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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple.

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Speaker 2: Car Play and Android Auto with the Bloomberg Business.

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Speaker 1: App, Listen on demand wherever you get your podcasts, or

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Speaker 1: watch us live on YouTube.

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Speaker 3: There's some things that are happening.

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Speaker 4: A UBS, for example, is down almost five percent. So

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Speaker 4: we want to get you some analysis here with Alison Williams,

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Speaker 4: Boomberg Intelligence, Senior Analyst, Global Banks and Asset Managers. So basically,

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Speaker 4: the there was a fourth quarter earnings miss. It did

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Speaker 4: announce a buy back of up to one billion dollars

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Speaker 4: and shares this year, So you can make an argument, Allison,

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Speaker 4: there's something for the bulls or something for the bears.

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Speaker 3: What was there for you?

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Speaker 5: So I think you know, investor has got as much

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Speaker 5: as they could today. You know, the issue is this

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Speaker 5: is a long It's going to be a long time

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Speaker 5: frame for this deal to execute, which I think investors

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Speaker 5: should have been prepared for.

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Speaker 6: They may have wanted a bit more.

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Speaker 5: The one negative thing for the outlook is that twenty

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Speaker 5: twenty four estimates are likely going to come down a

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Speaker 5: little bit because you know the returns are going to

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Speaker 5: be lower. But that's because I think UBS is trying

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Speaker 5: to be aggressive in you.

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Speaker 6: Know, pulling forward those costs.

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Speaker 5: So they did upsize the costs on a growth basis,

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Speaker 5: but they're going to invest those so not falling to

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Speaker 5: the bottom line, so perhaps some disappointment there. They did

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Speaker 5: reiterate their sort of three year target. They gave a

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Speaker 5: longer term target that was in line with the high

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Speaker 5: end before Credit sweet so I think those were all positive.

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Speaker 5: The buybacks also a little bit better than expected. The

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Speaker 5: big positive news was twenty seven percent increase in dividend

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Speaker 5: though also, as you said, fourth quarter, you know, not

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Speaker 5: so much great things going on there, so that the

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Speaker 5: miss was on costs. Their adjusted costs fell, their integration

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Speaker 5: costs or the restructing costs were much bigger than expected,

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Speaker 5: the wealth flows moderated a little bit, and the investment

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Speaker 5: band lost money.

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Speaker 7: Allison, what is the new UBS here post Credit Swiss

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Speaker 7: and full disclosure, I'm a client of UBS used to

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Speaker 7: work at Credit Swiss, so I'm all over the Swiss

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Speaker 7: stuff here. But what's where does UBS want to be

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Speaker 7: now that they've acquired Credits Swiss? What are their ambitions

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Speaker 7: VISAVI a global financial institution?

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Speaker 5: So I don't think that the big picture strategy has

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Speaker 5: changed much for them, right, So they their focuses on wealth.

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Speaker 6: You know, they're the premier global wealth manager.

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Speaker 5: They added some assets, they added some relationships with Credit

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Speaker 5: Suite in the investment bank.

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Speaker 6: Again, they're still focused on equities.

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Speaker 5: So even though profit disappointed, revenue came in about in line.

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Speaker 5: So that's that's a positive thing. On the equities trading

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Speaker 5: side of things. They did add you know, some incremental ads.

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Speaker 5: There were some numbers around the traders. The Bloomberg News reported.

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Speaker 5: We obviously look at the top line revenue, you know,

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Speaker 5: there they kept the M and A and the research

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Speaker 5: areas were the areas that they added to and those

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Speaker 5: areas did pretty well.

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Speaker 6: On the quarter.

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Speaker 4: So what else do you need to hear to get

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Speaker 4: more confidence in all of this. Wean just like a

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Speaker 4: kind of hold and wait for two more years.

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Speaker 8: Basically, I think it is like a show me right,

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Speaker 8: So I think it's going to be a step by

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Speaker 8: step So Armandi, as you know, said this morning that

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Speaker 8: you know, they might sacrifice a little bit of revenue

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Speaker 8: because they are focused on profitability.

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Speaker 6: They're focused on doing things right.

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Speaker 5: So again, like those are the types of things that

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Speaker 5: you have to have confidence.

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Speaker 6: He has done a big turnaround at the UBS before.

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Speaker 5: But I think that it is the kind of thing

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Speaker 5: where it's like quartered by quarter, investors have to start

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Speaker 5: to see, you know, some of the.

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Speaker 6: You know, some support for these estimates.

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Speaker 5: Another target they put out there this morning was one

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Speaker 5: hundred billion per year for the next two years a

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Speaker 5: net new wealth asset. So I think that's a pretty

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Speaker 5: good target. But again we saw some slowing in the

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Speaker 5: fourth quarter. Some of that was mandates leaving with credit

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Speaker 5: sue relationship managers still pretty stable, but I think investors

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Speaker 5: will want to see, you know more so you know,

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Speaker 5: over the next few quarters, UBS delivering on its plans.

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Speaker 7: So Elison, just, I mean you cover everything all the

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Speaker 7: global big investment banks, commercial banks. Here is the global

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Speaker 7: bank is that just left to the Morgan, Stanley's, the Goldman,

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Speaker 7: sachs Is or whatever. It doesn't seem like anybody in Asia,

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Speaker 7: anybody in Europe can compete against the JP Morgans of

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Speaker 7: the world.

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Speaker 5: So Paul, it's I mean, it's really been over the

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Speaker 5: last decade, you know, ever since you left the business,

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Speaker 5: but it was it was.

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Speaker 6: Last decade, you know.

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Speaker 5: The US Bank just fought, you know, really making those

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Speaker 5: market share games. You know, Credit Suite was is sort

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Speaker 5: of the latest to who you know, provide some provide

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Speaker 5: some gains to those US players if you will keep

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Speaker 5: in mind that, uh you know, that sale from UBS

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Speaker 5: follows them exiting prime brokerage. Before Current Suite, we had

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Speaker 5: Deutsche Bank who also exited Prime berg Bridge.

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Speaker 6: You know, they shed parts of their fixed income business.

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Speaker 5: If we went back to several years prior, there was

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Speaker 5: a lot of the European players getting out of fix

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Speaker 5: and you know, keep in mind, it.

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Speaker 6: Is a scale business.

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Speaker 5: And I think where banks like JP Morgan have been

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Speaker 5: winning and in fact Goldman Sachs has gained the most

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Speaker 5: market share over the last several years, or that they

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Speaker 5: are investing in technology that helps them get better revenue,

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Speaker 5: that helps them have more money to invest. And so

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Speaker 5: it's really that virtuous cycle that some of those big

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Speaker 5: US banks have been enjoying.

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Speaker 4: And before we let you go, let's talk about you

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Speaker 4: cover everything. A KKR doing particularly well. Also, what's driving

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Speaker 4: some of these private equity guys to outperform at this point?

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Speaker 5: I think, you know, if you look at the asset

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Speaker 5: management industry, right like the two areas of growth are

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Speaker 5: private markets and passive.

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Speaker 6: The big difference is that private markets has very significant fees,

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Speaker 6: and since you've seen these big companies go public, I mean,

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Speaker 6: the fundraising is just impressive.

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Speaker 3: Great stuff. Alison is the best.

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Speaker 7: She is absolutely wonder who hired her, Alison Williams.

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Speaker 1: To do it yourself.

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Speaker 7: Exactly, patting myself on the back there, No, but she's

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Speaker 7: the best. Allison Williams, Senior Analyst, Global Banks, Bloomberg Intelligence.

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Speaker 7: Before she came to Bloomberg Intelligence to cover bank she

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Speaker 7: was at Morgan Stanley Investment Management on the buy side

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Speaker 7: as a senior analyst covering banks there for all their

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Speaker 7: big funds.

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Speaker 4: I just don't like all these banks have different business models,

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Speaker 4: and I do not understand you keep them all straight,

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Speaker 4: like at least oil companies, like they dig for stuff

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Speaker 4: and they get it out of the ground, Like they

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Speaker 4: may dig in different places, but it's it's pretty straightforward.

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Speaker 7: I mean, you know, back in college, I wrote a

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Speaker 7: paper on who are the five biggest investment banks in

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Speaker 7: twenty five years?

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Speaker 9: Who they're going to be?

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Speaker 7: One of them was Deutsche Bank, And for a while

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Speaker 7: I was looking really good there until not so.

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Speaker 4: Much although I mean, we thought they weren't going to

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Speaker 4: survive twenty sixteen. So we thought we were all like

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Speaker 4: beating the drum to total bankruptcy or someone buying it.

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Speaker 3: Like you know, UBS or UniCredit, and that shouldn't happen.

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Speaker 7: So and you just look at the European banks and

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Speaker 7: they just haven't evolved with the times. The governments haven't

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Speaker 7: allowed cross border consolidation, and so the net result is

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Speaker 7: in this global world they're nowhere, I mean nowhere, Deutsche Bank,

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Speaker 7: you BS, they're regional banks now. And it's a shame

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Speaker 7: because you know, there was a time when you really

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Speaker 7: thought that they could become a global financial institutions. So

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Speaker 7: I have to see now it's up to the JP

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Speaker 7: Morgans and Goldwin's and the Morgan standards of the world.

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Speaker 9: So good stuff.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am on applecar Play and Android Auto

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Speaker 1: Alexa Play Bloomberg eleven thirty.

