1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,560 --> 00:00:15,520 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,479 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,640 Speaker 1: at Bloomberg dot com slash podcast. We think about the pandemic. 7 00:00:22,760 --> 00:00:28,479 Speaker 1: The economic disruption was broad, it was deep, but perhaps 8 00:00:28,480 --> 00:00:32,360 Speaker 1: it was felt even more uh poignantly by some of 9 00:00:32,360 --> 00:00:35,080 Speaker 1: the small businesses out there. Let's get some color on 10 00:00:35,240 --> 00:00:38,639 Speaker 1: that story. Carol Lee Mitchell, head of Small Business Strategy 11 00:00:38,720 --> 00:00:41,400 Speaker 1: for Bank of America, joins us caardly. Thanks so much 12 00:00:41,400 --> 00:00:44,040 Speaker 1: for taking the time here. Just give us us you know, 13 00:00:44,040 --> 00:00:47,159 Speaker 1: we've all seen the vacant stores, the businesses that have 14 00:00:47,240 --> 00:00:49,680 Speaker 1: gone out of business. Give us a just kind of 15 00:00:49,680 --> 00:00:50,960 Speaker 1: a sense that we have a little bit of a 16 00:00:51,040 --> 00:00:55,320 Speaker 1: perspective now on how small businesses have been dealing with 17 00:00:55,360 --> 00:00:59,040 Speaker 1: the economic fallout of the pandemic. Sure, happy, delighted to 18 00:00:59,080 --> 00:01:04,320 Speaker 1: be here. So small business owners going into We're quite 19 00:01:04,360 --> 00:01:09,679 Speaker 1: optimistic vaccine rollout consumer demand and spend with high and 20 00:01:09,760 --> 00:01:12,040 Speaker 1: quite frankly, the small business owners were just ready to 21 00:01:12,080 --> 00:01:14,720 Speaker 1: get back at it. As we started to settle into 22 00:01:14,720 --> 00:01:20,080 Speaker 1: twenty one, started to suddenly experience labor shortages, operation challenges, 23 00:01:20,640 --> 00:01:24,880 Speaker 1: you know, supply chain issues, and started to temper optimism 24 00:01:25,160 --> 00:01:27,840 Speaker 1: just a hair. And I say just a hair because 25 00:01:28,120 --> 00:01:31,640 Speaker 1: while that was all happening, consumer spend was still remaining. 26 00:01:32,160 --> 00:01:34,800 Speaker 1: And as we go into the holiday season, UM, I 27 00:01:34,800 --> 00:01:37,160 Speaker 1: would I would say that our business owners are telling 28 00:01:37,280 --> 00:01:41,120 Speaker 1: us that they're still quite optimistic. Why many of them 29 00:01:41,160 --> 00:01:45,040 Speaker 1: expect revenue and sales to increase, UM. Many of them 30 00:01:45,080 --> 00:01:47,600 Speaker 1: have made operation changes, and I think this is an 31 00:01:47,640 --> 00:01:50,000 Speaker 1: important thing to note. One of the gifts of the 32 00:01:50,040 --> 00:01:55,520 Speaker 1: pandemic that occurred is that the enablement of digital technologies 33 00:01:55,560 --> 00:01:59,320 Speaker 1: and solutions to drive commerce electronically. So this is just 34 00:01:59,400 --> 00:02:02,600 Speaker 1: being able to pay for your cupcake with a debit 35 00:02:02,600 --> 00:02:06,040 Speaker 1: card or credit card and or Dell is something that 36 00:02:06,120 --> 00:02:10,400 Speaker 1: didn't exist prior to the pandemic. So enabling business owners 37 00:02:10,440 --> 00:02:15,520 Speaker 1: to drive commerce virtually hybrid situation, and or in person 38 00:02:16,000 --> 00:02:18,320 Speaker 1: is something that's going to give them the flexibility to 39 00:02:18,400 --> 00:02:22,280 Speaker 1: maintain and so we're very optimistic. It's also supported by 40 00:02:22,320 --> 00:02:27,120 Speaker 1: internal data. Deposit volume is at a record high. Small 41 00:02:27,160 --> 00:02:30,680 Speaker 1: business owners are coming to us saying I believe in 42 00:02:30,720 --> 00:02:32,760 Speaker 1: my future, I want to expand, I want to take 43 00:02:32,800 --> 00:02:36,040 Speaker 1: a loan. I'm gonna invest in my business. Growth numbers 44 00:02:36,040 --> 00:02:39,600 Speaker 1: are pre pandemic levels prior to nine. It's really been 45 00:02:40,400 --> 00:02:43,400 Speaker 1: a nice thing to see, Carol. The loan story is 46 00:02:43,440 --> 00:02:47,600 Speaker 1: a fascinating one because we've heard big bank CEOs complain 47 00:02:47,720 --> 00:02:52,440 Speaker 1: about a lack of loan growth. Are smaller businesses going 48 00:02:52,520 --> 00:02:56,360 Speaker 1: to go out and borrow and invest? Our data is 49 00:02:56,360 --> 00:03:00,880 Speaker 1: suggesting that our our small business owners are currently borrowing 50 00:03:00,880 --> 00:03:05,959 Speaker 1: and investing, in fact at record levels prior to UM 51 00:03:06,080 --> 00:03:09,240 Speaker 1: and so from our perspective at Bank of America, this 52 00:03:09,320 --> 00:03:12,920 Speaker 1: has been a really positive sign UM. Again, this is 53 00:03:12,960 --> 00:03:15,880 Speaker 1: also coupled with the fact that deposit balances are stars 54 00:03:15,919 --> 00:03:19,960 Speaker 1: of cash. Position is strong, optimism is great. Sales and 55 00:03:20,040 --> 00:03:22,320 Speaker 1: revenue again, we can see the sales and revenue coming 56 00:03:22,360 --> 00:03:27,600 Speaker 1: in stronger, stronger than where we were clearly but definitely 57 00:03:27,600 --> 00:03:32,239 Speaker 1: in some cases even prior to and so the data 58 00:03:32,280 --> 00:03:34,600 Speaker 1: points to suggest that we're in a pretty pretty decent 59 00:03:34,600 --> 00:03:39,040 Speaker 1: place currently. I know you guys have done work looking 60 00:03:39,080 --> 00:03:42,960 Speaker 1: at women owners of small businesses. How have they fared? 61 00:03:43,120 --> 00:03:46,800 Speaker 1: Maybe better, worse than maybe the average small business. Sure 62 00:03:47,080 --> 00:03:50,240 Speaker 1: important to note that in of all of the new 63 00:03:50,280 --> 00:03:53,360 Speaker 1: businesses that were started, over half were started by women 64 00:03:53,880 --> 00:03:56,680 Speaker 1: business owners. So this is something that we have been 65 00:03:56,760 --> 00:04:02,040 Speaker 1: watching and monitoring. Over of women business owners are telling 66 00:04:02,160 --> 00:04:05,920 Speaker 1: us that stress and mental health and wellness are at 67 00:04:05,920 --> 00:04:08,960 Speaker 1: the top of the list of concerns to them, and 68 00:04:09,000 --> 00:04:11,280 Speaker 1: it is really something that he's been kind of looming 69 00:04:11,400 --> 00:04:14,080 Speaker 1: even prior to the pandemic, but this is now the 70 00:04:14,160 --> 00:04:19,599 Speaker 1: number one concerned and also feeding operation change, like how 71 00:04:19,640 --> 00:04:23,800 Speaker 1: they work with their employees, how they provide benefits. Many 72 00:04:23,880 --> 00:04:27,000 Speaker 1: of our women business owners, in fact, over forty eight 73 00:04:27,120 --> 00:04:30,840 Speaker 1: percent