,

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Speaker 1: last week we saw tougher efforts against Huawei and specifically

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Speaker 1: more companies that would be put on watch lists if

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Speaker 1: they are providing semi conductors and other critical pieces of

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Speaker 1: of of of supply to Huawei. And you know they

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Speaker 1: have some semi conductors store up, but within a year

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Speaker 1: they're in serious trouble. So I mean, I really do

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Speaker 1: think that on every issue that matters between the US

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Speaker 1: and China, whether it's national security or internal human rights,

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Speaker 1: or whether it's the economy or tech, the relationship between

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Speaker 1: the US and China is heading in a bad direction. Um.

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Speaker 1: And so there It's true. I was talking to Jared

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Speaker 1: Kushner a few days ago, and he was being considerably

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Speaker 1: softer I would argue than say Peter and Navarrow on

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Speaker 1: issues like the importance of still doing business with China,

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Speaker 1: not breaking tech company's ability to engage. Then I would

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Speaker 1: see from others like light Highs or like Pompeale in

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Speaker 1: particular my Pompeio securiy state. Um. But in general, we

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Speaker 1: know where this relationship is heading, no matter who wins

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Speaker 1: in November, and it's probably the most important geopolitical issue

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Speaker 1: for the markets by by a factor of magnitude. Yeah. Well,

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Speaker 1: the way that you distinguish that is really important. The

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Speaker 1: idea that ten Cent shares rallying with the idea that

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Speaker 1: perhaps President Trump is softening his stance ambanning these businesses,

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Speaker 1: but the direction of travel is what's important to watch.

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Speaker 1: Nile Ferguson, a Bloomberg opinion columnist, writing that Joe Biden

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Speaker 1: could end up being a wartime president, talking about the

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Speaker 1: concern that some people have that the US China titfor

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Speaker 1: tat is going to lead to a hot war. Do

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Speaker 1: you think that we are getting closer to that? No? No,

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Speaker 1: I wrote Neil after he wrote that piece, And you

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Speaker 1: know sort of that it would amused me because I

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Speaker 1: mean he has become a bit of a bomper on

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Speaker 1: that issue. I do think that we are in a

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Speaker 1: technology code war with the Chinese, where we literally want

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Speaker 1: their tech companies to fail and we will punish not

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Speaker 1: just those companies, but those that work with them. But

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Speaker 1: I mean the likelihood of a hot war. First of all,

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Speaker 1: the Chinese truly don't want one. They understand they're a

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Speaker 1: c asymmetric capabilities compared to the United States. I mean,

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Speaker 1: there are a regional military power. They know we're close

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Speaker 1: to American capacity, but they also still understand that there's

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Speaker 1: a lot in that we work on together. I mean,

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Speaker 1: no matter how bad the US China relationship gets, I

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Speaker 1: still think we're gonna be selling them crude oil. No

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Speaker 1: matter how bad it gets. I still think when we

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Speaker 1: go to Walmart, we're gonna be buying a lot of

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Speaker 1: goods that are made in China. And I still think

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Speaker 1: that a lot of our universities are gonna be working

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Speaker 1: really hard to make sure that Chinese foreign students can

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Speaker 1: come and pay a pull freight, because otherwise many of

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Speaker 1: those colleges will be in a lot of trouble. So

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Speaker 1: not only do I not see a hot war, I

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Speaker 1: think there are limitations to how bad this relationship can get,

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Speaker 1: and and they considerably greater than say with the Russians.

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Speaker 1: Uh Ian Bremer. Just with the time left, I want

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Speaker 1: to turn ourselves to the levant into the future for

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Speaker 1: mr Ara Tojan. We don't have time to really dive

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Speaker 1: into this correctly. But there's been three or four air

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Speaker 1: to ones across the span from two thousand two, which

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Speaker 1: are to Wan is affecting Greece, affecting hydrocarbons north of crete,

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Speaker 1: which air to Wan is affecting Libya. Uh. Well, Libya,

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Speaker 1: we have a cease fire now that actually seems to

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Speaker 1: be able to stick. That's a good thing, um, And

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Speaker 1: I would say that I recognize that overplaying his hand

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Speaker 1: is only gonna lead um to military confrontation. Doesn't want

