Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovk. We're here every day bringing
Speaker 1: you the latest news from the world of business and finance,
Speaker 1: plus technology, politics, economics, all purtnising the power of Business
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Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on
Speaker 1: YouTube search Bloomberg Global News. But it was just this
Speaker 1: past weekend that the news broke that Broadcom was said
Speaker 1: to be and talked about vm Ware. Well, it became
Speaker 1: official this morning. Dina bas is Seattle bureau chief for
Speaker 1: Bloomberg News. Dina joins us now on the phone from Seattle.
Speaker 1: We got some more details, thanks to you and to
Speaker 1: Leanna Baker Dinah, sixty one billion dollars. It's a record
Speaker 1: tech deal. There's a ghost shop provision here. What else
Speaker 1: do does our investor audience need to know? Uh? You know, so,
Speaker 1: Broadcom was basically saying that vm Ware is going to
Speaker 1: become the new name for its off for a business,
Speaker 1: is going to become the focus of a software business
Speaker 1: that they've been building for the last couple of years. Uh.
Speaker 1: There is also a go shop provision in here, though,
Speaker 1: so vm Ware can for a limited period of time
Speaker 1: try to find other bidders. So we'll we'll see if
Speaker 1: that creates additional late, late breaking drama in this deal. Boy,
Speaker 1: it's good to be vm Ware, right, I guess at
Speaker 1: this point, I mean who else wants it? Or who
Speaker 1: should want vm ware? Dina. You know, vm Ware has
Speaker 1: partnerships with all of the major cloud companies, so and
Speaker 1: the closest one is with Amazon's cloud business, So we're
Speaker 1: talking Amazon, Microsoft, Google. The problem is that in the
Speaker 1: current regulatory environment, it's going to be difficult for any
Speaker 1: of those companies to to put together a deal potentially.
Speaker 1: Uh that that's going to be a little hard with
Speaker 1: the scrutiny that regulators are putting on on large tech. UH.
Speaker 1: Intel another chip maker. Obviously Intel CEO used to be
Speaker 1: the CEO of vm Ware. UH. Cisco is another name
Speaker 1: that's been been mentioned, But we don't know what's going
Speaker 1: to happen from here on out. All right, So we
Speaker 1: have a very smart audience, I know that. But if
Speaker 1: they're not familiar with Broadcommon, vm Ware, what is it
Speaker 1: about these companies, what do they do and what is
Speaker 1: it about them that maybe makes a good combination. Well,
Speaker 1: you have to look back at broadcomms M and a
Speaker 1: strategy over the past couple of years. They're a hardware company,
Speaker 1: a chip maker, but in order to reduce their exposure
Speaker 1: to the cyclicality of the chip industry, they've been buying
Speaker 1: up software companies. They bought a big part of Semantic,
Speaker 1: they bought ci A technologies and part of what they
Speaker 1: do UM. When they do that, it's almost a private
Speaker 1: equity like strategy. They look at these companies that are
Speaker 1: a little bit more mature, but have solid, successful product
Speaker 1: lines that they can you know, continue running and bring
Speaker 1: in money and and ring costs out of At the
Speaker 1: same time, software tends to be a more regular flow
Speaker 1: of revenue than than hardware and chips in particular, which
Speaker 1: are as I mentioned, very cyclical. So when you look
Speaker 1: at vm ware, you have a company that pioneered a
Speaker 1: type of software called virtualization software, and UM, even though
Speaker 1: that technology is being surpa asked by the sorts of
Speaker 1: things people are using more frequently in the cloud. They
Speaker 1: still have a very strong position. They're still very deeply
Speaker 1: embedded in a very large number of corporate networks and
Speaker 1: their software basically helps you reduce the number of servers
Speaker 1: that you have to use and cut costs. Well, I
Speaker 1: think about where we were yesterday Informatica in Vegas, right,
Speaker 1: and this was yes cloud, but it was also about
Speaker 1: taking data, making it intelligent, doing lots of different things
Speaker 1: with it. Like it's just this. I feel like there's
Speaker 1: a lot of crossover happening within the tech INDs right
Speaker 1: with so much data is how do you make it
Speaker 1: valuable to different customers? So Sodina, what what does Broadcom
Speaker 1: end up doing with vm where? Now? How why are
Speaker 1: these companies better off together than they would be by themselves. Well,
Speaker 1: vm Ware has been in a tough spot for the
Speaker 1: last couple of years. There's been a lot of financial
Speaker 1: engineering going on around the company. So if you if
Speaker 1: you go back historically, vm Ware was a very successful startup,
Speaker 1: was bought by e MC and probably the most valuable
Speaker 1: tech deal you know in the history in terms of
Speaker 1: what e MC paid for it and what it ended
Speaker 1: up making them in money. But then e MC gets
Speaker 1: bought by Dell. Vm ware has been you know, spun
Speaker 1: awesome doll back into you know, it's been there's been
Speaker 1: a lot of backports about where what's gone on with
Speaker 1: them and all that's going on. They've been trying to
Speaker 1: come up with a strategy to deal with this uh
Speaker 1: legacy product line that I talked about before, this virtualization software.
