1 00:00:01,440 --> 00:00:05,320 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 2 00:00:05,400 --> 00:00:08,480 Speaker 1: weekdays at ten am Eastern on EFFL car playing Android 3 00:00:08,520 --> 00:00:11,600 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 4 00:00:11,680 --> 00:00:15,520 Speaker 1: you get your podcasts, or watch us live on YouTube. 5 00:00:16,640 --> 00:00:19,599 Speaker 2: Tesla That's dock down by three tenths of one percent 6 00:00:19,640 --> 00:00:21,640 Speaker 2: a great scoop by Dana Hall and Ed Ludlow on 7 00:00:21,680 --> 00:00:24,560 Speaker 2: our Bloomberg News team talk about how staff and Tesla 8 00:00:24,600 --> 00:00:28,560 Speaker 2: are bracing for potential job cuts. Apparently, managers were asked 9 00:00:28,680 --> 00:00:32,240 Speaker 2: to affirm whether each of their employees position is critical. 10 00:00:32,520 --> 00:00:33,280 Speaker 2: That feels good. 11 00:00:33,760 --> 00:00:35,320 Speaker 3: Yeah, that always feels. 12 00:00:35,040 --> 00:00:37,760 Speaker 2: Really great when you hear that. Joining us now is 13 00:00:37,800 --> 00:00:42,200 Speaker 2: Steve Mann, Bloomberg Intelligence, Global Autos and Industrials research analyst Hasteve. 14 00:00:42,240 --> 00:00:44,000 Speaker 2: What did you make out of the scoop from Bloomberg? 15 00:00:44,920 --> 00:00:47,200 Speaker 4: Well, I think, I mean, job cuts are never good 16 00:00:47,280 --> 00:00:50,000 Speaker 4: for the employees, but I think the investors will probably 17 00:00:50,040 --> 00:00:53,519 Speaker 4: look at it positively because the stock's been down like 18 00:00:53,560 --> 00:00:57,000 Speaker 4: twelve percent since their last earnings call in thirty percent 19 00:00:57,200 --> 00:01:00,840 Speaker 4: year today, and that's all because as you know, slowing 20 00:01:00,880 --> 00:01:04,720 Speaker 4: EV sales price cuts, so the company needs to do 21 00:01:04,800 --> 00:01:08,000 Speaker 4: something to you know, to address them of the short 22 00:01:08,080 --> 00:01:09,920 Speaker 4: term challenges they're facing. 23 00:01:10,720 --> 00:01:13,160 Speaker 5: So when I see news like this, it's it really 24 00:01:13,160 --> 00:01:16,679 Speaker 5: makes me think, Steve, that maybe they see something fundamental 25 00:01:16,880 --> 00:01:19,759 Speaker 5: in their business such that they have to look at 26 00:01:19,800 --> 00:01:24,039 Speaker 5: a big fixed cost like people, what's the company saying 27 00:01:24,040 --> 00:01:26,920 Speaker 5: these days about where they see well, I guess demand. 28 00:01:28,040 --> 00:01:30,479 Speaker 4: Well, well that's a good question. I think you got 29 00:01:30,520 --> 00:01:33,919 Speaker 4: two questions there. First of all, fundamentally, you know, they've 30 00:01:33,959 --> 00:01:37,880 Speaker 4: done a lot of price cutting, you know, in their operations, 31 00:01:38,600 --> 00:01:42,800 Speaker 4: in an administrative side of things, in their manufacturing, so 32 00:01:42,840 --> 00:01:45,880 Speaker 4: they're naturally they actually they're naturally kind of out of 33 00:01:46,600 --> 00:01:49,160 Speaker 4: They plucked out all the low hanging fruits. There's not 34 00:01:49,280 --> 00:01:53,559 Speaker 4: much to cut anymore other than looking at their human resources, 35 00:01:53,560 --> 00:01:57,360 Speaker 4: and that's what they're doing at this time. Now. Obviously 36 00:01:58,560 --> 00:02:01,200 Speaker 4: you know you don't want to cut, but I think 37 00:02:01,360 --> 00:02:04,160 Speaker 4: they have to. If you look at forged earnings call 38 00:02:04,640 --> 00:02:09,919 Speaker 4: last night, the market is really brutal. They've the margins 39 00:02:10,000 --> 00:02:13,320 Speaker 4: was down, like was that negative ninety eight percent for 40 00:02:13,320 --> 00:02:16,880 Speaker 4: Ford's EV business. That's worse than their third quarter. So 41 00:02:17,760 --> 00:02:22,000 Speaker 4: from that you can see the whole entire EV market 42 00:02:22,160 --> 00:02:27,320 Speaker 4: is still facing you know, price cuts, slower demand, and 43 00:02:27,320 --> 00:02:29,400 Speaker 4: that's you know, I think that's what Tessa is trying 44 00:02:29,400 --> 00:02:31,760 Speaker 4: to dress for twenty twenty four. 45 00:02:31,919 --> 00:02:34,280 Speaker 2: Hey, Steve, do we have an idea of when the 46 00:02:34,320 --> 00:02:37,600 Speaker 2: trough might happen for EV's, when we is just going 47 00:02:37,680 --> 00:02:39,519 Speaker 2: to take cheaper ones or is it going to be 48 00:02:39,560 --> 00:02:42,399 Speaker 2: actually more hybrid and that trough be really pushed out. 49 00:02:43,320 --> 00:02:47,600 Speaker 4: I think hybrid is a good kind of fill in 50 00:02:47,680 --> 00:02:52,000 Speaker 4: between now and when you know EV's can take off. 51 00:02:52,840 --> 00:02:56,280 Speaker 4: Our view is actually, you know, around twenty twenty six, 52 00:02:56,800 --> 00:03:01,200 Speaker 4: because I think that's when prices cost of manufacturing evs 53 00:03:01,680 --> 00:03:05,680 Speaker 4: will come down, you know, with localization of battery production, 54 00:03:06,400 --> 00:03:11,160 Speaker 4: more EV models out there, and everyone, every automaker right 55 00:03:11,200 --> 00:03:15,280 Speaker 4: now is talking about the second generation of EV vehicles, 56 00:03:15,280 --> 00:03:18,760 Speaker 4: the third generation of EV vehicles. They're actually designed on 57 00:03:18,800 --> 00:03:22,880 Speaker 4: a very different platform than the ICE vehicles, the internal 58 00:03:22,880 --> 00:03:28,520 Speaker 4: combustion engine vehicles that is supposed to streamline production, cut parts, 59 00:03:29,000 --> 00:03:31,959 Speaker 4: cut the number of parts, and hopefully drive costs down 60 00:03:32,000 --> 00:03:35,520 Speaker 4: and make it more affordable for the consumers. 61 00:03:35,160 --> 00:03:39,880 Speaker 3: So it's a twenty sixth story. Will the charging infrastructure 62 00:03:40,320 --> 00:03:41,720 Speaker 3: also be a twenty six story? 63 00:03:43,040 --> 00:03:46,520 Speaker 4: Well, no, there are some spending at the moment to 64 00:03:46,600 --> 00:03:53,840 Speaker 4: increase charging infrastructure, but I mean that's another bottleneck that 65 00:03:54,360 --> 00:03:57,440 Speaker 4: the industry is facing. I think, you know, out on 66 00:03:57,520 --> 00:03:59,920 Speaker 4: the West coast, out in the East coast, charging in 67 00:04:00,120 --> 00:04:05,080 Speaker 4: structure are not of a big concern, but Central America is, 68 00:04:05,200 --> 00:04:06,960 Speaker 4: So that's where the focus is. I think in the 69 00:04:07,000 --> 00:04:08,880 Speaker 4: next couple of years you really built up the charging 70 00:04:09,280 --> 00:04:11,640 Speaker 4: infrastructure in that part of the country. 71 00:04:11,840 --> 00:04:14,720 Speaker 5: How many charging units do you have at the Princeton 72 00:04:14,760 --> 00:04:16,280 Speaker 5: campus at Bloomberg right now? 73 00:04:17,279 --> 00:04:19,800 Speaker 4: Oh, it's It's interesting. If you go out to the 74 00:04:19,839 --> 00:04:23,559 Speaker 4: parking lot here, you think it's a Tesla dealership out here, 75 00:04:24,640 --> 00:04:29,160 Speaker 4: there's probably you know, fifty forty. 76 00:04:29,000 --> 00:04:31,479 Speaker 2: Fifty people have the cars, like are the Tesla's actually 77 00:04:31,480 --> 00:04:33,080 Speaker 2: being plugged in or ev oh. 78 00:04:33,040 --> 00:04:36,080 Speaker 4: Yeah, oh yeah, oh yeah. You'll see mostly Tesla. You'll 79 00:04:36,080 --> 00:04:38,840 Speaker 4: see a couple of Volkswagen, a couple of Volvols. 80 00:04:38,960 --> 00:04:41,279 Speaker 5: But because when I was that's why when I was 81 00:04:41,320 --> 00:04:43,440 Speaker 5: at the Princeton campus, Steve, you know, I guess I 82 00:04:43,440 --> 00:04:46,400 Speaker 5: haven't been there since before the pandemic. It's called it 83 00:04:46,440 --> 00:04:49,640 Speaker 5: five years. Five years we had two. Now you're telling 84 00:04:49,720 --> 00:04:52,640 Speaker 5: we have fifty. That is a good barometer. 85 00:04:52,760 --> 00:04:53,080 Speaker 3: I think. 86 00:04:53,480 --> 00:04:55,520 Speaker 5: I think Bloomberg is usually on the cutting edge of 87 00:04:55,520 --> 00:04:57,279 Speaker 5: this stuff, but still interesting. 88 00:04:57,360 --> 00:04:58,880 Speaker 2: Yeah, and I wonder like, did you get the idea 89 00:04:58,880 --> 00:05:02,200 Speaker 2: that the charging was there, therefore you brought the EV's 90 00:05:02,800 --> 00:05:06,080 Speaker 2: or it's just a clientele that has the EV's. Unfair question, 91 00:05:06,279 --> 00:05:07,000 Speaker 2: But like, what do. 92 00:05:06,960 --> 00:05:09,880 Speaker 4: You think that's a good question. It's all about the 93 00:05:09,880 --> 00:05:14,159 Speaker 4: cost of ownership. I think you're right, Alex. Having the 94 00:05:14,240 --> 00:05:17,760 Speaker 4: charging stations here make it convenient for people to charge 95 00:05:17,800 --> 00:05:21,240 Speaker 4: and really cut their monthly costs. Right, there's no fuel 96 00:05:21,279 --> 00:05:25,920 Speaker 4: costs anymore with the with the evs, and but it's 97 00:05:26,000 --> 00:05:27,400 Speaker 4: all by the cost of ownership. 