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Speaker 1: The same thing has been true in Seria, uh, with

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Speaker 1: their claims for buffer zone but backing away when the

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Speaker 1: Russians pushed them hard. Um. I think the same thing

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Speaker 1: is true in the East Mediterranean. I mean, you know

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Speaker 1: they're saying they're gonna drill, but that's in part it's

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Speaker 1: because it's easy to beat up on the Greeks by

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Speaker 1: themselves when you have divisions inside the European Union, unwilling

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Speaker 1: to have a comedy united front against Turkey. That's been frustrating,

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Speaker 1: I think to the Greeks. Um. So the problem is

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Speaker 1: that Turkey is in massive economic trouble right now. The

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Speaker 1: Turkish leyra, of course, UM continues to fall. Um, the

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Speaker 1: the indebtedness is a serious problem. UM and uh and

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Speaker 1: and and the the small and medium enterprises. You're doing

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Speaker 1: very badly. And so if you're Earnwan and you're thinking

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Speaker 1: through how you can continue to leave that country and

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Speaker 1: not end up in jail um and a Turkish prison

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Speaker 1: is not a fun place to be right Um. You're

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Speaker 1: you're thinking about what you can do to rally the

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Speaker 1: population behind you. And a lot of this UM is

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Speaker 1: overt nationalism and bomb throwing, but it's it's not getting

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Speaker 1: involved in serious military confrontation. And I do think that

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Speaker 1: earn One is savvy enough to understand how deep doesn't

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Speaker 1: want to go. Remember remember Tom that you have that

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Speaker 1: turn the Russian relationship which was totally broken. It was

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Speaker 1: arder One that ended up apologizing with a face because

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Speaker 1: it was hurting his economy. He understands that he can

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Speaker 1: only go so far. Ian Bremer, thank you so much

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Speaker 1: and good writing to you in Nantucket. He of course

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Speaker 1: is with your Asia group an oil and read a

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Speaker 1: cent of Energy aspects and reading what is the distinction

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Speaker 1: right now in supply, demand dynamics and oil. What are

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Speaker 1: you focused on all right now? Even with the storms

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Speaker 1: comming Thomas Unfortunately, so long demand and how much we

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Speaker 1: are recovering, how far away we are from pre twenty

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Speaker 1: that will put it along way away, and we have

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Speaker 1: built so much infant treat that. Yes, while these storms

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Speaker 1: are supportive for crude in the sense that we are

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Speaker 1: shutting in a lot of classes Mexico prodition, it's not

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Speaker 1: really going to move the needle. That comes to just

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Speaker 1: the shire volume of inventory that we still need to

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Speaker 1: run down, all right, So what will move the needle?

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Speaker 1: I'm looking right now Crewe traded on the n imax

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Speaker 1: forty two dollars and seventy six cents. It's been moving

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Speaker 1: in this forty to forty three dollar range for a

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Speaker 1: while right now at the upper end of that range.

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Speaker 1: What would take? What would it take to break out?

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Speaker 1: And it will break out to the upside or to

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Speaker 1: the downside? I mean, honestly, had it not been for

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Speaker 1: the weaker dollar, given where the physical market is right now,

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Speaker 1: crude would have been five dollars law. So this is

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Speaker 1: very much in a financial market supporting the price of oil,

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Speaker 1: because if you look at the contango, which really tells

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Speaker 1: you how weak or strong the market is. The crude

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Speaker 1: curves have moved into more of a contango, you know,

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Speaker 1: for the front month is far more depressed than future prices. Um,

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Speaker 1: we will get there, It will. It will take another

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Speaker 1: year or so to run down this massive infantry overhand.

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Speaker 1: We built over the first five months of the year.

