WEBVTT - Corporate Boards Meeting Challenges In New World 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.119 at Bloomberg dot com slash podcast. Well, over these last 0:00:22.160 --> 0:00:26.280 fourteen months, everyone's lives have been disrupted to some degree, 0:00:26.400 --> 0:00:30.360 some extraordinarily so. And that's true for corporate corporations as well. 0:00:30.400 --> 0:00:33.640 And it's been fascinating to to kind of observe how 0:00:33.720 --> 0:00:37.199 different companies UH manage their way through the pandemic, how 0:00:37.240 --> 0:00:41.080 different boards of directors help their management teams navigate through 0:00:41.120 --> 0:00:43.360 these times. So it's a great time to speak for 0:00:43.440 --> 0:00:48.400 our next guest, Denbisa Moyo. She is a global economist economist. 0:00:48.640 --> 0:00:51.200 She currently serves on the boards of Chevron and three 0:00:51.400 --> 0:00:53.960 M and she has a new book out entitled How 0:00:54.200 --> 0:00:56.720 Boards Work and How They Can Work Better in a 0:00:56.840 --> 0:00:59.280 Chaotic World. Then, be said, thanks so much for joining 0:00:59.400 --> 0:01:01.800 us here. You know, we don't have much hindsight here 0:01:01.800 --> 0:01:03.960 because we're just at the very early stages of coming 0:01:03.960 --> 0:01:07.440 out on the other side of this pandemic. But in general, 0:01:08.080 --> 0:01:11.959 how do you think certain boards I guess reacted to 0:01:12.160 --> 0:01:15.560 and then maybe plan for strategically how to you know, 0:01:15.680 --> 0:01:20.000 evolve in this crazy world right now. Yeah. So the 0:01:20.040 --> 0:01:23.160 truth is a number of companies found themselves in a 0:01:23.240 --> 0:01:26.240 pretty stable and solid position, um, you know, to the 0:01:26.319 --> 0:01:29.880 extent that from the financial perspective of their balance sheet, 0:01:30.200 --> 0:01:33.640 from the operational perspective in terms of safety and just 0:01:33.760 --> 0:01:37.280 keeping the proverbial lights on, and then of course from 0:01:37.280 --> 0:01:40.360 the strategic aspect, so making sure that the business can 0:01:40.400 --> 0:01:43.040 survive through challenging times. There are a number of companies 0:01:43.280 --> 0:01:46.880 that actually did perfectly fine. Um. The bigger issue is, 0:01:46.920 --> 0:01:48.640 of course, there are a number of companies in the 0:01:48.720 --> 0:01:52.480 US about fourteen to fifteen percent of American corporations UM, 0:01:52.520 --> 0:01:55.800 that are incredibly vulnerable. They're known as zombie companies. By that, 0:01:55.800 --> 0:01:59.640 I mean that they don't have enough even interest sorry 0:01:59.800 --> 0:02:02.200 cats to cover the interest payment on their debt. And 0:02:02.240 --> 0:02:05.440 they were of course vulnerable from a balanchie perspective. Many 0:02:05.440 --> 0:02:08.800 companies struggled in terms of that switch from um sort 0:02:08.800 --> 0:02:13.120 of bricks and motor operations into being deployed UH is 0:02:13.160 --> 0:02:16.360 from the remotely UM, and of course the strategic questions remain. 0:02:16.440 --> 0:02:18.440 I'm wa seeing a lot of consolidation in the markets 0:02:18.520 --> 0:02:21.720 right now, but I do think that this this experience 0:02:21.919 --> 0:02:24.320 will separate the sort of what we used to say 0:02:24.360 --> 0:02:26.440 back in the day, demand from the boys. UM. So 0:02:26.560 --> 0:02:29.680 I think it has been quite a jarring experience of 0:02:29.720 --> 0:02:35.240 many companies. I guess E s G is, do we 0:02:35.280 --> 0:02:40.919 consider it the most important issue going forward for boards? Well, listen, 0:02:41.080 --> 0:02:43.880 it's become an existential crisis. M E. S G is 0:02:44.000 --> 0:02:47.440 part and parcel of how companies are thinking about themselves 0:02:47.480 --> 0:02:50.160 longer term, and obviously we're talking about environmental, social and 0:02:50.200 --> 0:02:53.160 governance issues. UM. You know, I think that the broader 0:02:53.560 --> 0:02:57.480 environment remains quite challenged in terms of economic growth beyond 0:02:57.880 --> 0:03:03.520 