WEBVTT - Berkshire Hathaway Meeting, Google Trial, Tyson Foods 0:00:02.920 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.960 --> 0:00:13.840 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:00:13.920 --> 0:00:16.639 weekdays at ten am Eastern on Apple car Playing and 0:00:16.720 --> 0:00:19.640 broud Otto with the Bloomberg Business app. Listen on demand 0:00:19.680 --> 0:00:24.000 wherever you get your podcasts, or watch us live on YouTube. 0:00:24.920 --> 0:00:28.320 All right, let's go to our good friends out in Omaha, Nebraska. 0:00:28.840 --> 0:00:32.080 Berkshire Hathaway, Mister Warren Buffett. He got all the accolades 0:00:32.200 --> 0:00:34.839 together in Omaha, like he does once a year, and 0:00:34.880 --> 0:00:37.480 people look forward to this. It's like, you know, they're 0:00:37.600 --> 0:00:40.760 super Bowl the investors in Berkshire Hathway. 0:00:40.760 --> 0:00:43.120 Matthew Polozola. I believe he was there. 0:00:43.360 --> 0:00:45.560 I was there and he is a senior ANALYSTY covers 0:00:45.560 --> 0:00:47.440 the insurance companies for Bloomberg Intelligence. 0:00:47.840 --> 0:00:51.000 Matthew, you went, tell us, give us a lay of 0:00:51.000 --> 0:00:51.360 the land. 0:00:51.520 --> 0:00:53.760 What's it like after in Omaha when these people get 0:00:53.760 --> 0:00:56.600 together to talk to Warren Buffett about his investment philosophy. 0:00:56.720 --> 0:01:00.160 Yeah, it was crazy this year. Actually it was packed. 0:01:00.120 --> 0:01:03.360 So as in like a big arena arena. 0:01:03.480 --> 0:01:07.800 Yeah, it's it's the Chi Health Center arena there. They 0:01:07.800 --> 0:01:11.600 said they expected around forty thousand people this year. It 0:01:11.760 --> 0:01:15.360 was in previous years where I've been there, the upper 0:01:15.400 --> 0:01:18.240 bowl of the arena's kind of empty. It was every 0:01:18.280 --> 0:01:19.840 seat in the house was taken this year. 0:01:20.520 --> 0:01:22.760 What was the vibe without Charlie Munger? This is the 0:01:22.760 --> 0:01:24.880 first time in many years. I mean he passed away 0:01:24.920 --> 0:01:28.319 a few months ago. Warren Buffett wasn't up there alone. 0:01:28.360 --> 0:01:31.039 He had two deputies with them, very important deputies if 0:01:31.040 --> 0:01:32.120 you followed Berkshire Hathaway. 0:01:32.120 --> 0:01:33.920 But what was the vibe like? Yeah, it was sad 0:01:35.080 --> 0:01:37.600 for sure. And they usually they start with this movie, right, 0:01:37.640 --> 0:01:39.560 and usually the movie's kind of funny and it's got 0:01:39.560 --> 0:01:41.800 a bunch of comedic elements to it. It was it 0:01:41.840 --> 0:01:43.840 was a whole tribute to to Charlie, and it was 0:01:43.920 --> 0:01:48.800 it was, you know, touching. But also Buffett really talked 0:01:48.840 --> 0:01:51.080 a lot about passing a lot of things on to 0:01:51.240 --> 0:01:54.600 Greg Able and how you know, maybe the next CEO 0:01:54.760 --> 0:01:57.040 can do this that. So it was, you know, just 0:01:57.080 --> 0:01:59.920 a kind of passing of torch. Seemed like moment two. 0:02:00.120 --> 0:02:02.800 So not just said because Munger wasn't there, but said 0:02:02.800 --> 0:02:07.360 because Buffett really seemed to be, you know, moving on 0:02:07.760 --> 0:02:08.120 all right. 0:02:08.680 --> 0:02:11.840 He's got a quote unquote problem in that he has 0:02:11.840 --> 0:02:13.760 one hundred and eighty nine billion dollars of cash on 0:02:13.880 --> 0:02:14.640 the balance se do. 0:02:14.639 --> 0:02:15.280 You have that problem too? 0:02:15.400 --> 0:02:16.400 I don't have that problem. 0:02:16.480 --> 0:02:19.760 I mean I do carry an impressive cash in the pocket, 0:02:19.840 --> 0:02:21.640 that's true, not one hundred eight ali and large. 0:02:22.360 --> 0:02:25.560 I mean, realistically, did how does he put that in? 0:02:25.639 --> 0:02:27.639 I mean, I guess with t bills at four or 0:02:27.639 --> 0:02:29.560 five percent, that's not a terrible thing anymore. 0:02:29.960 --> 0:02:30.880 What's he saying about that? 0:02:31.080 --> 0:02:33.840 So that took a lot of pressure off of holding 0:02:33.880 --> 0:02:38.160 cash for them. They made like a billion in investment 0:02:38.160 --> 0:02:40.480 income before and it went up to like six billion, 0:02:41.160 --> 0:02:44.840 you know, just from holding cash. They talked about their 0:02:45.000 --> 0:02:48.720 retained earnings. Just just having retained earnings and investing that 0:02:48.720 --> 0:02:50.960 in treasury bills, you should have earnings growth from the company. 0:02:52.000 --> 0:02:55.200 They really talked about it's really tough to move the needle. 0:02:55.400 --> 0:02:57.720 It didn't seem like anything was happening, you know, in 0:02:57.800 --> 0:02:59.399 terms of where to put a lot of money to work. 0:02:59.680 --> 0:03:02.280 Is this it's time different in terms of Warren Buffett 0:03:02.320 --> 0:03:05.800 sitting back and looking at businesses out there for Berkshire 0:03:05.800 --> 0:03:08.040 half the way to buy. Have there been dry spells 0:03:08.080 --> 0:03:08.959 like this in the past. 0:03:10.240 --> 0:03:12.280 Yeah, I mean, look they bought Alligating a couple of 0:03:12.320 --> 0:03:14.960 years ago for almost twelve billion dollars, so. 0:03:15.600 --> 0:03:17.760 From my good buddy Jeff Kirby, Yeah. 0:03:17.520 --> 0:03:20.600 And it wasn't you know, so that wasn't an insignificant deal. 0:03:20.639 --> 0:03:22.919 So they did something. They've put about fifteen billion dollars 0:03:22.960 --> 0:03:26.079 to work in Japan as well, so it's not either 0:03:26.160 --> 0:03:28.400 doing nothing. It's just these things don't move the needle 0:03:28.440 --> 0:03:30.079 that much for them when they have, you know, so 0:03:30.160 --> 0:03:31.240 much capital to begin with. 0:03:31.440 --> 0:03:37.960 You know, one of our listeners earlier today, Pingban said Boeing, Boy, 0:03:38.160 --> 0:03:40.560 would that be a great deal in terms of size 0:03:40.560 --> 0:03:43.000 it's one hundred and ten billion market cap and could 0:03:43.040 --> 0:03:45.480 they use a steadying hand? I'm thinking Goldman Sachs great 0:03:45.480 --> 0:03:46.400 financial crisis. 0:03:47.160 --> 0:03:48.520 I don't know if they want to be in the 0:03:48.520 --> 0:03:51.440 air They had done a couple of equity investments in 0:03:51.440 --> 0:03:54.160 the airlines years ago and kind of gave up on that. 0:03:54.200 --> 0:03:56.320 They also own Precision Cast Parts, which is a big 0:03:56.320 --> 0:03:58.840 supplier to these companies, So I don't know if they 0:03:58.880 --> 0:04:01.280 want to be that far in the value chain for airlines. 0:04:01.320 --> 0:04:04.080 If you guys missed what Paul was talking about on Friday, 0:04:04.560 --> 0:04:07.480 Thomas black Over, who's over at Bloomberg opinion. He's got 0:04:07.520 --> 0:04:09.360 to call him out. That says, how crazy would it 0:04:09.400 --> 0:04:11.280 be if Buffett bought Bowing? It was among the most 0:04:11.320 --> 0:04:14.840 read on Friday. Everybody was talking about this story. Okay, 0:04:14.840 --> 0:04:17.200 so if not Boeing, what are the types of businesses 0:04:18.080 --> 0:04:19.800 that you think could be next? I mean, I know 0:04:19.839 --> 0:04:22.320 you cover property and casualty insurance, so that's certainly like 0:04:22.360 --> 0:04:26.320 where your mind is. But any other sees candies out there? 0:04:26.839 --> 0:04:29.160 Any other apples out there. We'll talk about Apple more 0:04:29.160 --> 0:04:31.120 in a second, But if. 0:04:31.000 --> 0:04:33.159 There are, I think the next thing they're gonna buy 0:04:33.240 --> 0:04:35.479 is gonna be something like we haven't heard of, right, 0:04:35.560 --> 0:04:38.000 or it's gonna be you know, they own Lubrasol, a 0:04:38.080 --> 0:04:40.480 chemical company, right, and they make They're like one of 0:04:40.520 --> 0:04:45.119 the only companies that make these specific chemicals for ev 0:04:45.440 --> 0:04:47.600 engines and things like that. You know, so I think 0:04:47.800 --> 0:04:51.960 that's what they look for, you know. I just I 0:04:52.000 --> 0:04:54.280 don't think Buffett. I don't think he has it in 0:04:54.360 --> 0:04:57.599 him anymore. For the for the last kind of elephant hunt, 0:04:57.839 --> 0:04:59.720 I don't know it could happen. I mean, they were 0:04:59.760 --> 0:05:04.760 int just did in a data company a while ago. 0:05:04.880 --> 0:05:07.040 It was kind of like a data broker they talked 0:05:07.080 --> 0:05:09.960 about at the meaning being interested in a Canadian company. 0:05:09.960 --> 0:05:12.240 That was kind of all they said. They also have 0:05:12.800 --> 0:05:16.360 several billion dollars of an undisclosed position, which they've kept 0:05:16.400 --> 0:05:20.200 confidential in their last thirteen f's. So there's stuff cooking. 0:05:20.839 --> 0:05:24.320 It's tough. I you know, I thought they were going 0:05:24.360 --> 0:05:26.680 to buy all of oxy. They kind of threw cold 0:05:26.720 --> 0:05:29.440 water on that, so maybe something the energy space was 0:05:29.440 --> 0:05:32.560 a big thing actually at the meeting. Okay, Buffett and 0:05:32.600 --> 0:05:35.719 his annual letter had said, you know, more or less, 0:05:35.760 --> 0:05:38.400 if we're going to get pinged for these wildfire losses, 0:05:38.440 --> 0:05:41.120 we might not want to be in this business. But 0:05:41.160 --> 0:05:44.359 they kind of counterbalanced that at the meeting, saying a 0:05:44.400 --> 0:05:47.240 lot of you know, energy demand's going to be through 0:05:47.240 --> 0:05:50.240 the roof. There's very few companies in the world with 0:05:50.320 --> 0:05:52.719 the capital to invest in this. We're one of them. 0:05:52.800 --> 0:05:54.760 So it was kind of a little bit of a 0:05:54.800 --> 0:05:56.080 good cop, bad cop situation. 