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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 1: Eastern on Apple, Cardplay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: At the other headline of the day, we love it.

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Speaker 2: It's Jamie Diamond, CEO of JP Morgan and his annual letter.

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Speaker 2: Lots of things to get through on this one. You know,

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Speaker 2: he says that AI could augument virtually every job, so

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Speaker 2: that was sort of the one thing he did talk about. Obviously,

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Speaker 2: he doesn't like lots of regulation in Boswell three, so

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Speaker 2: let's dig into it. Allison Williams, Bloomberg Intelligence, Senior Analyst,

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Speaker 2: Global Banks and Asset Managers, joins us. Now, all right, Alison,

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Speaker 2: what are some of the takeaways here?

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Speaker 3: So I think, you know, it's always interesting to hear

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Speaker 3: what's on Jamie's mind. I think some things are consistent.

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Speaker 3: He gives his views on on regulation, which he feels

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Speaker 3: like there definitely needs to be some changes as well

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Speaker 3: as the policy.

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Speaker 4: And the political front.

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Speaker 3: You know, one of the interesting things this year was

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Speaker 3: the twenty year look back it's the anniversary of the

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Speaker 3: JP Morgan Bank One deal. As you may remember, Bank

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Speaker 3: One was actually the buyer of JP Morgan, and I

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Speaker 3: was lucky enough to be at the dinner that night

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Speaker 3: with the CEOs of both Bank One and JP Morgan,

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Speaker 3: and certainly did not anticipate what would be where we'd be,

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Speaker 3: you know, twenty years later, But did anticipate that. Jamie Diamond,

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Speaker 3: even I think at that time, showed himself to be

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Speaker 3: a patient CEO. He waited to take the job, he

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Speaker 3: was selective, he took the job with Bank One, he

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Speaker 3: was selective about the JP Morgan deal. He stored up

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Speaker 3: his capital and was in a good position at the crisis.

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Speaker 3: And so you know, today when we're seeing a lot

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Speaker 3: of headlines around some of his concerns, and again certainly

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Speaker 3: he does outline a lot of these in the annual report,

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Speaker 3: it just really just puts into mind that the risk.

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Speaker 4: Manager that he is.

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Speaker 3: And so while there's a lot of headlines about his

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Speaker 3: talk about inflation, he's been very vocal about the world

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Speaker 3: needing to be prepared for higher rates. I think it's

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Speaker 3: just a way that he does his job and manages

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Speaker 3: his company thinking about the downsides, thinking about the risks

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Speaker 3: out there and sort of always being prepared to be

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Speaker 3: in the best position he can.

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Speaker 5: All right, Allison, So those are you know, we always

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Speaker 5: look to that letter for some long term trend issues

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Speaker 5: and he calls out AI in particular this time, how

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Speaker 5: about the short term stuff. We're gonna hear about the

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Speaker 5: short term stuff this Friday with the earning starting.

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Speaker 6: What are you what are you looking for.

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Speaker 5: From JPM and maybe from some of the other big

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Speaker 5: banks that we care about.

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Speaker 3: Sure, and you know, there are a lot of call

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Speaker 3: outs about the great job that they've been doing, the

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Speaker 3: great year that they had last year, and we really

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Speaker 3: think that this quarter they're going to continue to you know,

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Speaker 3: execute on all cylinders. I think that the net interest

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Speaker 3: income story is you know, that's sort of the big

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Speaker 3: thing that everyone's watching. We've had a big shift in

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Speaker 3: the market view on rates since the last time these

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Speaker 3: banks have reported, but we think that JP Morgan will

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Speaker 3: continue to show resilience in that net interest income and

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Speaker 3: surprise investors positively on that front. Part of that is

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Speaker 3: the credit card business, where it just continues to show

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Speaker 3: very strong growth, and part of it is the deposit pricing,

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Speaker 3: which has come in a little bit better than expected.

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Speaker 4: So we think that's that's going to help JP.

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Speaker 3: Morgan, it's going to help Bank of America the card side,

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Speaker 3: helping JP Morgan and City Group a little bit more.

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Speaker 3: But also we're we may see provisions tick up, but

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Speaker 3: that's not because of the weaker environment. It's more because

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Speaker 3: the card loan growth continues to be strong. It's normalizing,

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Speaker 3: and this tends to be the seasonally.

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Speaker 4: Higher quarter for card losses.

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Speaker 3: So I think that we could get more resilient and

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Speaker 3: interesting income up, also higher provisions.

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Speaker 2: Yeah, let's talk about that, because last week Marcus Golden

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Speaker 2: Sax's Marcus lowered the rate on its savings account high

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Speaker 2: yield savings account. It was just ten basis points, but

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Speaker 2: and I obviously use it, and I was like, dude,

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Speaker 2: we haven't even had a rate cut. What are we doing?

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Speaker 2: But that's clearly going to be good for these guys,

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Speaker 2: but bad for me.

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Speaker 4: Yeah.

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Speaker 3: So, I mean on the deposit front, you know, really

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Speaker 3: a year ago, I think it became a big news

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Speaker 3: with all the bank turmoil that deposit prices were going up,

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Speaker 3: and consumers I think that saw those headlines if they

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Speaker 3: hadn't already been getting the yield, they were going after it,

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Speaker 3: and so the yields have gone up.

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Speaker 4: We saw the yields on loans go up, and then

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Speaker 4: we saw the yields.

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Speaker 3: On deposits go up and now are out of place

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Speaker 3: where you know, the question is will that will those

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Speaker 3: deposit prices continue to go up and sort of eat

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Speaker 3: away at the yield. The reason why banks are or

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Speaker 3: one benefit of banks of if the rate cuts come

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Speaker 3: is that those prices will come down, as you said,

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Speaker 3: But then you know, there for all of these banks,

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Speaker 3: there is a question of you know, the deposits and

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Speaker 3: what they can do with those deposits, excuse me, And

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Speaker 3: there is a competitive aspect to it, and so there

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Speaker 3: are times when banks are more aggressively pricing, and there

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Speaker 3: are times when you know, as you said, for Goldman Sachs,

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Speaker 3: maybe they're less aggressively pricing. Maybe they see, you know,

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Speaker 3: less of a need of what they can do with

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Speaker 3: that money, or balance sheet management because as we know,

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Speaker 3: there is a cost to capital to fund that balance sheet,

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Speaker 3: that there are higher capital requirements, there are other things

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Speaker 3: you can do with your capital, and so I think these.

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Speaker 4: All kind of go into the mix of what banks

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Speaker 4: are thinking.

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Speaker 5: Hey, Allison, going to hear anything this quarter from the

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Speaker 5: banks about commercial real estate and the problems that may

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Speaker 5: pose for the US I guess economy and maybe the

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Speaker 5: banking system. Or is that just a regional bank thing.

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Speaker 4: I think, you know, it will continue to tick up.

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Speaker 4: I think it's it is a.

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Speaker 3: Broad I guess bank thing, But the commercial the regional

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Speaker 3: banks is just more important to their earnings.

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Speaker 4: So I was speaking.

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Speaker 3: Before about card If you look at card that the

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Speaker 3: banks that I cover, you know, especially JP Morgan, City, Wells,

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Speaker 3: and Bank of America are tend to be over indexed to.

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Speaker 4: Card less so to commercial real estate.

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Speaker 3: Of those four banks, Wells Fargo is really the one

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Speaker 3: that that sort of has a commercial real estate exposure

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Speaker 3: similar to the regional piers. They have the largest US

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Speaker 3: office exposure across the banks I cover, But they also

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Speaker 3: have an eight percent reserve already against those loans, so

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Speaker 3: they've been very conservative.

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Speaker 4: On that book. I think the newer worry, if you will,

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Speaker 4: is the excuse me multifamily lending business.

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Speaker 3: New York Community really sort of brought that to Like

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Speaker 3: JP Morgan has the closest business to that, but they've

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Speaker 3: talked about some underwriting protections they have there just in

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Speaker 3: terms of how they look at rents and the way

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Speaker 3: they underwrite being much more conservative. And so they've had

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Speaker 3: you know, very good performance in that book over a

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Speaker 3: long period of time. Still, you know people are going

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Speaker 3: to look at it, but it's just it's more of

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Speaker 3: sort of a very long term story for the.

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Speaker 2: Banks and having a hard time getting excited about JP

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Speaker 2: Morgan kicking off earnings on Friday. What's going to be

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Speaker 2: for me? Sort of and for you the biggest surprise,

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Speaker 2: like what are you most jazzed about watching when it

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Speaker 2: comes to all the big banks, all the asset managers,

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Speaker 2: all the private all the guys.

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Speaker 3: I mean, I think the biggest surprise will be that

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Speaker 3: interest income resilience and just the fact that it does

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Speaker 3: come in better than expected. You know, it was interesting

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Speaker 3: last quarter all the banks generally beat on net interest

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Speaker 3: income but guided down and so the stocks were acted,

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Speaker 3: you know, very negatively towards that.

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Speaker 4: This quarter, I think there.

