WEBVTT - Boris Johnson Wouldn’t Last A Year As UK Leader 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul Swinge you. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:24.920 at Bloomberg dot com. Theresa May is quitting as a 0:00:24.920 --> 0:00:27.720 Prime minister. She is out on June seven, although she 0:00:27.760 --> 0:00:31.440 will be staying for a bit longer to manage the transition. 0:00:31.680 --> 0:00:35.639 Right now, this is being treated as a positive in markets, 0:00:35.680 --> 0:00:37.800 at least for the time being, with the pound gaining. 0:00:38.080 --> 0:00:41.479 Joining us now Danny blanche Flower, Professor of Economics at Dartmouth. 0:00:41.479 --> 0:00:45.760 He is also a former Bank of America, Bank of England. Uh, policymaker, 0:00:45.840 --> 0:00:49.000 excuse me, Professor blanche Flower. We love having you on. 0:00:49.880 --> 0:00:54.560 Why are British assets rallying today? Well? I see you 0:00:54.560 --> 0:00:59.120 in some sense at least a release at the some 0:00:59.280 --> 0:01:03.720 of the and is over, but it's really unclear kind 0:01:03.720 --> 0:01:06.560 of where we're going. So the movement isn't that great. 0:01:07.040 --> 0:01:09.120 And I've been thinking today I think perhaps for the 0:01:09.160 --> 0:01:12.000 market is the most interesting thing is, in all probability 0:01:12.040 --> 0:01:14.160 we're going to see a new chance of the Exchequer. 0:01:14.600 --> 0:01:17.679 Who will be the person appointing the new Governor of 0:01:17.720 --> 0:01:20.520 the Bank of England. And I think that's obviously an 0:01:20.560 --> 0:01:23.000 issue we need to kind of care about. Who knows 0:01:23.040 --> 0:01:25.959 where that's going to go. But the uncertainty going forward 0:01:26.760 --> 0:01:30.640 is basically not just who the leader will be. The 0:01:30.760 --> 0:01:33.520 reality is that this is a leader of a party 0:01:33.800 --> 0:01:37.160 that the minority government. So the question really we should 0:01:37.160 --> 0:01:40.520 ask ourselves is could this person actually govern? Could they 0:01:40.640 --> 0:01:45.039 negotiate anything through the parliament? Is the Halloween deadline is 0:01:45.040 --> 0:01:46.960 going to be pushed back, which I suspect it is, 0:01:47.400 --> 0:01:49.480 And I think the markets have to deal with the 0:01:49.560 --> 0:01:52.840 prospect of perhaps by Christmas there will be a labor 0:01:52.920 --> 0:01:56.880 government headed by Corbin. All those things are on the table. 0:01:57.280 --> 0:02:00.240 So in the short term, market saying Okay, this thing 0:02:00.240 --> 0:02:03.480 at last has happened, But down the road, who the 0:02:03.480 --> 0:02:07.600 heck knows? So, Professor, it appears that bars Johnson is 0:02:07.600 --> 0:02:11.680 the favorite to replace May. What would a Bars Johnson 0:02:11.760 --> 0:02:16.280 leadership look like? Well, it's hard to tell. I mean, 0:02:16.320 --> 0:02:21.839 he was singularly unsuccessful as the Foreign Secretini and ended 0:02:21.919 --> 0:02:25.519 up resigning UM with the reality that we should say 0:02:25.560 --> 0:02:27.799 is that he was the top candidate to get the 0:02:27.840 --> 0:02:30.799 job a loust time around, it didn't get it. I mean, 0:02:30.840 --> 0:02:33.000 the reality is he's not going to be able to 0:02:33.040 --> 0:02:37.960 pull together any cross party kind of consensus. So he's 0:02:38.000 --> 0:02:41.880 a populist. Um he basically is says, I want to 0:02:41.880 --> 0:02:44.560 go back and negotiate some deal or other and it's 0:02:44.600 --> 0:02:48.120 not then we'll use the threat of having um having 0:02:48.120 --> 0:02:51.600 no deal at Halloween. So I think it's not going 0:02:51.600 --> 0:02:54.200 to be a government of consent. That the my suspicion 0:02:54.280 --> 0:02:57.320 is if and when he gets to be Prime Minister, 0:02:57.480 --> 0:03:01.160 my bet would be he won't last the year. Okay, 0:03:01.320 --> 0:03:05.960 So that's perhaps why people aren't counting in the idea 0:03:05.960 --> 0:03:07.639 of a herd Brexit as much as you would think 0:03:07.680 --> 0:03:10.000 