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Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm

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Speaker 1: Jason Kelly. We're here every day bringing you the latest

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Speaker 1: news from the world's of business and finance, plus technology, politics, economics,

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Speaker 1: all harnessing the power of Bloomberg Business Week reporters and editors,

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Speaker 1: than a hundred and twenty countries. You can download Bloomberg

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Speaker 1: Business Week on iTunes, SoundCloud, or Bloomberg dot Com. You

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Speaker 1: can also listen to our radio show weekdays at two

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Speaker 1: pm Eastern only on Bloomberg Radio. Well earlier today, the

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Speaker 1: US thirty year yields are closing in on their lowest

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Speaker 1: level as concerns grow over the impact of the escalating

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Speaker 1: trade war and global economic growth, and his policymakers around

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Speaker 1: the world step in to provide support. They get the

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Speaker 1: latest on what we're seeing in the treasury market. We

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Speaker 1: welcome Liz Copper McCormick. She's a bond and FX reporter

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Speaker 1: for Bloomberg News, joining us on the phone. Liz, thanks

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Speaker 1: so much for joining us. It's been a wild day

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Speaker 1: in the financial markets, including the treasury markets. Kind of

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Speaker 1: what are you seeing in the treasury markets right now,

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Speaker 1: what are you what are you learning? Well, it has

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Speaker 1: been a wild day. No one's getting like a calm

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Speaker 1: summer by any means. But so, like you mentioned there,

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Speaker 1: you know, we had a trifect of central banks overnight ease,

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Speaker 1: you know, some very much a surprise. We had weak

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Speaker 1: data in Germany, and it was adding to this trade

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Speaker 1: war that, as we all know, got a heightened boost

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Speaker 1: last week with the new teriffs that President Trump threatened

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Speaker 1: in the retaliation by China. So it's just the growing

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Speaker 1: feeling that you know, global growth is turning in central banks,

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Speaker 1: you know, it's there like a race to the bottom

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Speaker 1: of more easing, and people feel like, for sure, the

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Speaker 1: Federal Reserve will have to do more, probably more than

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Speaker 1: Chairman Powell you know, alluded to they were thinking last week,

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Speaker 1: just because inflation is just not hitting and there's just

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Speaker 1: you know, people are flying into the safety of government

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Speaker 1: bonds and that's what's driving the thirty year yields so low.

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Speaker 1: So how do we read this as investors live because

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Speaker 1: there's so many stories on the Bloomberg terminal great reached

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Speaker 1: byre fs and rates and bond team and how all

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Speaker 1: of these signals that we're seeing in the global bond

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Speaker 1: market are pointing increasingly to a global economic downturn. So

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Speaker 1: how do we how do you make sense of Okay,

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Speaker 1: ignore that signal, but this signal, this means something, right,

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Speaker 1: That's that's the hard thing. You know, someone was explaining

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Speaker 1: to me, because I was talking to an investor this

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Speaker 1: morning that yes, of course, and we know we look

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Speaker 1: at yield curves which many of them slices are inverted

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Speaker 1: or very flat, which is a historically recession warning. But

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Speaker 1: there is like a backdrop that is ongoing and that

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Speaker 1: has kept at yields historically lower, and it's kind of

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Speaker 1: giving fuel to this that there's like global savings blood,

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Speaker 1: which Chairman Bernanki has talked about prior. Chairman, that there's

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Speaker 1: so much money not enough places. There's negatives yields fourteen

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Speaker 1: trillion abroad, so that any positive yield in the US

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Speaker 1: looks good. Even demographics, you know, we know we have

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Speaker 1: an aging population and so more people are saving in

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Speaker 1: fixed assets, and we have no inflation. So there's there's

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Speaker 1: all these fundamental reasons that even if you know, maybe

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Speaker 1: people are wrong and saying and recession is coming right away,

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Speaker 1: but growth is flowing, and there's a lot of forces

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Speaker 1: that should support demand for fixed income securities, which is

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Speaker 1: keeping yields low. So this it's interesting. I certainly would

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Speaker 1: not want to be Chairman Pal and the other members

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Speaker 1: of the f O m C because it seems like

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Speaker 1: I'm getting a lot of pressure to perhaps counteract against

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Speaker 1: some of the negative issues of global trade uncertainty with

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Speaker 1: my interest rate sets. So you know, if I'm Chairman

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Speaker 1: Pal and the other members, my data looks pretty decent.

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Speaker 1: What do you think the FED will do in the

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Speaker 1: upcoming meetings? Well, yeah, that is a buying for the set,

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Speaker 1: and and they have mentioned and you know that trade

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Speaker 1: is one of those uncertainties that is creating headwinds. So

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Speaker 1: I think given that even since Chairman Pal spoke last

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Speaker 1: week and they minute finished their meeting, the trade situation

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Speaker 1: has not only got worse, but much worse. You with

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Speaker 1: with what I just laid out, and we have many

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Speaker 1: firms like Goldman Sachs team came out this week and said,

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Speaker 1: now we don't see a trade deal between the U

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Speaker 1: S and China happening until after the presidential election in

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Speaker 1: and they kind of up to three how many more

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Speaker 1: cuts the FED will do this year. So I think

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Speaker 1: even if the FID wants to say that, you know, unemployment,

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Speaker 1: as we know, is extremely historically low in the US.

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Speaker 1: There are some good signs, but these headwinds and it

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Speaker 1: creates uncertainty for investors, which also hurts you know, investor

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Speaker 1: sentiment in investing. So I think the FED is going

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Speaker 1: to have to be compelled to focus more on these

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Speaker 1: trade issues, which you know, financial conditions are affected by

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Speaker 1: the stock falling, and that's not good for the FED.

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Speaker 1: We're talking to Liz Kapita McCormick, bond and FX reporter.

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Speaker 1: We do want to mention to all of our Bloomberg

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Speaker 1: Radio listeners in the United States. You've been listening to

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Speaker 1: a nationwide test the emergency alert system, so we do

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Speaker 1: want to bring that to your attention. Talking about the

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Speaker 1: rates market, the bond market, and what we've been seeing

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Speaker 1: certain this week certainly pick up steam if you will,

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Speaker 1: UH and concerns about what's going to happen in the

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Speaker 1: global economy. Liz, So, I do wonder too, how does

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Speaker 1: I know we do say that the FED is independent,

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Speaker 1: but I do wonder about watching the tweets of Donald Trump.