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Speaker 1: We are drawing stocks right now. The hurricanes again will

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Speaker 1: help draw down that faster, but it just will take

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Speaker 1: us a good year given that demand. It's not recovering

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Speaker 1: in a straight line. Right. There's a lot of stops

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Speaker 1: and starts that are parts of the US that are

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Speaker 1: getting better, pots that are not. Even the rest of

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Speaker 1: the world is the same too. Short of visit, Amrina

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Speaker 1: sent thank you so much for joining us today with

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Speaker 1: energy aspects. This is a joy. She was a strong

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Speaker 1: which if you're in the game, everyone knows, was one

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Speaker 1: of the premier value houses of another time and place,

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Speaker 1: and is now head of active equity at Wells Fargo

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Speaker 1: Asset Management. And Melody joins us now from the land

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Speaker 1: of PEPs blue ribbon beer. Uh. And I've got to

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Speaker 1: ask right now. It's a simple question. Our Amazon and

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Speaker 1: Apple value stocks. Well, you know, tom As we used

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Speaker 1: to say, prices what you've hey, value is what you get,

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Speaker 1: and the market would say that you're getting a lot

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Speaker 1: of value still out of these larger cap names. Certainly

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Speaker 1: the price seems very high. But as you know, and

428
00:25:16,160 --> 00:25:19,600
Speaker 1: as you have been talking about four months and months

429
00:25:19,640 --> 00:25:24,040
Speaker 1: and months um, investors are seeking growth in this market

430
00:25:24,119 --> 00:25:27,280
Speaker 1: where there's very hard to come by. We're all looking

431
00:25:27,280 --> 00:25:29,159
Speaker 1: at three years, four years, five years. You as a

432
00:25:29,280 --> 00:25:33,960
Speaker 1: value pro if it's stupid crazy pricing on so many

433
00:25:34,000 --> 00:25:38,960
Speaker 1: different sectors, how far out are you rationalizing revenue and

434
00:25:39,040 --> 00:25:42,720
Speaker 1: earnings growth? Those are two lines, folks that cross out

435
00:25:42,720 --> 00:25:45,800
Speaker 1: in the distance. Is in melody buying for five years

436
00:25:45,800 --> 00:25:50,000
Speaker 1: from now? Well, you know, I think our managers really

437
00:25:50,040 --> 00:25:53,360
Speaker 1: are looking three to five years out, and that's kind

438
00:25:53,359 --> 00:25:58,280
Speaker 1: of typical for portfolio managers to do when they're building models.

439
00:25:58,600 --> 00:26:02,600
Speaker 1: I think the interesting thing about this time is, you know,

440
00:26:03,000 --> 00:26:06,280
Speaker 1: I was taught early in my career really try to

441
00:26:06,320 --> 00:26:09,440
Speaker 1: figure out what the market is telling you, and it's

442
00:26:09,440 --> 00:26:13,720
Speaker 1: really difficult. It's a difficult question to answer in today's world.

443
00:26:13,920 --> 00:26:18,280
Speaker 1: But I have to wonder if the market's not saying, gosh,

444
00:26:18,480 --> 00:26:22,600
Speaker 1: there's a big te tonic shift happening in our economy,

445
00:26:22,920 --> 00:26:26,520
Speaker 1: and it's happening at a pace that we haven't seen before,

446
00:26:27,000 --> 00:26:31,199
Speaker 1: just accelerated because this pandemic UM and that might be

447
00:26:31,400 --> 00:26:34,240
Speaker 1: the reason for that. Our contrast between the winners and

448
00:26:34,240 --> 00:26:36,640
Speaker 1: the losers in the market and so when you look

449
00:26:36,680 --> 00:26:40,800
Speaker 1: three to five years out doesn't look a lot different.

450
00:26:41,600 --> 00:26:48,000
Speaker 1: It doesn't mean that, you know, technology UM really drives productivity,

451
00:26:48,200 --> 00:26:54,119
Speaker 1: supports profit margins um and drive expansions right, and and

452
00:26:54,720 --> 00:26:59,960
Speaker 1: doesn't mean that some other sectors that we're really supportive

453
00:27:00,000 --> 00:27:03,560
Speaker 1: of our of our our economy, like travel and leisure

454
00:27:03,720 --> 00:27:08,800
Speaker 1: and bricks and mortar retail just don't anymore well. And

455
00:27:08,840 --> 00:27:10,560
Speaker 1: this is the whole idea that what we're seeing in

456
00:27:10,600 --> 00:27:13,159
Speaker 1: the stock market is the reality that the future has

457
00:27:13,200 --> 00:27:17,040
Speaker 1: been brought forward by ten years due to the pandemics.

458
00:27:17,160 --> 00:27:19,920
Speaker 1: It's accelerated a lot of these changes that already were happening.