98 00:05:27,400 --> 00:05:28,000 Speaker 3: It's free. 99 00:05:28,240 --> 00:05:32,600 Speaker 6: The energy should be charging you people down there for this. 100 00:05:33,120 --> 00:05:36,040 Speaker 3: They got I mean they got the solar panels up back, they. 101 00:05:35,880 --> 00:05:38,279 Speaker 6: Got free launch, the literally free launch. 102 00:05:38,360 --> 00:05:40,200 Speaker 5: It's awesome down all right, Steve, thanks so much for 103 00:05:40,240 --> 00:05:43,560 Speaker 5: joining us. Steve Manny's a global autos industrials research he's 104 00:05:43,560 --> 00:05:46,479 Speaker 5: down there in Bloomberg in our Princeton office, which is 105 00:05:46,520 --> 00:05:47,040 Speaker 5: really cool. 106 00:05:47,160 --> 00:05:49,479 Speaker 3: That's you know, that was one of the Bloomberg's first offices. 107 00:05:49,800 --> 00:05:50,120 Speaker 3: Down there. 108 00:05:50,120 --> 00:05:51,720 Speaker 5: They had the global data folks and I don't know 109 00:05:51,720 --> 00:05:53,200 Speaker 5: how many people we have that there with three thousand 110 00:05:53,279 --> 00:05:56,680 Speaker 5: maybe maybe more do some awesome work down there, and 111 00:05:56,680 --> 00:05:57,599 Speaker 5: that's where a lot of. 112 00:05:57,600 --> 00:06:00,040 Speaker 2: The b I folks, and also all the EV's apparently. 113 00:06:00,000 --> 00:06:01,719 Speaker 3: Carent all the EV's fifty. That's pretty cool. 114 00:06:03,200 --> 00:06:07,080 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 115 00:06:07,160 --> 00:06:10,680 Speaker 1: weekdays at ten am Eastern on applecard Play and Android 116 00:06:10,720 --> 00:06:13,479 Speaker 1: Otto with the Bloomberg Business app. You can also listen 117 00:06:13,600 --> 00:06:16,680 Speaker 1: live on Amazon Alexa from our flagship New York station. 118 00:06:17,080 --> 00:06:20,800 Speaker 1: Just say Alexa play Bloomberg eleven thirty. 119 00:06:21,440 --> 00:06:22,440 Speaker 3: It's got a Hermit chen here. 120 00:06:22,440 --> 00:06:24,359 Speaker 5: He's a senior and was covering the regional banks Hermit 121 00:06:24,960 --> 00:06:27,360 Speaker 5: New York Community Bank. That's the story of I guess 122 00:06:27,360 --> 00:06:30,080 Speaker 5: the last several days. What's the current status of that? 123 00:06:30,200 --> 00:06:33,240 Speaker 5: Is that something that bank investors in general have to 124 00:06:33,279 --> 00:06:35,200 Speaker 5: worry about regional banks in this country? 125 00:06:35,360 --> 00:06:40,240 Speaker 7: Sure, I think it's definitely brought to the forefront worries 126 00:06:40,279 --> 00:06:44,400 Speaker 7: about commercial real estate in particular. But really New York 127 00:06:44,400 --> 00:06:48,400 Speaker 7: Community's issues are a bit aiosyncratic because they just crossed 128 00:06:48,400 --> 00:06:51,480 Speaker 7: over that one hundred billion dollar threshold that requires tougher 129 00:06:51,520 --> 00:06:55,839 Speaker 7: regulatory scrutiny. And New York Community is also the dominant 130 00:06:55,920 --> 00:06:59,600 Speaker 7: lender in the rent regulated apartment lending area here in 131 00:06:59,640 --> 00:07:03,720 Speaker 7: New York Work, so not much read across to other regionals. 132 00:07:03,960 --> 00:07:06,479 Speaker 2: Well, we also had headline that they want to sell 133 00:07:06,520 --> 00:07:09,280 Speaker 2: some of their RV loans and offloads some mortgage risk. 134 00:07:09,320 --> 00:07:10,840 Speaker 2: Are there going to be the buyers for that. 135 00:07:11,320 --> 00:07:13,880 Speaker 7: Right, so that that's going to be an issue for 136 00:07:14,080 --> 00:07:15,800 Speaker 7: the records. 137 00:07:15,680 --> 00:07:18,120 Speaker 2: The buyers at the right price, buyers at the right price. 138 00:07:18,160 --> 00:07:21,400 Speaker 7: So for newer community what these two actions are really 139 00:07:22,680 --> 00:07:26,360 Speaker 7: a bid to improve their capital ratios. They've talked about 140 00:07:27,040 --> 00:07:29,560 Speaker 7: lifting their CT one ratio to ten percent by the 141 00:07:29,680 --> 00:07:31,800 Speaker 7: end of the year, which would be more in line 142 00:07:31,840 --> 00:07:35,600 Speaker 7: with their larger regional baking peers. And so the synthetic 143 00:07:35,640 --> 00:07:40,600 Speaker 7: transaction to add insurance on their residential mortgage loans and 144 00:07:40,720 --> 00:07:44,360 Speaker 7: offload some RV loans is designed to potentially do that. 145 00:07:45,320 --> 00:07:48,720 Speaker 5: R V loans, now, these are recreational vehicle loans. John 146 00:07:48,760 --> 00:07:52,040 Speaker 5: Tucker thought there's some technical arcane these. 147 00:07:52,600 --> 00:07:54,720 Speaker 2: We're sure to John Tucker, that was me. I was 148 00:07:54,720 --> 00:07:56,680 Speaker 2: the one who was like, is this a specialized sort 149 00:07:56,680 --> 00:07:57,080 Speaker 2: of loan? 150 00:07:57,760 --> 00:07:59,080 Speaker 3: So is that a thing? 151 00:07:59,480 --> 00:08:02,480 Speaker 7: Yeah, So that's the thing that some regional banks actually do, 152 00:08:02,640 --> 00:08:04,800 Speaker 7: and it's it's a lucrative business. You can think of 153 00:08:04,800 --> 00:08:07,760 Speaker 7: as sort of like a an auto loan, but just 154 00:08:07,760 --> 00:08:10,680 Speaker 7: for r v's and banks like M and T and 155 00:08:10,760 --> 00:08:12,360 Speaker 7: Bank ozk Uh. 156 00:08:15,920 --> 00:08:17,000 Speaker 3: These are RV lenders. 157 00:08:17,520 --> 00:08:20,400 Speaker 2: Well, also, remember that RVs were super hot in twenty twenty. 158 00:08:20,440 --> 00:08:22,800 Speaker 2: Everyone wanted them. You couldn't like make them fast enough 159 00:08:22,840 --> 00:08:25,400 Speaker 2: because that was the only vacation you could have get 160 00:08:25,400 --> 00:08:26,840 Speaker 2: in your RV go around. 161 00:08:27,160 --> 00:08:29,440 Speaker 7: So that's right, what's going to be the open road? 162 00:08:29,600 --> 00:08:31,960 Speaker 2: Exactly what's going to be next for this company? Because 163 00:08:32,040 --> 00:08:34,800 Speaker 2: you could make an argument that they're doing everything right 164 00:08:34,880 --> 00:08:36,520 Speaker 2: and I'm putting that in quotes in terms of like 165 00:08:36,600 --> 00:08:39,720 Speaker 2: updating investors, getting their books in order, et cetera. So 166 00:08:39,960 --> 00:08:42,559 Speaker 2: what do they do now that they right? 167 00:08:42,800 --> 00:08:46,959 Speaker 7: They're trying to control the narrative, But the market's saying 168 00:08:47,080 --> 00:08:51,600 Speaker 7: something else entirely where where the market's concerned that even 169 00:08:51,600 --> 00:08:54,400 Speaker 7: though liquidity is in a pretty good shape and deposits 170 00:08:54,440 --> 00:08:56,960 Speaker 7: are actually up, but since the end of the year, 171 00:08:57,520 --> 00:08:59,880 Speaker 7: are they going to be able to generate enough earn 172 00:09:00,440 --> 00:09:02,760 Speaker 7: to meet their capital ratios? And how are they going 173 00:09:02,840 --> 00:09:06,319 Speaker 7: to fare in the upcoming stress test? When they did that, 174 00:09:07,200 --> 00:09:08,960 Speaker 7: if you step back and when you look at what 175 00:09:09,000 --> 00:09:12,400 Speaker 7: they did after they announced the signature transaction last year, 176 00:09:12,440 --> 00:09:14,679 Speaker 7: when they were viewed as a savior, they could have 177 00:09:14,760 --> 00:09:17,360 Speaker 7: been I guess maybe a bit more aggressive in building 178 00:09:17,440 --> 00:09:20,400 Speaker 7: up their capital and liquidity back then, so they're not 179 00:09:20,480 --> 00:09:23,920 Speaker 7: in a pickle now. But that's really spilled milk at 180 00:09:23,920 --> 00:09:24,520 Speaker 7: this point. 181 00:09:24,760 --> 00:09:28,360 Speaker 5: So one of the themes I'm still in the back 182 00:09:28,400 --> 00:09:30,000 Speaker 5: of my mind if I were a bank investors, I 183 00:09:30,160 --> 00:09:33,560 Speaker 5: just don't know the magnitude of some of these commercial 184 00:09:33,559 --> 00:09:34,599 Speaker 5: real estate exposures. 185 00:09:35,000 --> 00:09:36,160 Speaker 3: I believe in the past you've. 186 00:09:36,040 --> 00:09:39,680 Speaker 5: Said for most lenders, it's not that big a deal, is. 187 00:09:39,679 --> 00:09:43,840 Speaker 7: That right, Well, we're gonna talk specifically about office commercial 188 00:09:43,880 --> 00:09:47,199 Speaker 7: real estate, where that's that's really the potential boogeyman here. 189 00:09:48,640 --> 00:09:52,959 Speaker 7: On average, across our research coverage, which covers the largest 190 00:09:53,200 --> 00:09:57,080 Speaker 7: nineteen twenty regional banks, it's two percent of their total 191 00:09:57,120 --> 00:10:01,440 Speaker 7: low books, so it's actually really small, advantageable and you 192 00:10:01,679 --> 00:10:04,440 Speaker 7: can and then on top of that, you have pretty 193 00:10:04,679 --> 00:10:07,960 Speaker 7: conservative underwriting, and they've they know this is a risk, 194 00:10:08,000 --> 00:10:09,800 Speaker 7: and the regulators know this is a risk, so the 195 00:10:09,840 --> 00:10:13,040 Speaker 7: banks have already started to build up reserves to protect 196 00:10:13,080 --> 00:10:15,839 Speaker 7: against potential losses. So put that all together, it just 197 00:10:15,840 --> 00:10:17,680 Speaker 7: seems like it's going to be a manageable issue. But 198 00:10:17,720 --> 00:10:19,720 Speaker 7: you're going to see losses eventually. 