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Speaker 1: I monitor them like the rest of the world. Uh,

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Speaker 1: you know, when he increasingly targets J. Powell and the

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Speaker 1: Federal Reserve. I mean how that might be impacting policy. Yeah,

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Speaker 1: it's it's not good. And when we did have the

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Speaker 1: four former FED chairs come out and do an OpEd

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Speaker 1: and say this is not good. Um. You know, the

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Speaker 1: central banks independent. It's very important and it's one of

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Speaker 1: the key things that you know, has made the U. S.

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Speaker 1: Treasury market the world, you know, benchmark debt. But I

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Speaker 1: think I don't know what I want to get into

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Speaker 1: conspiracy theory. There are you know that there are a

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Speaker 1: few people who feel like it's not helping and it's

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Speaker 1: adding pressure onto Chairman Powell and the FED. Um with

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Speaker 1: the President with these constant tweets. Um, so they keep

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Speaker 1: saying they're independent and they're not being affected, but it's

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Speaker 1: it's clouding at least for traders and investors wondering is

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Speaker 1: it in the in the calculus now? Which is more

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Speaker 1: confusing to read. All right, we're gonna leave it on

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Speaker 1: that note. Liz, thank you so much. Always appreciate your insight,

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Speaker 1: and check out the magazine and Bloomberg dot com and

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Speaker 1: also the Bloomberg terminal for more of a Lizz's coverage

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Speaker 1: on the bond and FX markets. I'm a traveling man.

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Speaker 1: Is that time of the year for men, women, kids,

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Speaker 1: everybody's puppies, pets, everybody to travel. And we're keeping a watch,

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Speaker 1: of course on the overall market picture, but we're also

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Speaker 1: watching the travel industry because you've got a bunch of

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Speaker 1: those companies, including Booking Holding, Ship Advisor. They're gonna report

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Speaker 1: their earnings today after the close, also Cedar Fair, uh

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Speaker 1: SeaWorld already out this week. James Harteman follows this group

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Speaker 1: the leisure industry. He's an analyst at Wedbush Securities, and

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Speaker 1: he joins us on the phone from Cleveland, Ohio. J

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Speaker 1: It's nice to have you here with us. I am

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Speaker 1: curious when you look at and follow and track your industry. Uh,

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Speaker 1: and then pull into kind of what's happening on a

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Speaker 1: macro level. Concerns about you is trying to trade whether

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Speaker 1: or not we're falling into recession. Um, how do these

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Speaker 1: stocks normally perform in this kind of an environment and

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Speaker 1: in an environment where there's more and more nervousness? Sure,

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Speaker 1: and thanks for having me, um, Well suffice it to say,

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Speaker 1: and I cover a lot of consumer discretionary stock, highly

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Speaker 1: discretionary stock more specifically, and so UM, at the end

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Speaker 1: of the day, nobody has to have any of this stuff, right,

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Speaker 1: and so UM the macro concerns, right, the fear of

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Speaker 1: of appending recession, that is the biggest concern across the board. UM.

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Speaker 1: I would tell you, based on the numbers that we've

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Speaker 1: seen so far, I think the North American consumer year

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Speaker 1: to date has been fairly resilient. UM. I think the

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Speaker 1: bigger factor that has maybe held back numbers is just

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Speaker 1: we had a really wet, uh late spring early summer

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Speaker 1: time period, and I do think that that impacted sales

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Speaker 1: of some of the distrationary stocks that I follow, certainly

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Speaker 1: as you think about amusement parts. But as we make

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Speaker 1: our way into the you know, further into the summer,

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Speaker 1: I think weather has normalized. I think numbers are generally

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Speaker 1: getting better, at least UM for the North American consumer.

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Speaker 1: I think Europe is a different matter, um from a

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Speaker 1: macro perspective. And then you know, as we get into

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Speaker 1: some of the company's specifics, teriffs are a pretty big

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Speaker 1: deal for the power sports names that I follow, the

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Speaker 1: likes of you know, Harley Davidson and Brunswick and players

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Speaker 1: those those types of names. Yeah, James, that's those are

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Speaker 1: names I wanted to spend a couple of minutes on

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Speaker 1: because I think about, you know, Harley Davidson and Polaris

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Speaker 1: and against some of those power sports names you mentioned,

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Speaker 1: and I know the tariff issue is material for them.

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Speaker 1: Just give us a sense of how that's impacting those

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Speaker 1: companies performance. Oh, it's been a really big deal. So

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Speaker 1: you know, Harley has probably been the most high profile name. UM.

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Speaker 1: They famously a little over a year ago said that UM,

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Speaker 1: given the European retaliatory tariffs, which are again in response

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Speaker 1: to the two thirty two tariffs that that the Trump

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Speaker 1: administration put on steel and aluminum, UM that that ultimately

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Speaker 1: under that teriff regime that we weren't that they weren't

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Speaker 1: going to be able to make any money on European motorcycles.

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Speaker 1: So they're in the process of moving their production to Thailand.

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Speaker 1: The production of European motorcycles. Specific all the stuff that's

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Speaker 1: made America, will that soldid America, I should say, will

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Speaker 1: be made in America, but the European bikes are now

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Speaker 1: going to be made in Thailand. UM And that was

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Speaker 1: a pretty high profile move. They took a lot of

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Speaker 1: flak from the from the President for that one, but

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Speaker 1: they didn't really have much of a choice. Polaris is

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Speaker 1: the company that probably has the biggest exposure to China

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Speaker 1: among the names that we follow, and it's been you know,

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Speaker 1: it's been a assive hit to their their numbers this year.

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Speaker 1: Um And So for a while, I think a lot

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Speaker 1: of people were hoping that we would make progress with

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Speaker 1: respect to negotiations with the Chinese. Now I think it's

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Speaker 1: more on the exemption side, the hope that you know,

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Speaker 1: they can make a good enough argument, uh to the

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Speaker 1: to the U. S. Trade Office that their products in

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Speaker 1: particular shouldn't be hit as hard with some of these terraces.