Speaker 1: How do they modernize, how do they regain the leadership
Speaker 1: role they once had in a market that's bypassed them,
Speaker 1: And so they've been investing in a lot of different
Speaker 1: areas and security, mobile device management, networking, but still the
Speaker 1: vast majority of the revenue is coming from this older software.
Speaker 1: So he've been struggling to figure out what the strategy
Speaker 1: is as a standalone company in terms of how they're
Speaker 1: going to continue growing. Their revenue growth has ticked down
Speaker 1: into the single digits where two years ago, three years
Speaker 1: ago was in the double digits. That's been challenging. Being
Speaker 1: owned by Broadcom freeze them from having to worry about that. Broadcom.
Speaker 1: You know, I spoke to Broadcom Software president Tom Croft
Speaker 1: this morning and he said, look, you know, yes, they're
Speaker 1: single digit revenue business. But that's the type of business
Speaker 1: we run very well. Um and so VM work gets
Speaker 1: to be you outside of the stock market scrutiny of
Speaker 1: around its growth rates, and Broadcom will will try again
Speaker 1: to squeeze costs out of it and and focus on
Speaker 1: profit of you know, this aging product line. Heyda. What's
Speaker 1: going on just more broadly in the tech industry, especially
Speaker 1: as we're seeing kind of the big tech really under fire.
Speaker 1: If you look at certainly the performance in the equity
Speaker 1: markets this year so far. But there's been a lot
Speaker 1: of tech deals, right, and some big ones this year. Sure,
Speaker 1: obviously you know there's Microsoft Activision at sixty nine billion,
Speaker 1: he said earlier. This one is the biggest tech deal.
Speaker 1: But that's only if you consider Microsoft activision of gaming
Speaker 1: or entertainment deal. I suppose what we're seeing right now
Speaker 1: is kind of a confluence of different, potentially conflicting factors.
Speaker 1: So companies valuations are going down because the market is
Speaker 1: going down, So acquiring a company becomes potentially cheaper. That said,
Speaker 1: the company doing the acquisition, if they are doing it
Speaker 1: by stock, well, their stock is going down to so
Speaker 1: you have to weigh that and We talked at the
Speaker 1: top of this conversation about the increasingly difficult regulatory environment
Speaker 1: around large deals. So you have a cup of different
Speaker 1: forces pulling on things, but valuations are going down and
Speaker 1: that that may enable some more opportunistic buying for those
Speaker 1: buyers that that can get their deals approved by regulators
Speaker 1: and have the cash or the stock to do it.
Speaker 1: Kind of fascinating just to see what's going on and
Speaker 1: what is so far, I feel like a very crazy
Speaker 1: financial market year, Dina explained, so much. Thank you so much,
Speaker 1: Tina basked, she Seattle bureau chief that Bloomberg News joining
Speaker 1: us on the phone from Seattle. So again, right, we
Speaker 1: heard about the deal just not even a week ago,
Speaker 1: and here you have it. Yeah, but you know, in
Speaker 1: just a few minutes, we're gonna talk about Stays big take,
Speaker 1: which is about you know, the troubles brewing in tech. Yeah, exactly.
