WEBVTT - Herro: Glencore worth substantially more than current value

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<v Speaker 1>This is Bloomberg Surveillance. We have been using the rally

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<v Speaker 1>that we've seen since the loads of February to lighten

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<v Speaker 1>up on some of the more risky investments. I think

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<v Speaker 1>the best measure of how the economy is performing, you know,

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<v Speaker 1>gives us the best sense of what's going to just jobs,

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<v Speaker 1>because we can measure jobs whether you're talking about breakfast,

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<v Speaker 1>whether it's the next you to drop. Across the Middle East,

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<v Speaker 1>there's just a lot of churn gire politically. It's going

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<v Speaker 1>to make life more difficult economically. Bloomberg Surveillance your link

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<v Speaker 1>to the world of economics, finance, and investment on Bloomberg Radio.

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<v Speaker 1>Good morning everyone, Michael McKee and Tom Keith, Bloomberg Surveillance worldwide.

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<v Speaker 1>Good morning all of you in Europe in this hour,

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<v Speaker 1>all of a sudden, our most important interview of the day,

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<v Speaker 1>David Harrow, International investor out of Chicago, the first place Cubs.

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<v Speaker 1>David Harrow looking at the dilution and shares. We'll look

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<v Speaker 1>at that for a moment of course. Bayern mon Santo

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<v Speaker 1>leading headlines today. Coming up. David Harrow on international UH

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<v Speaker 1>investment futures. Well, they're flat. I'm gonna call it Dow

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<v Speaker 1>futures negative one. Not much going on there, watching commodities

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<v Speaker 1>with a modest implosion and commodities off of Friday Bloomer surveillance.

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<v Speaker 1>This morning brought you by kone Resnik Accounting, Tacks, Advisory,

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<v Speaker 1>look Ahead, Gain Insight, Imagine More. The professionals at Cone

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<v Speaker 1>resident can help your business breaks and find out more

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<v Speaker 1>at Cone Resnick dot com. Michael A. Merger. We spoke

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<v Speaker 1>to the chief executive officer Chairman of the management board

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<v Speaker 1>a bear earlier. I took two aspirin to prepare for

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<v Speaker 1>this interview yet and they just solicited yeah. Many Cento

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<v Speaker 1>has not responsed well, they said earlier they didn't like it,

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<v Speaker 1>but then now the details are out, we haven't had

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<v Speaker 1>a response. Thank you to the teams at City Group

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<v Speaker 1>in Barrenberg Capital for their smart research this morning on

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<v Speaker 1>is looking for higher prices. What a perfect time to

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<v Speaker 1>speak to David Harrow, who does international investment and has

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<v Speaker 1>been doing it large cap international Investment with Harris Associas. David,

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<v Speaker 1>Good morning, Good morning, Tom. How are you well. I'm

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<v Speaker 1>very good. I've done a clinic earlier. Odd this all

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<v Speaker 1>cash deal which is Bologny. They have to go out

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<v Speaker 1>to their shareholders and do something in the form of

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<v Speaker 1>offer with share dilution, which frankly goes over to your

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<v Speaker 1>ownership of Swiss banks and French banks. Do you just

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<v Speaker 1>assume Europe is going to be on one big cash

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<v Speaker 1>call asking shareholders for for for issuing new shares for cash.

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<v Speaker 1>Is that the Harold plan for the next twenty four months? Uh?

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<v Speaker 1>I sure hope not. Uh. In this particular case, they

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<v Speaker 1>think they could buy a good company at a reasonable price,

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<v Speaker 1>and therefore, yes, you're exactly right. They said it's a

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<v Speaker 1>cash issue, but they're gonna have to get the cash

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<v Speaker 1>from somewhere and there will be a share placement. And

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<v Speaker 1>I think this is why the stockets reacting the way

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<v Speaker 1>it is. What about credit sweets, I mean the banking

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<v Speaker 1>industry beleaguer unit credit. Maybe the CEO is out in

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<v Speaker 1>the next couple of days. I just mentioned Deutsche Bank

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<v Speaker 1>with a challenging chart to say the least. Do you

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<v Speaker 1>assume a cash call by the Swiss banks? Yeah? I

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<v Speaker 1>would not expect either Ubs or Credit Suites, the two

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<v Speaker 1>big huge banks in Switzerland to need cash. They have

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<v Speaker 1>done this already. They should be fine. If you look

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<v Speaker 1>at their leverage ratios. If you look at their capital ratios,

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<v Speaker 1>they're actually ahead of where they need to be in seventeen.