199 00:10:19,480 --> 00:10:21,480 Speaker 2: So can this bank stay in business. 200 00:10:21,760 --> 00:10:22,880 Speaker 3: That's going to be an open question. 201 00:10:23,040 --> 00:10:23,120 Speaker 8: Uh. 202 00:10:23,760 --> 00:10:27,040 Speaker 7: They've tried to put a very encouraging view out there 203 00:10:27,320 --> 00:10:31,000 Speaker 7: on their earning, on their management call earlier this morning, 204 00:10:31,240 --> 00:10:35,400 Speaker 7: talking about the strength of deposit franchise and you're not 205 00:10:35,440 --> 00:10:38,520 Speaker 7: seeing deposits flow out of the branches, and they have 206 00:10:38,720 --> 00:10:41,959 Speaker 7: a boost of liquidity. So they're they're what they need 207 00:10:42,040 --> 00:10:44,640 Speaker 7: is time and it remains to be seen if the 208 00:10:44,640 --> 00:10:46,800 Speaker 7: market's going to give them time to build up their capital. 209 00:10:47,640 --> 00:10:49,440 Speaker 3: I want some m and A. I want some business. 210 00:10:49,520 --> 00:10:51,120 Speaker 5: I want to come in here every Monday morning and 211 00:10:51,120 --> 00:10:53,160 Speaker 5: see company A, bank A buying bank B. 212 00:10:53,480 --> 00:10:55,240 Speaker 2: But that's what they did. And look what they're in now. 213 00:10:58,920 --> 00:11:00,640 Speaker 3: Careful what you wish? What are we going to see? 214 00:11:01,920 --> 00:11:07,680 Speaker 7: You know, this whole issue surrounding your community. Where they 215 00:11:08,160 --> 00:11:11,920 Speaker 7: came in, helped out the FDIC and the regulators and 216 00:11:12,000 --> 00:11:16,400 Speaker 7: really helped out the banking system by taking over signature, 217 00:11:16,760 --> 00:11:18,760 Speaker 7: and now they're in this pickle where they have to 218 00:11:18,800 --> 00:11:23,000 Speaker 7: adhere to these tougher regulations clearing that one hundred billion mark. 219 00:11:23,320 --> 00:11:25,280 Speaker 7: I don't think any other bank that's going to be 220 00:11:25,280 --> 00:11:28,720 Speaker 7: in this same situation wants to jump into that same scenario. 221 00:11:28,800 --> 00:11:30,720 Speaker 6: Can I answer a quse stupid question. Is there a 222 00:11:30,760 --> 00:11:33,640 Speaker 6: stock price that we need to be worried about? Is 223 00:11:33,679 --> 00:11:37,079 Speaker 6: it three seventy well zero, but three seventy nine right now? 224 00:11:37,160 --> 00:11:38,880 Speaker 6: Down another today? 225 00:11:40,200 --> 00:11:45,720 Speaker 7: I think if the market pressure continues, it's going to 226 00:11:45,840 --> 00:11:49,280 Speaker 7: be something where where the regulators take a more focus 227 00:11:49,440 --> 00:11:52,920 Speaker 7: view and maybe be more forceful with what's next. 228 00:11:53,040 --> 00:11:54,440 Speaker 2: But you have to wonder too. You know they were 229 00:11:54,480 --> 00:11:57,080 Speaker 2: able to do that with SVBN First Republic, right, but 230 00:11:57,200 --> 00:11:59,760 Speaker 2: now look at what happened with this bank which boughts 231 00:11:59,840 --> 00:12:01,840 Speaker 2: of first of public access because of that? So what 232 00:12:01,840 --> 00:12:04,120 Speaker 2: will regulators do to that? 233 00:12:04,280 --> 00:12:04,520 Speaker 3: Right? 234 00:12:04,600 --> 00:12:07,319 Speaker 2: Hey, Jamie, Jamie, sorry to ask, but I got another 235 00:12:07,440 --> 00:12:08,520 Speaker 2: favor you got to do me. 236 00:12:08,520 --> 00:12:10,240 Speaker 3: For here start a body down at St. 237 00:12:10,280 --> 00:12:12,559 Speaker 5: Barts, but can you go over and buy you in 238 00:12:12,559 --> 00:12:14,640 Speaker 5: your community bank? Hermit Chap, Thank you so much. We 239 00:12:14,720 --> 00:12:17,520 Speaker 5: appreciate that, Hermit cham He's a senior analys He covers 240 00:12:17,520 --> 00:12:20,240 Speaker 5: the regional banks in the US Force. It's been a 241 00:12:20,280 --> 00:12:22,920 Speaker 5: go to source here really over the last you know, 242 00:12:23,400 --> 00:12:25,000 Speaker 5: twelve to eighteen months as we kind of figure out 243 00:12:25,000 --> 00:12:26,960 Speaker 5: what's happening with the regional bank business. 244 00:12:28,440 --> 00:12:32,319 Speaker 1: You're listening to the Bloomberg Intelligence podcast Catch Us live 245 00:12:32,400 --> 00:12:35,120 Speaker 1: weekdays at ten am Eastern on Apple car Playing and 246 00:12:35,240 --> 00:12:38,120 Speaker 1: broud Otto with the Bloomberg Business app. Listen on demand 247 00:12:38,160 --> 00:12:42,480 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 248 00:12:44,000 --> 00:12:45,440 Speaker 5: All right, let's get a sense of what we're doing 249 00:12:45,440 --> 00:12:47,760 Speaker 5: here with this market's We're about halfway through the earnings 250 00:12:47,800 --> 00:12:51,120 Speaker 5: for the quarter. We've got to fed that presumably is 251 00:12:51,160 --> 00:12:53,000 Speaker 5: in the mood of rate cutting. 252 00:12:53,280 --> 00:12:54,080 Speaker 3: So what do we do here? 253 00:12:54,160 --> 00:12:56,960 Speaker 5: Couch Schlife joins and she's a chief investment officer at 254 00:12:56,960 --> 00:13:00,439 Speaker 5: Bimo Family Offices. I remember when they were Bank of Montreal, 255 00:13:00,480 --> 00:13:02,960 Speaker 5: but some I'm sure you know consultant came in and 256 00:13:02,960 --> 00:13:06,079 Speaker 5: said bemo and shorten it to BEMO. So Pang of 257 00:13:06,120 --> 00:13:08,120 Speaker 5: Montreal bought a lot of my loans that I originated 258 00:13:08,120 --> 00:13:10,640 Speaker 5: at Chase, So we love those folks. Carol, what are 259 00:13:10,679 --> 00:13:12,760 Speaker 5: we doing with this market here? I had a great 260 00:13:12,960 --> 00:13:15,079 Speaker 5: November December. I'm not sure if everybody else did, but 261 00:13:15,120 --> 00:13:17,640 Speaker 5: I had a great period there. I'm wondering what do 262 00:13:17,679 --> 00:13:18,880 Speaker 5: I do now in twenty twenty four. 263 00:13:19,880 --> 00:13:24,679 Speaker 9: Yeah, November and December were definitely fun periods, especially coming 264 00:13:25,000 --> 00:13:29,360 Speaker 9: after October. But we think the market's got a little 265 00:13:29,400 --> 00:13:32,240 Speaker 9: over their skis with exuberance about how soon and how 266 00:13:32,280 --> 00:13:35,319 Speaker 9: often the FED was going to cut this year, and 267 00:13:35,400 --> 00:13:39,040 Speaker 9: so the some rationalization of that coming into this year 268 00:13:39,080 --> 00:13:40,640 Speaker 9: is actually makes a lot of sense. 269 00:13:40,760 --> 00:13:43,320 Speaker 10: But our approach really hasn't changed much. 270 00:13:43,360 --> 00:13:45,760 Speaker 9: We actually were in the soft landing camp all of 271 00:13:45,880 --> 00:13:48,040 Speaker 9: last year, from the beginning of the year on, thinking 272 00:13:48,040 --> 00:13:50,840 Speaker 9: the FED was going to be able to navigate both 273 00:13:50,960 --> 00:13:55,040 Speaker 9: keeping the employment and the economy humming along while we 274 00:13:55,040 --> 00:13:59,800 Speaker 9: were seeing inflation straighten itself out. But coming into this 275 00:14:00,080 --> 00:14:03,040 Speaker 9: you're keeping that balanced approach to risk where you're getting 276 00:14:03,040 --> 00:14:05,880 Speaker 9: paid to invest in some bonds, so having that portion 277 00:14:05,960 --> 00:14:08,880 Speaker 9: of your portfolio maybe out of cash into some of 278 00:14:08,880 --> 00:14:12,400 Speaker 9: those higher yielding, shortened intermediate term bonds, but then also 279 00:14:12,720 --> 00:14:16,400 Speaker 9: not wanting to back away from a growth oriented sort 280 00:14:16,440 --> 00:14:19,240 Speaker 9: of We think the economy is in decent shape. We 281 00:14:19,280 --> 00:14:25,600 Speaker 9: think you'll see a broadening like you saw in November 282 00:14:25,680 --> 00:14:29,280 Speaker 9: December last year. The most encouraging thing about that period 283 00:14:29,360 --> 00:14:31,960 Speaker 9: was seeing that broadening of the market, the participation. 284 00:14:32,520 --> 00:14:33,520 Speaker 10: You narrowed it up. 285 00:14:33,480 --> 00:14:36,240 Speaker 9: On the good days here as we've had earnings from 286 00:14:36,280 --> 00:14:39,280 Speaker 9: the Magnificent seven or five or two as you were 287 00:14:39,320 --> 00:14:43,840 Speaker 9: talking earlier, but bringing that through and continuing to see 288 00:14:43,880 --> 00:14:47,080 Speaker 9: more participation in mid and small cap will really be necessary. 