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Speaker 3: Will be the resilience in the net interest income that

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Speaker 3: could surprise to the upside. They will adjust the outlooks

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Speaker 3: the ladder is expected. I think the other thing that

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Speaker 3: that I'll be focusing on investors are going to be

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Speaker 3: focusing on is those investment banking fees. So there's been

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Speaker 3: a lot of talk about bullishness for those fees. You know,

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Speaker 3: we also think that we could see a big jump

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Speaker 3: in the fees, but we're still you know, nowhere near

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Speaker 3: compared to where we were at the twenty twenty one, So,

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Speaker 3: you know, you could see a big jump in fees,

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Speaker 3: but the questions are going to be you know, how

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Speaker 3: are things trending. I pos the volumes have been good,

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Speaker 3: but you know, there's still a lot of questions from

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Speaker 3: investors around some of the performance. We've had some good performers,

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Speaker 3: there have been some not so good performer We still

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Speaker 3: have some valuations that you know, investors are waiting to

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Speaker 3: get better. They don't want to go public and have

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Speaker 3: to mark down those investments. So I think the pipelines

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Speaker 3: and the investment banking fees are going to be right.

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Speaker 3: I guess one of the more exciting things this quarter, Alex,

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Speaker 3: you know, maybe not as exciting as we had hoped

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Speaker 3: for earlier in the year.

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Speaker 6: Yeah, we'll see, all right. Alison Williams, thanks so much

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Speaker 6: for joining us.

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Speaker 5: Alson Williams. She's a senior animal. She covers all the

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Speaker 5: big banks on a global basis. She does that for

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Speaker 5: Bloomberg Intelligence. Before that, she alluded to she was at

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Speaker 5: Morgan Stanley Investment Management on the buy side and where

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Speaker 5: she covered the banks. And of course, when a couple

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Speaker 5: of big banks get together, they need to court their

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Speaker 5: large shareholders, and Morgan Stanley Investment Management is certainly one

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Speaker 5: of those. So that's why Allison was on the front lines.

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Speaker 5: And when those two JP Morgan Chase with the predecessor

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Speaker 5: and the bank from Ohio.

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Speaker 6: I can't think of the name one one.

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Speaker 2: I bet she's not watching the eclipse because it's hard

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Speaker 2: at work. So I mean, I'm just saying, but I'm

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Speaker 2: also looking at multiple countdown clocks now are counting down

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Speaker 2: to the eclipse special orre we counting down to the

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Speaker 2: actual eclipse. See, I'm just saying, this is a lot happening.

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Speaker 2: going to talk about ev charging. So Ryan Fisher is

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Speaker 2: Bloomberg BNF EV charging team leader and he joins us

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Speaker 2: now from London. So I guess, just to start off,

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Speaker 2: who are the big players in EV charging?

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Speaker 7: Yeah, so some of them maybe not quite household Thames yet,

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Speaker 7: but you've got charge Point in the US certainly people

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Speaker 7: may have heard of, and the sentiment was pretty positive

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Speaker 7: a few years ago. Stock prices up and then everything

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Speaker 7: is kind of crashed down, sentiment not so great. Some

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Speaker 7: of these companies have not met the targets that they

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Speaker 7: might have done. But what we're starting to see the

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Speaker 7: few companies that you definitely won't have heard of actually

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Speaker 7: have started to post some positive profit margins. So there's

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Speaker 7: like fast charging manufacturers in Europe call Ken Power making

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Speaker 7: that the kind of units that concern big power to

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Speaker 7: evs and charge it fast. And then you've got some

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Speaker 7: of the ones who do the slower power units as well.

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Speaker 7: And then also you've got a couple of these companies

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Speaker 7: that you may have heard of, like ABB, producing chargers

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Speaker 7: as part of a portfolio. So they're selling transformers and

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Speaker 7: they're sort of using that as somewhat of a way

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Speaker 7: to get into companies and sell some of their other

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Speaker 7: products that they've got and added on as an additional

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Speaker 7: so lots going on on the hardware side, and then

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Speaker 7: you've got operators. So these are like the companies who

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Speaker 7: basically will sell the electricity to charge a vehicle. You

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Speaker 7: kind of think of it like filling up with petrol.

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Speaker 7: And none of those so far are profitable, but we

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Speaker 7: have seen some good signs, so some of those being

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Speaker 7: EBITDAR positive now fast ned posted that which is a

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Speaker 7: Dutch one the other day in the US. Unprofitable so far,

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Speaker 7: but there's a company called EVgo you may have heard of,

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Speaker 7: who has these fast charges and they actually basically delivered

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Speaker 7: one hundred and ninety one percent more energy in twenty

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Speaker 7: twenty three than they had in twenty twenty two, so

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Speaker 7: good progress there.

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Speaker 5: So Ryan, where are we kind of, I guess on

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Speaker 5: a timeline of kind of getting enough charging capabilities into

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Speaker 5: the system that can really support, you know, a wide

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Speaker 5: adoption of evs. It feels like what we're hit We've

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Speaker 5: hit a speed bump here. What's the timeline do you think?

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Speaker 5: When you talk to folks in the industry.

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Speaker 7: Yeah, it's an interesting one because we cover the global markets.

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Speaker 7: So you look at China and they installed about a

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Speaker 7: million of these public charges last year, and the US

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Speaker 7: did sort of low tens of thousands. So there's a

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Speaker 7: big difference depending on where you are in the world.

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Speaker 7: I think the US and Europe are more similar in

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Speaker 7: how they'll play out, and Europe is maybe just five

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Speaker 7: years ahead. So Europe has got actually loads of competition

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Speaker 7: at the moment, and the story a little bit when

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Speaker 7: we look at this is some of the companies looking

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Speaker 7: like competition is starting to weigh on the demand that

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Speaker 7: they're delivering because it's a bit monopolistic. So I want

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Speaker 7: the best land as a company, and I want the

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Speaker 7: best grid connection, and I want that to be somewhere

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Speaker 7: that people are going and somewhere where people can buy things.

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Speaker 7: And they're realizing that, well, the demand isn't quite there yet.

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Speaker 7: But if we believe in the long term trajectory of evs,

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Speaker 7: let's get in this business. Let's get those spots. So

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Speaker 7: we've seen that in Europe, and I think the US

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Speaker 7: is just starting to tick over. The US has been

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Speaker 7: hugely dominated by Tesla. So if you look at Tesla

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Speaker 7: on the vehicle side, kind of eighty percent of these

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Speaker 7: pure battery electric vehicles five years ago, kind of Tesla's

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Speaker 7: and then they also provide the supercharging, and that's kind

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Speaker 7: of pushed all the competition out. But what we saw

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Speaker 7: last year was some of these other auto makers really

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Speaker 7: producing the evs and therefore providing a market for other

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Speaker 7: people to come into, but the US slightly behind basically

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Speaker 7: the global maybe just because Tesla has this dominance in

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Speaker 7: the market.

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Speaker 2: This is a super dumb question. Where does a charging

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Speaker 2: operator get the power to then enable me to put

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Speaker 2: a Tesla into that network?

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Speaker 7: Yeah, it's an interesting one. So there has been a

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Speaker 7: lot of these companies that are going out and they're saying,

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Speaker 7: you know what, instead of putting two charges in at

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Speaker 7: my petrol station where the power exists, I actually now

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Speaker 7: need kind of twelve chargers. And in some cases, when

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Speaker 7: you look at, for example, the Tesla stations, they've got

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Speaker 7: like one hundred chargers in one spot. Now that becomes

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Speaker 7: a big grid connection. The next thing is charging the trucks.

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Speaker 7: So this could be like the same amount of power

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Speaker 7: as a town, and a lot of the utilities are

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Speaker 7: taking too long to do it. So it's like that

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Speaker 7: how long does it take to get a permit? How

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Speaker 7: long does it take to actually get energized, can you

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Speaker 7: make the agreements with the land, Lisa, All of this

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Speaker 7: has kind of slowed it down, but clearly industries trying

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Speaker 7: to work together, and this has become a big topic

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Speaker 7: for the automakers and the utilities as well, some of

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Speaker 7: them trying to sign contracts on site. So if you

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Speaker 7: imagine these companies small fry, like several small meters across

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Speaker 7: multiple places, the utility is maybe not so interested in that,

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Speaker 7: but now they're actually delivering a lot of demand. So

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Speaker 7: as I say, looking to other markets in the US

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Speaker 7: and China being a good example, the public chargers in

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Speaker 7: China now deliver more energy than the whole of Ireland,

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Speaker 7: so a lot of energy. And therefore that becomes interesting

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Speaker 7: because if you're an energy developer and you're doing like

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Speaker 7: solar on site next to it with a battery, and

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Speaker 7: we've seen what TV, which is one of these truck

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Speaker 7: charging companies, basically build a station that's not connected to

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Speaker 7: the grid at all. It's just got straight to the

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Speaker 7: solar and a battery. So cool innovations going on there.

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Speaker 5: Hey, Ryan, Here in the US, EV sales have slowed

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Speaker 5: materially and a lot of people are trying to think

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Speaker 5: there's a combination of reasons, price being a big big one,

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Speaker 5: but one of those drivers is just the lack of

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Speaker 5: a fully ubiquitous charging in structure. When you talk to

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Speaker 5: your EV companies, how did they think about it? Are

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Speaker 5: they concerned about the long term demand of EV's in general,

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Speaker 5: and if so, do they feel like they could be

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Speaker 5: part of the solution there?