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Speaker 1: Hey just got about a minute left, James, and I'm

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Speaker 1: just looking at some of the stocks. I mean, UM

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Speaker 1: Sea World. That company has had quite a bounce back,

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Speaker 1: and we know it went through some troubles over the

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Speaker 1: last few years, but it's up about almost thirty seven

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Speaker 1: percent this year. I'm assuming that's because it's a domestic

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Speaker 1: play and show. When we think about US China trade,

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Speaker 1: it's somewhat immune. Is that the case, although I do

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Speaker 1: think about foreign travelers who go to Sea World. Sure,

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Speaker 1: so the China issue is relatively insignificant to a company

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Speaker 1: like sea World. Europe does matter, and so to the

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Speaker 1: extent that that macro concerns in Europe have raised their

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Speaker 1: ugly heads that you know, I do think that affects them,

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Speaker 1: but I think more than anything, um, they've been really

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Speaker 1: successful in terms of turning around their business the last

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Speaker 1: or five quarters, much better attendance numbers. They've really cut

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Speaker 1: a lot of costs out of their business. As we

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Speaker 1: move forward, though, my my concern for a company like

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Speaker 1: sea World is that they're competing in some in some

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Speaker 1: key markets with the likes of Disney and Universal uh

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Speaker 1: and those companies have have really stepped up their efforts,

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Speaker 1: stepped up their investments, no most tolerably with the recent

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Speaker 1: opening of a big Star Wars attraction at Disneyland, and

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Speaker 1: you know they're going to open a similar attraction at

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Speaker 1: disney World here by the end of the book. If

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Speaker 1: you're looking at sea World, that's that's certainly one that's

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Speaker 1: to keep in mind. James Harderman, thanks so much for

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Speaker 1: joining us, James as a managing director and Leisure and

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Speaker 1: analysts at wed Bush Securities joinings on the phone from Cleveland, Ohio.

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Speaker 1: Come together, come together, certainly through m n A. For

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Speaker 1: the first half of the year, m n A grew

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Speaker 1: nine percent in value compared to the same period of ten.

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Speaker 1: To get a sense of what we might be seeing

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Speaker 1: in the M and A market for the remainder of

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Speaker 1: the year looking forward, we welcome John Reece. John is

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Speaker 1: head of Global m n A at White in Case

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Speaker 1: joins us on the phone from New York. John, thanks

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Speaker 1: so much for joining us. Let's just kind of recap

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Speaker 1: a little bit kind of what we saw globally and

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Speaker 1: in the US in terms of M and A activity. Hi, Paul, um,

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Speaker 1: nice to speak to you. M and A has been

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Speaker 1: very active for the first half of the year, a

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Speaker 1: lot of big deals. A little less active from the

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Speaker 1: number of deals, volume of deals. UM it's the big

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Speaker 1: deals that have dominated landscape, and it's been focused more

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Speaker 1: on the United States than it generally has been historically

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Speaker 1: UM as compared to Asia in Europe at this point. Yeah,

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Speaker 1: I was gonna say, I looked at the m A

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Speaker 1: function on the Bloomberg and overall global deal flow I

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Speaker 1: think it's about two point nine trillion. Uh, And we're

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Speaker 1: down a little bit more than six percent year over

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Speaker 1: year UM compared with last year, So we are seeing

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Speaker 1: people pull back. Your point is that the deals that

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Speaker 1: are being done, they're bigger, Um, the bigger deals with

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Speaker 1: the high profile deals, Carol, people focus on them. Um.

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Speaker 1: They're still up. But overall, as you say, total volume

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Speaker 1: is down a bit and total number of deals is

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Speaker 1: down substantially. UM. But again, it's still an interesting active

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Speaker 1: environment right now with a lot of clouds on the horizon.

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Speaker 1: Of course. Well, that is so true. And John, my

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Speaker 1: first question I really wanted to ask you is how

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Speaker 1: quiet is your world right now? Because with all this volatility,

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Speaker 1: we're doing stories about how corporations and CEOs are kind

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Speaker 1: of holding back and making decisions. So I'm curious, is

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Speaker 1: uh pretty quiet? No phones ringing off the hook? There? It? Um.

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Speaker 1: It's a really good question. We we've been very, very

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Speaker 1: busy that the real volatility is, you know, is very recent.

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Speaker 1: People are almost a little bit hardened to the volatility,

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Speaker 1: given if you recall last December, we're probably down. We

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Speaker 1: remain pretty buzy, we remain pretty optimistic. Again, I think

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Speaker 1: there are people pulling you know, saying Okay, let's do it.

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Speaker 1: Are they just kind of waiting that they are? They

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Speaker 1: are doing it, but at the valuations there are. Whenever

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Speaker 1: there's a diligent piccup or anything like that, people spend

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Speaker 1: a lot more time thinking about it. But no, plenty

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Speaker 1: of deals are still happening. So, John, what's really driving

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Speaker 1: the deal market these days? Is it more strategic deals

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Speaker 1: or is it kind of more the financial driven private

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Speaker 1: equity deals? A very good question. A fair amount of

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Speaker 1: activity in both and and again a lot of our

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Speaker 1: experiences are anecdotal. We're probably seeing more activity on the

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Speaker 1: strategic side than on the private equity side right now.

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Speaker 1: So what kind of deals? And I'm curious what industries, John,

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Speaker 1: are you seeing some activity or do you anticipate we'll

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Speaker 1: see more activity for the rest of I think UM is,

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Speaker 1: as you know, TMT remains very active. Technology remains active.

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Speaker 1: I mean in some respects that it's hard to know

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Speaker 1: what you mean when you say technologies since everything has

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Speaker 1: a technology aspect to it. Um, we're seeing a fair

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Speaker 1: amount of consumer you know, retail is obviously big issues,

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Speaker 1: big issues. UM, what do you make of a story?

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Speaker 1: Paul and I just talked about for a New York audience,

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Speaker 1: we talked about a story about how some retail landlords

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Speaker 1: are figuring out a way to kind of securitize UM

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Speaker 1: rents right and then kind of help out those struggling retailers.

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Speaker 1: What do you think about that? I think it's it's

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Speaker 1: one aspect of trying to help out retailers which is

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Speaker 1: a very difficult circumstance right now, as you well know, UM,

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Speaker 1: trying lots of different things. UM. Obviously we are all

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Speaker 1: in New York focused on Barney's right now, and the

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Speaker 1: fact that after all these years there's not gonna be

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Speaker 1: much left on Barney's retail retails. Retails an issue on

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Speaker 1: an ongoing basis. So John, you know, I want to

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Speaker 1: get a sense of the kind of the regulatory antitrust environment.

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Speaker 1: You know, when the Trump administration came into office, I know,

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Speaker 1: you know, we talked to a bunch of M and

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Speaker 1: A bankers and they were like, oh boy, here we go.

