1 00:00:04,760 --> 00:00:08,080 Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 2 00:00:08,119 --> 00:00:11,200 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,280 --> 00:00:14,480 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:14,520 --> 00:00:16,560 Speaker 1: you and your money, whether you at the grocery store 5 00:00:16,800 --> 00:00:19,960 Speaker 1: or the trading floor. Find the Bloomberg p L Podcast 6 00:00:20,000 --> 00:00:28,800 Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. There's been 7 00:00:28,840 --> 00:00:33,360 Speaker 1: a big question Pim ever since Donald Trump's election about 8 00:00:33,560 --> 00:00:37,680 Speaker 1: bank regulation and just how much it would get rolled back. 9 00:00:37,720 --> 00:00:39,839 Speaker 1: Well to answer some of those questions or possibly give 10 00:00:39,920 --> 00:00:43,080 Speaker 1: us some insight, uh Silla Brush, a Bloomberg News reporter 11 00:00:43,120 --> 00:00:46,639 Speaker 1: covering regulation, wrote a story with the headline Trump may 12 00:00:46,680 --> 00:00:50,600 Speaker 1: save banks billions by disrupting global rules. We want to 13 00:00:50,600 --> 00:00:53,760 Speaker 1: bring in Silla Brush himself to explain which rules are 14 00:00:53,800 --> 00:00:56,800 Speaker 1: at greatest risk of getting rulled back. Silla, thanks for 15 00:00:56,840 --> 00:00:58,880 Speaker 1: joining us. Great to be with you. So what do 16 00:00:58,960 --> 00:01:02,920 Speaker 1: you think is most at rich? Which provisions are most 17 00:01:02,920 --> 00:01:05,639 Speaker 1: at risky? It rolled back to give banks more leeway 18 00:01:05,680 --> 00:01:08,399 Speaker 1: at this point. So one of the interesting things it's 19 00:01:08,720 --> 00:01:10,800 Speaker 1: in the focus of this story is about a whole 20 00:01:10,920 --> 00:01:13,880 Speaker 1: range of rules at the global level that aren't yet 21 00:01:13,920 --> 00:01:17,200 Speaker 1: actually on the books. So It's an interesting situation where 22 00:01:17,800 --> 00:01:20,800 Speaker 1: regulators at the global level are trying to finalize these 23 00:01:20,840 --> 00:01:24,200 Speaker 1: new standards, and yet this election has just occurred and 24 00:01:24,440 --> 00:01:28,400 Speaker 1: Donald Trump, president elect, wants to in his own words, 25 00:01:28,600 --> 00:01:33,679 Speaker 1: dismantle financial regulations. So for rules, uh that are aren't 26 00:01:33,720 --> 00:01:36,240 Speaker 1: even on the books, it just makes it at least 27 00:01:36,959 --> 00:01:39,679 Speaker 1: perhaps much less likely that they'll ever get on the books. 28 00:01:39,800 --> 00:01:42,199 Speaker 1: So it's a different question than rolling him back, which 29 00:01:42,319 --> 00:01:44,560 Speaker 1: he very well may do. For plenty of rules that 30 00:01:44,560 --> 00:01:46,560 Speaker 1: are already you know, on the books in the US, 31 00:01:46,760 --> 00:01:49,720 Speaker 1: can you describe some of the controversial rules and what 32 00:01:49,800 --> 00:01:53,120 Speaker 1: they might do to the bank stocks and to their 33 00:01:53,120 --> 00:01:56,600 Speaker 1: ability to generate profits. So some of these rules that 34 00:01:56,680 --> 00:01:58,800 Speaker 1: regulators have been spending the better part of the year 35 00:01:58,840 --> 00:02:01,880 Speaker 1: at the global level trying to to finish off, are 36 00:02:02,320 --> 00:02:06,280 Speaker 1: you restrictions on banks ability to use their own internal 37 00:02:06,320 --> 00:02:10,320 Speaker 1: models to basically decide how risky various types of loans, 38 00:02:10,480 --> 00:02:15,480 Speaker 1: corporate corporate securities, bonds, and other assets on their books are. 39 00:02:15,560 --> 00:02:18,920 Speaker 1: And these are very complicated models, but they they're basically 40 00:02:19,040 --> 00:02:24,400 Speaker 1: used to determine how much capital banks have. So you know, 41 00:02:24,480 --> 00:02:27,959 Speaker 1: if these don't if these new restrictions don't come on 42 00:02:28,800 --> 00:02:32,160 Speaker 1: for banks, in the US or around the world. Then 43 00:02:32,760 --> 00:02:36,360 Speaker 1: you know the warnings from the industry where that these 44 00:02:36,480 --> 00:02:38,760 Speaker 1: these rules could cost billions of dollars, in some cases 45 00:02:38,880 --> 00:02:41,840 Speaker 1: hundreds of billions of dollars, and they were generally going 46 00:02:41,880 --> 00:02:44,840 Speaker 1: to be softened over the They were getting softened over 47 00:02:44,840 --> 00:02:47,000 Speaker 1: the course of the year. But now there's this big 48 00:02:47,080 --> 00:02:50,400 Speaker 1: question about whether these rules actually make it on the books. 49 00:02:50,600 --> 00:02:53,079 Speaker 1: Well and talk a little bit. I mean Donald Trump 50 00:02:53,160 --> 00:02:55,520 Speaker 1: is is going to be the president of the United States, 51 00:02:55,919 --> 00:02:59,799 Speaker 1: uh and potentially could soften rules in the United States. 52 00:03:00,040 --> 00:03:04,280 Speaker 1: Why would this have such a big effect on global regulation? 