Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily
Speaker 1: 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 Right
Speaker 1: Now our interview of the day without question, on the
Speaker 1: future of Global Wall Street. He was the first kid
Speaker 1: in his family to go to college. He ended up
Speaker 1: landing at Xerox, went on to Columbia University with the
Speaker 1: usual NBA and landed at a small investment shop a
Speaker 1: million years ago, and there he built their investment research department,
Speaker 1: the II winner for I believe it was nine even
Speaker 1: ten years in a row. Leon Cooperman joins us, this
Speaker 1: could be a four hour conversation. We don't have that,
Speaker 1: so let's get to it with a gentleman from Omega. Leon,
Speaker 1: I want to talk right now about the future of
Speaker 1: Golden Sex. You have a beloved relationship with it. You
Speaker 1: and I have talked about this many times before. I
Speaker 1: guess they're trying to be a retail bank. We went
Speaker 1: from Lloyd over to David. How is your Golden Sex doing.
Speaker 1: I think they're doing very well. I didn't expect this question,
Speaker 1: and I retired from Golden Sex excuse me at the
Speaker 1: end of so I'm gone for what twenty years? Um,
Speaker 1: so maybe more than twenty years, to be closer to
Speaker 1: thirty years, and so things have changed. But I have
Speaker 1: an extraordinary high requ off for the firm to have
Speaker 1: a great culture. They're they're they're terrific people. But in
Speaker 1: all honesty, uh, I'm not current. What do you point? Okay,
Speaker 1: that's diplomat. I made a big mistake when I got
Speaker 1: my stock when they went public. I gave it all
Speaker 1: to charity, and that I should have given a cash
Speaker 1: and kept a stock we Okay, that's a good way
Speaker 1: to put it. But Leon Cooperman, what's so important here
Speaker 1: is this experiment of trying to do investment banking, trying
Speaker 1: to do investment research and strategies you did and Golden
Speaker 1: successet management, and also trying to be a bank. Do
Speaker 1: you think that can be a successful strategy. I'm sure
Speaker 1: if Goldman Sacks Persuser will be successful strategy. What can
Speaker 1: I say? You know, I don't run the shop. When
Speaker 1: I was there, we were a private partnership. We used
Speaker 1: to laugh about the banks uh, and then what happened
Speaker 1: during the financial crisis in two thousand and eight, we
Speaker 1: were they were forced to survive, and you know, they'll
Speaker 1: go with the they'll go with the float. You know,
Speaker 1: when I was dead, they were very reluctant get into
Speaker 1: money management. Now that in my management with two feet,
Speaker 1: so you know, they adapt to the environment. They're smart people,
Speaker 1: they're good people, and I would have great confidence in
Speaker 1: the farm. Leon Cooperman Jerome Power will speak at Jackson
Speaker 1: Hole today a virtual jackson Hole this week. Rather, I
Speaker 1: should say, tell me how you perceive the interest rate
Speaker 1: structure that the FED has set. What is the FED
Speaker 1: rant on Global Wall Street? They have created a real
Speaker 1: speculative bubble. In my opinion, I have to admit that
Speaker 1: I'm uncomfortable at the present time because not because of
Speaker 1: the virus, it's a factor. Uncomfortable because focus on something
Speaker 1: the market isn't focused on, and that is the amount
Speaker 1: of debt that's being created. Who pays for the party
Speaker 1: when the party is over? You know, we just celebrate
Speaker 1: our two and forty fourth birthday. And basically it took
Speaker 1: us two and forty four years to go from zero
Speaker 1: national debt to twenty one trillion will probably end this
Speaker 1: year trillion. That is a growth rate in debt far
Speaker 1: in excess of what the economy is growing at. And
Speaker 1: I think that that's going to be a problem down
Speaker 1: the road. And I think they they've created a real
Speaker 1: speculative environment. You know, I was just looking give me
Speaker 1: some statistics. Apple announced their fourth one split on July.
Speaker 1: The twenty day average call volume at that time with
Speaker 1: seven and one calls. Okay. This past Friday, Apple traded
Speaker 1: two point one million calls, three times the average of
Speaker 1: twenty days okay, And the stock is up sevent since
Speaker 1: the announcement of the split. Next before this morning, Tesla
Speaker 1: announced their five for one split August eleven. Same thing,
Speaker 1: big increase in call volume. The stock is up forty
Speaker 1: nine percent since the stock split was announced against the
Speaker 1: SMP up one. Now, the last time I checked, if
Speaker 1: somebody gave me five singles for five dollar bill, it
Speaker 1: didn't create a new wealth, right, did not create Well,
Speaker 1: that was the old calculation. Now this is the new calculation.