Speaker 1: This will get you thinking in a big way. This
Speaker 1: is Bloomberg. You're listening to Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.
Speaker 1: So more Americans died of drug overdoses in then any
Speaker 1: previous year to mention these numbers, more than a hundred
Speaker 1: thousand Americans, that's up fift from the previous year. More
Speaker 1: than eighty thousand died using opioids. And just yesterday we
Speaker 1: got where that Teva will pay ten million to settle
Speaker 1: opioid related claims that just in West Virginia. And remember
Speaker 1: earlier this year, tim there was news that for the
Speaker 1: largest U S corporations have agreed to pay roughly twenty
Speaker 1: six billion to settle a tsunami of lawsuits linked to
Speaker 1: claims that their business practices help you the deadly opioid crisis. Well,
Speaker 1: we've got an expert voice with stalk all things when
Speaker 1: it comes to the opioid epidemic here in the United States,
Speaker 1: Dr Caleb Alexander, as Professor of Epidemiology at the Johns
Speaker 1: Hopkins Bloomberg School of Public Health. Dr Alexander is we
Speaker 1: should know it has been an expert for plaintiffs in
Speaker 1: opioid litigation. Dr Alexander, how are you fine? Thanks for
Speaker 1: having me, Well, you've been working on something. You've been developing,
Speaker 1: the Opioid Industry Document Archive. It's launched by Johns Hopkins
Speaker 1: University and u c SF. We should know that JOHNS.
Speaker 1: Hopkins Bloomberg School of Public Health that is supported by
Speaker 1: Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies.
Speaker 1: What is the Opioid Industry Document Archive? The Archives is
Speaker 1: an effort to shine the bright light of day on
Speaker 1: millions of documents that have been generated through ongoing opioid litigation.
Speaker 1: It provides an opportunity for members of the public breath
Speaker 1: to have lost a loved one, researchers, historians, legal scholars,
Speaker 1: and others to be able to examine the corporate practices
Speaker 1: that has contributed to the worst drug epidemic in our
Speaker 1: country's history. You know what's what's fascinating to me, Dr
Speaker 1: Alexander and I think about this When any of the
Speaker 1: drug companies seem to um come to a settlement to
Speaker 1: settle those opioid related claims, they usually say, what we
Speaker 1: did nothing wrong. When you look at this archive and
Speaker 1: you are able to see these documents, is that not
Speaker 1: fair event to say that? Well? It him. It's an
Speaker 1: excellent question, and I should start by saying that it's
Speaker 1: unusual that out of litigation we get this opportunity to
Speaker 1: actually put these sorts of documents in the public domain
Speaker 1: all too often, unfortunately, uh these documents remain field and
Speaker 1: and the public never has an opportunity to actually see,
Speaker 1: uh see these types of internal corporate communications, emails, presentations,
Speaker 1: sales reports, budgets and the like. And you know, I
Speaker 1: don't think we would be seeing settlements of billions and
Speaker 1: billions of dollars. You just pointed out the one for
Speaker 1: twenty six billion with four of the country's largest corporations.
Speaker 1: I don't think we would be seeing settlements of that
Speaker 1: magnitude if there wasn't longdoing that had taken place, Dr Alexander.
Speaker 1: We we are getting, you know, thanks to the Opioid
Speaker 1: Industry Document Archive, to some really great work by a
Speaker 1: journalists who've dug into this over the last few years,
Speaker 1: we are getting a good understanding of what some companies
Speaker 1: have done with regards to their marketing of these pharmaceuticals.
Speaker 1: The cat, though, is out of the bag and the
Speaker 1: proof is in the pudding. As Carol mentioned, more than
Speaker 1: a hundred thousand overdose deaths here in the United States
Speaker 1: just last year. What now does the United States do?
Speaker 1: What can we do to start preventing these deaths and
Speaker 1: to get these numbers to come down. Well, there are
Speaker 1: many abatement activities that are underway in cities and counties
Speaker 1: around the country. And we know, for example, that there
Speaker 1: are highly safe, highly effective FDA approved treatments for opioid addiction,
Speaker 1: and we need to scale these up massively. But but
Speaker 1: the real focus of the Archives is really to allow
Speaker 1: for us to learn what took place within these corporations
Speaker 1: so as to prevent these sorts of activities from occurring again.