53 00:03:05,000 --> 00:03:07,600 Speaker 1: So the US, UH, you know, there are these you know, 54 00:03:07,680 --> 00:03:10,000 Speaker 1: several different bodies at the global level that try to 55 00:03:10,080 --> 00:03:14,320 Speaker 1: set standards UM that work across around the world, that 56 00:03:14,440 --> 00:03:18,400 Speaker 1: basically set minimum standards that every nation jurisdiction has to 57 00:03:18,400 --> 00:03:21,400 Speaker 1: comply with. The idea general ideas that they want to 58 00:03:21,400 --> 00:03:25,680 Speaker 1: prevent regulatory arbitrage banks moving from one jurisdiction to the 59 00:03:25,760 --> 00:03:30,080 Speaker 1: next because the rules are softer and easier. UM. The 60 00:03:30,200 --> 00:03:35,040 Speaker 1: US has several seats on these tables, at these international tables, 61 00:03:35,200 --> 00:03:38,040 Speaker 1: and they help set the rules of the road. So 62 00:03:38,720 --> 00:03:40,920 Speaker 1: you know, if these rules don't get put on the 63 00:03:40,960 --> 00:03:43,960 Speaker 1: books and they aren't sort of enforced and implemented. Then 64 00:03:44,040 --> 00:03:48,160 Speaker 1: you start to get serious questions about you know what 65 00:03:48,160 --> 00:03:50,400 Speaker 1: what the sort of power of these international bodies is. 66 00:03:50,480 --> 00:03:53,680 Speaker 1: It's too early to answer those questions really, but it 67 00:03:53,760 --> 00:03:58,680 Speaker 1: certainly raises the question as far as domestic banking goes, 68 00:03:58,800 --> 00:04:01,360 Speaker 1: can you give us any side into what are the 69 00:04:01,480 --> 00:04:05,560 Speaker 1: hot button issues for domestic banks? For domestic I mean 70 00:04:05,560 --> 00:04:08,040 Speaker 1: the US banks, so that we've already seen sort of 71 00:04:08,440 --> 00:04:12,240 Speaker 1: big concerns about you know, what will happen about the 72 00:04:12,280 --> 00:04:15,920 Speaker 1: Consumer Financial Production Bureau UM, and that affects you know, 73 00:04:15,920 --> 00:04:19,640 Speaker 1: a whole range of domestic banks and mortgages and credit cards. 74 00:04:20,120 --> 00:04:24,800 Speaker 1: And you know whether Congress at at Trump's sort of 75 00:04:24,839 --> 00:04:29,880 Speaker 1: direction or encouragement UM starts to change sort of the 76 00:04:30,480 --> 00:04:33,720 Speaker 1: CFPP is ability to make make rules and and crack 77 00:04:33,800 --> 00:04:37,919 Speaker 1: down on the industry. UM. That's a major area. UH, 78 00:04:38,120 --> 00:04:51,680 Speaker 1: that's already popped up since the election. It is a 79 00:04:51,839 --> 00:04:56,200 Speaker 1: bond blood bath out there. Will this continue or is 80 00:04:56,279 --> 00:05:00,880 Speaker 1: this time when we finally see yields peak and then stabilized. 81 00:05:00,920 --> 00:05:03,039 Speaker 1: To answer that question, I want to bring Eric Stein, 82 00:05:03,200 --> 00:05:07,680 Speaker 1: co director of Global fixed Income at Eaton Vance. Uh. Eric, 83 00:05:07,720 --> 00:05:11,360 Speaker 1: thank you so much for joining us. What do you 84 00:05:11,400 --> 00:05:14,000 Speaker 1: think is this? Is this the start of a larger trend, 85 00:05:14,160 --> 00:05:16,240 Speaker 1: a larger bond sell off, or are we going to 86 00:05:16,360 --> 00:05:19,400 Speaker 1: hit some kind of equilibrium here where yields stabilize. You know, 87 00:05:19,440 --> 00:05:21,880 Speaker 1: I think it certainly could be the start of a 88 00:05:21,960 --> 00:05:23,920 Speaker 1: larger sell off. You know, do I expect to see 89 00:05:24,400 --> 00:05:26,920 Speaker 1: the sell off like we've had basically, you know, every day? 90 00:05:26,960 --> 00:05:29,480 Speaker 1: You know, we had the bond market effectively closed on 91 00:05:29,600 --> 00:05:32,800 Speaker 1: Friday for the Veterans Day holidays. We've really really had 92 00:05:32,839 --> 00:05:35,800 Speaker 1: three trading days post the election. We've seen a significant 93 00:05:35,800 --> 00:05:38,800 Speaker 1: sell off all of those days, really significant sell off 94 00:05:38,839 --> 00:05:41,919 Speaker 1: in the bond market since just about the time that 95 00:05:42,200 --> 00:05:44,920 Speaker 1: the President elect now Trump gave his speech about three 96 00:05:44,960 --> 00:05:48,320 Speaker 1: am Tuesday evening going into Wednesday morning. So I think 97 00:05:48,360 --> 00:05:50,880 Speaker 1: most of the sell off, though, has been an increase 98 00:05:50,920 --> 00:05:53,880 Speaker 1: in inflation expectations. If you take nominal treasuries and break 99 00:05:53,920 --> 00:05:56,800 Speaker 1: them between inflation expectations at real rates, there's been some 100 00:05:56,880 --> 00:05:59,120 Speaker 1: increased on the real rate. A lot of it's also 101 00:05:59,200 --> 00:06:03,640 Speaker 1: been an increase of inflation expectations. What are you advising 102 00:06:03,720 --> 00:06:06,440 Speaker 1: clients to do, just sit tight and wait and see 103 00:06:06,480 --> 00:06:08,440 Speaker 1: what happens, or is this the time. If you have 104 00:06:08,520 --> 00:06:11,480 Speaker 1: got if you have gains in the bond market, take 105 00:06:11,560 --> 00:06:13,599 Speaker 1: the gain and wait for a better time. You know, 106 00:06:13,800 --> 00:06:16,200 Speaker 1: I'm somewhat biased, but you know here at the advance 107 00:06:16,240 --> 00:06:18,599 Speaker 1: we do run a number of flexible portfolios or global 108 00:06:18,640 --> 00:06:21,479 Speaker 1: macro strategy are short teration strategy can come fund funds 109 00:06:21,520 --> 00:06:24,599 Speaker 1: that can short funds that can profit from higher rates 110 00:06:24,720 --> 00:06:28,000 Speaker 1: or a stronger US dollar, higher inflation expectations. I think, 111 00:06:28,040 --> 00:06:30,520 Speaker 1: you know, if you think broadly in markets, you know 112 00:06:30,560 --> 00:06:33,320 Speaker 1: we've had declining interest rates. Um, you know, we had 113 00:06:33,360 --> 00:06:36,160 Speaker 1: inflation expectations that got the very low levels. Now those 114 00:06:36,200 --> 00:06:38,680 Speaker 1: were picking up even ahead of the election. But I 115 00:06:38,680 --> 00:06:40,240 Speaker 1: think it's you know, we may be in for a 116 00:06:40,360 --> 00:06:43,000 Speaker 1: very different bond market given that we're certainly going to 117 00:06:43,080 --> 00:06:46,160 Speaker 1: have a larger fisc CO response that should lead to 118 00:06:46,240 --> 00:06:48,680 Speaker 1: higher inflation. Whether or not leads to higher growth I 119 00:06:48,720 --> 00:06:51,159 Speaker 1: think is still to be determined. Um, but I think 120 00:06:51,200 --> 00:06:54,479 Speaker 1: you know, potentially there is higher growth if we get 121 00:06:54,520 --> 00:06:57,479 Speaker 1: some stuff on the tax and regulatory side