this year's rebound. How we thinking about technology, demographic ships, income, inequality, 0:03:03.639 --> 0:03:07.000 climate change, All these aspects are very much front and 0:03:07.080 --> 0:03:11.160 center of the minds of board members but also CEOs 0:03:11.240 --> 0:03:13.720 and and business leaders as they think about how to 0:03:13.840 --> 0:03:17.119 navigate not just the post COVID environment in the short term, 0:03:17.280 --> 0:03:19.760 but longer term, how it is we're going to run 0:03:19.760 --> 0:03:22.400 these businesses UM in the longer term and in a 0:03:22.520 --> 0:03:27.560 very challenged world. With China rising deglobalization, digitization, et cetera. 0:03:28.440 --> 0:03:31.160 I'm curious how a board, how a company like Chevron 0:03:31.200 --> 0:03:36.920 approaches that, because clearly Chevron's businesses fossil fuels. On the 0:03:36.920 --> 0:03:40.440 other hand, it's not like it would be it would 0:03:40.480 --> 0:03:43.400 be bad if they just everyone stopped making oil right 0:03:43.520 --> 0:03:46.640 all of a sudden. Their needs we need these products. 0:03:46.680 --> 0:03:51.120 So how does a company like Chevron approach E s G. Well, 0:03:51.200 --> 0:03:53.960 I think it's important to put this in context. Um, 0:03:54.000 --> 0:03:56.120 you know, they're on the one hand, there are people 0:03:56.160 --> 0:04:00.920 who are pushing very aggressively for defunding UH energy companies, 0:04:00.920 --> 0:04:03.920 and I think that there's a missed opportunity here because 0:04:03.920 --> 0:04:07.240 they tend to over overshadow, overlook the point that there 0:04:07.240 --> 0:04:09.800 are one point five billion people around the world who've 0:04:09.800 --> 0:04:12.560 got no access to energy in a cost effective and 0:04:12.560 --> 0:04:16.360 sustainable way, and it's just not reasonable for society to 0:04:16.480 --> 0:04:21.520 leave those people in energy poverty, given the broader macroeconomic risks. 0:04:21.560 --> 0:04:24.320 But just in terms of how the best companies and 0:04:24.360 --> 0:04:27.280 corporations are viewing the E s G agenda, it's not 0:04:27.440 --> 0:04:32.000 just about risk mitigation and thinking about greenhouse gas intensity 0:04:32.120 --> 0:04:36.320 and thinking about carbon intensity. All those things are critically important, 0:04:36.320 --> 0:04:39.440 but we also have to think about investing and looking 0:04:39.480 --> 0:04:42.799 at ways to continue to grow these businesses but also 0:04:42.880 --> 0:04:45.920 to grow the global economy and make sure that we 0:04:46.000 --> 0:04:49.839 continue to progress and in terms of human progress more generally. So, 0:04:50.120 --> 0:04:52.880 I think that whatever the issue is in terms of 0:04:52.960 --> 0:04:55.120 e s g. Not just climate change, but issues of 0:04:55.160 --> 0:04:59.680 worker advocacy, racial diversity of course, gender diversity as well. UM, 0:04:59.680 --> 0:05:03.560 couldn't turns around China's rise. Uh, you know, areas of obesity, 0:05:03.680 --> 0:05:06.479 voter rights, all of these things have to be looked 0:05:06.520 --> 0:05:09.080 at in a in a more sort of thoughtful and 0:05:09.240 --> 0:05:12.400 constructive and pragmatic way. And that's that's what I think 0:05:12.400 --> 0:05:16.560 the best corporations are doing. Basic based upon your experience, UM, 0:05:16.800 --> 0:05:20.400 what are your views of globalization? There was arguably since 0:05:20.440 --> 0:05:23.240 the end of World War to the world has become smaller, 0:05:23.839 --> 0:05:27.640 it's become a much more global market um over the 0:05:27.720 --> 0:05:30.240 last fifty years. But then under the prior administration, there 0:05:30.279 --> 0:05:33.640 was a move back to make America first on shoring 0:05:33.800 --> 0:05:37.840 some businesses. Um, how do you view as you sit 0:05:37.880 --> 0:05:40.400 on those boards of two global companies, how do you 0:05:40.400 --> 0:05:45.040 think about globalization? How does corporate America think about globalization? Well? 0:05:45.120 --> 0:05:49.320 Look that the textbooks are very clear theoretically globalization