289 00:14:47,160 --> 00:14:49,680 Speaker 2: And we think too, Carol, But I guess I wonder 290 00:14:49,800 --> 00:14:51,680 Speaker 2: when we get there, because it doesn't seem like a 291 00:14:51,720 --> 00:14:55,640 Speaker 2: really no one's going to sell right now? That feels clear, right, 292 00:14:55,680 --> 00:14:58,600 Speaker 2: The hurdle to cell feels really high. But if I 293 00:14:58,600 --> 00:15:01,440 Speaker 2: have money in a money market fund, the hurdle to 294 00:15:01,520 --> 00:15:04,360 Speaker 2: then buy here feels also really high. So what am 295 00:15:04,360 --> 00:15:05,120 Speaker 2: I supposed to do? 296 00:15:06,080 --> 00:15:07,080 Speaker 10: Yeah, it does. 297 00:15:07,200 --> 00:15:09,800 Speaker 9: It feels high until we're looking back and the Fed's 298 00:15:09,840 --> 00:15:11,560 Speaker 9: done a couple cuts and all of a sudden, you're 299 00:15:11,600 --> 00:15:14,240 Speaker 9: five percent in cash is three three and a half percent. 300 00:15:14,440 --> 00:15:16,000 Speaker 2: So I need to buy small cabs now. 301 00:15:17,440 --> 00:15:20,600 Speaker 9: Is smaller mid cap in terms of more broadly, and 302 00:15:20,640 --> 00:15:22,960 Speaker 9: there's ways to do it in a passive way. There's 303 00:15:23,000 --> 00:15:26,160 Speaker 9: ways to look through. You know, are there interesting sectors 304 00:15:26,200 --> 00:15:29,800 Speaker 9: or industries or actively managed ETFs that you want to 305 00:15:29,800 --> 00:15:33,640 Speaker 9: be part of. There's some secular stories going on out there, 306 00:15:33,800 --> 00:15:37,440 Speaker 9: as it relates to artificial intelligence, as it relates to 307 00:15:38,280 --> 00:15:39,680 Speaker 9: infrastructure rebuild. 308 00:15:40,040 --> 00:15:42,680 Speaker 10: There's some active ETFs. 309 00:15:41,840 --> 00:15:47,160 Speaker 9: That follow those those segments, if you will, And so 310 00:15:47,240 --> 00:15:49,920 Speaker 9: there's interesting ways to play it. And then again too, 311 00:15:50,000 --> 00:15:53,040 Speaker 9: even if you have passive s and P exposure and 312 00:15:53,080 --> 00:15:57,640 Speaker 9: dollar cost average into that you're getting participation de facto 313 00:15:57,840 --> 00:16:02,760 Speaker 9: by the overweight in those major indexes to technology in 314 00:16:02,760 --> 00:16:04,840 Speaker 9: the United States here in particular. 315 00:16:04,880 --> 00:16:07,920 Speaker 5: So cal when when you talk to your your clients 316 00:16:07,920 --> 00:16:11,880 Speaker 5: at BIMO Family Office, the the you know, the financial 317 00:16:11,920 --> 00:16:16,480 Speaker 5: consultants at BIMO, what's the ETF allocation. 318 00:16:16,040 --> 00:16:16,400 Speaker 3: For you guys? 319 00:16:16,440 --> 00:16:18,920 Speaker 5: How often do you say do you recommend an ETF 320 00:16:18,960 --> 00:16:21,800 Speaker 5: to get at you know, maybe just exposure to fixed 321 00:16:21,840 --> 00:16:23,960 Speaker 5: income or just different asset classes. 322 00:16:24,000 --> 00:16:25,880 Speaker 3: So how important are ETFs? 323 00:16:26,880 --> 00:16:30,920 Speaker 9: Well, ETFs play a role, so do active and passive. 324 00:16:30,960 --> 00:16:36,800 Speaker 9: We also have passively managed tax or passively managed tax 325 00:16:36,840 --> 00:16:41,040 Speaker 9: efficient strategies where we can do separate accounts. So there's 326 00:16:41,080 --> 00:16:43,120 Speaker 9: a variety. It depends on the size of the account. 327 00:16:43,120 --> 00:16:46,120 Speaker 9: It depends on the inclinations. If we're going to take 328 00:16:46,360 --> 00:16:50,560 Speaker 9: and say, adopt an exposure to artificial intelligence, an extra 329 00:16:50,640 --> 00:16:54,560 Speaker 9: exposure to Japan or artificial intelligence, we might take a 330 00:16:54,640 --> 00:16:59,040 Speaker 9: three to five percent position in a particular ETF or 331 00:16:59,040 --> 00:17:03,360 Speaker 9: a suite of ETF. If the account is the such 332 00:17:03,400 --> 00:17:05,800 Speaker 9: a size that we want to use ETFs to deploy 333 00:17:05,840 --> 00:17:09,560 Speaker 9: some short, intermediate, long term bonds, the whole position might 334 00:17:09,600 --> 00:17:12,120 Speaker 9: be in a variety of ETFs, and they would most 335 00:17:12,160 --> 00:17:13,359 Speaker 9: likely be passive. 336 00:17:13,000 --> 00:17:16,040 Speaker 2: There what do you really hate right now? Like what 337 00:17:16,080 --> 00:17:17,000 Speaker 2: can you not touch? 338 00:17:18,200 --> 00:17:19,240 Speaker 10: What could we not touch? 339 00:17:19,520 --> 00:17:23,120 Speaker 9: Yeah, I'm not sure depending on the client, that there's 340 00:17:23,400 --> 00:17:26,800 Speaker 9: anything we really hate, if you will, that's part of 341 00:17:26,840 --> 00:17:30,520 Speaker 9: being balanced. We're going to be underweight some certain things. 342 00:17:30,560 --> 00:17:37,160 Speaker 9: Emerging markets, develop markets in Europe where underweight those relative 343 00:17:37,200 --> 00:17:39,240 Speaker 9: to relative to. 344 00:17:39,480 --> 00:17:41,919 Speaker 10: The overweight we've had in the United States. 345 00:17:42,280 --> 00:17:46,760 Speaker 9: Sector Wise, it's tough because there's a lot of interesting 346 00:17:46,840 --> 00:17:50,399 Speaker 9: things going on, especially from a secular build standpoint in 347 00:17:50,440 --> 00:17:53,439 Speaker 9: the United States, and there's a lot of things that 348 00:17:53,480 --> 00:17:58,480 Speaker 9: are overlooked and unloved. We don't hate technology, but clearly 349 00:17:58,560 --> 00:18:01,000 Speaker 9: that's where all the emphasis has been. But there's a 350 00:18:01,000 --> 00:18:04,760 Speaker 9: lot of things like industrial and infrastructure companies where when 351 00:18:04,800 --> 00:18:07,000 Speaker 9: you look at those as sectors, they're only ten or 352 00:18:07,040 --> 00:18:09,440 Speaker 9: twelve percent of the S and P. And we think 353 00:18:09,480 --> 00:18:13,720 Speaker 9: you'll see that grow as we reindustrialize and bring manufacturing 354 00:18:13,760 --> 00:18:16,080 Speaker 9: back here, as we build out the grid. You mentioned 355 00:18:16,480 --> 00:18:20,080 Speaker 9: having the green and the hook, you need to get 356 00:18:20,119 --> 00:18:24,119 Speaker 9: it on the grid. Also in places where take Minnesota, 357 00:18:24,160 --> 00:18:27,679 Speaker 9: where you've got the western part of the state is 358 00:18:27,720 --> 00:18:30,800 Speaker 9: where the solar can be built, but it's not attached 359 00:18:30,840 --> 00:18:32,879 Speaker 9: to the grid, so they actually have to build hundreds 360 00:18:32,920 --> 00:18:35,439 Speaker 9: of miles of transmission power just to get it to 361 00:18:35,480 --> 00:18:35,919 Speaker 9: the grid. 362 00:18:36,119 --> 00:18:37,760 Speaker 2: To be fair, there is like a name for that thing, 363 00:18:38,000 --> 00:18:40,240 Speaker 2: that thing, but I just know the thing that you 364 00:18:40,280 --> 00:18:41,359 Speaker 2: need to plug into the grid. 365 00:18:41,560 --> 00:18:43,680 Speaker 3: But there is a need a plugging things. 366 00:18:43,720 --> 00:18:46,280 Speaker 2: It's the pluggy thing. We'll just coin that right here. 367 00:18:46,480 --> 00:18:49,359 Speaker 5: So, Carol, we're about halfway through earnings. Here is anything 368 00:18:49,440 --> 00:18:50,720 Speaker 5: kind of jumping out at you? 369 00:18:50,760 --> 00:18:50,920 Speaker 11: Here? 370 00:18:50,960 --> 00:18:51,159 Speaker 2: Are you? 371 00:18:51,240 --> 00:18:53,119 Speaker 3: Are you okay with the earnings? Do you think we're. 372 00:18:53,000 --> 00:18:56,000 Speaker 5: Seeing some cracks maybe in earnings power out there? 373 00:18:56,720 --> 00:18:58,399 Speaker 9: I think the thing that jumps out at me on 374 00:18:58,480 --> 00:19:01,679 Speaker 9: earnings is that you can't and you can't broad brushstroke 375 00:19:01,760 --> 00:19:04,199 Speaker 9: even in an entire sector. There's been a lot of 376 00:19:04,240 --> 00:19:07,119 Speaker 9: dispersion in those sectors about the haves and the have nots. 377 00:19:07,160 --> 00:19:10,680 Speaker 9: There's also been a lot of dispersion in how investors 378 00:19:10,720 --> 00:19:13,359 Speaker 9: are treating them because a company might beat on the 379 00:19:13,359 --> 00:19:15,879 Speaker 9: top and the bottom line, and they nail the stock 380 00:19:15,960 --> 00:19:18,879 Speaker 9: because they don't like what the CFOs said and the 381 00:19:18,920 --> 00:19:23,920 Speaker 9: conference call, and so it's really it feels and smells 382 00:19:23,960 --> 00:19:28,440 Speaker 9: like we're back into a stock pickers market. We're actively managed, 383 00:19:28,520 --> 00:19:31,840 Speaker 9: should have an advantage if they've got deep and broad research, 384 00:19:31,880 --> 00:19:33,879 Speaker 9: and so that's one of the things that strikes me, 385 00:19:34,000 --> 00:19:36,320 Speaker 9: because overall earnings are pretty reasonable. 386 00:19:36,720 --> 00:19:38,760 Speaker 10: They're not as exuberant. 