Speaker 1: When you've got a big component of robin hood investors,
Speaker 1: that sort of one theory out there, what's risk your
Speaker 1: right now? The high flying stocks or bonds. Well, I
Speaker 1: think no question that bonds to me present the return
Speaker 1: free risk. Uh, and that's what's work in favor of
Speaker 1: the stock market. What I have not fully appreciated is
Speaker 1: the what a zero interest rate environment does for stocks.
Speaker 1: I was focused on the fact that we've had zero
Speaker 1: interest rates in Japan and Europe and their stocks are
Speaker 1: five or six multiple points below the United States market.
Speaker 1: So I think low interest rates are indicative of a
Speaker 1: problem economy. You know, we've had artificial support for the
Speaker 1: economy since two thousand and eight. You know, it's thirteen years.
Speaker 1: And uh, I don't look at that as being the positive.
Speaker 1: I look at that as possibly being a negative. You're
Speaker 1: you're Stephen Ratner, close to Mike Bloomberg, who I have
Speaker 1: enormous respect for, basically wrote an article this morning in
Speaker 1: The Times preach the economic recovery that isn't you know? Um,
Speaker 1: I think that the zero rates is creating a very
Speaker 1: speculative tone to the market. I have said for months
Speaker 1: now that we're really dealing with three markets, not one market.
Speaker 1: The first market is the fang market. And frankly, uh,
Speaker 1: these are very fine companies, these technology companies whose demand
Speaker 1: has been pulled forward by at least five years due
Speaker 1: to the virus. They're not cheap, but by the historical
Speaker 1: standards of the nifty fifty of nineteen seventy two and
Speaker 1: UH the technology bubble of two thousand, they're not in
Speaker 1: any way expensive, and people could conjure up with I
Speaker 1: want to come up, Leon, I want to go through this,
Speaker 1: and we should mention to all of you on our simulcast,
Speaker 1: we welcome you to Bloomberg Radio and Television. We are
Speaker 1: with Leon Cooperman of Omega. Of course he's mentioned Mr Bloomberg,
Speaker 1: the founder of Bloomberg LP, this radio and TV property
Speaker 1: as well, and also Mr Rattner writing today an essay
Speaker 1: on the market, Steve Rattner of course managing uh some
Speaker 1: of the assets of Mr Bloomberg, And of course he's
Speaker 1: appeared with this many times before. Leon Cooperman, to the
Speaker 1: world of Stephen Ratner. You learned a Columbia business school
Speaker 1: of a sixty forty or a six efficient market and
Speaker 1: proper asset allocation? What is the Cooper theory Cooperman theory?
Speaker 1: Given the distortions that we have now, can you stay
Speaker 1: with with original investment science or do you have to
Speaker 1: invent something new for the next ten years. Book of
Speaker 1: seventy seven years of age. I have no clients. I
Speaker 1: retired at the end of twenty eighteen, and I do
Speaker 1: what makes me comfortable. Right now. I have very, very
Speaker 1: very few bonds. I think bonds represent a return free risk. Uh,
Speaker 1: and I don't. I was beginning to explain to you
Speaker 1: there three markets out there. There's the fang market, richly
Speaker 1: appraised but not ridiculously appraised. Okay, then the Robintive market,
Speaker 1: which is ridiculous, totally ridiculous. Regrettably, I said this on
Speaker 1: TV about a month ago, that that mark would end
Speaker 1: in tears, and the very next day, some young man,
Speaker 1: yes seven creating, committed suicide. Okay, when you carl i
Speaker 1: con is as bright as they come. He liquidates his position,
Speaker 1: hurts at seventy two cents a share in three weeks later,
Speaker 1: his training of five dollars. And you check into what's
Speaker 1: going on in the Robin hood uh, platform Eastman, Kodak Robin,
Speaker 1: the platform, Tesla, Robin and platform. So you know that's
Speaker 1: gonna end in tears. I have no interest in that market.
