WEBVTT - Markets Expect Mid-Year Snapback From Coronavirus 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl podcast on Paul Swing You. 0:00:05.360 --> 0:00:07.760 Along with my co host Lisa Brahmas, each day we 0:00:07.880 --> 0:00:10.399 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.600 and your money. Whether at the grocery store or the 0:00:12.640 --> 0:00:15.960 trading floor. Find a Bloomberg Penl podcast on Apple podcast 0:00:16.120 --> 0:00:18.040 or wherever you listen to podcasts, as well as at 0:00:18.040 --> 0:00:21.040 Bloomberg dot com. We still don't have a sense of 0:00:21.040 --> 0:00:24.880 whether the coronavirus is contained or can be contained. There's 0:00:24.880 --> 0:00:27.600 still are questions being raised about the numbers coming out 0:00:27.600 --> 0:00:30.760 of China, Apple saying that they will not meet their 0:00:30.760 --> 0:00:33.559 revenue forecasts for the first quarter in light of some 0:00:33.640 --> 0:00:38.360 of the sales disruptions in China, and yet markets incredibly 0:00:38.400 --> 0:00:40.400 resilient in the United States. Joining us down to find 0:00:40.440 --> 0:00:44.080 out exactly how much longer markets can remain this resilient. 0:00:44.120 --> 0:00:46.840 Fill Orlando, chief equity market strategist and head of client 0:00:46.920 --> 0:00:50.920 portfolio Management at Federated her Mays joining us by phone. Phil, 0:00:51.200 --> 0:00:53.080 You've been a bowl, You've gotten it right for a 0:00:53.200 --> 0:00:57.000 long time. You've been heavy into the big tech giants. 0:00:57.000 --> 0:00:59.680 I'm wondering from your perspective, at what point do you 0:00:59.760 --> 0:01:02.320 throw in your cards and say, you know what, this 0:01:02.400 --> 0:01:05.000 is going to be a longer term issue for the 0:01:05.040 --> 0:01:09.560 tech giants what's going on in China. So thank you 0:01:09.600 --> 0:01:13.600 again for having me on UM. I'm not sure that 0:01:13.720 --> 0:01:16.880 we're going to throw the towel in. UM. I will 0:01:16.920 --> 0:01:22.360 absolutely concede that the market, except for you know, a 0:01:22.520 --> 0:01:26.080 three percent correction over about six trading days at the 0:01:26.200 --> 0:01:33.080 end of January, has largely ignored the coronavirus and and UH. 0:01:33.120 --> 0:01:37.160 In my humble opinion, I think this situation is going 0:01:37.200 --> 0:01:40.680 to be potentially bigger than than people think. And we're 0:01:40.720 --> 0:01:47.160 just today getting the first snippets of economically related news 0:01:47.280 --> 0:01:52.800 investment related news on coronavirus witness UH, you know, Apple 0:01:52.920 --> 0:01:58.320 talking about having some supply issues and and Walmart talking about, 0:01:58.960 --> 0:02:04.200 you know, having missed on on Christmas, particularly January, maybe 0:02:04.280 --> 0:02:07.040 some in December. I'm not sure exactly where the details 0:02:07.040 --> 0:02:11.320 are in part based upon UH coronavirus and and we 0:02:11.400 --> 0:02:15.120 also know that a couple of the other retailers, Calls 0:02:15.120 --> 0:02:19.280 and Target had disappointing numbers. So I think there's gonna 0:02:19.320 --> 0:02:24.000 be more of this going forward. UM. As we looked 0:02:24.040 --> 0:02:27.600 at the retail sales numbers that were related to the 0:02:27.680 --> 0:02:32.120 street for the Commerce department on Friday, UM, Christmas was 0:02:32.160 --> 0:02:36.800 pretty good. And and as we define Christmas, because of 0:02:36.840 --> 0:02:41.800 the the the extraordinarily early Thanksgiving and the way the 0:02:41.840 --> 0:02:44.240 Black Friday weekend was sort of split up half in 0:02:44.280 --> 0:02:48.480 November half in December, companies were making a concerted effort 0:02:48.560 --> 0:02:51.200 to start to advertise and move Christmas product in the 0:02:51.240 --> 0:02:54.120 month of October. So our view was, Okay, let's just 0:02:54.280 --> 0:03:00.440 define Christmas as October, November, December, and January because you've 0:03:00.480 --> 0:03:03.200 got gift card redemptions. So as we looked at the 0:03:03.280 --> 0:03:05.400 data for those four months on a year of a 0:03:05.480 --> 0:03:10.240 year basis, retail sales are up four That was a 0:03:10.240 --> 0:03:14.080 pretty good Christmas. So I'm fine with Christmas having been good. 0:03:14.600 --> 0:03:19.160 Coronavirus UM really didn't start to become part of our 0:03:19.320 --> 0:03:23.760 nomenclature here in the States until about the third week 0:03:23.840 --> 0:03:27.720 in in January, and has now really started to you know, 0:03:27.840 --> 0:03:33.480 catch some some some traction here looking at coronavirus versus stars. 