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<v Speaker 1>So in both in those cases, I do not believe

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<v Speaker 1>they need cash. They're well capitalized. In the case of

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<v Speaker 1>Deutsche Bank is a different story. But I think overall,

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<v Speaker 1>excuse me, if you look at the European banking scenery,

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<v Speaker 1>for the most part, the big non kind of co

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<v Speaker 1>op government involved banks are sitting pretty strongly in terms

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<v Speaker 1>of capital position. It's some of these smaller banks, these

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<v Speaker 1>coop kind of non for profit entities that seem to

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<v Speaker 1>need still need a more cash. Well, they may not

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<v Speaker 1>need cash, but they do need profits. Um, what say

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<v Speaker 1>you to President CEO t Jm's plans get out of

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<v Speaker 1>invested banking and go heavily into wealth management. Well, he's

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<v Speaker 1>not going to get out of investment banking completely. He's

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<v Speaker 1>gonna try to keep kind of the lighter capital service

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<v Speaker 1>arm of that. And what they what he's noticed that

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<v Speaker 1>he's almost been at the bank now a year. He

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<v Speaker 1>hasn't been there, he's probably been there about ten eleven

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<v Speaker 1>months now that when you look at the capital deployment

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<v Speaker 1>of credit suis far too much of it was focused

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<v Speaker 1>on recycling the free cash into the investment bank where

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<v Speaker 1>it was not able to earn a through cycle return.

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<v Speaker 1>And then he looked at his private bank and certain

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<v Speaker 1>areas like Asia Wealth Management that we're earning great returns

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<v Speaker 1>where they have critical mass, where they're the leader was

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<v Speaker 1>being starved of capital. And really what he's doing is

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<v Speaker 1>turning enough to capital allocations to the trading operations and

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<v Speaker 1>the areas in the investment bank where they cannot earn

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<v Speaker 1>that through cycle return, to funnel that over to where

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<v Speaker 1>there are hungry mouse. Just think of the birds chirping

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<v Speaker 1>and then ust it's spring here in Chicago, and give

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<v Speaker 1>those give the host birds some worms. And that's exactly

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<v Speaker 1>what he's doing. Now, when you do this, it doesn't

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<v Speaker 1>come without a little bit of friction. There's a lot

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<v Speaker 1>of people in the investment bank or saying, hey, what's

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<v Speaker 1>going on here? But this is really the right thing

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<v Speaker 1>to do is to deploy capital in any business, by

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<v Speaker 1>the way, in any business, deploy capital where you have

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<v Speaker 1>the best through cycle return, not where you're earning returns

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<v Speaker 1>to stay or tomorrow, but through the cycle. Mike, did

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<v Speaker 1>you notice how Harold got that shameless plug in for

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<v Speaker 1>it's spring in Chicago. Do you note that both of

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<v Speaker 1>their baseball teams are in first place? Yeah, and in

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<v Speaker 1>the Zurich teams, you know, just nothing. And the Cubs

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<v Speaker 1>have the best record in baseball. Yeah, so that's why

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<v Speaker 1>you're it's extort. I mean, Harold's like eight days a week.

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<v Speaker 1>He goes from Ridley Field down to Chemiskey Park that time. David,

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<v Speaker 1>everybody wants to know your thoughts on Glencore. Remind us

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<v Speaker 1>when you bought Glencore and why you purchased shares in Glencore. Well,

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<v Speaker 1>we were a little too early. We bought it in

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<v Speaker 1>our international portfolios. Now the domestic portfolios and some of

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<v Speaker 1>the global ones had earlier, but in our international portfolios

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<v Speaker 1>we bought it in June or July of last year.

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<v Speaker 1>And the reason why we bought it is the price

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<v Speaker 1>that dropped completely based on what had happened at Copper.

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<v Speaker 1>Copper basically went from ten thousand dollars to at a

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<v Speaker 1>low of four thousand. Today it's at about um and

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<v Speaker 1>and I think what people were really fearing is that

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<v Speaker 1>there was just some black hole. This thing's going to

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<v Speaker 1>get flushed down the drain. When we looked at it,

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<v Speaker 1>we did our work. We first thing we looked at

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<v Speaker 1>was their trading operation, which reliably produces say thirty of

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<v Speaker 1>their ebit uh uh. Now this is they are, in

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<v Speaker 1>many many cases the top trader of many of these commodities,

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<v Speaker 1>whether it be some medals, agricultural commodities. So this is

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<v Speaker 1>a very strong position to be and they're the ones

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<v Speaker 1>between the producer and the user. Uh. And they know

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<v Speaker 1>it's not a risk taking, so they buy to facilitate orders.