Speaker 1: It's not rational to me. I don't spend time on
Speaker 1: it the third market, the things to be done, and
Speaker 1: that's everything else. So I give a shout out to
Speaker 1: my former partner Sam Martini who did great work or
Speaker 1: something called Mr Cooper c O O P. I own it, Okay,
Speaker 1: I like it. I would add to it right here,
Speaker 1: right now. He did work. The work he did was
Speaker 1: knowable by anybody. Okay, he's a digger, he's a smart
Speaker 1: on the average guy. The coming three weeks ago reported
Speaker 1: earnings in the second quarter five hundred million dollars in
Speaker 1: cash earnings, which was fifty percent of the market value
Speaker 1: of the company in one quarter. Everybody was thinking about
Speaker 1: the stocking work twelve or thirteen. Now that you are right,
Speaker 1: just because the time I want to circle back. We're
Speaker 1: talking about the future of Goldman Sachs, the future of
Speaker 1: Global Wall Street. Can you own the banks here? And
Speaker 1: if Mr Diamond is running the sterling performer of the banks,
Speaker 1: can you acquire shares in JP Morgan? This morning? I
Speaker 1: could I own City Bank, and I'm I'm concerned about
Speaker 1: financial conditions generally, so I'm not adding to my banks.
Speaker 1: I think they're probably cheap. Uh, They're a cheap group
Speaker 1: in the market. You keep with perseverating about Goldman. Don't
Speaker 1: worry about Goldman. Goldman will be just fine. They go
Speaker 1: with the flow, They'll figure out what they gotta do. Right. Well, well, Leanna,
Speaker 1: and perhaps don't worry about Goldman. But what about hedge funds?
Speaker 1: You moved to a family office. If you were starting
Speaker 1: your career out now, would you start a hedge fund
Speaker 1: or would you stay in the private realm? Would you
Speaker 1: say away from that industry? Let me tell you what's happened. Okay, uh,
Speaker 1: And maybe indirectly, I'll answer you a question. If you
Speaker 1: came to me in two thousand and eight and said, Lee,
Speaker 1: I want to invest in your hedge fund, and I
Speaker 1: said to you, know, you don't want to be in
Speaker 1: a hedge fund. You want to be in a relative
Speaker 1: return vehicle. Hedge funds are hedged. Basically, they have a
Speaker 1: short position. We are now in front of a ten
Speaker 1: year bull market in the economy, a tenure bull run
Speaker 1: in the stock market. You don't want to have any
Speaker 1: hedges on. You want to be bulls out investment. You
Speaker 1: would have had me arrested. That's exactly what's happened. Okay.
Speaker 1: Now everybody says, well, the passive index is that beat
Speaker 1: the hedge funds. We don't want to be in the
Speaker 1: hedge funds. And you have to ask yourself a question
Speaker 1: now the time you want to be fully invested on
Speaker 1: alongside and not have a hedge on and I'd say no,
Speaker 1: I think hedge funds make sense now. So the people
Speaker 1: that went into hedge funds in two thousand and eight
Speaker 1: are disenchanted, But the fact is they made that decision.
Speaker 1: I retired the top. I retired to do the path right.
Speaker 1: It's uh and uh, you know, I want to have
Speaker 1: a life of my own. You know, I'm basically I'm
Speaker 1: very focused at philanthropy now. You know. I tell the
Speaker 1: young kids that I meet with it, you know, I
Speaker 1: give them a quote. I gotta fine, Okay, Leon, we're
Speaker 1: on a time. All I can say is that's either
Speaker 1: a phenomenal backdrop in front of three guys on Madison
Speaker 1: Avenue or the island you're on, Lisa and I want
Speaker 1: to visit my con February mean, I I am totally
Speaker 1: illiterate technologically. I pressed a button in my computer that
Speaker 1: background appeared. I can't get rid of it. Short Hills,
Speaker 1: New Jersey. I am a Florida resonate. Uh. So you're
Speaker 1: doing this to get you're doing this to get a
Speaker 1: tech dodge from the I R S. That's what he's doing, everybody.
Speaker 1: Leon Cooperman's in Florida today and for the other hundred
Speaker 1: eighty one days he's gotta be there as well. Mr Cooperman,
Speaker 1: thank you so much. With Omega as well. Right now,
Speaker 1: Dr Bremer to just as well. My book of the
Speaker 1: summer is Richard hass Magisterial The World. It is a
Speaker 1: primer on our international relations. Of course, Ian Bremer knows
Speaker 1: every word of that. He joins us now because he
Speaker 1: is doing one of the coolest things in international relations.