0:03:34.080 --> 0:03:36.800 Back in the two thousand and two thousand and three neighborhood, 0:03:37.080 --> 0:03:41.080 the total confirmed number of cases for STARS was We're 0:03:41.200 --> 0:03:45.600 we're already north of seventy three thousand with with the 0:03:45.640 --> 0:03:49.400 coronavirus with no real end in sight here, and our 0:03:49.440 --> 0:03:51.600 best guess is that this is going to continue for 0:03:51.600 --> 0:03:54.320 at least another couple of months. And that's got to 0:03:54.400 --> 0:03:59.960 take into account um retail sales numbers being sloppy in February. 0:04:00.160 --> 0:04:03.160 Maybe that spills into the easter season. And I think 0:04:03.160 --> 0:04:06.680 we're going to get more guidance down from companies who 0:04:06.680 --> 0:04:10.920 are going to use coronavirus as a justification for why 0:04:10.960 --> 0:04:14.280 their numbers are coming in, you know, software than expect it. 0:04:14.280 --> 0:04:17.360 And I'm not sure that any of that is yet 0:04:17.400 --> 0:04:19.640 in the market, with the market having done as well 0:04:19.680 --> 0:04:21.760 as it's been doing. So, Phil, are you in the 0:04:21.800 --> 0:04:25.160 camp that I think is gating some more members every day? 0:04:25.440 --> 0:04:28.960 And that camp is if the coronavirus does have a 0:04:29.000 --> 0:04:33.280 meaningful economic impact on global economies, the central banks are 0:04:33.320 --> 0:04:38.040 they're waiting to respond in lower rates and be you know, supportive. 0:04:38.600 --> 0:04:42.600 We're absolutely there, But I don't think our Federal Reserve 0:04:42.640 --> 0:04:44.760 is going to cut interest rates because I don't think 0:04:45.240 --> 0:04:49.120 the coronavirus situation is going to be uh from a 0:04:49.160 --> 0:04:52.400 time standpoint. Um, we think it's going to have a 0:04:52.440 --> 0:04:55.760 significant first quarter impact, and I think as we get 0:04:55.800 --> 0:04:58.800 into the second quarter, the middle of the year, I 0:04:58.839 --> 0:05:01.800 think we're gonna have our hand around this. Um. We 0:05:01.839 --> 0:05:06.320 are doing much better looking at coronavirus compared to Stars. 0:05:06.360 --> 0:05:08.760 One of the things we're focusing on is what's known 0:05:08.800 --> 0:05:11.360 as the mortality rate, the percentage of people who died 0:05:11.400 --> 0:05:14.640 from this with With Stars, that mortality rate was just 0:05:14.800 --> 0:05:18.960 under ten percent. With the coronavirus. The mortality rate right 0:05:18.960 --> 0:05:21.320 now is running about two and a half percent. The 0:05:21.680 --> 0:05:25.400 Chinese government as as as much as as we think 0:05:25.400 --> 0:05:29.479 they're being irresponsible here in terms of transparency and letting 0:05:29.520 --> 0:05:32.000 the world know what's going on, etcetera. When we look 0:05:32.080 --> 0:05:37.560 at COVID nineteen versus Stars, they have been much more 0:05:37.600 --> 0:05:41.080 aggressive by you know, a period of about a month 0:05:41.120 --> 0:05:43.320 of six weeks in terms of letting the world know 0:05:43.400 --> 0:05:49.080 what's going on, giving us the sequencing. US global pharmaceutical 0:05:49.080 --> 0:05:54.320 and biotechnology companies are actively working on some some compounds 0:05:54.360 --> 0:05:57.280 that that might have some promise in terms of vaccines 0:05:57.400 --> 0:06:01.719 or you know, medicinal purposes or whatever. So I truly 0:06:01.760 --> 0:06:04.480 believe in my heart of hearts that that as we 0:06:04.520 --> 0:06:06.840 get into the second quarter of working towards the middle 0:06:06.839 --> 0:06:08.920 of the year, we're gonna have our hands around this 0:06:09.400 --> 0:06:12.360 and