1 00:00:04,760 --> 00:00:07,720 Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim 2 00:00:07,800 --> 00:00:11,080 Speaker 1: Fox along with my co host Lisa Abramowitz. Each day 3 00:00:11,119 --> 00:00:14,360 Speaker 1: we bring you the most important, noteworthy, and useful interviews 4 00:00:14,400 --> 00:00:16,560 Speaker 1: for you and your money, whether at the grocery store 5 00:00:16,800 --> 00:00:19,960 Speaker 1: or the trading floor. Find the Bloomberg P L Podcast 6 00:00:20,000 --> 00:00:28,840 Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. I want 7 00:00:28,840 --> 00:00:32,640 Speaker 1: to bring in my colleague Brook Sutherland, a Bloomberg Gadfly 8 00:00:32,800 --> 00:00:36,400 Speaker 1: columnist who wrote a piece that was really terrific yesterday 9 00:00:36,479 --> 00:00:41,199 Speaker 1: about President elect Donald trumps celebration of a decision that 10 00:00:41,280 --> 00:00:46,479 Speaker 1: he says he reached with Carrier UH to keep with 11 00:00:46,560 --> 00:00:49,479 Speaker 1: Carriers Heating and air Conditioning unit to save about one 12 00:00:49,520 --> 00:00:52,720 Speaker 1: thousand Indiana jobs. Brooke, thank you so much for being 13 00:00:52,960 --> 00:00:55,320 Speaker 1: with us. So can you just talk first a little 14 00:00:55,320 --> 00:00:58,880 Speaker 1: bit about what this agreement was and what this really 15 00:00:58,960 --> 00:01:01,760 Speaker 1: does with respect to saving jobs in the US. Sure, 16 00:01:01,880 --> 00:01:03,960 Speaker 1: you know, I think we're still waiting for all of 17 00:01:04,000 --> 00:01:07,679 Speaker 1: the details. But United Technologies announced the decision earlier this 18 00:01:07,760 --> 00:01:11,039 Speaker 1: year to shut down to Indiana plants actually and move 19 00:01:11,160 --> 00:01:15,160 Speaker 1: the jobs to Mexico. So the agreement that Trump is 20 00:01:15,200 --> 00:01:17,800 Speaker 1: talking about has to do with the facility in Indianapolis, 21 00:01:18,000 --> 00:01:21,280 Speaker 1: um and they are planning on saving about a thousand 22 00:01:21,400 --> 00:01:24,199 Speaker 1: jobs there. We don't know yet what's going to happen 23 00:01:24,240 --> 00:01:27,959 Speaker 1: to the other Indiana factory, which was in Huntington's uh So, 24 00:01:28,480 --> 00:01:31,880 Speaker 1: you know, at best, this is sort of a stop gap, 25 00:01:32,000 --> 00:01:35,240 Speaker 1: half measure that maybe save some jobs, but not all 26 00:01:35,319 --> 00:01:38,720 Speaker 1: of them. And it's just not really clear if it 27 00:01:38,800 --> 00:01:41,880 Speaker 1: does much more beyond that. Um So, just real quick, 28 00:01:42,240 --> 00:01:45,040 Speaker 1: what what exactly what kinds of jobs are we talking 29 00:01:45,080 --> 00:01:49,320 Speaker 1: about that? Uh? United Technology was going to move to 30 00:01:49,400 --> 00:01:52,720 Speaker 1: Mexico and you know, how long will they actually stay here? 31 00:01:52,720 --> 00:01:56,160 Speaker 1: Why were they thinking of moving to Mexico? Sure? You know, 32 00:01:56,240 --> 00:02:00,120 Speaker 1: so these are manufacturing jobs that typically play pay pretty all. 33 00:02:00,160 --> 00:02:02,520 Speaker 1: I mean, you're talking about about twenty five dollars an hour, 34 00:02:02,600 --> 00:02:05,080 Speaker 1: which is a lot more than somebody can make working 35 00:02:05,120 --> 00:02:08,720 Speaker 1: in the service industry. But you can have those same 36 00:02:08,800 --> 00:02:11,160 Speaker 1: jobs done in Mexico for a lot less, and so 37 00:02:11,240 --> 00:02:13,520 Speaker 1: that's part of the appeal. The other part is that, 38 00:02:13,960 --> 00:02:16,480 Speaker 1: you know, there have been significant regulations in the air 39 00:02:16,520 --> 00:02:19,680 Speaker 1: conditioning and h VAC industry in terms of making the 40 00:02:19,680 --> 00:02:23,120 Speaker 1: products more efficient, living up to sort of environmental standards, 41 00:02:23,120 --> 00:02:26,239 Speaker 1: and those have a cost, and so to be competitive. 42 00:02:26,360 --> 00:02:29,000 Speaker 1: What United Technologies has said is they need to lower 43 00:02:29,120 --> 00:02:31,440 Speaker 1: labor costs, and a lot of its competitors have already 44 00:02:31,440 --> 00:02:34,399 Speaker 1: made these moves to Mexico. And so that's really where 45 00:02:34,440 --> 00:02:36,560 Speaker 1: it's coming from, not you know, we don't want to 46 00:02:36,600 --> 00:02:40,119 Speaker 1: support America. Is it also the case that while these 47 00:02:40,200 --> 00:02:44,080 Speaker 1: jobs may be saved, other factory jobs in Indiana in 48 00:02:44,120 --> 00:02:49,080 Speaker 1: the geographical location where this United Technologies carrier plant is located, 49 00:02:49,800 --> 00:02:54,880 Speaker 1: those layoffs and those moves to Mexico they're continuing exactly. 50 00:02:54,880 --> 00:02:56,520 Speaker 1: I mean, it's not even that all of the United 51 00:02:56,520 --> 00:02:59,200 Speaker 1: Technologies jobs are going to be saved, they're only saving 52 00:02:59,280 --> 00:03:02,000 Speaker 1: some of them. So but there are you know, other 53 00:03:02,080 --> 00:03:04,360 Speaker 1: manufacturers who have had to make these same decisions. And 54 00:03:04,400 --> 00:03:07,280 Speaker 1: I don't think that manufacturers like making these decisions, but 55 00:03:07,320 --> 00:03:09,240 Speaker 1: a lot of times it's just sort of the reality 56 00:03:09,240 --> 00:03:12,080 Speaker 1: of the economic situation they find themselves in. And to 57 00:03:12,200 --> 00:03:15,560 Speaker 1: your point, Rex Nerd, which is another industrial manufacturer, is 58 00:03:15,600 --> 00:03:18,680 Speaker 1: also in Indiana, not too far from where the United 59 00:03:18,680 --> 00:03:21,320 Speaker 1: Technologies plant is actually, and they are looking at shutting 60 00:03:21,320 --> 00:03:24,200 Speaker 1: down that facility and moving those jobs to Mexico. And 61 00:03:24,240 --> 00:03:26,520 Speaker 1: we haven't really heard as much about rex Nerd, and 62 00:03:26,520 --> 00:03:29,280 Speaker 1: I have to wonder if that's because there's no viral 63 00:03:29,400 --> 00:03:31,680 Speaker 1: video about the rex nerd layoffs the way that there 64 00:03:31,760 --> 00:03:34,639 Speaker 1: was with Carrier. It hasn't gotten as much public attention, 65 00:03:34,680 --> 00:03:37,800 Speaker 1: It hasn't drawn as much pushback, it hasn't really been 66 00:03:37,840 --> 00:03:41,960 Speaker 1: talked about about by President Trump. Um So I just 67 00:03:42,000 --> 00:03:44,000 Speaker 1: sort of wonder if we're going to see anything there, 68 00:03:44,000 --> 00:03:46,120 Speaker 1: if he's just sort of picking and choosing the ones 69 00:03:46,200 --> 00:03:49,280 Speaker 1: that might bring good publicity. I love the lead Donald 70 00:03:49,280 --> 00:03:52,640 Speaker 1: Trump can't micromanage his way to a man manufacturing revival 71 00:03:53,160 --> 00:03:57,240 Speaker 1: in America. Perhaps he can't micromanage his way to a 72 00:03:57,280 --> 00:04:00,360 Speaker 1: manufacturing revival. But is there something on a policy level 73 00:04:00,360 --> 00:04:04,200 Speaker 1: that he could do to keep manufacturing jobs in the 74 00:04:04,280 --> 00:04:08,440 Speaker 1: US or these jobs just going away because of automation. Well, 75 00:04:08,440 --> 00:04:10,320 Speaker 1: I think that's sort of a tough question. You know, 76 00:04:10,400 --> 00:04:13,800 Speaker 1: he's talked about leveling hefty tariffs at these companies that 77 00:04:14,000 --> 00:04:16,560 Speaker 1: manufacture products in Mexico and then bring them back to 78 00:04:16,600 --> 00:04:19,679 Speaker 1: the US. He's talked about doing this on an individual basis, 79 00:04:19,720 --> 00:04:22,159 Speaker 1: which I think would be very hard to implement without 80 00:04:22,200 --> 00:04:25,640 Speaker 1: looking like you're picking and choosing who wins in this country. 81 00:04:25,640 --> 00:04:27,800 Speaker 1: And you know which businesses do well and if they 82 00:04:27,800 --> 00:04:29,680 Speaker 1: don't do exactly what you tell them to do, you're 83 00:04:29,680 --> 00:04:32,839 Speaker 1: going to punish them. That's a very dangerous precedent to set. 84 00:04:32,880 --> 00:04:34,560 Speaker 1: I don't know if you want to have a mass 85 00:04:34,640 --> 00:04:37,640 Speaker 1: tariff because that could spark trade war. So I don't 86 00:04:37,880 --> 00:04:40,240 Speaker 1: really know what you do on a national scale to 87 00:04:40,279 --> 00:04:42,760 Speaker 1: stop this from happening. And even if you put those 88 00:04:42,800 --> 00:04:45,119 Speaker 1: types of policies in place, you're not going to change 89 00:04:45,160 --> 00:04:48,080 Speaker 1: sort of the broader trends that are driving this momentum. 90 00:04:48,120 --> 00:04:50,560 Speaker 1: A lot of it is technology. You know, these jobs 91 00:04:50,560 --> 00:04:53,479 Speaker 1: are being replaced by machines because they don't need people 92 00:04:53,520 --> 00:04:56,840 Speaker 1: to do them, or there's excess manufacturing capacity because these 93 00:04:56,839 --> 00:05:00,520 Speaker 1: companies have merged, or their products just aren't into and anymore. 94 00:05:00,520 --> 00:05:03,480 Speaker 1: If you're Caterpillar or Joy Global. People just aren't buying 95 00:05:03,560 --> 00:05:07,400 Speaker 1: mining equipment right now because commodity prices have eroded so much. 96 00:05:07,720 --> 00:05:09,880 Speaker 1: I just want to note that another new store. You 97 00:05:09,920 --> 00:05:13,840 Speaker 1: mentioned technology, but something called the Internet Archive. They preserve 98 00:05:13,920 --> 00:05:16,719 Speaker 1: the digital records of billions of web pages, indeed, even 99 00:05:16,839 --> 00:05:20,280 Speaker 1: cash pages of websites that no longer exist. They are 100 00:05:20,320 --> 00:05:23,520 Speaker 1: moving their backup data to Canada because they fear potential 101 00:05:23,600 --> 00:05:27,160 Speaker 1: changes in legislation due to a Trump administration could maybe 102 00:05:27,160 --> 00:05:29,360 Speaker 1: put the archives at at risk. All different a lot 103 00:05:29,400 --> 00:05:31,839 Speaker 1: of moving pieces there is, and you know, I think 104 00:05:32,040 --> 00:05:35,240 Speaker 1: that's what makes it hard to tackle these sort of 105 00:05:35,360 --> 00:05:37,680 Speaker 1: job decisions on a national level. And that's one of 106 00:05:37,680 --> 00:05:39,320 Speaker 1: the points I was trying to make is that typically 107 00:05:39,320 --> 00:05:41,599 Speaker 1: this is a conversation that happens on the state level, 108 00:05:41,880 --> 00:05:45,679 Speaker 1: where you have state governors or legislators talking to companies 109 00:05:45,680 --> 00:05:48,120 Speaker 1: about specific facilities within their state and what they can 110 00:05:48,120 --> 00:05:50,440 Speaker 1: do to preserve jobs. But it's hard to translate that 111 00:05:50,480 --> 00:06:04,799 Speaker 1: on the national level. I want to bring in Eric Marshall, 112 00:06:04,920 --> 00:06:08,680 Speaker 1: portfolio manager with Hodges Funds, to talk a little bit 113 00:06:08,800 --> 00:06:12,600 Speaker 1: about what to look for in small cap stocks. And 114 00:06:12,720 --> 00:06:15,320 Speaker 1: we've just seen an amazing run in the Russell two 115 00:06:15,360 --> 00:06:19,560 Speaker 1: thousand and other small small cap indexes, the Russell two 116 00:06:19,560 --> 00:06:24,760 Speaker 1: thousand gaining almost eleven percent since the US election. Thank 117 00:06:24,800 --> 00:06:25,920 Speaker 1: you for being with us, Eric. Do you think that 118 00:06:25,960 --> 00:06:28,880 Speaker 1: this can continue? We think