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Speaker 1: We are off to the races. But since then it's

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Speaker 1: kind of been uneven. I think about the how tough

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Speaker 1: it wasn't get the A T and T Time Warner

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Speaker 1: deal done, How tough the DJ was there it's your

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Speaker 1: sense of kind of just the regulatory environment. I think

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Speaker 1: the antitrust regulatory environment is really not significantly different than

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Speaker 1: what it's been historically. There's some tough deals and people

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Speaker 1: are pushing the envelope. I think the real issue is

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Speaker 1: the scipious environment and the hostility that foreign investors from

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Speaker 1: certain jurisdictions feel with respect to investing in the United States.

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Speaker 1: The US is still a very attractive environment for a

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Speaker 1: lot of countries. It's very very unattracted right now for

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Speaker 1: a Asia. Right and of course, if he is the

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Speaker 1: Committee on Foreign Investment in the United States basically deciding

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Speaker 1: what kinds of foreign investors can do deals in the US,

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Speaker 1: and depending on kind of the mood and the relationship

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Speaker 1: between the United States and other countries, can really determine

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Speaker 1: whether or not deals get through. UM. Investors are listening, John,

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Speaker 1: I think they're watching the market environment of this week.

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Speaker 1: You know, so far we've had what our biggest drop

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Speaker 1: decline in stocks so far in twenty nineteen. We've seen

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Speaker 1: a bounce back today. UM, how do you see it

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Speaker 1: from an M and A perspective? Are there areas you

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Speaker 1: think investors should be watching for more consolidation or for

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Speaker 1: more deal flow in particularly. You talked about some of

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Speaker 1: it before, but I'm just curious in particulars or anybody.

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Speaker 1: I think the biggest question. I think everybody knows a

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Speaker 1: recession is going to be coming at some point in time,

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Speaker 1: and that there's going to be price drops, and nobody

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Speaker 1: knows what it is. All we can say is that

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Speaker 1: compared to whenever I spoke to you last time a

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Speaker 1: month there, two or three months ago, we're that much

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Speaker 1: closer to what happening. And you do feel a sense

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Speaker 1: of what's happened over the last few days, when combined

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Speaker 1: with really the stuff going on between China and the US,

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Speaker 1: as people are going to ask more and more is it?

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Speaker 1: Is it finally here? And then you're gonna see some

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Speaker 1: kind of drop in the stock market, which is going

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Speaker 1: to be exciting for buyers but completely uninteresting for sellers,

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Speaker 1: and is going to result in a slowdown in and

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Speaker 1: the m and a market for some period of time

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Speaker 1: until people's price expectations are reset. Now, I think everybody

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Speaker 1: at the end of the day right now is going

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Speaker 1: to say it's not happening yet, and we've got another

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Speaker 1: three or six or nine months of a lot of activity. So, John,

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Speaker 1: just in terms of valuation, US deal volumes down in

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Speaker 1: the first half of the year. How much of that

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Speaker 1: do you think was reflecting and just you know, the

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Speaker 1: buyers not wanting to pay where sellers are we might be,

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Speaker 1: you know, given low interest rates in a lot of

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Speaker 1: talk about asset bubble values and things like that, how

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Speaker 1: much has evaluation been a problem. I think it's more

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Speaker 1: been a problem of less attractive assets generally being on

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Speaker 1: being on the on the market. At this point in time.

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Speaker 1: I think at the end of the day, people are

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Speaker 1: used to and open to paying very third prices for

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Speaker 1: good assets. So I kind of don't think it's been

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Speaker 1: a valuation question as much as an inventory question. But

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Speaker 1: who knows. We'll find out. All right, We're gonna leave

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Speaker 1: it on that note, John, Thank you, Thank you. John Reese,

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Speaker 1: he is head of Global m and A at White

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Speaker 1: in Case joining us on the phone in New York City.

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Speaker 1: And I thought it was interesting, Paul, in a day

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Speaker 1: where one of the stories on our deal menu is

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Speaker 1: about DuPont gearing up for another twenty billion dollar plus

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Speaker 1: divestment that could become one of the chemical industry's biggest

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Speaker 1: transactions this year. So some of those big guys, you

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Speaker 1: continue to see them pair back in terms of entities

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Speaker 1: that maybe are not considered strategy dick right. Uh, And

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Speaker 1: so they're selling off business and that would be a

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Speaker 1: big one getting rid. And it seems like every Monday

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Speaker 1: we come in, there's big deals to talk about, oftentimes

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Speaker 1: in the healthcare space. I think, how many times can

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Speaker 1: these companies, you know, how much more combinations can we

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Speaker 1: see in the healthcare space? But lots of them? And

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Speaker 1: either which is one of the areas that that that

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Speaker 1: John highlighted John freedom, Uh, and that also means freedom

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Speaker 1: of your information or at least I should say having

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Speaker 1: privacy issues. Um. There are several stories this little makes

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Speaker 1: sense in a moment, several stories in the magazine this

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Speaker 1: week looking at the tech lash that is underway. The

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Speaker 1: set of stories explains what the Internet has become, how

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Speaker 1: it got there, how to push back, and how to

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Speaker 1: hide from Silicon Valley. Felix Gilette wrote one of those stories,

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Speaker 1: his story about how the Information super Highway became transformative,

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Speaker 1: lucrative and a hostile, toxic mess. There's a headline for you,

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Speaker 1: Felix joins us along with Joel Weber, Bloomberg Business Week

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Speaker 1: editor uh Inter Bloomberg Interactives Stories. First of all, I

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Speaker 1: do want to start with you tell, because I love

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Speaker 1: this series of stories, Felix among them, and I just think,

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Speaker 1: what were you guys thinking? It's a first of all,

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Speaker 1: great beetreet, but I think it's so smart for everyone

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Speaker 1: to read. We think about Zeitgeist a lot, and there's this,

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Speaker 1: um I wouldn't even call it low level, like mid

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Speaker 1: level to high level hum and drumbeat about tech clash

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Speaker 1: and sort of the privacy that we've all given up,

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Speaker 1: uh in order to have some great tools. To be

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Speaker 1: honest with you, Felix, the story fits into sort of

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Speaker 1: this package because it really is the foundation upon which

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Speaker 1: the Internet has been as we know it has been based.