we're gonna see these numbers start to receive. So 0:06:12.360 --> 0:06:16.359 so it's ugly right now. Um, we're gonna see a 0:06:16.440 --> 0:06:18.560 hit to GDP growth, We're going to see a hit 0:06:18.640 --> 0:06:21.360 to corporate earnings. But as as we look at the 0:06:21.440 --> 0:06:24.040 balance of the year, I think we're we're looking at 0:06:24.080 --> 0:06:27.120 a snapback as we get into the middle of the 0:06:27.200 --> 0:06:29.520 year and in a strong second half of the year, 0:06:29.560 --> 0:06:33.560 and I think that's why we're seeing a limited market response. Now. 0:06:33.760 --> 0:06:36.720 I think investors some degree you're sharing that view and 0:06:36.839 --> 0:06:40.840 perhaps looking through the ugliness of what's going on right now. 0:06:41.320 --> 0:06:43.000 Right well, that's exactly where I was going to go, 0:06:43.160 --> 0:06:45.200 which is you said that you don't think markets have 0:06:45.279 --> 0:06:48.360 been pricing in the real potential implications of the coronavirus. 0:06:48.720 --> 0:06:50.920 It sounds like they're not because they're expecting a V 0:06:51.040 --> 0:06:54.400 shape recovery and the economy and there therefore there isn't 0:06:54.440 --> 0:06:56.640 gonna be a longer lasting effect. Are you in that 0:06:56.800 --> 0:06:58.520 camp where you're not going to change any of your 0:06:58.560 --> 0:07:01.320 positioning in response to what we're seeing over in China, 0:07:01.680 --> 0:07:04.520 just with the expectation of this V shaped recovery, we 0:07:04.720 --> 0:07:07.640 we have not made any changes in terms of positioning. 0:07:07.720 --> 0:07:10.200 We made some changes in positioning at the end of 0:07:10.360 --> 0:07:16.400 last calendar year in terms of taking domestic large cap 0:07:16.680 --> 0:07:21.720 growth from overweight back to neutral and upgrading domestic large 0:07:21.800 --> 0:07:25.840 cap value from neutral to overweight. We've got overweights and 0:07:25.960 --> 0:07:30.160 domestic small cap um and we also added an overweight 0:07:30.200 --> 0:07:33.280 to emerging markets, which, in light of what we now 0:07:33.360 --> 0:07:37.680 know with coronavirus, maybe that was a little premature, but 0:07:37.840 --> 0:07:40.400 we're gonna stick with it again because we think of 0:07:40.520 --> 0:07:43.800 the relatively short live nature of what we think we're 0:07:43.840 --> 0:07:46.320 dealing with right now. Hey, Phil, thanks so much for 0:07:46.440 --> 0:07:49.800 joining us to really appreciate your thoughts. As always, Phil Orlando, 0:07:50.200 --> 0:07:53.880 chief equity market strategists and head of client portfolio Management 0:07:53.960 --> 0:07:56.920 at Federated our mays joining us on the phone. Uh. 0:07:57.000 --> 0:07:59.920 Phil has remained, as you noted, at least a consistent 0:08:00.080 --> 0:08:04.080 lee bullish. He's been consistently right. I think I appreciate 0:08:04.160 --> 0:08:06.440 his thoughts on the coronavirus how, you know, kind of 0:08:06.520 --> 0:08:09.400 putting a timeframe on it, kind of bleeding into uh 0:08:09.560 --> 0:08:12.679 the second quarter, but then becoming less of an issue 0:08:12.760 --> 0:08:14.320 in the second half of the year. That's I think 0:08:14.360 --> 0:08:23.360 how they are discounting the coronavirus there at Federated WELLO. 0:08:23.440 --> 0:08:26.440 Good friends at Walmart reported earnings this morning kind of 0:08:26.560 --> 0:08:28.880 mixed bag. The fourth quarter of the all important holiday 0:08:29.000 --> 0:08:31.880 quarter a little bit uh weaker than expected, but the 0:08:31.960 --> 0:08:34.880 four year guidance for pretty much in line with what 0:08:35.000 --> 0:08:37.000 the street was looking for. So the net net on 0:08:37.040 --> 0:08:39.480 the stock is it's up about eight tenths of one 0:08:39.679 --> 0:08:42.640 percent today. For Walmart. To get a sense of what's 0:08:42.679 --> 0:08:45.400 going on at Walmart and all things retail, we turned 0:08:45.400 --> 0:08:49.160 to our good friend Bert Flickinger, Managing Director Strategic Resource Group. 0:08:49.200 --> 0:08:51.400 He joins us here in our Bloomberg Interactor Broker Studio. 