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Speaker 7: Yeah, and there's definitely kind of differences in opinions. The

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Speaker 7: US hionde CEO saying something along the lines of today,

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Speaker 7: why buy an EV from an automaker who's lobbying against EV's,

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Speaker 7: And obviously he's talking about the US there. But you

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Speaker 7: do see a difference in those that are kind of

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Speaker 7: in on it and those that aren't. And I think

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Speaker 7: some who aren't have previously been so they've they've committed billions,

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Speaker 7: they've talked about targets, and then they're starting to row

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Speaker 7: it back. And some of that is maybe because the

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Speaker 7: technology is behind they can't do it as cheap as

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Speaker 7: everyone else. So there's different reasons. And I think when

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Speaker 7: you look at liabilities, I don't think that's talked about enough. Actually,

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Speaker 7: some of these companies have put cars out there and

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Speaker 7: then the batteries had a problem and they've got to

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Speaker 7: recall it, and that could be multi billions. So I

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Speaker 7: think there's some caution as well in saying, why don't

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Speaker 7: we put a few less casts out because then we

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Speaker 7: can learn from them and we can do it later.

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Speaker 7: Some of the narrative has been they're not putting the

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Speaker 7: cars out because quite physibly, like the battery operations are

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Speaker 7: up and running. But I think there was other reasons.

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Speaker 2: Ryan, Hey, look, this was great. We really appreciated Ryan Fisher,

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Speaker 2: Bloomberg BNF EV charging head, and we'll be doing this

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Speaker 2: every Monday, talking about different areas within the energy transition.

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Speaker 2: This is why Paul stuck with me, because somehow I'm

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Speaker 2: going to make him talk about all this stuff. But

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Speaker 2: interesting you might have, like what little power centers around

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Speaker 2: EV charging networks.

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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 Effle car Playing and

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Speaker 1: broud Otto with the Bloomberg Business App. Listen on demand

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

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Speaker 2: And Barry, founder and managing partner at the Red Needle,

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Speaker 2: is joining us. Equity is doing nothing A body yelds

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Speaker 2: up a little bit. But before we get to all

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Speaker 2: that fun stuff, an, are you watching the eclipse?

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Speaker 8: Absolutely would have missed it. I remember the last one

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Speaker 8: seven years ago, Alex and just standing out in Central

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Speaker 8: Park with armies full of people. So I'm hoping to

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Speaker 8: repeat the experience again. Today's look of fun.

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Speaker 2: All right, So she's not a clip stow, fine, are

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Speaker 2: you bon yield out at this point? That's my way

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Speaker 2: of asking, like, hey, how much higher can yield go

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Speaker 2: at this point?

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Speaker 9: Yeah?

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Speaker 8: I got to tell you, Alex, I for a while

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Speaker 8: now stopped looking at bon yields as an indicator of

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Speaker 8: where I should be putting capital to work. Just these

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Speaker 8: usual indicators haven't been as consistent over the last couple

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Speaker 8: of years, and so I've just really gone back to

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Speaker 8: good old fashioned fundamentals, esoteric signs, looking specifically at what

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Speaker 8: might be a catalyst for the stocks individually, to try

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Speaker 8: and see you out of play right now?

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Speaker 5: All right, So where you guys, as you think about

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Speaker 5: just kind of M and A in general, what's kind

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Speaker 5: of your outlook here for the remainder of twenty twenty

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Speaker 5: four Because we've got, you know, equity markets higher, but

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Speaker 5: rates are still higher as well.

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Speaker 8: They are, but I do think that the actual backdrop

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Speaker 8: for M and A this year has gotten a lot

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Speaker 8: more interesting. If you think back over the last two

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Speaker 8: years and you put yourself in the position of the

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Speaker 8: boards of public companies, and I've been there, it's been

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Speaker 8: a really difficult place to say yay or nay to

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Speaker 8: getting deals done. We've seen a bit of an exception

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Speaker 8: in the oil and gas based alex that I know

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Speaker 8: is your forte And the reason for that lack of

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Speaker 8: activity has been. Yes, partly, financing has obviously been a

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Speaker 8: lot more expensive, whether it's been in cash deals or

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Speaker 8: stock deals, but also because you just didn't want to

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Speaker 8: be the board member who looked like a bit of

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Speaker 8: a schmuck if you've got the care wrong. Because the

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Speaker 8: macro is just so volatile and a lot of the

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Speaker 8: key factors you want, you know, you didn't want to

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Speaker 8: be selling too cheap, you're buying too expensively. I think

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Speaker 8: things all settled down a little bit now, which gives

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Speaker 8: people more confidence to go out and buy. And I

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Speaker 8: do think that we're going to see some names forced

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Speaker 8: to do some M and A activity, and specifically they're

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Speaker 8: all like all these fallen angels from that twenty twenty

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Speaker 8: twenty twenty one pandemic irradarling period where I think some

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Speaker 8: of these names are going to have to diversify or die,

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Speaker 8: and it's going to force them to go and do

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Speaker 8: some M and A.

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Speaker 2: So how do you play all of that? So, Okay,

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Speaker 2: if you're buying yielded out, so you're looking less at that,

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Speaker 2: you're looking at the fundamentals, you do think M and

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Speaker 2: A could be it sounds like a catalyst. Yeah, talk

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Speaker 2: to me about the sectors first and that that you

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Speaker 2: want to play.

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Speaker 8: Well, let's take a look at consumer, for example, alex

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Speaker 8: and you know that's one where you've got a history

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Speaker 8: if you go back in time where deals tended to be.

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Speaker 8: First of all, they were a lot bigger, so you

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Speaker 8: saw lots of mass consolidation and sort of murders of equals.

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Speaker 8: And then you have the shift towards consumer brands and

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Speaker 8: food and beauty and apparel trying to buy these high

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Speaker 8: growth challenger brands with really fast top plane growth but

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Speaker 8: lesser a focus and profitability. We look at what happened

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Speaker 8: last year. We still Campbell's go and buy sobos brands.

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Speaker 8: That's a two point eight billion dollar deal. And I

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Speaker 8: think that's because in food, for example, you're going to

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Speaker 8: see the fact that inflation's not gone completely the consumers,

438
00:21:50,640 --> 00:21:52,160
Speaker 8: they are not going to keep putting up a price

439
00:21:52,200 --> 00:21:54,600
Speaker 8: increases in the cost space of seeing a step function up.

440
00:21:55,400 --> 00:21:57,680
Speaker 8: Organic growth on the margin level and on the top

441
00:21:57,720 --> 00:21:59,360
Speaker 8: light level has slowed down. So I think that's going

442
00:21:59,400 --> 00:22:01,320
Speaker 8: to force more m and A the lights of which

443
00:22:01,359 --> 00:22:03,600
Speaker 8: we started to see last year again with Campbell one

444
00:22:03,680 --> 00:22:05,480
Speaker 8: specific company. I'm going to go out on a limb

445
00:22:05,480 --> 00:22:07,520
Speaker 8: here and sort of testing the thesis. I look at

446
00:22:07,560 --> 00:22:10,240
Speaker 8: something alex like Olipleaux. Do you remember when that went public?

447
00:22:11,280 --> 00:22:13,720
Speaker 8: You know, when we're all sitting at home, the valuation

448
00:22:13,840 --> 00:22:17,520
Speaker 8: on that hair company and shampoo company was absolutely astronomical.

449
00:22:17,520 --> 00:22:20,359
Speaker 8: It's now trading at a fraction single digit fraction of

450
00:22:20,359 --> 00:22:22,600
Speaker 8: where it was. But it's a good cash flow business.

451
00:22:22,720 --> 00:22:25,840
Speaker 8: It's got a smart backer advent, a private equity firm

452
00:22:25,880 --> 00:22:28,640
Speaker 8: that knows what it's doing. That business, in my opinion,

453
00:22:28,760 --> 00:22:30,879
Speaker 8: is going to have to go and buy other brands

454
00:22:31,240 --> 00:22:33,879
Speaker 8: to regain the trust of the public market again, so

455
00:22:33,880 --> 00:22:35,680
Speaker 8: I would look at that as a potential acquire It's

456
00:22:35,680 --> 00:22:37,200
Speaker 8: got the means to do it, And that's the kind

457
00:22:37,200 --> 00:22:39,800
Speaker 8: of thesis I find a little bit contrarian and interesting.

458
00:22:39,880 --> 00:22:43,159
Speaker 5: Right now, and talk to us about the private equity

459
00:22:43,160 --> 00:22:44,200
Speaker 5: and the private credit business.

460
00:22:44,359 --> 00:22:49,639
Speaker 6: How ready are those two folks willing to commit to

461
00:22:49,800 --> 00:22:51,000
Speaker 6: M and A. Here, it would.