Speaker 1: Ian Bremer escapes every summer to Nantucket and you think
Speaker 1: he's leading the big life. But what he's doing is
Speaker 1: leaned over a desk working like crazy on his next book.
Speaker 1: And that next book. We are in anticipation of the
Speaker 1: crisis we need. What is the crisis, Dr Bremer, that
Speaker 1: we need? And you'd like to believe that it's coronavirus, right,
Speaker 1: because it's the biggest of our lifetimes. As we all know,
Speaker 1: crises do give us the opportunity to respond to things
Speaker 1: that are deeply broken. Uh. It is hard to see. Uh,
Speaker 1: in this environment that we are taking advantage of the
Speaker 1: opportunities this crisis affords us. So the book is all
Speaker 1: about that and other such opportunities on our horizon. What
Speaker 1: we have right now is we jump from news item
Speaker 1: to news item. This morning, Dr bremer It is a
Speaker 1: Secretary of State making a convenient trip to Israel so
Speaker 1: he can speak from Jerusalem to support his president with
Speaker 1: his evangelical base. Comment on the appropriateness of a Secretary
Speaker 1: of State speaking at a convention from Jerusalem. Uh, there's
Speaker 1: not much that this administration is concerned about in terms
Speaker 1: of symbolic appropriateness. Uh. I've never seen anyone in the
Speaker 1: White House state we couldn't do that because it wouldn't
Speaker 1: be appropriate. That's that's not the way they being UM,
Speaker 1: and frankly, it's not the way their base wants them
Speaker 1: to be. But let's be clear that the US relationship
Speaker 1: with Israel UM is one of Trump's best in the world.
Speaker 1: His foreign policy successes are more about Israel than just
Speaker 1: about anywhere else. Remember, they moved the embassy to Jerusalem,
Speaker 1: so you wouldn't be surprised if Pompeo is speaking from
Speaker 1: the new US embassy that many administrations had supported but
Speaker 1: no one had done. You also have now normalization of
Speaker 1: relations between the Israelis and the UA, something actually facilitated
Speaker 1: by the Trump administration. And it looks like Pompeo is
Speaker 1: going to Sudan after that. I think that that my
Speaker 1: expectation is Sudan is also going to normalize. This is
Speaker 1: not going to stop with the U a E. It's
Speaker 1: actually quite something. And since we usually beat up on
Speaker 1: Trump in terms of foreign policy failings and how different
Speaker 1: leaders don't like him, this is one way they do
Speaker 1: forgetting about the way they do it, or the this
Speaker 1: course or the tone. What is the distinction between a
Speaker 1: Biden foreign policy in a second term Trump foreign policy?
Speaker 1: The biggest difference is probably Europe. President Trump and the
Speaker 1: entire administration believes that the EU is bad for the
Speaker 1: United States. They want to deal individually with European governments.
Speaker 1: They strongly supported Brexit. President Biden if he became, if
Speaker 1: he won, would be the antithesis of that. He would
Speaker 1: support a stronger EU. Um he would clearly and build
Speaker 1: up the multilateral aspects of that relationship, where Trump there's not.
Speaker 1: On China, Tom the Biden administration and the Trump administration
Speaker 1: would be almost identical. And it's so interesting from the
Speaker 1: d n C last week, you didn't hear anyone talking
Speaker 1: about China, despite the fact that that's probably the single
Speaker 1: issue that exercises and animates President Trump the most internationally.
Speaker 1: And it's because quietly, when you talk to Biden's national
Speaker 1: security and foreign policy team don't have problems with the
Speaker 1: way that Trump does some of these things. But actually,
Speaker 1: in terms of you know, Taiwan, Hong Kong, South China,
Speaker 1: CE technology based one trade deal, all of that, Biden
Speaker 1: and Trump were nearly identical. All Right, Ian Bremer of
Speaker 1: eur Asia Group joining US right now, let's talk about China.
Speaker 1: President Trump has come out saying that he was going
Speaker 1: to ban all transactions of US businesses with the likes
Speaker 1: of ten Cent and TikTok's parent company. We're seeing him
Speaker 1: perhaps dial back some of those threats, at least in
Speaker 1: private conversations. Where are we on that and how pivotal
Speaker 1: is that to the relationship between China and the US.
Speaker 1: Um it's it's significant. I wouldn't say it's pivotal. UM.
Speaker 1: I would say Huawei is more pivotal. Huawei is the
Speaker 1: most important technology company for China. It is their national champion.