0:08:51.559 --> 0:08:53.640 So Bert, a little bit of a mixed bag out 0:08:53.880 --> 0:08:56.360 of Walmart. What's your key takeaway going forward with these 0:08:56.400 --> 0:08:59.720 folks too? A couple of things, Paul and Lisa. One, 0:09:00.000 --> 0:09:04.920 Walmart's insulated because they sell more fresh food, refrigerated, frozen 0:09:05.000 --> 0:09:07.720 and fresh than anyone else, so it's about two thirds 0:09:07.800 --> 0:09:11.640 of their business. So Walmart, like Costco, which hit a 0:09:11.679 --> 0:09:14.240 fifty two week high in the Bloomberg terminal today, to 0:09:15.080 --> 0:09:20.760 uh forward looking, they've both invested tremendously in technology for 0:09:20.840 --> 0:09:24.080 the last thirty years. So the markets looking at Walmart's 0:09:24.160 --> 0:09:28.120 capex being a little bit less in technology compared to 0:09:28.840 --> 0:09:34.800 competitive peers. And secondly that Walmart and Costco strategically invested 0:09:34.840 --> 0:09:39.400 in distribution centers and inventory. So despite tariffs, coronavirus, and 0:09:39.559 --> 0:09:44.880 sourcing more locally within the continental US, Walmart has some 0:09:45.040 --> 0:09:47.520 longer term advantages for the next couple of quarters that 0:09:47.679 --> 0:09:50.520 most of their competitors don't come close on. All. Right, 0:09:50.559 --> 0:09:53.520 let's put the coronavirus aside, because they basically have not 0:09:53.760 --> 0:09:57.160 put that into their assumptions in any way, it's unclear 0:09:57.200 --> 0:09:58.559 how they're going to be dealing with that, and just 0:09:58.679 --> 0:10:00.920 talk about the fact that they missed expectations when it 0:10:00.960 --> 0:10:06.199 came to revenues in EPs forecast. This has been completely 0:10:06.200 --> 0:10:10.160 shrugged off by markets. Yet this comes after Target also disappointed. 0:10:10.640 --> 0:10:13.040 I'm wondering how much we can read into this as 0:10:13.080 --> 0:10:15.240 a trend. Does I say something about the consumer just 0:10:15.320 --> 0:10:18.199 to say something about Amazon dot Com, you know, rolling 0:10:18.280 --> 0:10:21.720 up all of the market share away from the Walmarts 0:10:21.760 --> 0:10:24.839 and the targets of the world. Lisa, It says yes 0:10:24.920 --> 0:10:28.640 to all of the above. It says the Amazon roll up. Uh. 0:10:28.880 --> 0:10:33.800 It also also says uh, despite targets miss in our 0:10:33.960 --> 0:10:38.280 pricing studies. Targets still a little bit premium priced in 0:10:39.160 --> 0:10:43.400 our pricing studies with Walmart. For the first time UH 0:10:43.720 --> 0:10:48.080 in five years, Walmart's line price with the low price 0:10:48.280 --> 0:10:53.120 leader leaders Windco in the West, UH Costco nationally and internationally. 0:10:53.400 --> 0:10:57.679 So you and Tom Kane talk about very well frequently 0:10:58.400 --> 0:11:03.280 is while Walmart's investing more in lower prices, Walmart's units 0:11:03.320 --> 0:11:06.000 are up. At the same time, as you're presently pointing out, 0:11:06.920 --> 0:11:11.120 the consumers are facing higher monthly budget expenses in ten 0:11:11.240 --> 0:11:15.280 out of the top eleven expenditures everything except gasoline, so 0:11:16.080 --> 0:11:20.959 UH rent, tuition, UH insurance, it's taxes, etcetera, etcetera. So 0:11:21.120 --> 0:11:25.240 the consumers more cash constrained. And as people look at 0:11:25.320 --> 0:11:28.880 where the consumers going Ross stores on the Bloomberg terminal 0:11:29.000 --> 0:11:33.079 fifty two week high today, Bloomberg Burlington on the Bloomberg 0:11:33.360 --> 0:11:36.120 had a fifty two week high today, UH lows and 0:11:36.200 --> 0:11:39.440 home Depot in terms of category dominant earlier today UH 0:11:40.040 --> 0:11:42.920 fifty two week high. So the consumers are going where 0:11:42.960 --> 0:11:46.559 the best prices are, and the best prices are with 0:11:46.640 --> 0:11:49.439 the big retailers that are off price price impact or 0:11:50.000 --> 0:11:53.920 destination that have procurement power. But also I want to 0:11:54.000 --> 0:11:58.240 make sure to catch key point you referenced, is is 0:11:58.400 --> 0:12:01.599 this sustainable? It might be sustainable for a quarter or 0:12:01.679 --> 0:12:05.559 two of the fifty two week highs within retail. Fresh 0:12:05.679 --> 0:12:08.960 Pet hit of fifty two week high today, that's sustainable. 