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Speaker 1: So so, Felix, I'm talking about section two thirty. Take

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Speaker 1: me back to the nineties. How did we How did

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Speaker 1: we end up in this mess? I mean, I think

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Speaker 1: that you know, in many ways, the secret to understand

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Speaker 1: and how we got here is to go back and

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Speaker 1: understand this story. And it gets back to this early

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Speaker 1: debate about how should the Internet be regulated and a

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Speaker 1: group of people, you know, senators who are like, Okay,

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Speaker 1: we have this new technology come in and we need

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Speaker 1: to set up rules similar to what's on TV, the

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Speaker 1: radio and telephones to make sure that, you know, kids

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Speaker 1: aren't being exposed to harassment, pornography, dangerous material, and the internet.

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Speaker 1: And the way to do that is to set up

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Speaker 1: some fines, some possible prison time, and to put up

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Speaker 1: some really strict rules. And there was another group that

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Speaker 1: came along and saying, yeah, you know, this is kind

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Speaker 1: of a new thing, and over regulating that at the

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Speaker 1: beginning is not going to be such a good idea,

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Speaker 1: and the better way to do this is to allow

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Speaker 1: the tech companies to regulate themselves. And out of that

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Speaker 1: did that work out? Fast forward to but hold on there,

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Speaker 1: there's twenty six words. Yeah, so the most important thing

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Speaker 1: that came out of this whole messy debate was the

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Speaker 1: twenty six word statute, which was a tiny little amendment

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Speaker 1: crammed into this giant Telecommunications perform bill that essentially said

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Speaker 1: Internet service providers cannot be held liabele for the vast

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Speaker 1: majority of things posted by their users. And it seemed

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Speaker 1: like such a small and innocuous statute amendment when it

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Speaker 1: was first past and in fact, most people ignored it.

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Speaker 1: I mean, that's kind of what's wild is that you

430
00:23:26,800 --> 00:23:28,840
Speaker 1: go back to read the coverage of the time, nobody

431
00:23:28,960 --> 00:23:31,359
Speaker 1: was even thinking about this, and yet fast forward to

432
00:23:31,400 --> 00:23:35,800
Speaker 1: the present day and people say this is what created

433
00:23:35,920 --> 00:23:38,840
Speaker 1: the Internet and also big text safe harbor. I love

434
00:23:38,880 --> 00:23:42,520
Speaker 1: that yeah phrase that you wouldn't have social media without

435
00:23:42,560 --> 00:23:45,440
Speaker 1: this law because it would be too risky for anybody

436
00:23:45,480 --> 00:23:48,959
Speaker 1: to post all this user generated content. You wouldn't have

437
00:23:49,160 --> 00:23:51,640
Speaker 1: and that gets to the fact that they would basically

438
00:23:51,760 --> 00:23:54,680
Speaker 1: have to take responsibility for the content on their platforms.

439
00:23:54,680 --> 00:23:57,359
Speaker 1: And right now, like a publisher, Like a publisher, right now,

440
00:23:57,359 --> 00:24:00,560
Speaker 1: they can kind of say no, we're just enabling free speech,

441
00:24:00,680 --> 00:24:05,359
Speaker 1: right and take it up with the users videos. So yeah,

442
00:24:05,400 --> 00:24:09,400
Speaker 1: so there's harrassment going on, there's a misinformation campaign. Ultimately,

443
00:24:09,480 --> 00:24:11,600
Speaker 1: platforms can kind of say, no, it's not us, take

444
00:24:11,640 --> 00:24:13,480
Speaker 1: it up with the user. And the problem with that

445
00:24:13,680 --> 00:24:16,520
Speaker 1: is that, you know, in over the years, what's happened

446
00:24:16,560 --> 00:24:20,480
Speaker 1: is that with the spread of anonymity and pseudonymity, a

447
00:24:20,520 --> 00:24:23,320
Speaker 1: lot of times many web users are kind of beyond

448
00:24:23,359 --> 00:24:25,600
Speaker 1: the reach of anybody to read to get to and

449
00:24:25,640 --> 00:24:29,359
Speaker 1: so it creates this kind of vacuum and over time.

450
00:24:29,440 --> 00:24:33,720
Speaker 1: You know, originally this this law became beloved in Silicon

451
00:24:33,840 --> 00:24:36,359
Speaker 1: Valley and everyone said, oh, this is the you know,

452
00:24:36,760 --> 00:24:39,560
Speaker 1: this is such a valuable lot allow you know, the

453
00:24:39,640 --> 00:24:43,720
Speaker 1: US to dominate the global internet industry. But recently, as

454
00:24:43,760 --> 00:24:48,080
Speaker 1: part of this uh backlash against the tech big tech

455
00:24:48,160 --> 00:24:51,040
Speaker 1: that we've been talking about, Uh, this law has basically

456
00:24:51,080 --> 00:24:55,000
Speaker 1: come under siege in d C. Yes. Uh, there's senators

457
00:24:55,000 --> 00:24:58,960
Speaker 1: Conservative senators who are saying they're upset with Google and saying, oh,

458
00:24:59,040 --> 00:25:02,840
Speaker 1: you know, you're answering conservative viewpoints on YouTube and the

459
00:25:02,920 --> 00:25:07,199
Speaker 1: search results, and that violates the spirit of Section to thirty,

460
00:25:07,240 --> 00:25:10,000
Speaker 1: which was based on a kind of neutrality we're gonna

461
00:25:10,200 --> 00:25:12,119
Speaker 1: if we weren't gonna Tree as the publisher, but now

462
00:25:12,160 --> 00:25:15,320
Speaker 1: you're acting with editorial control. And there's also liberals who

463
00:25:15,320 --> 00:25:17,800
Speaker 1: are upset that's saying, you know, you're using this law

464
00:25:17,880 --> 00:25:22,440
Speaker 1: to shield yourself from the bad behavior, worst behavior of

465
00:25:22,520 --> 00:25:24,359
Speaker 1: your users. Paul, you know a thing or two about this.

466
00:25:24,400 --> 00:25:26,920
Speaker 1: How what are we looking at in terms of change? Yeah?

467
00:25:27,520 --> 00:25:30,679
Speaker 1: How vulnerable is this? The investors are saying nothing's going

468
00:25:30,720 --> 00:25:33,720
Speaker 1: to change, that the risk is relatively relatively dimindiss But

469
00:25:33,800 --> 00:25:37,280
Speaker 1: what I will say, Felix, what's changed in my experience, um,

470
00:25:37,440 --> 00:25:39,320
Speaker 1: with the with the internet companies is this is the

471
00:25:39,359 --> 00:25:41,440
Speaker 1: first time, really in the last six months, the first

472
00:25:41,440 --> 00:25:43,480
Speaker 1: time in the history of the Internet, that the Washington

473
00:25:43,560 --> 00:25:45,240
Speaker 1: has really started to take a look at big tech.