462
00:22:50,800 --> 00:22:53,159
Speaker 5: Seem like the private equity folks, they've been holding on

463
00:22:53,160 --> 00:22:54,879
Speaker 5: to a lot of assets a lot longer they probably

464
00:22:54,920 --> 00:22:57,080
Speaker 5: would like to, so they have some incentive to get

465
00:22:57,080 --> 00:22:57,800
Speaker 5: deals done.

466
00:22:58,040 --> 00:22:58,920
Speaker 6: Are they going to be a player?

467
00:22:59,000 --> 00:23:01,840
Speaker 8: Yeah, that's a great point. That's a terrific point. They've

468
00:23:01,840 --> 00:23:03,520
Speaker 8: got an incentive to get deals done because a lot

469
00:23:03,520 --> 00:23:06,840
Speaker 8: of deals were done six or seven years ago, so

470
00:23:06,880 --> 00:23:09,760
Speaker 8: traditional private equity is now a little bit past the

471
00:23:09,760 --> 00:23:12,920
Speaker 8: horizon to get out of those investments. The other piece

472
00:23:12,960 --> 00:23:14,679
Speaker 8: of this is too, if you think about when a

473
00:23:14,720 --> 00:23:17,600
Speaker 8: deal is done and inception, a lot of leverages often

474
00:23:17,600 --> 00:23:19,840
Speaker 8: put on these private companies, and a lot of those

475
00:23:19,960 --> 00:23:23,440
Speaker 8: debt maturities are coming up. Private equity firms don't necessarily

476
00:23:23,600 --> 00:23:26,480
Speaker 8: want to recapitalize them with much more expensive debt, and

477
00:23:26,560 --> 00:23:28,439
Speaker 8: we start holding them for longer, I think they'd rather

478
00:23:28,560 --> 00:23:31,159
Speaker 8: sell than deal with that maturity wall. So I think

479
00:23:31,200 --> 00:23:33,639
Speaker 8: you're going to have a lot of willing sellers, And

480
00:23:33,680 --> 00:23:35,080
Speaker 8: I do think this again is going to be an

481
00:23:35,080 --> 00:23:38,119
Speaker 8: opportunity where buyers, now that the macro has died down,

482
00:23:38,119 --> 00:23:40,640
Speaker 8: will start sharpening their pencils, look at the cash balances

483
00:23:40,640 --> 00:23:44,000
Speaker 8: they've accumulated, and I think we'll start seeing strategics perhaps

484
00:23:44,359 --> 00:23:47,359
Speaker 8: being a lot more active in buying private equity assets

485
00:23:47,400 --> 00:23:48,199
Speaker 8: than they were before.

486
00:23:48,480 --> 00:23:51,640
Speaker 2: Okay, so I get all of this, But at what point, though,

487
00:23:51,680 --> 00:23:53,639
Speaker 2: do you need to start looking at yields again? Like

488
00:23:53,680 --> 00:23:58,240
Speaker 2: if we get a stronger CPI your thesis is sound,

489
00:23:58,359 --> 00:23:59,720
Speaker 2: what if raids hit five percent?

490
00:24:01,600 --> 00:24:03,920
Speaker 8: Yeah? I think that rates have been expected to be

491
00:24:03,960 --> 00:24:05,840
Speaker 8: higher for longer, and I think the street's actually been

492
00:24:05,880 --> 00:24:08,320
Speaker 8: reunderwriting that thesis are its for quite a long time,

493
00:24:08,359 --> 00:24:09,639
Speaker 8: and I think they've sort of got the past the

494
00:24:09,640 --> 00:24:12,119
Speaker 8: point of the sticker shock. I think the other piece

495
00:24:12,119 --> 00:24:13,960
Speaker 8: that I would say when it comes to bond yields

496
00:24:14,000 --> 00:24:17,520
Speaker 8: and looking at treasuries as the PEG is one of

497
00:24:17,520 --> 00:24:19,720
Speaker 8: my thesis coming into this year is the importance of

498
00:24:19,760 --> 00:24:22,479
Speaker 8: fiscal policy form really dictating what appetite was going to

499
00:24:22,480 --> 00:24:25,160
Speaker 8: be around a lot of these debt plays. And one

500
00:24:25,160 --> 00:24:27,200
Speaker 8: thing that's been interesting to me in watching the election,

501
00:24:27,359 --> 00:24:29,040
Speaker 8: which if anything is going to be one of the

502
00:24:29,040 --> 00:24:32,560
Speaker 8: big influences in terms of shocks to that thesis. None

503
00:24:32,600 --> 00:24:34,840
Speaker 8: of the key presidential candidates are coming out right now

504
00:24:34,880 --> 00:24:37,439
Speaker 8: with March daylight between them when the fiscal policy front

505
00:24:38,160 --> 00:24:40,639
Speaker 8: at least nothing concrete, although no shots or surprises. So

506
00:24:40,840 --> 00:24:42,919
Speaker 8: I'm just still continuing to think that BONN yields. Yes,

507
00:24:42,960 --> 00:24:45,320
Speaker 8: they're important, Yes that cost of financing is critical, but

508
00:24:45,359 --> 00:24:48,400
Speaker 8: in terms of catalysts to move markets, I just don't

509
00:24:48,400 --> 00:24:49,760
Speaker 8: see them at this particular moment.

510
00:24:50,840 --> 00:24:53,680
Speaker 5: So, and just as it relates to financing deals here,

511
00:24:55,200 --> 00:24:57,520
Speaker 5: you know, these rates, they're still by historical standards, these

512
00:24:57,560 --> 00:25:00,679
Speaker 5: rates are not terribly high, but for the average CEO,

513
00:25:00,760 --> 00:25:03,879
Speaker 5: CFO and board member they feel really high relative in

514
00:25:03,960 --> 00:25:06,399
Speaker 5: the past decade or here. So how much of a

515
00:25:06,440 --> 00:25:08,280
Speaker 5: hindrance is that to just getting deals done.

516
00:25:09,600 --> 00:25:11,760
Speaker 8: I think it has been a hindrance, but I don't

517
00:25:11,800 --> 00:25:13,760
Speaker 8: think that it's going to continue to be a hindrance

518
00:25:13,800 --> 00:25:17,239
Speaker 8: because one thing that has changed in this narrative is

519
00:25:17,320 --> 00:25:20,640
Speaker 8: a level of confidence that at some point, yes, inflation

520
00:25:20,720 --> 00:25:23,040
Speaker 8: will come down and yes interest rates will come down. Now,

521
00:25:23,040 --> 00:25:25,479
Speaker 8: what obviously has changed is the pace at which that

522
00:25:25,640 --> 00:25:28,120
Speaker 8: is going to take place. You remember the six rate

523
00:25:28,160 --> 00:25:30,159
Speaker 8: cuts that some of the most aggressive analysts had on

524
00:25:30,200 --> 00:25:33,200
Speaker 8: the docket for this year. It's now gone to maybe two, right,

525
00:25:33,680 --> 00:25:36,480
Speaker 8: So the pace of decline is coming down. But if

526
00:25:36,480 --> 00:25:38,520
Speaker 8: we look forward not to twenty twenty five, but we

527
00:25:38,520 --> 00:25:41,240
Speaker 8: look to twenty twenty six, you know, you can see

528
00:25:41,240 --> 00:25:44,240
Speaker 8: a deal being negotiated at some point towards the second

529
00:25:44,280 --> 00:25:47,080
Speaker 8: half of this year. It probably won't close until twenty

530
00:25:47,160 --> 00:25:49,200
Speaker 8: twenty five, by which time we hope the rate action

531
00:25:49,520 --> 00:25:51,879
Speaker 8: will have taken place, and you can see corporates being

532
00:25:51,880 --> 00:25:53,679
Speaker 8: a little bit more confident that there'll be a slightly

533
00:25:53,760 --> 00:25:57,119
Speaker 8: lower interest rate environment when it comes to actually executing

534
00:25:57,160 --> 00:26:00,440
Speaker 8: against a plan to deliver deliver synergies against. So again

535
00:26:00,640 --> 00:26:03,679
Speaker 8: you're absolutely right, higher than recent history, but manageable.

536
00:26:04,080 --> 00:26:07,080
Speaker 2: So you mentioned consumers can consumer stocks in terms of

537
00:26:07,200 --> 00:26:09,520
Speaker 2: m and a other areas that we've seen, right, We've

538
00:26:09,520 --> 00:26:12,439
Speaker 2: seen a ton in the biotech space, which we tend

539
00:26:12,480 --> 00:26:15,359
Speaker 2: to see normally. Right, we see energy. We also hear

540
00:26:15,400 --> 00:26:17,879
Speaker 2: a lot about potential software deals because there's just so

541
00:26:17,920 --> 00:26:20,440
Speaker 2: many software players and regional banks. Where do you think

542
00:26:20,600 --> 00:26:21,680
Speaker 2: is the most likely.