Speaker 1: They're using it to drive five G, which is their
Speaker 1: effort to control the Internet of things and all of
Speaker 1: the data and the monetization of that data, and and
Speaker 1: the advance is an AI that come from it, and
Speaker 1: the United States is not all dialing back. In fact,
Speaker 1: last week we saw tougher efforts against Huawei and specifically
Speaker 1: more companies that would be put on watch lists if
Speaker 1: they are providing semi conductors and other critical pieces of
Speaker 1: of of of supply to Huawei. And you know they
Speaker 1: have some semi conductors store up, but within a year
Speaker 1: they're in serious trouble. So I mean, I really do
Speaker 1: think that on every issue that matters between the US
Speaker 1: and China, whether it's national security or internal human rights,
Speaker 1: or whether it's the economy or tech, the relationship between
Speaker 1: the US and China is heading in a bad direction. Um.
Speaker 1: And so there It's true. I was talking to Jared
Speaker 1: Kushner a few days ago, and he was being considerably
Speaker 1: softer I would argue than say Peter and Navarrow on
Speaker 1: issues like the importance of still doing business with China,
Speaker 1: not breaking tech company's ability to engage. Then I would
Speaker 1: see from others like light Highs or like Pompeale in
Speaker 1: particular my Pompeio securiy state. Um. But in general, we
Speaker 1: know where this relationship is heading, no matter who wins
Speaker 1: in November, and it's probably the most important geopolitical issue
Speaker 1: for the markets by by a factor of magnitude. Yeah. Well,
Speaker 1: the way that you distinguish that is really important. The
Speaker 1: idea that ten Cent shares rallying with the idea that
Speaker 1: perhaps President Trump is softening his stance ambanning these businesses,
Speaker 1: but the direction of travel is what's important to watch.
Speaker 1: Nile Ferguson, a Bloomberg opinion columnist, writing that Joe Biden
Speaker 1: could end up being a wartime president, talking about the
Speaker 1: concern that some people have that the US China titfor
Speaker 1: tat is going to lead to a hot war. Do
Speaker 1: you think that we are getting closer to that? No? No,
Speaker 1: I wrote Neil after he wrote that piece, And you
Speaker 1: know sort of that it would amused me because I
Speaker 1: mean he has become a bit of a bomper on
Speaker 1: that issue. I do think that we are in a
Speaker 1: technology code war with the Chinese, where we literally want
Speaker 1: their tech companies to fail and we will punish not
Speaker 1: just those companies, but those that work with them. But
Speaker 1: I mean the likelihood of a hot war. First of all,
Speaker 1: the Chinese truly don't want one. They understand they're a
Speaker 1: c asymmetric capabilities compared to the United States. I mean,
Speaker 1: there are a regional military power. They know we're close
Speaker 1: to American capacity, but they also still understand that there's
Speaker 1: a lot in that we work on together. I mean,
Speaker 1: no matter how bad the US China relationship gets, I
Speaker 1: still think we're gonna be selling them crude oil. No
Speaker 1: matter how bad it gets. I still think when we
Speaker 1: go to Walmart, we're gonna be buying a lot of
Speaker 1: goods that are made in China. And I still think
Speaker 1: that a lot of our universities are gonna be working
Speaker 1: really hard to make sure that Chinese foreign students can
Speaker 1: come and pay a pull freight, because otherwise many of
Speaker 1: those colleges will be in a lot of trouble. So
Speaker 1: not only do I not see a hot war, I
Speaker 1: think there are limitations to how bad this relationship can get,
Speaker 1: and and they considerably greater than say with the Russians.