took a pay cut to enable and keep their 74 00:04:30,880 --> 00:04:35,240 Speaker 1: employees on on the book and also happy, giving them 75 00:04:35,279 --> 00:04:38,920 Speaker 1: wellness benefits, more flexibility and time. And so I think 76 00:04:38,920 --> 00:04:43,919 Speaker 1: there's this recognition that yes, it's it's far more stressful 77 00:04:44,200 --> 00:04:48,520 Speaker 1: than it was pre pandemic. But what's been a gift 78 00:04:48,960 --> 00:04:52,279 Speaker 1: is that there's this recognition that there's there's issues to 79 00:04:52,360 --> 00:04:56,200 Speaker 1: be addressed, and their solutions being designed and developed to 80 00:04:56,360 --> 00:04:59,479 Speaker 1: help sort of the people. You know, they're working long 81 00:04:59,520 --> 00:05:01,960 Speaker 1: hours and enabling and opening up their businesses so that 82 00:05:02,000 --> 00:05:05,560 Speaker 1: we can drive commerce forward. I think it's interesting I 83 00:05:05,640 --> 00:05:10,440 Speaker 1: wonder if um women do better at opening businesses if 84 00:05:10,480 --> 00:05:14,600 Speaker 1: they have more longevity in this kind of situation, because 85 00:05:14,880 --> 00:05:21,240 Speaker 1: I imagine men have a lower pain threshold. Is that 86 00:05:21,440 --> 00:05:24,120 Speaker 1: is that just my mom talking through me? Or is 87 00:05:24,160 --> 00:05:28,520 Speaker 1: that that's probably true? Right? Well, the there there are 88 00:05:28,520 --> 00:05:30,440 Speaker 1: a couple of things. I think women tend to start 89 00:05:30,480 --> 00:05:34,479 Speaker 1: businesses that are just addressing needs of people in the community. 90 00:05:34,520 --> 00:05:38,560 Speaker 1: And sixty percent of our local economy, our local economy 91 00:05:38,560 --> 00:05:41,160 Speaker 1: of our community is driven by business owners or one, 92 00:05:41,640 --> 00:05:44,280 Speaker 1: you know, building something that serves a purpose in need 93 00:05:44,279 --> 00:05:48,120 Speaker 1: in that local environment is a good thing. And number two, 94 00:05:48,200 --> 00:05:51,040 Speaker 1: we see that the vast majority of our women business 95 00:05:51,040 --> 00:05:56,880 Speaker 1: owners north of feel more connected to the community than 96 00:05:57,080 --> 00:06:01,080 Speaker 1: their male counterparts. And it's sort of a sin theodic relationship. 97 00:06:01,120 --> 00:06:04,799 Speaker 1: They feel more connected to them. They also give back 98 00:06:04,839 --> 00:06:08,320 Speaker 1: to them and this relationship gives them a little bit 99 00:06:08,320 --> 00:06:12,120 Speaker 1: of a platform to say, you, regardless of what happens 100 00:06:12,160 --> 00:06:15,400 Speaker 1: in the macro environment landscape, I know that, you know, 101 00:06:15,640 --> 00:06:17,640 Speaker 1: I feel pretty safe in my community to kind of 102 00:06:17,680 --> 00:06:20,400 Speaker 1: do what we need to do, you know, build a business, 103 00:06:20,640 --> 00:06:23,600 Speaker 1: drive commerce and drive sales. And you know, we've seen 104 00:06:23,640 --> 00:06:28,440 Speaker 1: that it's been really um a positive thing, especially during 105 00:06:28,520 --> 00:06:32,520 Speaker 1: such challenging times. You know, Caroly, when you walk by 106 00:06:32,560 --> 00:06:36,159 Speaker 1: any small business on any main street USA, they all 107 00:06:36,200 --> 00:06:40,240 Speaker 1: have one sign in the window help wanted. What is 108 00:06:40,400 --> 00:06:43,080 Speaker 1: your survey data kind of? And your respondence? What are 109 00:06:43,120 --> 00:06:45,440 Speaker 1: they tell you about how they're trying to manage through 110 00:06:45,480 --> 00:06:49,760 Speaker 1: this challenge. It's a it's a difficult one. UM. Many 111 00:06:49,960 --> 00:06:55,320 Speaker 1: of our women business owners in fact north of are 112 00:06:55,360 --> 00:06:58,560 Speaker 1: saying that they plan to hire. That's up from nine percent, 113 00:06:58,880 --> 00:07:01,640 Speaker 1: uh just last year. But I think that you can't 114 00:07:01,640 --> 00:07:04,960 Speaker 1: have a conversation about hiring without sort of retaining. And 115 00:07:05,000 --> 00:07:08,240 Speaker 1: I think many of our business owners are focusing more 116 00:07:08,279 --> 00:07:11,160 Speaker 1: on retaining employees and that's where some of the wellness benefits. 117 00:07:11,160 --> 00:07:14,520 Speaker 1: And that's where some of the conversations around hey, how 118 00:07:14,520 --> 00:07:17,240 Speaker 1: are you doing, how can we make this less stressful 119 00:07:17,760 --> 00:07:21,480 Speaker 1: coming into play? Um. Our business owners are mindful of that, 120 00:07:21,560 --> 00:07:24,240 Speaker 1: and so while they're in the same pool sort of 121 00:07:24,280 --> 00:07:28,720 Speaker 1: competing to hire great talent. Um, what I'm finding is 122 00:07:28,760 --> 00:07:32,400 Speaker 1: that our business owners are so thoughtful about maintaining their 123 00:07:32,400 --> 00:07:34,960 Speaker 1: existing employees and making sure that the ones that they 124 00:07:35,000 --> 00:07:42,040 Speaker 1: have are taken taken care of. Currently, I we've seen 125 00:07:42,080 --> 00:07:46,000 Speaker 1: consumer confidence drop and the last reading was better but um, 126 00:07:46,040 --> 00:07:48,760 Speaker 1: there had been a lull I guess in the numbers, 127 00:07:48,880 --> 00:07:51,560 Speaker 1: And I wonder what you make of that, what small 128 00:07:51,600 --> 00:07:53,720 Speaker 1: businesses should make of that, because it does seem like 129 00:07:54,400 --> 00:07:58,240 Speaker 1: consumers have money saved up and you know, we're slowly 130 00:07:58,360 --> 00:08:03,200 Speaker 1: opening up, we're getting back to business as usual, and 131 00:08:03,200 --> 00:08:05,880 Speaker 1: there's so much demand for products. That's weird to see 132 00:08:05,920 --> 00:08:10,240 Speaker 1: confidence drop like that. I guess it's inflation. Well, I think, 133 00:08:10,280 --> 00:08:14,360 Speaker 1: I mean the confidence the confidencing is interesting because confidence 134 00:08:14,400 --> 00:08:16,320 Speaker 1: since spent. I think one of the things that we're 135 00:08:16,320 --> 00:08:20,360 Speaker 1: seeing is that, yes, while we're monitoring confidence in taking 136 00:08:20,360 --> 00:08:24,120 Speaker 1: down just just a hair, what we do see is 137 00:08:24,200 --> 00:08:28,680 Speaker 1: the corresponding spend volume shifting to things that are more 138 00:08:28,760 --> 00:08:33,480 Speaker 1: sort of essentials, you know, things that are enabling um, 139 00:08:33,520 --> 00:08:36,480 Speaker 1: you know, our our consumers and our small business owners 140 00:08:36,520 --> 00:08:39,280 Speaker 1: to kind of, you know, feel better about their current situation. 