and 0:05:49.320 --> 0:05:52.200 by that I mean the movements of trade and in 0:05:52.279 --> 0:05:56.200 trade of goods of services UM. Capital flows, moving capital 0:05:56.440 --> 0:05:59.359 in what we traditionally call the carry trade, borrowing in 0:05:59.360 --> 0:06:01.800 places like London in New York at low interest rates, 0:06:01.839 --> 0:06:06.400 investing in high risk adjusted high return places like Brazil 0:06:06.480 --> 0:06:09.280 or South Africa. UM. You know, looking at the immigration, 0:06:09.360 --> 0:06:13.680 movement of people across borders, global standards, global cooperation, all 0:06:13.720 --> 0:06:17.640 these five elements of globalization. There is absolutely no doubt 0:06:17.680 --> 0:06:21.680 about it from historical evidence UM that these aspects, when 0:06:21.960 --> 0:06:26.000 they are at full function UM do contribute to broadening 0:06:26.000 --> 0:06:28.680 economic growth, the sort of expansion of the g d 0:06:28.760 --> 0:06:31.839 P PIE and human progress. That being said, we have 0:06:32.040 --> 0:06:34.320 to be aware and since this is the fact that 0:06:34.360 --> 0:06:37.400 there have been pockets of the population around the world 0:06:37.640 --> 0:06:40.239 UM that have been left behind UM. And that's where 0:06:40.480 --> 0:06:44.400 the schism and the challenges emerge for globalization. As we 0:06:44.480 --> 0:06:46.840 have seen, it's led to Brexit, it's led to the 0:06:46.920 --> 0:06:51.200 American America first type of policies. And my view is 0:06:51.240 --> 0:06:54.840 that from again to a very pragmatic since UM globalization 0:06:54.880 --> 0:06:58.520 should be pursued, but understanding that we need to make 0:06:58.560 --> 0:07:03.200 sure that everyone participating in this expansion, and that requires 0:07:03.240 --> 0:07:07.400 a little bit more temerity, but also thoughtfulness with respect 0:07:07.440 --> 0:07:10.080 to how we approach a globalization. It can't be full 0:07:10.160 --> 0:07:12.760 hog as we know it's in the textbook. But at 0:07:12.800 --> 0:07:15.000 the same time, I think we should not be pursuing 0:07:15.320 --> 0:07:20.320 a very aggressive progressive era. All right, Don Visa, thanks 0:07:20.400 --> 0:07:22.960 very much for joining us, Don Visa. That Moyo there. 0:07:22.960 --> 0:07:26.800 She is global economists currently serving on the boards of 0:07:27.120 --> 0:07:30.720 Chevron and three am great to get her views on 0:07:30.760 --> 0:07:33.440 these issues. Also, she's one of Time magazines one hundred 0:07:33.480 --> 0:07:42.680 most influential people in the world. This is Bloomberg. You 0:07:42.760 --> 0:07:46.120 got some economic data out today. US housing starts They 0:07:46.200 --> 0:07:49.160 felt by more than forecast in April, suggesting that supply 0:07:49.320 --> 0:07:53.720 chain constraints and rising material costs continue to hold builders back. 0:07:53.800 --> 0:07:56.880 Let's get some more color on the housing business and 0:07:56.880 --> 0:07:59.080 the construction business. We do that with Dr Jack Tchung 0:07:59.440 --> 0:08:03.080 ce Oh of James Hardy Industries. That is a publicly 0:08:03.120 --> 0:08:06.560 traded company. Uh. Dr Tron, thanks so much for joining 0:08:06.640 --> 0:08:10.400 us here. We've been hearing about supply chain shortages across 0:08:10.480 --> 0:08:14.160 a number of industries here. As the world's economies begin 0:08:14.480 --> 0:08:17.200 to ramp up talk to us about those supply chain 0:08:17.320 --> 0:08:21.440 challenges in the housing market. Good more and Paul, thank 0:08:21.440 --> 0:08:24.640 you for having me. UM. Yes, you certainly within the 0:08:24.800 --> 0:08:30.120 housing industry relative to new construction, is that we have 0:08:30.240 --> 0:08:34.640 experienced a really the shortage of lumber UM as well 0:08:34.720 --> 0:08:38.640 as the escalating prices in lumber UM. And then compounding 0:08:38.720 --> 0:08:41.160 the issue too is that there is anso a lack 0:08:41.200 --> 0:08:45.760 of labor skill, labor that that that really allowed the 0:08:45.760 --> 0:08:51.160 builders to to complete those new housing starts. UM. So 