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Speaker 4: The FAA Administrator Mike Whittaker is on Capitol Hill today

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Speaker 4: and he'll be talking about the latest Boeing news and

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Speaker 4: how the FA is going to have a little bit

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Speaker 4: more oversight. And just to add some color to this spirit,

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Speaker 4: Aerospace is on their earnings call right now. They weren't

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Speaker 4: able to give guidance because of what's going on with Boeing,

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Speaker 4: and they say that their goal, yay, is to have

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Speaker 4: zero production deficits. That's good goal, thank you. They say

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Speaker 4: they're fully aligned with with Boeing. They plan to have

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Speaker 4: more automation of some manual tasks. They've added inspectors, assessed

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Speaker 4: plug sequence with Boeing. Like they're doing all the right stuff.

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Speaker 4: And they have made progress, they say, in stabilizing the

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Speaker 4: seven thirty seven production in the fourth quarter.

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Speaker 3: So what does this all mean, Like, do we want.

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Speaker 4: FAA regulators like getting involved more more boring planes?

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Speaker 3: That is it better? Is it worse? They were already involved.

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Speaker 3: It's confusing.

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Speaker 9: I don't know. I don't know. But George Ferguson he knows,

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Speaker 9: he might know.

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Speaker 7: He covers all this aerospace and airline stuff for Bloomberg Intelligence.

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Speaker 9: George, what's the latest here?

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Speaker 7: What changes do you think may come to the FAA,

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Speaker 7: may come to Boeing?

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Speaker 10: So you know, what we heard from Whitaker in some

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Speaker 10: of his initial comments was that rather than auditing Boeing safety,

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Speaker 10: they're going to have a you know, physical presence on

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Speaker 10: the line, and that they would push some of that

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Speaker 10: presence down into Spirit Aero systems. I suppose that means

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Speaker 10: they'd push it also into other suppliers. I mean, I

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Speaker 10: frankly think it's a good thing, right I think that

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Speaker 10: clearly right now, the way the system is is set up,

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Speaker 10: it's not working well. You know, we've talked about it.

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Speaker 2: I think it's you.

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Speaker 10: Know, largely due to turnover, you know, as we went

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Speaker 10: through the pandemic. I think we've lost a lot of

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Speaker 10: talent at these companies. But so clearly we're having a

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Speaker 10: breakdown in the manufacturing process. And I think, you know,

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Speaker 10: the FAA is here to regulate, and you know, I

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Speaker 10: think this something that puts the long term health of

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Speaker 10: the US aerospace business at risk, and they're here to

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Speaker 10: help protect that right and so putting them down on

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Speaker 10: the line I think is a positive. It may slow

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Speaker 10: things down, but I think for a good reason, so

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Speaker 10: that you get quality through there and folks can trust

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Speaker 10: the products coming out of Boeing and other US aerospace suppliers.

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Speaker 4: Why weren't FAA regulars already there and have a physical presence.

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Speaker 10: Well, so, I mean, I think they were largely handling

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Speaker 10: things from an audit standpoint, right, reviewing processes and certification.

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Speaker 10: I think that they're you know, they've been stressed thin

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Speaker 10: through the pandemic as well. They haven't had enough you know,

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Speaker 10: workers as well a lot of turnover.

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Speaker 11: And I think also, I.

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Speaker 10: Think this business was a simpler business if you go

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Speaker 10: back twenty or thirty years ago. I know that's a

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Speaker 10: long way to go, especially I'm talking to people off

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Speaker 10: it's financial markets.

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Speaker 11: Yeah, but if you go back.

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Speaker 10: Twenty thirty years ago, this just this apply chains didn't

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Speaker 10: stretch as far. They were a lot more domestically focused,

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Speaker 10: a lot more vertically integrated. And that's been changed dramatically

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Speaker 10: over the last number of years. And I think Boeing

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Speaker 10: got on the cutting edge of that when they built

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Speaker 10: the seven eight seven, And I think that's created you know,

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Speaker 10: some challenges here and now I think, you know, the

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Speaker 10: regulator as well as the manufacturer has to figure out

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Speaker 10: how they can manage such a far flung supply chain

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Speaker 10: and make sure equality comes to on the line.

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Speaker 11: So I think the world's a little bit different and.

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Speaker 10: That's one of the reasons why it's changing.

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Speaker 9: What's that mean for, you know, the economics of Boeing.

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Speaker 7: I mean there's a school thought out there that you know,

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Speaker 7: maybe ten twenty years ago they kind of maybe made

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Speaker 7: the choice to focus a little bit more on shareholders

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Speaker 7: than maybe on the engineering of the company engineering pedigree,

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Speaker 7: and that's arguably worked out well for shareholders. Is there

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Speaker 7: a sense that they maybe went too far and might

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Speaker 7: have to kind of retrench a little bit.

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Speaker 10: I think there is a sense that they went too far, right,

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Speaker 10: if you know, member going to meetings with the old

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Speaker 10: CEO McNerney and even Muhlenberg, a couple of CEOs ago,

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Speaker 10: and you know, they've get into the you know, the

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Speaker 10: meeting with the analysts and talk about how they had

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Speaker 10: a cash generating machine, and I think that's really great,

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Speaker 10: you know, but at the end of the day, these

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Speaker 10: are engineering businesses and manufacturing businesses, and I think they've

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Speaker 10: got to, you know, look again at investing in the

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Speaker 10: people that build these aircraft. It's not it's not like

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Speaker 10: an auto plant where you have a lot of capital

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Speaker 10: equipment in there. You know, you've got robotics, you've got

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Speaker 10: jigs and everything like that that will really help support

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Speaker 10: workers that maybe aren't as you know, trained as an

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Speaker 10: aerospace worker. Aerospace has a lot less of that. The

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Speaker 10: volumes are lower, the work is a lot a lot more.

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Speaker 10: You know, it could be it could be complex, it

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Speaker 10: could be very specific, so much so that you can't

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Speaker 10: get a capital tool on or a machine on it.

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Speaker 10: And so you really need a seasoned workforce there, well

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Speaker 10: trained workforce, And I think that's where they need to be, right,

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Speaker 10: they need to get reinvested back in that workforce.

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Speaker 4: And in that process, I have a really dumb question,

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Speaker 4: So excuse the dumb question.

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Speaker 3: Why is it so hard?

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Speaker 4: Like I understand that building big things that carry people

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Speaker 4: is difficult, but doing it well shouldn't be hard.

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Speaker 3: For a Boeing and an Airbus the only.

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Speaker 4: Two guys who do it, so like, where have they

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Speaker 4: gone so wrong? They have to sort of drill down

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Speaker 4: this much?

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Speaker 10: Well, I guess I would say it's so hard because

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Speaker 10: the tolerances are so tight, right, meaning you can't make

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Speaker 10: a mistake in this business. Right you and I go

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Speaker 10: to work, I can make a problem in a spreadsheet,

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Speaker 10: it's okay, I'll probably figure it out in a couple

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Speaker 10: hours or something like that. You can make a bad

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Speaker 10: car and when it breaks down, you pull to the

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Speaker 10: side of the road and you get the tow truck.

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Speaker 10: It's not the end of the day. This is a

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Speaker 10: zero tolerance for defects business, and that means every little

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Speaker 10: miss is noticed. And that's why I think it's so hard.

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Speaker 9: Fair Enough, is Boeing taking new orders?

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Speaker 12: Now?

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Speaker 9: How was it day to day for them? Are they

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Speaker 9: still their backlogs still here?

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Speaker 13: So stuff?

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Speaker 10: Yeah, I mean they're absolutely open for business taking orders.

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Speaker 10: I haven't seen many orders flow through lately. I have

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Speaker 10: heard some customers like Ryanair that are always looking for

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Speaker 10: a good deal say that if anybody doesn't want their airplanes,

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Speaker 10: they're willing to take them. But I mean on the

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Speaker 10: sales side, absolutely, I think they're open for business. And

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Speaker 10: on the manufacturing side, that's the challenge here too, is

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Speaker 10: they're not going to shut it down. They're building at

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Speaker 10: a thirty eight rate. They've got to do that as

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Speaker 10: well as possible while improving it. And then you know,

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Speaker 10: we're gonna wait and see what the FAA, what changes

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Speaker 10: the FAA may want as they get involved here, but

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Speaker 10: they're still running the business while they try to make

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Speaker 10: these improvements.

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Speaker 4: Because I mean for an airliner, for example, like you

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Speaker 4: put in orders and it's like years in advance, right,

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Speaker 4: so like they kind of have to stay in the queue.

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Speaker 4: But if the deliveries are pushed out, what airlines have

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Speaker 4: enough of like old play that they.

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Speaker 3: Can still do the stuff?

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Speaker 10: You know, So the global airflying fleet, like I could

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Speaker 10: take the next couple hours to talk you through it,

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Speaker 10: but you got like ninety Yeah, I mean there's a

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Speaker 10: there's a lot of them that have older fleet that

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Speaker 10: can that can rely on it. Right now, there's been

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Speaker 10: no change to Boeing's build strategy. They're building it the

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Speaker 10: thirty eight that they broke to at the end of

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Speaker 10: last year.

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Speaker 11: And if this FAA you know.