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<v Speaker 1>And then then we looked at their other operations, copper,

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<v Speaker 1>zinc and coal. Now coal is the one we are

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<v Speaker 1>the most concerned about, but coal, of course is making

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<v Speaker 1>lots of money, helped by the low Australian dollar. Let

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<v Speaker 1>me interrupt, if I can just cut the time. I

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<v Speaker 1>think this is so important, Margaret Capps. Going from sixty

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<v Speaker 1>eight billion down to twenty seven billion, Okay, we all

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<v Speaker 1>know that revenues imploded two and thirty three gazillion dollars

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<v Speaker 1>down to a hundred and seventy one. We all know that.

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<v Speaker 1>But as you point out, but down the income statement

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<v Speaker 1>and cash flow has been relatively resilient. That's where a

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<v Speaker 1>value guy like you comes in. Why are you so

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<v Speaker 1>lone on this trade? Well, because it's not a good

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<v Speaker 1>environment for commodity. And what people do is they throw

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<v Speaker 1>it in with all the other commodity companies and you

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<v Speaker 1>really can't do that. And this provides an opportunity because

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<v Speaker 1>each commodity has a different supplying demand curve. They each

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<v Speaker 1>commodity has a different cost curve. For instance, iron ore

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<v Speaker 1>has a very flat cost curve, and you know there's

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<v Speaker 1>three or four producers who could keep producing this stuff

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<v Speaker 1>at thirty dollars a ton. Copper, which is the biggest

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<v Speaker 1>commodity that Glencore makes, it's just the opposite. It has

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<v Speaker 1>extremely steep cost curve. It has slow and steady demand.

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<v Speaker 1>And by the way, if you believe everyone's going to

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<v Speaker 1>start buying hybrids and electric cars, those those vehicles who

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<v Speaker 1>more copper than a regular automobile. But the fact is

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<v Speaker 1>you have to look at each each company separately. You

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<v Speaker 1>have to look at where they're exposures. You can't just say, oh,

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<v Speaker 1>Glencore is in the commodity business. Short and in essence

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<v Speaker 1>is what happened. You saw these big baskets of businesses

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<v Speaker 1>and commodities being shortened by those who are against commodities. Well,

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<v Speaker 1>to us, there's an opportunity in that if when you

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<v Speaker 1>just have blind selling without looking at what you're selling,

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<v Speaker 1>it's like getting on a train not knowing where the

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<v Speaker 1>train is. Well, we've only got a minute before the break,

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<v Speaker 1>so let me just ask you a quick question. We'll

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<v Speaker 1>get back to Glencore in a moment. Five years ago

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<v Speaker 1>they went public at about five dollars a share um

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<v Speaker 1>now one how long till they get back to what

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<v Speaker 1>people got into this stock it? Yeah, I I don't

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<v Speaker 1>believe that's going to happen anytime soon. We believe it

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<v Speaker 1>is substantially worth more than it is today now. Also

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<v Speaker 1>note that in September they raised capital at one and

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<v Speaker 1>to us this was the right thing to do because

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<v Speaker 1>it gave the balance sheet strength and certainty in this

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<v Speaker 1>uncertain commodity you don't want. So we're a little bit

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<v Speaker 1>above that price, but I think it's you know five

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<v Speaker 1>this sitting and we're not getting there anytime David Harrow.