that there's a good case 119 00:06:29,040 --> 00:06:31,960 Speaker 1: that we'll see the bull market and small caps continue, 120 00:06:32,000 --> 00:06:34,440 Speaker 1: and there's a couple of things that make us encouraged 121 00:06:34,520 --> 00:06:37,640 Speaker 1: in this space. You know, it's been a very bifurcated 122 00:06:37,720 --> 00:06:40,680 Speaker 1: market within small caps. This year where a lot of 123 00:06:40,720 --> 00:06:44,080 Speaker 1: the things having to do with reads and utilities and 124 00:06:44,160 --> 00:06:47,200 Speaker 1: a lot of the defensive areas have really carried very 125 00:06:47,279 --> 00:06:52,279 Speaker 1: high multiples, while a lot of areas within consumer discretionary 126 00:06:52,440 --> 00:06:56,640 Speaker 1: industrials have not. And you know, as we look at 127 00:06:56,680 --> 00:07:00,800 Speaker 1: the prospects for higher interest rates, lower taxes, US regulation 128 00:07:01,240 --> 00:07:05,640 Speaker 1: and it continued pick up in merger and acquisition activity, 129 00:07:06,040 --> 00:07:08,960 Speaker 1: we think you could still see room to run in 130 00:07:09,040 --> 00:07:11,840 Speaker 1: this bull market for small cap stocks. All right, can 131 00:07:11,880 --> 00:07:15,239 Speaker 1: you give us some specific industry groups or even names? 132 00:07:15,280 --> 00:07:18,880 Speaker 1: I know, for example, we're looking at a potential infrastructure 133 00:07:18,960 --> 00:07:23,680 Speaker 1: spending plan coming from President elect Donald Trump administration. Is 134 00:07:23,720 --> 00:07:26,480 Speaker 1: that going to help small cap stocks? Yeah, And that's 135 00:07:26,520 --> 00:07:28,960 Speaker 1: one of the areas in the Hodges Small Cap Fund 136 00:07:28,960 --> 00:07:31,520 Speaker 1: that we've really been focused on is companies that can 137 00:07:31,600 --> 00:07:35,240 Speaker 1: benefit from that infrastructure spend and it leads us to 138 00:07:35,280 --> 00:07:39,520 Speaker 1: own a lot of the materials, uh, including concrete and 139 00:07:39,560 --> 00:07:43,720 Speaker 1: cement companies. One that we like is a relatively new 140 00:07:43,760 --> 00:07:47,720 Speaker 1: I p o Ra and this is a company that 141 00:07:47,760 --> 00:07:51,800 Speaker 1: makes large diameter concrete pipes and so forth that are 142 00:07:51,880 --> 00:07:55,239 Speaker 1: used for water infrastructure, which is UH, there's a huge 143 00:07:55,440 --> 00:07:58,240 Speaker 1: upgrade cycle going on. The stock trades at a very 144 00:07:58,320 --> 00:08:02,560 Speaker 1: reasonable valuation and very much still underneath the radar. They 145 00:08:02,560 --> 00:08:05,200 Speaker 1: went public a couple of months ago, and uh, not 146 00:08:05,520 --> 00:08:08,240 Speaker 1: exactly a great time for small cap I p o s, 147 00:08:08,640 --> 00:08:11,720 Speaker 1: but we like things like that. We're seeing opportunities in 148 00:08:11,920 --> 00:08:14,240 Speaker 1: some of the steel companies and a lot of these 149 00:08:14,280 --> 00:08:18,600 Speaker 1: material companies that will benefit from a multi year spending 150 00:08:18,760 --> 00:08:22,120 Speaker 1: cycle for infrastructure. Just tell us the name of the company. Again, 151 00:08:22,160 --> 00:08:25,800 Speaker 1: people may not have heard, uh, Fonterra Fontera indeed. And 152 00:08:26,440 --> 00:08:27,960 Speaker 1: did you buy it at the IP or did you 153 00:08:27,960 --> 00:08:30,200 Speaker 1: wait for it to come out? We bought some of 154 00:08:30,200 --> 00:08:31,800 Speaker 1: the I p O and it broke that I p 155 00:08:31,920 --> 00:08:34,400 Speaker 1: O price and actually traded off and we've added to 156 00:08:34,480 --> 00:08:39,280 Speaker 1: it since. Um, you have a fund, the Pure Contrarian Fund. 157 00:08:40,160 --> 00:08:45,520 Speaker 1: What's your most contrarian bet within that fund? Um Our 158 00:08:45,720 --> 00:08:48,640 Speaker 1: founder of our firm, Craig Hodges, manages that fund, and 159 00:08:48,679 --> 00:08:52,199 Speaker 1: I would say one of the pure contrarian funds. UH 160 00:08:52,760 --> 00:08:55,880 Speaker 1: biggest moves was in some of the steel and iron 161 00:08:55,880 --> 00:08:59,960 Speaker 1: ore companies which were kind of left for dead, probably 162 00:09:00,000 --> 00:09:03,720 Speaker 1: doably a year or two ago, and we found some 163 00:09:04,000 --> 00:09:07,520 Speaker 1: very deep value opportunities and several companies there that have 164 00:09:07,600 --> 00:09:11,240 Speaker 1: done very well so you know, when US Steel got 165 00:09:11,240 --> 00:09:14,120 Speaker 1: down to eight dollars of share, that fund took a 166 00:09:14,240 --> 00:09:17,440 Speaker 1: large position in that stock, as well as things like 167 00:09:17,480 --> 00:09:21,800 Speaker 1: Cleveland Cliffs and some of the those more commodity type 168 00:09:21,840 --> 00:09:24,960 Speaker 1: companies that people had really just kind of thrown away 169 00:09:25,000 --> 00:09:27,480 Speaker 1: with the bathwater. Do you think that, given the rally 170 00:09:27,520 --> 00:09:29,480 Speaker 1: that we've seen recently, that there's still more room to 171 00:09:29,559 --> 00:09:32,520 Speaker 1: run with the steel and metals companies. I think that 172 00:09:32,600 --> 00:09:36,400 Speaker 1: there is. When you look at overall consumption of steel 173 00:09:36,679 --> 00:09:42,960 Speaker 1: in in the United States, Uh, it's relicatively good. The 174 00:09:43,040 --> 00:09:46,600 Speaker 1: capacity utilization of a lot of domestic steel companies has 175 00:09:46,679 --> 00:09:50,400 Speaker 1: been running in the sixty six percent area now for 176 00:09:50,440 --> 00:09:54,079 Speaker 1: the past couple of years because of so much cheap 177 00:09:54,200 --> 00:09:58,560 Speaker 1: imports of steel coming out of Southeast Asia and Turkey, 178 00:09:58,760 --> 00:10:01,480 Speaker 1: places like this. And I think as you see some 179 00:10:01,559 --> 00:10:06,320 Speaker 1: of the trade regulations tighten up a little bit, if 180 00:10:06,360 --> 00:10:08,360 Speaker 1: you mean tariffs, I mean, because that's what's not the 181 00:10:08,400 --> 00:10:12,320 Speaker 1: steel industry, right. I mean, they put sanctions on imported steel, 182 00:10:12,360 --> 00:10:15,440 Speaker 1: making it more expensive and or more competitive with US 183 00:10:16,000 --> 00:10:19,360 Speaker 1: produced products. And you've seen US steel new core all 184 00:10:19,480 --> 00:10:21,840 Speaker 1: move higher, absolutely and PIM A lot of people don't 185 00:10:21,880 --> 00:10:25,360 Speaker 1: realize we don't have enough steel capacity in our country. 