along with 122 00:06:57,520 --> 00:07:00,600 Speaker 1: some targeted um infrastructure spending, and if we're a new 123 00:07:00,640 --> 00:07:03,040 Speaker 1: growth and inflation paradigm, we should be in a new 124 00:07:03,080 --> 00:07:06,479 Speaker 1: interest rate and inflation expectations paradigm as well. Okay, so Eric, 125 00:07:06,520 --> 00:07:09,200 Speaker 1: since you have a flexible mandate, you can go in 126 00:07:09,279 --> 00:07:11,520 Speaker 1: and buy at this point. At what point do you 127 00:07:11,560 --> 00:07:16,040 Speaker 1: buy a thirty year bond at three yield? I want 128 00:07:16,040 --> 00:07:17,880 Speaker 1: to I want to see it keep backing up from here, 129 00:07:17,920 --> 00:07:20,800 Speaker 1: to be honest, or see you know, a change in 130 00:07:21,000 --> 00:07:24,360 Speaker 1: what people are expecting in terms of the fiscal stimulus 131 00:07:24,520 --> 00:07:26,880 Speaker 1: um that we're that we you know, may be getting 132 00:07:26,920 --> 00:07:29,400 Speaker 1: next year. How do you even plan though? How do 133 00:07:29,440 --> 00:07:31,600 Speaker 1: you how do we even we have no facts? Right 134 00:07:31,680 --> 00:07:34,920 Speaker 1: well exactly so to me, you know, when this election occurred, 135 00:07:34,960 --> 00:07:37,920 Speaker 1: that was certainly surprising. The way I thought about it was, Look, 136 00:07:37,960 --> 00:07:41,200 Speaker 1: the distribution of outcomes has widened. So if you said, 137 00:07:41,640 --> 00:07:43,880 Speaker 1: if we if if Hillary Clinton had been elected, and 138 00:07:43,920 --> 00:07:46,760 Speaker 1: we kind of have a continent continuation, I should say, 139 00:07:46,760 --> 00:07:49,480 Speaker 1: of the same policies, then we'd probably be in this 140 00:07:49,560 --> 00:07:51,720 Speaker 1: kind of muddle through one and a half two percent 141 00:07:51,840 --> 00:07:55,080 Speaker 1: not terrible but not certainly not great growth environment. Now 142 00:07:55,120 --> 00:07:58,880 Speaker 1: with President elect Trump now being ready to take over 143 00:07:58,960 --> 00:08:02,600 Speaker 1: beginning and Jane or of seventeen to be a distributions wider, 144 00:08:02,640 --> 00:08:05,960 Speaker 1: if we get two massive amounts of protectionism, that's that's 145 00:08:05,960 --> 00:08:08,240 Speaker 1: probably a higher probability of recession that we would have 146 00:08:08,280 --> 00:08:12,240 Speaker 1: had frankly under Hillary Clinton administration. However, if we get 147 00:08:12,280 --> 00:08:15,920 Speaker 1: tax and regulatory reform and some target infrastructure spending, that's 148 00:08:15,920 --> 00:08:20,040 Speaker 1: significantly higher probability of two and a half three type growth. 149 00:08:20,080 --> 00:08:21,760 Speaker 1: And I think the way the markets looking at and 150 00:08:21,800 --> 00:08:24,119 Speaker 1: I think this is correct, is we're going to get 151 00:08:24,200 --> 00:08:28,920 Speaker 1: more of the tax, regulatory and fiscal side. The protectionism side, 152 00:08:28,920 --> 00:08:31,000 Speaker 1: it's still to be determined. So I certainly agree with 153 00:08:31,000 --> 00:08:33,440 Speaker 1: the tony of your question. No one really knows, but 154 00:08:33,480 --> 00:08:36,320 Speaker 1: I'd say right now the distribution of outcomes is certainly 155 00:08:36,360 --> 00:08:38,520 Speaker 1: a lot wider than then, let's say, what it was 156 00:08:39,080 --> 00:08:41,880 Speaker 1: a week ago pre election. Eric, you think that the 157 00:08:41,960 --> 00:08:45,560 Speaker 1: increase in yields will have any effect on bond issuance 158 00:08:45,600 --> 00:08:49,000 Speaker 1: by corporate borrowers, Uh, you know, certainly. I think bar 159 00:08:49,200 --> 00:08:51,440 Speaker 1: you know, Barros to some extent have been, you know, 160 00:08:51,679 --> 00:08:55,600 Speaker 1: of all types of instruments, you know, emerging market countries, 161 00:08:55,679 --> 00:08:59,079 Speaker 1: corporates have been, you know, to some extent expecting higher rates. 162 00:08:59,120 --> 00:09:02,000 Speaker 1: I don't think anyone is expecting, you know, higher rates 163 00:09:02,160 --> 00:09:05,280 Speaker 1: in the exact manner, uh, and kind of speed that 164 00:09:05,280 --> 00:09:07,520 Speaker 1: we're getting them now. But you know, to the extent 165 00:09:07,559 --> 00:09:10,480 Speaker 1: that they think we're going into a lot higher rate regime, 166 00:09:10,480 --> 00:09:12,840 Speaker 1: which I don't think people really think. But um, you know, 167 00:09:12,880 --> 00:09:16,240 Speaker 1: maybe they want to issue quicker um and and kind 168 00:09:16,280 --> 00:09:18,120 Speaker 1: of get that out the way. With the extent that 169 00:09:18,200 --> 00:09:19,640 Speaker 1: you know, they want to be a little more tactical 170 00:09:19,679 --> 00:09:22,400 Speaker 1: and wait till markets will will settle down. Um you know, 171 00:09:22,559 --> 00:09:25,840 Speaker 1: maybe maybe then they would wait. But certainly, at some level, uh, 172 00:09:25,840 --> 00:09:28,360 Speaker 1: it gets it gets to be significantly more costly. That 173 00:09:28,440 --> 00:09:31,520 Speaker 1: being said, rates from a historical perspective, uh, and even 174 00:09:31,520 --> 00:09:33,960 Speaker 1: from where we were a couple of years ago, are 175 00:09:33,960 --> 00:09:36,720 Speaker 1: still at very low levels. It's just that they've they've rallied, 176 00:09:36,880 --> 00:09:39,920 Speaker 1: you know, really since the July time period, they've they've 177 00:09:39,960 --> 00:09:43,880 Speaker 1: sold off pretty significantly, obviously accelerated that sell off since 178 00:09:43,880 --> 00:09:46,440 Speaker 1: the election outcome. Eric, We've seen a lot of bonds 179 00:09:46,480 --> 00:09:49,679 Speaker 1: sell off. We've seen investment grade corporate bonds, we've seen 180 00:09:49,720 --> 00:09:53,480 Speaker 1: emerging markets debt, and of course treasuries, which asset class 181 00:09:53,520 --> 00:09:56,080 Speaker 1: with in fixed income. Do you think is the most 182 00:09:56,360 --> 00:10:01,320 Speaker 1: dangerous right now? Most most dangerous it's to me probably 183 00:10:01,800 --> 00:10:05,520 Speaker 1: it's probably still to some extent treasuries, um, just because 184 00:10:05,559 --> 00:10:08,960 Speaker 1: the nominal treasuries I should say I like tips. I 185 00:10:09,000 --> 00:10:11,120 Speaker 1: think tips are good places to be if you do 186 00:10:11,200 --> 00:10:13,560 Speaker 1: them on if you buy them on a treasury hedge basis. 