459
00:27:19,960 --> 00:27:23,199
Speaker 1: As an active equity manager, how do you get an

460
00:27:23,280 --> 00:27:28,240
Speaker 1: edge on that? Do you just go Apple Amazon? No?

461
00:27:28,800 --> 00:27:32,080
Speaker 1: In fact, when I look across the board at all

462
00:27:32,160 --> 00:27:36,320
Speaker 1: of the managers that now are on the Wells Fargo

463
00:27:36,359 --> 00:27:42,560
Speaker 1: Asset Management platform UM, we have two very prominent growth

464
00:27:42,560 --> 00:27:46,240
Speaker 1: teams that have done both done extremely well. One of

465
00:27:46,240 --> 00:27:49,119
Speaker 1: them doesn't own Apple at all, the other one is

466
00:27:49,280 --> 00:27:53,120
Speaker 1: slightly overweight Apple. And so there you take two different

467
00:27:53,320 --> 00:27:58,240
Speaker 1: you know, two different dynamics there. Um both doing well,

468
00:27:58,280 --> 00:28:01,919
Speaker 1: but it's difficult as a growth manager not to be

469
00:28:02,720 --> 00:28:05,560
Speaker 1: UM and have some exposure there. Now they both have

470
00:28:05,800 --> 00:28:09,280
Speaker 1: exposure to a lot of other names in technology. They're

471
00:28:09,280 --> 00:28:12,800
Speaker 1: both overweight that space because they do believe in the

472
00:28:12,920 --> 00:28:16,720
Speaker 1: power of technology driving all of those things that I

473
00:28:16,760 --> 00:28:21,760
Speaker 1: talked about profit margins, productivity, etcetera. UM, But they're also

474
00:28:22,440 --> 00:28:25,640
Speaker 1: very diversified in other sectors. And I would say so

475
00:28:25,760 --> 00:28:33,080
Speaker 1: are our value managers who see the US manufacturing renaissance

476
00:28:33,520 --> 00:28:37,360
Speaker 1: really truly happening, right, And this is not just about jobs,

477
00:28:37,359 --> 00:28:41,360
Speaker 1: but it's about cost structure and margins. And so we

478
00:28:41,480 --> 00:28:44,920
Speaker 1: have seen more and more manufacturing coming back to the

479
00:28:44,960 --> 00:28:47,880
Speaker 1: Midwest in other places in the US, and it seems

480
00:28:47,960 --> 00:28:50,640
Speaker 1: like that really is truly, you know, here to stay.

481
00:28:50,720 --> 00:28:52,240
Speaker 1: I'm glad that you mentioned that. I mean, there was

482
00:28:52,280 --> 00:28:56,160
Speaker 1: a story on the Bloomberg over the weekend about the

483
00:28:56,240 --> 00:29:01,120
Speaker 1: Kenosha region in Wisconsin, which I'm sure is close to you.

484
00:29:01,640 --> 00:29:03,920
Speaker 1: This idea that there there was actually a twenty five

485
00:29:04,560 --> 00:29:09,240
Speaker 1: salary increase in certain areas. Do that fox Con uh

486
00:29:09,480 --> 00:29:13,160
Speaker 1: factory that was brought to the region. Where do you

487
00:29:13,280 --> 00:29:16,959
Speaker 1: see the most potential upside due to what you call

488
00:29:17,600 --> 00:29:22,400
Speaker 1: the manufacturing renaissance that you see taking place. Well, I

489
00:29:22,400 --> 00:29:25,520
Speaker 1: think it's going to continue to come from you know,

490
00:29:26,120 --> 00:29:28,680
Speaker 1: you know, all different areas of manufacturing across the board,

491
00:29:28,720 --> 00:29:33,480
Speaker 1: whether it is in tech manufacturing but also industrial manufacturing.

492
00:29:33,760 --> 00:29:36,480
Speaker 1: And so we've seen it in Wisconsin certainly, We've seen

493
00:29:36,480 --> 00:29:39,520
Speaker 1: it in the rust bells in Ohio and other states. UM.