0:05:57.320 --> 0:06:00.479 So on the Apple thing, Yeah, what I mean, I 0:06:00.480 --> 0:06:03.279 was surprised to well, I don't know, yeah, I was surprised. 0:06:03.320 --> 0:06:05.400 I mean, it seems like something should be a core 0:06:05.440 --> 0:06:07.760 holding now, So how did he kind of phrase it all? 0:06:08.040 --> 0:06:10.159 So Tim Cook was there and he was, you know, 0:06:10.279 --> 0:06:12.760 up in the crowd like he had like a normalcy. 0:06:13.320 --> 0:06:16.320 He had a front row sack. Okay, I just big sure, 0:06:16.520 --> 0:06:21.000 definitely on the floor front row. Buffett more or less 0:06:21.080 --> 0:06:27.400 said he was worried about taxes going up and that 0:06:27.600 --> 0:06:30.240 was part of the impetus for selling the position. They 0:06:30.279 --> 0:06:34.880 sold about thirteen percent of their Apple shares. The stock 0:06:34.960 --> 0:06:37.559 was up a lot last year, and that was pretty 0:06:37.640 --> 0:06:39.719 much what he said. He said, we think tax rates 0:06:39.800 --> 0:06:43.119 might go up from here. We have big unrealized gains 0:06:43.120 --> 0:06:46.840 and realized gains, so it seemed like that was the 0:06:46.839 --> 0:06:47.680 push for it. 0:06:48.800 --> 0:06:52.479 How do we look at why, like, how do we 0:06:52.520 --> 0:06:56.000 look at Berkshire Hathaway selling out of a position, because 0:06:56.320 --> 0:06:59.120 typically you'd sell out of a position for one of 0:06:59.160 --> 0:07:01.320 two reasons, and you think you can use that cash 0:07:01.360 --> 0:07:04.080 better elsewhere, or two you think that investment is not 0:07:04.120 --> 0:07:06.560 going in the direction you want it to go in. Obviously, 0:07:06.560 --> 0:07:08.400 he has no use for the cash to use it elsewhere. 0:07:08.720 --> 0:07:10.280 So the only other way to read into this is 0:07:10.440 --> 0:07:12.240 he doesn't think the investment is going where he wants 0:07:12.240 --> 0:07:12.560 it to go. 0:07:13.400 --> 0:07:16.440 Is that a fair assessment is possible? I mean he 0:07:16.480 --> 0:07:19.280 had also said he expects Apple to be their largest 0:07:19.280 --> 0:07:21.640 holding in a year from now, and when Greg takes over, 0:07:21.680 --> 0:07:24.040 expects it to be a large holding for them. So, 0:07:24.840 --> 0:07:27.080 I mean, I think the taxes, the tax i location 0:07:27.280 --> 0:07:30.400 was it. I don't know. I mean, the valuation of 0:07:30.400 --> 0:07:32.440 the stock is probably plays a role in it. You know, 0:07:32.600 --> 0:07:35.200 just taking some off the table, you're definitely right with. 0:07:35.360 --> 0:07:38.240 It's not like they needed, you know, fifteen billion dollars 0:07:38.280 --> 0:07:42.960 more on the one eighty nine. But you know, besides 0:07:43.000 --> 0:07:44.360 the taxes, that's really all had the points. 0:07:44.520 --> 0:07:45.960 Does Berkshire buy backstock? 0:07:46.440 --> 0:07:48.560 They do. They only started doing it a couple of 0:07:48.600 --> 0:07:50.640 years ago. They bought back two point six billion of 0:07:50.680 --> 0:07:54.200 stock this quarter. Buffett talks about a lot. They just 0:07:54.240 --> 0:07:56.920 can't buy back a lot because of the float. There's 0:07:56.960 --> 0:07:58.840 just not a lot for them to buy back. So 0:07:59.640 --> 0:08:02.480 they buy back more, I think, But it's been about 0:08:02.600 --> 0:08:05.000 you know, two three billion one two three, and I 0:08:05.040 --> 0:08:06.760 don't see it going up from there. 0:08:06.960 --> 0:08:09.080 How was Omaha in May? 0:08:09.720 --> 0:08:11.920 It's fine. The weather was fine. It was it rained 0:08:11.920 --> 0:08:13.280 a little bit. You have to line up at like 0:08:13.280 --> 0:08:16.000 five o'clock in the morning to get in there, so uh, 0:08:16.320 --> 0:08:18.680 that was tough, but it was It's a spectacle. You 0:08:18.720 --> 0:08:20.720 should you should go on yeah, I mean the first 0:08:20.760 --> 0:08:22.920 the day before you get so you have to be 0:08:22.920 --> 0:08:27.800 a shareholder. They give me a a an analyst thing, 0:08:27.920 --> 0:08:31.600 but they don't really you know that. You still wait online. 0:08:31.880 --> 0:08:35.800 And the day before on Friday, all the companies are 0:08:35.800 --> 0:08:39.960 in the the the arena and you can go, you 0:08:40.000 --> 0:08:43.000 buy stuff, you can talk to some of the managements. 0:08:44.040 --> 0:08:47.360 It's really great. And it's like I said, it was packed. 0:08:47.440 --> 0:08:49.960 Everything was packed. Seas candy they said they sold four 0:08:50.000 --> 0:08:50.880 tons of seasca. 0:08:51.280 --> 0:08:52.839 I was just gonna end with you. Did you eat 0:08:52.840 --> 0:08:53.839 any of the peanut Britle? 0:08:54.320 --> 0:08:54.640 I did. 0:08:54.720 --> 0:08:57.400 I don't like peanut brittle. But seas candy, by the way, 0:08:57.400 --> 0:09:02.040 not sheep. SE's candy box a box and they were 0:09:02.120 --> 0:09:04.280 just hand over fists and they've got it down to 0:09:04.320 --> 0:09:07.240 a science where you step in the line, they give 0:09:07.280 --> 0:09:08.480 you the candy, you walk. 0:09:08.280 --> 0:09:08.760 On the thing. 0:09:09.120 --> 0:09:12.040 The other thing was squish mellows, which I've talked about before. 0:09:12.280 --> 0:09:14.440 My kids love these things. They bought when they bought 0:09:14.440 --> 0:09:17.960 Alleghany Allegheny almost coming to call Jazzuares which makes toys, yep. 0:09:18.280 --> 0:09:21.120 And these things are just again they can't sell them 0:09:21.160 --> 0:09:21.680 fast enough. 0:09:21.600 --> 0:09:22.280 All right, good stuff. 0:09:22.280 --> 0:09:26.080 Mata Alizola, senior analys who covers the insurance business ostensibly, 0:09:26.320 --> 0:09:27.920 and he might be our candy analyst. 0:09:28.080 --> 0:09:30.679 He was after an Almah. Does it all for Bloomberg Intelligence. 0:09:31.200 --> 0:09:32.120 We appreciate that. 0:09:33.640 --> 0:09:37.520 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:09:37.600 --> 0:09:41.120 weekdays at ten am Eastern on applecar Play and Android 0:09:41.160 --> 0:09:43.920 Otto with the Bloomberg Business app. You can also listen 0:09:44.040 --> 0:09:47.120 live on Amazon Alexa from our flagship New York station 0:09:47.480 --> 0:09:52.040 Just say Alexa playing Bloomberg eleven thirty. 0:09:51.600 --> 0:09:54.600 Seeing stocks up for what could be a third week 0:09:54.640 --> 0:09:56.240 in a row. We'll have to wait till Friday to 0:09:56.240 --> 0:09:58.319 see about that. Let's see what Brian Crowez has to 0:09:58.320 --> 0:10:00.920 say about all this, president of Sharf Invests. He's joining 0:10:01.000 --> 0:10:04.040 us from beautiful Low Scottos, California. Brian, good to have 0:10:04.120 --> 0:10:07.520 you with us this afternoon. I'm going through your thesis here, 0:10:07.880 --> 0:10:12.640 and you argue that there is too much optimism when 0:10:12.640 --> 0:10:15.880 it comes to tech out there right now? What's going 0:10:15.920 --> 0:10:18.000 on here? Because you say that S and P. Five 0:10:18.040 --> 0:10:21.440 hundred levels of concentration of tech go all the way 0:10:21.440 --> 0:10:23.360 back to a concerning time the Internet bubble. 0:10:25.000 --> 0:10:28.040 Yeah, thanks for having me as you know, tech has 0:10:28.120 --> 0:10:33.560 been a very strong performer really for since the twenty 0:10:33.360 --> 0:10:36.319 twenty two bottom. And you know, last year, for example, 0:10:36.360 --> 0:10:39.720 tech was a fifty six percent despite the tech sector 0:10:39.760 --> 0:10:44.320 really having pretty mediocre earnings growth in total. And so 0:10:44.360 --> 0:10:47.080 if you look at the tech sector relative the SMP, 0:10:47.720 --> 0:10:50.280 it's actually at highs above. 0:10:49.960 --> 0:10:52.440 Where that was in nineteen ninety nine. 0:10:52.720 --> 0:10:55.600 And as a percentage, the S and P five hundred 0:10:55.640 --> 0:10:58.360 tech sectors thirty percent of the SMP, which is which 0:10:58.360 --> 0:10:58.880 is higher than. 0:10:58.840 --> 0:11:00.000 It was at the peak of the bubble. 0:11:00.520 --> 0:11:04.120 But that doesn't even include Amazon, Google, Tesla or Meta. 0:11:04.160 --> 0:11:06.079 If you add those in, it's now forty one percent. 0:11:06.440 --> 0:11:08.920 To put it in perspective, you ten years ago, the 0:11:08.960 --> 0:11:12.880 tech sector was about seventeen percent of the SMP. So really, 0:11:12.920 --> 0:11:14.880 tech is a huge waiting now in the SMP. 0:11:15.960 --> 0:11:18.600 Did they not earn their way into that type of 0:11:18.640 --> 0:11:20.199 waiting here? I mean, you look at it in a 0:11:20.320 --> 0:11:22.599 video for example, the bulls will tell you, boy, the 0:11:22.679 --> 0:11:24.520 multiple today is cheaper than it was before the run 0:11:24.600 --> 0:11:26.960 up because we've seen such a surgeon earnings. I guess 0:11:27.000 --> 0:11:29.319 that's just a way of saying, you know, is AI 0:11:29.480 --> 0:11:30.280 really a thing here? 0:11:31.760 --> 0:11:35.000 I mean, certainly the tech sector has earned some of 0:11:35.040 --> 0:11:38.000 its stripes by having better earnings growth over the last 0:11:38.000 --> 0:11:39.880 ten years than the other sectors. 0:11:40.920 --> 0:11:44.800 But you know, we'd point to nineteen ninety nine end 0:11:44.800 --> 0:11:46.440 in ninety nine, there was a lot. 0:11:46.280 --> 0:11:51.480 Of great companies Cisco, Intel, Dell, Sun, Micro, Qualcom, AOL. 0:11:51.520 --> 0:11:53.200 These are all companies that are in the top ten. 0:11:53.480 --> 0:11:56.680 And I, an investor, bought those companies despite what we 0:11:56.720 --> 0:11:59.640 all know was the tremendous growth of the Internet, you 0:12:00.120 --> 0:12:02.880 would have underperformed dramatically over the next twenty. 