based on Boris Johnson's rhetoric this morning. Is that how 0:03:10.040 --> 0:03:14.679 we can interpret that? I think? So, I mean he's 0:03:14.720 --> 0:03:17.000 talked about we can go back to the European Union 0:03:17.040 --> 0:03:20.320 and reading ghost games. UM, Well that you know that's 0:03:20.360 --> 0:03:22.720 cloud cuckoo land, because the European Unions said, well, the 0:03:22.760 --> 0:03:25.720 deal is the deal and a no deal would have 0:03:25.800 --> 0:03:31.120 to resolve the Irish question. And Boris Johnson is very 0:03:31.160 --> 0:03:34.800 good at headline, but not very good at the committy 0:03:34.880 --> 0:03:38.400 gritty of actually negotiating and trying to work out what 0:03:38.440 --> 0:03:40.640 you would do. So there's a lot of other people 0:03:40.640 --> 0:03:42.320 who were in there, but the reality who are in 0:03:42.320 --> 0:03:45.880 this competition, the reality of many of them of brexiteers. 0:03:45.960 --> 0:03:49.640 But um, we we will see whether that actually will 0:03:49.720 --> 0:03:53.640 generate any kind of majority in the House of Commons. 0:03:53.760 --> 0:03:55.520 And what we've seen is that it has not been 0:03:55.560 --> 0:03:57.880 able to do that. So being Prime minister at once 0:03:58.480 --> 0:04:01.119 being able to govern is a another and I think 0:04:01.160 --> 0:04:04.760 that's the problem. Um, And we'll see. But I don't 0:04:04.800 --> 0:04:08.400 think much of anything is resolved. It was absolutely clear 0:04:08.480 --> 0:04:11.839 the three times that Theresa May lost that she had 0:04:11.880 --> 0:04:15.280 no consent as across the Parliament, and the fourth time 0:04:15.360 --> 0:04:18.400 was not a charm and so we've really not resolved 0:04:18.520 --> 0:04:23.120 very much. Um, we will see. So, Professor, what is 0:04:23.160 --> 0:04:26.080 the status of a second referendum? Is that still on 0:04:26.120 --> 0:04:29.640 the table in anyway? I absolutely think it is. It 0:04:30.120 --> 0:04:33.159 is on the table a possibility. Many of the people 0:04:33.520 --> 0:04:37.760 in the Tory Party who don't like it, Um, it's 0:04:37.760 --> 0:04:39.960 still on the table. But I think the reason why 0:04:40.000 --> 0:04:44.000 it's gained kind of complicated is unclear what what the 0:04:44.120 --> 0:04:47.120 question would be in that referendum, So would it be 0:04:47.520 --> 0:04:53.000 here's Theresa May's deal against remaining. So so even though 0:04:53.160 --> 0:04:55.599 we people talk about the second referend, if you have 0:04:55.680 --> 0:04:59.240 to resolve what's the question, you can't just say do 0:04:59.240 --> 0:05:01.480 you want brexit or not break it? Because that's the 0:05:02.240 --> 0:05:04.760 devil now, as we know, is in the detail. So 0:05:04.800 --> 0:05:08.080 I think the answered yes, probably, but we have to 0:05:08.120 --> 0:05:15.159 resolve what's in a referendum about so that so obviously 0:05:15.440 --> 0:05:17.880 it's a big problem. But all options are on the 0:05:17.920 --> 0:05:21.600 table um and a general election might well end up 0:05:21.600 --> 0:05:24.159 being where where we'll end up, and I won't resolve 0:05:24.200 --> 0:05:27.920 anything either. So just a real quick here, Danny, I'm wondering, 0:05:27.960 --> 0:05:31.280 looking back at Theresa May's tenure, are we going to 0:05:31.320 --> 0:05:33.760 say that she utterly failed and she could have done 0:05:33.800 --> 0:05:37.080 something different, or that she just was dealt a terrible 0:05:37.120 --> 0:05:41.680 hand of cards. I disagree on the delta terrible hand 0:05:41.720 --> 0:05:44.200 of cards. She means she was delta hand. Perhaps that 0:05:44.320 --> 0:05:49.520 was unexpected, but she made us two fundamental errors. The 0:05:49.560 --> 0:05:52.039 first error she made but she did not reach across 0:05:52.080 --> 0:05:55.880 the aisle to anybody outside the right essentially the right 0:05:55.880 --> 0:05:59.839 wing of a Tory party, and that and that groups 0:06:00.000 --> 0:06:02.719 walked down governments in the past. John Major was brought 0:06:02.760 --> 0:06:05.120 