0:08:51.200 --> 0:08:55.560 that's really been an issue that as an industry, particularly 0:08:55.600 --> 0:08:59.920 a new construction UM that that have been played with 0:09:00.120 --> 0:09:02.920 during the past six months. So it's not about I mean, 0:09:03.000 --> 0:09:07.319 you want to build as much as as possible. UM. 0:09:07.960 --> 0:09:10.000 You want to get out there, get the land, you'll 0:09:10.000 --> 0:09:13.600 build on spec all no problem, right, because the demand 0:09:13.679 --> 0:09:15.560 is there. It's just that you don't have the stuff 0:09:15.679 --> 0:09:18.760 or the people that you need. UM. That's correct, Paul. 0:09:18.800 --> 0:09:22.160 I mean the the demand has been very strong UM. 0:09:22.320 --> 0:09:25.000 And you know, just just to give you a little perspective, 0:09:25.120 --> 0:09:29.520 I mean, UM, there is during the past decade, if 0:09:29.720 --> 0:09:34.640 if you look at the total new single family constructions 0:09:34.880 --> 0:09:38.640 UM in the in the US during the past decade, 0:09:38.640 --> 0:09:42.880 there is only about seven mill millions homes, the single 0:09:42.880 --> 0:09:46.959 family homes that were built. And and this was really 0:09:46.960 --> 0:09:51.400 compared to eleven million homes that would build every decade 0:09:51.679 --> 0:09:55.160 in the previous five decades UM. So certainly you know 0:09:55.200 --> 0:09:58.960 there is a there's a shortage of new single family 0:09:59.000 --> 0:10:02.560 homes in the US UM and what the what the 0:10:02.600 --> 0:10:05.080 trend that we see right now is really just, uh, 0:10:05.160 --> 0:10:10.480 the market is catching up the the demand is really strong, 0:10:10.640 --> 0:10:14.560 and then supply is really trying to catch up. You know. 0:10:14.640 --> 0:10:16.920 The one thing we've been hearing a lot about but 0:10:16.960 --> 0:10:19.439 I didn't think about it for the construction business is 0:10:19.960 --> 0:10:22.400 labor shortages. So talk to us about that. I mean, 0:10:22.400 --> 0:10:26.439 it's one thing for McDonald's or to be raising its 0:10:26.480 --> 0:10:29.160 minimum wage or Amazon to be raising its minimum wage 0:10:29.160 --> 0:10:31.200 to attract workers. But I always thought, you know, housing 0:10:31.240 --> 0:10:34.920 construction jobs were pretty good paying jobs. Talk to us 0:10:34.920 --> 0:10:38.480 about the labor aspect. Yeah, you know, it's a it 0:10:38.640 --> 0:10:41.360 is a is a good paying jobs. But you know, 0:10:41.480 --> 0:10:45.560 within construction because of all all the different type of 0:10:45.800 --> 0:10:49.199 uh um job that's going on, and you need someone 0:10:49.280 --> 0:10:54.119 to who have to feel the concrete, to phone the foundation, 0:10:54.240 --> 0:10:56.640 you need a skill that really do the roof, and 0:10:56.840 --> 0:11:00.760 the skills person that uh that really put the siding on, 0:11:01.040 --> 0:11:03.760 the skill person to put on the interior home, the 0:11:04.200 --> 0:11:06.640 electrician and so on. So so it's really you need 0:11:06.679 --> 0:11:10.360 to have different type of skill labor to recomplete the home. UM. 0:11:10.400 --> 0:11:14.200 So it's UM. You know, with the since the last 0:11:14.240 --> 0:11:19.080 bubble in UM in the housing crisis a decade ago, UM, 0:11:19.480 --> 0:11:23.160 the industry has lost a few of those labor. And 0:11:23.160 --> 0:11:26.640 then certainly during the past few years with the restriction 0:11:26.720 --> 0:11:31.520 on the immigration UM coming from from south of the country, 0:11:32.040 --> 0:11:36.200 we certainly saw a lack of that labor as well. 0:11:36.760 --> 0:11:40.240 So it's really a confluence of two factors that really 0:11:40.280 --> 0:11:44.319 affect the the new home construction in the US today, 0:11:44.679 --> 0:11:47.080 the lack of lumber and then also the lack of 0:11:47.120 --> 0:11:52.079 skill labor. But if you're able to get more for homes, 0:11:52.120 --> 0:11:54.880 I guess you're able to then offer more pay And 0:11:54.880 --> 0:11:57.480 would that help you attract more labor or is it 0:11:57.600 --> 0:12:01.920 are they