Speaker 1: And we have a president which is tobacco. The Opioid
Speaker 1: Archives sits upon a fire or kind of tobacco industry
Speaker 1: documents that's been used for decades to reveal industry strategies,
Speaker 1: to question science, hast doubt about the health harms of
Speaker 1: its products, and delayed public health regulation. And and you
Speaker 1: think the most documents there have been very important policies
Speaker 1: put in place regarding tobacco, such as state and local
Speaker 1: ordinances mandating smoke free public spaces and workplaces. Well, we
Speaker 1: certainly could talk for a long time on this, and
Speaker 1: hopefully we can talk again in the future because we've
Speaker 1: unfortunately run out of time. But interesting and important work
Speaker 1: that you guys are doing, and as you said, It's
Speaker 1: not often that we get people have access public access
Speaker 1: to all of the documents involved in in cases like this.
Speaker 1: Dr Caleb Alexander's, professor of Epidemiology at Johns Hopkins Bloomberg
Speaker 1: School of Public Health, joining us on the phone from Baltimore.
Speaker 1: Of course, the school is supported by Michael Bloomberg, founder,
Speaker 1: Bloombergalpy and Bloomberg Philanthropies, and Dr Alexander's we said served
Speaker 1: as an expert for plaintiffs and opioid litigation. This is
Speaker 1: Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes
Speaker 1: Tim Stinovic on Bloomberg Radio. Well the cover of the
Speaker 1: new issue of Bloomberg Business Week. It's also Today's Bloomberg
Speaker 1: Big Take. It's how the tech route isn't just cyclical,
Speaker 1: it is well earned and it is overdue. The story
Speaker 1: by Bradstone and Lazette Chapman. It's this week's cover story,
Speaker 1: as Carol mentioned, is available on newsstands, on the Bloomberg
Speaker 1: and at Bloomberg dot com. Slash business Week with us
Speaker 1: Now to tell us all about it is Jeff Muscus,
Speaker 1: Senior Features editor for Bloomberg Business Seek. He's with us
Speaker 1: in the Bloomberg Interactive Broker Studio along with Joel Webber,
Speaker 1: the editor of Bloomberg Business Week, who's with us as well. Joel. So, so,
Speaker 1: all good things must come to an end, and it's
Speaker 1: certainly seeming like that's happening in Silicon Valley. Yeah, we
Speaker 1: kind of called the bottom and now it's coming out,
Speaker 1: you know, to Nazac two days, it's creeping back out
Speaker 1: since we kind of put the finishing touches, said, uh,
Speaker 1: it'll regress tomorrow. I'm sure. Um, But basically, you know,
Speaker 1: we do a tech you every year, and what we
Speaker 1: really wanted to talk about here, and I think it
Speaker 1: just became impeccably unfortunate timing because every it's like the
Speaker 1: world caught up to the ideas that we had in
Speaker 1: this package is everything has started to change. The VC
Speaker 1: backed funny money, when money was free, led to a
Speaker 1: lot of uh, you know, exorbitant ideas and investments and
Speaker 1: SPACs and crypto and we're seeing an aggression to the norm.
Speaker 1: I think, or and what Jeff really set out to
Speaker 1: do and as the architect of this package and brad
Speaker 1: Stone and was that, like you mentioned, wrote the cover story,
Speaker 1: which I think is the the in the Today's big Take,
Speaker 1: which really sets the table. But there's a lot of
Speaker 1: other things in this package that helped kind of amplify
Speaker 1: this idea. So Jeff being the guiding hand that put
Speaker 1: all of these stories together, Like, what were you what
Speaker 1: were you setting out to accomplish? Sure? Well, like you said, Joel,
Speaker 1: we sort of started out from the position of okay,
Speaker 1: well you know here we are sort of um returning
Speaker 1: to very degrees of a new version of normal as
Speaker 1: people returned to their offices and that sort of thing.