474
00:25:45,480 --> 00:25:47,920
Speaker 1: That's what's different, you know, right, And if you're gonna

475
00:25:47,960 --> 00:25:52,680
Speaker 1: put your science on something twenty six words exacting exactly. Well,

476
00:25:52,680 --> 00:25:55,479
Speaker 1: it's a great read, as is the series of stories

477
00:25:55,480 --> 00:25:57,560
Speaker 1: that really, like I say, I said, it really takes

478
00:25:57,560 --> 00:26:00,000
Speaker 1: a look at privacy and how the internet kick got

479
00:26:00,040 --> 00:26:01,800
Speaker 1: to where it is today and some of the big

480
00:26:01,800 --> 00:26:04,159
Speaker 1: players in there. Um, thank you, Thank you, Felix. To

481
00:26:04,320 --> 00:26:07,040
Speaker 1: last writer Bloomberg business Week and of course Jill Webber,

482
00:26:07,080 --> 00:26:09,280
Speaker 1: the editor of Bloomberg Business Week. You can find this

483
00:26:09,320 --> 00:26:13,160
Speaker 1: story in the magazine, hitting newstands tomorrow, also at Bloomberg

484
00:26:13,200 --> 00:26:22,000
Speaker 1: dot com and on the Bloomberg terminal. I'm roamco Journal. Yeah,

485
00:26:22,080 --> 00:26:23,920
Speaker 1: but you let me drive? Oh no, no, no, no,

486
00:26:25,480 --> 00:26:30,200
Speaker 1: home honey, please, I'll do the drivels me. I want

487
00:26:30,200 --> 00:26:45,920
Speaker 1: to drive, Just drive by the question try bogs the

488
00:26:46,160 --> 00:26:53,080
Speaker 1: drive to the globe. Thanks well up Dawn on Bloomberg Radio. Well,

489
00:26:53,119 --> 00:26:54,960
Speaker 1: let's drive to the close. I think we can certainly

490
00:26:55,320 --> 00:26:57,880
Speaker 1: characterize today as a day of volatility, as Charlie Pellet

491
00:26:57,880 --> 00:27:00,440
Speaker 1: has been reporting all afternoon, the wild swing in the

492
00:27:00,720 --> 00:27:03,600
Speaker 1: equity and fixed income markets. To get a little perspectively,

493
00:27:03,600 --> 00:27:05,800
Speaker 1: welcome our next our next guest, Mike Moray is the

494
00:27:05,920 --> 00:27:08,919
Speaker 1: c i O of Integrity Viking Funds. He joins us

495
00:27:08,920 --> 00:27:11,440
Speaker 1: here in our Bloomberg Interactive a broker studio, but he

496
00:27:11,600 --> 00:27:14,280
Speaker 1: is north a North Dakota base, so he made the

497
00:27:14,359 --> 00:27:16,600
Speaker 1: long trip here to the Bloomberg Inactor broker studio. We

498
00:27:16,600 --> 00:27:19,000
Speaker 1: appreciate that, Mike, Thanks for being with us. Just give

499
00:27:19,119 --> 00:27:21,920
Speaker 1: us Let's just go back over the last few days

500
00:27:21,960 --> 00:27:24,639
Speaker 1: of this week. You know, Monday, big sell off, a

501
00:27:24,680 --> 00:27:27,720
Speaker 1: little bit of a bounce back to yesterday. Today just

502
00:27:28,040 --> 00:27:32,080
Speaker 1: wild swings intra day. As a portfolio manager, how do

503
00:27:32,200 --> 00:27:34,359
Speaker 1: you think about the volatility that we're seeing in the markets.

504
00:27:35,240 --> 00:27:38,920
Speaker 1: Thank you for having me, Paul. The recent volatility is certainly,

505
00:27:39,359 --> 00:27:44,560
Speaker 1: you know, causing some angst amongst investors, but we take

506
00:27:44,600 --> 00:27:47,560
Speaker 1: a little bit more of a calm approach, uh when

507
00:27:47,680 --> 00:27:50,159
Speaker 1: handling the volatility and really kind of stick to the

508
00:27:50,240 --> 00:27:54,600
Speaker 1: process of how we manage our mutual fund. We we

509
00:27:54,760 --> 00:27:59,200
Speaker 1: invest in companies that have solid business models, have long

510
00:27:59,359 --> 00:28:03,240
Speaker 1: histories of raising their dividend, provide that level of high

511
00:28:03,320 --> 00:28:06,280
Speaker 1: current income as well as dividing growth, and we feel

512
00:28:06,359 --> 00:28:10,800
Speaker 1: these factors can allow an investor to maintain their exposure

513
00:28:10,880 --> 00:28:15,400
Speaker 1: to the two equities even in um you know, volatile

514
00:28:15,440 --> 00:28:17,560
Speaker 1: times or market pullbacks. And I just want to point

515
00:28:17,560 --> 00:28:20,439
Speaker 1: out the Integrity Dividend Harvest Fund, which you are part

516
00:28:20,520 --> 00:28:23,720
Speaker 1: of the management right and manager are co manager. In

517
00:28:23,920 --> 00:28:28,280
Speaker 1: terms of the fund, it's up about five points six

518
00:28:28,359 --> 00:28:30,280
Speaker 1: percent I think in the past year, so you're beating

519
00:28:30,760 --> 00:28:34,560
Speaker 1: most of everybody eighty second percentile, so you're beating most

520
00:28:34,600 --> 00:28:36,840
Speaker 1: of the folks, most of your peers in that category.

521
00:28:37,080 --> 00:28:38,600
Speaker 1: I mean, it's all about the dividend place. So in

522
00:28:38,720 --> 00:28:41,959
Speaker 1: terms of macro stories, you don't care too much as

523
00:28:42,040 --> 00:28:44,480
Speaker 1: long as the company feels confident enough to keep that

524
00:28:44,600 --> 00:28:47,120
Speaker 1: dividend up. And we know companies have barrored a ton

525
00:28:47,160 --> 00:28:49,920
Speaker 1: of money, cheap money, and they're not necessarily putting it

526
00:28:49,920 --> 00:28:54,160
Speaker 1: into capital expenditures, gen buybacks and dividends. That is correct, Carol.