just simply not there? UM? It's it certainly helps, 0:12:01.960 --> 0:12:07.120 but it's not gonna be able to attract enough labor 0:12:07.280 --> 0:12:09.920 to UM to complete homes. And it's certainly, like I 0:12:09.960 --> 0:12:14.240 mentioned before, with the lack of lumber it's also slowly 0:12:14.320 --> 0:12:17.079 down as well. But you know, how how we think 0:12:17.080 --> 0:12:20.120 about James Hardy is that you know a third of 0:12:20.160 --> 0:12:23.800 our business is really exposed to new construction, but the 0:12:23.920 --> 0:12:28.199 other two thirds really exposed to UH the renovation and 0:12:28.640 --> 0:12:32.440 UH and then UM market and and for that market 0:12:32.679 --> 0:12:35.640 is quite strong. UM. It is you know, with the 0:12:35.800 --> 0:12:39.439 COVID condition that's happening right now, you see a lot 0:12:39.520 --> 0:12:42.480 more UM folks that stay at home and walk from 0:12:42.520 --> 0:12:47.920 home and so the really UM having a beauty, beautiful 0:12:48.000 --> 0:12:50.839 home and then extension of the home will be a 0:12:50.960 --> 0:12:54.600 key part of of of the growth in that sector. UM. 0:12:54.720 --> 0:12:57.199 And also with that sector as you renovate your home, 0:12:57.960 --> 0:13:00.520 the need for lumbers not as critical as it is 0:13:00.640 --> 0:13:04.599 in new obstruction. Alright, really interesting insight and it was 0:13:04.679 --> 0:13:08.640 great to get your take on what's going on the industry. Jack, 0:13:08.679 --> 0:13:10.760 thanks so much for joining us. Dr Jack Drawing, the 0:13:10.840 --> 0:13:17.240 CEO of James Hardy Industries, get overnight A David Deeds. 0:13:17.320 --> 0:13:21.280 He's the managing principal and senior portfolio strategist at pe 0:13:21.400 --> 0:13:24.840 Pack Private Wealth Management. They got about ten billion dollars 0:13:24.880 --> 0:13:29.000 and assets under management. David, I guess the key question, UH, 0:13:29.400 --> 0:13:33.600 from thirty five thousand feet is do you see rapid 0:13:33.720 --> 0:13:37.880 growth um in the reopening and is that accompanied by 0:13:38.840 --> 0:13:43.640 you know, real temporary, real permanent inflation or is it 0:13:43.760 --> 0:13:47.880 more of a transient inflation issue. Well, Matt, you put 0:13:47.960 --> 0:13:51.480 your finger on the sixty dollar question. You know, at 0:13:51.559 --> 0:13:54.640 this point no one really knows. I think we are 0:13:54.760 --> 0:14:00.199 seeing rapid growth, notwithstanding the housing start report today with 0:14:00.360 --> 0:14:03.480 its economy opening up, opening up as the pandemic wanes. 0:14:03.559 --> 0:14:08.319 We've got huge fiscal stimulus from UH various packages, and 0:14:08.520 --> 0:14:11.880 there could be a an infrastructure bill on the way, 0:14:11.960 --> 0:14:14.280 and of course we have record low interest rates. All 0:14:14.320 --> 0:14:17.200 of that is a real tail wind behind the economy. Now, 0:14:17.679 --> 0:14:21.120 last week we had two reports consumer prices producer prices, 0:14:21.160 --> 0:14:24.840 which suggested much faster than expect inflation. But when you 0:14:25.000 --> 0:14:27.960 do the deep dive, Matt, you see that those alone 0:14:28.640 --> 0:14:31.680 don't answer your question because of what was driving the increase. 0:14:31.840 --> 0:14:35.240 It was prices on used cars. It was prices on 0:14:35.360 --> 0:14:39.160 car rentals and prices on hotel stays. You know, a 0:14:39.280 --> 0:14:42.800 year ago those industries were left for dead under the lockdown. 0:14:43.040 --> 0:14:45.200 Of course, now, for example, the use cars were up 0:14:45.240 --> 0:14:48.360 ten percent, biggest since nineteen fifty three, But something tells 0:14:48.480 --> 0:14:50.680 us that a year from now we're not going to 0:14:50.720 --> 0:14:54.960 see another ten percent uh hike in used car prices. 0:14:55.040 --> 0:14:57.800 We think it's a temporary thing. So who knows? You 0:14:57.880 --> 0:15:00.880 know this is this is the question. You can't rule 0:15:01.000 --> 0:15:05.440 either scenario completely out, Matt David. We're just finishing up 0:15:05.520 --> 0:15:08.920 what has been a very strong earnings reporting season, and 0:15:09.160 --> 0:15:11.440 a lot of folks are saying, boy, we certainly needed that, 0:15:11.560 --> 0:15:14.120 we need more of it because this is an expensive market. 