543
00:26:23,040 --> 00:26:25,040
Speaker 8: In terms of like activity. I think we'll continue to

544
00:26:25,040 --> 00:26:28,199
Speaker 8: see contolidate consolidation alex in you the permia and in

545
00:26:28,200 --> 00:26:31,119
Speaker 8: the boiling gas space where scale really is critical and

546
00:26:31,160 --> 00:26:35,239
Speaker 8: where you've got these absolutely act intensive companies, you need

547
00:26:35,280 --> 00:26:38,080
Speaker 8: to get those benefits of scale. So that's one space

548
00:26:38,119 --> 00:26:40,240
Speaker 8: I think will continue to spend activity. I don't spend

549
00:26:40,280 --> 00:26:41,760
Speaker 8: a ton of time that I have in the past,

550
00:26:42,320 --> 00:26:44,240
Speaker 8: but I do think we'll see activity there. When it

551
00:26:44,280 --> 00:26:48,359
Speaker 8: comes to software, I think that this is an interesting space.

552
00:26:48,400 --> 00:26:51,879
Speaker 8: It's still very expensive. But one area that I do

553
00:26:51,920 --> 00:26:54,280
Speaker 8: think the strategics will start to go shopping a little

554
00:26:54,320 --> 00:26:57,080
Speaker 8: bit more aggressively is buying some of these private companies

555
00:26:57,400 --> 00:27:00,600
Speaker 8: backed by venture capital, backed by growth stage equity, where

556
00:27:00,680 --> 00:27:03,439
Speaker 8: valuations are now a bit more sensible and there are

557
00:27:03,440 --> 00:27:05,280
Speaker 8: some real buyers of choice out there where you know,

558
00:27:05,280 --> 00:27:07,359
Speaker 8: when I talk to the private side community in tech,

559
00:27:07,440 --> 00:27:09,959
Speaker 8: salesforce is where people want to sell their businesses too.

560
00:27:10,240 --> 00:27:13,560
Speaker 8: How auto networks, if you're in cyber very healthy balance sheet,

561
00:27:13,560 --> 00:27:15,520
Speaker 8: it's lots of free cash flow. And if you look

562
00:27:15,560 --> 00:27:17,800
Speaker 8: back in history, and McKinsey had a very interesting piece

563
00:27:17,840 --> 00:27:21,159
Speaker 8: out on the so in recent weeks, Programmatic m and A,

564
00:27:21,440 --> 00:27:24,119
Speaker 8: which has lots of acquisitions behind a thesis rather than

565
00:27:24,160 --> 00:27:29,320
Speaker 8: a really one really big mega merger has tended to

566
00:27:29,359 --> 00:27:32,600
Speaker 8: actually generate quite good incremental shareholder returns above the average

567
00:27:32,600 --> 00:27:34,479
Speaker 8: by about two hundred basis points. And so I do

568
00:27:34,560 --> 00:27:37,320
Speaker 8: think looking at some of those historical m ANDA machines

569
00:27:37,359 --> 00:27:39,840
Speaker 8: who know what they're doing on integration will be interesting.

570
00:27:40,200 --> 00:27:43,439
Speaker 2: Interesting and thanks a lot, really great stuff. Really enjoyed,

571
00:27:43,520 --> 00:27:46,040
Speaker 2: have fun at the eclipse today and very founder and

572
00:27:46,040 --> 00:27:50,440
Speaker 2: managing partner at thread Needle, Paul and John and jam

573
00:27:50,480 --> 00:27:51,359
Speaker 2: again John Tucker.

574
00:27:51,440 --> 00:27:55,879
Speaker 6: I'll join you there with his with his welding helmet.

575
00:27:56,920 --> 00:27:59,760
Speaker 2: Yeah, he's a welding helmet, apparently not glasses. You're a good,

576
00:27:59,760 --> 00:28:02,439
Speaker 2: good work out, but I kept the helmet because you

577
00:28:02,440 --> 00:28:04,679
Speaker 2: never know, you never know, you never know what you're

578
00:28:04,680 --> 00:28:06,720
Speaker 2: going to need that welding health. I want to see

579
00:28:06,760 --> 00:28:10,520
Speaker 2: what your garage looks like. I actually don't fation the garage.

580
00:28:10,560 --> 00:28:14,960
Speaker 4: I have a shed, large shed, and with the basement.

581
00:28:15,119 --> 00:28:19,080
Speaker 2: You can't even move in there. Somebody with old welding gear.

582
00:28:20,600 --> 00:28:24,520
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

583
00:28:24,600 --> 00:28:28,120
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

584
00:28:28,119 --> 00:28:30,920
Speaker 1: Auto with a Bloomberg Business app. You can also listen

585
00:28:31,040 --> 00:28:34,120
Speaker 1: live on Amazon Alexa from our flagship New York station.

586
00:28:34,480 --> 00:28:37,240
Speaker 1: Just say Alexa playing Bloomberg eleven thirty.

587
00:28:38,400 --> 00:28:40,320
Speaker 2: All right, well, let's go to someone who's probably not

588
00:28:40,320 --> 00:28:43,040
Speaker 2: eclipsed out yet, and that is Julie Fine. She's Bloomberg

589
00:28:43,160 --> 00:28:45,960
Speaker 2: Texas Bureau chief and she's standing by. I mean, it's

590
00:28:45,960 --> 00:28:48,160
Speaker 2: not that I don't think it's cool. It just it's

591
00:28:48,200 --> 00:28:50,600
Speaker 2: a lot. It's a lot. Are you eclipsed out?

592
00:28:51,240 --> 00:28:54,560
Speaker 10: I'm getting eclipse stot Yesterday I was in Target and

593
00:28:54,640 --> 00:28:57,920
Speaker 10: I was like in the line for self checkout for

594
00:28:58,000 --> 00:29:02,400
Speaker 10: like twenty minutes. It's just so crowded here. I think

595
00:29:02,720 --> 00:29:05,920
Speaker 10: you think about a Super Bowl when you know a

596
00:29:06,000 --> 00:29:09,480
Speaker 10: stadium holds roughly one hundred thousand people, so you probably

597
00:29:09,520 --> 00:29:11,320
Speaker 10: have two hundred thousand people in town right now in

598
00:29:11,320 --> 00:29:14,240
Speaker 10: the Dallas area. The mayor estimates four hundred thousand.

599
00:29:15,080 --> 00:29:17,920
Speaker 5: So people are coming there because Dallas is in the

600
00:29:17,960 --> 00:29:18,960
Speaker 5: totality area.

601
00:29:19,000 --> 00:29:20,160
Speaker 6: Is that is that the story?

602
00:29:20,280 --> 00:29:21,720
Speaker 2: Dallas is totality.

603
00:29:21,800 --> 00:29:25,640
Speaker 10: We get totality for three minutes and fifty one seconds,

604
00:29:25,880 --> 00:29:29,920
Speaker 10: to be exact, So Dallas is in totality. So we

605
00:29:30,000 --> 00:29:32,720
Speaker 10: have a lot of people in town, and you can

606
00:29:32,960 --> 00:29:34,040
Speaker 10: certainly feel it.

607
00:29:34,760 --> 00:29:37,720
Speaker 2: I mean, okay, to be fair, I mean I made joke,

608
00:29:37,760 --> 00:29:40,320
Speaker 2: but this is there's a definite economic reasons here, Like

609
00:29:40,320 --> 00:29:42,120
Speaker 2: how much could Texas make on this thing?

610
00:29:43,040 --> 00:29:47,480
Speaker 10: A leading economists estimate estimates over four hundred million dollars

611
00:29:47,920 --> 00:29:51,120
Speaker 10: for the entire state. Because there's areas that are in

612
00:29:51,400 --> 00:29:55,360
Speaker 10: almost totality, like Austin and Houston. You got the Hill Country.

613
00:29:55,400 --> 00:29:58,440
Speaker 10: I mean, hotels are jammed. My family said to me

614
00:29:58,520 --> 00:30:01,320
Speaker 10: on Friday, we should try to come in for the eclipse.

615
00:30:01,360 --> 00:30:03,840
Speaker 10: And you're looking at you know, to even get here

616
00:30:04,200 --> 00:30:06,120
Speaker 10: was twelve hundred dollars on Sunday.

617
00:30:06,240 --> 00:30:06,880
Speaker 2: Oh my god.

618
00:30:07,120 --> 00:30:09,520
Speaker 10: Well and this is a little late to think about

619
00:30:09,560 --> 00:30:10,560
Speaker 10: that exactly.

620
00:30:10,680 --> 00:30:13,120
Speaker 6: Well, Governor Hoche, the Governor Hoche.

621
00:30:12,880 --> 00:30:14,480
Speaker 5: For the state of New York is telling people like

622
00:30:14,800 --> 00:30:17,760
Speaker 5: because another one is up in Buffalo and Niagara Falls.

623
00:30:18,080 --> 00:30:20,240
Speaker 10: Well, fun fact, that's where I'm from.

624
00:30:20,400 --> 00:30:22,720
Speaker 4: Oh, I'm all eclipse.

625
00:30:22,280 --> 00:30:27,160
Speaker 10: Today, and in Buffalo it's supposed to be better forecast

626
00:30:27,320 --> 00:30:30,360
Speaker 10: actually than here in Dallas. We're a little overcast here.

627
00:30:30,720 --> 00:30:33,720
Speaker 10: But Buffalo apparently is jammed with people as well.