0:12:09.320 --> 0:12:13.559 Not sure chain retail is sustainable. Not sure Amazon sustainable. 0:12:13.880 --> 0:12:16.640 So let's talk. I know Walmart's having an investor day 0:12:16.920 --> 0:12:19.400 UH today, so we'll get some more news out of 0:12:19.480 --> 0:12:21.439 that throughout the day. But one of the places I 0:12:21.440 --> 0:12:25.640 always look for Amazon and Target and Target and Walmart 0:12:25.679 --> 0:12:28.040 to see how the compete against Amazon is their digital sales. 0:12:28.080 --> 0:12:32.480 So another thirty growth in the digital sales for Walmart. 0:12:32.559 --> 0:12:34.720 That's good, but it's slowing a little bit, but still 0:12:34.800 --> 0:12:40.640 pretty solid digital sales. And can consumers who historically might 0:12:40.679 --> 0:12:43.520 have only been able to to get to a Walmart 0:12:44.160 --> 0:12:48.079 once or twice a month. Mark Lori x X of 0:12:48.679 --> 0:12:52.680 Amazon and acquisition by Walmart of Jet will be able 0:12:52.800 --> 0:12:59.040 to deliver from Walmart supercenters to of US homes within 0:12:59.120 --> 0:13:04.240 the Continental U lass and Walmart's brilliantly put FedEx UH 0:13:04.400 --> 0:13:07.520 depots within its store so people can buy at Walmart 0:13:07.720 --> 0:13:10.720 and ship either within the US or outside the US. 0:13:11.000 --> 0:13:13.440 At what point do we have to start worrying about 0:13:13.679 --> 0:13:17.160 the consumer and how much momentum there is if where 0:13:17.200 --> 0:13:21.600 they're going is ross stores as the discounters we have, Lisa, 0:13:21.679 --> 0:13:24.640 we have to start worrying about the consumer. Now. The 0:13:24.800 --> 0:13:27.880 telling period is going to be Memorial Data Labor Day 0:13:28.000 --> 0:13:32.120 where the consumer uh, it's Bloomberg reports has We've been 0:13:32.240 --> 0:13:36.440 traveling in record numbers, spending in record numbers, but looking 0:13:36.520 --> 0:13:40.559 on the Bloomberg even before Ryan Newman's tragic death and 0:13:41.080 --> 0:13:46.800 NASCAR yesterday, NASCAR attendance is way down and that's he's 0:13:46.800 --> 0:13:50.560 still he's alive. He's in serious condition. Thank you serious 0:13:50.600 --> 0:13:54.920 parts and prayers and appreciate the uh timely correction. Yeah, 0:13:54.920 --> 0:13:58.319 and it's actually as injuries are not life threatening after 0:13:58.440 --> 0:14:02.079 that horrible crash. Um but he it seems like is 0:14:02.200 --> 0:14:05.520 going to emerge. But really interesting and thank you so 0:14:05.679 --> 0:14:08.360 much for being with us, Bird, because this is I 0:14:08.440 --> 0:14:10.079 think one of the big questions when I came in 0:14:10.480 --> 0:14:14.480 Walmart disappointing after target disappointing. You know, a knee jerk 0:14:14.559 --> 0:14:17.360 response might be to say, is this concerning you? Look 0:14:17.440 --> 0:14:19.680 under the hood, A lot of factors at play, but 0:14:19.800 --> 0:14:22.800 certainly heading into this period of the year, important to 0:14:22.920 --> 0:14:25.160 watch to see if it makes a trend. Uh, and 0:14:25.320 --> 0:14:27.400 we will have you back to discuss that. Bird Flickinger, 0:14:27.440 --> 0:14:30.480 Managing director at Strategic Resource Group, joining us here in 0:14:30.600 --> 0:14:33.440 our interactive broker studios. And interesting to see how Walmart 0:14:33.520 --> 0:14:38.200 shairs really resilient after missing estimates on a whole variety, 0:14:38.240 --> 0:14:41.440 actually gaining today. Uh, They're up eight tenths of a percent. 0:14:41.760 --> 0:14:43.760 Not a massive gain, but given the fact that the 0:14:43.840 --> 0:14:47.160 broader market move is lower and that they missed expectations 0:14:47.480 --> 0:15:02.120 and that they still are gaining, it's somewhat notable. The 0:15:02.200 --> 0:15:04.280 big news one of the many big news items of 0:15:04.320 --> 0:15:06.320 the day. There actually are a lot that are sort 0:15:06.320 --> 0:15:08.600 of done the corporate front. On the corporate front is 0:15:08.760 --> 0:15:12.360 the tie up of Franklin Resources agreeing to buy leg 0:15:12.480 --> 0:15:15.280 Mason to create a one and a half trillion dollar giant. 