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<v Speaker 1>This will continue this discussion in Glencore. To be clear,

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<v Speaker 1>Glencore off London priced and pence from that five level,

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<v Speaker 1>and it's very confusing where the decimal point goes there

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<v Speaker 1>the way the London Stock Exchange does it. All you

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<v Speaker 1>need to know is it's moved from five on down

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<v Speaker 1>to one and that gives you this scope and scale

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<v Speaker 1>of the decline. Will come back from Mr Harrow, not

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<v Speaker 1>only on Glencore, but maybe we could even touch on

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<v Speaker 1>a little roast belt politics, which is more than up

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<v Speaker 1>to speed upon as well. We've covered cup We checked

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<v Speaker 1>the box of cubs and white socks. Michael, Yeah, you

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<v Speaker 1>can never talk enough about it. If you can't, that'll

0:10:38.640 --> 0:10:43.719
<v Speaker 1>be true. We've learned that. Interview after interview after interview,

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<v Speaker 1>the yield one point eight three futures flat. This morning

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<v Speaker 1>Checking with Michael got the latest world in the national headlines. Michael,

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<v Speaker 1>Mike time, thank you very much. A submarine is being

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<v Speaker 1>used in the search for the black boxes from eagyp

0:10:59.840 --> 0:11:03.360
<v Speaker 1>the flight eight oh four. The sub from Egypt's Oil

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<v Speaker 1>Ministry will be at the scene where searchers continue to

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<v Speaker 1>scour a section of the Mediterranean for wreckage, especially the

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<v Speaker 1>black boxes. Each of the President continues to caution against speculation,

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<v Speaker 1>but mounting evidence points to a sudden and dramatic, catastrophic failure.

0:11:19.280 --> 0:11:22.280
<v Speaker 1>President Obama has lifted the sale of arms to Vietnam.

0:11:22.559 --> 0:11:25.640
<v Speaker 1>The President made the announcement in Hannoi today to win.

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<v Speaker 1>Suicide attacks on the southern Yemen city of Aiden left

0:11:29.320 --> 0:11:33.120
<v Speaker 1>at least forty five army recruits dead. Global News twenty

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<v Speaker 1>four hours a day, powered by our twenty four hundred

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<v Speaker 1>journalists and more than a hundred fifty news bureaus around

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<v Speaker 1>the world. Michael bar My, Tom Michal, thanks so much.

0:11:41.720 --> 0:11:43.840
<v Speaker 1>Oil sells. Don't want to make a big deal about it,

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<v Speaker 1>but it's been a trend for a few days. Brand

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<v Speaker 1>European Oil six the barrel down fifty six cents, West

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<v Speaker 1>Texas seventy six, Gold down three dollars fifty then, but

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<v Speaker 1>David Herrow of Harris Associates, Michael McKee and Tom Keane

0:11:59.120 --> 0:12:06.959
<v Speaker 1>stay with US bird surveillance worldwide. The news update brought

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<v Speaker 1>to you by Bank of America Mary Lynch is Global

0:12:08.679 --> 0:12:11.400
<v Speaker 1>Cash Management Solutions, helping you manage, protecting, and invest your

0:12:11.400 --> 0:12:13.599
<v Speaker 1>global cash. Wherever the road the growth leads. That's the

0:12:13.640 --> 0:12:17.040
<v Speaker 1>power of Global Connections. Bank of America member. Remember f

0:12:17.120 --> 0:12:24.520
<v Speaker 1>G I C Global Business News twenty four hours a

0:12:24.600 --> 0:12:27.840
<v Speaker 1>day at Bloomberg dot Com, the Radio plus Global lapp

0:12:27.920 --> 0:12:31.360
<v Speaker 1>and on your radio. This is a Bloomberg Business Flash

0:12:31.760 --> 0:12:34.400
<v Speaker 1>and I'm Karin Moscow. US DOT Index futures they are

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<v Speaker 1>a little changed this morning. Let's go to the First

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<v Speaker 1>Word Breaking news desk for today's morning call, and here's

0:12:39.520 --> 0:12:43.200
<v Speaker 1>Bill Maloney. Good morning Bill, Good morning Karen. US futures

0:12:43.240 --> 0:12:46.080
<v Speaker 1>have improved since the last time we spoke. Doubt futures

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<v Speaker 1>now down four points. S and p s are unchanged,

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<v Speaker 1>and now as the futures are higher by four US

0:12:51.800 --> 0:12:55.400
<v Speaker 1>ten yeld at one point eight three percent. Taiwan rose

0:12:55.440 --> 0:12:58.840
<v Speaker 1>two point six percent overnight. That's the most since September,

0:12:59.120 --> 0:13:02.760
<v Speaker 1>helped by apples pliers, while up markets remain lower, led

0:13:02.760 --> 0:13:06.000
<v Speaker 1>by two point three percent declines in Italy. On the

0:13:06.040 --> 0:13:10.080
<v Speaker 1>US economic front, FEDS Williams said he expects GDP growth