Speaker 1: And so for the first time really in in two years,
Speaker 1: we're taking a sustained and marginally less COVID inflicted look
Speaker 1: at where is the tech industry now? Where are all
Speaker 1: these you know, big name companies that you know, a
Speaker 1: lot many of us haven't. I haven't been looking that
Speaker 1: squarely act for the past couple of years. And what
Speaker 1: does the tech world look like now? And where's it going?
Speaker 1: And with that in mind, you know a lot of
Speaker 1: our best writers and reporters here at Bloomberg News and
Speaker 1: on the Tech team, uh took a look at some
Speaker 1: of our our biggest, bold faced name targets from Instagram
Speaker 1: and TikTok uh, to Google and all the way down.
Speaker 1: Uh and then you know, sort of looking forward to
Speaker 1: where is the tech world going. We have a bunch
Speaker 1: of interesting looks both that things like prediction markets that
Speaker 1: are sort of on the bubble of regulation and biotech
Speaker 1: stories like this, look at h what they're called better
Speaker 1: odds babies, the science of pologenic risk scoring that might
Speaker 1: well just be the next big thing. So one of
Speaker 1: the things that I loved about the package was like,
Speaker 1: they're serious stuff. But then there's like the perfect encapitulation
Speaker 1: of everything that Jeff talking about is just remember the
Speaker 1: scooter craze. Want to start to feel a little bit
Speaker 1: like a segue now, Uh, it survived the pandemic mostly, Jeff,
Speaker 1: But why why why was it like such a perfect
Speaker 1: story to include in this context. Well, like you're saying
Speaker 1: a minute ago, Joel, that you know, right before the pandemic,
Speaker 1: the bottom started to drop out of this uh wave
Speaker 1: basically decade long cash burning as a means of not
Speaker 1: just survival, but as the main strategy for a huge
Speaker 1: part of the venture backed tech industry. And uh so
Speaker 1: the scooter craze was well suited for that moment where
Speaker 1: the whole deal was Okay, well, you know this or
Speaker 1: that mega fund is going to give you guys nine
Speaker 1: figure checks on the regular to go out and build
Speaker 1: an exploicit monopoly. Now go do it um and coming
Speaker 1: out of the pandemic for for a variety of reasons,
Speaker 1: or you know, as people start to to need things
Speaker 1: like scooters again, we come back to find these companies
Speaker 1: sort of clinging to life to varying degrees and without
Speaker 1: the easy access to capital that everybody got used to. Hey, Jeff,
Speaker 1: I feel like one of the things that I feel
Speaker 1: like with every guest, and you often hear like pets
Speaker 1: dot com, pets dot com, Like, are we likning exactly?
Speaker 1: Are we lining like this tech route that we're seeing.
Speaker 1: Is it similar to what we saw in two thousand?
Speaker 1: I mean, are those comparisons fair or is it different?
Speaker 1: I think we're still ways off the sort of industry
Speaker 1: wide carnage that we saw at the end of the
Speaker 1: dot com bubble, But Brad and Lazett are smart to
Speaker 1: draw the comparison, at least in terms of the hype
Speaker 1: machine between you know, the sort of infamous pets dot
Speaker 1: Com super Bowl ads and the Super Bowl ads we
Speaker 1: saw this year. With all those crypto celebrities. Yeah, the
Speaker 1: crypt the crypto pets comparison. My favorite was the Larry
Speaker 1: David one because I'm just a big Larry David. There's
Speaker 1: some other ones that are pretty good too. But so,
Speaker 1: you know, what does VC actually had to say about this,
Speaker 1: because that figures into Brandon was that story to bring
Speaker 1: it back to today's big take, right, like because they're
Speaker 1: undaunted really right? Yeah, for what it's worth, most of
Speaker 1: the sort of mainline VC types that you would want
Speaker 1: to talk to you and that Brandon Lizette went out
Speaker 1: to for for this kind of piece, you know, kind
Speaker 1: of said, well, the next next thing is coming, like
Speaker 1: this is going to expose the businesses that aren't ready
Speaker 1: for the next moment for what they are, and the
Speaker 1: people who have done the work to prepare for a