0:15:15.360 --> 0:15:18.640 This comes amid a slew of consolidation among asset managers. 0:15:18.680 --> 0:15:22.080 Any massa covering it all, investing reporter for Bloomberg News, 0:15:22.160 --> 0:15:24.680 joining us here in our interactive broker studios. Can you 0:15:24.800 --> 0:15:28.320 just take a step back and look at how significant 0:15:28.360 --> 0:15:31.720 the wave of consolidation has been in the past, say, 0:15:31.800 --> 0:15:35.000 five to ten years within the asset management space. Sure, 0:15:35.120 --> 0:15:37.280 as you mentioned, I mean you can really just rattle 0:15:37.320 --> 0:15:41.880 off these big UM episodes of mergers and acquisitions in 0:15:42.080 --> 0:15:45.840 the asset management industry. You saw Investco by Oppenheimer Funds, 0:15:45.880 --> 0:15:49.400 you saw Janice Henderson, Standard Life Aberdeen, and this is 0:15:49.480 --> 0:15:52.760 just the latest in that wave of consolidation that we're seeing. 0:15:53.000 --> 0:15:55.600 As active managers are trying to, you know, figure out 0:15:55.680 --> 0:16:00.840 how to navigate um and increasingly passive investing world. You 0:16:00.960 --> 0:16:03.360 just kind of need scale to be able to compete. 0:16:03.720 --> 0:16:07.240 So give us the Again, the rationale is scale. So 0:16:07.440 --> 0:16:10.360 are we simply are these companies simply saying I can 0:16:10.400 --> 0:16:12.520 see the pressure on my revenue line. I don't think 0:16:12.560 --> 0:16:15.080 that's going away anytime soon, So I just got to 0:16:15.120 --> 0:16:17.760 get scale and try to rationalize my costs. Is that 0:16:17.880 --> 0:16:19.880 kind of the play here. Yeah. If you look back 0:16:19.920 --> 0:16:22.440 over the past ten or fifteen years, both leg Mason 0:16:22.520 --> 0:16:26.320 and Franklin Templeton have seen their assets under management UM 0:16:26.600 --> 0:16:29.600 kind of come down from their highs. So now, as 0:16:29.680 --> 0:16:32.840 you mentioned, you have UM a one point five trillion 0:16:32.920 --> 0:16:36.120 dollars in assets in these combined firms. It also fills 0:16:36.160 --> 0:16:39.800 in some gaps for Franklin UM, particularly on the fixed 0:16:39.840 --> 0:16:44.080 income and alternatives side. What's the price tag being viewed 0:16:44.120 --> 0:16:46.560 as in the market UM the deal is valued at 0:16:46.600 --> 0:16:48.880 about four point five billion dollars, and is that viewed 0:16:48.960 --> 0:16:52.080 is too much too little? UM? I think it's valued 0:16:52.120 --> 0:16:56.560 about as about in line. So how about when I 0:16:56.640 --> 0:16:59.800 think of big neutro funds, obviously I start with Fidelity. 0:17:00.480 --> 0:17:03.480 Do we see Fidelity on the M and a trail? Often? 0:17:03.520 --> 0:17:05.080 I can't think of some I can't think of any 0:17:05.119 --> 0:17:07.879 big deals. That's a good question. Fidelity has often been 0:17:07.920 --> 0:17:10.640 one to really go it alone. But Fidelity also has 0:17:10.720 --> 0:17:14.480 the advantage of being just one like a giant already. 0:17:15.080 --> 0:17:19.920 It's really for the slightly like middle size. Can't really 0:17:20.040 --> 0:17:22.920 pass a trillion dollars in assets where you're seeing this 0:17:23.080 --> 0:17:26.840 kind of consolidation. Neither leg Or or Franklin was really 0:17:26.880 --> 0:17:29.200 able to get there on its own. So now tying 0:17:29.240 --> 0:17:31.840 them up, they can finally get past that trillion dollars 0:17:31.920 --> 0:17:36.640 in assets kind of mark. It helps because UM technology 0:17:36.960 --> 0:17:40.679 is increasingly costly for these asset managers, and and if 0:17:40.760 --> 0:17:42.879 you can spread out some of those costs across all 0:17:42.920 --> 0:17:46.600 these different assets and then also offer different product lines. 0:17:46.960 --> 0:17:49.120 It really does help to be more of a big supermarket. 