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Speaker 10: Analysis takes longer than six months, maybe we get into

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Speaker 10: a situation where Boeing can't go to the next build

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Speaker 10: rate that they had they had projected as they you know,

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Speaker 10: told customers they could have airplanes. I could tell you

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Speaker 10: that there's a lot of folks, a lot of airlines

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Speaker 10: in the world that expected airplanes, even from air Bus

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Speaker 10: at certain dates that are having to push some of

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Speaker 10: those out and and make, you know, make provisions with

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Speaker 10: either less sores or using older fleet so that they

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Speaker 10: can cover the schedule they want to fly. So this

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Speaker 10: is not just a Boeing issue with sort of managing

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Speaker 10: not having airplanes ready.

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Speaker 9: All right, George, thanks so much for joining us again.

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Speaker 7: George Ferguson, Senior Aerospace, Defense and Airlines Annols Bloomberg Intelligence

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Speaker 7: on the Zoom Camp from a Bloomberg's headquarters down to Princeton,

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Speaker 7: New Jersey.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on fo car Playing and

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Speaker 1: broud Otto with the Bloomberg Business app. Listen on demand

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 7: A bad day for President Trump and his legal team.

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Speaker 7: Can you put this in context for us?

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Speaker 13: Sure? Yes, it's a speed bump in his legal journey.

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Speaker 13: I guess you could call it.

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Speaker 14: He the a three judge panel of the d C

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Speaker 14: Circuit Court of Appeals, which is actually the US Circuit

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Speaker 14: Court of Appeals based in DC, has ruled the Trump's

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Speaker 14: argument that he is immune from criminal prosecution because he

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Speaker 14: was president when he was allegedly committing these crimes related

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Speaker 14: to the insurrection at the Capitol on January six, that

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Speaker 14: his argument is wrong, that he has no immunity and

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Speaker 14: he can indeed be prosecuted. Trump has just said that

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Speaker 14: he was going to appeal that decision, and that would

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Speaker 14: go to the full US Circuit Court of Appeals for

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Speaker 14: the District of Columbia and then presumably onto the Supreme

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Speaker 14: Court if he doesn't like the answer from the nine judges.

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Speaker 4: Wendy, do you think that it will get to the

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Speaker 4: Supreme Court? We were debating whether or not they would

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Speaker 4: take it.

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Speaker 13: Up if it got there. It's always hard to tell

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Speaker 13: what the Supreme Court will do. I have no doubt that.

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Speaker 14: If the nine judge panel agrees with the three judge panel,

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Speaker 14: that Trump will appeal it all the way to the

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Speaker 14: Supreme Court. And it's one of those basic fundamental constitutional

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Speaker 14: questions that frankly, the Supreme Court would probably be interested

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Speaker 14: in taking up because it will determine once and for

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Speaker 14: all whether a president has immunity now a president, we've

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Speaker 14: never faced this before, first of all, but also Trump

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Speaker 14: is arguing based on a nineteen eighty two Supreme Court

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Speaker 14: decision that in civil cases. A president is immune from

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Speaker 14: civil lawsuits. For ax, he took his president, but a

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Speaker 14: civil lawsuit and a criminal indictment are two very different things.

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Speaker 9: So lots of questions here. One of them is just timing, Wendy.

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Speaker 7: Do we have any framework for how the one, possibly

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Speaker 7: two appeals would take.

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Speaker 13: We don't. He has a former president.

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Speaker 14: Trump has until Monday to file an appeal, or to

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Speaker 14: say he's going to appeal.

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Speaker 13: I think so he has till Monday to do that.

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Speaker 14: Then we don't know how long it would take the

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Speaker 14: full court to decide, and then the Supreme Court may

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Speaker 14: or may not take its time, depending on how complicated

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Speaker 14: the issue is. I like to think that these courts

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Speaker 14: would not act based on politics, and there's no reason

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Speaker 14: to think they would. So they may just see the

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Speaker 14: case as easy and decide quickly, or they may decide

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Speaker 14: to take more time. But either way, the clock is

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Speaker 14: ticking toward the November election.

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Speaker 3: Wendy. Let's just play it out for a second.

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Speaker 4: So let's just say that this sticks in whatever way

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Speaker 4: and he's not granted criminal immunity.

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Speaker 3: With them, what like, does what does that do to

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Speaker 3: the November election?

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Speaker 14: Well, what it does do is allow Jack Smith, the

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Speaker 14: Justice Department Special prosecutor, to move forward with his case

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Speaker 14: charging Trump with responsibility for the January sixth attack on

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Speaker 14: the US Capitol in twenty twenty one. And Jack Smith

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Speaker 14: says he's ready to go and would like to do

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Speaker 14: this case quickly. So presumably if the courts act in

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Speaker 14: time and the question of immunity is settled so that

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Speaker 14: a trial can go forward, then we could be looking

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Speaker 14: at a trial on that case before the election.

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Speaker 7: So is there any consensus in Washington about how this

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Speaker 7: will play out here because it doesn't seem very good

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Speaker 7: for the former president just from my read, which is

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Speaker 7: totally uninformed.

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Speaker 13: Well, it's not. It doesn't look like it's going to

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Speaker 13: be good for the president.

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Speaker 14: The laws are pretty clear, and the argument that Trump

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Speaker 14: is basing his appeal on that he's immune from civil

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Speaker 14: lawsuits has no application to the criminal statutes. So, you know,

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Speaker 14: it doesn't look like it's going to get any better

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Speaker 14: the higher up he goes in the judicial system.

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Speaker 13: But we never knows. Different judges see different things.

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Speaker 4: Wendy, how does this playin with voters? Because clearly his

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Speaker 4: base is going to assume that he's being unfairly prosecuted anyway,

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Speaker 4: So that in some ways helps the base. We see

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Speaker 4: every time there's a new indictment, he gets a load

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Speaker 4: of fundraising money.

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Speaker 3: So who does this actually sway in terms of voters?

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Speaker 14: This doesn't sway well, it doesn't sway voters either way.

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Speaker 14: People who don't like Donald Trump think he should be prosecuted,

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Speaker 14: people who who a lot of Trump's supporters do believe

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Speaker 14: that this is politically motivated. They buy his line and

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Speaker 14: campaign rallies that this is a quote unquote witch hunt,

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Speaker 14: and so this is just another step in that road

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Speaker 14: toward that. However, our recent Bloomberg News Morning Console poll

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Speaker 14: published last week said that fifty three percent of voters

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Speaker 14: in the important swing states would not vote for Trump

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Speaker 14: if he were convicted of a crime. And that includes

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Speaker 14: one in four Republican voters in swing states. So if

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Speaker 14: he is convicted, that really could damage his reelection prospects.

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Speaker 4: All right, Wendy, thanks so much. We really appreciate it.

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Speaker 4: Thank you for jumping on with us, Wendy. Benjamison, a

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Speaker 4: Bloomberg Washington senior editor, on that story, I don't know,

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Speaker 4: I think anything's going to get so political. It's going

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Speaker 4: to be so hard to see the forest in the trees.

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Speaker 7: Yeah, I just don't know how the timing's going to work,

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Speaker 7: and just a lot of hurdles there. But moving forward,

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Speaker 7: I guess is kind of the story.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on applecar.

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Speaker 2: Play and Android Auto with the Bloomberg Business Act.

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Speaker 7: David Bonson joined a series the Chief Investment Option for

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00:22:24,800 --> 00:22:28,480
Speaker 7: the Bonson Group. David again, John Tucker was looking for

443
00:22:28,560 --> 00:22:30,000
Speaker 7: some theme to talk about here in this market.

444
00:22:30,080 --> 00:22:30,919
Speaker 9: I don't see a lot here.

445
00:22:30,960 --> 00:22:32,639
Speaker 7: We got a ton of earnings going on out there,

446
00:22:32,720 --> 00:22:35,800
Speaker 7: but it seems to be everybody's kind of waiting on

447
00:22:35,920 --> 00:22:38,400
Speaker 7: the fed. You know, I don't know what do you guys,

448
00:22:38,920 --> 00:22:41,159
Speaker 7: What are you guys looking for in terms of direction

449
00:22:41,359 --> 00:22:42,280
Speaker 7: in this marketplace?

450
00:22:42,720 --> 00:22:46,720
Speaker 15: I always am looking for company earnings and actual activities

451
00:22:46,760 --> 00:22:48,879
Speaker 15: from the businesses we invest in. In other words, a

452
00:22:48,920 --> 00:22:51,280
Speaker 15: day today is the way it's supposed to be. You know,

453
00:22:51,480 --> 00:22:54,800
Speaker 15: the market's trading around the size of the briefcase. J

454
00:22:55,000 --> 00:22:57,399
Speaker 15: Powell carries to a press conference. It strikes me as

455
00:22:57,480 --> 00:23:01,159
Speaker 15: very unhealthy markets trading around sign and property having a

456
00:23:01,359 --> 00:23:04,399
Speaker 15: blockbuster earnings result last night. Now that makes a lot

457
00:23:04,480 --> 00:23:07,920
Speaker 15: of sense. So you see the largest mall operator in

458
00:23:07,960 --> 00:23:10,560
Speaker 15: the country up four and a half percent today. It

459
00:23:10,680 --> 00:23:12,720
Speaker 15: was a name I talked about with you guys last

460
00:23:12,720 --> 00:23:15,480
Speaker 15: time I was here, that you know, we're bottom up people,

461
00:23:15,600 --> 00:23:20,040
Speaker 15: We're markets, are businesses doing things kind of people. I'd

462
00:23:20,160 --> 00:23:22,879
Speaker 15: like to see less of the obsession with Jpal quite frankly.