186 00:10:25,480 --> 00:10:28,319 Speaker 1: We need to import of our steel just to meet 187 00:10:28,360 --> 00:10:32,559 Speaker 1: our needs. The problem is we've been importing thirty percent 188 00:10:32,640 --> 00:10:35,360 Speaker 1: or thirty five percent of that steel and that's really 189 00:10:35,440 --> 00:10:40,200 Speaker 1: caused pricing not to recover while demand has recovered for 190 00:10:40,280 --> 00:10:42,960 Speaker 1: things like auto and infrastructure and construction. Let me just 191 00:10:43,000 --> 00:10:45,920 Speaker 1: turn your attention Hodges small cap fund. Right, you're up 192 00:10:45,960 --> 00:10:49,080 Speaker 1: more than thirteen and a half percent so far this year. 193 00:10:49,160 --> 00:10:52,440 Speaker 1: Good on't you? U? J C. Penny is in the 194 00:10:52,559 --> 00:10:56,560 Speaker 1: portfolio small cap? How does that end up being? What's 195 00:10:56,559 --> 00:10:58,680 Speaker 1: your definition of small cap? It seems to change no 196 00:10:58,720 --> 00:11:01,600 Speaker 1: matter you know who portfolio manager. Well, believe it or not. 197 00:11:01,760 --> 00:11:04,240 Speaker 1: J C. Penny's is down to about a three billion 198 00:11:04,280 --> 00:11:06,920 Speaker 1: dollar market cap, and when we bought the stock, I 199 00:11:07,000 --> 00:11:08,839 Speaker 1: think it was about two and a half billion dollar 200 00:11:08,920 --> 00:11:12,319 Speaker 1: market cap, so well within the definition of the Russell 201 00:11:12,400 --> 00:11:15,840 Speaker 1: two thousand market cap range. But it's really a turnaround 202 00:11:15,880 --> 00:11:21,520 Speaker 1: situation where we see, uh, some good underlying assets in 203 00:11:21,559 --> 00:11:23,520 Speaker 1: the former real estate and so forth, and we think 204 00:11:23,520 --> 00:11:26,040 Speaker 1: that the management's new plan to kind of reinvent the 205 00:11:26,080 --> 00:11:30,120 Speaker 1: business through the house wares and Sephora brand, some of 206 00:11:30,120 --> 00:11:32,520 Speaker 1: these new things that they're doing and kind of cater 207 00:11:32,640 --> 00:11:35,840 Speaker 1: to a younger generation as well as gain back some 208 00:11:35,920 --> 00:11:38,720 Speaker 1: of those core customers. We think that there's a very 209 00:11:38,720 --> 00:11:43,439 Speaker 1: good risk award there. What's your concern about the rise 210 00:11:43,559 --> 00:11:46,800 Speaker 1: in benchmark borrowing costs and how that could affect some 211 00:11:46,880 --> 00:11:50,520 Speaker 1: of these smaller companies which are going to need to 212 00:11:50,559 --> 00:11:55,440 Speaker 1: borrow and might not be able to borrow at higher rates. Well, 213 00:11:55,440 --> 00:11:58,520 Speaker 1: I think if you look at um, you know, corporate 214 00:11:58,520 --> 00:12:02,599 Speaker 1: balance sheets in general roll uh, they're in really relatively 215 00:12:02,640 --> 00:12:05,839 Speaker 1: good good shape right now. And I do think that 216 00:12:06,240 --> 00:12:10,280 Speaker 1: you definitely need to be more aware in a higher 217 00:12:10,600 --> 00:12:14,720 Speaker 1: interest rate environment about the uh, you know, interest burden 218 00:12:15,200 --> 00:12:18,640 Speaker 1: that smaller companies have with their balance sheets as the 219 00:12:18,679 --> 00:12:22,160 Speaker 1: cost of capital goes up. But I think, you know, 220 00:12:22,200 --> 00:12:26,640 Speaker 1: everybody's had a very long period of time of low 221 00:12:26,720 --> 00:12:30,480 Speaker 1: interest rates to refinance get their balance sheets in order. 222 00:12:30,960 --> 00:12:35,080 Speaker 1: And I think that the in general, um, you know, 223 00:12:35,120 --> 00:12:38,880 Speaker 1: that a lot of the concerns there could be offset 224 00:12:39,040 --> 00:12:44,320 Speaker 1: by you know, a lower lower tax corporate tax rate. Transports, 225 00:12:44,360 --> 00:12:46,440 Speaker 1: I noticed you got a Jet Blue holding in there. 226 00:12:46,480 --> 00:12:50,400 Speaker 1: I mean Warren Buffett recently going in and buying shares 227 00:12:50,480 --> 00:12:56,120 Speaker 1: of airline companies Delta United, you know, and that that's 228 00:12:56,120 --> 00:12:59,600 Speaker 1: another one. You missed our Kntrian fund earlier. That's one 229 00:12:59,640 --> 00:13:01,679 Speaker 1: of the big bets we made a couple of years ago, 230 00:13:01,760 --> 00:13:04,480 Speaker 1: and no one liked airlines. We were buying airlines, and 231 00:13:04,720 --> 00:13:06,959 Speaker 1: we what we see going on in the airline industry 232 00:13:07,240 --> 00:13:09,960 Speaker 1: is not that much different than what happened in the 233 00:13:10,080 --> 00:13:13,600 Speaker 1: railroad industry ten years ago, where they had kind of 234 00:13:13,640 --> 00:13:17,120 Speaker 1: come out of a decade's worth of consolidation and you 235 00:13:17,240 --> 00:13:20,320 Speaker 1: started to see an environment where now I think the 236 00:13:20,360 --> 00:13:25,520 Speaker 1: top four airlines control about seventy of the domestic capacity, 237 00:13:25,720 --> 00:13:29,160 Speaker 1: so you're getting a more rational pricing environment. People are 238 00:13:29,160 --> 00:13:32,600 Speaker 1: being more careful about how they add capacity, how they 239 00:13:32,640 --> 00:13:36,280 Speaker 1: manage that, and we think that we're in an environment 240 00:13:36,360 --> 00:13:39,920 Speaker 1: now where airlines, for the first time in about thirty years, 241 00:13:39,920 --> 00:13:43,760 Speaker 1: will actually generate respectable shareholder returns. So I want to 242 00:13:43,760 --> 00:13:59,200 Speaker 1: thank you there. Eric Marshall, portfolio manager Hodges Funds. Two 243 00:13:59,200 --> 00:14:01,480 Speaker 1: asset classes want to focus on right now our private 244 00:14:01,480 --> 00:14:05,280 Speaker 1: equity and venture capital, and joining us is Greg Stento. 