Speaker 1: Uh Ian Bremer. Just with the time left, I want
Speaker 1: to turn ourselves to the levant into the future for
Speaker 1: mr Ara Tojan. We don't have time to really dive
Speaker 1: into this correctly. But there's been three or four air
Speaker 1: to ones across the span from two thousand two, which
Speaker 1: are to Wan is affecting Greece, affecting hydrocarbons north of crete,
Speaker 1: which air to Wan is affecting Libya. Uh. Well, Libya,
Speaker 1: we have a cease fire now that actually seems to
Speaker 1: be able to stick. That's a good thing, um, And
Speaker 1: I would say that I recognize that overplaying his hand
Speaker 1: is only gonna lead um to military confrontation. Doesn't want
Speaker 1: The same thing has been true in Seria, uh, with
Speaker 1: their claims for buffer zone but backing away when the
Speaker 1: Russians pushed them hard. Um. I think the same thing
Speaker 1: is true in the East Mediterranean. I mean, you know
Speaker 1: they're saying they're gonna drill, but that's in part it's
Speaker 1: because it's easy to beat up on the Greeks by
Speaker 1: themselves when you have divisions inside the European Union, unwilling
Speaker 1: to have a comedy united front against Turkey. That's been frustrating,
Speaker 1: I think to the Greeks. Um. So the problem is
Speaker 1: that Turkey is in massive economic trouble right now. The
Speaker 1: Turkish leyra, of course, UM continues to fall. Um, the
Speaker 1: the indebtedness is a serious problem. UM and uh and
Speaker 1: and and the the small and medium enterprises. You're doing
Speaker 1: very badly. And so if you're Earnwan and you're thinking
Speaker 1: through how you can continue to leave that country and
Speaker 1: not end up in jail um and a Turkish prison
Speaker 1: is not a fun place to be right Um. You're
Speaker 1: you're thinking about what you can do to rally the
Speaker 1: population behind you. And a lot of this UM is
Speaker 1: overt nationalism and bomb throwing, but it's it's not getting
Speaker 1: involved in serious military confrontation. And I do think that
Speaker 1: earn One is savvy enough to understand how deep doesn't
Speaker 1: want to go. Remember remember Tom that you have that
Speaker 1: turn the Russian relationship which was totally broken. It was
Speaker 1: arder One that ended up apologizing with a face because
Speaker 1: it was hurting his economy. He understands that he can
Speaker 1: only go so far. Ian Bremer, thank you so much
Speaker 1: and good writing to you in Nantucket. He of course
Speaker 1: is with your Asia group an oil and read a
Speaker 1: cent of Energy aspects and reading what is the distinction
Speaker 1: right now in supply, demand dynamics and oil. What are
Speaker 1: you focused on all right now? Even with the storms
Speaker 1: comming Thomas Unfortunately, so long demand and how much we
Speaker 1: are recovering, how far away we are from pre twenty
Speaker 1: that will put it along way away, and we have
Speaker 1: built so much infant treat that. Yes, while these storms
Speaker 1: are supportive for crude in the sense that we are
Speaker 1: shutting in a lot of classes Mexico prodition, it's not
Speaker 1: really going to move the needle. That comes to just
Speaker 1: the shire volume of inventory that we still need to
Speaker 1: run down, all right, So what will move the needle?
Speaker 1: I'm looking right now Crewe traded on the n imax
Speaker 1: forty two dollars and seventy six cents. It's been moving
Speaker 1: in this forty to forty three dollar range for a
Speaker 1: while right now at the upper end of that range.
Speaker 1: What would take? What would it take to break out?
Speaker 1: And it will break out to the upside or to
Speaker 1: the downside? I mean, honestly, had it not been for
Speaker 1: the weaker dollar, given where the physical market is right now,
Speaker 1: crude would have been five dollars law. So this is
Speaker 1: very much in a financial market supporting the price of oil,
Speaker 1: because if you look at the contango, which really tells
Speaker 1: you how weak or strong the market is. The crude
Speaker 1: curves have moved into more of a contango, you know,
Speaker 1: for the front month is far more depressed than future prices. Um,
Speaker 1: we will get there, It will. It will take another
Speaker 1: year or so to run down this massive infantry overhand.
Speaker 1: We built over the first five months of the year.
Speaker 1: We are drawing stocks right now. The hurricanes again will
Speaker 1: help draw down that faster, but it just will take
Speaker 1: us a good year given that demand. It's not recovering
Speaker 1: in a straight line. Right. There's a lot of stops
Speaker 1: and starts that are parts of the US that are
Speaker 1: getting better, pots that are not. Even the rest of
Speaker 1: the world is the same too. Short of visit, Amrina
Speaker 1: sent thank you so much for joining us today with
Speaker 1: energy aspects. This is a joy. She was a strong
Speaker 1: which if you're in the game, everyone knows, was one
Speaker 1: of the premier value houses of another time and place,
Speaker 1: and is now head of active equity at Wells Fargo
Speaker 1: Asset Management. And Melody joins us now from the land
Speaker 1: of PEPs blue ribbon beer. Uh. And I've got to
Speaker 1: ask right now. It's a simple question. Our Amazon and
Speaker 1: Apple value stocks. Well, you know, tom As we used
Speaker 1: to say, prices what you've hey, value is what you get,
Speaker 1: and the market would say that you're getting a lot
Speaker 1: of value still out of these larger cap names. Certainly
Speaker 1: the price seems very high. But as you know, and
Speaker 1: as you have been talking about four months and months
Speaker 1: and months um, investors are seeking growth in this market
Speaker 1: where there's very hard to come by. We're all looking
Speaker 1: at three years, four years, five years. You as a
Speaker 1: value pro if it's stupid crazy pricing on so many
Speaker 1: different sectors, how far out are you rationalizing revenue and
Speaker 1: earnings growth? Those are two lines, folks that cross out
Speaker 1: in the distance. Is in melody buying for five years
Speaker 1: from now? Well, you know, I think our managers really
Speaker 1: are looking three to five years out, and that's kind
Speaker 1: of typical for portfolio managers to do when they're building models.