Speaker 1: storm like this are gonna be just fine. Well, and
Speaker 1: more new money keeps coming in, right, Like we talked
Speaker 1: about all these these these startup companies that are able
Speaker 1: to stay private for what ten years and right, and
Speaker 1: they don't have to tap the public. Just straight Carol
Speaker 1: Andrees and Horowitz announced directly four point five billion dollar
Speaker 1: fund for crypto, just for crypto, top or. I mean,
Speaker 1: it could have been a long time in the process
Speaker 1: or chasing the next big thing and and trying to
Speaker 1: figure out where it kind of goes from here. And
Speaker 1: so I think just again to bring it back to
Speaker 1: to to brad Stone and like why we wanted to
Speaker 1: do this on the cover, it was like there is
Speaker 1: a controlled burn every once in a while that hits,
Speaker 1: and like that's kind of what it feels like right now,
Speaker 1: where it's like, let's suppress some of the funny money,
Speaker 1: let's go back to basics. And while that's happening, you
Speaker 1: know what. I think We talked about this yesterday with
Speaker 1: Sarah Fryer on on this show. It's like even the
Speaker 1: Metas of the world have to look themselves in the
Speaker 1: mirror and realize that, you know, TikTok is eating their
Speaker 1: lunch and they have to basically take their business model
Speaker 1: and and basically come up with a way of fighting back, right,
Speaker 1: And like even even Meta has to deal with this stuff,
Speaker 1: right the biggest companies in the world, so text obviously
Speaker 1: ever changing. It's why it makes it so much fun
Speaker 1: to talk about. But even the Sacred Cows, you know,
Speaker 1: there comes the moment that everything is cyclical. Yeah, it's
Speaker 1: pretty remarkable. Right, it's the big tech that are having
Speaker 1: to kind of do some soul searching, that's right. Whereas
Speaker 1: you know, the last couple of times we we sort
Speaker 1: of talked about something like this, as as Brandon's point
Speaker 1: out in the piece, you know, it was something that
Speaker 1: the rest of the industry could more or less look
Speaker 1: at or call out as an outlier, a pharaonis or
Speaker 1: even though we work the damage here, as you were saying,
Speaker 1: a moment ago is too broad based to just sort
Speaker 1: of ignore as cost doing business, great timing, you know,
Speaker 1: we just we just do it every week. Remember Joe
Speaker 1: called the bottom, Remember this day, Remember pressure Joe Webber.
Speaker 1: He's the editor of Bloomberg Business Week and Jeff Muskus
Speaker 1: is senior features editor at Bloomberg Business Week, both in studio.
Speaker 1: This is the cover story now on newsstands, on and
Speaker 1: on the Bloomberg This is Bloomberg Radio. I'm a journal Yeah,
Speaker 1: but you let me drive. Oh no, no, no, no,
Speaker 1: all right, please, I'll do the right gravels. I want
Speaker 1: to drive. It's a good question. Good drive. This is
Speaker 1: the drive to the clothes. Well don on Bloomberg Radio.
Speaker 1: All right, we are just about ten a half minutes
Speaker 1: left in today's trading session. It is time to drive
Speaker 1: to the clothes and we've got a good guest who's
Speaker 1: gonna give us some specific names that he's interested in.
Speaker 1: Max Washerman is the founder and a senior portfolio manager
Speaker 1: at Miramark Capital. Max joining us this afternoon on the
Speaker 1: phone from Northbrook, Illinois. Max, how are you. I'm doing well?
Speaker 1: Thank you well. Before we get to some of the
Speaker 1: picks that you have, I just want to get your
Speaker 1: take on on the markets and what we're seeing right now.
Speaker 1: Two days in a row of gains for the Indusseas.
Speaker 1: Are we out of the woods? I don't think necessary
Speaker 1: we're out of the woods, but I think we're trying
Speaker 1: to find a bottom. And with the Federal Reserve released
Speaker 1: some notes the other day and basically didn't surprise anyone
Speaker 1: on the downside, meaning they're not giving any shockers, so
Speaker 1: that helped. And also I think with some of the
Speaker 1: retail numbers that came out Donald the General Dollar Store
Speaker 1: basically coming out and saying that the consumer is not dead.