463
00:23:23,080 --> 00:23:25,760
Speaker 3: Okay, So then what do you like, like what's working

464
00:23:25,800 --> 00:23:26,320
Speaker 3: bottom up?

465
00:23:26,720 --> 00:23:28,639
Speaker 15: I think bottom up you have to look at the

466
00:23:28,840 --> 00:23:32,480
Speaker 15: spaces that are not overvalued. Even though some of those

467
00:23:32,520 --> 00:23:35,280
Speaker 15: overvalued names have done well, it's not been the quarter

468
00:23:35,359 --> 00:23:37,680
Speaker 15: everyone seems to think it has for mag seven, but

469
00:23:37,840 --> 00:23:42,400
Speaker 15: Tesla's gotten crushed, and Microsoft had, you know, good results,

470
00:23:42,440 --> 00:23:45,920
Speaker 15: but not a great stock result. Facebook had a huge

471
00:23:46,160 --> 00:23:48,040
Speaker 15: up swing on a dividen announcement.

472
00:23:48,440 --> 00:23:49,800
Speaker 11: It's been very mixed.

473
00:23:50,000 --> 00:23:52,560
Speaker 15: We're looking at things like consumer staples that we think

474
00:23:52,600 --> 00:23:56,639
Speaker 15: are showing their pricing power, growing dividends, and if it

475
00:23:56,760 --> 00:23:59,119
Speaker 15: is going to be a boring year, that will be

476
00:23:59,160 --> 00:23:59,880
Speaker 15: a good thing for such.

477
00:24:00,000 --> 00:24:02,159
Speaker 3: Does that mean that you sell tech or you did

478
00:24:02,160 --> 00:24:03,840
Speaker 3: don't want to buy them here, Well.

479
00:24:03,720 --> 00:24:05,240
Speaker 16: For us, we don't have to worry about selling it

480
00:24:05,280 --> 00:24:06,720
Speaker 16: because we didn't buy it to begin with.

481
00:24:06,920 --> 00:24:08,360
Speaker 3: And so so you don't own any of the big

482
00:24:08,400 --> 00:24:10,160
Speaker 3: mag seven or six, not a single one.

483
00:24:10,280 --> 00:24:12,360
Speaker 9: And so that's why are evaluation called.

484
00:24:13,040 --> 00:24:14,360
Speaker 11: It's totally evaluation called.

485
00:24:14,400 --> 00:24:16,720
Speaker 15: These are seven of the best run companies in history

486
00:24:17,000 --> 00:24:19,600
Speaker 15: that have done extremely well, and they have a blended

487
00:24:19,800 --> 00:24:22,600
Speaker 15: negative return over the last two years. And I don't

488
00:24:22,600 --> 00:24:25,200
Speaker 15: think people realize that because twenty twenty three was so good,

489
00:24:25,680 --> 00:24:28,120
Speaker 15: but it was mostly just offsetting what was so bad

490
00:24:28,200 --> 00:24:29,879
Speaker 15: in twenty two, and we think that's what it's going

491
00:24:29,920 --> 00:24:30,080
Speaker 15: to do.

492
00:24:30,440 --> 00:24:33,359
Speaker 16: That's what companies that trade at thirty thirty five, forty times.

493
00:24:33,840 --> 00:24:34,960
Speaker 11: You know, Facebook right now.

494
00:24:34,880 --> 00:24:37,880
Speaker 15: Has a higher forward multiple than it does backward after

495
00:24:38,000 --> 00:24:38,480
Speaker 15: last week.

496
00:24:38,600 --> 00:24:39,320
Speaker 11: That's just crazy.

497
00:24:39,760 --> 00:24:42,600
Speaker 15: So what do you how do you screen for stocks?

498
00:24:42,600 --> 00:24:44,960
Speaker 15: What's important to you, guys at the Bondson dividend growth.

499
00:24:45,040 --> 00:24:47,240
Speaker 15: So it starts with companies that have a dividend higher

500
00:24:47,280 --> 00:24:50,160
Speaker 15: than the SMP. Generally we want one hundred basis points

501
00:24:50,240 --> 00:24:51,960
Speaker 15: or so higher in the SMP, but then a track

502
00:24:52,080 --> 00:24:54,240
Speaker 15: record of growing the dividend from there.

503
00:24:54,359 --> 00:24:56,720
Speaker 16: That's the screen, as you asked. Then we start doing

504
00:24:56,760 --> 00:24:59,200
Speaker 16: our work. Then we have to research. We want management

505
00:24:59,240 --> 00:25:01,320
Speaker 16: that's committed to the dividend, committed.

506
00:25:00,960 --> 00:25:02,160
Speaker 11: To growing it year over year.

507
00:25:02,600 --> 00:25:04,439
Speaker 15: They can only do so if they have a company

508
00:25:04,520 --> 00:25:07,240
Speaker 15: that has recurring free cash flow. So if the free

509
00:25:07,320 --> 00:25:10,320
Speaker 15: cash flow or the business model itself lends itself to

510
00:25:10,440 --> 00:25:13,000
Speaker 15: lumpy earnings, it may not be a good diviting payer

511
00:25:13,080 --> 00:25:15,080
Speaker 15: has to have a strong balance sheet. It's a little

512
00:25:15,080 --> 00:25:17,159
Speaker 15: bit more boring. You get a lot in healthcare. You

513
00:25:17,240 --> 00:25:18,919
Speaker 15: know why we did so well last year.

514
00:25:18,880 --> 00:25:20,920
Speaker 11: Was financials asset managers.

515
00:25:20,960 --> 00:25:23,680
Speaker 15: Blackstone was up over eighty percent, Apollo and blew out

516
00:25:23,720 --> 00:25:26,840
Speaker 15: what up fifty percent. Even though consumer staples and healthcare

517
00:25:26,840 --> 00:25:29,920
Speaker 15: were laggards last year, but again on a two year basis,

518
00:25:30,200 --> 00:25:33,399
Speaker 15: they're beating everything else because twenty twenty two mattered. So

519
00:25:33,720 --> 00:25:36,440
Speaker 15: that's our approach, and we don't try to time in

520
00:25:36,520 --> 00:25:39,439
Speaker 15: and out of it. I don't know if Nvideo's going

521
00:25:39,520 --> 00:25:41,679
Speaker 15: up another fifty percent or not. I do know if

522
00:25:41,720 --> 00:25:44,800
Speaker 15: it does, it's multiple expansion, and we do not invest

523
00:25:44,880 --> 00:25:45,880
Speaker 15: on multiple expansion.

524
00:25:45,960 --> 00:25:47,640
Speaker 16: We invest on free cash flow growth.

525
00:25:47,760 --> 00:25:48,760
Speaker 3: Do you like big oil?

526
00:25:49,520 --> 00:25:53,720
Speaker 16: Well, I love oil, small, little, medium, and big, but all.

527
00:25:53,440 --> 00:25:54,399
Speaker 9: You kind of front here.

528
00:25:54,720 --> 00:25:55,680
Speaker 11: Yeah, I think that.

529
00:25:55,800 --> 00:25:57,760
Speaker 16: I think that that's where you get the great dividend growths.

530
00:25:57,800 --> 00:25:59,240
Speaker 3: I was asking, and I think that the.

531
00:25:59,280 --> 00:26:02,399
Speaker 15: Biden administry policies are very favorable to big oil and

532
00:26:02,680 --> 00:26:04,840
Speaker 15: very unfavorable to small oil. They're not allowing a lot

533
00:26:04,880 --> 00:26:08,000
Speaker 15: of new projects, which makes the projects that Exon and

534
00:26:08,080 --> 00:26:10,679
Speaker 15: Chevron already have in the ground much more valuable. Make

535
00:26:10,960 --> 00:26:14,840
Speaker 15: enables them to go buy Hess and Pioneer respectively, and

536
00:26:14,880 --> 00:26:18,520
Speaker 15: their permium market share is just exploding. So both Chevron

537
00:26:18,600 --> 00:26:20,720
Speaker 15: and Exon we think are great plays, but they're not

538
00:26:20,760 --> 00:26:24,720
Speaker 15: our biggest energy exposure. It's midstream. So we on ETF.

539
00:26:24,840 --> 00:26:28,840
Speaker 15: The ticker is UMI. It's actively managed, has about eighteen

540
00:26:28,920 --> 00:26:33,560
Speaker 15: different pipeline names, export LNG terminals, but it's actively managed

541
00:26:33,600 --> 00:26:36,359
Speaker 15: around that midstream energy infrastructure story.

542
00:26:36,840 --> 00:26:38,000
Speaker 16: Last year, energy was.

543
00:26:38,040 --> 00:26:41,080
Speaker 15: Down a couple percent, Exon was down a little, Chevron

544
00:26:41,160 --> 00:26:44,800
Speaker 15: was down nine midstream was up sixteen percent. The MLPs

545
00:26:44,840 --> 00:26:47,480
Speaker 15: were up twenty five percent for the third year in

546
00:26:47,560 --> 00:26:51,040
Speaker 15: a row. So we do like the midstream energy story.

547
00:26:51,480 --> 00:26:54,080
Speaker 7: What gets you to sell a name is it they

548
00:26:54,200 --> 00:26:57,320
Speaker 7: cut the dividend or they just say they start doing

549
00:26:57,320 --> 00:26:59,840
Speaker 7: stuff that might put the dividend cash flowers.