0:13:10.160 --> 0:13:13.920
<v Speaker 1>of about two percent. Said two to three sixteen rate

0:13:13.960 --> 0:13:17.640
<v Speaker 1>hikes three to four and twenty seventeen is about right

0:13:19.040 --> 0:13:22.320
<v Speaker 1>market US Manufacturing p m I. In dealing THEWS Bear

0:13:22.360 --> 0:13:24.040
<v Speaker 1>offered to buy him on Santo for a hundred and

0:13:24.040 --> 0:13:27.760
<v Speaker 1>twenty two dollars a share in cash. Tribute Publishing rejected

0:13:27.760 --> 0:13:32.000
<v Speaker 1>revised Genett takeover proposal, and Aria's Capital by American Capital

0:13:32.040 --> 0:13:35.800
<v Speaker 1>for three point four billion or fourteen ninety five a share.

0:13:36.200 --> 0:13:38.880
<v Speaker 1>Finally some of your wall sheet upgrades and downgrades at

0:13:38.920 --> 0:13:42.439
<v Speaker 1>Bank of America, Staples, Allegheny Technologies, and al CoA all

0:13:42.559 --> 0:13:45.840
<v Speaker 1>raised to buy Universal Display, raised to buy A Coleman Sachs,

0:13:46.160 --> 0:13:50.800
<v Speaker 1>Mosaic cuts reduced at HSBC, enabled Midstream, raised OVOD, h JP,

0:13:50.920 --> 0:13:54.640
<v Speaker 1>Morgan and US Silica raised out perform at r b C.

0:13:55.280 --> 0:13:57.960
<v Speaker 1>And that's your Bloomberg first Word Morning call for Monday,

0:13:58.480 --> 0:14:02.600
<v Speaker 1>two thousand and sixteen. Thanks building your live breaking news

0:14:02.600 --> 0:14:05.120
<v Speaker 1>over your Bloomberg type squawk go in your terminal. That's

0:14:05.240 --> 0:14:07.640
<v Speaker 1>s U U A w K go and it's a

0:14:07.640 --> 0:14:10.760
<v Speaker 1>Bloomberg business flash, Tom and Mike Karen, thanks so much.

0:14:10.760 --> 0:14:14.360
<v Speaker 1>Bloomberg Surveillance this morning and brought you by Investco. Do

0:14:14.440 --> 0:14:17.880
<v Speaker 1>the day's headlines have you searching for more investment ideas?

0:14:18.360 --> 0:14:21.400
<v Speaker 1>Investco's experts can help find out the latest thought leadership

0:14:22.160 --> 0:14:26.480
<v Speaker 1>at the Investco block. Visit investco dot com slash us

0:14:26.560 --> 0:14:30.680
<v Speaker 1>to subscribe. I n V s CEO investco dot com

0:14:30.800 --> 0:14:36.120
<v Speaker 1>slash us to subscribe. We've been making headlines, having a

0:14:36.160 --> 0:14:39.520
<v Speaker 1>good time here with David Harrow talking about investment. David,

0:14:39.840 --> 0:14:42.960
<v Speaker 1>one of the great themes of your Glencore investment is

0:14:43.000 --> 0:14:45.400
<v Speaker 1>how the top of the income statement rolls over, but

0:14:45.520 --> 0:14:48.600
<v Speaker 1>the bottom of it down the income statement and in

0:14:48.680 --> 0:14:51.680
<v Speaker 1>free cash well does not or doesn't roll over as

0:14:51.800 --> 0:14:54.480
<v Speaker 1>much nearly as much. Can The same thing we said

0:14:54.480 --> 0:14:58.880
<v Speaker 1>in banking about the trading persistency of cash flows and

0:14:58.920 --> 0:15:03.520
<v Speaker 1>mining being asset management is there is there a legitimate

0:15:03.760 --> 0:15:08.440
<v Speaker 1>underpricing the asset management right now? Yeah? I think there is.