Speaker 1: With an over sold market, I think you're getting some life.
Speaker 1: So you think it's over, you think it's over sold.
Speaker 1: I think the market is a little over sold right now.
Speaker 1: The negativity is so pervasive that when you have any
Speaker 1: negative news come out and the market starts to rally,
Speaker 1: that's usually a good sign that we're trying to find
Speaker 1: a bottom. And I think we're I think we're like
Speaker 1: in the seventh bending, if you would baseball analogy. But
Speaker 1: I mean, Max, you sound really optimistic. Well, I think
Speaker 1: when you know what the problem is, that's a big
Speaker 1: step in the right direction. Where before the Federal Reserve
Speaker 1: didn't have a where the problem was. They thought, you know,
Speaker 1: inflation was transitory. They felt that they could take a
Speaker 1: lack of days approach on raising interest rates, supply chains,
Speaker 1: all these issues we really know about. It's just addressing
Speaker 1: them and working through it. So I think, yeah, I'm
Speaker 1: optimistic in the long term. It doesn't mean, like Harol mentioned,
Speaker 1: you could get it more downside, and we could see
Speaker 1: another five to seven percent on the downside. But we
Speaker 1: think we're through the majority of the problem. And it's
Speaker 1: been a bad market. I mean, nas deck was down
Speaker 1: thirty and the SMP was close to down twenty. It
Speaker 1: could still go further, but we're not We're not bailing
Speaker 1: on this market, all right. At this point, I'm just
Speaker 1: going to another sports. I'm talking about football. Have you
Speaker 1: ever seen Tom Brady pull out a game in the
Speaker 1: last quarter or the last few minutes. It's pretty remarkable.
Speaker 1: So much can happen, Uh, in so many different ways.
Speaker 1: Volume is something, And I can't remember that it it was
Speaker 1: Randy Watts or another guest who brought in that. What
Speaker 1: we tend to see though, is not the volume confiction
Speaker 1: behind an update. Uh, it's not there. And I'm looking
Speaker 1: at one of the metrics on the Bloomberg in terms
Speaker 1: of volume on the New York Stock Exchange, and it
Speaker 1: looks like we're down again, so that there's not necessarily
Speaker 1: even though it's a broad based felt rally, it's not
Speaker 1: like a lot of investors are jumping in on this. No,
Speaker 1: I don't think they are. In fact, when you come
Speaker 1: into a holiday weekend, you're gonna have even less volume activity.
Speaker 1: But I think what you're starting to see though, if
Speaker 1: you're trying to find the retailers find a bottom. I
Speaker 1: mean whether you take a Target of Walmart or even
Speaker 1: a Costco, and you're trying to find out where the
Speaker 1: bottom is, and you're starting to see that you can
Speaker 1: still go lower. I mean, we all know emotions can
Speaker 1: take you. We know the FED could surprise at some
Speaker 1: point in raise interest rate seventy five to a hundred
Speaker 1: basis points where somebody's not expecting it. That being said
Speaker 1: to be super negative at this particular juncture, I'm not
Speaker 1: sure it serves the purpose because we know the interest
Speaker 1: rates are going up. We know inflations here. We know
Speaker 1: we have supply constraints, but they're being addressed. I think
Speaker 1: we just have to work through this excess in the market,
Speaker 1: and I think we're doing that. Okay, let's talk about
Speaker 1: some of the individual stock picks that you have, because
Speaker 1: you've got some really interesting ones. I want to start
Speaker 1: with UPS. Why are you bullish on UPS? I think
Speaker 1: we like we're divid in growth UM. We like a
Speaker 1: lot of companies are paying above average dividend growing it
Speaker 1: UM good multiple. So UPS has been able to make
Speaker 1: our return on capital about and they've been really able
Speaker 1: to profit in the last mile of delivery. You take
Speaker 1: that along with the fact that UM trailing earnings are
Speaker 1: about fourteen times forward earnings about fifteen times right now,
Speaker 1: paying a three point four percent dividends they increased the
Speaker 1: dividend in the past year, and they increased the buy
Speaker 1: back by up to two billion in stock, so it
Speaker 1: has all the fun amounts. We think it's in the
Speaker 1: right place, and when people are shopping, they're still using ups,
Speaker 1: max backs, backs, macs. Fundamentals, though, is it really fundamentals
Speaker 1: when we're talking about buy backs and dividend growth versus
Speaker 1: maybe investing in the business or hiring you know what
Speaker 1: I'm saying. Sure, I hear what you're saying. And what's
Speaker 1: interesting is we've had a lot of guests coming on
Speaker 1: who are looking at stocks that are that are paying dividends,
Speaker 1: and to me, at is a little bit more of
Speaker 1: a safer play that you know you're gonna get that
Speaker 1: dividend no matter what the share price doesnt, no matter
Speaker 1: what the environment does. Well, you know, we've been a
Speaker 1: consistent diviend grower. It's not like lately we've been doing
Speaker 1: the firm. But look at the fact that they were
Speaker 1: able to raise the dividend. That's the big thing. That's
Speaker 1: a cash flow. They have a new CEO and she's
Speaker 1: been able to really focus on profitability, so they're handling package.