down by by that group. So that so that was 0:06:05.160 --> 0:06:08.039 the first thing. And the second thing she did was 0:06:08.080 --> 0:06:12.200 she triggered Articles fifty in March two thousand and seventeen 0:06:12.720 --> 0:06:16.920 with absolutely no plan whatsoever. So you trigger this thing 0:06:16.960 --> 0:06:19.880 and give yourself a two year dead line with absolutely 0:06:19.880 --> 0:06:22.800 no clue what the plan was going to be and 0:06:22.880 --> 0:06:26.560 no possibility of generating consensus. She to do that, she 0:06:26.600 --> 0:06:29.520 could have triggered this mark of fifty later. Still, she 0:06:29.600 --> 0:06:32.360 just held her self a terrible hand, delt herself apple hand, 0:06:32.360 --> 0:06:35.320 and unfortunately did not make it any better. Danny branch Flower, 0:06:35.360 --> 0:06:37.840 Professor of economics for Dartmouth College, Thank you so much 0:06:37.880 --> 0:06:55.560 for joining us. What has been a very difficult environment 0:06:55.600 --> 0:06:58.120 for bricks and mortar retail. One area that has seen 0:06:58.200 --> 0:07:01.280 growth is music and our next guest has been on 0:07:01.320 --> 0:07:04.479 the forefront of this growth. Ron Japan, Us CEO of 0:07:04.520 --> 0:07:07.320 Guitar Center based in Los Angeles, California. Ron, thanks so 0:07:07.400 --> 0:07:09.400 much for joining us. Just first, I wonder if you 0:07:09.400 --> 0:07:12.640 could just tell us about Guitar Center how big you guys. 0:07:12.720 --> 0:07:16.560 What's the growth been looking like? Yeah, sure, Um, well, 0:07:16.560 --> 0:07:20.560 we're about two point two billion dollars in revenue and 0:07:20.600 --> 0:07:24.240 we go into the market with four different segments. We 0:07:24.360 --> 0:07:27.920 have our arm knee channel segment, which is guitar center, 0:07:28.080 --> 0:07:31.520 so those are our brick and mortar namesake stores that 0:07:31.640 --> 0:07:34.640 we also have the ability to buy online, ship to store, 0:07:34.680 --> 0:07:37.760 buy online, ship to customer. We didn't have a pure 0:07:37.800 --> 0:07:42.360 play brand, which we call Musicians Friend, which is just online. 0:07:43.080 --> 0:07:45.600 And then we have a music and Arts segment which 0:07:45.760 --> 0:07:48.920 is the beginning stages of the musical journeys for children, 0:07:49.280 --> 0:07:52.600 so think of band and orchestra and schools. And then 0:07:52.640 --> 0:07:56.600 our fourth segment is our business solutions, which is our 0:07:56.640 --> 0:08:00.680 business where we're going into other businesses help them do 0:08:00.880 --> 0:08:06.240 conference centers, studios, bars and restaurants and businesses like that. 0:08:07.080 --> 0:08:09.840 So we talk a lot here on the show about 0:08:09.920 --> 0:08:13.080 brick and mortar versus online. How have you seen sort 0:08:13.120 --> 0:08:16.320 of your two businesses when it comes to just how 0:08:16.400 --> 0:08:20.680 you're how you're selling the goods? Uh evolve? Yeah, Well, 0:08:20.680 --> 0:08:24.160 we've um, we have a pretty unique situation is that 0:08:24.240 --> 0:08:28.880 our products are lend themselves to a environment where it 0:08:28.880 --> 0:08:31.440 can really be a lot of fun. So when you 0:08:31.520 --> 0:08:35.360 go to our Guitar Center store, it's really a experience. 0:08:35.760 --> 0:08:37.880 So what we do is we make sure that when 0:08:37.880 --> 0:08:40.880 you walk into the store, you're greeted by great salespeople 0:08:41.120 --> 0:08:44.120 and you have the opportunity to actually play the instruments. 0:08:44.480 --> 0:08:47.040 So it's a unique experience to be able to walk 0:08:47.080 --> 0:08:49.840 in to one of our stores, take a guitar thousand 0:08:49.880 --> 0:08:52.599 dollar guitar, ten thousand dollar guitar off the wall, be 0:08:52.640 --> 0:08:55.360 able to sit down and play it without anybody um 0:08:56.040 --> 0:08:58.480 bothering you. And we see that as a very unique 0:08:58.840 --> 0:09:01.240 experience because when you go to a mom and pop 0:09:01.360 --> 0:09:03.559 or other stores, they actually have signs on the wall 0:09:03.920 --> 0:09:07.160 that say please do not touch, ask for salespeople. We 0:09:07.200 --> 0:09:09.880 actually have an amp plugged in with a pick ready 0:09:09.920 --> 0:09:12.880 to go, and you can sit down and play the guitar. 