550
00:27:00,680 --> 00:27:03,800
Speaker 15: Yeah, those are all good answers. It could be opportunity costs.

551
00:27:03,800 --> 00:27:05,800
Speaker 15: There was a company, Cardinal Health, we bought for about

552
00:27:05,800 --> 00:27:08,359
Speaker 15: fifty bucks. It's in a fantastic dividend grower. It got

553
00:27:08,400 --> 00:27:10,400
Speaker 15: to one hundred and ten. They continued going the divd

554
00:27:10,480 --> 00:27:13,280
Speaker 15: then they're executing, but at that point we got five

555
00:27:13,359 --> 00:27:15,960
Speaker 15: years of return in one year, and we just exited

556
00:27:16,040 --> 00:27:19,720
Speaker 15: simply to be able to pursue better opportunities. We're selling

557
00:27:19,880 --> 00:27:22,359
Speaker 15: MetLife today as a matter of fact, and that's the

558
00:27:22,440 --> 00:27:24,359
Speaker 15: name we've owned for a few years. But it's a

559
00:27:24,400 --> 00:27:27,840
Speaker 15: company that is not growing its dividend in cash, but

560
00:27:27,920 --> 00:27:30,800
Speaker 15: it is growing at dividends per share. So we're getting

561
00:27:30,840 --> 00:27:33,240
Speaker 15: more dividends per share, but they're just paying the same

562
00:27:33,280 --> 00:27:34,920
Speaker 15: amount because they're buying.

563
00:27:34,760 --> 00:27:35,639
Speaker 11: Back so much stock.

564
00:27:36,200 --> 00:27:38,479
Speaker 15: When they're buying back three times as much stock as

565
00:27:38,480 --> 00:27:41,000
Speaker 15: they are paying dividend, we don't like that. But your

566
00:27:41,080 --> 00:27:43,000
Speaker 15: question about if they cut the dividend, do we sell it.

567
00:27:43,160 --> 00:27:45,439
Speaker 15: It's our job to not let that happen. We need

568
00:27:45,600 --> 00:27:48,159
Speaker 15: to be in front of companies that will cut the dividend,

569
00:27:48,480 --> 00:27:50,680
Speaker 15: and some of the sort of career making moments for me,

570
00:27:50,800 --> 00:27:54,240
Speaker 15: were deciding against the grain to sell companies we believed

571
00:27:54,240 --> 00:27:56,719
Speaker 15: were at risk of cutting the dividend ended up being right.

572
00:27:56,960 --> 00:27:58,399
Speaker 9: How do you identify those companies? You just see their

573
00:27:58,440 --> 00:27:59,080
Speaker 9: free cash flows?

574
00:27:59,119 --> 00:28:02,119
Speaker 15: Maybe or yeah, my favorite story while time is two

575
00:28:02,160 --> 00:28:04,480
Speaker 15: thousand and seven City Group. When they continue to pay

576
00:28:04,520 --> 00:28:07,480
Speaker 15: the dividend and then we're borrowing twelve billion dollars from

577
00:28:07,520 --> 00:28:11,440
Speaker 15: Saudi Arabia. This doesn't look right to me, and I think, yeah,

578
00:28:11,480 --> 00:28:14,040
Speaker 15: when free cash flow goes negative and the dividend keeps going,

579
00:28:14,160 --> 00:28:17,040
Speaker 15: then they're basically taking advance on the credit card to

580
00:28:17,080 --> 00:28:17,719
Speaker 15: pay the dividend.

581
00:28:18,119 --> 00:28:20,400
Speaker 4: So do you get heat from investors though, in terms

582
00:28:20,440 --> 00:28:23,200
Speaker 4: of not buying, not being in big tech, and being

583
00:28:23,240 --> 00:28:26,000
Speaker 4: in big oil, because that's like the reverse of what

584
00:28:26,080 --> 00:28:28,240
Speaker 4: the cool trendy thing ESG thing is.

585
00:28:28,960 --> 00:28:30,960
Speaker 15: That's a really good question, but we actually don't take

586
00:28:31,000 --> 00:28:32,280
Speaker 15: heat for it. But a lot of that has to

587
00:28:32,359 --> 00:28:34,520
Speaker 15: do with self selection of the client base. The types

588
00:28:34,560 --> 00:28:36,800
Speaker 15: of people that like working with us might be more

589
00:28:36,840 --> 00:28:37,720
Speaker 15: predisposed to that.

590
00:28:38,040 --> 00:28:38,680
Speaker 11: But also we're.

591
00:28:38,560 --> 00:28:43,400
Speaker 15: Incredibly communicative, we explain why isn't there's a certain ideological

592
00:28:43,480 --> 00:28:43,920
Speaker 15: bend in this.

593
00:28:44,240 --> 00:28:46,600
Speaker 11: Obviously there is in the ESG side for us.

594
00:28:46,720 --> 00:28:48,800
Speaker 15: We really believe we have a fiduciary duty to find

595
00:28:48,800 --> 00:28:51,560
Speaker 15: the right investment opportunities for clients. I'm out against big

596
00:28:51,600 --> 00:28:55,080
Speaker 15: tech ideologically. I'm against big tech not returning cash to shareholders.

597
00:28:55,160 --> 00:28:58,880
Speaker 15: I think that it is absolutely inexcusable that Apple is

598
00:28:58,960 --> 00:29:02,440
Speaker 15: paying tip money out to investors when when they're making

599
00:29:02,560 --> 00:29:05,040
Speaker 15: more cash in a year than most of the S

600
00:29:05,120 --> 00:29:08,040
Speaker 15: and P makes in a lifetime. It's just to me,

601
00:29:08,160 --> 00:29:11,520
Speaker 15: it's an unfair treatment of shareholders. But I understand the argument.

602
00:29:12,280 --> 00:29:14,800
Speaker 15: You know, there's always people ask about it. But look,

603
00:29:14,920 --> 00:29:17,800
Speaker 15: Netflix was up one thousand percent last decade, and it

604
00:29:17,880 --> 00:29:20,200
Speaker 15: gave back all of that return in about six months

605
00:29:20,240 --> 00:29:23,280
Speaker 15: in twenty twenty two. So I'm a child of the

606
00:29:23,360 --> 00:29:26,479
Speaker 15: nineties that grew up beginning investing money professionally in the nineties.

607
00:29:26,760 --> 00:29:28,160
Speaker 11: I saw what happened with.

608
00:29:28,280 --> 00:29:30,040
Speaker 16: Cisco today is sitting on fifty dollars.

609
00:29:30,120 --> 00:29:32,720
Speaker 15: It was eighty dollars in nineteen ninety nine and it's

610
00:29:32,760 --> 00:29:36,000
Speaker 15: one and it's grown earnings and profits and revenues every year.

611
00:29:36,360 --> 00:29:37,480
Speaker 11: It's executed perfectly.

612
00:29:37,560 --> 00:29:41,480
Speaker 15: It was just plain overpriced, and when you buy something

613
00:29:41,560 --> 00:29:45,120
Speaker 15: that overpriced, you risk decades of lost return.

614
00:29:45,200 --> 00:29:46,920
Speaker 16: We're just unwilling to take it that risk.

615
00:29:47,240 --> 00:29:49,000
Speaker 7: So what's what do you think is a what's a

616
00:29:49,080 --> 00:29:51,240
Speaker 7: dividend yield that screens well for you? Do you is

617
00:29:51,280 --> 00:29:53,080
Speaker 7: it by industry, by company or do you say I

618
00:29:53,160 --> 00:29:54,720
Speaker 7: need at least a two and adre percent yield or

619
00:29:54,760 --> 00:29:55,160
Speaker 7: something like that.

620
00:29:55,360 --> 00:29:57,959
Speaker 15: Yeah, I mean universally we tend to want about two

621
00:29:58,000 --> 00:29:59,720
Speaker 15: and a half just to start, but there's some sectors

622
00:29:59,760 --> 00:30:01,040
Speaker 15: with that wouldn't be nearly enough.

623
00:30:01,120 --> 00:30:02,880
Speaker 11: The portfolio blends.

624
00:30:02,560 --> 00:30:05,200
Speaker 15: To about a four handle yield, and that's more than

625
00:30:05,280 --> 00:30:08,400
Speaker 15: double the S and P. And so you're going to

626
00:30:08,480 --> 00:30:12,400
Speaker 15: end up with some higher yielding names. Simon Property, Lamar, Advertising,

627
00:30:12,440 --> 00:30:17,640
Speaker 15: the public. It's a wonderful, wonderful company. Wonderful company, you

628
00:30:17,680 --> 00:30:20,440
Speaker 15: talk about shareholder alignment. Family owns so much of it.

629
00:30:20,520 --> 00:30:23,880
Speaker 15: They're going the dividend every year. Our midstream energy stuff

630
00:30:23,960 --> 00:30:25,960
Speaker 15: is over five percent yield. So you get some higher

631
00:30:26,040 --> 00:30:28,440
Speaker 15: yielding names. You're going to have lower yielding names on

632
00:30:28,560 --> 00:30:29,280
Speaker 15: some of these ones that.

633
00:30:29,280 --> 00:30:30,080
Speaker 11: It's just priced in.

634
00:30:30,600 --> 00:30:32,680
Speaker 15: You know McDonald's I think we talked about last time.