628
00:30:34,320 --> 00:30:35,960
Speaker 2: It is actually quite interesting if you look at like

629
00:30:36,000 --> 00:30:38,360
Speaker 2: an Airbnb map. This came out on on X like

630
00:30:38,400 --> 00:30:40,960
Speaker 2: a few weeks ago. I guess, and you just saw

631
00:30:41,160 --> 00:30:44,160
Speaker 2: exactly where the line was where the eclipse was going

632
00:30:44,200 --> 00:30:49,120
Speaker 2: to go sold out airbnbs, So to your point, all right, Julie, well,

633
00:30:49,160 --> 00:30:50,840
Speaker 2: what what else are you going to be watching? Kind

634
00:30:50,840 --> 00:30:52,320
Speaker 2: of what are some of the highlights here?

635
00:30:53,280 --> 00:30:56,200
Speaker 10: Well, I think there was some questions about the power

636
00:30:56,240 --> 00:30:59,400
Speaker 10: grid because solar will be affected for a short period

637
00:30:59,400 --> 00:31:02,440
Speaker 10: of time, but the power grid in Texas seems very

638
00:31:02,480 --> 00:31:05,640
Speaker 10: prepared to handle that. So we'll be watching that.

639
00:31:05,720 --> 00:31:05,920
Speaker 9: You know.

640
00:31:06,040 --> 00:31:08,800
Speaker 10: We our office is smack in the middle of downtown,

641
00:31:09,000 --> 00:31:12,920
Speaker 10: so they're actually blocking entrances and exits for an hour

642
00:31:13,040 --> 00:31:16,360
Speaker 10: or so. What's really interesting is we're supposed to have

643
00:31:16,400 --> 00:31:19,960
Speaker 10: severe weather this evening, so obviously everybody will be paying

644
00:31:20,000 --> 00:31:23,280
Speaker 10: attention to that. It'll be really interesting and actually, you know,

645
00:31:23,360 --> 00:31:26,040
Speaker 10: hopefully people are smart about when they choose.

646
00:31:25,800 --> 00:31:27,440
Speaker 2: To travel and come in and out of town.

647
00:31:27,720 --> 00:31:30,240
Speaker 10: If there's a horrible rainstorm and everybody's kind of trying

648
00:31:30,280 --> 00:31:31,360
Speaker 10: to get out of Dallas.

649
00:31:32,560 --> 00:31:34,680
Speaker 6: Big dings, big in Texas.

650
00:31:34,920 --> 00:31:35,600
Speaker 2: That sounds fun.

651
00:31:35,800 --> 00:31:37,520
Speaker 10: Everything's bigger here and better.

652
00:31:38,040 --> 00:31:39,840
Speaker 2: Yeah, I do think that the solar thing is also

653
00:31:39,920 --> 00:31:41,440
Speaker 2: kind of interesting, but again, if you're prep for it,

654
00:31:41,480 --> 00:31:42,160
Speaker 2: maybe it's not that big.

655
00:31:42,200 --> 00:31:42,520
Speaker 4: Of a deal.

656
00:31:42,520 --> 00:31:44,880
Speaker 2: All right, Julie, thank you so much. Have fun, Be safe,

657
00:31:44,920 --> 00:31:47,840
Speaker 2: Julie Fine Blueberg, Texas Beera chief joining us.

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00:31:47,880 --> 00:31:48,240
Speaker 4: There.

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00:31:50,600 --> 00:31:54,480
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

660
00:31:54,560 --> 00:31:57,600
Speaker 1: weekdays at ten am Eastern on Apple car Play and

661
00:31:57,600 --> 00:32:00,560
Speaker 1: Android Auto with the Bloomberg Business at You can also

662
00:32:00,640 --> 00:32:03,760
Speaker 1: listen live on Amazon Alexa from our flagship New York

663
00:32:03,840 --> 00:32:07,160
Speaker 1: station Just Say Alexa playing Bloomberg eleven.

664
00:32:08,800 --> 00:32:11,360
Speaker 5: Again, we think about where we are, where we were

665
00:32:11,400 --> 00:32:14,440
Speaker 5: back in October, to where we are now SP five

666
00:32:14,520 --> 00:32:16,680
Speaker 5: hundred up over twenty five percent.

667
00:32:16,840 --> 00:32:20,080
Speaker 6: Just a big, big move, big first quarter as.

668
00:32:19,920 --> 00:32:21,479
Speaker 5: Well to kind of finish that off, and we got

669
00:32:21,480 --> 00:32:22,680
Speaker 5: a little bit more green here today.

670
00:32:22,720 --> 00:32:25,080
Speaker 6: So the question for a lot of folks is, boy,

671
00:32:25,160 --> 00:32:25,960
Speaker 6: that was quick.

672
00:32:25,760 --> 00:32:28,400
Speaker 5: And did I miss that move in the market. Let's

673
00:32:28,480 --> 00:32:30,960
Speaker 5: check in with Walter Todd. He does his stuff for living.

674
00:32:30,960 --> 00:32:34,920
Speaker 5: He's a president, chief investment officer, managing director of Greenwood Capital.

675
00:32:35,520 --> 00:32:38,120
Speaker 6: And Walter, I'm guessing you're in South Carolina.

676
00:32:39,920 --> 00:32:40,280
Speaker 9: I am.

677
00:32:40,440 --> 00:32:45,240
Speaker 11: I've got my clips glasses ready for the viewing later today, and.

678
00:32:45,160 --> 00:32:47,600
Speaker 5: I'm guessing you're pretty happy after your lady game Cocks

679
00:32:47,680 --> 00:32:49,240
Speaker 5: last night put on a heck of a show.

680
00:32:50,520 --> 00:32:51,560
Speaker 9: Yeah, congratulates.

681
00:32:51,600 --> 00:32:53,520
Speaker 11: I gave a shout out to dawns Daley and the

682
00:32:53,560 --> 00:32:56,000
Speaker 11: team for a great win, undefeated season.

683
00:32:56,040 --> 00:32:57,720
Speaker 9: Pretty incredible, Yes, amazing.

684
00:32:58,000 --> 00:33:00,200
Speaker 5: All right, Walter, what are you telling your clients? You're

685
00:33:00,240 --> 00:33:04,000
Speaker 5: about kind of these markets where they've moved, where the

686
00:33:04,000 --> 00:33:05,000
Speaker 5: opportunities are.

687
00:33:05,520 --> 00:33:07,160
Speaker 6: What are you talking? What do you saying to your

688
00:33:07,160 --> 00:33:08,160
Speaker 6: clans these days?

689
00:33:09,280 --> 00:33:10,920
Speaker 11: Yeah, Well, as you kind of alluded to in the

690
00:33:10,960 --> 00:33:13,280
Speaker 11: lead in here, it's been quite a move off the lows,

691
00:33:13,360 --> 00:33:16,000
Speaker 11: and you know, it's this year has been a little

692
00:33:16,000 --> 00:33:18,959
Speaker 11: bit hard to figure out, quite honestly for me. I mean,

693
00:33:18,960 --> 00:33:21,040
Speaker 11: the move off the loads in October and rates peaked

694
00:33:21,080 --> 00:33:23,680
Speaker 11: at five and the SMB started to rise as rates fell.

695
00:33:23,760 --> 00:33:24,800
Speaker 9: That made a lot of sense.

696
00:33:24,840 --> 00:33:27,800
Speaker 11: But as we see here today, you know, up almost

697
00:33:27,840 --> 00:33:30,040
Speaker 11: ten percent for the first quarter for the SMP. You know,

698
00:33:30,360 --> 00:33:33,040
Speaker 11: rates have risen, the expectation for fed cuts has gone

699
00:33:33,040 --> 00:33:35,720
Speaker 11: from seven to less than three. So it's a little

700
00:33:35,720 --> 00:33:38,400
Speaker 11: bit puzzling to see the market kind of screaming in that.

701
00:33:38,520 --> 00:33:41,520
Speaker 11: With that backdrop, having said that, you know, the reason

702
00:33:41,600 --> 00:33:43,960
Speaker 11: for the rate cut push out is because economic data

703
00:33:44,000 --> 00:33:46,080
Speaker 11: has been better and that should be good for earnings.

704
00:33:46,440 --> 00:33:48,640
Speaker 11: I think, you know, depending on your time horizon. In

705
00:33:48,680 --> 00:33:50,720
Speaker 11: the very short term, it feels like this market's a

706
00:33:50,720 --> 00:33:52,480
Speaker 11: little bit tired, kind of churning here.

707
00:33:52,800 --> 00:33:54,800
Speaker 9: We're seeing some rotation underneath the surface.

708
00:33:54,840 --> 00:33:57,480
Speaker 11: So I think you can kind of bide your time

709
00:33:57,520 --> 00:34:00,280
Speaker 11: a little bit here and look for opportunities in the

710
00:34:00,360 --> 00:34:04,320
Speaker 11: volatility that we think will come. But again, it's it's

711
00:34:04,480 --> 00:34:06,920
Speaker 11: it's It reminds me of the quote from Mark Twain.

712
00:34:07,440 --> 00:34:09,320
Speaker 11: It ain't once you don't know that gets you into trouble.