245 00:14:05,360 --> 00:14:09,000 Speaker 1: He is managing director at Harbor Vest Are based in Boston, 246 00:14:09,240 --> 00:14:12,400 Speaker 1: home to Bloomberg. Greg, thanks very much for being here much. 247 00:14:12,400 --> 00:14:14,320 Speaker 1: I appreciate it. Let me just give you a headline 248 00:14:14,320 --> 00:14:17,160 Speaker 1: though that Brent crude is rising to the highest this 249 00:14:17,240 --> 00:14:21,680 Speaker 1: year after the agreement in Vienna by OPEC to hold 250 00:14:21,840 --> 00:14:24,800 Speaker 1: production levels flat. And one if you could speak a 251 00:14:24,800 --> 00:14:27,960 Speaker 1: little bit about increases in the price of almost everything, 252 00:14:28,080 --> 00:14:31,320 Speaker 1: including money, and what would that do to private equity 253 00:14:31,360 --> 00:14:35,880 Speaker 1: and venture capital markets. Sure well. Harbor Vest is a 254 00:14:35,920 --> 00:14:40,280 Speaker 1: global private equity asset manager focused on providing solutions to 255 00:14:40,760 --> 00:14:45,200 Speaker 1: investors around the globe seeking to access the private markets. 256 00:14:45,280 --> 00:14:49,760 Speaker 1: Solutions being money like a lot of mezzanine financing, solutions 257 00:14:49,760 --> 00:14:53,120 Speaker 1: being uh, ways in which investors can access the asset class, 258 00:14:53,120 --> 00:14:57,000 Speaker 1: whether that be through a co mingle fund, through a 259 00:14:57,160 --> 00:15:01,080 Speaker 1: dedicated account, or through some type of a specialized vehicle. Uh. 260 00:15:01,120 --> 00:15:03,560 Speaker 1: And so that those are ways in which investors are 261 00:15:03,560 --> 00:15:06,280 Speaker 1: coming into the asset class. You know, with regards to 262 00:15:06,600 --> 00:15:11,200 Speaker 1: the pricing environment that you speak about, uh, you know, 263 00:15:11,400 --> 00:15:14,800 Speaker 1: we're focused on long term investing and so uh, no question, 264 00:15:14,880 --> 00:15:17,560 Speaker 1: the valuations over the past year have been pretty full 265 00:15:17,600 --> 00:15:19,640 Speaker 1: around the board, but you know, in all parts of 266 00:15:19,640 --> 00:15:23,200 Speaker 1: the business, uh, And so investors have got to work 267 00:15:23,200 --> 00:15:26,320 Speaker 1: hard to find those special opportunities where there's growth, where 268 00:15:26,360 --> 00:15:29,400 Speaker 1: there's very strong secular long term trends to be able 269 00:15:29,400 --> 00:15:32,120 Speaker 1: to overcome the full prices that that folks have had 270 00:15:32,160 --> 00:15:33,680 Speaker 1: to pay here in the short term. But again, this 271 00:15:33,720 --> 00:15:36,640 Speaker 1: is all about long term investing, uh, And that's what 272 00:15:36,840 --> 00:15:39,360 Speaker 1: you know, brings it back to our firms that we've 273 00:15:39,360 --> 00:15:42,320 Speaker 1: been doing this for thirty five years and have the 274 00:15:42,400 --> 00:15:45,160 Speaker 1: access to those types of opportunities where we can see 275 00:15:45,160 --> 00:15:48,600 Speaker 1: long term value and long term creation of growth. You know, Greg, 276 00:15:48,640 --> 00:15:52,120 Speaker 1: there's been a lot of discussion about how pensions and 277 00:15:52,720 --> 00:15:56,640 Speaker 1: insurance companies have moved away from hedge funds um just 278 00:15:56,760 --> 00:16:00,120 Speaker 1: because of how high the fees are. I'm one ring 279 00:16:00,160 --> 00:16:02,680 Speaker 1: whether that holds in the private equity world as well. 280 00:16:02,720 --> 00:16:05,240 Speaker 1: I saw a story in the Boston Globe last night 281 00:16:05,280 --> 00:16:08,520 Speaker 1: about the Massachusetts State pension fund paying one point five 282 00:16:08,560 --> 00:16:10,800 Speaker 1: billion dollars to more than one hundred private equity firms 283 00:16:10,800 --> 00:16:13,160 Speaker 1: of the past five years, and that that's sort of 284 00:16:13,200 --> 00:16:16,800 Speaker 1: that's the headline, even though the returns were, uh, we're 285 00:16:16,840 --> 00:16:22,080 Speaker 1: remarkable eighteen percent annualized from two thousand elements. So no question, 286 00:16:22,120 --> 00:16:24,840 Speaker 1: there's a focus on fees within the private markets that 287 00:16:24,880 --> 00:16:26,880 Speaker 1: are being paid. But what we think is that the 288 00:16:26,920 --> 00:16:28,600 Speaker 1: real focus needs to be on the net returns. As 289 00:16:28,640 --> 00:16:30,320 Speaker 1: you just talked about. I mean that has been the 290 00:16:30,360 --> 00:16:35,800 Speaker 1: best performing part of the Massachusetts State portfolio. Um, the 291 00:16:35,880 --> 00:16:38,640 Speaker 1: returns that you can earn in the private markets have 292 00:16:39,320 --> 00:16:42,200 Speaker 1: consistently exceeded what you can earn in the private the 293 00:16:42,240 --> 00:16:46,200 Speaker 1: public equity markets, or other other asset classes over a 294 00:16:46,240 --> 00:16:49,600 Speaker 1: long period of time. Why can you demystify