635
00:30:33,080 --> 00:30:35,680
Speaker 15: That's a lower yield now only because we're up six

636
00:30:35,800 --> 00:30:38,520
Speaker 15: hundred percent since we bought the stock. Same for Walmart

637
00:30:38,920 --> 00:30:40,680
Speaker 15: Walmart went public.

638
00:30:40,440 --> 00:30:41,400
Speaker 16: The same year I was born.

639
00:30:41,440 --> 00:30:43,880
Speaker 15: They've grown the dividend every single year, so you end

640
00:30:43,960 --> 00:30:46,800
Speaker 15: up with a lower yield right now. But our yield

641
00:30:47,080 --> 00:30:50,760
Speaker 15: on Walmart McDonald's is like forty percent on purchase, We're

642
00:30:50,800 --> 00:30:53,640
Speaker 15: getting forty percent year over year from what we bought

643
00:30:53,680 --> 00:30:54,280
Speaker 15: the stock at.

644
00:30:54,680 --> 00:30:56,440
Speaker 11: That's what the whole point of dividend growth is.

645
00:30:56,760 --> 00:30:58,959
Speaker 4: I just have like, there's up thirty seconds, right. Are

646
00:30:59,000 --> 00:31:01,520
Speaker 4: you competing with money mark at funds in terms of

647
00:31:01,560 --> 00:31:02,520
Speaker 4: getting money in clients?

648
00:31:02,720 --> 00:31:05,840
Speaker 15: No, you're always competing with the risk free rate in

649
00:31:06,520 --> 00:31:08,719
Speaker 15: the fact that people have to bench it against something,

650
00:31:08,960 --> 00:31:11,560
Speaker 15: But they're not people saying I'm considering either money market

651
00:31:11,720 --> 00:31:12,760
Speaker 15: or a divid in portfolio.

652
00:31:12,840 --> 00:31:14,360
Speaker 11: It's a totally different risk profile.

653
00:31:14,760 --> 00:31:17,400
Speaker 15: It's true in a macroeconomic sense, but it's never true

654
00:31:17,440 --> 00:31:18,800
Speaker 15: in a micro economic sense.

655
00:31:20,120 --> 00:31:22,440
Speaker 9: How's the weather out in here we go?

656
00:31:22,880 --> 00:31:25,400
Speaker 11: Here's the thing. I'm sitting here in Manhattan. The sun's out,

657
00:31:25,480 --> 00:31:26,080
Speaker 11: it's beautiful.

658
00:31:26,120 --> 00:31:26,920
Speaker 16: It's a little chilly.

659
00:31:27,440 --> 00:31:30,520
Speaker 15: California having the worst rainstorm that they've seen, which, of

660
00:31:30,560 --> 00:31:32,880
Speaker 15: course there people wouldn't even you know, around the country

661
00:31:32,960 --> 00:31:35,440
Speaker 15: wouldn't consider it a storm. But in Newport they'll probably

662
00:31:35,480 --> 00:31:36,880
Speaker 15: end up canceling school for a month.

663
00:31:37,080 --> 00:31:38,280
Speaker 9: I saw some of the video coming.

664
00:31:38,320 --> 00:31:41,920
Speaker 11: Looks really fatty. It's pretty bad. They've gotten a lot

665
00:31:41,920 --> 00:31:42,200
Speaker 11: of rain.

666
00:31:42,280 --> 00:31:44,960
Speaker 15: It's a little worse inland, but yeah they you know,

667
00:31:45,120 --> 00:31:46,960
Speaker 15: we get this like once every hundred years.

668
00:31:47,040 --> 00:31:49,080
Speaker 9: Yeah, all right, it's hopefully good. Snow up and tell

669
00:31:49,200 --> 00:31:50,160
Speaker 9: hoo for the skiers.

670
00:31:50,600 --> 00:31:52,840
Speaker 7: David Bonson, thanks so much for joining us at David Bonson,

671
00:31:53,000 --> 00:31:54,680
Speaker 7: Chief Investment Officer, Boson Group.

672
00:31:55,640 --> 00:31:57,960
Speaker 9: Dividend yields. That's one of the many regions we like

673
00:31:58,000 --> 00:31:59,600
Speaker 9: to talk to day because it's a strategy we don't

674
00:31:59,640 --> 00:31:59,920
Speaker 9: hear enough.

675
00:32:00,440 --> 00:32:00,840
Speaker 3: It's true.

676
00:32:01,400 --> 00:32:03,440
Speaker 4: And also just hallar risk profile is factored and when

677
00:32:03,440 --> 00:32:04,480
Speaker 4: you take a look at the S and P divid

678
00:32:04,520 --> 00:32:05,800
Speaker 4: and NEI old and sort of how to manage that.

679
00:32:06,000 --> 00:32:06,959
Speaker 3: Yep, I think that's interesting.

680
00:32:08,520 --> 00:32:12,360
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

681
00:32:12,480 --> 00:32:15,400
Speaker 1: weekdays at ten am Eastern on applecar.

682
00:32:15,000 --> 00:32:17,760
Speaker 2: Play and Android Auto with the Bloomberg Business app.

683
00:32:17,880 --> 00:32:20,719
Speaker 1: You can also listen live on Amazon Alexa from our

684
00:32:20,760 --> 00:32:25,040
Speaker 1: flagship New York station, Just say Alexa Play Bloomberg eleven.

685
00:32:24,880 --> 00:32:28,560
Speaker 4: Thirty Bloomberg Intelligence, where we're going to tap all our

686
00:32:28,640 --> 00:32:30,920
Speaker 4: analysts that cover about two thousand companies and one hundred

687
00:32:30,920 --> 00:32:34,280
Speaker 4: and thirty industries that we cover worldwide. But we're going

688
00:32:34,320 --> 00:32:36,640
Speaker 4: to tap someone else right now in the ETF world

689
00:32:37,040 --> 00:32:39,160
Speaker 4: for her take on the market, and that's Sylvia Dablonski,

690
00:32:39,280 --> 00:32:42,760
Speaker 4: chief executive officer and chief investment officer at Defiance ETFs.

691
00:32:43,080 --> 00:32:45,600
Speaker 4: A great perspective on sort of what the trends are

692
00:32:45,680 --> 00:32:48,840
Speaker 4: in the market and what people are doing with their money. Sylvia,

693
00:32:48,880 --> 00:32:49,680
Speaker 4: thanks for joining us.

694
00:32:49,680 --> 00:32:50,360
Speaker 3: We appreciate it.

695
00:32:50,640 --> 00:32:53,320
Speaker 4: What are you seeing most right now as we're sort

696
00:32:53,320 --> 00:32:54,920
Speaker 4: of in the second month of the year after a

697
00:32:55,120 --> 00:32:56,280
Speaker 4: very bizarre four.

698
00:32:56,200 --> 00:32:59,680
Speaker 12: Weeks, Hi, Alex's great to see you. Yeah, I mean,

699
00:33:00,440 --> 00:33:03,400
Speaker 12: has been a very bizarre four weeks. What's really interesting,

700
00:33:03,440 --> 00:33:05,400
Speaker 12: and I think what's what's pretty good is that some

701
00:33:05,560 --> 00:33:08,560
Speaker 12: of the positive momentum that we had towards the end

702
00:33:08,600 --> 00:33:11,200
Speaker 12: of the year has continued into this year, and that

703
00:33:11,320 --> 00:33:13,240
Speaker 12: blip on the radar that we saw those first couple

704
00:33:13,280 --> 00:33:15,320
Speaker 12: of days and you know, have kind of just faded

705
00:33:15,360 --> 00:33:17,840
Speaker 12: to the wayside. So what we're seeing on our side

706
00:33:17,920 --> 00:33:21,360
Speaker 12: is just this continued, you know, exuberance and excitement about

707
00:33:21,400 --> 00:33:24,120
Speaker 12: the AI trade. Most of the flows that we've seen

708
00:33:24,200 --> 00:33:27,360
Speaker 12: have come into that space, So quantum computing types of stocks,

709
00:33:27,440 --> 00:33:28,960
Speaker 12: AI stocks, machine.

710
00:33:28,720 --> 00:33:31,200
Speaker 17: Learning kind of an expansion of that ecosystem.

711
00:33:31,280 --> 00:33:32,920
Speaker 12: So before it was just NA video and a MD

712
00:33:33,040 --> 00:33:35,040
Speaker 12: and now people are sort of looking at companies like

713
00:33:35,080 --> 00:33:37,760
Speaker 12: Polenteer who you just mentioned, had uh, you know, a

714
00:33:37,840 --> 00:33:41,040
Speaker 12: great earnings report, and Taiwan Sid my conductor, you know,

715
00:33:41,160 --> 00:33:43,800
Speaker 12: I on q IBM, some of these other players in

716
00:33:43,840 --> 00:33:46,320
Speaker 12: the AI space, and it's just been, you know, off

717
00:33:46,400 --> 00:33:47,360
Speaker 12: to the races.

718
00:33:47,040 --> 00:33:48,560
Speaker 9: There, all right.

719
00:33:48,800 --> 00:33:51,160
Speaker 7: One of my favorite ETFs out there is a Defiance

720
00:33:51,240 --> 00:33:55,640
Speaker 7: ETF c r u Z. I'm fascinated with the cruise business,

721
00:33:55,680 --> 00:33:57,000
Speaker 7: the economics of the cruise business.

722
00:33:57,000 --> 00:33:59,720
Speaker 9: I actually even may go on a cruise coming up.