187 00:10:14,080 --> 00:10:16,679 Speaker 1: I think you know US treasuries to the extent you know, 188 00:10:16,840 --> 00:10:18,800 Speaker 1: as I said earlier, we're gonna we likely are gonna 189 00:10:18,800 --> 00:10:22,400 Speaker 1: have higher inflation. We're going to have more fiscal easing, 190 00:10:22,440 --> 00:10:25,120 Speaker 1: which is, you know, whether it comes from taxes or spending, 191 00:10:25,160 --> 00:10:28,040 Speaker 1: were likely some combination of both. That means more issuance 192 00:10:28,360 --> 00:10:30,720 Speaker 1: and some more issues should we hand the treasury market? 193 00:10:31,040 --> 00:10:33,120 Speaker 1: And if we get more economic growth, which I think 194 00:10:33,160 --> 00:10:35,400 Speaker 1: is certainly not a given, but the potential for being 195 00:10:35,400 --> 00:10:39,560 Speaker 1: in a higher growth regime, uh certainly exists. Um, you know, 196 00:10:39,600 --> 00:10:42,320 Speaker 1: then those are three bad things. More growth, more issuance, 197 00:10:42,360 --> 00:10:45,240 Speaker 1: and more inflation are all bad for nominal holders of 198 00:10:45,240 --> 00:10:48,080 Speaker 1: of U S treasuries. What if you could speak to 199 00:10:48,120 --> 00:10:51,280 Speaker 1: the issue of high yield debt. There's been a big 200 00:10:51,280 --> 00:10:54,360 Speaker 1: sell off just looking at the eye shares iebox high 201 00:10:54,440 --> 00:10:57,840 Speaker 1: yield et F. He's taken a looking down about four 202 00:10:57,880 --> 00:11:00,960 Speaker 1: and a quarter percent since the beginning November. What about 203 00:11:01,000 --> 00:11:03,720 Speaker 1: high yield? Yes, so, I mean certainly the you know 204 00:11:03,800 --> 00:11:05,719 Speaker 1: you've seen across you know what I'll call kind of 205 00:11:05,760 --> 00:11:08,120 Speaker 1: the riskier credit asset classes. So whether it's high yield 206 00:11:08,200 --> 00:11:11,040 Speaker 1: or emerging markets, you know, what interest rates. If interest 207 00:11:11,120 --> 00:11:13,120 Speaker 1: rates are just going up from kind of a real 208 00:11:13,200 --> 00:11:17,040 Speaker 1: rate perspective, just the economies growing a little bit faster, 209 00:11:17,160 --> 00:11:19,480 Speaker 1: that that doesn't hurt those asset classes that much. But 210 00:11:19,559 --> 00:11:22,120 Speaker 1: I think given the kind of shock of the interest 211 00:11:22,240 --> 00:11:24,320 Speaker 1: rate move, which to me is again a combination of 212 00:11:24,360 --> 00:11:28,880 Speaker 1: potential for more issuance, uh definitely more inflation as well 213 00:11:28,920 --> 00:11:31,440 Speaker 1: as potentially higher real growth, I think you're you're you know, 214 00:11:31,480 --> 00:11:34,200 Speaker 1: you're gonna see some dislocation and credit markets you're seeing 215 00:11:34,240 --> 00:11:37,079 Speaker 1: it right now, and high yield you're seeing is seeing 216 00:11:37,200 --> 00:11:39,199 Speaker 1: in emerging markets as well. So I think you know, 217 00:11:39,240 --> 00:11:42,160 Speaker 1: at some point they're certainly gonna be opportunities in those 218 00:11:42,200 --> 00:11:45,520 Speaker 1: asset classes, whether on an absolute, uh you know, kind 219 00:11:45,559 --> 00:11:48,559 Speaker 1: of standpoint, or kind of relative to to U S. Treasuries. 220 00:11:48,640 --> 00:11:50,520 Speaker 1: So real quick, what do you think is the best 221 00:11:50,520 --> 00:11:53,600 Speaker 1: bet right now? Best bet? So, as I said before, 222 00:11:53,679 --> 00:11:55,960 Speaker 1: I like tips versus um, you know, I like tips 223 00:11:56,040 --> 00:11:58,319 Speaker 1: versus U S treasuries. I also h you know, I 224 00:11:58,360 --> 00:12:01,320 Speaker 1: also like so floating rate asset supporting right bank loans 225 00:12:01,840 --> 00:12:05,160 Speaker 1: clos those are attractive. Also, certain types of mortgage backed 226 00:12:05,200 --> 00:12:08,600 Speaker 1: securities IO interest only mortgage backs that actually have a 227 00:12:08,679 --> 00:12:11,400 Speaker 1: negative duration. We have some of those bonds in our 228 00:12:11,400 --> 00:12:14,240 Speaker 1: short duration Strategic Income fund. Um. You know, those have 229 00:12:14,280 --> 00:12:17,400 Speaker 1: been performing well over the past couple of days. Thank 230 00:12:17,440 --> 00:12:19,600 Speaker 1: you very much for spending time with us. Sarah Stein, 231 00:12:19,679 --> 00:12:23,040 Speaker 1: as a portfolio manager and co director of Global Fixed 232 00:12:23,080 --> 00:12:27,000 Speaker 1: Income for EAT Invents, helps to manage over three hundred 233 00:12:27,080 --> 00:12:31,600 Speaker 1: billion dollars of customer assets. He is based in Boston. 234 00:12:43,760 --> 00:12:47,160 Speaker 1: Samson Electronics, it wants to get into your car, and 235 00:12:47,200 --> 00:12:50,240 Speaker 1: it's spending eight billion dollars to do so. It has 236 00:12:50,280 --> 00:12:54,120 Speaker 1: agreed to buy Harmon International Industries. And here to tell 237 00:12:54,200 --> 00:12:57,640 Speaker 1: us more is Alex Sherman, Bloomberg's Mergers and Acquisitions and 238 00:12:57,720 --> 00:13:01,160 Speaker 1: Deals reporter Alex Sherman. Always a pleasure tell us about this, 239 00:13:01,320 --> 00:13:05,760 Speaker 1: uh recently announced deal to buy Harmon International. I mean, 240 00:13:05,840 --> 00:13:07,920 Speaker 1: I know we keep talking about the car, but is 241 00:13:07,960 --> 00:13:12,520 Speaker 1: Harmon just uh, you know, about automobiles or it is? 242 00:13:12,520 --> 00:13:15,439 Speaker 1: Is it also about audio? Yeah? So I mean if 243 00:13:15,480 --> 00:13:18,320 Speaker 1: you think back, you know a few years now, maybe 244 00:13:18,320 --> 00:13:21,840 Speaker 1: even decades ago, Harmon was all about audio. The BBL 245 00:13:22,320 --> 00:13:26,800 Speaker 1: for sure, audio home system, home audio system card exactly. 