Speaker 1: I think the interesting thing about this time is, you know,
Speaker 1: I was taught early in my career really try to
Speaker 1: figure out what the market is telling you, and it's
Speaker 1: really difficult. It's a difficult question to answer in today's world.
Speaker 1: But I have to wonder if the market's not saying, gosh,
Speaker 1: there's a big te tonic shift happening in our economy,
Speaker 1: and it's happening at a pace that we haven't seen before,
Speaker 1: just accelerated because this pandemic UM and that might be
Speaker 1: the reason for that. Our contrast between the winners and
Speaker 1: the losers in the market and so when you look
Speaker 1: three to five years out doesn't look a lot different.
Speaker 1: It doesn't mean that, you know, technology UM really drives productivity,
Speaker 1: supports profit margins um and drive expansions right, and and
Speaker 1: doesn't mean that some other sectors that we're really supportive
Speaker 1: of our of our our economy, like travel and leisure
Speaker 1: and bricks and mortar retail just don't anymore well. And
Speaker 1: this is the whole idea that what we're seeing in
Speaker 1: the stock market is the reality that the future has
Speaker 1: been brought forward by ten years due to the pandemics.
Speaker 1: It's accelerated a lot of these changes that already were happening.
Speaker 1: As an active equity manager, how do you get an
Speaker 1: edge on that? Do you just go Apple Amazon? No?
Speaker 1: In fact, when I look across the board at all
Speaker 1: of the managers that now are on the Wells Fargo
Speaker 1: Asset Management platform UM, we have two very prominent growth
Speaker 1: teams that have done both done extremely well. One of
Speaker 1: them doesn't own Apple at all, the other one is
Speaker 1: slightly overweight Apple. And so there you take two different
Speaker 1: you know, two different dynamics there. Um both doing well,
Speaker 1: but it's difficult as a growth manager not to be
Speaker 1: UM and have some exposure there. Now they both have
Speaker 1: exposure to a lot of other names in technology. They're
Speaker 1: both overweight that space because they do believe in the
Speaker 1: power of technology driving all of those things that I
Speaker 1: talked about profit margins, productivity, etcetera. UM, But they're also
Speaker 1: very diversified in other sectors. And I would say so
Speaker 1: are our value managers who see the US manufacturing renaissance
Speaker 1: really truly happening, right, And this is not just about jobs,
Speaker 1: but it's about cost structure and margins. And so we
Speaker 1: have seen more and more manufacturing coming back to the
Speaker 1: Midwest in other places in the US, and it seems
Speaker 1: like that really is truly, you know, here to stay.
Speaker 1: I'm glad that you mentioned that. I mean, there was
Speaker 1: a story on the Bloomberg over the weekend about the
Speaker 1: Kenosha region in Wisconsin, which I'm sure is close to you.
Speaker 1: This idea that there there was actually a twenty five
Speaker 1: salary increase in certain areas. Do that fox Con uh
Speaker 1: factory that was brought to the region. Where do you
Speaker 1: see the most potential upside due to what you call
Speaker 1: the manufacturing renaissance that you see taking place. Well, I
Speaker 1: think it's going to continue to come from you know,
Speaker 1: you know, all different areas of manufacturing across the board,
Speaker 1: whether it is in tech manufacturing but also industrial manufacturing.
Speaker 1: And so we've seen it in Wisconsin certainly, We've seen
Speaker 1: it in the rust bells in Ohio and other states. UM.