141 00:08:39,679 --> 00:08:43,679 Speaker 1: Our business owners, UM would suggest that because again they 142 00:08:43,880 --> 00:08:47,760 Speaker 1: operate within their local community. The support and the rallying 143 00:08:47,760 --> 00:08:51,560 Speaker 1: that they're feeling from consumers has been tremendous. And so 144 00:08:51,679 --> 00:08:55,120 Speaker 1: you know, your your listener's decision to not buy that 145 00:08:55,200 --> 00:08:57,560 Speaker 1: cupcake from a big box but walking over to that 146 00:08:57,679 --> 00:09:00,960 Speaker 1: local bakery, that's happening more and more and more, and 147 00:09:01,040 --> 00:09:04,839 Speaker 1: so you know, our business owners feel like even though 148 00:09:04,880 --> 00:09:08,920 Speaker 1: confidence maybe down, just the hair um, the local community 149 00:09:09,120 --> 00:09:12,760 Speaker 1: support has been tremendous. And I think that's gonna continue 150 00:09:12,760 --> 00:09:16,760 Speaker 1: on into two UM and again the unknown variables of 151 00:09:16,840 --> 00:09:19,960 Speaker 1: things that could potentially happen. Not being prepared, I think 152 00:09:20,080 --> 00:09:24,360 Speaker 1: is one contributing factor. I think going into two you're 153 00:09:24,360 --> 00:09:26,840 Speaker 1: going to see that a lot more people are prepared 154 00:09:27,240 --> 00:09:30,120 Speaker 1: for the unknown. And and I think that that level 155 00:09:30,160 --> 00:09:34,000 Speaker 1: of preparation will help us, you know, think about stending 156 00:09:34,280 --> 00:09:36,920 Speaker 1: and engaging in ways that we used to in the 157 00:09:37,000 --> 00:09:40,920 Speaker 1: past a bit more freely. Carly, thank you so much 158 00:09:40,960 --> 00:09:43,000 Speaker 1: for joining us. We really appreciate you joining us and 159 00:09:43,160 --> 00:09:46,800 Speaker 1: sharing the results of your survey. Carl Lee Mitchell, head 160 00:09:46,840 --> 00:09:54,520 Speaker 1: of Small Business Strategy at Bank of America. There all right, 161 00:09:54,559 --> 00:09:57,480 Speaker 1: Now let's get back to the markets. Tom Plumb, President 162 00:09:57,559 --> 00:09:59,920 Speaker 1: chief investment officer at Plumb Funds, joins us on the 163 00:10:00,000 --> 00:10:05,400 Speaker 1: phone from Madison, Wisconsin. What a great town, Um, and 164 00:10:05,480 --> 00:10:10,640 Speaker 1: he's portfolio manager there. The Plumb balanced fun Tom, Um, 165 00:10:10,800 --> 00:10:15,920 Speaker 1: we are today is not the UH I guess, the 166 00:10:16,480 --> 00:10:19,840 Speaker 1: worst day to be an equity investor. We're up again 167 00:10:20,240 --> 00:10:23,720 Speaker 1: to five right now, so hovering near record high on 168 00:10:23,800 --> 00:10:27,760 Speaker 1: the SMP five hundred. Even though um, we're all worried 169 00:10:27,760 --> 00:10:33,200 Speaker 1: about supply chains and labor shortages and inflation, what gives well, 170 00:10:33,200 --> 00:10:37,560 Speaker 1: you know, Uh, it is interesting because the earnings are 171 00:10:37,640 --> 00:10:41,920 Speaker 1: coming up and right now we've had basically over half 172 00:10:41,960 --> 00:10:45,800 Speaker 1: of the market cap of the SNP has reported. There 173 00:10:45,840 --> 00:10:49,720 Speaker 1: are three things that are really emerging as trend with 174 00:10:50,840 --> 00:10:55,760 Speaker 1: of the companies beating their projections. Growth stocks have been 175 00:10:55,760 --> 00:10:59,680 Speaker 1: beating on revenue of about eighteen verses twelve so far, 176 00:11:00,440 --> 00:11:06,360 Speaker 1: but value stocks have been beating on earnings growth possibly 177 00:11:06,600 --> 00:11:11,079 Speaker 1: compared about low twenties for typical growth stock. So, in 178 00:11:11,160 --> 00:11:15,880 Speaker 1: other words, of the cyclical economy, cyclical growth is being 179 00:11:16,200 --> 00:11:19,440 Speaker 1: beating secular growth in terms of earning growth and in 180 00:11:19,760 --> 00:11:25,360 Speaker 1: stock performance. So, um, we're seeing this despite these issues 181 00:11:25,400 --> 00:11:28,880 Speaker 1: that you just mentioned as really a tale of which 182 00:11:28,920 --> 00:11:33,040 Speaker 1: companies are dealing with the supply chain disruptions and the 183 00:11:33,160 --> 00:11:37,520 Speaker 1: cost inflation. If they're beating and doing well, uh, they're 184 00:11:37,559 --> 00:11:39,920 Speaker 1: getting rewarded. But if they do a bad job, man, 185 00:11:39,960 --> 00:11:44,440 Speaker 1: they're getting punished. Tom. How long does this cyclical play work? 186 00:11:44,480 --> 00:11:46,080 Speaker 1: I mean, I think a lot of investors it's been 187 00:11:46,120 --> 00:11:48,600 Speaker 1: a long time since value has been a good performances, 188 00:11:48,640 --> 00:11:50,640 Speaker 1: been a long time since small cap and a lot 189 00:11:50,720 --> 00:11:54,920 Speaker 1: of investors are just unsure how long this cycle lasts. 190 00:11:55,000 --> 00:11:58,320 Speaker 1: How do you think about that this is there's a 191 00:11:58,480 --> 00:12:02,120 Speaker 1: very strong possible oliting that this is just a blip, 192 00:12:02,200 --> 00:12:05,559 Speaker 1: because we have had in the last twelve years different 193 00:12:05,600 --> 00:12:09,000 Speaker 1: periods of time when the value stocks have outperformed. I 194 00:12:09,040 --> 00:12:13,680 Speaker 1: think once we start to get to tougher comparisons, once 195 00:12:13,720 --> 00:12:17,480 Speaker 1: we overlap the pandemic, we're going to start to look 196 00:12:17,520 --> 00:12:22,000 Speaker 1: again at which companies are true leaders and are combining 197 00:12:22,080 --> 00:12:27,640 Speaker 1: both cyclical growth with these really powerful digital growth trends 198 00:12:27,679 --> 00:12:32,120 Speaker 1: that we've been seeing for the last dozen years. So 199 00:12:32,920 --> 00:12:36,520 Speaker 1: in terms of uh, if I have new money to 200 00:12:36,600 --> 00:12:39,760 Speaker 1: put to work, um, is it is now a time 201 00:12:39,800 --> 00:12:42,240 Speaker 1: to still put it in equities? Is there any other 202 00:12:42,280 --> 00:12:47,559 Speaker 1: game in town? It is very difficult, you know, managing 203 00:12:47,600 --> 00:12:50,640 Speaker 1: a balanced phone. We look at the bonds also, and 204 00:12:50,679 --> 00:12:53,720 Speaker 1: of course with interest rates at these levels and the 205 00:12:53,960 --> 00:12:57,320 Speaker 1: talk that the Fed is going to start to their 206 00:12:57,720 --> 00:13:01,880 Speaker 1: and their tape rings, so we'll start to see um 207 00:13:02,440 --> 00:13:04,880 Speaker 1: pressure on interest rates. It makes you a little bit 208 00:13:04,920 --> 00:13:08,560 Speaker 1: cautious about what types of fixed income items to own. 209 00:13:09,120 --> 00:13:12,520 Speaker 1: You've had an incredible spike in some commodity prices, but 210 00:13:12,600 --> 00:13:16,720 Speaker 1: we've also seen those show some signs of topping. So 211 00:13:16,880 --> 00:13:21,000 Speaker 1: for us, it looks like good quality common stocks. They're 212 00:13:21,040 --> 00:13:25,520 Speaker 1: still they're they're hitting new records. Makes people anxious, but 213 00:13:25,600 --> 00:13:29,560 Speaker 1: I started out when the SNP was about seventy UM, 214 00:13:29,640 --> 00:13:36,080 Speaker 1: so that it's times higher. We've hit lots of new hides. Tom, 215 00:13:36,080 --> 00:13:39,400 Speaker 1: how about energy mentioned commodities, and we've got a w 216 00:13:39,440 --> 00:13:41,560 Speaker 1: t A crewed a north of eighty two dollars to share. 217 00:13:42,040 --> 00:13:47,320 Speaker 1: How do you think about energy stocks here? They you know, 218 00:13:47,400 --> 00:13:50,120 Speaker 1: they were so depressed. I mean again, back in the 219 00:13:50,200 --> 00:13:53,320 Speaker 1: early eighties they were thirty s and p. Now they're 220 00:13:53,760 --> 00:13:57,120 Speaker 1: the last year they bottomed out at about three UM, 221 00:13:57,160 --> 00:14:00,000 Speaker 1: so there's a possibility they could still run for a while. 222 00:14:00,600 --> 00:14:05,200 Speaker 1: But obviously there's some real alternatives and the political pressure 223 00:14:05,240 --> 00:14:08,080 Speaker 1: on them. So we've been cautious. We haven't been playing 224 00:14:08,120 --> 00:14:12,440 Speaker 1: that because we think that there's a fair possibility that 225 00:14:12,559 --> 00:14:15,040 Speaker 1: once supply and demand get a little bit more aligned, 226 00:14:15,520 --> 00:14:18,000 Speaker 1: that there's still going to be those political pressures on 227 00:14:18,120 --> 00:14:21,720 Speaker 1: energy stocks. Is supply and demand starting to get more 228 00:14:21,720 --> 00:14:24,400 Speaker 1: aligned now, I talked to Herbert d c O Volkswagen. 229 00:14:24,400 --> 00:14:28,000 Speaker 1: This morning he said, month after month, it's finally starting 230 00:14:28,000 --> 00:14:29,840 Speaker 1: to get better with chips. We heard the same from 231 00:14:29,840 --> 00:14:33,840 Speaker 1: Stilantis and Mary Bara is that um is there an 232 00:14:33,920 --> 00:14:38,200 Speaker 1: end in sight to these problems. Well, it's gonna be 233 00:14:38,320 --> 00:14:41,320 Speaker 1: like the pandemic. It's gonna be something that's going to 234 00:14:41,400 --> 00:14:44,200 Speaker 1: be valid or it will move both both ways. But yes, 235 00:14:44,240 --> 00:14:47,760 Speaker 1: it is. The trend is going to speed towards getting 236 00:14:47,760 --> 00:14:51,440 Speaker 1: an alignment between supplying demand and that will reduce some 237 00:14:51,560 --> 00:14:54,600 Speaker 1: of these price pressures it. Tom, thanks so much for 238 00:14:54,840 --> 00:14:57,320 Speaker 1: joining us. We always appreciate. Can you a few minutes 239 00:14:57,360 --> 00:15:01,160 Speaker 1: of your time? Tom Plumb, President and chief investment officer 240 00:15:01,200 --> 00:15:04,640 Speaker 1: of the Plump Funds, joining us on the phone from Madison, Wisconsin, 241 00:15:04,680 --> 00:15:08,040 Speaker 1: and again a strong, strong move here to the market. 242 00:15:08,080 --> 00:15:10,720 Speaker 1: We have the SMP up about eight tens of one percent, 243 00:15:10,840 --> 00:15:15,680 Speaker 1: NASDAK up up almost one full percentage point. Yeah, what's up? 244 00:15:15,880 --> 00:15:17,960 Speaker 1: Have you ever been to Madison? I have great town, 245 00:15:18,040 --> 00:15:21,360 Speaker 1: great town, what a town. Loved every minute of my 246 00:15:21,480 --> 00:15:24,080 Speaker 1: time there. Big big there's actually a big big money 247 00:15:24,520 --> 00:15:27,960 Speaker 1: uh institutional investor money in Madison Strong Funds, which is 248 00:15:27,960 --> 00:15:31,200 Speaker 1: now part of it. I guess wells Fargo, the Wisconsin 249 00:15:31,240 --> 00:15:34,880 Speaker 1: Investment Board. Lots of reasons ago uh to Madison was 250 00:15:34,920 --> 00:15:37,160 Speaker 1: just hanging out with college kids that was in college. 251 00:15:37,880 --> 00:15:42,560 Speaker 1: All business for me going into the Midwest. Now, I 252 00:15:42,600 --> 00:15:46,720 Speaker 1: want to get to the global CEO of Lincoln International 253 00:15:46,840 --> 00:15:50,000 Speaker 1: to give us the his outlook for the landscape of 254 00:15:50,680 --> 00:15:54,240 Speaker 1: M and A in markets right now. Rob Brown joins 255 00:15:54,320 --> 00:15:58,600 Speaker 1: us to talk about this amazing amount of activity that 256 00:15:58,640 --> 00:16:03,320 Speaker 1: we've seen, not just in the US but globally. And Rob, 257 00:16:03,760 --> 00:16:06,240 Speaker 1: we haven't seen well, there have been a number of 258 00:16:06,360 --> 00:16:11,360 Speaker 1: giant deals um we've talked about that haven't really gone through. 259 00:16:11,840 --> 00:16:15,480 Speaker 1: It seems like there's so many smaller and medium sized 260 00:16:15,480 --> 00:16:19,280 Speaker 1: deals that we're gonna hit another record in one. What 261 00:16:19,320 --> 00:16:22,080 Speaker 1: do you think? Yeah, I I totally agree with that. 262 00:16:22,160 --> 00:16:24,640 Speaker 1: The engine really of the M and A market is 263 00:16:25,240 --> 00:16:27,520 Speaker 1: um what you would call the middle market or the 264 00:16:27,520 --> 00:16:32,720 Speaker 1: private capital markets and driven in large park by private 265 00:16:32,760 --> 00:16:35,840 Speaker 1: equity venture funds, all the institutional capital that has been 266 00:16:35,920 --> 00:16:39,480 Speaker 1: raised and put to work really over the last decade UM, 267 00:16:39,680 --> 00:16:43,560 Speaker 1: and I think this year in particular, there's uh, you 268 00:16:43,720 --> 00:16:46,160 Speaker 1: you had this backrupt for a few years where there's 269 00:16:46,160 --> 00:16:48,280 Speaker 1: more capital rays that wants to be put to work 270 00:16:48,360 --> 00:16:50,480 Speaker 1: in buying companies or sitting on the balance sheet of 271 00:16:50,560 --> 00:16:53,040 Speaker 1: large corporates than there are high quality companies to buy. 272 00:16:53,120 --> 00:16:55,120 Speaker 1: So this capital and balance has been around for a 273 00:16:55,120 --> 00:16:57,880 Speaker 1: while and I think we'll continue for several years. This 274 00:16:58,000 --> 00:17:01,560 Speaker 1: year it's been intensified because as there were several deals 275 00:17:01,560 --> 00:17:05,240 Speaker 1: in several sectors, many deals that were COVID affected last 276 00:17:05,280 --> 00:17:07,000 Speaker 1: year that likely would have got done last year, that 277 00:17:07,040 --> 00:17:09,480 Speaker 1: are getting done this year. And then in the US 278 00:17:10,080 --> 00:17:14,680 Speaker 1: UM the fear over increases in capital gains rates has 279 00:17:14,720 --> 00:17:17,160 Speaker 1: pulled deals that may be left to their normal gestation, 280 00:17:17,480 --> 00:17:19,520 Speaker 1: would have gotten done next year the following year being 281 00:17:19,560 --> 00:17:23,000 Speaker 1: pulled into this year. So, by the way, you, by 282 00:17:23,040 --> 00:17:27,840 Speaker 1: the way, you recently have been named global CEO, and 283 00:17:28,720 --> 00:17:32,359 Speaker 1: you know, on the one hand, congratulations. On the other hand, wow, 284 00:17:32,480 --> 00:17:35,280 Speaker 1: there's a lot to deal with right now. I mean, 285 00:17:36,000 --> 00:17:37,840 Speaker 1: when you when you move into a new position like that, 286 00:17:37,880 --> 00:17:39,600 Speaker 1: I guess you've gotta take stock and look at what's 287 00:17:39,640 --> 00:17:43,399 Speaker 1: going on UM. And there's so many it seems like 288 00:17:43,600 --> 00:17:47,959 Speaker 1: question marks. There's so much UM foggy visibility because of 289 00:17:48,240 --> 00:17:50,560 Speaker 1: the end of the pandemic. Are we in a new world? 290 00:17:50,600 --> 00:17:54,600 Speaker 1: How do you see it? Yeah, it's a really good question. Uh. 291 00:17:54,680 --> 00:17:57,320 Speaker 1: You know, I will say from a global standpoint, and 292 00:17:57,359 --> 00:18:00,959 Speaker 1: you touched upon this in your opening remarks. Um, this, 293 00:18:00,960 --> 00:18:04,639 Speaker 1: this really um explosion in the M and A market 294 00:18:04,680 --> 00:18:07,600 Speaker 1: is not just a US phenomenon. It's global. H As 295 00:18:07,640 --> 00:18:10,440 Speaker 1: I think about, I think we're moving into a new paradigm. 296 00:18:10,520 --> 00:18:13,000 Speaker 1: I don't think so. I think as we go into 297 00:18:13,080 --> 00:18:16,119 Speaker 1: next year, we're still gonna be UM. You'll see a 298 00:18:16,160 --> 00:18:17,920 Speaker 1: bit of a pullback in the markets. As I said, 299 00:18:17,920 --> 00:18:21,240 Speaker 1: there'll be less COVID recovery deals, and you won't have 300 00:18:21,560 --> 00:18:23,480 Speaker 1: I think you won't have who knows with what goes 301 00:18:23,520 --> 00:18:26,240 Speaker 1: on in Washington, but you won't have this tax driven 302 00:18:26,240 --> 00:18:28,560 Speaker 1: pressure in the US. You will still have a market 303 00:18:28,560 --> 00:18:31,720 Speaker 1: where there's more capital rays and there are companies to buy. 304 00:18:31,760 --> 00:18:34,159 Speaker 1: I think there are a few um clouds on the 305 00:18:34,200 --> 00:18:37,400 Speaker 1: horizon right now. Whether those clouds dissipate or become storms, 306 00:18:37,840 --> 00:18:41,359 Speaker 1: time will tell. I think one of those clouds is inflation. Um. 307 00:18:41,400 --> 00:18:44,240 Speaker 1: You know, you have many people, There's people that have 308 00:18:44,280 --> 00:18:46,919 Speaker 1: been there twenty thirty years in their career. They were 309 00:18:46,960 --> 00:18:49,800 Speaker 1: never really dealt with inflation. So if we do see 310 00:18:49,840 --> 00:18:52,280 Speaker 1: inflation in a way we haven't seen it before, there 311 00:18:52,359 --> 00:18:54,800 Speaker 1: may be a plause, um my senses that will be 312 00:18:54,840 --> 00:18:56,800 Speaker 1: transitory and then they'll be Here's how this is gonna 313 00:18:56,800 --> 00:18:59,520 Speaker 1: affect my business, Here's how this is affecting the capital markets. 314 00:18:59,560 --> 00:19:02,399 Speaker 1: I think the other um cloud on the horizon is 315 00:19:02,520 --> 00:19:06,160 Speaker 1: China right there. There is a slowing of growth in China. 316 00:19:06,240 --> 00:19:09,280 Speaker 1: It's a massive market. It's having effects on supply chains 317 00:19:09,320 --> 00:19:12,119 Speaker 1: here we're seeing that is that going to dissipate or 318 00:19:12,160 --> 00:19:14,080 Speaker 1: is that going to get worse? So again, I I'm 319 00:19:14,119 --> 00:19:16,480 Speaker 1: not overly concerned about those things right now, but I 320 00:19:16,520 --> 00:19:18,760 Speaker 1: think those are things that have to be monitored as 321 00:19:18,800 --> 00:19:21,280 Speaker 1: you think about how much longer can this M and 322 00:19:21,320 --> 00:19:23,840 Speaker 1: A boom continue. That's Kinna where I want to go, 323 00:19:23,960 --> 00:19:26,080 Speaker 1: rob It's it seems to me one of the risk 324 00:19:26,119 --> 00:19:28,960 Speaker 1: in this M and A marketplace is too much capital 325 00:19:29,040 --> 00:19:31,119 Speaker 1: chasing too few deals. And I'm thinking, particularly from the 326 00:19:31,119 --> 00:19:33,800 Speaker 1: private equity side, given all the dry powder they have 327 00:19:33,920 --> 00:19:36,399 Speaker 1: their how do you think about some of the valuations 328 00:19:36,400 --> 00:19:40,560 Speaker 1: that are being paid potentially the risk of overpaying for 329 00:19:40,760 --> 00:19:44,760 Speaker 1: assets in the name of getting capital deployed. Yeah, I 330 00:19:45,000 --> 00:19:48,280 Speaker 1: think interestingly, I think that sentiment has been around for 331 00:19:48,280 --> 00:19:50,560 Speaker 1: probably the last three or four years because there was 332 00:19:50,600 --> 00:19:55,000 Speaker 1: this step function in valuations UM driven. I agree with you, 333 00:19:55,119 --> 00:19:58,560 Speaker 1: driven by capital availability, but it's not just capital availability 334 00:19:58,560 --> 00:20:00,240 Speaker 1: in the private equity side of it. If you look 335 00:20:00,240 --> 00:20:02,919 Speaker 1: at all the private debt funds that have been raised, right, 336 00:20:02,960 --> 00:20:06,200 Speaker 1: so the lenders willing to lend at high multiples gives 337 00:20:06,480 --> 00:20:09,919 Speaker 1: comfort for the equity holders to put equity higher equity 338 00:20:10,000 --> 00:20:13,040 Speaker 1: checks in it. And so to me, I think, I 339 00:20:13,080 --> 00:20:15,719 Speaker 1: think most deals are priced for perfection. They're not priced 340 00:20:15,720 --> 00:20:17,879 Speaker 1: for something going wrong or not hitting the forecast in 341 00:20:17,920 --> 00:20:21,000 Speaker 1: almost every sector, So there is risk when things are 342 00:20:21,000 --> 00:20:24,080 Speaker 1: priced to perfection because it's very rarely that the future 343 00:20:24,119 --> 00:20:27,159 Speaker 1: plays out perfect. The question, though, is going to be 344 00:20:27,200 --> 00:20:30,040 Speaker 1: how are the lenders going to react if things pull back? 345 00:20:30,480 --> 00:20:33,720 Speaker 1: And interestingly, in COVID, when COVID hit, and this may 346 00:20:33,800 --> 00:20:36,480 Speaker 1: or may not portend what's going to happen in the future, 347 00:20:37,000 --> 00:20:39,640 Speaker 1: there was a belief when business is pulled back, when 348 00:20:39,640 --> 00:20:41,800 Speaker 1: the capital markets tightened up for a quarter, that the 349 00:20:41,880 --> 00:20:43,760 Speaker 1: lenders were going to get aggressive and they were gonna 350 00:20:43,760 --> 00:20:47,440 Speaker 1: start forcing things. The lenders actually showed a high level 351 00:20:47,440 --> 00:20:49,679 Speaker 1: of patients. Now that may be that they were so 352 00:20:49,800 --> 00:20:52,480 Speaker 1: overwhelmed by the entire economy stopping on a dime so 353 00:20:52,560 --> 00:20:54,840 Speaker 1: to me, the question of what does that mean for 354 00:20:54,880 --> 00:20:57,359 Speaker 1: the future, it's going to be are the lenders gonna 355 00:20:57,400 --> 00:20:59,919 Speaker 1: work with private equity groups. Are these private acreups going 356 00:20:59,960 --> 00:21:02,639 Speaker 1: to support companies that maybe need help if there is 357 00:21:02,640 --> 00:21:05,080 Speaker 1: a recession and things pull back. But but the risk 358 00:21:05,119 --> 00:21:10,080 Speaker 1: of things being priced perfection, it's there. And the risk 359 00:21:10,119 --> 00:21:14,720 Speaker 1: of a pullback, you know, obviously not um total stoppage 360 00:21:14,840 --> 00:21:18,080 Speaker 1: like we saw during the lockdowns initially, but the risk 361 00:21:18,119 --> 00:21:21,080 Speaker 1: of a pullback in China is real that markets are 362 00:21:21,119 --> 00:21:23,520 Speaker 1: increasingly worried about it, even though we don't really see 363 00:21:23,560 --> 00:21:26,760 Speaker 1: it in equities. I totally agree with you, I and 364 00:21:26,760 --> 00:21:28,920 Speaker 1: and and there's just not as much transparency in that market. 365 00:21:28,960 --> 00:21:31,480 Speaker 1: But as you as you start hearing things peel back 366 00:21:31,520 --> 00:21:34,160 Speaker 1: even on what's going on in China evergrant right, and 367 00:21:34,280 --> 00:21:36,840 Speaker 1: they could have their own many housing bubble over there 368 00:21:36,880 --> 00:21:40,040 Speaker 1: that will have reverberations around the globe. And and so 369 00:21:40,119 --> 00:21:41,800 Speaker 1: there's two elements of that. A lot there's been a 370 00:21:41,800 --> 00:21:44,000 Speaker 1: lot of growth in the economy, and and that that 371 00:21:44,040 --> 00:21:46,639 Speaker 1: growth has helped businesses around the world that are serving 372 00:21:46,680 --> 00:21:49,520 Speaker 1: that um. But there are also a major supplier here. 373 00:21:49,560 --> 00:21:54,080 Speaker 1: So China is something maybe it dissipates, maybe the government 374 00:21:54,119 --> 00:21:56,640 Speaker 1: steps in. I don't know, but I agree with you 375 00:21:57,040 --> 00:21:58,720 Speaker 1: that and I said it earlier. That is one of 376 00:21:58,720 --> 00:22:02,080 Speaker 1: the clouds on the horizon out there, Rob going forward. 377 00:22:02,080 --> 00:22:04,800 Speaker 1: What are some of the sectors that you envision being 378 00:22:04,880 --> 00:22:08,200 Speaker 1: quite active from an M and A perspective, Yeah, I think, 379 00:22:08,480 --> 00:22:10,400 Speaker 1: you know, I think the sectors that maybe have more 380 00:22:10,440 --> 00:22:13,480 Speaker 1: secular growth and cyclical growth are going to continue to 381 00:22:13,480 --> 00:22:16,399 Speaker 1: see high levels of activity. And I think the two 382 00:22:16,520 --> 00:22:19,000 Speaker 1: in our business that we see probably the most secular 383 00:22:19,000 --> 00:22:22,240 Speaker 1: growth in our technology and healthcare UM. And I think 384 00:22:22,240 --> 00:22:26,199 Speaker 1: there's certain aspects of the business service UM economy that 385 00:22:26,240 --> 00:22:28,320 Speaker 1: also support those areas that are also going to see 386 00:22:28,320 --> 00:22:30,000 Speaker 1: a lot of growth. But I think if I think 387 00:22:30,000 --> 00:22:32,160 Speaker 1: of the two highest growth groups we're going to see 388 00:22:32,400 --> 00:22:35,879 Speaker 1: this year, UM, it's technology and healthcare and then certain 389 00:22:35,880 --> 00:22:39,439 Speaker 1: sectors of services. Yeah, I mean healthcare seems to be 390 00:22:39,520 --> 00:22:44,040 Speaker 1: changing so rapidly, just just the idea that we developed 391 00:22:44,040 --> 00:22:47,760 Speaker 1: a vaccine within a year, and then UM that's had 392 00:22:48,000 --> 00:22:50,919 Speaker 1: reverberations for other medicines that we now expect to be 393 00:22:51,000 --> 00:22:54,359 Speaker 1: able to UM come out with the question is UM 394 00:22:54,800 --> 00:22:58,560 Speaker 1: one of paying for it right? And inflation? Is that 395 00:22:58,960 --> 00:23:01,480 Speaker 1: I mean, clearly that's a cloud for for investors. But 396 00:23:01,640 --> 00:23:04,280 Speaker 1: is that UM Does that tie in at also the 397 00:23:04,320 --> 00:23:07,680 Speaker 1: way you look at global m and a inflation. Yeah, 398 00:23:07,720 --> 00:23:09,440 Speaker 1: I think it does. And I and again I think 399 00:23:09,440 --> 00:23:11,400 Speaker 1: it's a hard one to predict because, as I said, 400 00:23:11,440 --> 00:23:15,120 Speaker 1: I you have executives throughout the world, and I look 401 00:23:15,119 --> 00:23:17,240 Speaker 1: at myself, right, I've been doing this for thirty years. 402 00:23:17,280 --> 00:23:20,040 Speaker 1: I've never really had to deal with how does inflation 403 00:23:20,080 --> 00:23:22,640 Speaker 1: affect our clients? How does it affect our business? So 404 00:23:23,000 --> 00:23:25,359 Speaker 1: I think if we see a spike in inflation that 405 00:23:25,400 --> 00:23:27,800 Speaker 1: we haven't seen before, I think what you're going to 406 00:23:27,800 --> 00:23:29,480 Speaker 1: see as a pause, and that plause is going to 407 00:23:29,560 --> 00:23:32,560 Speaker 1: first be driven by business performance, right because if if 408 00:23:32,640 --> 00:23:34,760 Speaker 1: it's affecting inputs and people can't pass it on to 409 00:23:34,840 --> 00:23:37,359 Speaker 1: customers or clients, what does that mean for profitability or 410 00:23:37,640 --> 00:23:40,240 Speaker 1: or vice versa? Right? If there if they're seeing inflation 411 00:23:40,400 --> 00:23:43,160 Speaker 1: in their prices and yet their inputs aren't and they're 412 00:23:43,160 --> 00:23:46,960 Speaker 1: having and they're having what maybe views unsustainable UM profits, 413 00:23:47,040 --> 00:23:48,960 Speaker 1: how does that affect it? So I think I think 414 00:23:48,960 --> 00:23:53,199 Speaker 1: how inflation is ultimately to affect business performance, UH is 415 00:23:53,320 --> 00:23:55,560 Speaker 1: going to drive how to investors think about it? But 416 00:23:55,760 --> 00:23:58,320 Speaker 1: and to be clear, we're not We're not there yet, Rob, Right, 417 00:23:58,440 --> 00:24:01,320 Speaker 1: But but this is the kind of the visibility issue 418 00:24:01,359 --> 00:24:04,480 Speaker 1: that I was touching on before. It's just it's a 419 00:24:04,480 --> 