723
00:33:59,720 --> 00:34:01,880
Speaker 3: Versus it's Pete cruise. Now I feel like being.

724
00:34:01,640 --> 00:34:05,120
Speaker 9: Pitched yeah cr when I go on. So what do

725
00:34:05,160 --> 00:34:07,040
Speaker 9: you see in that industry these days? What are the drivers?

726
00:34:08,600 --> 00:34:08,799
Speaker 17: Yeah?

727
00:34:08,920 --> 00:34:11,960
Speaker 12: So I think it's been really interesting to watch the

728
00:34:12,040 --> 00:34:15,279
Speaker 12: cruise business and what happened during COVID is everybody you

729
00:34:15,360 --> 00:34:17,960
Speaker 12: know vividly remembers the cruise business just came to an

730
00:34:18,000 --> 00:34:21,040
Speaker 12: absolute halt and just took on so much debt and

731
00:34:21,320 --> 00:34:23,920
Speaker 12: it was just a complete disaster. Right, And I think

732
00:34:23,960 --> 00:34:26,359
Speaker 12: we're at the point now just listening to these last

733
00:34:26,400 --> 00:34:28,960
Speaker 12: earnings calls where you know, you had the CEO.

734
00:34:28,680 --> 00:34:32,000
Speaker 17: Of Carnival, of Royal Caribbean, you know, even the outlooks

735
00:34:32,000 --> 00:34:32,680
Speaker 17: from Norwegian.

736
00:34:33,120 --> 00:34:35,560
Speaker 12: You know, the spending is back, and what they're saying

737
00:34:35,680 --> 00:34:38,680
Speaker 12: is that they have more cruises booked for twenty twenty

738
00:34:38,719 --> 00:34:42,400
Speaker 12: four than they did pre pandemic. Finally, the average consumers

739
00:34:42,440 --> 00:34:44,520
Speaker 12: spending a lot more, you know, sort of finally, and

740
00:34:44,560 --> 00:34:46,520
Speaker 12: they're able to kind of like reduce their debt and

741
00:34:46,719 --> 00:34:48,319
Speaker 12: have stronger profit margins and.

742
00:34:48,760 --> 00:34:49,520
Speaker 17: And things like this.

743
00:34:49,760 --> 00:34:51,840
Speaker 12: So I think the reason that that's holding up the

744
00:34:51,920 --> 00:34:54,520
Speaker 12: whole travel trade in general is holding up because the

745
00:34:54,600 --> 00:34:58,400
Speaker 12: economy is holding up, right, The consumer remains strong, that

746
00:34:58,480 --> 00:35:00,160
Speaker 12: wage go to you know, four percent on or it

747
00:35:00,200 --> 00:35:03,359
Speaker 12: goes good jobs numbers. Inflation is coming down, the FED

748
00:35:03,560 --> 00:35:05,640
Speaker 12: is eventually going to stop piking, and I think that

749
00:35:06,239 --> 00:35:08,400
Speaker 12: you know, people feel like they can still spend a

750
00:35:08,480 --> 00:35:11,680
Speaker 12: little bit, right, and that transition from goods to services

751
00:35:11,719 --> 00:35:14,200
Speaker 12: and travel and experiences, I mean, it's it's continued to

752
00:35:14,280 --> 00:35:14,880
Speaker 12: forge ahead.

753
00:35:15,320 --> 00:35:18,400
Speaker 4: So have we seen at the same time, pivoting off

754
00:35:18,440 --> 00:35:20,680
Speaker 4: of that theme, the money kind of coming out of

755
00:35:20,760 --> 00:35:23,399
Speaker 4: money market funds and into stocks in that like, yeah,

756
00:35:23,440 --> 00:35:25,800
Speaker 4: things are getting better, rates will go down. I'll be

757
00:35:25,920 --> 00:35:27,479
Speaker 4: at the last couple of days, we've seen a nice

758
00:35:27,719 --> 00:35:29,640
Speaker 4: move up higher and yields, but I'm going to go

759
00:35:29,680 --> 00:35:32,120
Speaker 4: put money to work and economically sensitive stocks. They are

760
00:35:32,120 --> 00:35:34,520
Speaker 4: actually going to benefit because things are going to get better,

761
00:35:34,680 --> 00:35:37,600
Speaker 4: Rates will come down. Are we seeing this flow happen yet?

762
00:35:39,080 --> 00:35:39,120
Speaker 17: No?

763
00:35:39,320 --> 00:35:41,600
Speaker 12: And you make you make a really great point there, right,

764
00:35:41,680 --> 00:35:43,719
Speaker 12: You'd think with the performance that we saw in the

765
00:35:43,840 --> 00:35:46,160
Speaker 12: S and P five hundred and in Nasdaq last year

766
00:35:46,200 --> 00:35:50,040
Speaker 12: in particular, that that money would be just really piling

767
00:35:50,200 --> 00:35:52,480
Speaker 12: off of the sidelines. And I think it's going to

768
00:35:52,520 --> 00:35:54,480
Speaker 12: be a slow trickle. And you know, you still have

769
00:35:54,800 --> 00:35:56,279
Speaker 12: you still have a lot of clients out there and

770
00:35:56,360 --> 00:35:59,160
Speaker 12: investors that probably have, you know, things like CDs or

771
00:35:59,200 --> 00:36:01,800
Speaker 12: instruments that sure at certain times and they'll kind of

772
00:36:01,920 --> 00:36:03,720
Speaker 12: scale back into the market when that happens.

773
00:36:04,120 --> 00:36:06,520
Speaker 17: But I also think that you know, once you see

774
00:36:06,560 --> 00:36:07,040
Speaker 17: a year like.

775
00:36:07,120 --> 00:36:10,160
Speaker 12: Twenty twenty two and like probably every investor or many

776
00:36:10,160 --> 00:36:12,879
Speaker 12: of the investors that went to cash held all the time,

777
00:36:12,960 --> 00:36:14,920
Speaker 12: you know, all the tech stocks and just got hammered

778
00:36:15,000 --> 00:36:17,799
Speaker 12: down thirty forty percent. They didn't catch it. This year

779
00:36:17,840 --> 00:36:20,479
Speaker 12: it's just kind of you know, behavioral finance a little

780
00:36:20,480 --> 00:36:22,239
Speaker 12: bit there. But I do think that that money will

781
00:36:22,239 --> 00:36:24,320
Speaker 12: eventually come off the sidelines. I mean, look, at the

782
00:36:24,440 --> 00:36:26,000
Speaker 12: end of the day, you're never going to get rich

783
00:36:26,360 --> 00:36:29,600
Speaker 12: in treasuries, right, I mean, unless sure, we're multipillions of dollars,

784
00:36:29,600 --> 00:36:32,120
Speaker 12: I guess. But I think for the average investor that

785
00:36:32,160 --> 00:36:36,040
Speaker 12: has a longer term time horizon, that ten percent analys

786
00:36:36,080 --> 00:36:37,880
Speaker 12: return on the S and P five hundred plus these

787
00:36:37,960 --> 00:36:39,839
Speaker 12: kind of like gravy years where you hold a little

788
00:36:39,880 --> 00:36:42,919
Speaker 12: bit of semiconductors tech and get some outperformance.

789
00:36:42,960 --> 00:36:45,160
Speaker 17: I mean, that's that's wealth building, right.

790
00:36:45,320 --> 00:36:47,440
Speaker 12: So I do think it'll eventually kind of pile back

791
00:36:47,520 --> 00:36:49,160
Speaker 12: in and then it'll matter for markets.

792
00:36:49,239 --> 00:36:51,080
Speaker 17: Then you'll start to see a little bit of a

793
00:36:51,160 --> 00:36:51,879
Speaker 17: tailwind there too.

794
00:36:52,200 --> 00:36:54,040
Speaker 3: I asked this, Paul, because like I'm totally talking my

795
00:36:54,080 --> 00:36:54,480
Speaker 3: own book.

796
00:36:54,600 --> 00:36:57,160
Speaker 4: Like, sure, four months ago put some money in three

797
00:36:57,200 --> 00:36:58,799
Speaker 4: month tea bills, that was an easy call.

798
00:36:59,200 --> 00:37:00,200
Speaker 3: Those three months are up.

799
00:37:00,719 --> 00:37:06,360
Speaker 4: I don't know, now what do we do, right, But

800
00:37:06,480 --> 00:37:07,960
Speaker 4: like I'm the kind of person that wants to like

801
00:37:08,080 --> 00:37:10,120
Speaker 4: put gold bars and soup cans under my bed, right,

802
00:37:10,280 --> 00:37:12,759
Speaker 4: So so it's a I asked to talk my book.

803
00:37:12,760 --> 00:37:14,799
Speaker 4: But also I really am curious as to like people

804
00:37:14,880 --> 00:37:16,640
Speaker 4: like me, of which I'm sure there are many who

805
00:37:16,680 --> 00:37:18,000
Speaker 4: how they make those decisions fall.

806
00:37:18,040 --> 00:37:18,360
Speaker 9: I don't know.

807
00:37:18,480 --> 00:37:20,440
Speaker 7: I mean, I would hire a professional or go buy

808
00:37:20,640 --> 00:37:23,280
Speaker 7: s and pif.

809
00:37:22,160 --> 00:37:24,799
Speaker 3: Let's just be let's let's just be honest for a while.