246 00:13:27,280 --> 00:13:29,960 Speaker 1: It has gotten recently, it has moved much more into 247 00:13:29,960 --> 00:13:34,199 Speaker 1: the connected car area. And that's for sure why Samsung 248 00:13:34,280 --> 00:13:37,840 Speaker 1: made this deal. Uh. You know, obviously everybody knows Samsung 249 00:13:37,920 --> 00:13:41,199 Speaker 1: for mobile phones. People might be surprised that, uh, they 250 00:13:41,200 --> 00:13:44,760 Speaker 1: own about half of memory chips and cars, so they're 251 00:13:44,800 --> 00:13:47,400 Speaker 1: already there to some degree. Uh. And I feel like 252 00:13:47,480 --> 00:13:50,160 Speaker 1: Samsung must have made the decision that if they really 253 00:13:50,200 --> 00:13:53,160 Speaker 1: want to get into uh you know, audio and and 254 00:13:53,160 --> 00:13:56,679 Speaker 1: and sort of full unconnected car, acquiring Harmon was the 255 00:13:56,720 --> 00:13:58,760 Speaker 1: way to do it. Because this game is all about scale. 256 00:13:58,920 --> 00:14:01,400 Speaker 1: They realized they probably gonna have to compete against Apple 257 00:14:01,440 --> 00:14:03,719 Speaker 1: in the next decade or so. Apple has sort of 258 00:14:03,760 --> 00:14:05,480 Speaker 1: gone back and forth with about how they want to 259 00:14:05,480 --> 00:14:07,480 Speaker 1: get into the car. It seems like they're going to 260 00:14:07,520 --> 00:14:10,280 Speaker 1: do something. Whether that means an acquisition or go it 261 00:14:10,320 --> 00:14:13,480 Speaker 1: alone still to be determined. Um, but this is a 262 00:14:13,520 --> 00:14:16,680 Speaker 1: way for Samsung to sort of be a first mover here. Uh. 263 00:14:16,760 --> 00:14:18,719 Speaker 1: So you know, it's a fairly big price tag eight 264 00:14:18,720 --> 00:14:22,640 Speaker 1: billion dollars. From my understanding and reporting on this, Uh, 265 00:14:22,680 --> 00:14:26,280 Speaker 1: there were some other potential buyers out there. Um, we 266 00:14:26,320 --> 00:14:28,360 Speaker 1: don't know who they are yet, so I will try 267 00:14:28,360 --> 00:14:30,160 Speaker 1: to keep doing reporting and if we can get a 268 00:14:30,160 --> 00:14:32,400 Speaker 1: little bit more clarity on who they might be, they 269 00:14:32,440 --> 00:14:35,840 Speaker 1: are likely to be other large tech companies because more 270 00:14:35,880 --> 00:14:39,600 Speaker 1: of the auto guys eight billion dollars is a bit rich. Well, okay, 271 00:14:39,600 --> 00:14:42,920 Speaker 1: so Samsung is a South Korean company and Harmon is 272 00:14:43,000 --> 00:14:46,760 Speaker 1: a US company based in Sanford, Connecticut, which raises the 273 00:14:47,000 --> 00:14:50,840 Speaker 1: question that you addressed in another story, uh, that you 274 00:14:50,920 --> 00:14:55,080 Speaker 1: co authored with Jonathan Browning, uh, looking at how some 275 00:14:55,320 --> 00:14:59,640 Speaker 1: Chinese companies are getting advice to pump the brakes on 276 00:15:00,000 --> 00:15:04,040 Speaker 1: cential deals in the US. In other words, wait, take 277 00:15:04,080 --> 00:15:09,240 Speaker 1: your time see what President elect Donald Trump's policies are 278 00:15:09,400 --> 00:15:11,240 Speaker 1: before making a move. Can you tell us a little 279 00:15:11,240 --> 00:15:16,080 Speaker 1: more about that? Yeah, So I've spent the last the 280 00:15:16,160 --> 00:15:18,720 Speaker 1: latter part of last week talking to dealmakers and simply 281 00:15:18,760 --> 00:15:21,080 Speaker 1: asking them a straight up question, you know, what does 282 00:15:21,080 --> 00:15:27,280 Speaker 1: the Donald Trump election mean for this inbound Chinese to us? Specifically? Uh, 283 00:15:27,480 --> 00:15:29,440 Speaker 1: you know, over the next four years or so, which 284 00:15:29,480 --> 00:15:31,640 Speaker 1: we should say has been going gangbusters. So that's sort 285 00:15:31,680 --> 00:15:34,160 Speaker 1: of why I asked. It's a volume for Chinese m 286 00:15:34,200 --> 00:15:36,280 Speaker 1: and a inbound to the United States is up like 287 00:15:37,120 --> 00:15:40,320 Speaker 1: over last year. It really was getting off to sort 288 00:15:40,360 --> 00:15:43,640 Speaker 1: of a rocking start at the beginning of the year UM, 289 00:15:43,720 --> 00:15:45,920 Speaker 1: and obviously they're like, it doesn't It doesn't take a 290 00:15:46,000 --> 00:15:48,840 Speaker 1: rocket scientist to think that maybe this may slow down, 291 00:15:48,920 --> 00:15:54,920 Speaker 1: considering how outspoken Trump has been about basically curbing UH 292 00:15:55,280 --> 00:15:57,760 Speaker 1: businesses leaving the United States and going to China. And 293 00:15:57,760 --> 00:16:00,320 Speaker 1: that's exactly what would happen in many of these cases China. 