0:09:13.520 --> 0:09:15.640 So run. You know, one of the things that Lisa 0:09:15.640 --> 0:09:18.600 and I we hear from a lot of retail executives 0:09:18.600 --> 0:09:20.920 when they come here talking about their business. It's about 0:09:21.000 --> 0:09:23.600 shrinking the footprint of their stores to try to match 0:09:23.720 --> 0:09:26.160 kind of you know, the demand out there, giving them 0:09:26.200 --> 0:09:27.960 more and more sales are going online. You guys are 0:09:27.960 --> 0:09:31.920 actually adding stores. Talk to us about that. Yeah, well, 0:09:31.960 --> 0:09:35.640 so again it's in this omni channel environment for guitest 0:09:35.880 --> 0:09:39.000 Guitar Center brand. So what you see is we're adding 0:09:39.000 --> 0:09:42.400 about six to ten stores a year for a guitar center, 0:09:42.880 --> 0:09:45.880 and we just opened up Hawaii recently and we're going 0:09:45.920 --> 0:09:48.439 to open up Alaska a little bit later on the year. 0:09:48.480 --> 0:09:50.200 So this year we pulled back to six just because 0:09:50.240 --> 0:09:53.240 they're a little bit more complicated. But again we see 0:09:53.280 --> 0:09:57.880 this omni channel experience because of the environment that we have. 0:09:58.000 --> 0:10:00.640 Customers come into our stores and kind of like the 0:10:00.720 --> 0:10:05.640 candy land for our customer, they get to see spectacular guitars. 0:10:05.640 --> 0:10:08.480 It's not unusual to have somebody come sit down, play 0:10:08.480 --> 0:10:11.200 a guitar, play start playing a song, have a drummer 0:10:11.280 --> 0:10:14.280 start um playing the same song, and all of a sudden, 0:10:14.920 --> 0:10:16.480 you've got a song being played in the store by 0:10:16.480 --> 0:10:20.600 just customers. So that environment just keeps adding on. We're 0:10:20.600 --> 0:10:25.319 also adding services into our business, so we have lessons, repairs, 0:10:25.400 --> 0:10:28.720 and rentals. So we're now being able to sell you 0:10:28.760 --> 0:10:30.680 the instrument, We're being able to teach you how to 0:10:30.760 --> 0:10:34.400 use the instrument. We're able to support your gig at 0:10:34.400 --> 0:10:36.840 the bar. If we need to rent some additional products 0:10:36.840 --> 0:10:39.120 that go along with it and then repair the actual 0:10:39.160 --> 0:10:41.200 item when it needs repair. Were just to even be 0:10:41.280 --> 0:10:44.839 re strong. So I'm just wondering going forward, especially as 0:10:44.840 --> 0:10:47.360 you open all of these news stores, how are you 0:10:47.400 --> 0:10:50.839 financing that? We're doing it all on our own. Um, 0:10:50.920 --> 0:10:54.440 we're financially sound and we have the ability to open 0:10:54.480 --> 0:10:57.679 our stores. We've also acquired two companies recently in our 0:10:58.200 --> 0:11:00.960 B two B segment and with as Music and Arts, 0:11:01.720 --> 0:11:04.360 we've actually gone from a hundred and fifty stores and 0:11:04.400 --> 0:11:07.160 we're two hundred and fifteen stores currently and we looked 0:11:07.240 --> 0:11:10.360 open between twenty and thirty stores a year in that 0:11:10.440 --> 0:11:13.080 business segment. But right now I'm looking, Uh, I know 0:11:13.160 --> 0:11:15.640 that the company has a triple C rating and I'm 0:11:15.679 --> 0:11:18.800 just wondering, I mean, that's typically closer to default. How 0:11:18.800 --> 0:11:21.040 do you make sure that you generate enough revenue to 0:11:21.080 --> 0:11:24.760 offset the costs of some of these expenditures. Yeah, we're 0:11:24.800 --> 0:11:28.920 positive cash flow so UM. We manage our debt very 0:11:28.920 --> 0:11:31.480 carefully and we have our A B L which we 0:11:31.559 --> 0:11:33.400 use as our check book to be able to finance 0:11:33.440 --> 0:11:36.560 our operations. And we're well within all the limits that 0:11:36.600 --> 0:11:38.920 we