0:15:14.480 --> 0:15:16.760 This is a market that maybe these needs to grow 0:15:16.840 --> 0:15:21.240 into its multiple. How do you think about valuation here, Well, 0:15:21.440 --> 0:15:25.600 evaluations are at the upper bounds of what we've historically seen, 0:15:26.280 --> 0:15:30.920 close to twenty two times forward earnings UM, and when 0:15:30.960 --> 0:15:33.320 you look at other metrics like price to sales, like 0:15:33.480 --> 0:15:36.280 the value of the entire stock market relatives to the GDP, 0:15:36.480 --> 0:15:39.240 we're off the charts. On the other hand, it's all 0:15:39.400 --> 0:15:43.320 justifiable because of these low interest rates. But we also 0:15:43.440 --> 0:15:46.920 have UM, as you pointed out, great corporate earnings growth, 0:15:46.960 --> 0:15:49.960 and I think we're gonna see Q two going to 0:15:50.200 --> 0:15:53.280 again have great earnings growth because of course, the comparisons 0:15:53.320 --> 0:15:56.200 are gonna be versus the second quarter last year when 0:15:56.200 --> 0:15:59.680 we're virtually on lockdown. But then you're gonna see still 0:16:00.000 --> 0:16:02.840 positive but slowing earnings growth in the second half of 0:16:02.920 --> 0:16:06.240 this year, and positive but again slower growth next year 0:16:06.280 --> 0:16:08.880 in two thousand twenty two, And that's where the rubber 0:16:08.920 --> 0:16:11.520 is going to hit the road. Will that earnings growth 0:16:11.720 --> 0:16:15.640 continue to be sufficient to withstand these higher multiples? I 0:16:15.720 --> 0:16:18.840 think of interest rates continued low? Yes, If not, it's 0:16:18.920 --> 0:16:21.680 going to be a stock biggers market. That's the point. 0:16:21.720 --> 0:16:27.240 I mean, this market is priced for a um, no 0:16:27.520 --> 0:16:31.720 more lockdowns, right, a total and complete reopening and be 0:16:32.640 --> 0:16:36.440 um no interest rate increases from the FED or really 0:16:36.560 --> 0:16:41.720 even uh tapering until what the end of two Yeah, 0:16:41.840 --> 0:16:44.120 you know, I think that's right, and so the way 0:16:44.240 --> 0:16:47.400 we've been, you know the but the problem is, of course, 0:16:47.440 --> 0:16:52.480 Matt is if not stocks, then what cryptospacs, money markets? 0:16:52.720 --> 0:16:55.160 You know, there's no easy choices here. So I think 0:16:55.200 --> 0:16:58.400 we're continuing to stay stay say, stay the course, but 0:16:58.520 --> 0:17:02.840 perhaps to your PORTFOLI to those areas of the market 0:17:03.040 --> 0:17:05.680 which have not done so well for the last ten years, 0:17:05.960 --> 0:17:09.440 but with a rapidly expanding economy, with interest rates starting 0:17:09.480 --> 0:17:12.120 to move up with a whiff of inflation, could do better. 0:17:12.200 --> 0:17:15.000 Those are your cyclical names, your value names. Those may 0:17:15.040 --> 0:17:17.240 be the best bets going forward. All right, Dan, I 0:17:17.280 --> 0:17:19.520 know you're not not afraid to talk names here. Given 0:17:19.560 --> 0:17:22.520 a backdrop that you see out there in terms of inflation, 0:17:22.560 --> 0:17:24.440 in terms of rates. What are some of the names 0:17:24.440 --> 0:17:27.480 you guys are doing some work on these days. Yeah. Absolutely, 0:17:27.640 --> 0:17:29.959 So we like a name like all State. I mean, 0:17:30.200 --> 0:17:32.080 you know, here's a company that about ten times s 0:17:32.080 --> 0:17:34.880 eartings with a yield about two and a half percent, 0:17:34.960 --> 0:17:37.159 so you're getting a full one percent more than that 0:17:37.320 --> 0:17:40.800 ten year treasury. Uh. They've had better than expected claims 0:17:40.840 --> 0:17:43.400 experience because of course no one was driving. But there's 0:17:43.440 --> 0:17:46.119 no reason why that company can't continue to grow with 0:17:46.240 --> 0:17:50.000 a prosperous economy. And of course they're only paying out 