527
00:28:54,200 --> 00:28:56,360
Speaker 1: It's not that we don't care, but it's not a

528
00:28:56,520 --> 00:29:00,560
Speaker 1: big factor when we're managing the funds. We know the fund.

529
00:29:00,800 --> 00:29:04,040
Speaker 1: The particular stocks that we own in the Integrity Dividend

530
00:29:04,120 --> 00:29:08,120
Speaker 1: Harvest Fund, you know, are going to provide that growing

531
00:29:08,280 --> 00:29:10,840
Speaker 1: level of income. So even if we were to see

532
00:29:10,920 --> 00:29:15,520
Speaker 1: a recession, we feel that the distribution that we're going

533
00:29:15,560 --> 00:29:17,320
Speaker 1: to have is going to continue to grow. Well, the

534
00:29:17,400 --> 00:29:19,160
Speaker 1: last thing the company wants, right Paul, is you want

535
00:29:19,200 --> 00:29:21,360
Speaker 1: that headline crossing, uh so and so cut their David

536
00:29:21,400 --> 00:29:25,440
Speaker 1: ad Yes, exactly right. And what what I like to

537
00:29:25,720 --> 00:29:28,560
Speaker 1: you know, tell investors is instead of looking at your

538
00:29:28,880 --> 00:29:32,640
Speaker 1: particularly dividend investors, instead of looking at your portfolios value,

539
00:29:33,040 --> 00:29:36,640
Speaker 1: looking at the income that it provides. And what we

540
00:29:36,920 --> 00:29:42,080
Speaker 1: are providing with this particular fund is a a portfolio

541
00:29:42,400 --> 00:29:46,480
Speaker 1: that income will actually grow during a recession. Even your value,

542
00:29:46,520 --> 00:29:48,960
Speaker 1: even though your value might get lost, your income is

543
00:29:49,000 --> 00:29:51,800
Speaker 1: going to grow. So looking at like a name that

544
00:29:52,040 --> 00:29:55,880
Speaker 1: you've suggested highlighted is a Coca Cola. So I mean

545
00:29:55,960 --> 00:29:58,680
Speaker 1: there's a company. I'm just looking at it. Carol, you're

546
00:29:58,720 --> 00:30:00,760
Speaker 1: to day return, you know, a little over twelve, got

547
00:30:00,880 --> 00:30:03,720
Speaker 1: a dividend yield of about three. That's not a bad

548
00:30:03,720 --> 00:30:05,080
Speaker 1: way to make a living. So give us a sense

549
00:30:05,120 --> 00:30:08,160
Speaker 1: of why Coke is in your portfolio. You Cokes the

550
00:30:08,200 --> 00:30:11,040
Speaker 1: core holding for this particular portfolio. It checks a lot

551
00:30:11,120 --> 00:30:13,320
Speaker 1: of the boxes of what we're looking for. It's a

552
00:30:13,400 --> 00:30:16,600
Speaker 1: low volatile way to get equity exposure. It's got a

553
00:30:16,680 --> 00:30:19,680
Speaker 1: solid three percent dividend yield, and it has increased that

554
00:30:20,040 --> 00:30:23,840
Speaker 1: yield or it's dividend fifty six consecutive years. So we

555
00:30:23,920 --> 00:30:26,120
Speaker 1: have a very strong belief that that dividend is going

556
00:30:26,160 --> 00:30:28,479
Speaker 1: to continue to grow on a going forward basis. Right,

557
00:30:28,520 --> 00:30:29,960
Speaker 1: the five year net growth that we have in terms

558
00:30:30,000 --> 00:30:33,760
Speaker 1: of the dividend is like six, so pretty steady. Yes. Um,

559
00:30:33,880 --> 00:30:36,040
Speaker 1: A T and T, which I feel like widows and orphans, Right,

560
00:30:36,040 --> 00:30:38,640
Speaker 1: we talked about these companies like it's what's interesting about

561
00:30:38,760 --> 00:30:41,040
Speaker 1: is I think about dividend reinvestment plans like go back

562
00:30:41,120 --> 00:30:43,720
Speaker 1: how many years? And that was an investment strategy that

563
00:30:43,720 --> 00:30:45,160
Speaker 1: we used to talk about a lot. I feel like

564
00:30:45,200 --> 00:30:47,120
Speaker 1: it's gotten kind of lost in the sauce a little

565
00:30:47,120 --> 00:30:50,360
Speaker 1: bit with kind of alternative investment strategies and so on.

566
00:30:50,560 --> 00:30:53,240
Speaker 1: But A T and T is one of those companies

567
00:30:53,320 --> 00:30:55,120
Speaker 1: that folks would say, you want to have that in

568
00:30:55,120 --> 00:30:57,719
Speaker 1: your portfolio because check out the dividend and right now

569
00:30:57,760 --> 00:31:00,880
Speaker 1: it's just about six percent. Yeah, us and you know,

570
00:31:01,000 --> 00:31:04,080
Speaker 1: the story behind A T and T evolves around their

571
00:31:04,200 --> 00:31:07,320
Speaker 1: their cash flows, very solid cash flows that are allowing

572
00:31:07,360 --> 00:31:10,360
Speaker 1: the company to not just fund its dividend, but you know,

573
00:31:10,480 --> 00:31:14,120
Speaker 1: make strategic acquisitions and grow and diversify their company. You know,

574
00:31:14,240 --> 00:31:16,560
Speaker 1: so that the share price has obviously been punished over

575
00:31:16,600 --> 00:31:19,480
Speaker 1: the past several years because of some acquisitions that they made,

576
00:31:19,680 --> 00:31:21,560
Speaker 1: but we view these as prudent for the company to

577
00:31:21,640 --> 00:31:25,720
Speaker 1: diversify those cash flows and continue to grow their business.

578
00:31:26,280 --> 00:31:27,680
Speaker 1: So yeah, I'm just looking at A T and T

579
00:31:27,760 --> 00:31:31,040
Speaker 1: again up about year to date with a you know,

580
00:31:31,200 --> 00:31:35,240
Speaker 1: five percent dividend yields, So it's again a total total

581
00:31:35,320 --> 00:31:37,800
Speaker 1: return story. How about like it is a dividend investor

582
00:31:37,880 --> 00:31:39,840
Speaker 1: who's really focused on dividends, You look at a company

583
00:31:39,880 --> 00:31:41,800
Speaker 1: like A T and T with this huge debt load.