that for us? Sure? 295 00:16:50,120 --> 00:16:52,520 Speaker 1: So there's a number of reasons. UM. First of all, 296 00:16:52,600 --> 00:16:54,720 Speaker 1: when you operate in the private markets, you haven't you 297 00:16:54,840 --> 00:16:58,480 Speaker 1: operate out of the glare of the public investors, and 298 00:16:58,560 --> 00:17:00,680 Speaker 1: you have an opportunity to really think long term about 299 00:17:00,720 --> 00:17:03,120 Speaker 1: building a business and growing a business. You know, in 300 00:17:03,120 --> 00:17:06,960 Speaker 1: the venture capital space, for instance, UH, there's the creation 301 00:17:07,040 --> 00:17:09,880 Speaker 1: of new business ideas, you know, something like an uber 302 00:17:09,920 --> 00:17:12,719 Speaker 1: that never existed ten years ago, that when you have 303 00:17:13,280 --> 00:17:17,840 Speaker 1: the right entrepreneur um, the right product market fit, in 304 00:17:17,920 --> 00:17:20,639 Speaker 1: the right risk capital, you can bring that together to 305 00:17:20,680 --> 00:17:23,280 Speaker 1: create solutions to to meet unmet needs and create very 306 00:17:23,280 --> 00:17:26,600 Speaker 1: scale businesses. As a company that's been you know, UH 307 00:17:26,760 --> 00:17:28,679 Speaker 1: quoted in the press is being worth more than sixty 308 00:17:28,680 --> 00:17:31,760 Speaker 1: billion dollars today, UH and UH I land up. So 309 00:17:31,960 --> 00:17:36,679 Speaker 1: there are those opportunities to develop um UH solutions for 310 00:17:36,760 --> 00:17:40,720 Speaker 1: unmet needs, whether they be in technology or in healthcare 311 00:17:40,920 --> 00:17:45,240 Speaker 1: or other markets. Uh, and finding those right globally diversified 312 00:17:45,240 --> 00:17:47,920 Speaker 1: ideas or what we what we're focused on at Harper Ust. 313 00:17:48,240 --> 00:17:50,679 Speaker 1: You've got a lot of investments in Canada. I understand 314 00:17:51,240 --> 00:17:53,159 Speaker 1: also it's global, right. I wonder if you could just 315 00:17:53,200 --> 00:17:55,359 Speaker 1: speak a little bit about how the change in the 316 00:17:55,440 --> 00:18:00,000 Speaker 1: price of energy affects the decision making process for places 317 00:18:00,080 --> 00:18:02,520 Speaker 1: is like Canada, Because if you've got an overall economy 318 00:18:02,520 --> 00:18:05,600 Speaker 1: that is driven by commodity prices, what is that? How 319 00:18:05,640 --> 00:18:09,560 Speaker 1: does that sort of inform your view? Sure? So we 320 00:18:09,600 --> 00:18:11,639 Speaker 1: have a specialized fund that we put in place in 321 00:18:11,720 --> 00:18:14,600 Speaker 1: Canada in conjunction with a Kittian government, and I think 322 00:18:14,640 --> 00:18:18,160 Speaker 1: it was very much to diversify away from what you're discussing. 323 00:18:18,200 --> 00:18:21,159 Speaker 1: So the idea was to generate new business formation in 324 00:18:21,200 --> 00:18:24,200 Speaker 1: Canada's focused on the venture capital market. So it's trying 325 00:18:24,200 --> 00:18:28,520 Speaker 1: to find those Canadian venture capital firms and other other 326 00:18:28,800 --> 00:18:32,040 Speaker 1: global investment firms investing in Canada that can help drive 327 00:18:32,080 --> 00:18:35,480 Speaker 1: new business creation and new industries in Canada to to 328 00:18:35,680 --> 00:18:39,159 Speaker 1: somewhat diversify away from an economy that has written its 329 00:18:39,240 --> 00:18:43,480 Speaker 1: natural resource base. How has fundraising been so far this 330 00:18:43,560 --> 00:18:44,840 Speaker 1: year and what do you expect it to be like 331 00:18:44,920 --> 00:18:47,760 Speaker 1: next year? Well, for Harvarvest, it's been a it's been 332 00:18:47,760 --> 00:18:49,719 Speaker 1: a record year. For us, We've had a phenomenal year 333 00:18:49,760 --> 00:18:52,639 Speaker 1: in terms of the reception that we've had from investors 334 00:18:52,640 --> 00:18:58,200 Speaker 1: seeking UM commingle funds, UH, specialized funds like our Canadian 335 00:18:58,240 --> 00:19:01,960 Speaker 1: fund or are messing income fund or also looking at 336 00:19:02,000 --> 00:19:04,800 Speaker 1: you know, dedicated separate accounts that want a very specific 337 00:19:04,800 --> 00:19:07,360 Speaker 1: and bespoke solution. So for US has been a record year. 338 00:19:07,359 --> 00:19:09,159 Speaker 1: It's been, it's been, it's been quite good at invest 339 00:19:09,200 --> 00:19:13,399 Speaker 1: in the history UM Broadly across the industry, fundraising is 340 00:19:13,520 --> 00:19:16,960 Speaker 1: up mildly over last year. Uh, it's something that we watch, 341 00:19:17,040 --> 00:19:20,400 Speaker 1: you know, because those imbalances of capital in the market 342 00:19:20,880 --> 00:19:23,960 Speaker 1: are are of concern in any market, but also in 343 00:19:24,200 --> 00:19:28,840 Speaker 1: the private markets. Importantly, the reassuring thing has been that 344 00:19:28,880 --> 00:19:32,160 Speaker 1: there hasn't been a proliferation of the number of new 345 00:19:32,480 --> 00:19:34,640 Speaker 1: funds and the new managers coming into the business. So 346 00:19:35,119 --> 00:19:38,080 Speaker 1: while the capital is up slightly year over year, the 347 00:19:38,200 --> 00:19:41,959 Speaker 1: number of market participants is relatively steady h and so 348 00:19:42,000 --> 00:19:45,560 Speaker 1: that keeps the competitive dynamic and the competitive balance in place. 349 00:19:45,600 --> 00:19:47,479 Speaker 1: And again those are the types of things that are 350 00:19:47,520 --> 00:19:50,000 Speaker 1: investors seek from us to try to make sure that 351 00:19:50,040 --> 00:19:53,719 Speaker 1: we're finding those opportunities that despite the market environment, we're 352 00:19:53,760 --> 00:19:55,880 Speaker 1: going to have good, good potential for long term success. 