713
00:34:09,320 --> 00:34:10,879
Speaker 11: It's what you know for sure that just ain't.

714
00:34:10,960 --> 00:34:15,000
Speaker 2: So yeah, and Walter, that really depends on the volatility

715
00:34:15,000 --> 00:34:19,160
Speaker 2: actually materializing. What what does that volatility look like, and

716
00:34:19,160 --> 00:34:21,040
Speaker 2: what do you think finally causes that.

717
00:34:22,560 --> 00:34:23,800
Speaker 11: Yeah, well, I think we got a little bit of

718
00:34:23,840 --> 00:34:25,680
Speaker 11: a peek at that last week. If you look at

719
00:34:25,680 --> 00:34:28,720
Speaker 11: the action on Thursday from the you know, the comments

720
00:34:28,719 --> 00:34:33,120
Speaker 11: from Kashkari Thursday afternoon and then the you know, geopolitical issues.

721
00:34:33,160 --> 00:34:34,080
Speaker 9: Going on in the Middle East.

722
00:34:34,160 --> 00:34:36,640
Speaker 11: You saw the market drop you two percent, basically from

723
00:34:36,680 --> 00:34:39,359
Speaker 11: high to low in a couple of hours. So that's

724
00:34:39,480 --> 00:34:41,719
Speaker 11: I think a little snapshot of what could happen. I mean,

725
00:34:41,760 --> 00:34:45,120
Speaker 11: we'll see what happens with the CPI report on Wednesday,

726
00:34:45,160 --> 00:34:46,719
Speaker 11: and if that were to come out a little bit high,

727
00:34:46,800 --> 00:34:49,239
Speaker 11: we could see some more volatility. But you're right, I mean,

728
00:34:49,239 --> 00:34:54,120
Speaker 11: it's been incredibly low volatility backdrop for markets really off

729
00:34:54,120 --> 00:34:56,719
Speaker 11: the lows from last October. So there's no guarantee that

730
00:34:56,760 --> 00:34:59,400
Speaker 11: it will emerge, but I think the odds are that

731
00:34:59,440 --> 00:35:03,320
Speaker 11: it likely will as a function of probably higher rates

732
00:35:04,040 --> 00:35:05,120
Speaker 11: being the catalyst there.

733
00:35:06,160 --> 00:35:09,600
Speaker 5: Walter, Walter, what are you guys doing in the fixed

734
00:35:09,640 --> 00:35:11,719
Speaker 5: income space here? Man, I can just park myself for

735
00:35:11,880 --> 00:35:14,760
Speaker 5: to your treasure and get four point seven eight percent.

736
00:35:14,800 --> 00:35:15,560
Speaker 6: That's a lot too bad.

737
00:35:17,280 --> 00:35:18,040
Speaker 9: Yeah, absolutely.

738
00:35:18,040 --> 00:35:19,920
Speaker 11: I mean I think on the fixed income side, when

739
00:35:20,000 --> 00:35:22,279
Speaker 11: we have managed you know, a good number of fixed

740
00:35:22,320 --> 00:35:25,319
Speaker 11: income assets, I mean we take a Barbelle approach on that,

741
00:35:25,440 --> 00:35:27,480
Speaker 11: you know, as you say, you know, taking advantage of

742
00:35:27,480 --> 00:35:30,160
Speaker 11: the short end, but also you know, taking advantage of

743
00:35:30,239 --> 00:35:32,200
Speaker 11: rates moving higher and starting to step out a little

744
00:35:32,239 --> 00:35:34,960
Speaker 11: bit on the duration spectrum, but still staying you know,

745
00:35:35,040 --> 00:35:38,000
Speaker 11: shorter than the index. The other aspect of fixed income

746
00:35:38,080 --> 00:35:41,480
Speaker 11: is corporate spreads. Those are extremely tight right now. And

747
00:35:41,560 --> 00:35:43,840
Speaker 11: kind of back to the previous point about where where's

748
00:35:43,840 --> 00:35:46,560
Speaker 11: the volatility and it come from? You really haven't seen

749
00:35:46,680 --> 00:35:49,400
Speaker 11: anytime you've seen volatility in the equity market, the little

750
00:35:49,400 --> 00:35:52,360
Speaker 11: that we've seen, you really haven't seen spreads react, and

751
00:35:52,400 --> 00:35:54,160
Speaker 11: so we're kind of watching that to see it kind

752
00:35:54,160 --> 00:35:57,400
Speaker 11: of as a coincident indicator to validate any type of

753
00:35:57,440 --> 00:36:00,880
Speaker 11: sell off maybe has some legs on the corporate bond markets.

754
00:36:00,880 --> 00:36:03,719
Speaker 11: So we were actually transitioning a little bit of weight

755
00:36:03,800 --> 00:36:06,400
Speaker 11: out of corporates into treasuries as a result of those

756
00:36:06,440 --> 00:36:07,120
Speaker 11: tight spreads.

757
00:36:07,560 --> 00:36:09,279
Speaker 2: Yeah, yeah, you know, you and everybody else have been

758
00:36:09,280 --> 00:36:12,160
Speaker 2: waiting for those spreads to change. It's really fascinating. Do

759
00:36:12,200 --> 00:36:14,719
Speaker 2: you think we see for the tenure three percent or

760
00:36:14,760 --> 00:36:15,240
Speaker 2: five percent?

761
00:36:15,320 --> 00:36:21,160
Speaker 9: First, that's a great question. I think we I think

762
00:36:21,200 --> 00:36:22,200
Speaker 9: we can. Uh.

763
00:36:22,480 --> 00:36:25,240
Speaker 11: I think we could see a push back towards five percent,

764
00:36:25,960 --> 00:36:28,120
Speaker 11: you know, in that direction. Whether we whether we clip

765
00:36:28,120 --> 00:36:31,400
Speaker 11: it or not and get back to those highs from October,

766
00:36:31,400 --> 00:36:33,839
Speaker 11: IM not sure, but I think directionally we're gonna move

767
00:36:33,880 --> 00:36:37,080
Speaker 11: towards five percent before we head back below four and

768
00:36:37,080 --> 00:36:39,520
Speaker 11: and maybe head towards three as we moved through this year.

769
00:36:39,560 --> 00:36:42,759
Speaker 11: Because the other dynamic here is the federal government just

770
00:36:42,800 --> 00:36:46,840
Speaker 11: continues to run deficits and spend, you know, have deficit spending,

771
00:36:46,840 --> 00:36:49,480
Speaker 11: which has really kind of been the support for financial

772
00:36:49,480 --> 00:36:51,279
Speaker 11: markets in the economy. If you look over the past

773
00:36:51,320 --> 00:36:54,239
Speaker 11: several years, we've been running you know, five percent deficits

774
00:36:54,600 --> 00:36:56,960
Speaker 11: a year after year, which is you know, certainly helpful

775
00:36:57,000 --> 00:36:59,800
Speaker 11: to uh, the economic environment, financial conditions.

776
00:37:00,520 --> 00:37:03,360
Speaker 5: So on the equity side here, where are you seeing

777
00:37:03,360 --> 00:37:05,680
Speaker 5: opportunities here? Are you kind of all in with some

778
00:37:05,719 --> 00:37:07,480
Speaker 5: of those big growth stocks that have been powering the

779
00:37:07,520 --> 00:37:10,040
Speaker 5: market really for the last eighteen months, you know, the

780
00:37:10,120 --> 00:37:12,879
Speaker 5: nvd's of the world, or are you looking for maybe

781
00:37:12,920 --> 00:37:14,200
Speaker 5: some value in other spots.

782
00:37:15,880 --> 00:37:17,759
Speaker 9: Yeah, for us, it's kind of a bar bell.

783
00:37:17,880 --> 00:37:20,680
Speaker 11: So we certainly have exposure to you know, technology, not

784
00:37:20,840 --> 00:37:24,600
Speaker 11: in Nvidia specifically, but other technology names within the index

785
00:37:24,680 --> 00:37:26,840
Speaker 11: because that is I think a multi year kind of

786
00:37:26,840 --> 00:37:30,400
Speaker 11: growth dynamic with AI, but probably getting a little bit

787
00:37:30,440 --> 00:37:32,920
Speaker 11: stretched here in the short term. On the flip side,

788
00:37:32,960 --> 00:37:36,080
Speaker 11: we also see opportunities and want to have some exposure

789
00:37:36,080 --> 00:37:40,640
Speaker 11: to the value side of the equation, so think energy, materials, industrials,

790
00:37:41,000 --> 00:37:42,839
Speaker 11: And that's something we've really seen over the past month

791
00:37:42,960 --> 00:37:46,520
Speaker 11: is kind of this emerging inflation trade where you've seen

792
00:37:46,840 --> 00:37:51,480
Speaker 11: the commodities kind of catch a bid here. Industrials have

793
00:37:51,560 --> 00:37:55,040
Speaker 11: been consistently good, particularly down the cap scale. So we

794
00:37:55,160 --> 00:37:57,400
Speaker 11: believe you want to have a balance within the portfolio

795
00:37:57,960 --> 00:38:00,680
Speaker 11: between the growth and the value engine energy.