0:17:49.480 --> 0:17:51.600 Do you have a sense when you speak to analysts 0:17:52.040 --> 0:17:54.280 who've been watching the space for a while of who 0:17:54.359 --> 0:17:58.440 some of the next potential contenders are for for potential 0:17:58.520 --> 0:18:02.520 murder activity. Yeah, that's a good question. Basically, UM, what 0:18:02.760 --> 0:18:06.720 what we're looking at here is some of these acquisitions 0:18:06.760 --> 0:18:09.320 that we've really seen in the space have faltered a 0:18:09.359 --> 0:18:12.679 little bit or not been as successful as they were 0:18:12.760 --> 0:18:15.640 otherwise thought to be. So I think that that's leading 0:18:15.680 --> 0:18:18.240 to some questions about whether these deals actually pan out 0:18:18.320 --> 0:18:22.000 and work. UM. In some cases, like the Janice merger, 0:18:22.080 --> 0:18:24.440 you actually saw client outflows in the wake of those 0:18:24.720 --> 0:18:26.800 um in the wake of those tie ups, so it's 0:18:26.960 --> 0:18:32.399 not always UM a very beneficial thing in the aftermath. 0:18:32.720 --> 0:18:34.680 One thing that they mentioned on the conference call is 0:18:34.800 --> 0:18:38.280 that like Mason will kind of maintain the independence of 0:18:38.320 --> 0:18:40.600 all these different affiliate asset managers that it works with, 0:18:40.680 --> 0:18:44.280 and they're hoping to UM hang onto those client assets 0:18:44.320 --> 0:18:47.360 and stem some of those client outflow potential client outflows 0:18:47.359 --> 0:18:49.240 that way. You know, when I think about the pressure 0:18:49.280 --> 0:18:51.360 on the fees and doing large part to this move 0:18:51.440 --> 0:18:54.080 from active to passive Is that a global phenomenon or 0:18:54.080 --> 0:18:56.720 is that more in the the US. It is a 0:18:56.760 --> 0:18:59.720 global phenomenon. I think you're really seeing a lot of 0:18:59.800 --> 0:19:01.919 this happening in the US because that's where the largest 0:19:02.000 --> 0:19:05.159 asset managers are based, and that's both on the active 0:19:05.240 --> 0:19:09.240 side and the passive side. What about the alternative side, 0:19:09.280 --> 0:19:12.160 I mean, how much are that? Is that the area 0:19:12.240 --> 0:19:14.119 that people are looking to for the fees and just 0:19:14.200 --> 0:19:17.280 trying to get scope with respect to passive and then 0:19:17.359 --> 0:19:20.840 go into you know, the more liquid securities type of 0:19:21.080 --> 0:19:23.959 type of trade. It's a really good question. Alternatives are 0:19:24.000 --> 0:19:27.159 becoming so important for pretty much all asset managers. And 0:19:27.280 --> 0:19:31.720 we saw UM even last week with vanguards foray into 0:19:31.880 --> 0:19:35.520 private equity, and and Blackrock did didn't made a similar 0:19:35.560 --> 0:19:39.479 pushtion to alternatives as well. Even the giants of index 0:19:39.520 --> 0:19:43.000 investing can't ignore alts. So especially on the active side, 0:19:43.359 --> 0:19:45.920 UM firm like Franklin wants to bulk up in alternatives. 0:19:46.400 --> 0:19:48.800 Are we the early stages of late stages this consolidation? 0:19:48.840 --> 0:19:52.040 Do you think? I think that we're still gonna continue 0:19:52.080 --> 0:19:54.840 to see consolidation in this industry. There's so much pressure 0:19:54.880 --> 0:19:57.960 on fees for both active and pressive products. Um and 0:19:58.040 --> 0:20:01.159 scale has become so important. It's this barbell where you 0:20:01.240 --> 0:20:04.320 have to either be a behemoth that offers everything or 0:20:04.440 --> 0:20:06.959 just so niche and in between you're going to struggle. 0:20:07.320 --> 0:20:10.000 Any Massa, thanks so much for joining us. Annie Massa, 0:20:10.040 --> 0:20:13.040 investoring investing reporter for Bloomberg News, joining us here in 0:20:13.040 --> 0:20:21.520 a Bloomberg Interactor broker studio. Jeff Bezos, who is of 0:20:21.600 --> 0:20:24.040 course the founder of Amazon, announced that he is committing 0:20:24.160 --> 0:20:28.160 ten billion dollars of his own wealth to fighting climate change. 