0:17:50.040 --> 0:17:53.680 about twenty of their profits in the fourth dividends. That 0:17:53.760 --> 0:17:56.600 they can crank that dividend up. It seems if someone said, well, 0:17:56.760 --> 0:17:58.399 five years from now, you're gonna be better off of 0:17:58.440 --> 0:18:00.200 the ten year treasure, you're gonna be better all in 0:18:00.240 --> 0:18:03.879 a company like all State, All State looks good. Um. Uh. 0:18:04.040 --> 0:18:07.320 You know, we also like a company like General Motors 0:18:07.480 --> 0:18:11.119 because of course, you know, uh, to the extent that 0:18:11.240 --> 0:18:15.879 the semiconductor, uh supply permits. They're just selling cars as 0:18:15.920 --> 0:18:19.040 fast as they can make them. GM very low valuation. 0:18:19.280 --> 0:18:21.920 They too, like Tesla of course moving to the e 0:18:22.040 --> 0:18:24.600 V space, but they're not prices though. They're gonna be 0:18:24.680 --> 0:18:27.480 a big TV player, but of course they will be ultimately. 0:18:27.640 --> 0:18:29.320 So we think GM makes a lot of sense here. 0:18:30.160 --> 0:18:32.680 I just got about thirty seconds. Still like Viacom CBS. 0:18:32.760 --> 0:18:35.960 It's hot day for them today. Um, but you know 0:18:36.040 --> 0:18:37.600 this is one this is one of the socks that 0:18:37.640 --> 0:18:42.119 Bill Wang got burned on. Well yeah he did. I 0:18:42.160 --> 0:18:44.000 mean the stock got up too close to a hundred. 0:18:44.200 --> 0:18:49.000 Viacom quite astutely sold stock to institutional investors at eight five. 0:18:49.280 --> 0:18:51.400 What were they thinking, Well, guess what is it better 0:18:51.480 --> 0:18:53.440 buy now when it's in the low forties. And I 0:18:53.560 --> 0:18:58.159 think the um appeal of the entertainment and media and 0:18:58.280 --> 0:19:01.840 content stocks was underscored first of course with the Warner 0:19:01.960 --> 0:19:05.280 Media and Discovery combination. And of course today we just 0:19:05.440 --> 0:19:09.520 learned that Amazon is looking at the MGM studios for 0:19:09.600 --> 0:19:11.199 their content and so forth. So it makes a lot 0:19:11.200 --> 0:19:13.359 of sense. All right, David, thank you so much for 0:19:13.440 --> 0:19:16.200 joining us. As always, we appreciate you, appreciate your thoughts 0:19:16.240 --> 0:19:18.200 on the market and the names you're looking at. David 0:19:18.240 --> 0:19:22.040 Deet's managing principle and senior portfolio strategists at Pepeck Private 0:19:22.080 --> 0:19:27.960 Wealth Management, located in beautiful Bucolic Summit, New Jersey. This 0:19:28.720 --> 0:19:35.119 is Bloomberg, all right. The news of the day, I 0:19:35.280 --> 0:19:38.040 think is, you know, as it relates to Global Wall Street, 0:19:38.080 --> 0:19:40.040 is what's going on at JP Morgan and putting two 0:19:40.600 --> 0:19:43.720 of the contenders vying to succeed chief executive Jamie Diamond 0:19:43.760 --> 0:19:47.200 in charge of its sprawling consumer banking operation. Let's get 0:19:47.240 --> 0:19:49.080 some color on thatw We bring in Allison Williams. She's 0:19:49.080 --> 0:19:51.639 a senior banks analyst for Bloomberg Intelligence. She's been following 0:19:51.680 --> 0:19:54.840 this industry for decades, both on the by side in 0:19:54.920 --> 0:19:58.159 the South side. She knows all the players here. So Alison, 0:19:58.200 --> 0:20:01.120 thanks so much for joining us here. Um, Jamie Dimon 0:20:01.200 --> 0:20:03.760 is not going anywhere soon, is he? But I guess 0:20:03.800 --> 0:20:06.840 they're still trying to think about some succession plans. Is 0:20:06.880 --> 0:20:10.919 that's what's going on here? Sure? So you know Jamie 0:20:11.040 --> 0:20:15.159 Diamond's infamous line is every time someone asked him how 0:20:15.240 --> 0:20:16.920 long he's going to stay on, he always says five 0:20:16.960 --> 0:20:20.800 more years. And he says that every year. UM. So uh, 0:20:20.960 --> 0:20:23.240 they'll be conferences in the coming weeks and we'll see 0:20:23.280 --> 0:20:26.560 if he continues to say that. So the big news 0:20:26.680 --> 0:20:31.200 really is, um, you know, obviously the promotion of the 