0:12:02.679 --> 0:12:03.640 Years as an investor. 0:12:03.760 --> 0:12:07.400 So, yeah, and Video's growth is great right now, tremendous company, 0:12:07.400 --> 0:12:08.160 tremendous CEO. 0:12:08.760 --> 0:12:10.880 But there's always competition to knock you off. 0:12:10.720 --> 0:12:15.040 To the top, and usually those largest companies underperform over 0:12:15.080 --> 0:12:15.920 the longer term. 0:12:15.960 --> 0:12:19.079 So would you argue that there is actual competition coming 0:12:19.080 --> 0:12:21.400 for in video right now because it does seem like 0:12:21.480 --> 0:12:24.480 they have something, at least at the moment, that nobody 0:12:24.480 --> 0:12:25.120 else can offer. 0:12:26.480 --> 0:12:29.000 Oh, there's one hundred percent competition coming. I mean, we're 0:12:29.000 --> 0:12:32.680 based here in Silicon Valley. You know, the talk around 0:12:32.720 --> 0:12:36.080 the water cooler and barbecues is one hundred percent. I 0:12:36.120 --> 0:12:41.640 know people that are working at Microsoft and Google and 0:12:41.640 --> 0:12:44.680 they're all working to find a cheaper chip. I mean, 0:12:44.960 --> 0:12:47.520 the one thing tech companies don't like to do is 0:12:47.600 --> 0:12:49.200 people holding to other tech companies that. 0:12:49.200 --> 0:12:51.560 They can avoid it. Now, that's not to say they're 0:12:51.559 --> 0:12:52.559 going to come up with something in. 0:12:52.520 --> 0:12:55.920 The next year or two or even three, but eventually, 0:12:56.880 --> 0:13:00.240 you know there's going to be competition, and you know, 0:13:00.280 --> 0:13:02.280 competition is very fierce in tech. 0:13:03.040 --> 0:13:05.520 Hey, Brian, if if tech is not going to lead 0:13:05.559 --> 0:13:08.840 this market, what will Because there's a generation of investors 0:13:08.840 --> 0:13:12.440 out there that know nothing but tech leading this market higher. 0:13:13.600 --> 0:13:16.640 Yeah, it's kind of kind of amazing. You know, it's 0:13:16.679 --> 0:13:19.640 not just tech, it's growth in general. You know, we 0:13:19.640 --> 0:13:22.440 look at we looked at interest rates, and if you 0:13:22.480 --> 0:13:26.640 look when rates are below three percent, growth outperforms. When 0:13:26.720 --> 0:13:30.240 rates are above four percent, value outperforms. And actually, if 0:13:30.280 --> 0:13:33.000 you look back to nineteen sixty, the average of the 0:13:33.040 --> 0:13:37.000 ten year treasury has been about six percent, and today 0:13:37.040 --> 0:13:39.120 it's you know, around four and a half. All of 0:13:39.160 --> 0:13:42.439 the instances below three though, have occurred since the GFC, 0:13:43.080 --> 0:13:45.480 and so a lot of younger investors only know a 0:13:45.520 --> 0:13:49.960 time when when tech and growth outperform. However, if we're 0:13:49.960 --> 0:13:52.199 going to higher for longer environment. You know, we think 0:13:52.240 --> 0:13:55.480 it's a good good environment for value and if you 0:13:55.480 --> 0:13:58.280 look at growth versus value right now, it's about a 0:13:58.360 --> 0:14:01.600 ninety percent premium, which is well above you know, what 0:14:01.760 --> 0:14:04.760 you usually pay. So we think it's potentially a good 0:14:04.760 --> 0:14:06.080 time for value stocks. 0:14:06.160 --> 0:14:08.040 What are some of those value stocks that you guys 0:14:08.080 --> 0:14:09.000 are going after right now? 0:14:10.360 --> 0:14:13.920 Yeah, I mean, you know, an example of a value 0:14:13.960 --> 0:14:16.640 stock that's kind of really beaten up people don't like 0:14:16.720 --> 0:14:21.440 right now is Comcast. It trades at around ten times earnings. Obviously, 0:14:21.440 --> 0:14:26.440 there's there's some worries around not only cable sub subscriber disconnects, 0:14:26.440 --> 0:14:29.320 but also the broadband has been weak coming out of 0:14:29.360 --> 0:14:32.920 the pandemic. That a very strong pandemic, but broadband growth 0:14:33.000 --> 0:14:38.280 has gone in reverse recently because of you fixed wireless competition. 0:14:38.440 --> 0:14:41.800 But we think that longer term, this is a you know, 0:14:41.960 --> 0:14:46.200 really great asset. Actually, interesting enough, over the last ten years, 0:14:46.560 --> 0:14:48.960 Comcast has grown earnings at the same rate as Apple, 0:14:49.720 --> 0:14:52.400 and yet obviously trades at a huge discount. 0:14:52.440 --> 0:14:54.800 So, you know, we think this is one of those names. 0:14:54.440 --> 0:14:57.360 That investors are ignoring, but that should be a pretty 0:14:57.400 --> 0:15:01.000 high quality, good company over the next years, and a. 0:15:00.880 --> 0:15:01.960 Great management team. 0:15:02.400 --> 0:15:04.720 I could say, you over from experience, talk to us 0:15:04.720 --> 0:15:07.240 about dividends here, Brian, how important are dividends to you 0:15:07.240 --> 0:15:09.680 in a market where ten year treasures four and a 0:15:09.720 --> 0:15:10.200 half percent. 0:15:11.640 --> 0:15:15.640 Yeah, dividends are are one of the unsung heroes of investing. 0:15:15.720 --> 0:15:18.480 I mean, if you look over the long term, dividends 0:15:18.520 --> 0:15:22.760 are a significant contributor to to investors' returns. 0:15:23.000 --> 0:15:25.160 It's not something we absolutely look at. 0:15:25.280 --> 0:15:27.080 In other words, we're not saying, oh, we only want 0:15:27.080 --> 0:15:30.640 to buy a company with xyz dividend, but it fits 0:15:30.640 --> 0:15:35.480 into capital allocation strategy. And capital allocation is you know, 0:15:35.800 --> 0:15:39.040 the holy grail for investors. Companies that do bad capital 0:15:39.080 --> 0:15:43.000 allocation can really ruin, you know, the future returns for investors. 0:15:43.440 --> 0:15:45.280 You know, Berkshire Hathaway just had. 0:15:45.160 --> 0:15:48.480 Its annual meeting, and you know, one of the things 0:15:48.480 --> 0:15:51.480 that's made them one of the best reforming stocks over 0:15:51.480 --> 0:15:54.160 the last you know, fifty years, is is. 0:15:54.120 --> 0:15:57.040 That Warren Buffet's been a tremendous steward of capital. 0:15:57.120 --> 0:16:00.560 Even though they don't necessarily pay out large dividends, you 0:16:00.600 --> 0:16:02.320 can trust that the management is going to do the 0:16:02.400 --> 0:16:04.320 right thing with the capital. 0:16:04.400 --> 0:16:05.280 Well, that's interesting. 0:16:05.320 --> 0:16:07.680 We were just having a conversation with our insurance analyst 0:16:07.760 --> 0:16:10.360 here earlier. One hundred and eighty nine billion dollars in cash, 0:16:10.800 --> 0:16:12.280 By and large, that doesn't sound. 0:16:12.120 --> 0:16:14.160 Like being a good steward of capital. 0:16:14.400 --> 0:16:17.120 Although the interest rates today make it seem a little 0:16:17.120 --> 0:16:20.280 bit better. But shouldn't it be returning that to shareholders? 0:16:21.120 --> 0:16:24.040 So I think a couple of things from the Berkshire 0:16:24.320 --> 0:16:28.240 meeting takeaway is remember, first of all, remember they're an 0:16:28.240 --> 0:16:31.160 insurance company, so this is they have a lot of float, 0:16:32.200 --> 0:16:37.440 and so they've always chosen to be conservative, although this 0:16:37.480 --> 0:16:39.680 is this is sounding likely going to be more conservative. 0:16:39.720 --> 0:16:41.880 They had mentioned one hundred and eighty nine billion in 0:16:42.000 --> 0:16:44.200 cash going to potentially two hundred billion, So you bring 0:16:44.240 --> 0:16:46.960 a good point, shouldn't they just be returning some of that? Well, 0:16:46.960 --> 0:16:49.240 first of all, some of that is float. Second of all, 0:16:49.240 --> 0:16:52.120 they're earning five percent plus on that capital right now. 0:16:52.200 --> 0:16:54.680 So what Buffett's really saying is, hey, I'm not seeing 0:16:54.680 --> 0:16:57.840 a lot of great opportunities better than that five percent. 0:16:57.880 --> 0:17:00.280 I can get it's risk free. I don't have to 0:17:00.360 --> 0:17:04.159 the risks. And he also talked about the ability to 0:17:04.320 --> 0:17:07.199 really step in in a crisis, and so there's not 0:17:07.240 --> 0:17:09.320 only the five percent he's returning. But there's also the 0:17:09.400 --> 0:17:13.199 option value, and no one's better than Berkshire Hathaway in 0:17:13.280 --> 0:17:17.119 terms of when events happen getting really good deals. 0:17:17.119 --> 0:17:18.760 So we look at it as you're. 0:17:18.600 --> 0:17:21.600 Getting five percent today with no risk, and you've got 0:17:21.640 --> 0:17:24.320 the optionality if something were to happen that they could 0:17:24.320 --> 0:17:25.600 really take advantage of that for sure. 0:17:25.640 --> 0:17:28.360 Holdstill one hundred and nine billion dollars. That's a that's 0:17:28.359 --> 0:17:32.000 a pretty big pile of cash. Hey, I know we 0:17:32.400 --> 0:17:33.959 you talked a little bit about tech, but there is 0:17:34.000 --> 0:17:37.800 one tech company out there that you are bullish on. 0:17:38.760 --> 0:17:42.080 You argue that Oracle is a sneaky AI play. Why 0:17:42.080 --> 0:17:43.080 are you bullish on Oracle? 0:17:44.400 --> 0:17:44.600 Yeah? 0:17:44.600 --> 0:17:49.520 I mean Oracle is not cheap anymore. You know, it's 0:17:49.560 --> 0:17:54.200 still around an SMP multiple. But the thing that makes 0:17:54.200 --> 0:17:59.679 it interesting is they have really done a lot of 0:18:00.000 --> 0:18:02.400 behind the scenes in the cloud, and so people don't 0:18:02.400 --> 0:18:04.360 really think of them as a cloud player. But now 0:18:04.359 --> 0:18:06.840 they're with the purchase of Cerner, they're getting really big 0:18:07.240 --> 0:18:07.960 in healthcare. 0:18:08.680 --> 0:18:11.000 You've finally seen their cloud revenue really growing. 0:18:11.040 --> 0:18:13.480 I think the last quarter was up twenty six percent 0:18:13.560 --> 0:18:16.240 or so, and the cloud is starting to become a 0:18:16.320 --> 0:18:20.680 large percentage of their total total earnings. You know, management 0:18:20.720 --> 0:18:23.240 on the last call was really giddy in terms of 0:18:23.280 --> 0:18:26.120 how much money they were able to spend and basically 0:18:26.160 --> 0:18:29.240 said they just didn't have enough capacity for all of demand. 0:18:29.320 --> 0:18:31.359 So we think it's it's sort of an under the 0:18:31.440 --> 0:18:34.919 radar cloud play that has a lot more room to 0:18:34.960 --> 0:18:38.399 catch up relative to some of the other big players. 0:18:38.760 --> 0:18:40.439 All right, Brian, thanks so much for joining us there. 0:18:40.440 --> 0:18:43.560 I really appreciate it. Brian Krawez. He is the president 0:18:44.080 --> 0:18:50.240 of sharf In Investments, joining us from Los Gatos, California. 0:18:50.560 --> 0:18:54.400 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:18:54.520 --> 0:18:57.159 weekdays at ten am Eastern on Apple card Playing and 0:18:57.320 --> 0:18:59.840 broud Otto with the Bloomberg Business app. Listening on to 0:19:00.080 --> 0:19:03.119 and wherever you get your podcasts, or watch us live 0:19:03.240 --> 0:19:04.600 on YouTube. 0:19:05.280 --> 0:19:09.000 It's called litigation risk, regulatory risk for a big tech 0:19:09.040 --> 0:19:11.560 It's always been out there, but we're going to get 0:19:11.560 --> 0:19:13.520 some high profile cases coming very soon that's going to 0:19:13.560 --> 0:19:17.000 be really important for a lot of companies, including Google. 0:19:17.080 --> 0:19:20.480 Jennifer rejoins iss. She's our senior litigation analys at Bloomberg Intelligence. 0:19:20.480 --> 0:19:22.679 She joins us here in our Bloomberg Interactive Brookers Studio. 0:19:23.240 --> 0:19:28.239 So Google antitrust trial about to begin. Can you give 0:19:28.320 --> 0:19:30.760 us the background what's happening here with Google? 0:19:31.280 --> 0:19:33.320 Well, the one that's about to begin is an ad 0:19:33.359 --> 0:19:34.919 tech suit, but the one that you just finished up 0:19:34.960 --> 0:19:36.920 is the search suit. Very good, Okay, So I think 0:19:37.000 --> 0:19:37.320 it is. 0:19:37.520 --> 0:19:38.879 To be fair, it's kind of hard to keep all 0:19:38.880 --> 0:19:39.200 these things. 0:19:39.400 --> 0:19:42.520 It's so hard to head a straight right. And we 0:19:42.560 --> 0:19:46.040 have many others too, right, Google has other suits beyond that. 0:19:46.359 --> 0:19:48.560 But the thing is, I think what the ruling, the 0:19:48.560 --> 0:19:50.520 first ruling that's going to come out will probably be 0:19:50.600 --> 0:19:53.120 this search suit, right, because they had the closing arguments. 0:19:53.320 --> 0:19:55.760 The trial actually ended about six months ago. The judge 0:19:55.800 --> 0:19:57.760 put a lot of space in between, I think to 0:19:57.880 --> 0:20:01.000 really understand the facts and get through all the evidence. 0:20:01.760 --> 0:20:03.919 And I think he'll be deciding in a few months. 0:20:03.960 --> 0:20:07.880 And it's a really big deal because Google pays over 0:20:07.920 --> 0:20:10.760 twenty billion dollars a year to other companies to set 0:20:10.800 --> 0:20:14.440 Google as the default search engine. They pay Apple, they 0:20:14.440 --> 0:20:17.520 pay Mozilla, they pay the OEMs that make the Android phones. 0:20:17.960 --> 0:20:20.840 And it may be that if the judge decides those 0:20:20.880 --> 0:20:24.119 agreements are exclusionary and that they're anti competitive, that they 0:20:24.119 --> 0:20:28.240 arise to the level of exclusionary anti competitive conduct. He says, 0:20:28.359 --> 0:20:31.280 you can't have these you can't enter these agreements anymore. 0:20:31.560 --> 0:20:33.679 And the ones that are hurt are really not Google 0:20:33.720 --> 0:20:35.680 because we all know Google Search. You know, we're all 0:20:35.680 --> 0:20:37.040 going to keep using Google Search. 0:20:37.119 --> 0:20:40.240 Yeah, it's a verb, yes, exactly, it's the Kleenex. 0:20:40.359 --> 0:20:42.720 People aren't jumping to switch over to Bing, at least 0:20:42.800 --> 0:20:44.439 not yet. Maybe they will with. 0:20:44.560 --> 0:20:45.800 Je does he bing? 0:20:46.119 --> 0:20:48.640 Yeah, because he does. He's a big chap GPT guy. 0:20:48.720 --> 0:20:51.440 Oh yeah, in the Microsoft he always and that could change. 0:20:51.240 --> 0:20:53.560 Things, you know, the market could change. So you know, 0:20:53.640 --> 0:20:55.840 that's kind of out there too. Although this judge is 0:20:55.880 --> 0:20:58.280 looking backward in time, not really looking forward. They're looking 0:20:58.320 --> 0:21:01.000 at the conduct that has occurred in the last ten years. 0:21:01.320 --> 0:21:02.720 But in the greater scheme of things. Is that a 0:21:02.800 --> 0:21:06.720 huge threat to Google? Because if it is indeed the 0:21:06.800 --> 0:21:10.760 default search engine, just because so many people are spent 0:21:10.920 --> 0:21:14.159 you know, decades using it on their devices, on their computers, 0:21:14.560 --> 0:21:16.720 then if you know, when you buy a new phone, 0:21:16.760 --> 0:21:18.800 Apple says, Okay, which search engine would you like to 0:21:18.800 --> 0:21:21.320 be the default one? Won't people just choose Google? 0:21:21.359 --> 0:21:21.760 Anyway? 0:21:22.160 --> 0:21:24.000 Well, I think that's the case, which is why the 0:21:24.000 --> 0:21:26.240 remedy is going to be really important here. This judge 0:21:26.280 --> 0:21:28.080 is going to have to get creative. And you know, 0:21:28.160 --> 0:21:30.359 one of the things that he might do if, in fact, 0:21:30.400 --> 0:21:32.520 he rules that Google's broken the law. I mean that 0:21:32.560 --> 0:21:34.919 hasn't been determined yet. I tend to think he will, 0:21:35.240 --> 0:21:38.359 but it's very close. What he could say is, look, 0:21:38.440 --> 0:21:41.280 you've collected there's this flywheel, and you've collected so much 0:21:41.400 --> 0:21:44.520 data through scale, through so many searches that's allowed Google 0:21:44.560 --> 0:21:48.240 Search to get better and being Inductucgo and other potential 0:21:48.280 --> 0:21:51.080 in nascent competitors out there can't get to that scale 0:21:51.359 --> 0:21:53.520 to teach the search engine to get better. So maybe 0:21:53.560 --> 0:21:55.240 what you have to do, Google is share all that 0:21:55.359 --> 0:21:58.359 data and let others have a chance to actually become 0:21:58.359 --> 0:22:01.119 better and show what they can prove. Maybe let an 0:22:01.119 --> 0:22:03.919 ascent competitor come into the market, something like that, and 0:22:03.960 --> 0:22:06.639 in that way there could be a threat, right, I mean, 0:22:06.680 --> 0:22:09.920 it's not unrealistic to think with all that data that 0:22:10.040 --> 0:22:12.320 Google's a mast over the years that some other company 0:22:12.320 --> 0:22:13.360 could come in and compete. 0:22:13.480 --> 0:22:16.399 So has Apple actually come in and maybe communicated to 0:22:16.440 --> 0:22:18.320 the judge somehow like who whoa whoa whoa whoa, what 0:22:18.920 --> 0:22:21.439 if you do what you could do, that's really going 0:22:21.480 --> 0:22:25.199 to hurt us unintended consequence? Maybe has Apple appined on 0:22:25.200 --> 0:22:25.640 this at all? 0:22:25.760 --> 0:22:30.040 So both Apple and Mozilla executives testified, and Apple actually 0:22:30.080 --> 0:22:31.920 believe it or not, when they signed this agreement to 0:22:31.960 --> 0:22:35.240 get paid to set Google as a default, also agreed 0:22:35.240 --> 0:22:38.080 that they would defend it if ever came under attack. 0:22:38.160 --> 0:22:40.440 Now if that's not a little bit suspicious or defensive, 0:22:40.720 --> 0:22:42.520 I don't know what is. But they so they did 0:22:42.560 --> 0:22:45.920 come in and they defended the deal. They said, look, 0:22:45.920 --> 0:22:48.560 it makes the Apple phone better. A user opens the phone, 0:22:48.560 --> 0:22:50.159 they go to Safari and they do their search and 0:22:50.160 --> 0:22:51.760 they have the best search engine, and that's better for 0:22:51.800 --> 0:22:54.439 our users. And Google's the best. And that's just the 0:22:54.440 --> 0:22:57.439 bottom line. Mozilla actually said, look, this is really going 0:22:57.480 --> 0:22:59.240 to hurt our business. We depend on the money that 0:22:59.280 --> 0:23:01.600 we get from Google. We're small, you know, Firefox is 0:23:01.640 --> 0:23:03.480 really small, and we need that money. So they did 0:23:03.520 --> 0:23:04.200 testify like. 0:23:04.160 --> 0:23:06.000 That, Okay, like you said, this is not the only 0:23:06.119 --> 0:23:09.440 legal challenge company. Why do the lawyers always get paid 0:23:09.440 --> 0:23:13.199 by the way, always matter what it doesn't. 0:23:12.880 --> 0:23:15.000 The right and a lot and a lot. 0:23:15.359 --> 0:23:16.000 Yeah, I don't know. 0:23:16.080 --> 0:23:18.600 Jed if you cover, if you cover that. But but 0:23:18.640 --> 0:23:20.760 I'm curious where this falls and sort of the scheme 0:23:20.800 --> 0:23:24.320 of lawsuits that Google, for its part, is facing right now. 0:23:24.440 --> 0:23:27.879 Not to mention, I mean the lawsuits facing Amazon FTC 0:23:28.000 --> 0:23:30.320 issues facing Amazon Apple as well Meta. 0:23:30.440 --> 0:23:32.959 You have FTCV Meta at right. All of them right 0:23:32.960 --> 0:23:35.920 now are facing big monopolization suits. They have a suit 0:23:35.960 --> 0:23:38.360 coming up that challenges their ad tech business. It's it's 0:23:38.400 --> 0:23:41.160 not a really business that consumers generally know about, because 0:23:41.160 --> 0:23:44.800 this is a business to business supply chain right that 0:23:44.840 --> 0:23:48.560 they kind of control. And it's about actually advertisers, digital 0:23:48.600 --> 0:23:51.200 advertisers and publishers the software that they use to come 0:23:51.200 --> 0:23:53.840 together to place ads right, to find the space, to 0:23:54.240 --> 0:23:56.040 buy the space, to get the right ad to the 0:23:56.119 --> 0:23:59.280 right consumer. And Google basically owns the entire supply chain. 0:23:59.440 --> 0:24:01.680 They have nom and many pieces of it, and it's 0:24:01.720 --> 0:24:05.160 about manipulating that to take extract as much money from 0:24:05.160 --> 0:24:08.359 publishers and advertisers as they can. That's the allegation. That 0:24:08.400 --> 0:24:10.480 trial is coming up toward the end of this year, 0:24:10.560 --> 0:24:12.840 and I think that's actually kind of a bigger deal, 0:24:13.560 --> 0:24:15.800 right because it's in front of a jury now that 0:24:15.840 --> 0:24:19.040 doesn't happen very often because the DOJ can only go 0:24:19.080 --> 0:24:20.600 in front of a jury when they're looking for a 0:24:20.680 --> 0:24:25.160 monetary remedy. They're looking for injunctive and monetary remedy because 0:24:25.160 --> 0:24:29.119 they themselves were advertisers. So they're saying us was hurt 0:24:29.440 --> 0:24:32.080 by what Google did. We were advertisers, and we paid 0:24:32.080 --> 0:24:36.119 more to do that advertising because of Google's conduct. But 0:24:36.160 --> 0:24:38.040 when it goes in front of a jury, I think 0:24:38.080 --> 0:24:40.159 it's really hard for a jury to kind of parse 0:24:40.200 --> 0:24:42.840 out all the stages that have to be proven to 0:24:42.840 --> 0:24:45.920 prove an anti trust violation. This judge, who is studying 0:24:46.040 --> 0:24:48.520 really hard and the Google Search case is struggling. You 0:24:48.560 --> 0:24:51.359 can tell this is hard for him, So determine that 0:24:51.520 --> 0:24:54.359 line between conduct that's anti competitive and conduct that's just 0:24:54.440 --> 0:24:57.960 hyper competitive is very difficult. And I think with a 0:24:58.040 --> 0:25:01.160 jury there's probably a tendency the DJ just to paint 0:25:01.160 --> 0:25:04.160 the company is a big dominant bully rather than kind 0:25:04.160 --> 0:25:07.119 of getting into those nuances, and a jury's probably going 0:25:07.200 --> 0:25:09.720 to go that direction. That's what I think. So I 0:25:09.720 --> 0:25:11.040 think those are scary cases. 0:25:11.320 --> 0:25:12.919 All right, give us the timing on when some of 0:25:12.960 --> 0:25:14.600 these things are going to happen here, because I'm looking 0:25:14.600 --> 0:25:16.600 at the stock stacks up twenty percent this year, it's 0:25:16.680 --> 0:25:19.800 up sixty percent over the trailing twelve month. The market's 0:25:19.840 --> 0:25:21.959 not worried about it, now worried. What's the timing here 0:25:22.000 --> 0:25:22.560 of some of these? 0:25:22.720 --> 0:25:24.960 I think on liability, a decision will probably come out 0:25:24.960 --> 0:25:27.160 on the search case in a few months. And then 0:25:27.320 --> 0:25:29.480 if that happened in a few months, that's what I think. 0:25:29.640 --> 0:25:31.359 And if that happens, he's going to the judge is 0:25:31.359 --> 0:25:34.320 gonna have a separate hearing on remedy, separate process to 0:25:34.400 --> 0:25:37.040 determine the proper remedy. I think he'll give them a 0:25:37.040 --> 0:25:39.280 few months to get prepared for that. Experts will be 0:25:39.320 --> 0:25:42.520 testifying in that So I'm thinking maybe a remedy comes 0:25:42.520 --> 0:25:44.520 out sometime in fourth quarter. That's what I think. 0:25:44.600 --> 0:25:46.280 Okay, we only have a minute and a half left, 0:25:46.320 --> 0:25:49.679 but do you want to talk Apple? Meta is on 0:25:49.680 --> 0:25:49.960 your pap? 0:25:49.960 --> 0:25:52.240 Okay, madam, let's say the least risk is Meta. I 0:25:52.240 --> 0:25:55.680 think I think the FDC will lose. All they're really 0:25:55.720 --> 0:25:58.040 seeking is a divestiture of Instagram or What's app, And 0:25:58.080 --> 0:25:59.840 I just don't think it's it's not going to happen. 0:26:00.000 --> 0:26:01.040 That would be a big deal. It would be a 0:26:01.040 --> 0:26:02.520 big deal. I don't think it's going to happen. 0:26:02.720 --> 0:26:03.000 I don't. 0:26:03.040 --> 0:26:05.520 I actually don't think the DOJ suit against Apples all 0:26:05.520 --> 0:26:07.600 that great either. I know people would disagree with me, 0:26:08.040 --> 0:26:11.159 but I think the allegations I think Apples change some 0:26:11.200 --> 0:26:15.240 of the conduct that they're challenging already, and I think 0:26:15.320 --> 0:26:18.159 a lot of pro competitive justifications which can outweigh some 0:26:18.240 --> 0:26:21.080 of those anti competitive allegedly anti competitive conduct. 0:26:21.400 --> 0:26:23.040 Lena Cohn versus Amazon. 0:26:24.160 --> 0:26:26.439 I also don't think that's a great suit. Wow, I 0:26:26.440 --> 0:26:29.080 think the best suits that I think the suits against Google. 0:26:29.440 --> 0:26:31.919 I think I have some teeth, have some possibility. I 0:26:31.960 --> 0:26:34.280 don't really think the other three suits are all that great. 0:26:34.400 --> 0:26:37.919 Okay, interesting, this is their time to get big tech, right. 0:26:37.960 --> 0:26:40.879 I mean, you know, never know what the next administration. 0:26:40.320 --> 0:26:42.600 Is going to be, That's right, you don't know. Although 0:26:42.600 --> 0:26:46.080 there are some gopiers in the Congress that like what 0:26:46.160 --> 0:26:49.399 Lena Coon's doing, It actually said Donald Trump's keep her around. 0:26:49.480 --> 0:26:49.640 Yeah. 0:26:49.640 --> 0:26:51.800 I feel like Republicans and Democrats like they don't agree 0:26:51.840 --> 0:26:53.600 on anything except for going after big tech. 0:26:53.680 --> 0:26:56.240 Yeah, for different reasons, yes, live career, but they do agree. 0:26:56.320 --> 0:26:58.679 Yes, but if you ask the consumers, we're like, we 0:26:58.840 --> 0:27:01.960 like it. It's all good which works the Yeah, I 0:27:01.960 --> 0:27:02.720 don't know, I mean. 0:27:02.920 --> 0:27:05.640 I mean it's Amazon case in particular. I yeah, Amazon, 0:27:05.760 --> 0:27:08.200 they brought a lot of pro competitive benefits to consumers 0:27:08.240 --> 0:27:10.520 in the market since they started right, And so I 0:27:10.560 --> 0:27:13.800 think again, with these monopolization suits, it's always the anti 0:27:13.800 --> 0:27:17.080 competitive harm weighed against the pro competitive side when you've 0:27:17.080 --> 0:27:18.560 got a strong pro competitive side. 0:27:18.720 --> 0:27:21.199 Yep, all right, Jenniferree, thanks so much for joining us. 0:27:21.280 --> 0:27:24.480 Jenry, she is a senior litigation analyst for Bloomberg Intelligence, 0:27:24.560 --> 0:27:27.720 joining us live here in our Bloomberg Intelligence office. She 0:27:27.760 --> 0:27:29.800 doesn't mail it in like BI management does. She comes 0:27:29.840 --> 0:27:33.399 into the office, which we appreciate. In New York City 0:27:33.480 --> 0:27:34.360 as well. 0:27:35.640 --> 0:27:39.520 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:27:39.600 --> 0:27:43.160 weekdays at ten am Eastern on applecard Play and Android 0:27:43.160 --> 0:27:45.920 Otto with the Bloomberg Business app. You can also listen 0:27:46.040 --> 0:27:49.120 live on Amazon Alexa from our flagship New York station 0:27:49.520 --> 0:27:53.000 Just Say Alexa playing Bloomberg eleven thirty. 0:27:54.080 --> 0:27:58.440 Tyson Food reported some numbers here. Let's break it down 0:27:58.480 --> 0:28:01.320 with Jen Bartashis. She covers all of the retail stuff, 0:28:01.359 --> 0:28:04.120 all of the food companies for Bloomberg intelligence. 0:28:04.119 --> 0:28:05.560 She's based down in Princeton, New Jersey. 0:28:05.640 --> 0:28:08.280 I think she's using that zoom stuff that the kids 0:28:08.359 --> 0:28:11.360 use these days to kind of, you know, phone into. 0:28:11.200 --> 0:28:14.000 Us, Jen, talk to us about Tyson Food here. 0:28:14.160 --> 0:28:16.280 What did you see from again? What I just learned 0:28:16.359 --> 0:28:18.359 was the largest meat producer in the US. 0:28:18.840 --> 0:28:21.600 Yeah, good morning. So Tyson is one of the biggest 0:28:21.600 --> 0:28:25.000 meat producers globally actually, and by all accounts, they had 0:28:25.000 --> 0:28:27.320 a pretty decent quarter. They did raise their full year 0:28:27.320 --> 0:28:30.520 outlook for adjusted operating income off of strength in the 0:28:30.600 --> 0:28:34.080 chicken segment, which has been long awaited. But the stock 0:28:34.240 --> 0:28:37.360 is trading down, likely on commentary that they may see 0:28:37.440 --> 0:28:40.320 third quarter be weaker than fourth quarter, which would buck 0:28:40.440 --> 0:28:43.040 historical trends. And so a little bit of a mixed 0:28:43.040 --> 0:28:45.960 report coming out of Tyson today, but generally a pretty 0:28:45.960 --> 0:28:46.560 solid quarter. 0:28:46.840 --> 0:28:50.400 Is the current quarter usually strong because we're getting into summer, 0:28:50.480 --> 0:28:53.200 We got Memorial Day coming up, we buy the meat 0:28:53.200 --> 0:28:56.400 for the barbecue. I mean, why is it typically stronger? 0:28:57.400 --> 0:29:01.440 So it's seasonally stronger for meats like you like your chicken, 0:29:01.560 --> 0:29:06.200 or you're in historically for beef specifically because of grilling season. 0:29:06.240 --> 0:29:09.960 But that does translate into a weakness for prepared foods 0:29:10.000 --> 0:29:13.760 and for the pork segment generally, And so they're saying 0:29:13.800 --> 0:29:17.040 that the weakness in prepared foods and pork may outweigh 0:29:17.440 --> 0:29:20.200 the strength coming for the grilling season for chicken and 0:29:20.320 --> 0:29:22.520 for and for beef. 0:29:22.720 --> 0:29:26.640 All right, I'm looking at the PGeo function for Tyson 0:29:26.680 --> 0:29:30.040 Food TSN. Is the ticker percentage of revenue thirty seven 0:29:30.080 --> 0:29:34.160 percent beef, thirty three percent chicken, nineteen percent prepared foods 0:29:34.200 --> 0:29:37.920 and nine percent pork. Which business do you like? Which 0:29:37.960 --> 0:29:40.440 business does the street like? Is one better than the other? 0:29:40.480 --> 0:29:42.680 Better margins, better growth? How do we think about that? 0:29:43.560 --> 0:29:46.880 So, historically speaking, prepared foods is a much higher margin 0:29:47.280 --> 0:29:50.040 business within the company, and there were intents from Tyson 0:29:50.080 --> 0:29:53.880 to grow that considerably. That has great long term potential, 0:29:54.480 --> 0:29:56.880 but they are going through a little bit of short 0:29:56.960 --> 0:30:01.200 term turbulence with regards to additional startup costs associated with 0:30:01.360 --> 0:30:04.360 new plant lines and things like that. The chicken segment, 0:30:04.480 --> 0:30:07.280 which is a big part of the company's business, has 0:30:07.320 --> 0:30:11.120 been underperforming for years, and so what's encouraging coming out 0:30:11.160 --> 0:30:14.400 of today's earnings is that the chicken segment is finally 0:30:14.480 --> 0:30:19.640 showing improvement. Margins are up they're doing better with efficiencies, 0:30:19.680 --> 0:30:22.440 and even though overall volume is down, it's a much 0:30:22.560 --> 0:30:26.920 healthier margin that they're achieving out of that chicken business. Now, 0:30:26.960 --> 0:30:30.240 remember they've closed a bunch of plants recently, They've been 0:30:30.360 --> 0:30:34.520 resizing their processing footprint, so all the things that they 0:30:34.560 --> 0:30:36.560 need to do seem to be underway to help make 0:30:36.600 --> 0:30:39.240 that a much more profitable and bigger contributor to the 0:30:39.280 --> 0:30:40.040 overall company. 0:30:40.120 --> 0:30:43.080 It was interesting to hear Noura, and actually I would 0:30:43.120 --> 0:30:45.560 say we had I don't know if you Jen heard this, 0:30:45.640 --> 0:30:48.640 but we had kind of an interesting conversation about Tyson 0:30:48.720 --> 0:30:51.000 Foods just moments before we came to you, because Nora 0:30:51.120 --> 0:30:54.200 chose it as one of her market movers, and we 0:30:54.240 --> 0:30:56.880 all were all talking, well, we don't necessarily know necessarily 0:30:57.040 --> 0:31:00.400 the brand of whatever we're buying when we're in the store, 0:31:00.440 --> 0:31:04.080 and Tyson has much more than just Tyson Foods. Is 0:31:04.120 --> 0:31:09.000 this at its core a commodity company? Or do the 0:31:09.000 --> 0:31:14.160 brands Sarah Lee, Ballpark Hillshar Farm, Jimmy Dean, Tyson, Bosco's 0:31:15.040 --> 0:31:17.280 Gallo Salami do these matter to consumers? 0:31:18.400 --> 0:31:21.680 The brands do matter, and it depends on which consumer 0:31:21.720 --> 0:31:25.880 demographic you're talking about but Tyson has intentionally over the 0:31:25.920 --> 0:31:28.560 past several years moved away from being a strictly commodity 0:31:28.640 --> 0:31:31.920 driven company. That has helped smooth out earnings volatility. That 0:31:32.000 --> 0:31:36.040 helps make it a much healthier margin profile overall. And 0:31:36.280 --> 0:31:38.920 so that progress I think is going to continue. So 0:31:38.960 --> 0:31:43.400 those brands are very central to that long term, that 0:31:43.480 --> 0:31:46.800 long term plan that side. You're right, there is a 0:31:46.840 --> 0:31:48.760 lot of Tyson meat out there that you eat and 0:31:48.800 --> 0:31:51.200 you don't even realize it's Tyson. They you know, obviously 0:31:51.280 --> 0:31:53.800 will supply retailers that then have that as their private 0:31:53.840 --> 0:31:58.480 label brand. There are things like that that happen. But overall, 0:31:59.120 --> 0:32:04.080 what we're seeing is the consumer, especially lower income households, 0:32:04.360 --> 0:32:06.360 have been trading more into private label and that has 0:32:06.480 --> 0:32:10.080 left these brands a little bit lower in terms of 0:32:10.120 --> 0:32:13.400 overall volume that they're being that's that's being sold. So 0:32:13.400 --> 0:32:15.120 so that's where we're seeing a little bit of a 0:32:15.120 --> 0:32:19.320 little bit of that brand volatility in the last few quarters. 0:32:19.720 --> 0:32:22.000 Jen, you need to talk to investors in this company. 0:32:22.040 --> 0:32:23.040 What's the call here? 0:32:23.160 --> 0:32:25.160 I mean, are they do they own it for the dividend? 0:32:25.200 --> 0:32:27.960 Did they own it because they're bullush on Chicken? And 0:32:28.120 --> 0:32:31.200 I mean what's the investment call for owning a food 0:32:31.200 --> 0:32:31.840 company like this. 0:32:32.840 --> 0:32:36.280 Well, the dividend has been something that's been of appeal 0:32:36.400 --> 0:32:39.680 in recent years. The good news is that Tyson is 0:32:39.720 --> 0:32:42.120 back to where their free cash flower generation will cover 0:32:42.200 --> 0:32:46.160 the dividend, so that's that That also appeases some concern 0:32:46.200 --> 0:32:49.520 that the dividend might be cut. So generally it's been 0:32:49.960 --> 0:32:53.440 it's been along those lines. There is also long term growth. 0:32:53.880 --> 0:32:58.800 You know, Tyson has been slowly expanding international operations. When 0:32:58.840 --> 0:33:01.440 they get the formula right, meaning they get the right 0:33:01.480 --> 0:33:04.560 productivity and the plants that they've opened up overseas, there's 0:33:04.600 --> 0:33:07.760 a long runway for potential growth for Tyson outside the 0:33:07.880 --> 0:33:10.560 United States as well as within the United States. So 0:33:10.720 --> 0:33:12.400 that's a little bit of the appeal as well if 0:33:12.440 --> 0:33:15.680 you're a longer term perspective investor. 0:33:16.160 --> 0:33:18.120 Anything that investors have to keep their eyes on when 0:33:18.120 --> 0:33:21.240 it comes to supply issues out there, any bird flu 0:33:21.320 --> 0:33:24.800 avian flu type stuff that's getting into their production line 0:33:24.840 --> 0:33:27.160 that we've seen hit other types of companies. 0:33:27.960 --> 0:33:31.760 Yeah, so the bird flu or avian flu is certainly 0:33:31.760 --> 0:33:35.120 something that's in the headlines lately. It's been impacting. It's 0:33:35.200 --> 0:33:37.800 you know, we've seen outbreaks in very specific areas. Thus 0:33:37.840 --> 0:33:40.720 far hasn't really had a major impact on Tyson this year, 0:33:41.560 --> 0:33:44.720 but we are watching that very carefully. One of the 0:33:44.760 --> 0:33:47.320 longer term issues Tyson's going to face is just the 0:33:47.360 --> 0:33:50.680 beef cattle cycle. We're at the bottom of a cycle. 0:33:51.160 --> 0:33:56.120 There's very limited animal availability, and once that he starts 0:33:56.160 --> 0:33:58.000 to rebuild, things are going to get a little bit 0:33:58.000 --> 0:34:01.080 worse before they get better. With regards to apply, that 0:34:01.200 --> 0:34:04.480 means that the profitability of the cattle, of the beef 0:34:04.480 --> 0:34:07.560 segment within Tyson is going to remain pressured well into 0:34:07.600 --> 0:34:08.439 twenty twenty five. 0:34:08.640 --> 0:34:10.720 Wait a minute, are we are there not enough cows 0:34:10.760 --> 0:34:11.200 out there? 0:34:12.160 --> 0:34:13.280 Well, no, no, there. 0:34:13.560 --> 0:34:15.239 There are slaughtering them for food. 0:34:15.280 --> 0:34:19.280 That's the problem exactly. We're at the bottom of the cycle, 0:34:19.280 --> 0:34:22.719 which means that the supply is just very limited and 0:34:22.760 --> 0:34:25.320 because you know, cows take eighteen months two years to 0:34:25.680 --> 0:34:29.439 reach slaughter size, it's a slow rebuild and right now 0:34:29.440 --> 0:34:33.560 we're not seeing the initial signs of herd rebuilding that 0:34:33.600 --> 0:34:35.560 we need to really to. 0:34:35.320 --> 0:34:39.400 To really research analysts, How do how do you decide 0:34:39.400 --> 0:34:42.360 as an analyst how the herds are like you go 0:34:42.440 --> 0:34:45.120 out and cow cows out in Montana. 0:34:45.440 --> 0:34:48.279 Well, no, I look at USDA data, you know, so 0:34:48.360 --> 0:34:51.879 that's that's you know, USDA expectations. But you also talk 0:34:51.920 --> 0:34:54.600 to people who are who are in the industry right 0:34:54.840 --> 0:34:56.800 and there are things that affect you know, when those 0:34:56.960 --> 0:34:59.520 those herds are going to be rebuilt, the price of hay, 0:35:00.360 --> 0:35:03.960 the drought conditions, interest rates, you know, all of these 0:35:04.000 --> 0:35:07.080 things impact ranchers and their ability to take on the 0:35:07.120 --> 0:35:10.640 cost of rebuilding herds. And so you know, once those 0:35:10.640 --> 0:35:12.759 things start to optimize a little bit, then you'll start 0:35:12.800 --> 0:35:15.440 to see herds grow. Then you'll start to see a 0:35:15.520 --> 0:35:21.080 much higher in terms of supply that'll be coming to 0:35:21.120 --> 0:35:22.400 market in the next couple of years. 0:35:22.480 --> 0:35:24.960 What's the and this kind of goes back to Paul's question, 0:35:25.040 --> 0:35:27.640 But I thought chicken was like the hottest thing out 0:35:27.680 --> 0:35:30.799 there right now in terms of what consumers want. We 0:35:30.840 --> 0:35:33.520 saw Chipotle, Chick fil A running low. Chick fil A 0:35:33.640 --> 0:35:37.480 is huge, raising canes is absolutely huge right now. Why 0:35:37.600 --> 0:35:40.239 is chicken only gone in twenty nineteen from thirty two 0:35:40.239 --> 0:35:42.760 point two percent of revenue to thirty three point seven 0:35:42.800 --> 0:35:45.560 percent of revenue That was twenty nineteen to twenty twenty three. 0:35:46.640 --> 0:35:48.880 Well, a lot of that has been priced depreciation, so 0:35:49.200 --> 0:35:52.880 there's been oversupply in the market. When that happens, prices 0:35:52.880 --> 0:35:56.160 are down. That's great for consumers. It's great for restaurant 0:35:56.239 --> 0:35:58.719 chains in terms of buying, but it's not great for 0:35:58.800 --> 0:36:02.600 the producers. And so, you know, part of what we're 0:36:02.600 --> 0:36:05.759 looking for is, you know that prices start to stabilize 0:36:05.760 --> 0:36:08.319 a little bit, which will lead to, you know, opportunity 0:36:08.360 --> 0:36:12.000 for revenue growth to renew in the chicken segment. 0:36:12.120 --> 0:36:14.160 I'm sorry, Paul, did you just say priced appreciation? I 0:36:14.160 --> 0:36:15.320 thought everything was getting. 0:36:15.040 --> 0:36:17.719 More expensive, Yeah, the commodities, I guess. 0:36:17.840 --> 0:36:21.760 So what I learned here, Jen is chickens are short cycle, 0:36:22.320 --> 0:36:23.360 cows are long cycle. 0:36:24.080 --> 0:36:25.600 Correct, all right, boom so you. 0:36:25.680 --> 0:36:30.239 Learned something farm great stuff senior retail anels for Bloomberg Intelligence. 0:36:30.440 --> 0:36:32.400 I do remember for my days living down in Virginia, 0:36:32.480 --> 0:36:35.480 North Carolina. You know, you're out on the interstate and 0:36:35.600 --> 0:36:39.400 flatbed after flatbed after flatbed of these trucks would have 0:36:40.280 --> 0:36:43.640 chicken crates strapped on there and feathers are coming out 0:36:43.640 --> 0:36:45.640 all over the places, so you can't trap behind them, 0:36:45.960 --> 0:36:47.640 and it's not a good day for the chickens. I 0:36:47.640 --> 0:36:49.560 don't think the chickens going is not a good place 0:36:49.600 --> 0:36:51.839 for you. Yeah, but that's where I think you get 0:36:51.840 --> 0:36:53.240 a lot of chickens some North Carolina. 0:36:53.280 --> 0:36:54.920 Not a truck you want to be on Necessarily. I 0:36:54.920 --> 0:36:56.479 thought you were going to go somewhere else with the whole, 0:36:56.520 --> 0:36:58.680 like you know out in Colorado. You know you've got 0:36:58.800 --> 0:37:01.000 family out in Colorado. Like you go north of Boulder 0:37:01.000 --> 0:37:06.080 to Fort Collins, Greeley area, huge cattle area, right and 0:37:05.560 --> 0:37:08.320 you can you can smell it, Yeah, you can smell 0:37:08.360 --> 0:37:10.920 it exactly. Same with the central part of California. 0:37:11.040 --> 0:37:12.239 Yep, yep, very good. 0:37:12.280 --> 0:37:14.239 So anyway, we learned what we needed to learn about 0:37:14.320 --> 0:37:18.400 chickens and cows and pork bellies. You know, I always 0:37:18.400 --> 0:37:20.759 have to look at the pork belly, all right, I 0:37:20.760 --> 0:37:22.920 was Jim bartash Is talking about Tyson's food. 0:37:25.000 --> 0:37:28.879 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:37:28.960 --> 0:37:32.480 weekdays at ten am Eastern on applecar Play and Android 0:37:32.520 --> 0:37:35.680 Auto with the Bloomberg Business. You can also listen live 0:37:35.800 --> 0:37:38.960 on Amazon Alexa from our flagship New York station, Just 0:37:39.040 --> 0:37:42.640 Say Alexa Play Bloomberg eleven thirty. 0:37:43.480 --> 0:37:46.040 Tim Stenovick sitting in for Alex Steel here this morning 0:37:46.040 --> 0:37:48.120 on Paul Sweeney. We're live here in our Bloomberg Interactive 0:37:48.120 --> 0:37:51.000 Brokers studio. This is the Bloomberg Intelligence Show. We also 0:37:51.080 --> 0:37:55.480 stream this thing live on the introweb. That would be YouTube, 0:37:55.480 --> 0:37:58.040 dot com search Bloomber Podcast, and that's where you'll find us. 0:37:58.360 --> 0:38:00.160 You know, Tim, A lot of folks were saying, you know, 0:38:00.239 --> 0:38:00.839 coming off of. 0:38:00.760 --> 0:38:04.240 That October base level had that big twenty five percent 0:38:04.280 --> 0:38:06.040 plus move up in the S and P five hundred, 0:38:06.120 --> 0:38:07.600 A lot of folks are saying, well, we could use 0:38:07.600 --> 0:38:10.880 a nice pullback that would be healthy percent. 0:38:11.480 --> 0:38:12.319 Did we get it, Paul? 0:38:12.400 --> 0:38:13.960 I don't know. We kind of don't think we did. 0:38:14.000 --> 0:38:15.960 From the end of March through you know, kind of 0:38:16.200 --> 0:38:18.080 mid April we kind of had a four or five 0:38:18.080 --> 0:38:20.000 percent pull down, but here we are moving higher. 0:38:20.760 --> 0:38:22.719 Was that it was? I don't know, man. 0:38:22.880 --> 0:38:24.960 Yeah, I mean with these with these pullbacks, it's kind 0:38:24.960 --> 0:38:25.920 of like blink and you'll miss it? 0:38:26.160 --> 0:38:26.640 Can you miss it? 0:38:26.680 --> 0:38:31.040 Christina Hooper joins US chief Global market Strategist for in Vesco. 0:38:31.320 --> 0:38:34.480 She looks at the big picture for a huge pool 0:38:34.640 --> 0:38:35.360 of money. 0:38:35.640 --> 0:38:37.440 Christina, what do you make of that little pullback we 0:38:37.480 --> 0:38:39.520 had in the SP five hundred, What did you make 0:38:39.560 --> 0:38:39.759 of that? 0:38:39.840 --> 0:38:42.080 And did we just march higher from here? 0:38:44.040 --> 0:38:48.200 Well, I think that pullback and the quick ending of 0:38:48.200 --> 0:38:52.600 that pullback reflects just the changing views on the path 0:38:52.640 --> 0:38:57.399 of monetary policy this year. When markets got pessimistic and 0:38:57.520 --> 0:39:02.320 they felt that cut was far away and that potentially 0:39:02.360 --> 0:39:06.279 a hike could come sooner, we saw a sell off. 0:39:06.520 --> 0:39:09.560 But the problem with the sell off was that there's 0:39:09.600 --> 0:39:13.520 an awful amount of cash sitting on sidelines, and many 0:39:13.560 --> 0:39:17.160 investors are overweight cash, and so the reality is that 0:39:17.719 --> 0:39:22.399 with fundamentals looking fairly good, earning season going well, it's 0:39:22.480 --> 0:39:25.040 hard to sit on the sidelines if you see something 0:39:25.080 --> 0:39:28.440 of a bargain, even if it's not a kmart level 0:39:28.480 --> 0:39:33.680 blue light special. And so as a result, this was 0:39:33.880 --> 0:39:37.040 not necessarily the sell off that many wanted to see. 0:39:37.080 --> 0:39:39.319 But I think it's a function of the environment we're in. 0:39:39.560 --> 0:39:42.239 Where's that cash on the sidelines, Christina? Is it in 0:39:42.520 --> 0:39:45.840 high yield savings accounts that are still giving us five percent? 0:39:46.000 --> 0:39:47.680 Is it in money market funds? 0:39:47.719 --> 0:39:48.239 Where is it? 0:39:49.360 --> 0:39:54.360 Interestingly, it's in a combination of places, and so certainly 0:39:54.440 --> 0:40:00.440 some are enjoying higher yields, but not all relatively speaking. 0:40:01.239 --> 0:40:04.279 But the key is that I think this money was 0:40:04.320 --> 0:40:09.839 never intended for a long term cash savings. It always 0:40:10.160 --> 0:40:14.800 was sitting waiting or at least had a good chance 0:40:14.840 --> 0:40:19.040 of going back into the stock market once investors felt 0:40:19.120 --> 0:40:21.640 more comfortable. And I think we've gotten to that point, 0:40:21.760 --> 0:40:25.759 especially with last week, where the narrative has changed somewhat, 0:40:25.960 --> 0:40:29.520 and I think we'll see more cash moving into equities 0:40:29.960 --> 0:40:33.640 as investors get more comfortable with this changing narrative. 0:40:34.400 --> 0:40:37.080 Christina, I know what investco. You guys really take a 0:40:37.080 --> 0:40:40.840 global view broadly defined. You know, given where the various 0:40:40.840 --> 0:40:43.520 central banks are in terms of their posture aback cutting rates, 0:40:43.520 --> 0:40:45.760 it seems like the ECB and the Bank of England, 0:40:45.760 --> 0:40:47.480 maybe even a little head of the FED here. 0:40:47.520 --> 0:40:49.560 How do you think about the US versus non US? 0:40:51.320 --> 0:40:54.200 Well, the US has clearly been more resilient. It has 0:40:54.320 --> 0:41:01.280 been not as significantly impacted by aggressive rate high and 0:41:01.400 --> 0:41:05.000 so as a result, we are at a place where 0:41:05.600 --> 0:41:08.560 the Bank of England and in particular the ECB look 0:41:08.719 --> 0:41:12.239 poised to move sooner and I think that's going to 0:41:12.280 --> 0:41:12.840 be the case. 0:41:12.880 --> 0:41:14.360 It's just a. 0:41:14.640 --> 0:41:18.439 Function of the greater resilience of the US economy, which 0:41:18.440 --> 0:41:20.719 in turn has to do with in my opinion, two 0:41:20.800 --> 0:41:26.480 key reasons First, the US gave its households more fiscal stimulus. 0:41:26.920 --> 0:41:30.200 Certainly there was fyscal stimulus flowing in Europe and the UK, 0:41:30.840 --> 0:41:34.640 but it was more significant in the UUs. In addition, 0:41:35.160 --> 0:41:40.319 we have this wonderful phenomenon called long term fixed rate 0:41:40.400 --> 0:41:45.000 mortgages that not a lot of other countries can participate in, 0:41:45.640 --> 0:41:50.800 that can enjoy, and as a result, one key part 0:41:50.960 --> 0:41:56.640 of household finances, one's mortgage payment wasn't impacted by the 0:41:56.800 --> 0:42:00.359 very aggressive rate high cycle we experienced. We can't say that, 0:42:00.400 --> 0:42:04.920 for example, for our Canadian neighbors and for European neighbors, 0:42:05.000 --> 0:42:10.040 they experienced changes or increases in mortgage payments for the 0:42:10.040 --> 0:42:11.640 most part. 0:42:11.760 --> 0:42:14.760 Christina, we spoke earlier to Brian Crowees over at Sharp 0:42:14.840 --> 0:42:19.280 Investments and he said that investors here in the US 0:42:19.800 --> 0:42:23.319 are too optimistic when it comes to tech. Do you 0:42:23.320 --> 0:42:23.799 agree with that? 0:42:26.600 --> 0:42:28.759 Well, I think you have to ask the question what 0:42:28.960 --> 0:42:32.720 timeframe are you talking about? Because we've seen this before 0:42:32.840 --> 0:42:36.040 where investors can get very excited and if they have 0:42:36.080 --> 0:42:40.759 a short time horizon, they can easily be disappointed. But 0:42:41.120 --> 0:42:44.600 for those investors that have a long time horizon and 0:42:44.719 --> 0:42:52.239 are employing some kind of selectivity in their investments could 0:42:52.320 --> 0:42:55.239 very well benefit a lot of it. Though, is having 0:42:55.320 --> 0:42:59.040 that patience, having that longer time horizon, Because we could 0:42:59.040 --> 0:43:02.799 see periods where tech stocks become very highly valued, we 0:43:02.880 --> 0:43:05.880 could see periods of disappointment in terms of earnings, but 0:43:05.960 --> 0:43:08.840 certainly there's a lot of innovation going on in tech. 0:43:09.239 --> 0:43:12.480 Reminds me very much of the late nineteen nineties and 0:43:12.520 --> 0:43:16.400 the excitement over the Internet. Investors through their money at 0:43:16.440 --> 0:43:20.400 Internet stocks. Some worked, some didn't, and it was about 0:43:20.960 --> 0:43:25.520 essentially ferreting out the areas of opportunity and sticking with 0:43:25.560 --> 0:43:29.960 them even though there were some certainly periods of disappointment 0:43:29.960 --> 0:43:30.360 in there. 0:43:31.520 --> 0:43:33.200 Christina, our listeners are viewers. 0:43:33.200 --> 0:43:37.080 They've been hearing this term a lot recently, stagflation. What 0:43:37.120 --> 0:43:40.279 does stagflation mean to you and is it a concern 0:43:40.440 --> 0:43:41.160 for investors? 0:43:43.160 --> 0:43:45.360 Well, I think that Jay Powell closed the book on 0:43:45.400 --> 0:43:49.080 that last week, although I will say that we did 0:43:49.080 --> 0:43:52.800 see a lot of internet searches on the term stagflation before. 0:43:53.280 --> 0:43:56.759 To me, it's an environment like the nineteen seventies right 0:43:56.880 --> 0:44:03.080 where growth is really disappointing. It's stagnant, but inflation is 0:44:03.200 --> 0:44:07.640 high and it's very sticky. And while We've certainly seen 0:44:07.960 --> 0:44:12.239 some kind of aspects of some components of inflation that 0:44:12.280 --> 0:44:17.040 have been stickier. This disinflation journey has been very imperfect. 0:44:17.560 --> 0:44:19.839 I don't think this is an environment where we have 0:44:20.080 --> 0:44:23.239 high sticky inflation. I think we're going to see some 0:44:23.520 --> 0:44:28.880 nice progress in disinflation this year, and we can't say 0:44:28.960 --> 0:44:33.640 that growth is stagnant. Certainly, there are some cracks appearing 0:44:34.320 --> 0:44:36.800 in the US economy, but that's what the FED wanted. 0:44:36.840 --> 0:44:40.640 It wanted to cool a relatively hot economy that has 0:44:40.719 --> 0:44:45.480 had sub four percent unemployment for a very significant period 0:44:45.520 --> 0:44:45.839 of time. 0:44:46.239 --> 0:44:48.480 Christin, where do you think we'll see that disinflation? I mean, 0:44:48.480 --> 0:44:52.759 it's been pretty stubborn in many areas, and certainly the 0:44:52.840 --> 0:44:54.759 last mile has proven to be just as tough as 0:44:54.800 --> 0:44:55.680 many people thought it would. 0:44:57.840 --> 0:45:01.960 So we're starting to see a little easing in wage growth. 0:45:02.120 --> 0:45:07.799 If April's jobs report suggests a trend, I think it does. 0:45:08.719 --> 0:45:12.040 I think that will filter into and also I think 0:45:12.040 --> 0:45:15.920 we are seeing an increase in unemployment. I think that 0:45:16.040 --> 0:45:20.200 all filters into moderation and services spending. I mean, we're 0:45:20.200 --> 0:45:22.680 already hearing in a number of earnings reports that the 0:45:22.680 --> 0:45:26.440 consumer has become even more selective in their purchases, is 0:45:26.600 --> 0:45:31.080 even more concerned about expenses and the prices they pay 0:45:31.120 --> 0:45:34.000 for certain items. So I think that we'll continue to 0:45:34.040 --> 0:45:38.280 see progress in terms of disinflation on the services side 0:45:38.640 --> 0:45:42.200 that has been I think unusually hot for a long 0:45:42.239 --> 0:45:45.160 period of time, and over the course of the year, 0:45:45.440 --> 0:45:47.800 I think the situation will get significantly better. 0:45:48.560 --> 0:45:51.040 Christina, just looking at today's price action, we've got the 0:45:51.080 --> 0:45:52.440 S and P up a half of one percent, but 0:45:52.480 --> 0:45:55.239 the rustle is up about one point two percent. How 0:45:55.239 --> 0:45:57.520 do you think about some of the small MidCap names 0:45:57.520 --> 0:45:59.880 here Visa VI, you know, the big tech names that 0:46:00.120 --> 0:46:02.640 been such powerhouses for this market. 0:46:04.920 --> 0:46:08.480 Well, I think there's room for more participation, and I 0:46:08.600 --> 0:46:12.799 look specifically at smaller cap names as an area of 0:46:12.880 --> 0:46:16.880 real opportunity. If one believes, as I do, that we 0:46:16.960 --> 0:46:20.520 are going to see a stabilization, that this slowdown is 0:46:20.560 --> 0:46:23.640 going to be relatively brief. We're going to see a 0:46:23.719 --> 0:46:28.759 reacceleration in economic growth, and that's a reacceleration globally. By 0:46:28.800 --> 0:46:31.879 the way, the OECD you've been updated it's forecast last 0:46:31.880 --> 0:46:36.399 week for global growth. That's that creates a real opportunity 0:46:36.440 --> 0:46:39.040 for small caps, and I think that's why we're already 0:46:39.320 --> 0:46:42.160 seeing improved performance from smaller cap stocks. 0:46:42.320 --> 0:46:44.919 It's so interesting, Paul. I'm just looking at the top 0:46:44.960 --> 0:46:47.680 function here in Bloomberg and one of these stories that 0:46:47.760 --> 0:46:50.160 just came out is this great story bi own Michael 0:46:50.200 --> 0:46:53.880 mackenzie and Liz Capa McCormick at two million dollars per minute. 0:46:53.880 --> 0:46:57.920 Treasuries are minting cash like never before. Finally, for the 0:46:57.920 --> 0:47:00.960 first time in nearly a generation, fixed income is living 0:47:01.040 --> 0:47:03.440 up to its name. Christina, how much does that hold 0:47:03.520 --> 0:47:05.000 back equities? 0:47:07.840 --> 0:47:10.080 As I said, there's a lot of cash on sidelines, 0:47:10.200 --> 0:47:12.720 so there are a lot of places for that cash 0:47:12.760 --> 0:47:18.520 to go, and it's not a mutually exclusive situation. Investors 0:47:18.520 --> 0:47:22.360 can put money into bonds and can put money into equities, 0:47:22.480 --> 0:47:24.879 and I suspect that's what we're going to see. There's 0:47:24.880 --> 0:47:28.200 a growing recognition and actification. 0:47:28.640 --> 0:47:31.040 I'm just curious, like, if we do see rates come down, 0:47:31.520 --> 0:47:33.919 do we see that cash then move off the sidelines 0:47:34.440 --> 0:47:37.640 and into equities or is that the type of cash 0:47:37.719 --> 0:47:40.719 that wants to stay in something that's more predictable. 0:47:42.760 --> 0:47:45.600 I think the cash will probably the majority of it 0:47:45.640 --> 0:47:49.360 will go into equities, but I suspect that it's also 0:47:49.520 --> 0:47:52.120 going to go into fixed income, just because there's a 0:47:52.200 --> 0:47:55.680 recognition that that fixed income is more attractive than it's 0:47:55.760 --> 0:47:59.320 been in years and years, and that's going to continue. 0:47:59.680 --> 0:48:01.680 And also I think we're going to see more money 0:48:01.680 --> 0:48:03.000 going into alternatives. 0:48:03.040 --> 0:48:03.279 Again. 0:48:03.400 --> 0:48:07.759 Diversification is so important, and I think investors are recognizing 0:48:07.800 --> 0:48:11.120 that more and more as they see the unpredictability of 0:48:11.760 --> 0:48:13.040 the larger environment. 0:48:13.800 --> 0:48:15.960 Christina Hooper, thank you so much for joining us. Always 0:48:15.960 --> 0:48:17.600 appreciate getting your thoughts. Christina Hooper. 0:48:17.600 --> 0:48:21.480 She's a chief Global market Strategist at Invesco. 0:48:21.760 --> 0:48:26.279 This is the Bloomberg Intelligence Podcast, available on apples, Spotify, 0:48:26.480 --> 0:48:29.680 and anywhere else you'll get your podcasts. Listen live each 0:48:29.719 --> 0:48:33.080 weekday ten am to noon Eastern on Bloomberg dot com, 0:48:33.200 --> 0:48:36.600 the iHeartRadio app, tune In, and the Bloomberg Business app. 0:48:36.719 --> 0:48:39.840 You can also watch us live every weekday on YouTube 0:48:39.920 --> 0:48:41.760 and always on the Bloomberg terminal.