353 00:19:56,200 --> 00:19:58,720 Speaker 1: We're speaking with Greg Stento, he is managing director at 354 00:19:58,720 --> 00:20:01,560 Speaker 1: Harbor Vest the topic of an equity and venture capital. 355 00:20:01,760 --> 00:20:03,920 Speaker 1: I believe it early in November, right, you just closed 356 00:20:03,960 --> 00:20:06,879 Speaker 1: on a on a fund. I believe this was, what 357 00:20:07,000 --> 00:20:12,200 Speaker 1: about a four point seven seven billion dollar fund? Tell 358 00:20:12,280 --> 00:20:14,560 Speaker 1: us a little bit about this. This is a secondaries fund, 359 00:20:15,240 --> 00:20:18,120 Speaker 1: it is, and that's correct. Secondaries is something that we've 360 00:20:18,160 --> 00:20:21,359 Speaker 1: been doing since so we celebrated over thirty years of 361 00:20:21,440 --> 00:20:23,240 Speaker 1: having been active in the market. Just to be clear, 362 00:20:23,320 --> 00:20:26,280 Speaker 1: secondaries means people who want to sell their stake in 363 00:20:26,320 --> 00:20:28,640 Speaker 1: a private equity fund can sell it to somebody else 364 00:20:28,680 --> 00:20:30,560 Speaker 1: through this type of fund. Correct. That's right. It's an 365 00:20:30,600 --> 00:20:33,960 Speaker 1: ill liquid market and it's it's done through private transactions, 366 00:20:34,320 --> 00:20:38,000 Speaker 1: whether it be a fund position or a position in companies. UH. 367 00:20:38,040 --> 00:20:39,920 Speaker 1: And again we've been one of the pioneers in that space, 368 00:20:39,960 --> 00:20:41,679 Speaker 1: having done it now for more than thirty years, and 369 00:20:41,680 --> 00:20:44,399 Speaker 1: we closed a close to fund in early November that 370 00:20:44,600 --> 00:20:47,960 Speaker 1: is focused on that market, dedicated to that market. UH. 371 00:20:47,960 --> 00:20:50,240 Speaker 1: In particular, I think where we've carved out a niche 372 00:20:50,240 --> 00:20:52,000 Speaker 1: in the secondary market and is what we call the 373 00:20:52,040 --> 00:20:57,280 Speaker 1: complex transactions. So um these are doing things that UM 374 00:20:57,320 --> 00:21:00,000 Speaker 1: again we that are a little bit off the beaten 375 00:21:00,040 --> 00:21:05,000 Speaker 1: half of the typical commodity like lp UM purchase. So 376 00:21:05,040 --> 00:21:07,560 Speaker 1: these could be an end of fund life solution where 377 00:21:07,760 --> 00:21:09,960 Speaker 1: a private equity fund has reached near the end of 378 00:21:09,960 --> 00:21:13,680 Speaker 1: its life. The general partner still feels as though they've 379 00:21:13,680 --> 00:21:15,639 Speaker 1: got assets that they like to manage and continue to 380 00:21:15,680 --> 00:21:18,000 Speaker 1: grow for the next three to five years. But at 381 00:21:18,000 --> 00:21:20,400 Speaker 1: the same point, their investors are tired and maybe want 382 00:21:20,400 --> 00:21:21,679 Speaker 1: to some of them want to get out. So we 383 00:21:21,720 --> 00:21:25,760 Speaker 1: can provide a special vehicle to bridge that solution. Greg Stento, 384 00:21:25,880 --> 00:21:28,800 Speaker 1: managing director at Harbor Fest, speaking to us about the 385 00:21:28,800 --> 00:21:33,880 Speaker 1: outlook for private equity and venture capital. This is Bloomberg 386 00:21:46,440 --> 00:21:50,080 Speaker 1: Americans just loving their trucks. General Motors, Ford and other 387 00:21:50,359 --> 00:21:56,040 Speaker 1: major automakers beat analysts estimates for US sales y because 388 00:21:56,359 --> 00:21:59,880 Speaker 1: Americans just can't get enough pickups and SUVs. I want 389 00:21:59,880 --> 00:22:04,679 Speaker 1: to bringing Kevin Tynan, senior auto analysts for Bloomberg Intelligence, 390 00:22:04,720 --> 00:22:07,520 Speaker 1: talk a little bit about, uh, just how good these 391 00:22:07,520 --> 00:22:10,760 Speaker 1: sales numbers really were, and whether they can last. So, Kevin, 392 00:22:10,800 --> 00:22:13,880 Speaker 1: thanks so much for joining us, Hi Lisa. UM. Yeah, 393 00:22:14,000 --> 00:22:19,119 Speaker 1: so very good numbers in the sense that UM, you know, 394 00:22:19,320 --> 00:22:23,440 Speaker 1: consumer buying frenzy, end of the year, Black Friday through 395 00:22:23,480 --> 00:22:27,080 Speaker 1: the end of the year, clearance sales UM incentives obviously 396 00:22:27,200 --> 00:22:30,800 Speaker 1: higher and and very aggressive. UM. But I think the 397 00:22:30,840 --> 00:22:34,800 Speaker 1: concern there is if incentives don't work, which obviously they 398 00:22:34,840 --> 00:22:40,000 Speaker 1: are UM, and then what happens come January February you 399 00:22:40,080 --> 00:22:43,199 Speaker 1: have a little bit of a hangover? UM. You know, 400 00:22:43,240 --> 00:22:46,560 Speaker 1: the automakers are not as aggressive on on the incentive 401 00:22:46,600 --> 00:22:50,240 Speaker 1: and lease deals because there's no real demand left. UM. 402 00:22:50,480 --> 00:22:53,600 Speaker 1: So very good here and now today. The question is 403 00:22:53,640 --> 00:22:56,600 Speaker 1: what happens in If you care about what happens in 404 00:22:57,400 --> 00:23:01,160 Speaker 1: at this point for now, you'll take this. There's there's 405 00:23:01,200 --> 00:23:03,920 Speaker 1: talk of an eighteen point three seasonally adjusted rate, which 406 00:23:03,960 --> 00:23:07,639 Speaker 1: would be the best since UM employee pricing programs of 407 00:23:07,680 --> 00:23:11,280 Speaker 1: two thousand five h So all all things are coming 408 00:23:11,320 --> 00:23:14,679 Speaker 1: along here, Hey, Kevin, what about all things coming along 409 00:23:14,680 --> 00:23:20,560 Speaker 1: in the auto loan business? Yeah, I think there would be. Uh. 410 00:23:20,760 --> 00:23:26,480 Speaker 1: Delinquencies are rising, yeah, right, supprise right, I mean? And 411 00:23:26,680 --> 00:23:30,080 