494
00:29:39,760 --> 00:29:43,440
Speaker 1: So fox Con was clearly electronics, but we're seeing it

495
00:29:44,160 --> 00:29:47,680
Speaker 1: UM in other places. So UM, I have friends that

496
00:29:47,760 --> 00:29:51,840
Speaker 1: work in the manufacturing building. You know this isn't in

497
00:29:51,960 --> 00:29:58,720
Speaker 1: great you know standing today, but um auto airplane manufacturing parts, UM,

498
00:29:58,760 --> 00:30:06,880
Speaker 1: certainly automn automobile manufacturing part appliances. So UM across all industries.

499
00:30:07,520 --> 00:30:09,800
Speaker 1: What is your view forward? I mean, and you know

500
00:30:09,880 --> 00:30:13,000
Speaker 1: you've so experienced at value in the conundrum of growth

501
00:30:13,080 --> 00:30:16,120
Speaker 1: and value and now heading active management where you're in

502
00:30:16,160 --> 00:30:20,400
Speaker 1: brutal competition with index funds as well. Where is the

503
00:30:20,680 --> 00:30:23,920
Speaker 1: where I don't mean this by value like stock fundamentals,

504
00:30:23,920 --> 00:30:28,200
Speaker 1: but what's the value opportunity now for active management, how

505
00:30:28,200 --> 00:30:34,600
Speaker 1: do you place yourself to outperform whatever the mandate is

506
00:30:34,880 --> 00:30:39,120
Speaker 1: against index funds. I actually think this is kind of

507
00:30:39,160 --> 00:30:42,840
Speaker 1: a unique time for active management to really show its

508
00:30:42,840 --> 00:30:47,920
Speaker 1: true advantage. When we saw volatility levels like we saw,

509
00:30:48,480 --> 00:30:53,360
Speaker 1: you know, when we saw I'm starting in March and

510
00:30:53,440 --> 00:30:58,040
Speaker 1: in April, when this pandemic really hit, that's when active

511
00:30:58,080 --> 00:31:03,720
Speaker 1: management truly can show its power, right because managers, portfolio managers,

512
00:31:03,720 --> 00:31:07,520
Speaker 1: that analysts can go in and analyze fundamentals and where

513
00:31:07,520 --> 00:31:10,240
Speaker 1: those companies might be three to five years from now.

514
00:31:10,640 --> 00:31:16,200
Speaker 1: And so more than sixty of our active managers are

515
00:31:16,280 --> 00:31:20,719
Speaker 1: outperforming six in a five year time frame. When you

516
00:31:20,760 --> 00:31:24,440
Speaker 1: look out UM over over five years, when you look

517
00:31:24,520 --> 00:31:28,400
Speaker 1: over three years, it's more than seventy five. So this

518
00:31:28,640 --> 00:31:33,200
Speaker 1: is a time for active to really shine, and you know,

519
00:31:33,240 --> 00:31:38,480
Speaker 1: hopefully taking advantage of more and more volatility overpassed UM

520
00:31:38,560 --> 00:31:40,600
Speaker 1: will clearly showcase that what do you do on the banks?

521
00:31:40,600 --> 00:31:43,160
Speaker 1: I mean, Strong was so good at avoiding bank tobaccos

522
00:31:43,200 --> 00:31:44,920
Speaker 1: along the way, what do you do with the financials?

523
00:31:45,000 --> 00:31:48,680
Speaker 1: Right now, our managers are underweight that space, and I

524
00:31:48,720 --> 00:31:50,680
Speaker 1: think it's clear that it's going to be difficult for

525
00:31:50,840 --> 00:31:55,520
Speaker 1: banks to really outperform with rage with race as low

526
00:31:55,560 --> 00:31:57,840
Speaker 1: as they are and seemingly as low as they will

527
00:31:57,880 --> 00:32:01,320
Speaker 1: be for the next couple of years. Melody, I'm curious

528
00:32:01,360 --> 00:32:04,840
Speaker 1: about the bogey that you're looking for an active management.