00:24:08,439 Speaker 1: little bit foggy right now, it is. And interestingly, you know, 420 00:24:08,440 --> 00:24:10,920 Speaker 1: I think what ultimately make what lpimly drive this inflation 421 00:24:10,920 --> 00:24:12,800 Speaker 1: is you know, the central governments have pumped you know, 422 00:24:12,880 --> 00:24:15,680 Speaker 1: twenty plus trillion dollars in the global economy. So there's 423 00:24:15,680 --> 00:24:18,199 Speaker 1: a wash of capital, consumers of money in their pockets, 424 00:24:18,240 --> 00:24:20,480 Speaker 1: businesses of money in their pockets. And so we're in 425 00:24:20,520 --> 00:24:23,800 Speaker 1: an economy where where in a lot of area it's 426 00:24:23,800 --> 00:24:26,679 Speaker 1: not a demandage to supply, right, and when demand exceeds supply, 427 00:24:26,880 --> 00:24:30,000 Speaker 1: you see inflation. And so um. The flip side of 428 00:24:30,000 --> 00:24:31,639 Speaker 1: that is, I think a lot of the really strong 429 00:24:31,760 --> 00:24:36,240 Speaker 1: performance of businesses coming out of of of the pandemic 430 00:24:36,600 --> 00:24:38,959 Speaker 1: has been a result of a lot of money being 431 00:24:39,000 --> 00:24:41,280 Speaker 1: pumped into the economy. So there's been a benefit of it. 432 00:24:41,680 --> 00:24:43,639 Speaker 1: But you know, as you know that people want that 433 00:24:43,680 --> 00:24:47,119 Speaker 1: goldilocks not to not to overheated, not too cold, and 434 00:24:47,160 --> 00:24:51,000 Speaker 1: there's some signs that we could be moving towards overheated. Hey, Rob, 435 00:24:51,040 --> 00:24:53,040 Speaker 1: you know, when I think about m and A. I 436 00:24:53,040 --> 00:24:56,560 Speaker 1: think it is reflection of confidence, confidence on the board, 437 00:24:57,160 --> 00:25:00,800 Speaker 1: on the part of board of directors and on uh 438 00:25:00,880 --> 00:25:03,520 Speaker 1: you know, the CEOs of the world, and you know 439 00:25:03,680 --> 00:25:05,879 Speaker 1: so when I hear about these incredible M and A 440 00:25:05,960 --> 00:25:08,440 Speaker 1: results from the big investment banks over the last really 441 00:25:08,480 --> 00:25:11,359 Speaker 1: eighteen months, I'm like, how can they have confidence given 442 00:25:11,359 --> 00:25:13,840 Speaker 1: what's going on in the world here? Do you think 443 00:25:13,840 --> 00:25:16,200 Speaker 1: this M and A boom has just been primarily driven 444 00:25:16,240 --> 00:25:20,800 Speaker 1: by liquidity as you were talking about. I think liquidity 445 00:25:20,840 --> 00:25:22,919 Speaker 1: is a big, big chunk of it um. But I 446 00:25:23,000 --> 00:25:24,960 Speaker 1: also think you're right. I mean, I'm gonna you have 447 00:25:25,040 --> 00:25:27,239 Speaker 1: to have confidence. You have to have confidence in your 448 00:25:27,240 --> 00:25:29,240 Speaker 1: own business first before you're going to go out and 449 00:25:29,280 --> 00:25:31,159 Speaker 1: pay and buy another business, if you think of a 450 00:25:31,160 --> 00:25:34,440 Speaker 1: corporate CEO. So I agree with you, But I think 451 00:25:34,440 --> 00:25:37,000 Speaker 1: there's also as you look at where the stock market 452 00:25:37,119 --> 00:25:39,919 Speaker 1: is and the expectations for growth and a lot of 453 00:25:39,920 --> 00:25:42,960 Speaker 1: these big companies they're looking at their businesses and saying, 454 00:25:43,000 --> 00:25:46,080 Speaker 1: I can't meet those growth expectations organically I have to 455 00:25:46,160 --> 00:25:48,679 Speaker 1: go by So part of its confidence, part of it 456 00:25:48,760 --> 00:25:53,160 Speaker 1: is is growth expectations and the need to supplement organic 457 00:25:53,200 --> 00:25:56,760 Speaker 1: growth with acquisition growth to meet the expectation of public 458 00:25:56,760 --> 00:25:59,639 Speaker 1: company investors. All right, Rob, thank you so much for 459 00:25:59,720 --> 00:26:03,479 Speaker 1: joining us. Really appreciate getting your thoughts and perspective on 460 00:26:03,520 --> 00:26:06,359 Speaker 1: the red hot m n A market boy putting out 461 00:26:06,400 --> 00:26:10,080 Speaker 1: some major numbers across Wall Street. Rob Brown, Global CEO 462 00:26:10,280 --> 00:26:17,480 Speaker 1: for Lincoln International. Wow, the markets continue to rip here, 463 00:26:17,480 --> 00:26:20,040 Speaker 1: we have green on the screen. Let's get some color 464 00:26:20,119 --> 00:26:23,879 Speaker 1: and what's going on out there. We welcome Bloomberg Markets reporter, Cretti, Gupta, 465 00:26:23,920 --> 00:26:25,960 Speaker 1: Cretty what you got for us? You know, I think 466 00:26:25,960 --> 00:26:28,320 Speaker 1: all the action is in the bond market. It's really 467 00:26:28,440 --> 00:26:31,560 Speaker 1: going to be about those break evens, about really what 468 00:26:31,640 --> 00:26:35,879 Speaker 1: you're seeing boons. I mean, you've seen the markets so overheated. 469 00:26:36,040 --> 00:26:38,600 Speaker 1: I mean, if you're really looking at any asset class, 470 00:26:38,600 --> 00:26:40,560 Speaker 1: everyone says, you know, the bond market is really the 471 00:26:40,600 --> 00:26:42,400 Speaker 1: place to look at for what comes next. And that's 472 00:26:42,400 --> 00:26:46,600 Speaker 1: what you saw really this month, inflation expectations soaring until today, 473 00:26:46,600 --> 00:26:48,800 Speaker 1: a little bit of a pullback and break evens. And 474 00:26:48,840 --> 00:26:52,080 Speaker 1: then on top of that you've got a completely separate issue, 475 00:26:52,119 --> 00:26:54,920 Speaker 1: which is what's going on overseas at the ECB with 476 00:26:55,040 --> 00:26:56,919 Speaker 1: the Euro spiking, and a lot of this has to 477 00:26:56,920 --> 00:26:59,800 Speaker 1: do with simply the market being super short on euros, 478 00:27:00,160 --> 00:27:02,840 Speaker 1: and then Madame Leguard, President Legard of the e c 479 00:27:02,960 --> 00:27:05,520 Speaker 1: B not really pushing back hunt pricing. So, by the way, Coretty, 480 00:27:05,560 --> 00:27:07,439 Speaker 1: I've been I've been pointing this out with my I 481 00:27:07,480 --> 00:27:10,040 Speaker 1: have a chart um that I've been watching for the 482 00:27:10,119 --> 00:27:13,040 Speaker 1: last few days comparing the move index to the VIX 483 00:27:13,440 --> 00:27:16,080 Speaker 1: and all the action is in bonds. All of the 484 00:27:16,119 --> 00:27:19,400 Speaker 1: action is in bonds. As our colleague Vince Cignarella puts it, 485 00:27:19,400 --> 00:27:21,600 Speaker 1: it is all over the place and no one can 486 00:27:21,640 --> 00:27:23,560 Speaker 1: follow it, because that's really what's happening. You're trying to 487 00:27:23,560 --> 00:27:26,720 Speaker 1: price in something you're forcing in a narrative here that 488 00:27:26,800 --> 00:27:28,560 Speaker 1: the FED and the b O