have within that and we just are very prudent 0:11:38.920 --> 0:11:42.720 about all of our expenditures. So, Ron, I know Bain 0:11:43.040 --> 0:11:44.719 Capital acquired you guys, I guess it was ten or 0:11:44.760 --> 0:11:48.440 twelve years ago. What's they're thinking about the investment. That's 0:11:48.440 --> 0:11:52.560 a long time to own portfolio company. Actually, Bain doesn't 0:11:52.559 --> 0:11:57.959 own us anymore. Bain did take us UM private, and 0:11:58.200 --> 0:12:01.480 Aries is now the owner, and Aries has owned us 0:12:01.520 --> 0:12:05.560 since two thousand and fourteen, and they're extremely supportive of 0:12:05.640 --> 0:12:07.880 the direction that we're going in right now. And as 0:12:07.920 --> 0:12:10.960 we continue to improve the business and the profitability of 0:12:10.960 --> 0:12:13.080 the business, then um, I think, you know, we'll have 0:12:13.160 --> 0:12:16.360 some kind of a transaction in the future. But we've 0:12:16.400 --> 0:12:20.560 just finished six positive quarters in a row, and the 0:12:20.600 --> 0:12:23.520 business and all of our strategies continue to do well, 0:12:23.559 --> 0:12:26.400 and so we expect to just continue to move forward 0:12:26.440 --> 0:12:27.840 in the way that we're doing right now for the 0:12:27.880 --> 0:12:31.280 foreseeable future. Ron Japinka, thank you so much for joining us. 0:12:31.280 --> 0:12:34.680 At Ron Japana is chief executive officer of Guitar Center, 0:12:34.720 --> 0:12:54.679 based in Los Angeles. Well. One thing that rising trade 0:12:54.679 --> 0:12:57.360 tensions between the US and China have engendered in financial 0:12:57.400 --> 0:13:00.400 markets is volatility. To get a better I you how 0:13:00.440 --> 0:13:02.680 to best navigate this. We turned to our next guest, 0:13:02.960 --> 0:13:06.880 Doug's yuck Up, chief executive officer and partner for cover 0:13:06.920 --> 0:13:09.599 Our Capital Partners. They're based in Leewood, Kansas. They have 0:13:09.600 --> 0:13:13.160 approximately seven million dollars under management. Doug, thanks so much 0:13:13.240 --> 0:13:16.800 for joining us. How are you guys kind of managing 0:13:16.840 --> 0:13:20.040 the day to day swings in the marketplace that can 0:13:20.040 --> 0:13:22.440 be you know, and you know, just created by a 0:13:22.480 --> 0:13:26.120 tweet here or there. Yeah, you know, it's good actually 0:13:26.160 --> 0:13:29.280 to have volatility back, and we feel like it's presenting 0:13:29.320 --> 0:13:32.880 some opportunities for putting capital work that had not been 0:13:32.920 --> 0:13:34.640 president in the first three or four months of the year. 0:13:34.679 --> 0:13:37.080 And you know, I undeniably do not feel like the 0:13:37.120 --> 0:13:40.400 market is be'm blown off course, but the winds have shifted, right, 0:13:40.440 --> 0:13:42.679 I mean, things that were headwinds coming into the year 0:13:42.679 --> 0:13:44.920 and now tail winds and vice versa. And you know, 0:13:45.000 --> 0:13:46.960 the trade war going into even the month of May, 0:13:47.120 --> 0:13:49.280 felt like there was gonna be a quick and very 0:13:49.320 --> 0:13:52.439 prosperous resolution and that's been completely overturned. Yet at the 0:13:52.480 --> 0:13:54.199 same time, we didn't feel like earnings were going to 0:13:54.280 --> 0:13:56.680 be very strong, and they were considerably stronger than we 0:13:56.720 --> 0:13:58.880 had anticipated. And you know the FED was going to 0:13:58.960 --> 0:14:00.520 be neutral and that was gonna be a headwind. But 0:14:00.600 --> 0:14:03.439 out looks like the Fed And even despite some of 0:14:03.480 --> 0:14:05.679 the comments that we're pretty benign that came out on Wednesday, 0:14:06.000 --> 0:14:08.520 I mean, the FED is doubbish. And I think when capital, 0:14:08.559 --> 0:14:11.800 which is plentiful, starts to be mobilized in the absence 0:14:11.800 --> 0:14:13.920 of a lot of fear that dictated the trade this 0:14:13.920 --> 0:14:15.640 this last couple of weeks, I think it's a good 0:14:15.640 --> 0:14:17.719 opportunity for the market to actually