0:15:08.480 --> 0:15:11.760
<v Speaker 1>I mean, we are in a cycle where equities globally

0:15:11.800 --> 0:15:14.160
<v Speaker 1>been a little stagnant over the years. We are in

0:15:14.160 --> 0:15:17.120
<v Speaker 1>a low interest rate environment. If your Swiss space, you've

0:15:17.120 --> 0:15:20.080
<v Speaker 1>been in a strong Swiss franc based environment. So all

0:15:20.120 --> 0:15:23.920
<v Speaker 1>these things as headwinds to kind of mute what's happening

0:15:24.040 --> 0:15:28.760
<v Speaker 1>with some of these asset management businesses. And so we

0:15:28.840 --> 0:15:32.480
<v Speaker 1>take over time. Equity markets go up anywhere from seven

0:15:32.560 --> 0:15:35.480
<v Speaker 1>eight nine percent a year through time. Of course, it

0:15:35.520 --> 0:15:39.520
<v Speaker 1>depends your basis where you start, and that no money

0:15:39.560 --> 0:15:42.120
<v Speaker 1>comes in. So when you add those two things together,

0:15:42.240 --> 0:15:46.640
<v Speaker 1>you generally get a good mid to high single digit

0:15:46.720 --> 0:15:51.360
<v Speaker 1>revenue growth even with the pressures were seen on feest today.

0:15:51.400 --> 0:15:53.400
<v Speaker 1>So this is a good business to being. You don't

0:15:53.400 --> 0:15:56.320
<v Speaker 1>want to overpay for anything, including this. But it's a

0:15:56.320 --> 0:15:58.600
<v Speaker 1>good business to be in. And and yet a lot

0:15:58.640 --> 0:16:02.640
<v Speaker 1>of these companies have been ext really stignant. We've keep

0:16:02.680 --> 0:16:06.720
<v Speaker 1>increasing our exposures, prices stay weak and low, because when

0:16:06.760 --> 0:16:10.400
<v Speaker 1>global equities do pick up and Answest rates do perk up,

0:16:10.800 --> 0:16:16.040
<v Speaker 1>these asset managical companies will do much better. You uniquely

0:16:16.080 --> 0:16:18.640
<v Speaker 1>positioned maybe to answer this question because you guys had

0:16:19.360 --> 0:16:23.920
<v Speaker 1>a very rough year last year, probably Glencore being the

0:16:23.960 --> 0:16:26.840
<v Speaker 1>biggest reason. But when somebody says to you, why do

0:16:26.880 --> 0:16:31.360
<v Speaker 1>I want an active manager? Now, what do you say, Well,

0:16:32.080 --> 0:16:35.040
<v Speaker 1>you want a little bit of everything. When you're building

0:16:35.120 --> 0:16:40.200
<v Speaker 1>your wealth portfolio, you should have quality active managers. You

0:16:40.240 --> 0:16:43.760
<v Speaker 1>should have probably some some index funds as well. But

0:16:43.800 --> 0:16:47.360
<v Speaker 1>what what happens is we can demonstrate that some active

0:16:47.400 --> 0:16:50.800
<v Speaker 1>managers have all performed over the medium and long term.

0:16:51.200 --> 0:16:55.280
<v Speaker 1>Passive investment just simply puts money into stocks because they're there,

0:16:55.320 --> 0:16:58.520
<v Speaker 1>because they're part of an index, because they are a

0:16:58.560 --> 0:17:01.760
<v Speaker 1>certain size or in a certain region. Whereas active management,

0:17:01.800 --> 0:17:06.040
<v Speaker 1>if you find an active manager that has a good approach,

0:17:06.160 --> 0:17:10.639
<v Speaker 1>which is underpinned by a sound philosophy, over the medium

0:17:10.640 --> 0:17:13.560
<v Speaker 1>and long term, you can significantly outperform if you look

0:17:13.600 --> 0:17:17.000
<v Speaker 1>at our meetium and long term international numbers, we've outperformed

0:17:17.000 --> 0:17:20.120
<v Speaker 1>by three or fourner basis points per year over almost

0:17:20.119 --> 0:17:23.040
<v Speaker 1>twenty four years. So someone would have put their money

0:17:23.040 --> 0:17:25.399
<v Speaker 1>in the world as the U s funderneath a fund,

0:17:25.840 --> 0:17:28.000
<v Speaker 1>you would have lost three to four percent a year

0:17:28.000 --> 0:17:31.600
<v Speaker 1>over twenty four years. So there are certain managers and

0:17:31.640 --> 0:17:36.320
<v Speaker 1>I think it's predicated on them following their investment philosophy

0:17:36.400 --> 0:17:39.640
<v Speaker 1>and a discipline fashion. What that means, by the way,

0:17:39.760 --> 0:17:41.400
<v Speaker 1>is when you're a little bit out of favor over

0:17:41.440 --> 0:17:44.840
<v Speaker 1>the short term, you don't just switch act. You have

0:17:44.920 --> 0:17:47.600
<v Speaker 1>to stick to what you do, and in our case,

0:17:47.640 --> 0:17:50.360
<v Speaker 1>it's valuing businesses and buying them low and selling them

0:17:50.400 --> 0:17:55.080
<v Speaker 1>there within. That is the idea of what to do

0:17:55.119 --> 0:17:58.560
<v Speaker 1>with the emerging market right now. You're a large kept guy.