E and the e 489 00:27:28,640 --> 00:27:30,960 Speaker 1: c B E they're ready to hike on top of 490 00:27:31,000 --> 00:27:33,640 Speaker 1: the fact that weight they're not actually hiking because they're 491 00:27:33,640 --> 00:27:36,320 Speaker 1: still sticking to that transitory narrative. So there's a lot 492 00:27:36,400 --> 00:27:38,840 Speaker 1: going on, a lot of push and pull, and ultimately, 493 00:27:39,000 --> 00:27:40,679 Speaker 1: I hate to say this because this is like the 494 00:27:40,760 --> 00:27:43,640 Speaker 1: ultimate cliche, but you do start to see a little 495 00:27:43,680 --> 00:27:45,680 Speaker 1: bit of technicals come in because when you have these 496 00:27:45,680 --> 00:27:48,000 Speaker 1: extreme moves, at some point you have to pull back 497 00:27:48,040 --> 00:27:49,520 Speaker 1: a little bit, and that's where you're seeing the break 498 00:27:49,560 --> 00:27:52,359 Speaker 1: events do exactly that. Is there the risk that the 499 00:27:52,440 --> 00:27:56,240 Speaker 1: FED is falling behind a little bit. Here's be seen 500 00:27:56,280 --> 00:27:58,760 Speaker 1: some other central banks, um most recently, I guess Canada 501 00:27:59,240 --> 00:28:02,240 Speaker 1: raise rates. There's is that coming into the marketplace. Yeah, 502 00:28:02,240 --> 00:28:04,200 Speaker 1: I mean I would agree with that. It does seem 503 00:28:04,280 --> 00:28:06,679 Speaker 1: like the FED. I mean, this is where you have 504 00:28:06,760 --> 00:28:09,760 Speaker 1: to kind of take the bond market with a little 505 00:28:09,760 --> 00:28:12,400 Speaker 1: bit of a grain of salt, because there is so 506 00:28:12,440 --> 00:28:14,280 Speaker 1: many different factors going on right now. You have the 507 00:28:14,280 --> 00:28:17,280 Speaker 1: tips market, which is you know, very FED involved, but 508 00:28:17,320 --> 00:28:19,399 Speaker 1: you also have this huge sell off in the tips market. 509 00:28:19,400 --> 00:28:21,960 Speaker 1: Then you have this idea that well maybe you start 510 00:28:22,000 --> 00:28:24,239 Speaker 1: to see Chairman Powell even Madam Leguards say well, we're 511 00:28:24,280 --> 00:28:28,080 Speaker 1: aware of these inflationary pressures. We might see them stick around, 512 00:28:28,200 --> 00:28:30,560 Speaker 1: but we're still not changing our policy framework just yet. 513 00:28:30,600 --> 00:28:33,520 Speaker 1: So there there is that sentiment. Paul check out. Do 514 00:28:33,520 --> 00:28:35,399 Speaker 1: you have a terminal in front of you, Critty, I 515 00:28:35,440 --> 00:28:41,680 Speaker 1: have a terminal hashtag b t V one to eight 516 00:28:41,800 --> 00:28:45,560 Speaker 1: seven G hashtag b t V one to eight seven, 517 00:28:45,600 --> 00:28:48,000 Speaker 1: and you can see the one year implied policy rates. 518 00:28:48,520 --> 00:28:51,720 Speaker 1: You've got the b O E in white, the FED 519 00:28:51,840 --> 00:28:55,800 Speaker 1: in yellow, and the E C B in blue. Fun 520 00:28:55,880 --> 00:28:59,320 Speaker 1: fact I made this chart, you did, I did, I 521 00:28:59,360 --> 00:29:03,840 Speaker 1: did orefer to but using it, well, I've been using 522 00:29:03,840 --> 00:29:06,520 Speaker 1: it today, looking at it today because um, we had 523 00:29:06,520 --> 00:29:09,360 Speaker 1: a viewer right in I think early this morning or 524 00:29:09,400 --> 00:29:11,720 Speaker 1: maybe yesterday, I can never remember what day it is. 525 00:29:11,760 --> 00:29:16,000 Speaker 1: But uh, saying, look, if we see Chinese growth really 526 00:29:16,040 --> 00:29:19,680 Speaker 1: disappointing below five percent next year, can you really be 527 00:29:19,720 --> 00:29:22,640 Speaker 1: in a situation where the FED or any major central 528 00:29:22,680 --> 00:29:25,560 Speaker 1: bank starts to raise rates like that? I think it's 529 00:29:25,560 --> 00:29:27,600 Speaker 1: a great question because at the ultimate, at the end 530 00:29:27,640 --> 00:29:30,920 Speaker 1: of the day, Uh, that's really where all the where 531 00:29:30,960 --> 00:29:33,000 Speaker 1: the growth that's happening, where the extreme growth is happening, 532 00:29:33,000 --> 00:29:35,440 Speaker 1: where a lot of the commodity demand is coming from. 533 00:29:35,480 --> 00:29:37,400 Speaker 1: So I think that's a great question to ask. I 534 00:29:37,440 --> 00:29:39,640 Speaker 1: don't have the answer to that, sadly, but I think 535 00:29:39,680 --> 00:29:42,680 Speaker 1: there's Uh. There used to be a phrase, and forgive 536 00:29:42,760 --> 00:29:46,040 Speaker 1: the reference to to help issues given that we're in 537 00:29:46,040 --> 00:29:47,800 Speaker 1: the middle of a pandemic at the moment, but there 538 00:29:47,840 --> 00:29:50,000 Speaker 1: used to be a phrase that when the US sneezes, 539 00:29:50,160 --> 00:29:52,760 Speaker 1: the rest of the world catches a cold. Um. And 540 00:29:53,360 --> 00:29:56,400 Speaker 1: if you really replace that idea with China in the 541 00:29:56,440 --> 00:29:58,720 Speaker 1: regard that what happens in China start to affect the 542 00:29:58,720 --> 00:30:00,920 Speaker 1: rest of the world. I think they're really kind of 543 00:30:00,960 --> 00:30:03,400 Speaker 1: replacing it, because I mean, I like to look at 544 00:30:03,440 --> 00:30:05,880 Speaker 1: history in these examples. But in two thousand nine, it 545 00:30:05,960 --> 00:30:09,080 Speaker 1: was actually China and their massive fiscal package that helped 546 00:30:09,160 --> 00:30:12,400 Speaker 1: create the commodity demand and inflation. And right now they 547 00:30:12,440 --> 00:30:15,560 Speaker 1: don't have that same, right, they don't have that. You could, 548 00:30:15,600 --> 00:30:18,640 Speaker 1: you could go so many places with that phrase, now, right, 549 00:30:18,800 --> 00:30:20,240 Speaker 1: you gotta be careful with how you phrase it, but 550 00:30:20,320 --> 00:30:22,040 Speaker 1: I mean, it's it's an important When there's a security 551 00:30:22,120 --> 00:30:25,719 Speaker 1: league at a lab, the rest of the world shuts 552 00:30:25,760 --> 00:30:29,640 Speaker 1: down their economy. Exactly true. All right, Critty, thank you 553 00:30:29,680 --> 00:30:31,760 Speaker 1: so much for joining us. We appreciate critic to our 554 00:30:31,800 --> 00:30:35,200 Speaker 1: Markets Reporter. Thanks for listening to the Bloomberg Markets podcast. 555 00:30:35,560 --> 00:30:38,760 Speaker 1: You can subscribe and listen to interviews with Apple Podcasts 556 00:30:38,920 --> 00:30:42,800 Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm 557 00:30:42,840 --> 00:30:46,880 Speaker 1: on Twitter at Matt Miller three. Put on false Swhey, 558 00:30:46,880 --> 00:30:49,520 Speaker 1: I'm on Twitter at pt Sweeney Before the podcast. You 559 00:30:49,560 --> 00:30:52,200 Speaker 1: can always catch us worldwide at Bloomberg Radio.