387 00:19:38,640 --> 00:19:40,760 Speaker 9: On the beats on the top and bottom line as 388 00:19:40,800 --> 00:19:43,280 Speaker 9: they have been in prior quarters, but they're reasonable and 389 00:19:43,320 --> 00:19:47,920 Speaker 9: they're consistent with this economy. The other thing that's really 390 00:19:47,960 --> 00:19:51,560 Speaker 9: notable is companies are seeing from the reaction and other 391 00:19:51,600 --> 00:19:54,280 Speaker 9: stock prices that if they announce, oh, we're triming heads 392 00:19:54,280 --> 00:19:56,320 Speaker 9: over here and we're cutting costs over here, the stock 393 00:19:56,359 --> 00:19:59,000 Speaker 9: prices go up sort of no matter what the numbers are, 394 00:19:59,040 --> 00:20:04,160 Speaker 9: because it looks like management teams are staying really focused 395 00:20:04,160 --> 00:20:06,920 Speaker 9: to be laser precise in how they're running their business. 396 00:20:07,240 --> 00:20:09,360 Speaker 10: In the street likes that it does. 397 00:20:09,560 --> 00:20:12,680 Speaker 3: Absolutely. We saw that with Meta last year. Just amazing. 398 00:20:12,960 --> 00:20:16,520 Speaker 5: Cowrischlife, Chief Investment Officer for BEMO Family Office, Thanks so 399 00:20:16,600 --> 00:20:19,280 Speaker 5: much for joining us. Based after in Minneapolis, Saint Paul, 400 00:20:19,600 --> 00:20:22,400 Speaker 5: I'm happening to be a Saint Paul fan versus Minneapolis. 401 00:20:22,400 --> 00:20:25,040 Speaker 5: That's just my I thought that architecture in Saint Paul's 402 00:20:25,119 --> 00:20:25,600 Speaker 5: really cool. 403 00:20:25,680 --> 00:20:26,560 Speaker 2: I've never been the same place. 404 00:20:26,880 --> 00:20:29,119 Speaker 6: The airport that has a plane hanging from the ceiling. 405 00:20:29,400 --> 00:20:31,760 Speaker 3: I think so. I don't know, it's just I've been 406 00:20:31,840 --> 00:20:33,399 Speaker 3: so many airports in the Midwest that I. 407 00:20:33,720 --> 00:20:34,879 Speaker 2: Can't help your eyes with out with this one. 408 00:20:34,920 --> 00:20:36,520 Speaker 3: Ye got an great hotel. I forget the name of 409 00:20:36,560 --> 00:20:38,240 Speaker 3: the hotel that I like to stay in Saint Paul. 410 00:20:38,280 --> 00:20:40,159 Speaker 3: It's just awesome, really old school. 411 00:20:41,720 --> 00:20:45,600 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 412 00:20:45,680 --> 00:20:48,720 Speaker 1: weekdays at ten am Eastern on Apple card Play and 413 00:20:48,720 --> 00:20:52,000 Speaker 1: Android Otto with the Bloomberg Business. You can also listen 414 00:20:52,119 --> 00:20:55,200 Speaker 1: live on Amazon Alexa from our flagship New York station 415 00:20:55,600 --> 00:21:00,119 Speaker 1: Just Say Alexa playing Bloomberg eleven thirty. 416 00:21:00,119 --> 00:21:03,320 Speaker 2: Disney reporting after the closing bell today. Of course, yesterday 417 00:21:03,320 --> 00:21:06,919 Speaker 2: we got the news the ESPN, Fox and Warner Brothers 418 00:21:06,920 --> 00:21:09,680 Speaker 2: were going to do a streaming sports service. I don't 419 00:21:09,880 --> 00:21:13,119 Speaker 2: truly understand what that means, but luckily KEITHA. Mrgnahan is 420 00:21:13,119 --> 00:21:16,720 Speaker 2: here with us, Bloomberg Intelligence analyst on US Media. Gith, 421 00:21:17,280 --> 00:21:18,919 Speaker 2: is everyone going to ignore the quarter now and just 422 00:21:18,960 --> 00:21:21,680 Speaker 2: focus on this ESPN thing? Yeah? 423 00:21:21,720 --> 00:21:25,320 Speaker 8: Definitely, big, big news, Alex. Absolutely, I think there are 424 00:21:25,320 --> 00:21:28,000 Speaker 8: a lot of you know, obviously, it raised more questions 425 00:21:28,440 --> 00:21:32,080 Speaker 8: than answers, but potentially it could be a huge game changer. 426 00:21:32,119 --> 00:21:34,080 Speaker 8: I mean, especially if it kind of comes out at 427 00:21:34,119 --> 00:21:35,639 Speaker 8: a really really attractive price point. 428 00:21:36,359 --> 00:21:39,880 Speaker 3: So Githa, why, Well, I guess why are they doing 429 00:21:39,920 --> 00:21:40,280 Speaker 3: it now? 430 00:21:40,400 --> 00:21:40,760 Speaker 1: Do you think? 431 00:21:40,800 --> 00:21:43,159 Speaker 5: I mean, what's kind of the strategy there? Are they 432 00:21:43,160 --> 00:21:45,320 Speaker 5: trying to get people who just don't watch sports or 433 00:21:45,320 --> 00:21:46,919 Speaker 5: don't have subscribed a cable. 434 00:21:47,000 --> 00:21:47,760 Speaker 3: What's the play here? 435 00:21:48,880 --> 00:21:49,080 Speaker 11: Yeah? 436 00:21:49,119 --> 00:21:51,399 Speaker 8: I think you know, definitely, we know that we've lost 437 00:21:51,440 --> 00:21:55,399 Speaker 8: about thirty million consumers to court cutting. It used to 438 00:21:55,400 --> 00:21:57,600 Speaker 8: be one hundred million, we're now down to seventy million. 439 00:21:57,720 --> 00:22:01,480 Speaker 8: We also have multiple, multiple four who have actually never 440 00:22:01,560 --> 00:22:04,080 Speaker 8: subscribed to a PATV bundle, and a lot of them 441 00:22:04,119 --> 00:22:08,439 Speaker 8: actually tend to be very hardcore sports enthusiasts. So you 442 00:22:08,440 --> 00:22:10,479 Speaker 8: know that the companies are actually pinning that market at 443 00:22:10,480 --> 00:22:14,320 Speaker 8: about sixty million subscribers potential subscribers, So there's obviously a 444 00:22:14,400 --> 00:22:17,199 Speaker 8: huge target market for them. And I think this is 445 00:22:17,240 --> 00:22:19,919 Speaker 8: really a wave Paul for these companies to kind of 446 00:22:20,000 --> 00:22:23,040 Speaker 8: finally take control of their own destinies in a way. Right, 447 00:22:23,080 --> 00:22:26,119 Speaker 8: they own content production, but they have never you know, 448 00:22:26,280 --> 00:22:29,159 Speaker 8: owned distribution. You know, they've always kind of been at 449 00:22:29,160 --> 00:22:31,080 Speaker 8: the mercy of the PATV distributor, and so this is 450 00:22:31,359 --> 00:22:34,080 Speaker 8: a way for them kind of I think, whatever you 451 00:22:34,080 --> 00:22:35,600 Speaker 8: want to call it, but in a way kind of 452 00:22:35,640 --> 00:22:37,920 Speaker 8: future proofing their their revenue streams. 453 00:22:38,040 --> 00:22:41,280 Speaker 2: So when you say an attractive price, what is that price? 454 00:22:42,080 --> 00:22:46,280 Speaker 8: So there, you know, there have been some rumors out there, 455 00:22:46,359 --> 00:22:48,480 Speaker 8: so we know an attractive price has to be something 456 00:22:48,520 --> 00:22:52,320 Speaker 8: way below the seventy dollars PATV package, right, that's what 457 00:22:53,080 --> 00:22:55,760 Speaker 8: we're paying right now. If you just want to buy 458 00:22:55,800 --> 00:22:58,080 Speaker 8: this package off of Comcast or Charter or any of 459 00:22:58,080 --> 00:23:01,159 Speaker 8: the PATV operators out there, it's obviously not going to 460 00:23:01,160 --> 00:23:04,400 Speaker 8: be as low as say, you know, a regular streaming 461 00:23:04,440 --> 00:23:06,840 Speaker 8: service right like Netflix for twenty dollars. It's obviously going 462 00:23:06,880 --> 00:23:08,680 Speaker 8: to have to be higher than that. We have seen 463 00:23:08,680 --> 00:23:12,159 Speaker 8: some reports trickle in about a potential forty to fifty 464 00:23:12,280 --> 00:23:15,119 Speaker 8: dollars price point. I would say that that is still 465 00:23:15,160 --> 00:23:18,719 Speaker 8: pretty attractive for a hardcore sports fan. Of course, some 466 00:23:18,760 --> 00:23:21,040 Speaker 8: others will argue that you're still not going to get 467 00:23:21,119 --> 00:23:24,600 Speaker 8: all of the sports, right, You're not having paramount, you're 468 00:23:24,640 --> 00:23:27,320 Speaker 8: not having you know, NBC content, So it's still going 469 00:23:27,320 --> 00:23:30,040 Speaker 8: to be somewhat of an incomplete package. So it remains 470 00:23:30,040 --> 00:23:32,080 Speaker 8: to be seen, you know, you know, the devil obviously 471 00:23:32,119 --> 00:23:33,720 Speaker 8: is in the details. We'll have to wait and watch 472 00:23:33,720 --> 00:23:35,520 Speaker 8: and see if you know they're going to be able 473 00:23:35,560 --> 00:23:38,280 Speaker 8: to license out any of the other sports, or how 474 00:23:38,320 --> 00:23:41,760 Speaker 8: it exactly works. But I would say, you know, for first, 475 00:23:42,240 --> 00:23:45,200 Speaker 8: at first glance, the forty dollars price point seems pretty attractive. 476 00:23:45,560 --> 00:23:47,600 Speaker 5: Well, I got to pay for that somehow, and I 477 00:23:47,600 --> 00:23:48,920 Speaker 5: think the way I'm going to pay for it either 478 00:23:48,960 --> 00:23:51,280 Speaker 5: is I'm going to call up podcasts and cancel my 479 00:23:51,480 --> 00:23:55,199 Speaker 5: video package and just keep broadband. The cable companies can 480 00:23:55,280 --> 00:23:56,040 Speaker 5: be very happy. 