294 00:16:00,400 --> 00:16:03,080 Speaker 1: If China was to come in and buy US target, 295 00:16:03,080 --> 00:16:04,760 Speaker 1: at least some of that business, you'd have to think 296 00:16:05,160 --> 00:16:08,320 Speaker 1: would be rerouted to China. So my answer was sort 297 00:16:08,320 --> 00:16:13,400 Speaker 1: of split. I had at least three advisors um to 298 00:16:13,560 --> 00:16:16,440 Speaker 1: deals meeting bankers or lawyers tell me that they are 299 00:16:16,480 --> 00:16:20,000 Speaker 1: advising their clients to pump the brakes and say, well, 300 00:16:20,080 --> 00:16:22,120 Speaker 1: we don't really know what this means yet, but you'd 301 00:16:22,120 --> 00:16:24,720 Speaker 1: be wise to at least figure out what it means 302 00:16:25,160 --> 00:16:28,800 Speaker 1: before moving ahead with some large US acquisitions. I had 303 00:16:28,840 --> 00:16:31,040 Speaker 1: several other deal makers tell me that no, you know, 304 00:16:31,120 --> 00:16:34,000 Speaker 1: it's sort of industry specific, maybe, but we are not 305 00:16:34,120 --> 00:16:37,880 Speaker 1: seeing a slowdown yet. Chinese buyers still want to get 306 00:16:37,920 --> 00:16:39,840 Speaker 1: into the US. They have a lot of money to 307 00:16:39,920 --> 00:16:43,960 Speaker 1: spend UH, and because of the uncertainty, maybe they're not 308 00:16:44,040 --> 00:16:48,560 Speaker 1: convinced that a Trump presidency will necessarily mean that they 309 00:16:48,600 --> 00:16:53,040 Speaker 1: can stop making large US purchases. Alex Sherman, just to 310 00:16:53,160 --> 00:16:56,280 Speaker 1: focus on deals that we already know about in addition 311 00:16:56,280 --> 00:17:01,080 Speaker 1: to the Harmon International deal by Samsung previously, I know 312 00:17:01,120 --> 00:17:03,840 Speaker 1: that you have reported on the Qualcom deal to acquire 313 00:17:04,000 --> 00:17:07,879 Speaker 1: an XP Semiconductors that was a thirty eight billion dollar deal. 314 00:17:08,560 --> 00:17:13,959 Speaker 1: During the summer, Soft Bank of Japan purchased arm holdings 315 00:17:14,240 --> 00:17:16,720 Speaker 1: for thirty two billion dollars. Are there any more chip 316 00:17:16,800 --> 00:17:21,240 Speaker 1: companies or those kinds of companies left to buy? Well, 317 00:17:21,400 --> 00:17:23,359 Speaker 1: the world is getting smaller, but I would say the 318 00:17:23,359 --> 00:17:26,560 Speaker 1: short answer is yes. I still continue to hear that 319 00:17:27,200 --> 00:17:29,600 Speaker 1: sort of everyone is talking to everyone in chip land. 320 00:17:29,640 --> 00:17:33,160 Speaker 1: This is something that was enormous and it has continued 321 00:17:33,160 --> 00:17:36,639 Speaker 1: on to some people really push the envelope with me 322 00:17:36,680 --> 00:17:40,920 Speaker 1: and say, you know, anything's possible here. So Uh. Some 323 00:17:40,960 --> 00:17:44,840 Speaker 1: companies that we haven't really seen move yet, our Texas Instruments, Uh, 324 00:17:44,880 --> 00:17:47,639 Speaker 1: they haven't made a big acquisition at this point, intel 325 00:17:47,680 --> 00:17:52,240 Speaker 1: Bot Altera in early they that integration process is probably 326 00:17:52,280 --> 00:17:54,480 Speaker 1: to the point now where they could buy something else 327 00:17:54,480 --> 00:17:57,240 Speaker 1: as well. So yes, I would say we should probably 328 00:17:57,280 --> 00:18:00,400 Speaker 1: expect a few more mega chip deals of the next 329 00:18:00,480 --> 00:18:03,600 Speaker 1: year or so. Alex Srban, thank you so much for 330 00:18:03,680 --> 00:18:06,520 Speaker 1: being with us. Alex Sherman of Bloomberg News on the 331 00:18:06,600 --> 00:18:10,000 Speaker 1: latest mergers as well as the conundrum of what Chinese 332 00:18:10,040 --> 00:18:26,719 Speaker 1: companies should do in light of the Trump presidency. Taking 333 00:18:26,720 --> 00:18:28,679 Speaker 1: a look at what's going on in the world of 334 00:18:28,760 --> 00:18:32,520 Speaker 1: dividend paying stocks. Eric Irvine is the chief executive of 335 00:18:32,600 --> 00:18:35,240 Speaker 1: Reality Shares, and Eric, thank you very much for being 336 00:18:35,400 --> 00:18:39,359 Speaker 1: with us. Dividend paying stocks have been very popular with 337 00:18:39,440 --> 00:18:43,879 Speaker 1: investors because bond yields have been so historically low. What 338 00:18:44,040 --> 00:18:47,320 Speaker 1: is their outlook now? Yeah, well, I think it's important 339 00:18:47,359 --> 00:18:51,280 Speaker 1: to distinguish between, first of all, dividend paying stocks that 340 00:18:51,359 --> 00:18:53,879 Speaker 1: are focused on yield and dividend paying stacks that are 341 00:18:53,920 --> 00:18:57,399 Speaker 1: focused on growth, because that's been a tailor of two markets. Indeed, 342 00:18:57,440 --> 00:19:02,680 Speaker 1: the high yielding stocks have been single best performing sectors 343 00:19:02,760 --> 00:19:05,760 Speaker 1: or segments of the U S stock market since since 344 00:19:05,800 --> 00:19:07,520 Speaker 1: the first part of the year, all the way through 345 00:19:07,800 --> 00:19:10,600 Speaker 1: the end of the third quarter, and now they're almost 346 00:19:10,600 --> 00:19:14,320 Speaker 1: the single worst performing segment of the of the XMP five. Wait, 347 00:19:14,359 --> 00:19:16,840 Speaker 1: we just just back up. Can you explain the difference? 348 00:19:16,880 --> 00:19:21,400 Speaker 1: I mean, basically, you're talking about the dividend paying stocks 349 00:19:21,440 --> 00:19:24,119 Speaker 1: like utilities or things that are just steady as you go, 350 00:19:24,760 --> 00:19:28,680 Speaker 1: versus the dividend paying stocks that are dependent on um. 351 00:19:28,720 --> 00:19:31,399 Speaker 1: The more you sort of the more the economy grows, 352 00:19:31,400 --> 00:19:32,879 Speaker 1: the bigger the dividend will be that you'll pay. I 353 00:19:32,880 --> 00:19:36,520 Speaker 1: mean you're basically putting those into two different categories, correct, Yeah, exactly, 354 00:19:36,560 --> 00:19:39,080 Speaker 1: like think of you. I think it's perfect to point 355 00:19:39,119 --> 00:19:42,320 Speaker 1: out utility. So take a utility who's not really growing 356 00:19:42,320 --> 00:19:44,920 Speaker 1: their earnings. They've they've got their user base, they've got 357 00:19:44,960 --> 00:19:48,159 Speaker 1: their their customers, they're not really raising prices. They're just 358 00:19:48,240 --> 00:19:51,959 Speaker 1: focused on continuing to maintain the business and maintain the income. 359 00:19:52,000 --> 00:19:53,760 Speaker 1: So that business is going to pay out a high 360 00:19:53,800 --> 00:19:56,400 Speaker 1: portion of its income in the form of a dividend, 361 00:19:56,920 --> 00:19:59,240 Speaker 1: and it's going to be fairly stable. Maybe the yield 362 00:19:59,320 --> 00:20:01,840 Speaker 1: is as high as three and a half fo in 363 00:20:01,840 --> 00:20:05,920 Speaker 1: that category. Now, contrast that would say a Starbucks who 364 00:20:06,040 --> 00:20:09,359 Speaker 1: is growing its earnings, growing its business, and not quite 365 00:20:09,359 --> 00:20:11,360 Speaker 1: paying out as much of those earnings in the form 366 00:20:11,400 --> 00:20:13,919 Speaker 1: of a dividend, but still paying a nice dividend maybe 367 00:20:13,920 --> 00:20:16,679 Speaker 1: one one and a half to two. Starbucks is going 368 00:20:16,720 --> 00:20:20,240 Speaker 1: to be growing its dividend over time versus that utility 369 00:20:20,240 --> 00:20:23,000 Speaker 1: company which is just going to maintain a stable dividend. Yeah. 370 00:20:23,040 --> 00:20:26,600 Speaker 1: But having said that that, the idea that Starbucks and 371 00:20:26,640 --> 00:20:30,879 Speaker 1: other companies will grow the dividend, that's as much a 372 00:20:31,040 --> 00:20:35,080 Speaker 1: hope and a prayer as it is a contract enforceable 373 00:20:35,359 --> 00:20:39,720 Speaker 1: payment on a bond. Correct. Yeah, exactly, and and so 374 00:20:39,840 --> 00:20:43,480 Speaker 1: welcome to the investment universe. Right. Every everything is really 375 00:20:43,520 --> 00:20:46,439 Speaker 1: comes down to do you believe this company is going 376 00:20:46,480 --> 00:20:49,520 Speaker 1: to continue to do better in the future based on 377 00:20:50,080 --> 00:20:53,399 Speaker 1: really what what we value most, which is earnings growth? 378 00:20:53,480 --> 00:20:56,520 Speaker 1: So can they grow their earnings in the future. If 379 00:20:56,560 --> 00:21:00,320 Speaker 1: they can, likely that dividend will follow. And that's the 380 00:21:00,320 --> 00:21:03,879 Speaker 1: same equation or question everyone asks, even if they're investing 381 00:21:03,920 --> 00:21:07,440 Speaker 1: in the SMP five index fund, is can companies in 382 00:21:07,480 --> 00:21:11,760 Speaker 1: the SMPF grow their earnings? Otherwise I'll go home and 383 00:21:12,280 --> 00:21:14,880 Speaker 1: take my ball in play somewhere else. Really, so, Eric, 384 00:21:15,000 --> 00:21:18,200 Speaker 1: you're you're the CEO of this company, Reality Shares. Uh, 385 00:21:18,320 --> 00:21:21,879 Speaker 1: You're based in San Diego. Before that, you're at Morgan 386 00:21:21,960 --> 00:21:24,280 Speaker 1: Stanley for for fourteen years, and you built a group 387 00:21:24,960 --> 00:21:28,280 Speaker 1: to help people manage their money. Um, are you talking 388 00:21:28,280 --> 00:21:29,720 Speaker 1: with clients right now? I mean, do you get a 389 00:21:29,760 --> 00:21:33,040 Speaker 1: sense of just how skittish people feel and uncertain about 390 00:21:33,040 --> 00:21:36,280 Speaker 1: the future. Yeah, I think so. And it's it's kind 391 00:21:36,320 --> 00:21:38,760 Speaker 1: of ironic too, because you get a lot of complacency. 392 00:21:38,800 --> 00:21:41,720 Speaker 1: We've had, you know, seven now going on eight years 393 00:21:41,760 --> 00:21:45,719 Speaker 1: of positive SMP five type returns, and I think a 394 00:21:45,720 --> 00:21:48,919 Speaker 1: lot of people have in a way forgotten about market 395 00:21:48,920 --> 00:21:53,239 Speaker 1: corrections and how severe they can become. It's um, you know, 396 00:21:53,400 --> 00:21:55,520 Speaker 1: we all have short term memories when it comes to that. 397 00:21:55,560 --> 00:21:58,160 Speaker 1: But well, just to that point, I mean, it's sort 398 00:21:58,200 --> 00:22:00,440 Speaker 1: of I've got to say, I've been very confu used 399 00:22:00,760 --> 00:22:04,119 Speaker 1: as bond sell off and stocks rally, at what point 400 00:22:04,160 --> 00:22:06,600 Speaker 1: are people who are investing in to your point, the 401 00:22:06,640 --> 00:22:09,800 Speaker 1: dividend paying stocks are even just stocks broadly going to say, 402 00:22:09,840 --> 00:22:12,440 Speaker 1: you know what, we're worried about losses again, we're gonna 403 00:22:12,440 --> 00:22:14,000 Speaker 1: go back to bonds. They're paying a little bit more. 404 00:22:14,040 --> 00:22:16,479 Speaker 1: At least we can learn something. Well, I think you've 405 00:22:16,480 --> 00:22:19,480 Speaker 1: already started to see that, especially with these high yielders, 406 00:22:19,480 --> 00:22:22,199 Speaker 1: like utility sector was the single best performing sector up 407 00:22:22,280 --> 00:22:26,960 Speaker 1: until end of September almost I think at the high 408 00:22:27,160 --> 00:22:29,960 Speaker 1: they're in September just on a year today, basis not 409 00:22:30,200 --> 00:22:34,120 Speaker 1: exactly your Grandma's utilities toock right, and now they're only 410 00:22:34,200 --> 00:22:36,320 Speaker 1: up about six percent on the year, so they've already 411 00:22:36,359 --> 00:22:39,120 Speaker 1: given up nearly ten that's like three and a half 412 00:22:39,200 --> 00:22:42,800 Speaker 1: years of dividends wiped out in the course of just 413 00:22:42,960 --> 00:22:46,479 Speaker 1: two months. So I think that's the that's the start 414 00:22:46,600 --> 00:22:49,560 Speaker 1: of of that kind of flood out of these high 415 00:22:49,640 --> 00:22:53,320 Speaker 1: yielding stocks and into say the bond market. Now that's 416 00:22:53,359 --> 00:22:56,440 Speaker 1: not happening in the growths of those dividend growers because 417 00:22:56,440 --> 00:22:59,040 Speaker 1: those were basically ignored for the first part of the 418 00:22:59,160 --> 00:23:02,560 Speaker 1: year to barely keeping up with the SMP five, and 419 00:23:02,600 --> 00:23:06,600 Speaker 1: now all of a sudden, the industrials, the consumer discretionary stocks, 420 00:23:06,640 --> 00:23:08,919 Speaker 1: those are the ones that are really moving kind of 421 00:23:08,920 --> 00:23:12,880 Speaker 1: post election here, Eric, based on your experience, is there 422 00:23:12,920 --> 00:23:19,479 Speaker 1: a particular percentage yield that causes more investors to flee 423 00:23:19,840 --> 00:23:24,720 Speaker 1: stocks and go into either treasuries or c d s. 424 00:23:24,800 --> 00:23:26,439 Speaker 1: Is there a point where people say, you know what, 425 00:23:26,520 --> 00:23:30,080 Speaker 1: I'm willing to forego X in a company that's raising 426 00:23:30,119 --> 00:23:32,960 Speaker 1: its dividend, but I'd rather go buy a triple tax 427 00:23:33,000 --> 00:23:35,600 Speaker 1: free muni, or I'd rather go and buy a thirty 428 00:23:35,680 --> 00:23:40,160 Speaker 1: year that's paying who knows, maybe six. Yeah, it's Um, 429 00:23:40,200 --> 00:23:42,080 Speaker 1: it's not as simple as it used to be. It 430 00:23:42,200 --> 00:23:44,119 Speaker 1: used to be where if if you were able to 431 00:23:44,160 --> 00:23:46,600 Speaker 1: earn a yield that was higher than a treasury in 432 00:23:46,640 --> 00:23:49,480 Speaker 1: a stock, do you take that all day long? And 433 00:23:50,560 --> 00:23:52,639 Speaker 1: that the last five years or so have kind of 434 00:23:52,680 --> 00:23:57,040 Speaker 1: confused that issue, where as bond yields have have swayed 435 00:23:57,119 --> 00:24:00,240 Speaker 1: back and forth beneath the SMP yield, that's and the 436 00:24:00,240 --> 00:24:03,240 Speaker 1: real trigger point. But right now what you're seeing is 437 00:24:03,280 --> 00:24:06,880 Speaker 1: with that kind of the SNP at around two, if 438 00:24:06,920 --> 00:24:10,200 Speaker 1: we start to see bond yields creep, then by bond yields, 439 00:24:10,240 --> 00:24:13,320 Speaker 1: I mean the tenure creep above that two to two 440 00:24:13,320 --> 00:24:16,280 Speaker 1: and a half, three and beyond, I think people will 441 00:24:17,200 --> 00:24:21,159 Speaker 1: all of a sudden, yeah, there we come. And I 442 00:24:21,240 --> 00:24:23,720 Speaker 1: remember back to the days when you know, no client 443 00:24:23,880 --> 00:24:27,200 Speaker 1: could ever or whatever even dream of buying a municipal 444 00:24:27,200 --> 00:24:30,359 Speaker 1: bond that paid six percent tax free or less. And 445 00:24:30,359 --> 00:24:32,639 Speaker 1: then it was five percent, and then it was four. 446 00:24:32,680 --> 00:24:35,240 Speaker 1: And now I think people would you know, kill for 447 00:24:35,320 --> 00:24:38,000 Speaker 1: a stock or i'm sorry, bonds that would pay something 448 00:24:38,000 --> 00:24:39,800 Speaker 1: over three or four percent? What do you think is 449 00:24:39,840 --> 00:24:42,400 Speaker 1: the best bet from here to your end? We think 450 00:24:42,400 --> 00:24:45,680 Speaker 1: it's the growth of those stocks that are just healthy, good, 451 00:24:45,760 --> 00:24:53,000 Speaker 1: solid businesses with modest peas they can grow there, Um, Nike, Starbucks, 452 00:24:53,040 --> 00:24:58,159 Speaker 1: some of these like Coca Cola, ge MasterCard, Visa, some 453 00:24:58,280 --> 00:25:01,520 Speaker 1: of the just just a good alid growth companies that 454 00:25:01,560 --> 00:25:04,639 Speaker 1: are out there that haven't really been given in. You 455 00:25:04,680 --> 00:25:07,879 Speaker 1: consider master Card a growth company as well as Starbucks. 456 00:25:07,920 --> 00:25:10,600 Speaker 1: I mean, are they growing at those double digit multiples 457 00:25:10,680 --> 00:25:15,000 Speaker 1: that would justify the price? Actually they are. And and 458 00:25:15,600 --> 00:25:17,520 Speaker 1: again you know these are companies that have been around 459 00:25:17,520 --> 00:25:20,320 Speaker 1: for a long time, but they continue to grow those 460 00:25:20,640 --> 00:25:24,200 Speaker 1: those earnings and cash flows. And again with the growth, 461 00:25:24,200 --> 00:25:26,160 Speaker 1: we focus a lot on free cash flow because we're 462 00:25:26,200 --> 00:25:28,520 Speaker 1: so focused on the dividend and that the ability to 463 00:25:28,520 --> 00:25:31,160 Speaker 1: grow the dividend. But but that free cash flow growth 464 00:25:31,160 --> 00:25:33,560 Speaker 1: has been double digits and it's one of the few 465 00:25:33,840 --> 00:25:36,280 Speaker 1: pockets of of the SMP, Like I say, where you 466 00:25:36,280 --> 00:25:38,600 Speaker 1: can actually find double digit earnings growth in a lot 467 00:25:38,600 --> 00:25:41,520 Speaker 1: of these areas, and it's not easy to do with 468 00:25:41,600 --> 00:25:43,520 Speaker 1: multiples as high as they are. That's the other thing 469 00:25:43,640 --> 00:25:46,359 Speaker 1: is I'd say back off of the gas pedal and 470 00:25:46,359 --> 00:25:49,280 Speaker 1: and just if you if you're overweight stocks right now, 471 00:25:49,480 --> 00:25:52,000 Speaker 1: maybe now the time to just back off a little 472 00:25:52,000 --> 00:25:54,639 Speaker 1: bit and think about other alternatives that might be a 473 00:25:54,640 --> 00:25:57,440 Speaker 1: little bit more hedged. Eric Van, thank you so much. 474 00:25:57,520 --> 00:26:01,119 Speaker 1: Eric Ivan is chief executive officer at we led Shares, 475 00:26:01,400 --> 00:26:10,199 Speaker 1: talking to us from San Diego. Thanks for listening to 476 00:26:10,200 --> 00:26:13,199 Speaker 1: the Bloomberg PI and L podcast. You can subscribe and 477 00:26:13,280 --> 00:26:18,280 Speaker 1: listen to interviews at iTunes, SoundCloud, or whatever podcast platform 478 00:26:18,440 --> 00:26:21,159 Speaker 1: you prefer. I'm Pim Fox. I'm out there on Twitter 479 00:26:21,280 --> 00:26:24,960 Speaker 1: at pim Fox. I'm out there on Twitter at Lisa Abramo. 480 00:26:25,080 --> 00:26:27,679 Speaker 1: It's one before the podcast. You can always catch us 481 00:26:27,800 --> 00:26:29,359 Speaker 1: worldwide on Bloomberg Radio.