have kind of a 0:14:17.720 --> 0:14:20.800 pretty constructive summer, even if it only runs in place. So, Doug, 0:14:20.880 --> 0:14:24.920 where are you finding opportunities? Where are you buying right down? Yeah? Thankfully? So. 0:14:24.960 --> 0:14:27.480 I we like if you look at the sector performance 0:14:27.520 --> 0:14:30.080 this year, it's pretty amazing, right, But as it relates 0:14:30.120 --> 0:14:34.000 to a contrarian buying opportunity in a sector like healthcare, right, 0:14:34.080 --> 0:14:37.280 the smps of what twelve percent are almost year to 0:14:37.320 --> 0:14:38.760 date and healthcare is up just a little bit better 0:14:38.760 --> 0:14:42.680 than three right, And there's certainly there's regulatory knowing noise. 0:14:42.720 --> 0:14:45.000 It's a tendant to this sector. There always is, particularly 0:14:45.000 --> 0:14:48.840 when aspirations and in different campaign promises get to be 0:14:48.840 --> 0:14:51.320 slung around. We're just beginning to see that, and we're 0:14:51.360 --> 0:14:53.000 going to see that intensify over the course of the 0:14:53.040 --> 0:14:56.480 next year. Earnings were solid in Q one, Revenue was 0:14:56.560 --> 0:14:59.960 solid in Q one. Biotech specifically, we think in terms 0:15:00.160 --> 0:15:05.880 maybe immune immunotherapy, genomics, these are revolutionary therapies and technologies 0:15:05.920 --> 0:15:08.880 that we think are underappreciated. And this is a market, 0:15:08.920 --> 0:15:13.160 particularly given the pronounced level of actility we're undergoing right now. 0:15:13.520 --> 0:15:18.080 There's valuing substantive and substantial organic growth and high margin businesses, 0:15:18.120 --> 0:15:21.360 and those are plentiful in the healthcare sector right now. Well, Doug, 0:15:21.360 --> 0:15:22.600 how about in the you know, one of the things 0:15:22.640 --> 0:15:25.600 we've seen in these uh rising trade tensions between the 0:15:25.680 --> 0:15:27.680 US and China and what the Huahwei news is the 0:15:27.720 --> 0:15:30.560 tech sectors kind of gotten whipped around here, the semiconductor 0:15:30.640 --> 0:15:33.840 stocks taking a beating. Are you taking this as an 0:15:33.840 --> 0:15:36.840 opportunity to maybe take another look at tech or does 0:15:36.880 --> 0:15:38.640 this just too big of a risk to kind of 0:15:38.680 --> 0:15:40.920 bite off. No, we don't think it's to be a 0:15:41.000 --> 0:15:42.680 risk at all. Paul. You know, it's amazing. You know, 0:15:42.800 --> 0:15:45.040 if you guys follow beast book on Twitter, they put 0:15:44.920 --> 0:15:49.160 a phenomenal valuation compared and comparison chart out last night 0:15:49.640 --> 0:15:53.000 that the value H the P on tech and utilities 0:15:53.440 --> 0:15:56.240 are almost paired off right The U the P I 0:15:56.400 --> 0:15:59.440 utilities right now are twenty point one in tech twenty 0:15:59.440 --> 0:16:02.920 point five. We think there's some very interesting opportunities, particularly 0:16:02.960 --> 0:16:05.520 if you consider where we are in the economic cycle, 0:16:05.520 --> 0:16:09.080 which is undenidably late. We've seen enhancement of productivity and 0:16:09.120 --> 0:16:12.280 the aforementioned plentiful capital that's sitting on company balance sheets 0:16:12.480 --> 0:16:14.920 gets deployed in the fashion that's going to elevate that 0:16:14.960 --> 0:16:17.600 productivity to take the profitability into the future. We think 0:16:17.640 --> 0:16:20.360 tech has some very interesting opportunities right now, and I 0:16:21.000 --> 0:16:24.240 think the Uahwei thing, as it gets thrown around, is 0:16:24.240 --> 0:16:26.200 going to be a catalyst to really offer some of 0:16:26.200 --> 0:16:29.520 those interesting and attractive entry points. Interesting I'm looking right now, 0:16:29.560 --> 0:16:31.720 of course, though it yields, and I do have to 0:16:31.760 --> 0:16:35.840 wonder whether they're sending a more bearished signal uh than equities, 0:16:35.960 --> 0:16:39.440 especially with tenure yields hovering around the lowest since twenty seventeen. 