481 00:23:55,840 --> 00:23:57,720 Speaker 3: About this, no way. 482 00:23:57,840 --> 00:23:59,800 Speaker 8: I mean, this is really I think in and if 483 00:23:59,840 --> 00:24:01,840 Speaker 8: you just kind of look at the market reaction today, 484 00:24:01,840 --> 00:24:03,280 Speaker 8: you look at the broadcasters, you look at some of 485 00:24:03,359 --> 00:24:06,320 Speaker 8: these other media companies, obviously a very negative reaction, and 486 00:24:06,359 --> 00:24:08,120 Speaker 8: I think a lot of that is kind of exactly 487 00:24:08,240 --> 00:24:10,640 Speaker 8: this point that you're bringing up, Paul, which is this 488 00:24:10,800 --> 00:24:14,520 Speaker 8: worry that this is actually going to accelerate cord cutting. 489 00:24:14,520 --> 00:24:16,639 Speaker 8: So we already know that cord cutting is running at 490 00:24:16,640 --> 00:24:18,280 Speaker 8: about I mean it used to be back in the day, 491 00:24:18,320 --> 00:24:20,439 Speaker 8: it used to be two percent, three percent, just to 492 00:24:20,520 --> 00:24:23,639 Speaker 8: kind of this little trickle, so nobody was really overly 493 00:24:23,680 --> 00:24:26,159 Speaker 8: concerned about it. Of course, now that has accelerated to 494 00:24:26,200 --> 00:24:28,480 Speaker 8: about eight and a half percent right now, and I 495 00:24:28,480 --> 00:24:31,080 Speaker 8: think this news obviously can take it well into the 496 00:24:31,080 --> 00:24:35,520 Speaker 8: double digits, and that's really a dismally bleak future for 497 00:24:35,600 --> 00:24:36,679 Speaker 8: all of these broadcasters. 498 00:24:36,760 --> 00:24:38,840 Speaker 2: Do you think that the broad the broadcasters are surprised 499 00:24:38,840 --> 00:24:40,440 Speaker 2: by this? I mean, I had to have seen something 500 00:24:40,480 --> 00:24:43,080 Speaker 2: like this coming, right, like what's their plan ABCD? 501 00:24:44,240 --> 00:24:45,760 Speaker 8: Yeah, I mean I think we kind of knew that 502 00:24:46,000 --> 00:24:47,719 Speaker 8: ESPN was going to do it, but just kind of 503 00:24:47,800 --> 00:24:51,679 Speaker 8: getting this more robust bundle, you know, having you know, 504 00:24:51,720 --> 00:24:53,840 Speaker 8: both fought like if you kind of think about it. 505 00:24:53,920 --> 00:24:56,280 Speaker 8: Fox has never ever said in fact, they've been always 506 00:24:56,320 --> 00:24:58,680 Speaker 8: kind of married to the PATV bundle. So having them 507 00:24:58,760 --> 00:25:00,600 Speaker 8: kind of do something like this of these a little 508 00:25:00,600 --> 00:25:03,720 Speaker 8: bit of a shock, I would say, in some ways, 509 00:25:03,840 --> 00:25:06,720 Speaker 8: similarly Warner Brothers Discovery. Again, they don't have too much 510 00:25:06,720 --> 00:25:08,760 Speaker 8: of sports, but they do have some sports that really count, 511 00:25:08,920 --> 00:25:11,679 Speaker 8: which is the NBA and March Madness, and so you know, 512 00:25:11,720 --> 00:25:14,080 Speaker 8: again having them kind of participate and make this kind 513 00:25:14,119 --> 00:25:17,080 Speaker 8: of this bigger streaming service, I think definitely came as 514 00:25:17,119 --> 00:25:20,080 Speaker 8: a little bit of a surprise, if not as kind 515 00:25:20,080 --> 00:25:22,560 Speaker 8: of blind siding some of these broadcasters. 516 00:25:22,720 --> 00:25:25,159 Speaker 5: All Right, So I'm guessing on the conference call this 517 00:25:25,240 --> 00:25:28,320 Speaker 5: afternoon after the market close, when Disney reports earnings, this 518 00:25:28,320 --> 00:25:30,840 Speaker 5: will be a topic of conversation. But there's a long 519 00:25:30,880 --> 00:25:36,280 Speaker 5: list of issues for Disney and investors. What's topic number 520 00:25:36,280 --> 00:25:38,520 Speaker 5: one for you aside from what's going on here with 521 00:25:38,520 --> 00:25:39,520 Speaker 5: the sports business? 522 00:25:40,320 --> 00:25:42,239 Speaker 8: And I think the two things that everybody is kind 523 00:25:42,240 --> 00:25:44,679 Speaker 8: of really looking to is, you know what the streaming 524 00:25:44,680 --> 00:25:47,479 Speaker 8: profitability numbers are going to look like. I mean, Disney 525 00:25:47,480 --> 00:25:50,120 Speaker 8: has obviously already done a really really good job, Paul, 526 00:25:50,160 --> 00:25:53,280 Speaker 8: in terms of bearing those streaming losses. So just two 527 00:25:53,359 --> 00:25:56,000 Speaker 8: years ago they were losing about four billion dollars a year. 528 00:25:56,440 --> 00:25:58,760 Speaker 8: Last year they kind of really cut that down to 529 00:25:58,800 --> 00:26:01,520 Speaker 8: about two and a half billion. This year, hopefully they 530 00:26:01,520 --> 00:26:04,639 Speaker 8: get it down even lower. They're supposed to turn break 531 00:26:04,680 --> 00:26:07,200 Speaker 8: even to slightly positive by the end of the fourth quarter. 532 00:26:07,280 --> 00:26:09,560 Speaker 8: But any any kind of guidance that they can offer 533 00:26:09,600 --> 00:26:11,840 Speaker 8: on that front, I think is something that investors are 534 00:26:11,880 --> 00:26:13,719 Speaker 8: going to be looking very very closely at. And then 535 00:26:13,760 --> 00:26:15,879 Speaker 8: I think in general, just the cost cutting efforts, right, 536 00:26:15,920 --> 00:26:18,680 Speaker 8: We've seen Disney already do a fantastic job. I think 537 00:26:18,720 --> 00:26:20,960 Speaker 8: in many ways, even the sports streaming service kind of 538 00:26:20,960 --> 00:26:24,560 Speaker 8: speaks to that whole concept of, you know, rationalization of 539 00:26:24,600 --> 00:26:26,760 Speaker 8: sports costs because when they kind of bid in the 540 00:26:26,800 --> 00:26:29,359 Speaker 8: future for you know, for sports rights, you know, the 541 00:26:29,440 --> 00:26:31,880 Speaker 8: joint venture kind of really helps them limit the downside, 542 00:26:31,920 --> 00:26:34,160 Speaker 8: I think in many ways, because sports makes up forty 543 00:26:34,200 --> 00:26:37,359 Speaker 8: percent of Disney's total content bill, so it's a huge, huge, 544 00:26:37,440 --> 00:26:41,640 Speaker 8: huge part for them. So I think anything on those 545 00:26:41,640 --> 00:26:44,680 Speaker 8: two fronts, cost cutting and streaming profitability will be top 546 00:26:44,680 --> 00:26:45,080 Speaker 8: of mine. 547 00:26:45,119 --> 00:26:47,040 Speaker 2: So let's go to the streaming profitability for a second. 548 00:26:47,320 --> 00:26:50,359 Speaker 2: What is less bad versus good? 549 00:26:52,800 --> 00:26:55,920 Speaker 8: So right now, less bad is good, you know, because 550 00:26:55,960 --> 00:26:59,320 Speaker 8: nobody is making profits right now other than of course, Netflix, 551 00:26:59,320 --> 00:27:01,840 Speaker 8: which just through out about seven billion dollars of EBITDA 552 00:27:02,680 --> 00:27:05,880 Speaker 8: seven billion dollars of cash flow. None of these other 553 00:27:05,920 --> 00:27:09,040 Speaker 8: big media companies are doing it, and so that is 554 00:27:09,160 --> 00:27:11,840 Speaker 8: kind of, you know, the guiding light, if you will. 555 00:27:11,880 --> 00:27:14,160 Speaker 8: I mean, everybody wants to be Netflix. Of course, it's 556 00:27:14,200 --> 00:27:16,840 Speaker 8: not easy to get there. There's going to be a 557 00:27:16,840 --> 00:27:19,960 Speaker 8: lot of challenges down the road. But I think that 558 00:27:20,160 --> 00:27:22,640 Speaker 8: you know, we do have one streamer that has kind 559 00:27:22,640 --> 00:27:26,240 Speaker 8: of achieved profitability. We do have Netflix at twenty percent 560 00:27:26,359 --> 00:27:28,600 Speaker 8: operating margins. It's going to take a long time for 561 00:27:28,640 --> 00:27:30,800 Speaker 8: Disney for a lot of these other piers to kind 562 00:27:30,840 --> 00:27:33,400 Speaker 8: of get anywhere close to Netflix. But I think they 563 00:27:33,480 --> 00:27:35,080 Speaker 8: know what they have to achieve if they've got to 564 00:27:35,080 --> 00:27:35,879 Speaker 8: win over the street. 565 00:27:37,040 --> 00:27:40,160 Speaker 5: Does Bob I have a successor yet, because that's still 566 00:27:40,200 --> 00:27:40,960 Speaker 5: kind of an issue. 567 00:27:43,000 --> 00:27:46,680 Speaker 8: No, I mean, maybe they do. I'm not really sure. 568 00:27:46,760 --> 00:27:49,120 Speaker 8: I mean, you know, the one thing that I think 569 00:27:49,160 --> 00:27:51,240 Speaker 8: was kind of a little bit surprising is is their 570 00:27:51,400 --> 00:27:53,760 Speaker 8: hiring of an external CFO. So we've always kind of 571 00:27:53,800 --> 00:27:57,000 Speaker 8: seen Disney go internal for a lot of these key 572 00:27:57,080 --> 00:28:00,639 Speaker 8: management hires. It was interesting that they kind of, you know, 573 00:28:00,840 --> 00:28:03,919 Speaker 8: have mister Johnston there in the CFO post. I think 574 00:28:03,960 --> 00:28:07,000 Speaker 8: obviously he's going to do extremely well. But I think 575 00:28:07,000 --> 00:28:09,640 Speaker 8: that again raises the question of whether they will kind 576 00:28:09,640 --> 00:28:12,800 Speaker 8: of look externally for a candidate to lead Disney. 577 00:28:14,400 --> 00:28:18,560 Speaker 2: Is Disney stock a value trap? At this point, she 578 00:28:18,680 --> 00:28:20,680 Speaker 2: keeps laughing. I don't know what that means. 