796
00:38:00,719 --> 00:38:02,400
Speaker 2: Thank you very much. So how do you want to

797
00:38:02,440 --> 00:38:04,360
Speaker 2: play that? Like, what's the best way to play the

798
00:38:04,400 --> 00:38:05,480
Speaker 2: recent our performance?

799
00:38:07,320 --> 00:38:10,000
Speaker 11: Yeah, Alex, I know you're a big energy energy fan

800
00:38:10,080 --> 00:38:11,760
Speaker 11: there and follower and expert.

801
00:38:12,719 --> 00:38:12,959
Speaker 9: Yeah.

802
00:38:13,000 --> 00:38:17,279
Speaker 11: So within the portfolio we have, you know, a variety of.

803
00:38:17,200 --> 00:38:18,160
Speaker 9: Different exposures there.

804
00:38:18,239 --> 00:38:20,600
Speaker 11: So certainly on the EMP front, I think this m

805
00:38:20,600 --> 00:38:22,440
Speaker 11: and A that we've seen over the past year is

806
00:38:22,440 --> 00:38:24,840
Speaker 11: going to continue as we move through the rest of

807
00:38:24,840 --> 00:38:27,000
Speaker 11: this year and into twenty twenty five. We also have

808
00:38:27,080 --> 00:38:29,800
Speaker 11: exposures to some of the big integrated names like Exxon

809
00:38:29,880 --> 00:38:33,520
Speaker 11: and Chevron and different strategies. We don't have a ton

810
00:38:33,560 --> 00:38:36,160
Speaker 11: of exposure to the equipment and service space right now,

811
00:38:36,239 --> 00:38:38,799
Speaker 11: but I know that's been catching, you know, catching up

812
00:38:38,840 --> 00:38:41,080
Speaker 11: a little bit to the to the broader energy space.

813
00:38:41,120 --> 00:38:44,000
Speaker 11: So we think having a you know, a broad exposure

814
00:38:44,040 --> 00:38:46,719
Speaker 11: within energy and quite frankly, you know, it's just four

815
00:38:46,719 --> 00:38:49,239
Speaker 11: percent of the S and P, so you can have

816
00:38:49,280 --> 00:38:51,600
Speaker 11: you know, a pretty good overweight with just six to

817
00:38:51,640 --> 00:38:54,200
Speaker 11: seven percent of the portfolio in there. And we still

818
00:38:54,239 --> 00:38:57,440
Speaker 11: think this dynamic of you know, Nvidia, for example, being

819
00:38:57,560 --> 00:39:00,439
Speaker 11: larger than the entire energy space just make a whole

820
00:39:00,440 --> 00:39:01,719
Speaker 11: lot of common sense to us.

821
00:39:01,760 --> 00:39:04,320
Speaker 9: So we think there are opportunities in the energy space.

822
00:39:04,560 --> 00:39:05,400
Speaker 6: How about in healthcare?

823
00:39:05,400 --> 00:39:07,680
Speaker 5: A lot of folks are suggesting that could be a

824
00:39:07,719 --> 00:39:09,640
Speaker 5: defense area, but still some some growth, I guess.

825
00:39:11,280 --> 00:39:15,320
Speaker 11: Yeah, healthcare has been been disappointing, certainly disappointing. You know,

826
00:39:15,360 --> 00:39:17,080
Speaker 11: it was great in twenty twenty two when the market

827
00:39:17,160 --> 00:39:20,000
Speaker 11: was off, it was you know, lagged last year, started

828
00:39:20,040 --> 00:39:22,280
Speaker 11: to kind of emerge early this year, but it's falling

829
00:39:22,360 --> 00:39:22,879
Speaker 11: back off.

830
00:39:23,360 --> 00:39:26,080
Speaker 9: We see a lot of value within healthcare.

831
00:39:26,040 --> 00:39:30,840
Speaker 11: You know, whether that be pharmaceuticals, biotech, healthcare equipment, but

832
00:39:31,280 --> 00:39:34,200
Speaker 11: certainly has lagged the overall market. But we definitely have

833
00:39:34,239 --> 00:39:37,680
Speaker 11: a healthy weight within that sector and see opportunities. One

834
00:39:37,719 --> 00:39:40,759
Speaker 11: of the challenges for healthcare is an election year, which

835
00:39:40,760 --> 00:39:42,600
Speaker 11: tends to be a little bit of a headwind for

836
00:39:42,680 --> 00:39:43,280
Speaker 11: those names.

837
00:39:44,200 --> 00:39:46,480
Speaker 2: What don't you like right now, like what's like Forbotten

838
00:39:46,520 --> 00:39:47,040
Speaker 2: where you are?

839
00:39:48,719 --> 00:39:53,799
Speaker 11: Yeah, so we're we're underweight consumer discretionary right now. We're

840
00:39:53,920 --> 00:39:57,919
Speaker 11: underweight you know, real estate and utilities as interest rates

841
00:39:57,920 --> 00:40:03,120
Speaker 11: sensitive sectors and we're actually slightly underweight technology, which I

842
00:40:03,160 --> 00:40:06,000
Speaker 11: know is it seems like a crazy thing right now,

843
00:40:06,000 --> 00:40:08,640
Speaker 11: but again we think a little bit stretched here in

844
00:40:08,719 --> 00:40:11,200
Speaker 11: the short term given the move that we've seen, you know,

845
00:40:11,280 --> 00:40:13,200
Speaker 11: over the past eighteen months in that sector.

846
00:40:13,800 --> 00:40:16,160
Speaker 2: Yeah, that's so funny. It's like you don't want it,

847
00:40:16,239 --> 00:40:18,359
Speaker 2: but you have to have it, but it's stretched. That's

848
00:40:18,360 --> 00:40:20,000
Speaker 2: a tricky spot, definitely.

849
00:40:19,600 --> 00:40:22,520
Speaker 6: To be That's why people get absolutely this stuff matter's

850
00:40:22,520 --> 00:40:22,919
Speaker 6: tr true.

851
00:40:22,920 --> 00:40:23,960
Speaker 2: That's why I don't do that.

852
00:40:24,160 --> 00:40:26,640
Speaker 5: Walter Todd, thank you so much for joinings our president,

853
00:40:26,719 --> 00:40:30,719
Speaker 5: chie investment officer, Managing director Greenwood Capital. Coming to us

854
00:40:30,760 --> 00:40:33,280
Speaker 5: from the great state of South Carolina. Greenwood, South Carolina,

855
00:40:33,360 --> 00:40:34,680
Speaker 5: or I guess the whole state's going nuts.

856
00:40:34,880 --> 00:40:38,080
Speaker 6: I know. Amy mars is at Bloomberg News down in Washington.

857
00:40:38,080 --> 00:40:40,600
Speaker 6: We chatter with her this morning. She was overcome with

858
00:40:40,680 --> 00:40:44,200
Speaker 6: emotion talking about her University of South Carolina sports lady

859
00:40:44,320 --> 00:40:45,920
Speaker 6: game piks, when's basketball?

860
00:40:45,960 --> 00:40:48,279
Speaker 2: Yeah, no, I you know, puzz looking at me like,

861
00:40:48,360 --> 00:40:50,680
Speaker 2: come on, Alex, I get it a little bit together.

862
00:40:50,880 --> 00:40:52,359
Speaker 2: I got a little bit together.

863
00:40:52,080 --> 00:40:53,279
Speaker 6: For that, got a little bit together.

864
00:40:53,360 --> 00:40:53,560
Speaker 1: Yeah.

865
00:40:53,560 --> 00:40:55,040
Speaker 6: So that was a lot of fun for those folks

866
00:40:55,040 --> 00:40:55,399
Speaker 6: down there.

867
00:40:55,480 --> 00:40:56,880
Speaker 2: So We're done with that. Now we're moving on to

868
00:40:56,920 --> 00:40:58,520
Speaker 2: the men's match. Right, when's that.

869
00:40:58,560 --> 00:41:02,400
Speaker 6: Nine T tonight? So I'm not even nice exactly.

870
00:41:02,520 --> 00:41:04,359
Speaker 2: Wait, we got on the clips and the final four

871
00:41:04,400 --> 00:41:05,240
Speaker 2: in one day.

872
00:41:05,360 --> 00:41:09,320
Speaker 5: And you got coach cal Pari leaving Kentucky for Arkansas.

873
00:41:09,480 --> 00:41:11,399
Speaker 5: Perhaps the biggest news of the day.

874
00:41:11,560 --> 00:41:12,160
Speaker 2: Wow.

875
00:41:12,440 --> 00:41:13,800
Speaker 6: See she has no idea.

876
00:41:13,920 --> 00:41:14,799
Speaker 2: I don't, I really don't.

877
00:41:15,120 --> 00:41:19,600
Speaker 1: This is the Bloomberg Intelligence Podcast, available on apples, Spotify,

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Speaker 1: and anywhere else you get your podcasts. Listen live each

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Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,

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Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.

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Speaker 1: You can also watch us live every weekday on YouTube

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Speaker 1: and always on the Bloomberg terminal