0:16:40.480 --> 0:16:43.040 Do you think that that that we can sort of 0:16:43.080 --> 0:16:45.080 take some kind of bearished signal here or do you 0:16:45.080 --> 0:16:47.640 think that there's just a different story priced in having 0:16:47.680 --> 0:16:52.120 to do with Central Bank doublish policies. Yeah, there's always 0:16:52.160 --> 0:16:54.960 a message in the bond market, Riley. So we always 0:16:54.960 --> 0:16:57.320 say the bond market is more cold, hard and calculating 0:16:57.320 --> 0:16:59.800 in the stock markets, more that of the kind of 0:16:59.320 --> 0:17:03.320 the realm of the temperamental child. And it certainly is 0:17:03.360 --> 0:17:07.320 telling us that inflation is not an issue. It's likely 0:17:07.400 --> 0:17:11.400 telling us that growth rates may moderate. It is certainly 0:17:11.480 --> 0:17:16.160 embedding some sort of an elongation of the trade tariffs 0:17:16.200 --> 0:17:19.879 and foreign and domestic politics. If you think about like 0:17:19.960 --> 0:17:23.760 the two axes upon which markets pivot. You have access 0:17:23.800 --> 0:17:26.679 to capital and you have confidence, and the bond market 0:17:26.720 --> 0:17:29.119 is a proxy for both, and it's kind of splitting 0:17:29.160 --> 0:17:32.720 its time right now. Capital is plentiful, but confidence is 0:17:32.840 --> 0:17:36.760 absolutely waning. So people are kind of look for a signal, 0:17:37.160 --> 0:17:39.520 and not likely that would be embedded in a backup 0:17:39.560 --> 0:17:41.760 and yields, because even though yields will come down over 0:17:41.800 --> 0:17:44.920 the course last three months, the curve has steepens. You've 0:17:44.920 --> 0:17:47.399 had it's bull stepening trade that's been in place. That 0:17:47.520 --> 0:17:50.240 does give us an indication that if things do tend normalize, 0:17:50.280 --> 0:17:52.840 that can make a very productive contribution to the markets 0:17:52.840 --> 0:17:55.720 continuing forward. But the message of the bond market should 0:17:55.760 --> 0:17:58.119 never be ignored. So, Doug, are you part of what 0:17:58.240 --> 0:18:00.960 I guess I would call the kid census. Uh that 0:18:01.040 --> 0:18:03.760 it looks like the FED will cut rates at least 0:18:03.840 --> 0:18:07.880 once before the end of the year. I don't know, Paul, 0:18:07.880 --> 0:18:10.640 that is such a tough prediction to make. Means certainly 0:18:11.000 --> 0:18:13.359 like the Bloomberg the w I r P screed is 0:18:13.400 --> 0:18:17.000 giving what a my favorite Thank yeah, I love it 0:18:17.040 --> 0:18:19.280 as well. And in the market is in the market, 0:18:19.280 --> 0:18:20.840 and w I r P has always been a little 0:18:20.840 --> 0:18:23.679 bit detached from the Fed. I really don't know that 0:18:23.760 --> 0:18:27.800 the Fed needs to cut rates clearly if they don't 0:18:27.880 --> 0:18:31.840 feel like the economy is running, you know, so weaker, 0:18:31.880 --> 0:18:33.000 and what do you want to look at the GDP 0:18:33.080 --> 0:18:36.840 now from the Atlanta Fed or other um underlying sort 0:18:36.880 --> 0:18:39.439 of data points. I don't feel like they need the 0:18:39.520 --> 0:18:42.520 stimulus now if you could get something that kind of 0:18:42.640 --> 0:18:46.240 runs and buttresses the monetary policy, like something for us 0:18:46.000 --> 0:18:48.240 to productive about a fiscal policy, and who knows, maybe 0:18:48.240 --> 0:18:50.760 we get some kind of a breakthrough announcement with capital 0:18:50.840 --> 0:18:53.280 spending and infrastructure and that kind of thing. I don't 0:18:53.320 --> 0:18:56.080 think the FED once to cut I hope the FED 0:18:56.200 --> 0:18:58.080 does not cut. It is interesting to me that the 0:18:58.119 --> 0:19:00.480 market is obviously a far more pessimistic than the set 0:19:00.560 --> 0:19:03.720 is communicating or the economic data is demonstrating. No, I 0:19:03.720 --> 0:19:05.760 am not in a camp that they will doug. I'm 0:19:05.800 --> 0:19:08.760 struck by sort of this dissonance here. There's some people 0:19:08.800 --> 0:19:11.600 who say that the trade concerns are really what's weighing 0:19:11.800 --> 0:19:15.399 on equities and what's certainly creating a bid for bonds. 