579 00:28:21,560 --> 00:28:24,359 Speaker 8: I wish I knew the answers. I mean, you know, 580 00:28:24,400 --> 00:28:26,720 Speaker 8: if you just kind of look at the profit profile 581 00:28:26,800 --> 00:28:29,280 Speaker 8: of this company, it's actually really really strong. I mean, 582 00:28:29,320 --> 00:28:32,440 Speaker 8: I'm kind of when I think about the EPs potential. 583 00:28:32,600 --> 00:28:34,879 Speaker 8: I mean it's it's you know, ten to fifteen percent 584 00:28:34,920 --> 00:28:37,399 Speaker 8: EPs growth over the next few years, especially if it 585 00:28:37,480 --> 00:28:41,360 Speaker 8: gets to streaming profitability pretty quickly. So in that situation, 586 00:28:41,400 --> 00:28:43,400 Speaker 8: I think, you know, the stock will definitely have to 587 00:28:43,480 --> 00:28:45,280 Speaker 8: re rate. So I mean, it all kind of now 588 00:28:45,320 --> 00:28:48,040 Speaker 8: boils down to what they're going to say on the 589 00:28:48,080 --> 00:28:50,400 Speaker 8: profitability numbers, what they're going to say on this new 590 00:28:50,400 --> 00:28:53,080 Speaker 8: streaming service, whether that is going to accelerate the whole 591 00:28:53,080 --> 00:28:55,920 Speaker 8: profit profile. So you know, the devil again is going 592 00:28:55,960 --> 00:28:57,200 Speaker 8: to be in those details. 593 00:28:57,480 --> 00:28:58,920 Speaker 5: All right, Githa, you're going to be busy the say, 594 00:28:59,240 --> 00:29:00,560 Speaker 5: I think a lot of people are and be listening 595 00:29:00,600 --> 00:29:02,440 Speaker 5: into this call to forgot how they're going to get 596 00:29:02,440 --> 00:29:03,560 Speaker 5: their sports going forward. 597 00:29:03,560 --> 00:29:05,240 Speaker 3: Who cares about the EPs? But what do I have 598 00:29:05,280 --> 00:29:05,640 Speaker 3: to buy? 599 00:29:05,880 --> 00:29:08,160 Speaker 5: I don't have to pay to get all my sports here, 600 00:29:08,240 --> 00:29:10,600 Speaker 5: So we'll be paying attention to that. Keith Ranganath, and 601 00:29:10,680 --> 00:29:14,120 Speaker 5: she covers all of the media stuff for Bloomberg Intelligence 602 00:29:14,120 --> 00:29:16,120 Speaker 5: based down in Princeton, New Jersey. 603 00:29:16,200 --> 00:29:17,800 Speaker 3: So all I know is I'm not. 604 00:29:17,720 --> 00:29:22,000 Speaker 5: Gonna pay an incremental forty bucks for stuff I already get. 605 00:29:22,040 --> 00:29:23,880 Speaker 3: So I mean, I'm just gonna cut. 606 00:29:23,840 --> 00:29:26,360 Speaker 2: Have you cut the cord. No, okay, I haven't and 607 00:29:26,440 --> 00:29:27,560 Speaker 2: you haven't because. 608 00:29:28,320 --> 00:29:31,160 Speaker 5: Mostly sports, mostly sports, So now if I can get 609 00:29:31,840 --> 00:29:33,880 Speaker 5: you know, but CBS, Now, CBS isn't part. 610 00:29:33,720 --> 00:29:34,360 Speaker 3: Of this package. 611 00:29:34,520 --> 00:29:36,120 Speaker 5: So that's a problem because they have a lot of 612 00:29:36,120 --> 00:29:38,560 Speaker 5: football that you like to watch. They have a lot 613 00:29:38,560 --> 00:29:41,480 Speaker 5: of NCAA basketball they like to watch. So it's really 614 00:29:41,480 --> 00:29:45,880 Speaker 5: getting difficult here, I think for the consumer before. I mean, 615 00:29:46,240 --> 00:29:47,959 Speaker 5: what I used to argue for people is, yeah, you're 616 00:29:48,000 --> 00:29:51,240 Speaker 5: upset about the cababile. Everybody's upset about their cabable. But man, 617 00:29:51,360 --> 00:29:55,400 Speaker 5: it's convenient. It's one check and you get everything. Now 618 00:29:55,440 --> 00:29:58,320 Speaker 5: you're writing six, seven, eight checks, and are you getting 619 00:29:58,480 --> 00:29:59,320 Speaker 5: a better product? 620 00:29:59,560 --> 00:29:59,920 Speaker 3: I don't know. 621 00:30:00,320 --> 00:30:01,720 Speaker 2: First of all, he's still writing checks. 622 00:30:01,760 --> 00:30:03,480 Speaker 3: Let's just just what that is. 623 00:30:04,720 --> 00:30:08,600 Speaker 2: Yeah, generational thing you were, But you were bringing up 624 00:30:08,640 --> 00:30:10,240 Speaker 2: the idea that we walk up and pay cash to 625 00:30:10,280 --> 00:30:12,200 Speaker 2: the He just gives it right to them. That we're 626 00:30:12,200 --> 00:30:15,520 Speaker 2: gonna have like a bundle for streaming too, But eventually 627 00:30:15,520 --> 00:30:17,720 Speaker 2: they'll have to bundle up to sort of sidestep exactly 628 00:30:17,800 --> 00:30:18,720 Speaker 2: what you're just talking about. 629 00:30:18,960 --> 00:30:19,160 Speaker 1: Yep. 630 00:30:19,280 --> 00:30:19,600 Speaker 3: It is. 631 00:30:19,680 --> 00:30:22,440 Speaker 5: It is the total disruption of the media marketplace and 632 00:30:22,480 --> 00:30:24,920 Speaker 5: who pays. I think the consumer does here so terms, 633 00:30:24,960 --> 00:30:26,720 Speaker 5: certainly in terms of convenience. 634 00:30:28,720 --> 00:30:32,640 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 635 00:30:32,720 --> 00:30:35,760 Speaker 1: weekdays at ten am Eastern on Apple card Play and 636 00:30:35,760 --> 00:30:38,680 Speaker 1: Android Auto with the Bloomberg Business App. You can also 637 00:30:38,760 --> 00:30:41,920 Speaker 1: listen live on Amazon Alexa from our flagship New York 638 00:30:42,000 --> 00:30:46,360 Speaker 1: station just Say Alexa playing Bloomberg eleven thirty. 639 00:30:46,960 --> 00:30:49,760 Speaker 2: Let's get the perspective though, on how do you invest 640 00:30:49,800 --> 00:30:52,479 Speaker 2: and where to put money? When we're near five thousand, 641 00:30:52,480 --> 00:30:54,440 Speaker 2: which really, lets be honest, means nothing with the S 642 00:30:54,520 --> 00:30:56,840 Speaker 2: and P. People like round numbers, but I don't feel 643 00:30:56,840 --> 00:30:59,520 Speaker 2: a lot of conviction heading into this fill Orlando is 644 00:30:59,600 --> 00:31:04,360 Speaker 2: cheap what he strategist with vetterated hermes and he joins us, Now, Phil, 645 00:31:04,560 --> 00:31:07,040 Speaker 2: do you buy this rally here? Do you sell it? 646 00:31:07,120 --> 00:31:08,600 Speaker 2: Do you sit tight? What do you do? 647 00:31:10,520 --> 00:31:12,640 Speaker 11: First of all, Alex, thank you very much for having 648 00:31:12,680 --> 00:31:16,280 Speaker 11: me back on the program. Your previous guests made an 649 00:31:16,280 --> 00:31:20,360 Speaker 11: interesting comment about buying dips and that dip at forty 650 00:31:20,400 --> 00:31:24,240 Speaker 11: one hundred in late October was a great buying opportunity 651 00:31:24,280 --> 00:31:27,440 Speaker 11: we like. I'm sure a lot of folks were all 652 00:31:27,480 --> 00:31:30,160 Speaker 11: in at that time, but the market has now rallied 653 00:31:30,600 --> 00:31:35,040 Speaker 11: by twenty two percent from the end of October up 654 00:31:35,080 --> 00:31:39,000 Speaker 11: here to you know, a week into February. The Magnificent 655 00:31:39,120 --> 00:31:42,760 Speaker 11: seven has really driven that rally. Last year, the mag 656 00:31:42,840 --> 00:31:45,640 Speaker 11: seven was up seventy six percent, the S and P 657 00:31:45,840 --> 00:31:48,240 Speaker 11: was up twenty four percent, the other four hundred and 658 00:31:48,320 --> 00:31:51,400 Speaker 11: ninety three names were up twelve percent. So there's a 659 00:31:51,520 --> 00:31:55,800 Speaker 11: valuation disparity that's been created here. And that's the point 660 00:31:55,800 --> 00:31:59,600 Speaker 11: I'd like to make. We think that a lot of 661 00:31:59,680 --> 00:32:02,840 Speaker 11: the the froth in the market should spread out, and 662 00:32:03,160 --> 00:32:07,680 Speaker 11: this rally should should diversify, should broaden out the areas 663 00:32:07,680 --> 00:32:09,960 Speaker 11: of the market that were left for dead last year. 664 00:32:10,800 --> 00:32:16,600 Speaker 11: Domestic large cap value, domestic small cap growth, International, those 665 00:32:16,600 --> 00:32:18,600 Speaker 11: are the areas that we think have some room to 666 00:32:18,680 --> 00:32:22,440 Speaker 11: run here. And we'd be very nervous with stocks up here, 667 00:32:22,560 --> 00:32:24,760 Speaker 11: you know, as you said knocking on the door. At 668 00:32:24,760 --> 00:32:28,600 Speaker 11: five thousand, we're only four percent away from our full 669 00:32:28,720 --> 00:32:31,600 Speaker 11: year target of fifty two hundred. So something's got to 670 00:32:31,640 --> 00:32:32,880 Speaker 11: give here, all right? 671 00:32:33,000 --> 00:32:34,680 Speaker 3: Is our earning's going to give here? 672 00:32:34,800 --> 00:32:38,760 Speaker 5: I mean, can we see an earnings growth driven market here? 673 00:32:39,080 --> 00:32:39,720 Speaker 3: What are you seeing? 