810
00:37:25,000 --> 00:37:26,440
Speaker 7: So, so one of the names on your list that

811
00:37:26,480 --> 00:37:30,759
Speaker 7: you recently were adding was I b M. Old School Tech.

812
00:37:30,920 --> 00:37:31,680
Speaker 7: What's the thought there?

813
00:37:33,160 --> 00:37:35,800
Speaker 12: Yeah, So, interestingly enough, the old school tech company that

814
00:37:35,840 --> 00:37:39,120
Speaker 12: everybody kind of forgets about is one of the you know,

815
00:37:39,440 --> 00:37:41,239
Speaker 12: the best kind of leaders with.

816
00:37:41,280 --> 00:37:43,000
Speaker 17: The most experienced in AI.

817
00:37:43,400 --> 00:37:46,759
Speaker 12: You know, Watson X has been around before, probably before

818
00:37:46,800 --> 00:37:48,360
Speaker 12: AI was a word, right, so they were kind of

819
00:37:48,360 --> 00:37:49,239
Speaker 12: the first ones doing it.

820
00:37:49,320 --> 00:37:50,960
Speaker 17: They spent tons of money in R and D.

821
00:37:51,239 --> 00:37:53,279
Speaker 12: They it's just they've been hiding under a rock and

822
00:37:53,320 --> 00:37:56,320
Speaker 12: they don't kind of get the fanfare of the other companies.

823
00:37:56,360 --> 00:37:58,680
Speaker 12: But they have one of the most powerful hybrid AI

824
00:37:58,880 --> 00:38:01,320
Speaker 12: models out there. They partner with on the video with

825
00:38:01,360 --> 00:38:03,520
Speaker 12: a lot of stuff. So if you just kind of like,

826
00:38:03,880 --> 00:38:06,359
Speaker 12: you know, look at their website and see what they're doing.

827
00:38:06,480 --> 00:38:09,839
Speaker 12: For example, now they're working with Korea Quantum to use

828
00:38:09,920 --> 00:38:13,680
Speaker 12: supercomputing and AI to better target potential attacks.

829
00:38:13,280 --> 00:38:14,640
Speaker 17: For defense purposes.

830
00:38:14,719 --> 00:38:17,160
Speaker 12: Now, think about what's going on in the world right

831
00:38:17,360 --> 00:38:19,279
Speaker 12: just just every day, what we have going on in

832
00:38:19,320 --> 00:38:23,000
Speaker 12: the Middle East, Russia and Ukraine, you know, the Iran

833
00:38:23,040 --> 00:38:25,239
Speaker 12: strikes the other day. I mean, this information is so

834
00:38:25,400 --> 00:38:27,920
Speaker 12: highly valuable that you can't imagine that there won't be

835
00:38:27,960 --> 00:38:29,560
Speaker 12: a lot of government spending going into this.

836
00:38:29,760 --> 00:38:32,839
Speaker 17: And then not to mention you know, smart cities.

837
00:38:32,560 --> 00:38:35,600
Speaker 12: Electric cars, healthcare, all the just tech in general, right,

838
00:38:35,640 --> 00:38:37,320
Speaker 12: all the stuff we usually talk about, but there's a

839
00:38:37,400 --> 00:38:39,800
Speaker 12: huge need for this and IBM is really a leader.

840
00:38:39,640 --> 00:38:43,440
Speaker 3: There, Sylvia. What what is 'boten? What do you not like?

841
00:38:46,120 --> 00:38:46,960
Speaker 17: What do I not like?

842
00:38:47,880 --> 00:38:47,920
Speaker 2: So?

843
00:38:49,080 --> 00:38:52,440
Speaker 12: I you know, I think that I think that, like

844
00:38:52,800 --> 00:38:55,120
Speaker 12: it'll take a while for the small caps to really

845
00:38:55,160 --> 00:38:56,840
Speaker 12: start to rally. It's not like it's not that I

846
00:38:56,880 --> 00:38:59,920
Speaker 12: don't like them, it's just it I think I'm allocating

847
00:39:00,040 --> 00:39:01,960
Speaker 12: more towards the names that are moving, which which right

848
00:39:02,000 --> 00:39:04,279
Speaker 12: now we're going to be, you know, kind of tech, semiconductor,

849
00:39:04,440 --> 00:39:07,719
Speaker 12: like some of the consumer stuff I like, healthcare, you know,

850
00:39:07,920 --> 00:39:10,200
Speaker 12: all these weight lossgs and things like that. I mean,

851
00:39:10,520 --> 00:39:13,680
Speaker 12: you'll get lillly earnings this morning. They're taking off so

852
00:39:14,040 --> 00:39:16,080
Speaker 12: you know, I'm just not going to allocate too much

853
00:39:16,120 --> 00:39:18,440
Speaker 12: to utilities, and I'll probably wait a little bit to

854
00:39:18,480 --> 00:39:21,799
Speaker 12: get into small caps. And you know, again, I don't

855
00:39:21,840 --> 00:39:24,000
Speaker 12: think they're bad investments, because I do think breath.

856
00:39:23,760 --> 00:39:25,759
Speaker 17: Will expand, but I just think there's a little bit

857
00:39:25,840 --> 00:39:27,920
Speaker 17: more of ROI and and you know kind of the

858
00:39:28,640 --> 00:39:30,280
Speaker 17: tech sector for now in semi conductors.

859
00:39:30,840 --> 00:39:33,759
Speaker 7: So in your ETF business, Sylvie, where you seeing the

860
00:39:33,840 --> 00:39:35,160
Speaker 7: flows these days?

861
00:39:37,440 --> 00:39:40,239
Speaker 17: So we have seen you know, two places really.

862
00:39:40,320 --> 00:39:43,840
Speaker 12: One is again that quantum AI trade right we for

863
00:39:43,960 --> 00:39:46,279
Speaker 12: one of our ETFs or is at the highest level

864
00:39:46,280 --> 00:39:48,520
Speaker 12: it's ever been quantum, just because people are interested in

865
00:39:48,600 --> 00:39:49,000
Speaker 12: that theme.

866
00:39:49,840 --> 00:39:52,120
Speaker 17: And then there has been so much flow for for

867
00:39:52,280 --> 00:39:53,120
Speaker 17: defiance and for.

868
00:39:53,200 --> 00:39:57,800
Speaker 12: Our competitors in income ETF products, So ETF products that

869
00:39:58,239 --> 00:40:01,800
Speaker 12: use different types of options shadowgies to generate income for investors.

870
00:40:01,880 --> 00:40:04,160
Speaker 12: So we have like put right strategies where you know,

871
00:40:04,239 --> 00:40:06,439
Speaker 12: we have S and P exposure and we sell puts

872
00:40:06,480 --> 00:40:09,000
Speaker 12: to generate income. Other companies are doing it on single

873
00:40:09,080 --> 00:40:11,080
Speaker 12: name stocks and things like that. So there have just

874
00:40:11,120 --> 00:40:14,520
Speaker 12: been billions of dollars pouring into that enhanced income space.

875
00:40:14,560 --> 00:40:16,399
Speaker 12: And the idea there is like you get a little

876
00:40:16,440 --> 00:40:18,800
Speaker 12: bit of upset. It's almost you know, alex to like

877
00:40:18,840 --> 00:40:19,239
Speaker 12: what do you do?

878
00:40:19,400 --> 00:40:19,560
Speaker 1: Right?

879
00:40:19,640 --> 00:40:21,920
Speaker 12: So you get a little bit of that index exposure,

880
00:40:22,000 --> 00:40:24,239
Speaker 12: but you're still just getting your You're still just getting income,

881
00:40:24,280 --> 00:40:26,160
Speaker 12: so you kind of have this like guaranteed income and

882
00:40:26,239 --> 00:40:28,880
Speaker 12: then you know some portion of equity returns, so you

883
00:40:28,920 --> 00:40:30,960
Speaker 12: have a smoother ride than if you just invested in

884
00:40:31,040 --> 00:40:33,880
Speaker 12: the index, for example. So it's kind of like tapping

885
00:40:34,000 --> 00:40:36,920
Speaker 12: back in from from treasuries trade.

886
00:40:37,360 --> 00:40:39,839
Speaker 3: So not what Paul said, don't do the next fund,

887
00:40:40,000 --> 00:40:43,480
Speaker 3: but you can yeah, well you know what what Paul said.

888
00:40:43,520 --> 00:40:48,400
Speaker 12: Plus and maybe a little less downside if there's a

889
00:40:48,440 --> 00:40:50,800
Speaker 12: black swan event, but you know, it's it can go

890
00:40:50,880 --> 00:40:53,000
Speaker 12: either way, right if the market's just completely rally, I

891
00:40:53,040 --> 00:40:56,319
Speaker 12: mean S and P and NASDAC, they don't usually serve

892
00:40:56,360 --> 00:40:56,680
Speaker 12: you wrong.

893
00:40:56,800 --> 00:40:59,520
Speaker 9: So good stuff. Hey Sylvia, thanks so much for joining

894
00:40:59,600 --> 00:40:59,799
Speaker 9: us there.

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00:40:59,880 --> 00:41:02,880
Speaker 7: So we had Jablonski, chief executive Officer, Chief investment officer

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00:41:02,960 --> 00:41:05,680
Speaker 7: does it all for defind TTFS joining us at via

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00:41:05,719 --> 00:41:07,319
Speaker 7: zoom from New York City.

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00:41:07,360 --> 00:41:07,520
Speaker 13: Here.

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