0:20:28.200 --> 0:20:31.160 Who was biggest philanthropic effort so far, and it comes 0:20:31.200 --> 0:20:34.840 after a substantial pressure from within the company from workers 0:20:34.880 --> 0:20:37.080 saying that the company is not doing enough to fight 0:20:37.200 --> 0:20:39.960 climate change. But it really raises a question, what can 0:20:40.040 --> 0:20:43.640 the biggest companies do? What kind of meaningful changes could 0:20:43.680 --> 0:20:47.480 they make to reduce their carbon emissions and fight the 0:20:47.880 --> 0:20:50.520 rising climate. Jelly Bergstein joins us now the chief executive 0:20:50.520 --> 0:20:53.719 officer of Seventh Generation, which is based in Burlington, Vermont. 0:20:53.800 --> 0:20:56.880 It was acquired by Unilever, but it really has been 0:20:57.320 --> 0:21:00.840 one of the biggest speakers out of terms of corporate 0:21:00.880 --> 0:21:04.480 responsibility in this area. Joey, I'm really glad you're joining us. Today, 0:21:04.560 --> 0:21:07.280 I want to get your perspective on this ten billion 0:21:07.280 --> 0:21:10.680 dollar commitment that Jeff Bezos made. Where do you see 0:21:10.880 --> 0:21:13.680 the greatest need for that kind of money to actually 0:21:13.840 --> 0:21:17.119 combat uh, some of what we're seeing with respect to omissions. 0:21:19.760 --> 0:21:21.920 Thank you very much for having me on, Lisa. It's 0:21:22.160 --> 0:21:24.720 it's great to be with you and really applaud the 0:21:24.760 --> 0:21:29.159 commitment that Bezos is made to addressing what is the 0:21:29.240 --> 0:21:34.240 biggest crisis of our time. And UM, it's really important 0:21:34.240 --> 0:21:37.520 from our perspective that companies do take real and meaningful 0:21:37.560 --> 0:21:41.560 action to address climate As we look at what's going 0:21:41.640 --> 0:21:44.560 on in the world around us. We're really focused in 0:21:44.720 --> 0:21:48.520 three different areas. One is the products that we make 0:21:48.600 --> 0:21:50.840 and ensuring that we're creating products that actually have the 0:21:50.920 --> 0:21:53.880 low carbon footprint. Great example of that is an ultra 0:21:54.000 --> 0:21:56.400 concentrated launcher to Jurgen that we launched over a year 0:21:56.400 --> 0:21:59.800 ago UM that we sell on Amazon, and UM the 0:22:00.040 --> 0:22:01.920 shape the support that we get from the Amazon team 0:22:02.000 --> 0:22:05.399 on on that part of our business. We tax ourselves 0:22:05.480 --> 0:22:07.800 in internal carbon tax that we can then invest to 0:22:08.200 --> 0:22:11.640 address our own carbon footprint. And then I would say 0:22:11.680 --> 0:22:14.520 the third thing is that we're really looking at how 0:22:14.600 --> 0:22:16.679 do we clean up the energy grid in this country 0:22:16.760 --> 0:22:19.679 and would love to see investments being made much more 0:22:19.760 --> 0:22:23.159 broadly by companies across the US to really clean up 0:22:23.240 --> 0:22:27.720 our own energy grid. What we've discovered is that when 0:22:27.760 --> 0:22:31.679 you look at our full carbon footprint from making this stuff, 0:22:31.720 --> 0:22:34.600 for growing the ingredients on a farm, through to the 0:22:34.680 --> 0:22:37.680 production process and getting it into the hands of people 0:22:37.720 --> 0:22:42.000 to use, actually nine of our carbon footprint comes when 0:22:42.040 --> 0:22:44.639 you and are Washington drying our clothes at home and 0:22:45.119 --> 0:22:48.240 as clean as we can make our own operations. The 0:22:48.520 --> 0:22:51.960 only way to truly address the impact of business is 0:22:52.040 --> 0:22:55.800 to clean up the energy energy sorry, energy grid, and 0:22:56.600 --> 0:22:59.040 that for me is the top priority for us in 0:22:59.320 --> 0:23:01.480 UH in this kind tree. So, Joey, how do you 0:23:01.600 --> 0:23:03.959 do that with a company? Just take your company, how 0:23:04.000 --> 0:23:07.160 do you think about and try to address the energy grid? 0:23:07.240 --> 0:23:10.240 That just seems like a huge issue that might be 0:23:10.359 --> 0:23:14.160 outside of your natural kind of day to day business. Yeah, 0:23:14.320 --> 0:23:17.760 it's monumental, actually, um, and it is outside of our 0:23:17.840 --> 0:23:19.440 day to day business. So a lot of the work 0:23:19.520 --> 0:23:22.600 we're doing in that space has been around advocacy and 0:23:22.760 --> 0:23:26.720 working with grassroots organizations across the country to try to 0:23:26.800 --> 0:23:29.600