Speaker 1: third quarter of subprime auto loan balances became at least 412 00:23:30,160 --> 00:23:33,120 Speaker 1: ninety days delinquent. That's up from one point six percent 413 00:23:33,160 --> 00:23:36,879 Speaker 1: in the third quarter of four. And this is this 414 00:23:36,920 --> 00:23:40,040 Speaker 1: a significant concern? Yeah, these are these are concerns. The 415 00:23:40,119 --> 00:23:44,840 Speaker 1: length of the the average term getting longer, and the 416 00:23:44,880 --> 00:23:48,480 Speaker 1: amount uh financed, you know, the loan to asset ratio, 417 00:23:48,560 --> 00:23:52,480 Speaker 1: all those things are trending probably where where they would 418 00:23:52,520 --> 00:23:55,640 Speaker 1: cause concern. Um. The other issue is that as long 419 00:23:55,720 --> 00:24:00,200 Speaker 1: as money is cheap and easy, what you get is 420 00:24:00,720 --> 00:24:04,120 Speaker 1: that negative equity of those longer loans flowing into new 421 00:24:04,160 --> 00:24:07,000 Speaker 1: loans and people get more and more upside down, and 422 00:24:07,040 --> 00:24:12,280 Speaker 1: that's really what crashed in you know that two periods. 423 00:24:12,280 --> 00:24:16,520 Speaker 1: So what happens is you get consumers are drivers basically 424 00:24:16,560 --> 00:24:20,040 Speaker 1: having to hold onto those vehicles till the term until 425 00:24:20,080 --> 00:24:22,640 Speaker 1: there's at least close to some equity because they can't 426 00:24:22,720 --> 00:24:25,639 Speaker 1: roll that that negative equity anymore. And aren't they longer 427 00:24:25,760 --> 00:24:31,200 Speaker 1: term loans? Yeah, absolutely right, if not more so, the 428 00:24:31,240 --> 00:24:32,919 Speaker 1: average is probably a little bit higher. But if you 429 00:24:32,960 --> 00:24:35,359 Speaker 1: get people taken seventy two months loans, you don't have 430 00:24:35,400 --> 00:24:38,720 Speaker 1: equity in that vehicle. Um, which is okay if there 431 00:24:38,760 --> 00:24:40,560 Speaker 1: if if the finance company is gonna let you roll 432 00:24:40,560 --> 00:24:43,159 Speaker 1: that negative equity into the next loan. Once they stop that, 433 00:24:43,280 --> 00:24:45,639 Speaker 1: then that's where the real trouble starts. You know. I 434 00:24:45,680 --> 00:24:47,920 Speaker 1: do have to think that one thing that a number 435 00:24:47,960 --> 00:24:50,840 Speaker 1: of analysts have told us is that, UM, the auto 436 00:24:50,840 --> 00:24:55,320 Speaker 1: companies have captive finance companies, so they can afford to 437 00:24:55,800 --> 00:24:57,919 Speaker 1: take a little bit of a bigger risk keep extending 438 00:24:58,480 --> 00:25:02,080 Speaker 1: loans to even sub prime borrowers because they're earning so 439 00:25:02,160 --> 00:25:05,120 Speaker 1: much from selling the cars. How much does it put 440 00:25:05,400 --> 00:25:09,520 Speaker 1: the captive financing companies of these auto companies at risk 441 00:25:10,080 --> 00:25:14,200 Speaker 1: of making too many loans that are too speculative. Well, 442 00:25:14,400 --> 00:25:17,280 Speaker 1: that's certainly a big risk lease to the Other thing 443 00:25:17,680 --> 00:25:20,440 Speaker 1: you have to remember is um the leasing part of it, 444 00:25:20,760 --> 00:25:23,480 Speaker 1: where the automakers rather than if you think about a 445 00:25:23,560 --> 00:25:27,000 Speaker 1: cash or a finance deal with with cash incentive across 446 00:25:27,040 --> 00:25:30,880 Speaker 1: the table, you're getting these sort of subsidized residual values 447 00:25:31,440 --> 00:25:33,840 Speaker 1: that are being propped up. You know. And now those 448 00:25:33,920 --> 00:25:37,280 Speaker 1: vehicles come back, which we've been leasing at record rates, 449 00:25:37,280 --> 00:25:40,040 Speaker 1: starting to come down a little bit. UM. But as 450 00:25:40,080 --> 00:25:42,440 Speaker 1: those off lease vehicles come back in the market, there's 451 00:25:42,440 --> 00:25:45,879 Speaker 1: gonna be downward pressure on new price uh, new vehicle 452 00:25:45,960 --> 00:25:48,600 Speaker 1: prices because you're gonna have this flood of low mileage 453 00:25:48,640 --> 00:25:51,879 Speaker 1: off lease vehicles coming back to the market. It's not 454 00:25:51,920 --> 00:25:54,080 Speaker 1: an industry that really looks too far into the future 455 00:25:54,119 --> 00:25:56,280 Speaker 1: to worry about these things. But it's out there and 456 00:25:56,320 --> 00:25:58,560 Speaker 1: it's coming all right. Just gonna give you ten seconds. 457 00:25:58,600 --> 00:26:01,840 Speaker 1: The environmental protection age, see leaving in place those CEO 458 00:26:01,920 --> 00:26:04,320 Speaker 1: two standards. Is that going to hurt the industry? You 459 00:26:04,320 --> 00:26:06,280 Speaker 1: know what's going to happen PIM in ten seconds, is 460 00:26:06,359 --> 00:26:09,160 Speaker 1: that they will produce the fuel efficient vehicles. Those will 461 00:26:09,200 --> 00:26:11,960 Speaker 1: go into fleets, things like Lift Duber. There'll be really 462 00:26:12,240 --> 00:26:15,240 Speaker 1: aggressive lease deals for those companies. They'll hit their marks 463 00:26:15,240 --> 00:26:16,880 Speaker 1: and then they'll go ahead and turn around and sell 464 00:26:16,920 --> 00:26:24,320 Speaker 1: what they want. Thanks for listening to the Bloomberg pen 465 00:26:24,400 --> 00:26:29,200 Speaker 1: L podcast. You can subscribe and listen to interviews at iTunes, SoundCloud, 466 00:26:29,440 --> 00:26:33,640 Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm 467 00:26:33,640 --> 00:26:36,560 Speaker 1: out there on Twitter at pim Fox. I'm out there 468 00:26:36,600 --> 00:26:39,880 Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast. 469 00:26:39,920 --> 00:26:42,600 Speaker 1: You can always catch us worldwide on Bloomberg Radio.