0:20:31.280 --> 0:20:36.600 two former CFOs to head the Consumer Bank. UM. You know, 0:20:36.680 --> 0:20:41.000 I think because people have been watching, especially Marianne Um 0:20:41.240 --> 0:20:44.879 Lake who was a longtime CFO. She was replaced by 0:20:44.960 --> 0:20:49.680 jen Keepsack um more recently. UM, And so I think 0:20:50.000 --> 0:20:52.879 you know, all eyes are on these two women to 0:20:52.960 --> 0:20:56.000 see if one of them will become the contender. UM. However, 0:20:56.280 --> 0:21:00.359 for the moment, Um Pinto is really the Soul six user. 0:21:00.480 --> 0:21:04.679 So UM, just just to hopefully I'm being clear that UM, 0:21:04.800 --> 0:21:08.480 Pinto and Smith were basically the co leaders of the bank. 0:21:08.920 --> 0:21:14.000 Smith is retiring, which puts Pinto in the air apparent position. 0:21:14.240 --> 0:21:17.440 But I think all eyes are on, um, the two 0:21:17.560 --> 0:21:20.800 former CFOs who were promoted to have the Consumer Bank, 0:21:20.920 --> 0:21:24.800 to see if one of those women will rise to 0:21:24.880 --> 0:21:29.960 be the new CEO. So, just to recap, then we're 0:21:30.040 --> 0:21:34.680 saying Pinto is the successor is the air apparent right now? 0:21:35.119 --> 0:21:39.639 But we're watching Marianne Lake and Jennifer peep Sack in 0:21:39.840 --> 0:21:44.960 case they want not Pinto office pedestal. Well, it depends, right, 0:21:45.040 --> 0:21:48.919 So like, let's say that Diamonds stepped down tomorrow, Pinto 0:21:49.160 --> 0:21:51.639 is obviously the air apparents. Um. You know, if you 0:21:51.720 --> 0:21:54.240 went back a few years ago, UM, it would have 0:21:54.320 --> 0:21:58.240 been Pinto or Smith. I think that, um, you know, 0:21:58.640 --> 0:22:02.200 putting Marianne Late and Jen Peepsack in charge of the 0:22:02.280 --> 0:22:07.040 Consumer Bank sort of puts them into a runoff, right. So, UM, 0:22:07.160 --> 0:22:11.000 let's say, jaman so Jamie Diamond steps down tomorrow, Pinto's 0:22:11.040 --> 0:22:14.800 in charge. We wait five more years, as Jamie always does. 0:22:15.520 --> 0:22:18.560 Over the next couple of years, we would expect, um 0:22:18.880 --> 0:22:23.280 that either Lake or peep Sack rises to be the 0:22:23.960 --> 0:22:26.960 um leader of the Consumer Bank. Um, and then there's 0:22:27.000 --> 0:22:32.840 sort of a runoff between that leader and Pinto Alison. 0:22:32.880 --> 0:22:35.879 What does the market think about the tenure or the 0:22:36.000 --> 0:22:39.040 or the I guess the future with Jamie Diamond. I mean, 0:22:39.040 --> 0:22:41.760 obviously Jamie Diamond is is you know rock Star CEO 0:22:42.320 --> 0:22:46.600 has delivered for shareholders? Um. I presume shareholders are extraordinarily 0:22:46.600 --> 0:22:48.960 supportive of him. In theory, do they want him to 0:22:49.040 --> 0:22:51.080 stay as long as he wants to and as long 0:22:51.160 --> 0:22:55.560 as he continues to perform they do, UM, but I 0:22:55.640 --> 0:22:59.480 think they also do recognize UM that there is a 0:22:59.560 --> 0:23:02.400 very strong bench. I would say that, you know, all 0:23:02.520 --> 0:23:04.879 three of the people that UM we discussed are very 0:23:05.200 --> 0:23:09.520 well respected UM on Wall Street, UM, Pinto and Lake 0:23:09.600 --> 0:23:12.560 perhaps a little bit better known because of UM they're 0:23:12.720 --> 0:23:15.520 more forward facing walls over a longer period of time. 0:23:17.119 --> 0:23:21.119 Is he the most beloved major Wall Street CEO? I mean, 0:23:21.160 --> 0:23:23.600 the most revered. I don't know what what word to use, 0:23:23.680 --> 0:23:29.400 but he's basically the man to watch on Wall Street? Right? Well, yeah, 0:23:29.520 --> 0:23:32.920 he's the He's the only CEO commandaged through both of 0:23:33.040 --> 0:23:36.680 the recent crisis, right, So, UM he managed to the 0:23:36.720 --> 0:23:40.479 prior crisis. UM. You know, Lloyd Blankfine had had stucked 0:23:40.680 --> 0:23:42.919 down and paved the way for Solomon, which was actually 0:23:43.240 --> 0:23:46.200 a good transition period, right because when Solomon was in place, 0:23:46.840 --> 0:23:48.560