529
00:32:04,840 --> 00:32:08,120
Speaker 1: In other words, what type of returns target for an

530
00:32:08,120 --> 00:32:11,880
Speaker 1: active equity portfolio seems appropriate over the next five to

531
00:32:11,960 --> 00:32:15,600
Speaker 1: ten years. You know, I think you have to look

532
00:32:15,640 --> 00:32:19,280
Speaker 1: at out performing the benchmark by two to three I'll

533
00:32:19,320 --> 00:32:22,480
Speaker 1: pay I'll perform in your specific benchmark by two to

534
00:32:22,560 --> 00:32:27,560
Speaker 1: three percent to really showcase, um, the strength of active

535
00:32:27,560 --> 00:32:31,640
Speaker 1: management now clearly, um. You know you have to cover

536
00:32:31,720 --> 00:32:35,200
Speaker 1: your fees. That's ground one. So if you can cover

537
00:32:35,320 --> 00:32:39,440
Speaker 1: your fees and beat passive, to me, that's a win.

538
00:32:39,920 --> 00:32:43,440
Speaker 1: And I'm a believer in active. If an active manager

539
00:32:43,480 --> 00:32:47,120
Speaker 1: can do that, I'd actually rather be an active manager,

540
00:32:47,280 --> 00:32:51,840
Speaker 1: meant because that's going against the crowd, and I'd rather

541
00:32:51,880 --> 00:32:55,320
Speaker 1: be not with the crowd today, um, than with the crowd.

542
00:32:55,720 --> 00:32:59,640
Speaker 1: But ideally two all right, So if you want to

543
00:32:59,680 --> 00:33:01,560
Speaker 1: be against the crowd or you want to take a

544
00:33:01,640 --> 00:33:04,560
Speaker 1: have a contrarian take of some sort. What's the one

545
00:33:04,720 --> 00:33:09,360
Speaker 1: popular stock right now that you'd sell you know what

546
00:33:09,680 --> 00:33:13,160
Speaker 1: I am not because of my new role and I'm

547
00:33:13,200 --> 00:33:17,120
Speaker 1: not actually managing money. I'm not allowed to talk about

548
00:33:17,120 --> 00:33:20,040
Speaker 1: specific stocks. I can only talk Come on, no, who's listening.

549
00:33:21,280 --> 00:33:27,160
Speaker 1: We're in We're in the Aderondecks. We're doing right. Um.

550
00:33:27,400 --> 00:33:30,280
Speaker 1: I heard you get hassled all morning from thank you,

551
00:33:30,520 --> 00:33:33,200
Speaker 1: Thank you? Tom? Did you hear that somebody is on

552
00:33:33,240 --> 00:33:36,720
Speaker 1: my side? And come back any time. We're really to

553
00:33:36,840 --> 00:33:39,960
Speaker 1: take a vacation, and Tom, you need to take one's

554
00:33:40,120 --> 00:33:44,480
Speaker 1: right kids and work. What's sick is Lisa. The deer

555
00:33:44,520 --> 00:33:47,240
Speaker 1: flies up in the aderondis or like a B fifty

556
00:33:47,240 --> 00:33:50,400
Speaker 1: two bomber, you camp draw them. They're even bigger out

557
00:33:50,400 --> 00:33:53,720
Speaker 1: in northern Wisconsin. It's true. I spent a lot of

558
00:33:53,720 --> 00:33:55,760
Speaker 1: time in northern Wisconsin. I'll just let you know that

559
00:33:55,800 --> 00:33:59,640
Speaker 1: I had, I have family in Wisconsin. It's beautiful up there.

560
00:34:00,240 --> 00:34:04,640
Speaker 1: Dead silence, you guys just like I just a confirming that, yes,

561
00:34:04,680 --> 00:34:07,720
Speaker 1: there are incredible Let us know, folks, what time of

562
00:34:07,800 --> 00:34:11,120
Speaker 1: years should Lisa and I traveled in northern Wisconsin. It's

563
00:34:11,160 --> 00:34:15,520
Speaker 1: beautiful now, Okay, Emma bloody, thank you so much. I

564
00:34:15,640 --> 00:34:18,719
Speaker 1: greatly appreciate it. With Will's Fargo Asset Management really really

565
00:34:18,800 --> 00:34:22,760
Speaker 1: quite good, and value investing is there as well. Thanks

566
00:34:22,800 --> 00:34:27,040
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

567
00:34:27,280 --> 00:34:32,600
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

568
00:34:32,719 --> 00:34:37,000
Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.

569
00:34:37,080 --> 00:34:40,560
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio