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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 2: Let's go to put them Boyle.

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Speaker 3: She's a Bloomberg Intelligence senior US retail analyst. She covers

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Speaker 3: all this stuff. Put what's going on at Nike? That's

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Speaker 3: still my brand? I mean, aren't Aren't they still the

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Speaker 3: dominant player here? What's going on?

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Speaker 4: I'm going to say, you're not the target audience.

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Speaker 3: Some think I'm the target. I mean, just catch the

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Speaker 3: target demo for like anybody anymore? All right? Put them?

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Speaker 3: What's going on in Nike?

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Speaker 5: So so, Paul. Nike definitely is still the largest death

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Speaker 5: leisure brand in the world, with over fifty billion dollars

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Speaker 5: in sales, but in the last few years it has

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Speaker 5: lost a share to Hoka, to On and even to Adita's,

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Speaker 5: if you want to say. And part of that is

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Speaker 5: because it pulled out a wholesale it pulled out of

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Speaker 5: where people shop, and also it focused a little too

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Speaker 5: much on the digital space. Giving product really little focus,

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Speaker 5: and that's why we're seeing a change today. We need

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Speaker 5: someone who can come back, go back to the Nike DNA,

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Speaker 5: and really focus on product performance to deliver what Nike

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Speaker 5: has delivered for the last thirty plus years.

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Speaker 4: When you said they pulled out of retail, what do

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Speaker 4: you mean they tried to sell it themselves online and

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Speaker 4: their website.

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Speaker 5: Well, it's not that they pulled out of all retail,

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Speaker 5: but they definitely curbed their exposure into retail, whether it

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Speaker 5: was through foot locker, Macy's, etc. They had materially pulled

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Speaker 5: back what they were selling into those stores and now

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Speaker 5: they're back in. So they did come back. But what

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Speaker 5: happened is if you went to a foot locker prior

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Speaker 5: to twenty twenty, twenty, nineteen, twenty eighteen, you'd see a

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Speaker 5: lot of Nike there. Right, Nike was the predominant brand,

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Speaker 5: And had you walked in yesterday, even what you'll see

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Speaker 5: is Nike, you'll see Adidas, the Hoka you'll see on

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Speaker 5: So now people are being exposed to more brands and

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Speaker 5: that's part of the reason. But also those brands are

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Speaker 5: good brands, right. They have performance Hoka for running on

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Speaker 5: for running for lifestyle, they've really gained traction, and that's

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Speaker 5: because Nike let them.

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Speaker 3: I guess it was a week or so ago we

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Speaker 3: had Derek Jeter in here with the founder of Untucket,

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Speaker 3: Chris Riccobano, and they were talking about their introducing a

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Speaker 3: new brand of performance athletic leisure, and I heard their story,

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Speaker 3: I heard their pitch, but I'm like, what in the hill?

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Speaker 3: There's so much competition in there? How competitive is that market?

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Speaker 3: At leisure? Nobody's wearing the suits anymore, Plum, that thing's gone,

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Speaker 3: So I guess everybody is kind of into ath leisure.

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Speaker 3: How competitive is that part?

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Speaker 5: That's very competitive, But Nike's still the dominant player at

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Speaker 5: fifty billion dollars plus in sales. It is definitely winning

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Speaker 5: in the shoe category. In apparel, I'd say the gap

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Speaker 5: is much narrower to other players, including Adidas and others.

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Speaker 5: But it's also a space that's growing, right, So as

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Speaker 5: we hear more competition encroaching on the space, it's because

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Speaker 5: more people want more at leisure in their wardrobe. So

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Speaker 5: I'd say it's a category where it's not necessary that

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Speaker 5: one has to lose for another to win the category itself.

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Speaker 5: Is growing globally.

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Speaker 4: How long does it take to bring a new product, sneaker,

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Speaker 4: whatever to market?

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Speaker 5: It takes more than six months, depending on whether it's

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Speaker 5: just another color wave or depending on if it's a

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Speaker 5: new performance based product. But the pipeline is long. And

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Speaker 5: remember most of these sneakers are made in Vietnam. Vietnam

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Speaker 5: is a sneaker hub for manufacturing sneakers. Therefore, there is

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Speaker 5: a transit time involved as well. Now you can argue

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Speaker 5: that AI is going to cut some of that because

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Speaker 5: the design can happen faster and you can pre secure fabrics, etc.

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Speaker 5: But still it's still a long window.

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Speaker 4: The CEO who's getting canned, I don't know who's outgoing?

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Speaker 4: Was Was he a bean counter? I mean, what was

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Speaker 4: the problem with this guy?

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Speaker 5: It's not that there was a problem. He was not

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Speaker 5: a merchant. So John Donaho came in with DTC exposure.

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Speaker 5: So he is the one who led the digital first strategy,

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Speaker 5: wanting to lean more into digital, and well, that's great,

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Speaker 5: it is great to lean forward into digital, but at

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Speaker 5: the end of the day, retail is about product, especially

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Speaker 5: when it comes to a brand. Nike is not a marketplace.

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Speaker 5: It's not Amazon, so product matters most and he just

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Speaker 5: didn't have that product expertise behind him.

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Speaker 3: John, You and I know the fellow who runs this place.

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Speaker 3: But if I were running this place here, here's how

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Speaker 3: we go. No shorts in the workplace and no sandals.

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Speaker 4: That is a just did you know Puonhum that Paul

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Speaker 4: is the fashion police here at Bloomberg World headquarters and

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Speaker 4: he's driving.

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Speaker 5: Every He's always in Shortthills malls for us right checking

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Speaker 5: out the story.

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Speaker 3: I am, I do, I do some product as some

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Speaker 3: channel checks for Punham in the Short Hills mall. All right,

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Speaker 3: put him, thanks so much for joining us, appreciate it.

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Speaker 3: Put them Gil. She covers all the retail stuff for

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Speaker 3: Bloomberg Intelligence. She was Bloomerg Intelligence just celebrated his fifteenth

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Speaker 3: year anniversary. She was my first hire here and I've

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Speaker 3: hired one thirty analysts and she was number one, So

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Speaker 3: that was a good one for us.

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

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Speaker 1: weekdays at ten am Eastern on applecard Play and Android

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Speaker 1: Just say Alexa Play Bloomberg eleven thirty.

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Speaker 3: All right, what do you do here? The Fed cuts rates?

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Speaker 3: You're a financial advisor? What do you do with your clients?

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Speaker 3: What do you tell your clients in world work? Finally

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Speaker 3: rates are coming down. Let's check in with somebody who

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Speaker 3: does that stuff for a living. Sarah Ponzek, financial advisor

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Speaker 3: for UBS Private Wealth Management.

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Speaker 4: Full disclosure.

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Speaker 3: I am a client of UBS Private Wealth Management here

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Speaker 3: in New York. They take care of me. She's done

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Speaker 3: a Boca raton Florida. That's not a bad place to be. Sarah,

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Speaker 3: Thanks so much for joining us. Here are the FED

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Speaker 3: cuts rates. What kind of phone calls were you feeling

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Speaker 3: from your clients after that news, which was for some

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Speaker 3: people's surprise.

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Speaker 6: Yeah, it's great to be with you, Paul and John.

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Speaker 6: It didn't really come as a surprise. I would say,

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Speaker 6: we've all been talking about this since last year, it feels,

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Speaker 6: but finally the first rate cut since twenty twenty, and

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Speaker 6: the Fed came out swinging with a fifty basis point

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Speaker 6: rate cut. So the conversations that we've been having with clients,

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Speaker 6: even though it should not have come as a surprise.

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Speaker 7: You know, we've been talking all year long.

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Speaker 6: About locking in interest rates, extending out duration, slowly moving

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Speaker 6: out of high savings accounts and money markets with cash

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Speaker 6: that you do have.

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Speaker 7: You know, it's been difficult for some people to do that.

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Speaker 6: So finally this week, now that we actually saw the

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Speaker 6: fifty basis point cut, the question is okay, am I

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Speaker 6: too late? If I still have a lot of money

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Speaker 6: in cash, what do I do with that cash? So

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Speaker 6: those are the conversations, the types of conversations that we've

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Speaker 6: been having this week.

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Speaker 4: Ball So, Sarah, what do I do with my cash? Sarah?

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Speaker 7: Great question, John.

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Speaker 6: So you know what's interesting is, yes, we're continually and

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Speaker 6: repeatedly saying, all right, if you haven't already locked in

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Speaker 6: yields through fixed income and extended duration, now's the time

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Speaker 6: to do so. And what's interesting is sometimes we do

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Speaker 6: get pushedback. There's this this gap or this misunderstanding where

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Speaker 6: someone might say, well, well, why would I lock in

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Speaker 6: you know, a three, a five, a ten year bond

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Speaker 6: that's yielding four or five percent when my money market

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Speaker 6: is still yielding you know, four point eight or five percent.

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Speaker 6: You know, there's this trade off that some people feel

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Speaker 6: as though they're making in the short term and what

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Speaker 6: you really need to be aware of is the fact that, yes,

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Speaker 6: your money market might still be paying you, you know,

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Speaker 6: close to five percent today, but if you look at

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Speaker 6: the expectations of where you know, short term interest rates

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Speaker 6: are going to be a year from now, at the

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Speaker 6: end of twenty twenty five, we're looking at short term

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Speaker 6: yields being close to three percent most likely. So if

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Speaker 6: you can lock in a four percent Treasury bill, you know,

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Speaker 6: years out into the future, yeah, you know, you might

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Speaker 6: have a trade off for the next couple of months,

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Speaker 6: but you're going to set yourself up for success over

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Speaker 6: a longer period of time, which is really the name

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Speaker 6: of the game. So that's on the fixed income side,

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Speaker 6: extending out duration, we're talking about you know, maybe three

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Speaker 6: to seven years in maturity, looking at that intermediate duration

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Speaker 6: in the curve, and also staying up in quality, so

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Speaker 6: looking at treasuries, also looking at investment grade corporates. Now,

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Speaker 6: on the equity side, we still believe that the risk

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Speaker 6: reward for equities is pretty strong here. And yes, we've

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Speaker 6: seen a twenty percent return in the S and P

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Speaker 6: five hundred this year. Stocks are trading at records. That's great,

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Speaker 6: but we're seeing this broadening out. You know, if you

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Speaker 6: look at an equal weighted version of the S and

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Speaker 6: P five hundred, it also traded out a record high yesterday.

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Speaker 6: If you look at the sector breakdown of the S

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Speaker 6: and P five hundred, all but two sectors are trading

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Speaker 6: at fifty two week highs. So we've seen this broadening

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Speaker 6: in the stock market and that's really encouraging as an investor.

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Speaker 3: Sir, ETFs, how do you position them for your clients?

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Speaker 3: How much incoming calls do you get from your clients

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Speaker 3: about ETFs?

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Speaker 7: Great question, Paul.

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Speaker 6: You know, obviously we can talk about investing and where

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Speaker 6: to invest, but then there's a question of structure and

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Speaker 6: how you invest. You know, how do you what products

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Speaker 6: do you use to invest your money? So I would say,

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Speaker 6: you know, we use we do use ETFs and portfolios,

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Speaker 6: but we use this them and more so in a

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Speaker 6: supplementary way. When we think about the core portion of

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Speaker 6: our client's equity portfolios. A lot of what we do

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Speaker 6: is actually what's called direct indexing, which we would describe

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Speaker 6: as being a step above ets. It's like, as an investor,

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Speaker 6: you have your own index that's catered to you.

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Speaker 7: And why is that important?

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Speaker 6: You know, there's a couple of things that you can

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Speaker 6: do with the direct index that you cannot do with

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Speaker 6: an ETF. You know, when you have an ETF, let's

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Speaker 6: say an S and P five hundred ETF, that's one

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Speaker 6: line item in your portfolio. So if the market's up,

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Speaker 6: your ETF's up in value, there's not much tax planning

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Speaker 6: you can do there. You really can't do tax loss harvesting, which,

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Speaker 6: especially as we're getting towards the end of the year,

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Speaker 6: this is the time of year that we're gonna start

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Speaker 6: seeing tax planning really come to the forefront of portfolios.

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Speaker 6: So within a direct index, you actually own a couple

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Speaker 6: hundred positions within the portfolio. We all know that even

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Speaker 6: in a year in which the broader stock market is up,

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Speaker 6: there's a lot of individual stocks that trade at losses

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Speaker 6: and pretty hefty losses throughout the year. So what that

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Speaker 6: allows you to do is continue to get market performance

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Speaker 6: in your portfolio, but do plenty of tax planning on

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Speaker 6: the bottom side. And really, what a lot of research

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Speaker 6: has shown is that can add you know, an extra

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Speaker 6: two percentage of performance per year on an after tax basis.

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Speaker 7: So usually for US large cap stocks.

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Speaker 6: We're pretty big believers and passive indexing there, we'll use

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Speaker 6: direct indexing and then we'll use eat is to supplement that.

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Speaker 6: So that's where we you know, right now, for example,

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Speaker 6: small caps might perform pretty well with the expectation of

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Speaker 6: interest rates coming down, So adding to small caps, adding

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Speaker 6: to size exposure there, diversifying internationally there, maybe adding a

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Speaker 6: little bit of international exposure.

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Speaker 7: And then also playing industries and sector tilts.

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Speaker 6: You know, we've had some exposure to some etss that

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Speaker 6: really more so focused on artificial intelligence and cybersecurity this year,

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Speaker 6: for example, So using ETS as a supplementary play to

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Speaker 6: say your large cap core indexed portfolio.

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Speaker 4: Okay, so if with risk assets, Sarah, it's as easy

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Speaker 4: as just finding stocks that do well in a lower

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Speaker 4: rate environment, i e. Tech.

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Speaker 6: So yes, look, I think there's a couple of reasons

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Speaker 6: that we're still there.

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Speaker 4: I'm not saying your job as in hard, Sarah.

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Speaker 6: It's very U I would say it's pretty difficult, and

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Speaker 6: you're dealing with a lot of interesting personalities sometimes who

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Speaker 6: you know who.

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Speaker 4: Are and you're in BOCO, which all the retirees.

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Speaker 7: Right, lower retirees.

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Speaker 6: But it's been raining a lot here, so I honestly,

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Speaker 6: envy you up in New York right now, but we're

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Speaker 6: about to get to.

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Speaker 7: The nice time to be to be in Florida.

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Speaker 6: But no, I think what's interesting about tech is it's

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Speaker 6: not just an interest story play. Look, tech has been

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Speaker 6: the leading sector in the leading industry for the past

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Speaker 6: couple of years when interest rates were high.

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Speaker 7: You know, nowadays tech is quality. Tech is also you know, megacap.

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Speaker 6: Tech is a play on the artificial intelligence trade and

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Speaker 6: growth that we.

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Speaker 7: Expect to see.

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Speaker 6: And yes, you know growth is an area of the

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Speaker 6: market that's interest rate sensitive because essentially, at the end

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Speaker 6: of the day, when you look at tech, you know,

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Speaker 6: we have to think about the net present value of

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Speaker 6: future earnings, and the lower interest rates are, the more

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Speaker 6: attractive that future stream of earnings looks. So yes, we've

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Speaker 6: been optimistic on tech in the past, and that wasn't

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Speaker 6: an interest rate reason, and now I would say interest

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Speaker 6: rates are coming down is even more so a reason

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Speaker 6: to be a com optimistic on tech. With that said,

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Speaker 6: though you don't want tech to make up your whole portfolio, yes,

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Speaker 6: we do think it makes up a very significant portion

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Speaker 6: of a portfolio. But I mentioned earlier on we're seeing

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Speaker 6: a broadening out in the market. We're seeing some cyclical

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Speaker 6: sectors of the market, you know, start to play catch up,

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Speaker 6: so you want to make sure that you're well diversified.

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Speaker 6: But absolutely tech has you know, been a predominant role

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Speaker 6: player in portfolios for the past few years, and we

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Speaker 6: really don't see that changing.

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Speaker 3: Sar to what extent to your clients ask you about

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Speaker 3: getting exposure to alternative investments, whether it's hedge funds or

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Speaker 3: private equity, private credit, how does that play.

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Speaker 6: So it's becoming more of a common theme. I would

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Speaker 6: say it's still a conversation that we're bringing up rather

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Speaker 6: than a lot of clients coming to us and asking

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Speaker 6: about it. Because alternatives are so important when we think

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Speaker 6: about the universe of public companies, you know, think about

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Speaker 6: the universe of companies nowadays that go through an IPO

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Speaker 6: to list on a public stock exchange. I mean, it's

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Speaker 6: a very different world than it was, you know, ten

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Speaker 6: years ago, twenty years ago. Few were companies are going

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Speaker 6: public nowadays, and many of the largest companies in our

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Speaker 6: global economy, especially in the US economy, are actually still

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Speaker 6: private companies.

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Speaker 7: They haven't gone public.

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Speaker 6: So now more than ever, it's important to get exposure

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Speaker 6: to private markets, because it's a whole area, a whole

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Speaker 6: universe of the economy that you just don't have exposure

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Speaker 6: to you in your portfolio if you don't have exposure

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Speaker 6: to private markets. So where within private markets, you know,

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Speaker 6: do we look? We do still like private credit. You know,

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Speaker 6: private credit has been paying an annualized distribution yield of

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Speaker 6: around ten percent. Yes, a lot of these loans are

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Speaker 6: floating right, so we are going to start to see

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Speaker 6: that come down, but we still see that as an

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Speaker 6: attractive place to be, especially as.

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Speaker 7: An alternative to just traditional fixed income. Also, private equity.

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Speaker 6: Private equity is you know, we see as a very

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Speaker 6: important piece of portfolios.

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Speaker 7: Talk about lowering volatility.

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Speaker 6: You don't have the day to day swings of what

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Speaker 6: you see on public stock exchanges, but still getting those

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Speaker 6: strong double digit returns in private equity. And what's also

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Speaker 6: been really interesting in the private equity space is we've

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Speaker 6: seen more, you know, investor friendly structures where you're not

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Speaker 6: locked up for seven to ten years, you're not dealing

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Speaker 6: with capital calls. There's these evergreen structures that have been

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Speaker 6: produced where you can actually get out on a quarterly basis.

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Speaker 7: You have more liquidity.

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Speaker 6: So the environment for private privates, I would say, has

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Speaker 6: become much more investor friendly over the past year or

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Speaker 6: two years.

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Speaker 4: Even speaking of volatility, have you seen the volumes today?

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Speaker 4: Triple witching day? Oh real quick, Sarah, just a minute.

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Speaker 4: Can you use how do you use volatility to your

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Speaker 4: advantage as an investor for your quer Absolutely so.

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Speaker 6: Especially Look, we've seen some volatility over the past couple

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Speaker 6: of months in a year in which volatility really hasn't existed.

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Speaker 6: So look on the equity side, if you're someone who

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Speaker 6: sells a business, if you are sitting on a hoard

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Speaker 6: of cash, no, you have emotional ties to the money.

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Speaker 6: You don't want to invest at all at once, So

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Speaker 6: use volatility to your advantage. Yes, have a set plan.

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Speaker 6: You want a slowly dollar cost average into the market.

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Speaker 6: But if you have a week or a day in

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Speaker 6: which you see more volatility, may be speed that dollar

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Speaker 6: costs averaging up. Maybe you pull your investments forwards and

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Speaker 6: you use those doundies to slowly get yourself invested, because

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Speaker 6: at the end of the day, you know, the longer

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Speaker 6: you're sitting on the sidelines, the longer it is to

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Speaker 6: get in.

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Speaker 3: All right, Sarah, Thank you so much. We always appreciate

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Speaker 3: getting a few minutes of your time from South Florida.

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Speaker 3: Sarah Ponsek, Financial Advisor, UBS Private Wealth Management. Here again,

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Speaker 3: investing in a world where, for the first time in

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Speaker 3: a little bit more than four years, we actually have

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Speaker 3: rates coming down for a lot of folks. That's kind

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Speaker 3: of a new environment to invest in.

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

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Speaker 1: weekdays at ten am Eastern on Affo Car Playing Androud

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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

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Speaker 3: How about this ready mixed drink? Things you see like

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Speaker 3: vodkn iced, you see the little banish.

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Speaker 4: I have my favorite what is it is a my

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Speaker 4: tie and it's just like out of this world at Curison,

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Speaker 4: uh top shelf liquor. I can't remember who makes it,

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Speaker 4: but it is out of this world and you can

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Speaker 4: only have one because more than that, you're like you're

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Speaker 4: in a coma.

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Speaker 3: Really, I mean, that's what the kids are doing these days.

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Speaker 4: I don't know what's going on out there, not that

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Speaker 4: I'm a kid, but I'll.

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Speaker 3: Tell you someone who knows this stuff. He knows his booze.

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Speaker 3: He knows his weed. That is Ken senior consumer products

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Speaker 3: analysts hopefully is.

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Speaker 4: And he's sitting upright.

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Speaker 3: He's sitting upright. But he's been covering all these beverage

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Speaker 3: companies and he's seen every fad come and go. Can

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Speaker 3: what's the latest kind of strategy there for you know,

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Speaker 3: the Coca Colas of the world. The pepsis, where do

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Speaker 3: they see growth these days in new products?

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Speaker 8: YEAHI guys. So for Coca Cola, you know, they feel

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Speaker 8: themselves as a total beverage company. That's their aspiration. They

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Speaker 8: want to beat all beverages. Having said that, it's also

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Speaker 8: a company that is very image and reputational conscious, so

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Speaker 8: it's moving at a very measured pace to get into

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Speaker 8: the two trillion dollars global alcoholic beverage space. So they're

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Speaker 8: doing so by partnerships and alliances. Uh so, you just

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Speaker 8: heard the other day they've entered into a partnership with Bacarty,

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Speaker 8: the big drum company, to make bricardy and coke a product.

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Speaker 8: And we all kind of know, and so it's a

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Speaker 8: ready to drink It saves people time, you know, that

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Speaker 8: kind of thing. They've entered similar kind of arrangements with

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Speaker 8: Brown Foreman, with Jack and Coke. You know, Jack Daniels

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Speaker 8: and Coke.

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Speaker 4: With how lazy did he have to be to not

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Speaker 4: be able to figure out you can pour one and

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Speaker 4: pour the other.

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Speaker 8: Well, you know you have a point. You have a

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Speaker 8: point there, John. But think about it. If you want

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Speaker 8: to go to the beach, right if if if you

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Speaker 8: want to if you want to go somewhere to have

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Speaker 8: a picnic, you don't want to carry all these bottles

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Speaker 8: around and work about ice and you know whatever. Uh

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Speaker 8: So it's just it's a convenience and consumers are willing

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Speaker 8: to pay for that convenient It's all right, explain.

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Speaker 3: To me, Ken, because this is not John Tucker's demo

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Speaker 3: White Claw? What is this stuff? Why are all the

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Speaker 3: kids drinking it down the Jersey Shore?

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Speaker 8: Well, you know White Claw that's produced by E. J. Gallow.

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Speaker 8: They know the wine market really well, they know their demographics. Well. Uh,

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Speaker 8: they sense that there was an opportunity for a arguably

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Speaker 8: arguably a better tasting, more modern version of a low

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Speaker 8: alcohol refresher. And they've really hit a home run with

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Speaker 8: that product. I think it was really a game changer

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Speaker 8: in the whole heart Seltzer area, and it's still a

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Speaker 8: very strong, uh you know entrant that said and that

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Speaker 8: they go off topic too much. But the trend now

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Speaker 8: is to have vodka based drinks, So high New and

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Speaker 8: vodka and tequila tequila base and vodka based High News

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Speaker 8: are all the rage right now.

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Speaker 4: What about from PepsiCo.

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Speaker 8: That's not being quite as well, But you know, there's

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Speaker 8: a there's there's a niche market for these types of products.

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Speaker 8: I mean, you know, this is five or six percent

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Speaker 8: alcohol by volume, you know, so you see a hard product.

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Speaker 8: Most of these are malt based, about the same alcohol

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Speaker 8: level as beer, but it's for someone who maybe tiring

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Speaker 8: of beer the beer you know, taste is giving way

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Speaker 8: to things that are a little more flavorful. I think

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Speaker 8: are some of our data from our surveys bear ound

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Speaker 8: that consumers are looking for something new and exciting and

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Speaker 8: you know, looking for new flavor experiences beyond beer, and

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Speaker 8: so there's an itch here for that.

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Speaker 4: Brings me back to my college trip with my buddies

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Speaker 4: to Paris. We're in the hotel room. All we had

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Speaker 4: were little vodka bottles. I was like, well, we're not

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Speaker 4: going to drink vodka straight? What can we get. So

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Speaker 4: we went down to the soda machine. It was about midnight,

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Speaker 4: and what they had was Fanta orange soda. You can

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Speaker 4: mix those two. There's my idea.

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Speaker 2: Thank you.

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Speaker 3: All all you need for me is a glass ice

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Speaker 3: in Tito's and we're good to go. All right, So

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Speaker 3: let's switch gears. Let's let's go to the weed business.

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Speaker 3: That can give us the update on just kind of

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Speaker 3: the development of that business here in the US.

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Speaker 8: Well, in the US, as you know, it's still federally

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Speaker 8: illegal prohibited, So the revenue growth for cannabis in the

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Speaker 8: US is really state by state. And so all eyes

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Speaker 8: right now are on November fifth, Florida. The referendum to

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Speaker 8: legalize is on the ballot. You need sixty percent of

436
00:21:33,960 --> 00:21:37,840
Speaker 8: the vote. All the goals that I've seen strongly imply

437
00:21:37,920 --> 00:21:41,359
Speaker 8: it's going to pass. Think about Florida. Yeah, the third

438
00:21:41,480 --> 00:21:44,960
Speaker 8: largest state in the country, one hundred million visitors annually

439
00:21:45,760 --> 00:21:49,120
Speaker 8: could be open for business for legal marijuana. So all

440
00:21:49,160 --> 00:21:50,480
Speaker 8: eyes are on that market right now.

441
00:21:50,760 --> 00:21:53,399
Speaker 3: Here's my experience with it. And I buy a shop

442
00:21:53,440 --> 00:21:58,200
Speaker 3: for a friend, not for me. Is the dispensary in Neptune,

443
00:21:58,240 --> 00:22:00,840
Speaker 3: New Jersey is quite a nice expertperience. By the way,

444
00:22:01,240 --> 00:22:04,480
Speaker 3: there's and I tell you the the weed bartenders are

445
00:22:04,560 --> 00:22:06,680
Speaker 3: the friendliest, most knowledgeable people I've.

446
00:22:06,480 --> 00:22:08,680
Speaker 4: Ever dealt with because they're all high.

447
00:22:08,280 --> 00:22:10,320
Speaker 3: I guess, but I mean it's it's actually a good

448
00:22:10,320 --> 00:22:12,160
Speaker 3: exp So what's it been like in New Jersey? Ken,

449
00:22:12,280 --> 00:22:13,360
Speaker 3: the cannabis business.

450
00:22:14,080 --> 00:22:19,520
Speaker 8: It's booming, absolutely, it's absolutely booming. More and more cropping

451
00:22:19,640 --> 00:22:23,600
Speaker 8: up across the state. And it's been a big success

452
00:22:23,640 --> 00:22:28,320
Speaker 8: so far. And I'll tell you, ah, no, I was

453
00:22:28,320 --> 00:22:30,920
Speaker 8: gonna say, but, but it's also inviting competition. New York

454
00:22:31,160 --> 00:22:35,040
Speaker 8: legalized shortly thereafter. Now Pennsylvania is looking to do so,

455
00:22:35,040 --> 00:22:37,640
Speaker 8: so you know other states are watching closely.

456
00:22:37,720 --> 00:22:40,399
Speaker 3: Also, I can tell you in New York City they

457
00:22:40,480 --> 00:22:43,400
Speaker 3: used to have all these random kind of they cracked

458
00:22:43,440 --> 00:22:46,280
Speaker 3: out big time. They are all gone, literally in a snap,

459
00:22:46,280 --> 00:22:48,920
Speaker 3: in a blinkban eye. And now there's only just a

460
00:22:48,960 --> 00:22:49,800
Speaker 3: handful of ones.

461
00:22:49,600 --> 00:22:50,159
Speaker 2: That are approved.

462
00:22:50,160 --> 00:22:52,000
Speaker 3: And there's one like on my walk to pen station,

463
00:22:52,080 --> 00:22:53,720
Speaker 3: I see it there, but there's not many. It was

464
00:22:53,720 --> 00:22:55,680
Speaker 3: out of hand there for a while, but they cracked down,

465
00:22:55,720 --> 00:22:58,359
Speaker 3: all right. Ken Shay, he is our guy all things

466
00:22:58,680 --> 00:23:01,520
Speaker 3: booze and weed. He's a senior consumer Products onals. He

467
00:23:01,560 --> 00:23:04,280
Speaker 3: covers everything, folks, from cocoa cola to the cannabis business

468
00:23:04,400 --> 00:23:08,880
Speaker 3: to everything. And it is a huge, huge business, huge companies,

469
00:23:08,960 --> 00:23:11,879
Speaker 3: huge free cash flow, nice dividend yields too for folks

470
00:23:11,880 --> 00:23:15,359
Speaker 3: looking for dividend neils. Those consumer products companies have always

471
00:23:15,359 --> 00:23:17,280
Speaker 3: been a place to hide and kind a little bit

472
00:23:17,280 --> 00:23:20,680
Speaker 3: of recession proof, by and large for those names.

473
00:23:21,720 --> 00:23:25,600
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

474
00:23:25,680 --> 00:23:29,200
Speaker 1: weekdays at ten am Eastern on applecard Play and Android

475
00:23:29,240 --> 00:23:32,000
Speaker 1: Auto with the Bloomberg Business app. You can also listen

476
00:23:32,119 --> 00:23:35,200
Speaker 1: live on Amazon Alexa from our flagship New York station.

477
00:23:35,600 --> 00:23:38,359
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478
00:23:40,000 --> 00:23:41,760
Speaker 3: All right, we've got a FED that's cutting it straight.

479
00:23:41,800 --> 00:23:44,200
Speaker 3: So we just came out of a really pretty strong

480
00:23:44,240 --> 00:23:47,040
Speaker 3: second quarter earning season. Expectations are for some pretty decent

481
00:23:47,080 --> 00:23:49,720
Speaker 3: earnings coming up this quarter. That seems pretty constructive to me.

482
00:23:50,359 --> 00:23:52,199
Speaker 3: Let's check in with somebody who gets paid to do

483
00:23:52,200 --> 00:23:54,480
Speaker 3: this stuff. James about toay. He's managing director and chief

484
00:23:54,480 --> 00:23:59,440
Speaker 3: investment officer at Center Asset Management in New York City. James,

485
00:23:59,440 --> 00:24:03,040
Speaker 3: thanks so much for joining us here. Did we see

486
00:24:03,200 --> 00:24:05,879
Speaker 3: did the FED move yesterday, did that change or Wednesday?

487
00:24:05,920 --> 00:24:07,920
Speaker 3: Did that change your outlook at all?

488
00:24:07,920 --> 00:24:08,160
Speaker 8: Here?

489
00:24:09,960 --> 00:24:13,240
Speaker 2: It's too early to tell, you know. Really, if you

490
00:24:13,280 --> 00:24:16,639
Speaker 2: look at what the Fed did yesterday, and frankly, if

491
00:24:16,640 --> 00:24:22,240
Speaker 2: you read the headlines about yesterday's stock market reaction, you know,

492
00:24:22,320 --> 00:24:24,919
Speaker 2: the FED talking about the fact that they're taking out

493
00:24:24,960 --> 00:24:28,439
Speaker 2: an insurance policy so as not to risk a recession.

494
00:24:29,400 --> 00:24:33,080
Speaker 2: It's almost, you know, verbatim to what the newspaper headlines

495
00:24:33,119 --> 00:24:36,000
Speaker 2: and the commentary read, you know, back way back on,

496
00:24:36,200 --> 00:24:38,800
Speaker 2: you know, January of two thousand and one, when the

497
00:24:38,840 --> 00:24:42,200
Speaker 2: Fed you know, similarly surprised with a fifty basis point

498
00:24:42,240 --> 00:24:45,879
Speaker 2: cut in the FED funds rate. Obviously, you know, no

499
00:24:46,040 --> 00:24:49,360
Speaker 2: parallel is exactly the same, you know, even if it rhymes.

500
00:24:49,359 --> 00:24:52,960
Speaker 2: But you know, clearly there's this very big dichotomy at

501
00:24:52,960 --> 00:24:57,080
Speaker 2: this stage between economic data which the FED is relying upon,

502
00:24:57,560 --> 00:24:59,960
Speaker 2: you know, versus what we're seeing in terms of expectations

503
00:25:00,160 --> 00:25:01,200
Speaker 2: for corporate profits.

504
00:25:01,520 --> 00:25:04,080
Speaker 4: Okay, the Fed, as you put it, is taking out

505
00:25:04,119 --> 00:25:07,520
Speaker 4: the insurance policies. Should I be investing in some sort

506
00:25:07,520 --> 00:25:10,520
Speaker 4: of insurance in a portfolio as an investor?

507
00:25:12,000 --> 00:25:14,879
Speaker 2: Yes, you should, absolutely, I think you know, from our take,

508
00:25:15,400 --> 00:25:18,159
Speaker 2: you know, we think global economic growth stays like in

509
00:25:18,200 --> 00:25:21,879
Speaker 2: this low gear. We're not in a technical recession, but

510
00:25:21,920 --> 00:25:24,960
Speaker 2: we're very much vulnerable to a demand shock in the

511
00:25:25,080 --> 00:25:28,000
Speaker 2: United States, you know, much like the economy was I

512
00:25:28,040 --> 00:25:30,280
Speaker 2: hate to say it back in two thousand and one,

513
00:25:30,440 --> 00:25:33,280
Speaker 2: prior to nine to eleven. So you know, from our perspective,

514
00:25:33,640 --> 00:25:36,120
Speaker 2: you know, the winners are going to be, you know, treasuries,

515
00:25:36,119 --> 00:25:42,400
Speaker 2: defensive growth stocks, infrastructure, utility stocks. You know, the key

516
00:25:42,480 --> 00:25:44,760
Speaker 2: for US is going to be if companies can somehow,

517
00:25:45,240 --> 00:25:50,080
Speaker 2: you know, maintain they're very lofty earnings expectations that are

518
00:25:50,119 --> 00:25:55,359
Speaker 2: embedded in stock prices today and not disappoint like Federal

519
00:25:55,400 --> 00:26:00,240
Speaker 2: Express did today. And if the Fed can somehow, you know,

520
00:26:00,400 --> 00:26:04,399
Speaker 2: move policy rates towards what two year note is that is,

521
00:26:04,720 --> 00:26:07,600
Speaker 2: you know, down toward about four percent, which would equate

522
00:26:07,680 --> 00:26:11,240
Speaker 2: to about a two percent real yield two percent inflation.

523
00:26:12,280 --> 00:26:14,199
Speaker 2: You know, I'll be the first person to vote that.

524
00:26:14,280 --> 00:26:18,399
Speaker 2: They renamed the Equities Building down in d C for

525
00:26:18,880 --> 00:26:19,679
Speaker 2: Chairman Powell.

526
00:26:20,640 --> 00:26:22,840
Speaker 3: So, James, what are some of the sectors I guess

527
00:26:23,320 --> 00:26:26,840
Speaker 3: that screen well for you, And how do you select

528
00:26:26,920 --> 00:26:29,840
Speaker 3: equities generally speaking? In what's looking good these days?

529
00:26:30,040 --> 00:26:32,360
Speaker 2: Yeah, that's the thing I mean, we're pure bottom up investors,

530
00:26:32,359 --> 00:26:36,240
Speaker 2: and we always try to reconcile what's going on bottoms

531
00:26:36,320 --> 00:26:39,359
Speaker 2: up to the top down information. And you know, the

532
00:26:39,400 --> 00:26:41,600
Speaker 2: story that I talk about today is, you know, if

533
00:26:42,520 --> 00:26:45,120
Speaker 2: Rip fan Winkle was asleep right and he woke up

534
00:26:45,440 --> 00:26:48,600
Speaker 2: and you only showed him bottom up, I mean, excuse me.