674 00:32:41,480 --> 00:32:44,320 Speaker 11: I think that's a great point, Paul, that as we 675 00:32:44,360 --> 00:32:47,320 Speaker 11: look at the cumulative effect of what the Federal Reserve 676 00:32:47,400 --> 00:32:50,720 Speaker 11: has done in terms of tightening monetary policy over the 677 00:32:50,760 --> 00:32:54,080 Speaker 11: last you know, two years, right, they took interest rates 678 00:32:54,080 --> 00:32:56,960 Speaker 11: from zero to five and a half percent. They've shrunk 679 00:32:57,000 --> 00:32:59,640 Speaker 11: the balance sheet from nine trillion dollars down to seven 680 00:32:59,640 --> 00:33:03,240 Speaker 11: point seven trillion dollars. We think that the cumulative weight 681 00:33:03,320 --> 00:33:05,760 Speaker 11: of that tightening is going to start to have an 682 00:33:05,760 --> 00:33:09,120 Speaker 11: impact on the economy and corporate earnings. So we saw 683 00:33:09,200 --> 00:33:12,680 Speaker 11: that the fourth quarter was slower than the third. We 684 00:33:12,760 --> 00:33:15,440 Speaker 11: think that over the course of this year, the first 685 00:33:15,480 --> 00:33:18,320 Speaker 11: three quarters of this year, GDP growth is going to 686 00:33:18,320 --> 00:33:19,960 Speaker 11: be in that you know, one one and a half 687 00:33:20,040 --> 00:33:23,840 Speaker 11: percent neighborhood. Not a recession. We're in the soft landing camp. 688 00:33:24,080 --> 00:33:28,000 Speaker 11: But if GDP drops down from let's say five percent 689 00:33:28,040 --> 00:33:30,800 Speaker 11: in last year's third quarter to one percent at its 690 00:33:30,840 --> 00:33:34,480 Speaker 11: trough this year, should there be a commensurate decline in 691 00:33:34,560 --> 00:33:37,800 Speaker 11: corporate earnings. Earnings growth is going to slow, and we 692 00:33:37,880 --> 00:33:42,680 Speaker 11: think ultimately, given where valuation levels are, we could see 693 00:33:42,960 --> 00:33:46,160 Speaker 11: we could see some slowing in some stocks, particularly the 694 00:33:46,200 --> 00:33:49,600 Speaker 11: growth and technology names that have just had a phenomenal 695 00:33:49,680 --> 00:33:51,120 Speaker 11: run here over the last year or so. 696 00:33:52,520 --> 00:33:56,240 Speaker 2: Small cap trade, though worked for a second last year 697 00:33:56,280 --> 00:33:59,520 Speaker 2: and then it didn't. What gives you the confidence that 698 00:33:59,720 --> 00:34:01,520 Speaker 2: this time will be different. 699 00:34:02,880 --> 00:34:06,320 Speaker 11: The foremost dangerous words the English language for an investor. 700 00:34:06,440 --> 00:34:10,560 Speaker 11: This time it's different. What we're focused on within the 701 00:34:11,280 --> 00:34:16,640 Speaker 11: small cap row space domestically is healthcare with a real 702 00:34:16,719 --> 00:34:23,160 Speaker 11: focus on biotechnology. As we talk to our biotech experts here. 703 00:34:23,840 --> 00:34:27,839 Speaker 11: The pipeline, the drug pipeline for these companies has never 704 00:34:27,880 --> 00:34:32,040 Speaker 11: been stronger. The valuations have never been cheaper, and if 705 00:34:32,080 --> 00:34:34,279 Speaker 11: interest rates are in fact going to go down over 706 00:34:34,320 --> 00:34:36,520 Speaker 11: the course of this year, which we believe they will, 707 00:34:37,320 --> 00:34:40,400 Speaker 11: that should make the potential for m and a merger 708 00:34:40,400 --> 00:34:45,960 Speaker 11: and acquisition activity more prominent. So given the valuation and balance, 709 00:34:46,040 --> 00:34:49,720 Speaker 11: we think small caps against specifically biotech auto work. 710 00:34:50,800 --> 00:34:53,480 Speaker 5: All right, Phil, how about just some sectors in general here? 711 00:34:53,520 --> 00:34:55,880 Speaker 5: I mean you mentioned the tech names which have been 712 00:34:55,920 --> 00:34:57,400 Speaker 5: a leader. A lot of folks feel. 713 00:34:57,200 --> 00:35:00,279 Speaker 3: Like they need to continue to be a leader to 714 00:35:00,320 --> 00:35:01,280 Speaker 3: move this market higher. 715 00:35:01,320 --> 00:35:03,719 Speaker 5: Is there other places I need to be looking, because 716 00:35:03,800 --> 00:35:05,680 Speaker 5: unlike John Tucker, I did not own the MACS seven 717 00:35:05,760 --> 00:35:06,200 Speaker 5: last year. 718 00:35:07,040 --> 00:35:10,480 Speaker 11: Well, you know, more broadly speaking, let's look over in 719 00:35:10,520 --> 00:35:13,880 Speaker 11: the domestic large cav value area that I mentioned. There 720 00:35:13,880 --> 00:35:18,040 Speaker 11: are two categories there, financials and energy that we like 721 00:35:18,120 --> 00:35:23,880 Speaker 11: a lot. Energy. You know, crude prices are working higher. 722 00:35:23,960 --> 00:35:26,359 Speaker 11: We've gone from the mid sixties the mid seventies over 723 00:35:26,440 --> 00:35:28,680 Speaker 11: the last couple of months based upon all of this 724 00:35:28,800 --> 00:35:33,200 Speaker 11: instability you know in the Middle East. The stocks really 725 00:35:33,280 --> 00:35:37,719 Speaker 11: haven't participated. We could see crude prices in our view 726 00:35:38,320 --> 00:35:41,239 Speaker 11: working back to eighty ninety dollars a barrel given all 727 00:35:41,280 --> 00:35:45,040 Speaker 11: of this volatility on the underlying commodity. So energy should 728 00:35:45,120 --> 00:35:48,480 Speaker 11: work ps or low giving in yields are very high. 729 00:35:48,719 --> 00:35:51,560 Speaker 11: And then financial services. You go back a year ago 730 00:35:51,920 --> 00:35:54,480 Speaker 11: when Silicon Valley Bank and that whole thing blew up. 731 00:35:54,600 --> 00:35:57,919 Speaker 11: These stocks dropped fifty percent. Now, what we know now, 732 00:35:58,160 --> 00:36:01,880 Speaker 11: or we think we know now, is that the problems 733 00:36:02,000 --> 00:36:05,319 Speaker 11: were largely concentrated in a handful of companies that were 734 00:36:05,320 --> 00:36:09,000 Speaker 11: poorly managed, and the rest of the banking industry, particularly 735 00:36:09,080 --> 00:36:12,440 Speaker 11: the large cap names, are relatively in good shape, but 736 00:36:12,520 --> 00:36:15,000 Speaker 11: they haven't come back to where they were or should 737 00:36:15,040 --> 00:36:17,839 Speaker 11: have been. We think there's some catch up that will 738 00:36:17,880 --> 00:36:19,799 Speaker 11: play out over the course of this year for them 739 00:36:19,800 --> 00:36:20,200 Speaker 11: as well. 740 00:36:20,320 --> 00:36:23,160 Speaker 2: So what we see New York Community Bank, and you 741 00:36:23,160 --> 00:36:25,440 Speaker 2: could say that they bought some stuff from First Republic 742 00:36:25,480 --> 00:36:27,120 Speaker 2: and that's kind of why they're in that mess. 743 00:36:27,480 --> 00:36:29,160 Speaker 11: So do you that was going to be my answer. 744 00:36:29,440 --> 00:36:31,560 Speaker 2: Okay, so, but what about some of the regionals that 745 00:36:31,600 --> 00:36:34,600 Speaker 2: aren't that company and that aren't like the JP Morgan's like, 746 00:36:34,640 --> 00:36:36,560 Speaker 2: do you need to be looking at those between like 747 00:36:36,560 --> 00:36:38,400 Speaker 2: two hundred and two hundred and fifty billion or is 748 00:36:38,400 --> 00:36:39,520 Speaker 2: that it going to be too risky? 749 00:36:40,520 --> 00:36:43,560 Speaker 11: Well, and I think we get into a stock pickers 750 00:36:43,600 --> 00:36:46,040 Speaker 11: market environment where you've got to do your fundamental due 751 00:36:46,040 --> 00:36:49,040 Speaker 11: diligence on these companies and what do their balance sheet 752 00:36:49,040 --> 00:36:52,000 Speaker 11: and income statements look like? Do they have the same 753 00:36:52,040 --> 00:36:57,520 Speaker 11: sort of exposure to commercial real estate that Silicon Valley 754 00:36:57,560 --> 00:37:00,880 Speaker 11: Bank or New York Community Bank did, Do they have 755 00:37:01,000 --> 00:37:04,759 Speaker 11: the mismatch and assets and liabilities? Or have we just 756 00:37:04,800 --> 00:37:07,399 Speaker 11: thrown out the baby with the bathwater. So that's got 757 00:37:07,400 --> 00:37:09,640 Speaker 11: to be an individual decision that the analyst and the 758 00:37:09,680 --> 00:37:13,600 Speaker 11: portfolio manager is going to make about whether an individual 759 00:37:14,440 --> 00:37:17,200 Speaker 11: regional bank or money center has the same problems that 760 00:37:17,239 --> 00:37:20,080 Speaker 11: some of the ones that have got taken out behind 761 00:37:20,120 --> 00:37:22,600 Speaker 11: the woodshed. And rightly so a year ago. 762 00:37:23,880 --> 00:37:25,920 Speaker 3: All right, very good, Phil Orlando, thank you so much 763 00:37:25,920 --> 00:37:27,000 Speaker 3: for joining us. Philer Orlando. 764 00:37:27,120 --> 00:37:29,600 Speaker 5: He's a chief equity market strategist, and he's head of 765 00:37:29,640 --> 00:37:32,839 Speaker 5: the Client Portfolio Group, a federated hermes joining us at 766 00:37:32,880 --> 00:37:35,600 Speaker 5: via zoom from New York City. 767 00:37:35,600 --> 00:37:40,120 Speaker 1: This is the Bloomberg Intelligence Podcast, available on apples, Spotify, 768 00:37:40,320 --> 00:37:43,239 Speaker 1: and anywhere else you will get your podcasts. Listen live 769 00:37:43,320 --> 00:37:46,960 Speaker 1: each weekday ten am to noon Eastern on Bloomberg dot com, 770 00:37:47,040 --> 00:37:50,439 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 771 00:37:50,560 --> 00:37:53,680 Speaker 1: You can also watch us live every weekday on YouTube 772 00:37:53,800 --> 00:37:55,640 Speaker 1: and always on the Bloomberg terminal