584
00:31:42,080 --> 00:31:43,880
Speaker 1: I think it has the most debt of any non

585
00:31:43,960 --> 00:31:47,240
Speaker 1: financial company. Uh, how do you kind of get a

586
00:31:47,320 --> 00:31:50,760
Speaker 1: sense of the security of your dividend related to the debt?

587
00:31:50,920 --> 00:31:56,360
Speaker 1: Almost a billion? Yes, right, And that comes back to

588
00:31:56,440 --> 00:32:00,520
Speaker 1: their their cash flows and you know, the acquisity acquisition

589
00:32:00,560 --> 00:32:02,240
Speaker 1: is that they made that there's going to be plenty

590
00:32:02,280 --> 00:32:06,280
Speaker 1: of synergies involved there. So as as you guys mentioned

591
00:32:06,360 --> 00:32:07,960
Speaker 1: a huge debtload and they've taken on a lot of

592
00:32:08,000 --> 00:32:10,600
Speaker 1: debt to make these acquisitions. But they're forward looking and

593
00:32:10,960 --> 00:32:13,280
Speaker 1: when you have the synergies that you know they're going

594
00:32:13,320 --> 00:32:15,960
Speaker 1: to get by, you know, having that media in the

595
00:32:16,080 --> 00:32:18,720
Speaker 1: devices that they're delivered on, uh, it's it is going

596
00:32:18,800 --> 00:32:20,760
Speaker 1: to create a lot of synergies and we're very comfortable

597
00:32:20,760 --> 00:32:22,840
Speaker 1: that they're gonna be able to bring down their debtload, Mike.

598
00:32:22,920 --> 00:32:25,160
Speaker 1: A fair amount of companies offer up dividends, right, and

599
00:32:25,200 --> 00:32:27,520
Speaker 1: obviously you're looking for dividend, not just a dividend payer,

600
00:32:27,560 --> 00:32:30,160
Speaker 1: but also dividend growth. Here Coca Cola, we talked about

601
00:32:30,160 --> 00:32:32,280
Speaker 1: a T and t X, then mobiles also in your portfolio,

602
00:32:32,560 --> 00:32:35,440
Speaker 1: rise in communications three AM. How do you though then

603
00:32:35,600 --> 00:32:38,280
Speaker 1: kind of pick in terms of those companies that do

604
00:32:38,480 --> 00:32:41,680
Speaker 1: provide dividend. What are the other factors you're looking at? Well,

605
00:32:41,760 --> 00:32:44,400
Speaker 1: we go through a fairly rigorous process and we look

606
00:32:44,440 --> 00:32:47,160
Speaker 1: at four different factors. One of them is beta. We're

607
00:32:47,200 --> 00:32:49,480
Speaker 1: looking for companies that have a beta point seven five

608
00:32:49,560 --> 00:32:52,080
Speaker 1: or less. We're looking at the dividend yield. We want

609
00:32:52,160 --> 00:32:54,400
Speaker 1: to yield at least twenty five basis points higher than

610
00:32:54,440 --> 00:32:56,960
Speaker 1: the SMP five hundred, and then the years of divid

611
00:32:57,080 --> 00:33:00,720
Speaker 1: increases extremely important because we want to company that we

612
00:33:00,840 --> 00:33:03,040
Speaker 1: are highly confident that they're going to continue to grow

613
00:33:03,080 --> 00:33:05,880
Speaker 1: their dividend. And lastly, we look at market cap. We

614
00:33:06,000 --> 00:33:08,920
Speaker 1: like to see a market capitalization at least ten billion

615
00:33:09,080 --> 00:33:11,960
Speaker 1: or more. That just provides us with you know, a

616
00:33:12,120 --> 00:33:15,400
Speaker 1: well capitalized company puts the last company put in your portfolio.

617
00:33:15,960 --> 00:33:19,320
Speaker 1: Last company. I don't know if I can disclose that

618
00:33:19,360 --> 00:33:21,640
Speaker 1: because it might have been after market closed, but I

619
00:33:21,720 --> 00:33:24,520
Speaker 1: will say this, we have been increasing our exposure to healthcare.

620
00:33:24,600 --> 00:33:26,960
Speaker 1: We'll see a lot of opportunities there. We've seen, you know,

621
00:33:27,040 --> 00:33:30,320
Speaker 1: some pretty significant pullback with you know, the drug pricing issue,

622
00:33:30,840 --> 00:33:33,680
Speaker 1: you know, within Congress, but ultimately we see some great

623
00:33:33,720 --> 00:33:38,160
Speaker 1: opportunities there with names like av um am Gin as

624
00:33:38,200 --> 00:33:41,080
Speaker 1: well as Bristol Meyer and Johnson and Johnson, right, which

625
00:33:41,080 --> 00:33:43,400
Speaker 1: are all in your portfolio? Yes, all right, good stuff.

626
00:33:43,440 --> 00:33:44,960
Speaker 1: Have you been seeing money and new money come in?

627
00:33:45,040 --> 00:33:49,640
Speaker 1: I'm just trickle right now. Large large value has been

628
00:33:49,640 --> 00:33:51,480
Speaker 1: a little lot of favor because a lot of people

629
00:33:51,560 --> 00:33:54,280
Speaker 1: are chasing growth. But I've you know, we feel that

630
00:33:54,400 --> 00:33:56,240
Speaker 1: that's one of the bigger mistakes you can make. As

631
00:33:56,320 --> 00:33:59,600
Speaker 1: a investor is chasing growth as well as panic selling,

632
00:34:00,040 --> 00:34:01,680
Speaker 1: you know when we kind of take that out of

633
00:34:01,760 --> 00:34:05,080
Speaker 1: our process. And all right, appreciate your time, Mike, thank

634
00:34:05,120 --> 00:34:08,000
Speaker 1: you so much, coming all the way from my not

635
00:34:08,440 --> 00:34:11,560
Speaker 1: North Dakota. Is there a direct flight? I don't think so.

636
00:34:12,480 --> 00:34:15,840
Speaker 1: Mike Moury's CIO over at Integrity Viking Fust. Thanks for

637
00:34:15,920 --> 00:34:18,400
Speaker 1: listening to Bloomberg Business Week. You can subscribe to the

638
00:34:18,440 --> 00:34:21,560
Speaker 1: podcast on iTunes, SoundCloud, or Bloomberg dot com. You can

639
00:34:21,600 --> 00:34:24,040
Speaker 1: also listen to our radio show every weekday at two

640
00:34:24,080 --> 00:34:26,200
Speaker 1: pm Eastern only on Bloomberg Radio