535
00:26:48,760 --> 00:26:51,640
Speaker 2: You know, top down economic data. You know, you look

536
00:26:51,680 --> 00:26:56,200
Speaker 2: at you six unemployment, you know, moving sharply higher, trucking, construction,

537
00:26:56,440 --> 00:27:02,200
Speaker 2: steel production, softening, ism, manufacturing and contraction, inverted yield curves,

538
00:27:02,880 --> 00:27:08,040
Speaker 2: collapse in global commodity prices except gold China, European economic

539
00:27:08,080 --> 00:27:12,080
Speaker 2: stress getting worse, and you saw, you know, anecdotally new

540
00:27:12,119 --> 00:27:16,200
Speaker 2: car registrations in Europe down eighteen percent year of a

541
00:27:16,320 --> 00:27:22,040
Speaker 2: year in August, disastrous profit warning from Mercedes Benz Auto,

542
00:27:22,080 --> 00:27:25,600
Speaker 2: and credit card delinquency spiking higher. You know, Rip and

543
00:27:25,680 --> 00:27:28,320
Speaker 2: Winkle would say, we're already in a recession, if not,

544
00:27:29,040 --> 00:27:31,600
Speaker 2: you know, getting into moving into a shallow one. But

545
00:27:31,960 --> 00:27:34,040
Speaker 2: you know, if you look at if you showed Rip,

546
00:27:34,640 --> 00:27:36,680
Speaker 2: you know, price charts of the S and P five

547
00:27:36,760 --> 00:27:40,639
Speaker 2: hundred concerning consensus earnings expectations, it'd see a pe of

548
00:27:40,680 --> 00:27:44,480
Speaker 2: twenty two margins. You know, at all time highs and

549
00:27:44,800 --> 00:27:48,960
Speaker 2: you know, standard deviation above twenty year averages and sell

550
00:27:49,040 --> 00:27:52,080
Speaker 2: side expectations of six percent top line growth in twenty

551
00:27:52,080 --> 00:27:56,720
Speaker 2: five excuse me, fifteen percent earnings growth for twenty twenty five.

552
00:27:56,800 --> 00:27:59,199
Speaker 2: So RIP would say that we're on the cusp of

553
00:27:59,200 --> 00:28:03,280
Speaker 2: a boom in profit growth without having ever entered a recession.

554
00:28:03,359 --> 00:28:06,720
Speaker 2: You know, we're more leaning from a bottoms up perspective

555
00:28:06,760 --> 00:28:09,320
Speaker 2: towards what the economic data saying, which is back to

556
00:28:09,400 --> 00:28:13,320
Speaker 2: the point of defensive equities, the fact that treasuries will

557
00:28:13,320 --> 00:28:17,720
Speaker 2: probably outperform credit and maybe even equities at this point

558
00:28:17,720 --> 00:28:22,960
Speaker 2: in time, and a cautious stance towards profits. And I

559
00:28:23,000 --> 00:28:26,919
Speaker 2: think this earning season coming up is probably going to

560
00:28:26,960 --> 00:28:30,720
Speaker 2: be the most important season that will dictate the future

561
00:28:30,760 --> 00:28:32,680
Speaker 2: direction of what stock prices will do for the next

562
00:28:32,720 --> 00:28:34,960
Speaker 2: six months to twelve months, more so than what the

563
00:28:34,960 --> 00:28:39,480
Speaker 2: Fed does, more so than what the presidential election results are.

564
00:28:39,520 --> 00:28:43,640
Speaker 4: Broadly, what's your allocation right now? In a percentage break

565
00:28:43,680 --> 00:28:44,720
Speaker 4: it down that way.

566
00:28:45,000 --> 00:28:47,200
Speaker 2: Well, if you look at you know, we run one

567
00:28:47,560 --> 00:28:51,480
Speaker 2: dedicated infrastructure fund, which is actually having a spectacular year

568
00:28:51,520 --> 00:28:54,800
Speaker 2: because we're recognizing that you know, utilities have gone from

569
00:28:54,840 --> 00:28:59,280
Speaker 2: being bond proxies to an essence growth proxies with the

570
00:28:59,520 --> 00:29:02,720
Speaker 2: power generation needs of AI and other things. But in

571
00:29:02,760 --> 00:29:07,040
Speaker 2: an our American Select equity strategy, we've introduced long duration

572
00:29:07,360 --> 00:29:10,200
Speaker 2: treasury bonds. That's the first time I've done that in

573
00:29:10,200 --> 00:29:14,760
Speaker 2: inequity portfolio since early two thousand. So maybe that tells

574
00:29:14,800 --> 00:29:17,360
Speaker 2: you something when you look at our sector overweights within

575
00:29:17,400 --> 00:29:22,000
Speaker 2: our American Select, our biggest overweights are in consumer staples, healthcare,

576
00:29:22,320 --> 00:29:26,320
Speaker 2: and we're dramatically underweight all cyclicals. But we do have

577
00:29:26,400 --> 00:29:30,200
Speaker 2: some exposure within the Magnificent seven because you continue to

578
00:29:30,240 --> 00:29:35,760
Speaker 2: see those stocks being very driven by the fundamental momentum

579
00:29:35,760 --> 00:29:38,600
Speaker 2: towards this AI craze and we're not sure when that

580
00:29:38,720 --> 00:29:41,680
Speaker 2: is actually going to end, and these companies are demonstrating

581
00:29:41,720 --> 00:29:42,920
Speaker 2: some degree of excellence.

582
00:29:43,440 --> 00:29:45,200
Speaker 3: All right, James, thanks so much for joining us. Always

583
00:29:45,200 --> 00:29:48,000
Speaker 3: appreciate getting a few minutes of your time. James Abatte.

584
00:29:48,160 --> 00:29:51,160
Speaker 3: He's a managing director the chief investment officer at Center

585
00:29:51,360 --> 00:29:55,160
Speaker 3: Asset Management, located in Lower Manhattan.

586
00:29:55,160 --> 00:29:55,440
Speaker 4: Here.

587
00:29:55,560 --> 00:29:59,480
Speaker 1: This is the Bloomberg Intelligence Podcast, available on ap those,

588
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589
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590
00:30:06,960 --> 00:30:10,360
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591
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592
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