Speaker 1: They've increased prices by about ten percent, so they being
Speaker 1: able to handle some of the inflation. That doesn't mean
Speaker 1: there's not problems in the fundamentals facing the whole industry.
Speaker 1: But again, we're looking long term on these stocks. And
Speaker 1: when I look at the risk reward of a stock
Speaker 1: of this caliber paying the dividend the way they did,
Speaker 1: increasing it having to return on capital about thirty, I
Speaker 1: don't mind holding a company like this when it's a
Speaker 1: blow market multiple and paying such a strong dividend. So yes,
Speaker 1: it's gonna be a while. But these are the type
Speaker 1: of companies when the economy gets better, they really benefit.
Speaker 1: And it has some defensive capabilities and the fact that
Speaker 1: it's training below the market and it's giving you a
Speaker 1: lot more annal so we like that part. But and
Speaker 1: they're very profitable so to Thus it's a tough market,
Speaker 1: but this is the type of company we want to
Speaker 1: hold out in. Okay, what about VF Corps. Uh, this
Speaker 1: is a company that makes the north Face Vans Timberland Supreme.
Speaker 1: Why are you optimistic on VF Corps? Well, we're optimistic
Speaker 1: more now. I mean the stock was about eighty five
Speaker 1: dollars on a twelve months basis and now it's down
Speaker 1: to like in the mid forties. Right, it's forty eight
Speaker 1: today it's up three. It's paying you about a four
Speaker 1: point two percent dividend. It's a dividend aristocrat. And their
Speaker 1: business has been growing very strong. It's just in China
Speaker 1: where they've been having some weakness in the van's line.
Speaker 1: If you look at it from their perspective, they've been
Speaker 1: able to get rid of the inventory pretty much of
Speaker 1: full price, which is really good. And the gross margins
Speaker 1: they just reported they only had to decrease in the
Speaker 1: operating margins by like fifty basis points. So here's another
Speaker 1: company's trainer at thirteen times earnings. It's in the apparel
Speaker 1: outdoor way are which is a five billion dollar industry.
Speaker 1: They owned two percent of it, like eleven billion in revenue,
Speaker 1: and we think they have the potential as everybody starts
Speaker 1: to travel and they go out and they spend more.
Speaker 1: So the fact that we're recommending the stock, it's been
Speaker 1: already hammered from the eighties down, So we think the
Speaker 1: risk reward at this price again here is asymmetrical. We
Speaker 1: think we could see a lot more upside as the
Speaker 1: economy and people start traveling and buying. We know they
Speaker 1: have problems, but it just came out and reiterated the
Speaker 1: cash flow, and they just reiterated the earnings. So at
Speaker 1: this time a downside, we think it's there, all right.
Speaker 1: Get around, Hey, Max, Thank you so much. Max Wasserman,
Speaker 1: He's founder and senior portfolio manager at the independent private
Speaker 1: registered investment advisory for A Miramar Capital, training us on
Speaker 1: the phone from Northbrook, Illinois. Thanks for listening to Bloomberg
Speaker 1: Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg
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