0:17:58.800 --> 0:18:04.200
<v Speaker 1>Can you buy large cap M? Can you buy Petro Bross? Well,

0:18:04.240 --> 0:18:07.840
<v Speaker 1>I could buy Petro Bross, but I wouldn't. Uh you know,

0:18:07.920 --> 0:18:12.359
<v Speaker 1>e M requires Uh, yes, they are the basics. You

0:18:12.480 --> 0:18:14.520
<v Speaker 1>value cash flow streams and you put a price on

0:18:14.560 --> 0:18:17.960
<v Speaker 1>those cash flow streams. But an e M often you

0:18:18.119 --> 0:18:22.399
<v Speaker 1>have a lack of transparency and ownership structure and corporate

0:18:22.400 --> 0:18:26.439
<v Speaker 1>governance issues. And things that may prevent the cash that

0:18:26.480 --> 0:18:30.560
<v Speaker 1>has been generated by the business the getting uh down

0:18:30.600 --> 0:18:33.840
<v Speaker 1>to the shareholders. And so you have to really analyze

0:18:34.680 --> 0:18:38.199
<v Speaker 1>structure and rules and regulations. In Brazil, Petro Bross this

0:18:38.320 --> 0:18:41.359
<v Speaker 1>is a perfect example you bring up Tom because here's

0:18:41.359 --> 0:18:44.880
<v Speaker 1>the company that's strongly influenced by the government, both in

0:18:45.000 --> 0:18:48.440
<v Speaker 1>terms of the ownership basis, so maybe the government wants

0:18:48.440 --> 0:18:50.960
<v Speaker 1>a different capital structure than one that's optimal for the

0:18:51.040 --> 0:18:54.520
<v Speaker 1>other shareholders, and also in rules and regulations. There's price

0:18:54.600 --> 0:18:58.400
<v Speaker 1>caps on what Petro Bross is able to sell gasoline

0:18:58.400 --> 0:19:01.480
<v Speaker 1>had in Brazil, so base they lose money on every

0:19:01.520 --> 0:19:04.760
<v Speaker 1>gallon of gasolene they bump. So when when you have

0:19:04.880 --> 0:19:09.119
<v Speaker 1>that type of government interference and our view, that is

0:19:09.160 --> 0:19:12.600
<v Speaker 1>something that we just can't value, we can't handicap, we

0:19:12.640 --> 0:19:16.760
<v Speaker 1>can't deal with the other emerging market businesses um of

0:19:16.800 --> 0:19:20.159
<v Speaker 1>course have good exposure to growth and for the right price,

0:19:20.640 --> 0:19:22.880
<v Speaker 1>will invest in them. In the nineties and we're way

0:19:22.920 --> 0:19:27.440
<v Speaker 1>overweighting today we're trickling back up again as prices drop.

0:19:27.720 --> 0:19:30.560
<v Speaker 1>David Thinkings was David Harroll with Harris Associates. That was

0:19:30.600 --> 0:19:34.680
<v Speaker 1>an interesting like calling Glencore and you know you correctly

0:19:34.720 --> 0:19:38.960
<v Speaker 1>stated one challenging year for David. But but the three

0:19:38.960 --> 0:19:42.280
<v Speaker 1>and five year track record that uh, particularly five year

0:19:42.320 --> 0:19:46.960
<v Speaker 1>track record better than good to say the least, but

0:19:47.400 --> 0:19:50.960
<v Speaker 1>interesting on the banks and on mining. David Harrol of

0:19:50.960 --> 0:19:55.200
<v Speaker 1>Harris Associates futures negative one day, futures negative ten the

0:19:55.440 --> 0:20:00.520
<v Speaker 1>the end. One that's a stronger yen right now dollars

0:20:00.520 --> 0:20:09.840
<v Speaker 1>stronger Boomberg surveillance coming up the With all due respect,

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