0:19:15.400 --> 0:19:18.439 Other people saying that that's actually the peripheral story and 0:19:18.480 --> 0:19:20.960 it really has to do with slowing growth globally. Where 0:19:20.960 --> 0:19:24.520 do you come in on this, I think the the former. 0:19:24.920 --> 0:19:28.679 I've not seen any slowing growth globally. I think we 0:19:28.760 --> 0:19:31.200 have a fear of slowing growth globally. That goes back 0:19:31.240 --> 0:19:33.200 to the message of the bond market. Have not seen 0:19:33.280 --> 0:19:36.440 the data that would support that, other than in some 0:19:36.520 --> 0:19:41.680 anticipatory impact of the trade tariffs and it's it's contractionary 0:19:41.800 --> 0:19:45.120 capacity or it's play itself out. I've just not seen 0:19:45.160 --> 0:19:47.960 it yet least. I think it's more just consternation and fear, 0:19:48.400 --> 0:19:51.720 and that's being pulled forward, not unlike the optimism and 0:19:51.800 --> 0:19:53.880 the greed had been pulled forward in the first three 0:19:53.920 --> 0:19:56.760 or four months of this year just real quickly ten seconds, 0:19:56.760 --> 0:19:58.760 is or anything. You're just staying away from any equity 0:19:58.840 --> 0:20:02.800 sector there really is not. I mean, I think when 0:20:02.840 --> 0:20:04.520 you look at some of the valuations in the most 0:20:04.560 --> 0:20:07.680 defensive sectors like utilities in real estate and to think 0:20:07.680 --> 0:20:10.919 that they're up and growing it two or three percent 0:20:11.080 --> 0:20:14.200 with a P, I think you have to be really 0:20:14.240 --> 0:20:17.399 cautious there and selective. But as kind of wholesale basis, No, 0:20:17.560 --> 0:20:20.120 we're kind of consider everything on kind of an individual 0:20:20.200 --> 0:20:23.399 fundamental assessment basis. Doug Cioca, thank you so much for 0:20:23.440 --> 0:20:26.000 being with us. Doug Cioca, chief executive officer and partner 0:20:26.080 --> 0:20:30.919 at uh Cover Capital Partners from Leewood, Kansas. Interesting to 0:20:31.000 --> 0:20:33.280 see that he's seeing opportunities and he does think that 0:20:33.320 --> 0:20:35.320 this is more a story about trade concerns that it 0:20:35.400 --> 0:20:53.760 is slowing global growth. Talking about municipal bonds, we have 0:20:53.800 --> 0:20:56.199 to talk about the tremendous rally that we've seen in 0:20:56.240 --> 0:20:59.760 the debt, where we've seen prices on the debt rising 0:20:59.760 --> 0:21:03.000 to record highs relative to treasuries. Were very lucky to 0:21:03.000 --> 0:21:05.879 have with us here. Amanda al Rite, municipal bond reporter 0:21:05.960 --> 0:21:10.159 for Bloomberg News. In our interactive broker studios in New York. So, Amanda, 0:21:10.280 --> 0:21:12.880 there are a number of analysts coming out from big 0:21:12.920 --> 0:21:16.440 banks saying, Okay, this has gotten a little ahead of itself. 0:21:17.040 --> 0:21:20.080 There is going to be a pullback. What's the argument, right? 0:21:20.119 --> 0:21:22.439 So I talked to some portfolio managers this week that 0:21:22.560 --> 0:21:25.080 kind of made the case that with Muni's UM, whenever 0:21:25.119 --> 0:21:28.199 you see a sustained period of really big inflows like 0:21:28.200 --> 0:21:30.639 what we're seeing now, um, you're just kind of waiting 0:21:30.640 --> 0:21:32.760 for the other shoot to drop. UM. I think what's 0:21:32.760 --> 0:21:35.600 really interesting about this moment is that investors don't really 0:21:35.600 --> 0:21:37.440 know what that will be. So some people have even 0:21:37.480 --> 0:21:40.639 talked about the election is being something that could trigger 0:21:40.680 --> 0:21:43.520 that or something even more soon if people start to 0:21:43.560 --> 0:21:45.720 realize that they're kind of paying a lot to own 0:21:45.760 --> 0:21:48.480 munis right now, and maybe they're not being compensated for 0:21:48.520 --> 0:21:51.320 the risks, or maybe they're better off buying treasuries or 0:21:51.359 --> 0:21:54.359