Speaker 1: So fox Con was clearly electronics, but we're seeing it
Speaker 1: UM in other places. So UM, I have friends that
Speaker 1: work in the manufacturing building. You know this isn't in
Speaker 1: great you know standing today, but um auto airplane manufacturing parts, UM,
Speaker 1: certainly automn automobile manufacturing part appliances. So UM across all industries.
Speaker 1: What is your view forward? I mean, and you know
Speaker 1: you've so experienced at value in the conundrum of growth
Speaker 1: and value and now heading active management where you're in
Speaker 1: brutal competition with index funds as well. Where is the
Speaker 1: where I don't mean this by value like stock fundamentals,
Speaker 1: but what's the value opportunity now for active management, how
Speaker 1: do you place yourself to outperform whatever the mandate is
Speaker 1: against index funds. I actually think this is kind of
Speaker 1: a unique time for active management to really show its
Speaker 1: true advantage. When we saw volatility levels like we saw,
Speaker 1: you know, when we saw I'm starting in March and
Speaker 1: in April, when this pandemic really hit, that's when active
Speaker 1: management truly can show its power, right because managers, portfolio managers,
Speaker 1: that analysts can go in and analyze fundamentals and where
Speaker 1: those companies might be three to five years from now.
Speaker 1: And so more than sixty of our active managers are
Speaker 1: outperforming six in a five year time frame. When you
Speaker 1: look out UM over over five years, when you look
Speaker 1: over three years, it's more than seventy five. So this
Speaker 1: is a time for active to really shine, and you know,
Speaker 1: hopefully taking advantage of more and more volatility overpassed UM
Speaker 1: will clearly showcase that what do you do on the banks?
Speaker 1: I mean, Strong was so good at avoiding bank tobaccos
Speaker 1: along the way, what do you do with the financials?
Speaker 1: Right now, our managers are underweight that space, and I
Speaker 1: think it's clear that it's going to be difficult for
Speaker 1: banks to really outperform with rage with race as low
Speaker 1: as they are and seemingly as low as they will
Speaker 1: be for the next couple of years. Melody, I'm curious
Speaker 1: about the bogey that you're looking for an active management.
Speaker 1: In other words, what type of returns target for an
Speaker 1: active equity portfolio seems appropriate over the next five to
Speaker 1: ten years. You know, I think you have to look
Speaker 1: at out performing the benchmark by two to three I'll
Speaker 1: pay I'll perform in your specific benchmark by two to
Speaker 1: three percent to really showcase, um, the strength of active
Speaker 1: management now clearly, um. You know you have to cover
Speaker 1: your fees. That's ground one. So if you can cover
Speaker 1: your fees and beat passive, to me, that's a win.
Speaker 1: And I'm a believer in active. If an active manager
Speaker 1: can do that, I'd actually rather be an active manager,
Speaker 1: meant because that's going against the crowd, and I'd rather
Speaker 1: be not with the crowd today, um, than with the crowd.
Speaker 1: But ideally two all right, So if you want to
Speaker 1: be against the crowd or you want to take a
Speaker 1: have a contrarian take of some sort. What's the one
Speaker 1: popular stock right now that you'd sell you know what
Speaker 1: I am not because of my new role and I'm
Speaker 1: not actually managing money. I'm not allowed to talk about
Speaker 1: specific stocks. I can only talk Come on, no, who's listening.
Speaker 1: We're in We're in the Aderondecks. We're doing right. Um.
Speaker 1: I heard you get hassled all morning from thank you,
Speaker 1: Thank you? Tom? Did you hear that somebody is on
Speaker 1: my side? And come back any time. We're really to
Speaker 1: take a vacation, and Tom, you need to take one's
Speaker 1: right kids and work. What's sick is Lisa. The deer
Speaker 1: flies up in the aderondis or like a B fifty
Speaker 1: two bomber, you camp draw them. They're even bigger out
Speaker 1: in northern Wisconsin. It's true. I spent a lot of
Speaker 1: time in northern Wisconsin. I'll just let you know that
Speaker 1: I had, I have family in Wisconsin. It's beautiful up there.
Speaker 1: Dead silence, you guys just like I just a confirming that, yes,
Speaker 1: there are incredible Let us know, folks, what time of
Speaker 1: years should Lisa and I traveled in northern Wisconsin. It's
Speaker 1: beautiful now, Okay, Emma bloody, thank you so much. I
Speaker 1: greatly appreciate it. With Will's Fargo Asset Management really really
Speaker 1: quite good, and value investing is there as well. Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform
Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio