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Speaker 1: Search to Bloomberg Global News. Well, we want to talk
Speaker 1: a little bit more about COVID because this story definitely
Speaker 1: caught our attention. A Bloomberg Opinion column on how a
Speaker 1: vaccine to prevent all COVID is within reach. With the details,
Speaker 1: Let's bring in Lisa Jarvis, the former executive director of
Speaker 1: Chemical and Engineering News. She writes about biotech drug discovery
Speaker 1: in the pharmaceutical industry for Bloomberg Opinion, recently cut up
Speaker 1: to with Dr Anthony Faucy. She joins us on the
Speaker 1: phone in Chicago. Lisa, nice to have you here with
Speaker 1: Katie and myself. When you talk about a vaccine to
Speaker 1: prevent all COVID, we're talking to what about a pen
Speaker 1: coronavirus vaccine? UM, tell us a little bit more about
Speaker 1: what you found out, Hi, Katie, Hi Carol and Katie,
Speaker 1: thank you for having me. Yes, a pan coronavirus vaccine.
Speaker 1: There are two different ways to think about that. One
Speaker 1: would be a vaccine that would protect protect you from
Speaker 1: all the different variants of Stars Kobe too, so for
Speaker 1: the current pandemic. And then another would be a broader vaccine.
Speaker 1: So let's think about future pandemics, um, even things that
Speaker 1: have cropped up in the past, like the original Stars.
Speaker 1: So you would have a broad acting vaccine that would
Speaker 1: protect you against many different kinds of coronaviruses. So, is
Speaker 1: this something that drugmakers are currently working on, because, like
Speaker 1: as you describe in your piece, if you look at
Speaker 1: fires or if you look at Maderna, it seems like
Speaker 1: they've so far have been really focusing on making almost
Speaker 1: variant specific vaccines. Yeah. I think one of the reasons
Speaker 1: for that is that research on these type of uh
Speaker 1: pan coronavirus vaccine feels earlier and risk here um and UM.
Speaker 1: So we have a few companies that are working on
Speaker 1: pan coronavirus vaccines. They're most mostly in the biotech space.
Speaker 1: One of those I did talk about in the article
Speaker 1: That's your Biotechnology. Another one that does have a clinical
Speaker 1: trial running that fits into this category is called Gritstone UM,
Speaker 1: but a lot of the work is still in academic
Speaker 1: and government lab UM. I think what I'm trying to
Speaker 1: argue is that it probably would speed things along to
Speaker 1: get some of the heft of the big pharma world
Speaker 1: behind this concept. UM, because we all know that there
Speaker 1: probably will be more variants, and we all know that
Speaker 1: there will definitely be future pandemics. You know, it was
Speaker 1: funny reading through your column, Lisa, I thought, okay, because
Speaker 1: it does sound like we're chasing these variants with like
Speaker 1: you know, from vaccine to vaccine to vaccine, and it's
Speaker 1: going to be I think you say, like whackamle, right, Like,
Speaker 1: how do you a key up? How long though, would
Speaker 1: it take to create a pan coronavirus vaccine? Right? So,
Speaker 1: and this is something that Dr Fatti will tell you,
Speaker 1: UM to be really cautious about. UM. It could be months,
Speaker 1: but it could be years. And UM, I think it
Speaker 1: probably depends on a few different things. One would be
Speaker 1: how lucky we are and finding I talked about in
Speaker 1: the story this idea you want to find a spot
Speaker 1: on you know, in particular, say the spikes protein of
Speaker 1: the virus that isn't changing, So something that's going to
Speaker 1: look the same from variant to variant. UM sets the
Speaker 1: first step, um And And there's some early clues on that.
Speaker 1: I think we're going to make progress on that quickly.
Speaker 1: Two is being able to test those quickly, and three
Speaker 1: is being able to manufacture those at a scale. You know,
Speaker 1: as you know, we would want to give this to
Speaker 1: billions of people in some of these types of vaccines
Speaker 1: are much different than the ones we take now, so
Speaker 1: you know years, um, but we're gonna be facing this, right,
Speaker 1: We're gonna be facing this virus probably for years. We
Speaker 1: are going to be and so it matters, um And
Speaker 1: And I to distress that it's not that I think
Speaker 1: the variant specific approach, like creating an omicron specific vaccine
Speaker 1: is a terrible plan. It's just that by the time
Speaker 1: we have it, we may have moved on to the
Speaker 1: next variant, right, and so it will no longer be relevant.
Speaker 1: And we know that each of these variance looks a
Speaker 1: lot different from the one before it so far. So UM,
Speaker 1: that's why it's concerning. Lisa, could you walk me through
Speaker 1: the science a little bit here? And I went to
Speaker 1: a lover arts school, so my grasp on all of
Speaker 1: this is very tenuous. But in thinking of about a
Speaker 1: pan coronavirus vaccine, I mean, would it be similar to
Speaker 1: the flu? How? How should I be thinking about this? Um? Yeah,
Speaker 1: somewhat similar to the flu? And I mean, well, I
Speaker 1: should say, in the flu vaccine, they're putting different strains
Speaker 1: in based on what they predict is going to be circulating,
Speaker 1: right in this case, um, And people are working on
Speaker 1: universal vaccines, by the way, and a lot of the
Speaker 1: WORKOUP coronavirus vaccines are borrowing from that. UM. What you
Speaker 1: would be doing is trying to predict, um, what's coming next,
Speaker 1: and trying to find areas again on parts of the
Speaker 1: virus that looks similar across lots of different strains, lots
Speaker 1: of different families. UM. So if you could somehow package
Speaker 1: those all onto into one vaccine. UM. The ones I
Speaker 1: described that are happening UM, that government and academic labs
Speaker 1: are primarily working on are called a nanoparticle. So imagine
Speaker 1: a ball and if you tack a bunch of different
Speaker 1: um parts from various types of viruses onto the surface
Speaker 1: of the ball of the ball, you'd show that to
Speaker 1: your immune system and it would hopefully learn how to
Speaker 1: attack all of them um. So that's one way, and
Speaker 1: then another is you know, again to find this common um,
Speaker 1: this common piece that is across all the different coronaviruses,
Speaker 1: And there's a few different ways that you might think
Speaker 1: about delivering that, which you know could be similar to
Speaker 1: our current MR and a vaccine. Well, if you do
Speaker 1: think about what we did or what companies did right
Speaker 1: with certainly financial backing and help from the government, but
Speaker 1: able to create a vaccine. So if they all were
Speaker 1: working together on some kind of PAN coronavirus working out together,
Speaker 1: maybe it could be done a lot sooner rather than later. Hey, Lisa,
Speaker 1: thanks so much. Lisa Jarvis, as I mentioned earlier, former
Speaker 1: executive editor of Chemical and Engineering News, writes about biotech
Speaker 1: dructic discovery. I'm ready for a pan coronavirus, are you
Speaker 1: That sounds pretty good? Or a vaccine rather pand coronavirus.
Speaker 1: That's right. I don't want the pan coronavirus feel like
Speaker 1: we already have that. It's a good point. This is Bloomberg.
Speaker 1: You're listening to Bloomberg Business Week with Carol Masser and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. We want
Speaker 1: to get to a story that is in the magazine,
Speaker 1: the new issue of Bloomberg Business Week. It is out,
Speaker 1: It's on newsstands, on line at Bloomberg dot com. It's
Speaker 1: a store Katie about a little known fraud prevention company
Speaker 1: that is trying to become the digital intermediary between the
Speaker 1: government and its citizens. It's basically, you know, kind of
Speaker 1: going after our identity. How do you feel about that?
Speaker 1: I would say I don't love it. As someone who's
Speaker 1: very crypto curious, drives to be off the grid, don't
Speaker 1: love it. But it's a fascinating story. And this little
Speaker 1: known company, I mean, it seems like it's fate is
Speaker 1: riding on a very very big claim. Exactly, I d
Speaker 1: dot me. Let's get into it. Blueberg New Senior economics
Speaker 1: writer Sean Donnan wrote it. He joins us on the
Speaker 1: phone in Maryland. Sean, it's an incredible read. First of all,
Speaker 1: I have to be quite honest, I didn't know about
Speaker 1: this company. I D dot ME Who are they Me?
Speaker 1: Is a company based in suburban Virginia. They are about
Speaker 1: a little over a decade old. It was created by
Speaker 1: two veterans who were at Harvard Business School together, a
Speaker 1: guy called Lake Hall and the guy called Matt Thompson,
Speaker 1: and originally was to try and set up a kind
Speaker 1: of marketplace targeting veterans. And they quickly ran into this
Speaker 1: issue of how do we verify that people have served
Speaker 1: and very quickly discovered that actually the software that they
Speaker 1: had which allowed veterans to verify their identity was actually
Speaker 1: the most powerful part of their business, and began focusing
Speaker 1: on on that. And you fast forward to and and
Speaker 1: the pandemic and UM I d ME as as as
Speaker 1: they're called, were hired by By the end of the pandemic,
Speaker 1: it was twenty seven states UH to try and verify
Speaker 1: the identity of people who are applying for unemployment benefits.
Speaker 1: And that was in the midst of a huge amount
Speaker 1: of money going out from Washington being managed by these
Speaker 1: different state agencies that were overwhelmed and also a real
Speaker 1: wave of fraud at the time and concerns about you know,
Speaker 1: and I feel like that was such a big, big trend. Hey, Joel,
Speaker 1: come on in on this. Joe Weber is the editor
Speaker 1: Bloomberg business Week magazine. I do feel like when all
Speaker 1: those benefits are coming out, we were finding out about
Speaker 1: problems in this system and and finding out company about
Speaker 1: companies like this one. Well that's right, and and I
Speaker 1: d ME really helps solve this problem. You know, this
Speaker 1: interface between government agencies and sort of the digital, the
Speaker 1: digital you I guess you could could think of it UM.
Speaker 1: And it really caught my attention. And and was this
Speaker 1: number that UM I d ME put it into the ether,
Speaker 1: which was this four billion dollars of fraud UM. And
Speaker 1: the moment that that was really introduced UM from from
Speaker 1: the company, I remember Sean just being like, well, that's
Speaker 1: a really big number. And so that kind of set
Speaker 1: off like our interest in it because we no one
Speaker 1: had really been able to actually connect dots to to
Speaker 1: anything that that big, and and boy it was big.
Speaker 1: And so I think one of the things that the
Speaker 1: story and the story begins with this is you know
Speaker 1: that there's this number that gets thrown out and all
Speaker 1: of a sudden, the apparatus kind of springs up around
Speaker 1: it too, to show how government might be getting taken
Speaker 1: advantage of that. You know, maybe maybe these programs shouldn't
Speaker 1: even um be around to begin with, because um, you
Speaker 1: know we're we're not able to actually execute them correctly. Um.
Speaker 1: But then I think it becomes more nuanced and Channa'll
Speaker 1: take it back over to you because that for under
Speaker 1: billion number, Uh, how real is it? How do we think? Yeah? So,
Speaker 1: I mean, what's we're really interesting is the CEO Blake
Speaker 1: Hall came out with assessment that essentially half of all
Speaker 1: unemployment benefits that have been paid out by Washington had
Speaker 1: been stolen by fraudsters. He was billing it as the
Speaker 1: biggest cyber heist uh in American history at the time.
Speaker 1: And at the time I was looking that he came
Speaker 1: out with that, I was doing some reporting on the
Speaker 1: unemployment system and people who were struggling to get of
Speaker 1: benefits that that they were owed at the time, and
Speaker 1: one of the things I kept hearing from people was
Speaker 1: that they were running into problems getting through I d
Speaker 1: ME s um verification and and essentially validating that they
Speaker 1: were who they said they were, and that a huge
Speaker 1: number of a of of claims were being held up
Speaker 1: because of this no system. So I I kind of
Speaker 1: immediately or fairly quickly got in touch with Joel and
Speaker 1: and some of my other editors and said, hey, we
Speaker 1: really should be digging into this UH more deeply and
Speaker 1: kind of interrogating this a bit more because and then
Speaker 1: you know, you scratch the surface little when you discover
Speaker 1: that I d ME actually last summer signed a contract
Speaker 1: with the I R S to help UH delivered the
Speaker 1: child tax credit payments that went out and so that
Speaker 1: if you set up an online account with the I
Speaker 1: r S, you have to use I d ME. Now
Speaker 1: they also have an account with the Social Security Administration.
Speaker 1: They also do work with the Veterans Affairs Department, which
Speaker 1: means veterans who are seeking medical care sometimes have to
Speaker 1: set up I d me account altogether. Now, I d
Speaker 1: me says it has sixty eight million registered users. That's
Speaker 1: one in four American adults who, whether they know it
Speaker 1: or not, have an id ME account where it sometimes
Speaker 1: verified their identity there. And it's becoming this kind of
Speaker 1: gatekeeper to government services and benefits. And we had the
Speaker 1: stress test in the pandemic with what happened in the
Speaker 1: unemployment system. And while I d ME says rightly that
Speaker 1: they stopped a lot of fraud and so on, they
Speaker 1: also had a lot of problems associated with their software
Speaker 1: that raised a lot of questions about who we should
Speaker 1: allow to be the kind of gatekeeper the government services
Speaker 1: and should it be a for profit private company. So,
Speaker 1: you know, one of the things that the story goes
Speaker 1: into is sort of this this Kaka esque world that
Speaker 1: can descend upon you in when you try to prove
Speaker 1: who you say you are, and that goes awry and
Speaker 1: worth mentioning that majority of people who use I d
Speaker 1: ME probably don't have this problem, but but how weird
Speaker 1: can it get? John? The identity purgatory, I think is
Speaker 1: what you called it. Yeah, and uh, one California state
Speaker 1: assemblyman called it identity verification jail essentially. And we've also
Speaker 1: had people out in California. Um, uh, we've had activists
Speaker 1: out there, you know, say, look, we're essentially convicting people
Speaker 1: of a crime simply you know, by algorithms, sometimes by
Speaker 1: blocking them from from benefits and forcing them into this
Speaker 1: appeals process. Look, it's I got a had a call
Speaker 1: today from and that right Warmington, who we quote in
Speaker 1: the story. He's a sixty five year old healthcare administrator.
Speaker 1: She just uh started work at a at at a
Speaker 1: community clinic. Recently. She's in a better place than she
Speaker 1: was a few months ago. Uh, but she spent a
Speaker 1: lot of her spring last year just trying to get
Speaker 1: through the I d ME system. And what she said
Speaker 1: it was it was like opening a door and running
Speaker 1: into a brick wall over and over again because when
Speaker 1: she tried, essentially one of the one of the issues
Speaker 1: that you take a selfie of yourself, they match that
Speaker 1: two scans of your driver's license or your passport or
Speaker 1: other document. There's a facial recognition software and it often
Speaker 1: doesn't work. And then when that doesn't work and you
Speaker 1: have three tries, you get locked out for seventy two hours. Eventually,
Speaker 1: in that right, Warrington's and the lawyers, and it was
Speaker 1: lawyers to help her get through the system. We get
Speaker 1: a runch on. But that's terrifying. Um. When I was
Speaker 1: reading that, Bloomberg News Senior economics writer Sean Donnin and
Speaker 1: of course they'll editor editor U Booberg Business Week this
Speaker 1: story in the magazine. Do check it out. This is
Speaker 1: Bloomberg Business Week with Carol Masser and Bloomberg Quick takes
Speaker 1: Tim Stinovic on Bloomberg Radio. Um, and we want to
Speaker 1: get to this next story. It is the most read
Speaker 1: on the Bloomberg terminal today. It's about an individual who
Speaker 1: says U s stocks are in a super bubble, so
Speaker 1: get ready for a super crash. Let's bring in Bloomberg
Speaker 1: News Editor at Large Eric Shatzker for more on his
Speaker 1: conversation with longtime value investor Jeremy Grantham. This conversation, by
Speaker 1: the way, to be featured in a front row segment
Speaker 1: next week. Eric's story. As I said on the Bloomberg
Speaker 1: Terminal and Eric is on the phone in New York City, Eric,
Speaker 1: good to have you here. Um, Jeremy Grantham, You know,
Speaker 1: give us a little context for our world. I think
Speaker 1: there's many out there who know who he is. There
Speaker 1: probably are some that don't. Sure for those who don't,
Speaker 1: he's a value investing legend. He's been in the markets
Speaker 1: for fifty years. He's been calling market bubbles almost as long.
Speaker 1: People think of him as a perma bear, But to
Speaker 1: be honest, the reputation is a little unfair. Yes, he
Speaker 1: has called bear markets before in Japan and the nineteen eighties,
Speaker 1: in tech stocks in the late nineties, early two thousands,
Speaker 1: and in the housing market heading into the financial crisis.
Speaker 1: But he has also at times been pretty constructive on
Speaker 1: the market. Back on March to nine of two thousand nine,
Speaker 1: the day the SMP five hit its post crisis low,
Speaker 1: he said it was time to get back into the market.
Speaker 1: But now, as you said, he's calling this a super bubble,
Speaker 1: only the fourth in one hundred years, and he is
Speaker 1: predicting one epic crash. And Eric, let's walk through some
Speaker 1: of the alarm bells that he's seeing. What what is
Speaker 1: giving him the confidence to say that this We are
Speaker 1: in the super bubble now and it could be polic soon.
Speaker 1: He says. The pattern that has played out in the past,
Speaker 1: in two thousand and in two thousand and eight, and
Speaker 1: also in Japan, I should add in the nineteen in
Speaker 1: the late nineteen eighties is repeating itself. First, there's what
Speaker 1: he calls a blowoff, which is a rapid run up
Speaker 1: inspectative stock prices, which we had uh in late two
Speaker 1: thousand excuse me late early. Then the most speculative names
Speaker 1: in the market start to collapse, and that began in February,
Speaker 1: and a good indicator of that is cathy Woods Arc
Speaker 1: Innovation e TM, which is down from its high. And
Speaker 1: then he says, stalk the typically outperform in a bull market,
Speaker 1: like the mid caps, the Russell two thousand begin to
Speaker 1: underperform the higher quality blue chip names, and that's exactly
Speaker 1: what played out. He says, that is a recipe for
Speaker 1: a crack in the market. And furthermore, this is all
Speaker 1: statistically based. If you look at the trend of the SMPF,
Speaker 1: I've hundred over a very long period of time. What's
Speaker 1: happening now is a multi sigma deviation from the trend
Speaker 1: and that has always, in his view, been followed by
Speaker 1: a market crash. All right, you did have a conversation
Speaker 1: with him. We want to play a little clip um
Speaker 1: and this is just a segment Eric where you ask
Speaker 1: Jeremy Grantham, if this is a sell off, what's the bottom?
Speaker 1: Check it out, everybody. I think the crazy behavior, the
Speaker 1: peak of crazy behavior is behind us, I really do.
Speaker 1: I think we're now in the by the dip mode,
Speaker 1: which the super bubbles specialize in. You don't have two
Speaker 1: years of buying frenzy dying overnight. Typically so even you
Speaker 1: had some magnificent rallies. And by the dip is the
Speaker 1: watchword of practically every brokerage house out there, and it
Speaker 1: always is. You never, almost never have a major brokerage
Speaker 1: house say the game's over, guys, duck, it doesn't happen.
Speaker 1: The commercial imperative is it's overwhelming to stay bullish. That's
Speaker 1: how you make money. That's Jeremy Grantham. Eric's conversation a
Speaker 1: front row conversation that you can hear and its entirety
Speaker 1: next week. You know, Eric. What's interesting is He's right.
Speaker 1: Every Wall Street house I feel like has been coming
Speaker 1: out since the sell off began this year saying we
Speaker 1: we eat bye bye. It's still okay, It's still okay,
Speaker 1: Jeremy Grantham, I mean, how do we as you said,
Speaker 1: he's made some great calls. I'm always I always wonder
Speaker 1: about one of these kind of iconic investment voices, how
Speaker 1: we should read them, because has he gotten everything right?
Speaker 1: Or you know, how do we know? No? No, no no,
Speaker 1: And that is where we have to bring some skepticism
Speaker 1: to the conversation. He's a value investor, and let's not
Speaker 1: forget that. In the years following the financial crisis, and
Speaker 1: not just a couple of years, a decade plus value
Speaker 1: grammatically underperformed. So anybody who listened to the value crowd
Speaker 1: ended up after those ten years a lot poorer, right,
Speaker 1: having missed out on a lot of potential gains they
Speaker 1: would have had with a much more diversified portfolio of stocks,
Speaker 1: embracing companies like Amazon, Facebook, Tesla and the like. And
Speaker 1: so you have to look at it into perspective. Um,
Speaker 1: there's no question that the market has reached some extraordinary highs.
Speaker 1: Back in November, the SMP five touched north, and he's
Speaker 1: saying that in the next crash is going to go
Speaker 1: down to That's where the long term historical norm is
Speaker 1: right now, he says, and I'll repeat that in every
Speaker 1: past super bubble, that is what's happened. And furthermore, this
Speaker 1: time around, the Fed really doesn't have much animal left
Speaker 1: because we're living in inflationary times and they can't pump
Speaker 1: liquidity into the market because that would amount to sort
Speaker 1: of gasoline on the inflation fire. Right. It's incredible, and
Speaker 1: as we said, the most read story on the Bloomberg today, Eric,
Speaker 1: thank you so much, Bloomberg News Editor at Large, Eric
Speaker 1: Shatska sharing some of what he talked about with Jeremy Grantham,
Speaker 1: as he mentioned longtime value investor. Check it out the
Speaker 1: story right now at Bloomberg dot com. This is Bloomberg Radio.
Speaker 1: You're listening to Bloomberg Business Week with Carol Masser and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. This week,
Speaker 1: the National Retail Federation and hosted its Retail Big Show.
Speaker 1: It happened in New York City virtually and in person.
Speaker 1: It comes at a time, Katie, when I feel like
Speaker 1: retail continues to adapt and embrace that omni channel strategy
Speaker 1: that everybody talks about, but they still are dealing with
Speaker 1: supply chain challenges and higher costs of doing business and
Speaker 1: just finding workers. Right, Absolutely, all those questions is too
Speaker 1: we try to figure out the state of the American consumer,
Speaker 1: what they're spending money on. One that shifts back to services.
Speaker 1: So really interesting time for retail. All right, Let's bring
Speaker 1: in Nicki Barchi's vice president of Retail Innovation over an Aptos.
Speaker 1: They provide hardware and software services to the retail industry.
Speaker 1: They've got clients like Adidas. B j's Louis Vuitton tapestry
Speaker 1: so many. She joins us on the phone from Denver, Nikki,
Speaker 1: good to have you here with us. How are you
Speaker 1: and how's the retail industry doing. I'm I'm good. I'm
Speaker 1: recovering from COVID myself, which probably is a good analogy
Speaker 1: industry is doing right now. On Yeah, I would say
Speaker 1: that the holidays season was amazing. It was beyond amazing,
Speaker 1: like better than even with the supply chain issues. Retailers
Speaker 1: didn't have to promote nearly so much. So a lot
Speaker 1: of those benefits, even in the face of inflation, really came,
Speaker 1: you know, to the bottom line of retailers, not something
Speaker 1: that they had to had to give away in in
Speaker 1: cost or and discounts from two consumers. So I know,
Speaker 1: some of the headlines had said that the monthly spending
Speaker 1: in December was down, but that was on numbers that
Speaker 1: year over year were amazingly up. And obviously, I mean
Speaker 1: behavior shifted during the pandemic. My behaviors definitely shifted during
Speaker 1: the pandemic, but so did how people spend money. Obviously,
Speaker 1: online shopping was huge during the pandemic. Still is I mean,
Speaker 1: what is the future of actual physical stores look like?
Speaker 1: From your vantage point, Yeah, I think there's there's a
Speaker 1: couple of things that are happening. So I do think
Speaker 1: that consumers want to go back to stores, and I
Speaker 1: think that a Macron has definitely put a bit of
Speaker 1: a crimp in that and it still remains to be
Speaker 1: seeing the news is looking great that uh there might
Speaker 1: be some much better bounced back for store traffic, you know,
Speaker 1: coming the spring. But um, I think that the combination
Speaker 1: of consumers are going to give up the convenience and
Speaker 1: some of the habits and confidence that they've developed in
Speaker 1: online shopping over the last two years. But uh, instead
Speaker 1: we'll be seeking confuse that kind of more seamlessly into
Speaker 1: the store experience. So experiences an important word in the
Speaker 1: retail world these days because in order for consumers to
Speaker 1: have it be worth coming to the store, there has
Speaker 1: to be some kind of experience that that is there
Speaker 1: for them to drive that kind of traffic. And whether
Speaker 1: that's something that's based off of convenience, like, um, you know,
Speaker 1: the ease of returning something that you bought online that
Speaker 1: you could just take it to your local store, or
Speaker 1: the ease of the pickups for a buy online pick
Speaker 1: up in store order um, but also the entertainment aspect
Speaker 1: of experience UM, and even just that interacting with other
Speaker 1: human beings in real life. I think all our pieces
Speaker 1: of the puzzles for for bringing consumers back to stores
Speaker 1: and for retailers doing the things that they need to
Speaker 1: do to make those experiences UM valuable and enjoyable for consumers.
Speaker 1: So what's changed, you know, dramatically because of the pandemic.
Speaker 1: For sure that that that omni channel aspect of using
Speaker 1: stores much more heavily in order to supplement online buying.
Speaker 1: So uh, you know, during the pandemic, there were as
Speaker 1: many compacitive constraints around warehouses themselves and how many workers
Speaker 1: you could have in a warehouse at any given time, uh,
Speaker 1: and things like that in order to be able to
Speaker 1: maintain social distancing. So uh, you know, even though consumer
Speaker 1: volume was up tremendously, online retailers couldn't just fulfill that
Speaker 1: straight of warehouses. And the retailers that were most successful
Speaker 1: in adapting to that online surge were really the ones
Speaker 1: that were able to tap into story inventory and continue
Speaker 1: to distribute inventory to stores so that they could leverage
Speaker 1: that inventory for shoppers, both in terms of proximity to
Speaker 1: that shopper, but also just you know, I can have
Speaker 1: five people in this store. That are five more people
Speaker 1: than I could put in my warehouse. Yeah, no, I
Speaker 1: get it. Hey, Nikki, thank you so much. Nicki Baird,
Speaker 1: VP of Retail Innovation, over at Aptosa, on the phone
Speaker 1: from Denver. I don't know how you feel, back steph, Katie.
Speaker 1: I I'm tired of stuff. I am tired of stuff.
Speaker 1: I mean I live in a two bedroom apartment in Manhattan.
Speaker 1: I just don't have that much room. Truly, I would
Speaker 1: like to get back to traveling. I'm right ready to
Speaker 1: experience things. Yeah, but you let me drive? No, no, no, please,
Speaker 1: I'll do I want to drive. It's a good question
Speaker 1: to dry. This is the Drive to the Globe on
Speaker 1: bloo Bird Radio. It is time for the Drive to
Speaker 1: the Clothes. With us is Ben Kirby, co head of
Speaker 1: investments and portfolio manager at the independent global investment management
Speaker 1: firm Thornburg Investment Management. They have forty nine billion dollars
Speaker 1: in client assets. Ben joins us on the phone in
Speaker 1: Santa Fe, Mexico, which is where the company is based.
Speaker 1: So what I really want to know is do you
Speaker 1: went into Julia Roberts. Yeah, she lives. She she has
Speaker 1: a place here in New Mexico. So absolutely, big fan. Okay, No,
Speaker 1: let's get serious. It's been a tricky day in terms
Speaker 1: of the markets, and I think we're trying to figure
Speaker 1: out are we settling in or this is just the
Speaker 1: volatility everybody's been talking about as the market recalibrates itself. Ben,
Speaker 1: how do you see it? Yeah? Well, thanks thanks for
Speaker 1: having me on the show. I mean, look, I think
Speaker 1: that the volatility today is just um an indication of
Speaker 1: what's going to come for the rest of the year.
Speaker 1: There's a lot of cross current and we have, you know,
Speaker 1: a very strong economy, but we also have you know,
Speaker 1: tightening tiny monetary conditions, and I think I think we're
Speaker 1: going to have a lot of chances to to pick
Speaker 1: stocks and a lot of chances to uh either add
Speaker 1: die for clients, or or destroy value in the next
Speaker 1: in the next few months. Well, Ben, let's name some names.
Speaker 1: Where do you position yourself maybe hide yourself from some
Speaker 1: of the volatility in this environment. What do you like
Speaker 1: right now? So I like I like strong dominant companies. Um,
Speaker 1: I think I think the place you don't want to
Speaker 1: be right now is in companies that are losing money
Speaker 1: or companies that are you know, really investing all of
Speaker 1: their growth profits, trying to trying to gain market share
Speaker 1: and and and trying to do a land grab. So
Speaker 1: focus on companies that are durable, that are strong, that
Speaker 1: have cash generation, that have most around the business. A
Speaker 1: few names I guess I would highlight within semiconductors, we
Speaker 1: like Broadcom and Taiwan Semiconductor. We can talk about those
Speaker 1: two strong, dominant companies that are generating a lot of
Speaker 1: cash flow, that are growing, that have dividends. I think
Speaker 1: generally where you want to be similarly, you know, with
Speaker 1: an energy, I think you want to pick you know,
Speaker 1: some names that that have some some secular growth, but
Speaker 1: also that have a lot of a lot of cash
Speaker 1: generations of something like a total Energies in France is
Speaker 1: another big holding and struggle of our portfolios. Well, you
Speaker 1: know it's interesting too. I'm so glad we're talking with
Speaker 1: you because we've got a story in the magazine we're
Speaker 1: talking about um. Eric Shatzer had a conversation with Jeremy Grantham,
Speaker 1: who's calling that, you know, saying that we're in a
Speaker 1: super bubble and we're see basically a superbust um. But
Speaker 1: there are people saying it's time to look at your portfolio,
Speaker 1: that the US has had some incredible gains and it's
Speaker 1: time to start looking overseas. How do you see that
Speaker 1: as well, the US versus the rest of the world.
Speaker 1: I think there's a good argument for that. Uh, Certainly,
Speaker 1: valuations are a bit over outside the US. Um the
Speaker 1: rest of the world is not as far in the
Speaker 1: economic cycle as as the US, so the US is
Speaker 1: going to be hiking rates aggressively. Inflation is definitely more
Speaker 1: of a concern the US, and it is in Europe
Speaker 1: and the emerging markets. So simple economic cycle positioning, I
Speaker 1: think I think there's a there's a good argument for
Speaker 1: international companies. I think I think more than that though,
Speaker 1: it's that that's that sort of super bubble concept versus
Speaker 1: a super superbus. There's actually a lot of companies that
Speaker 1: are not in a super bubble. You know. So I
Speaker 1: mentioned Hotel. This company is trading at a at a
Speaker 1: at a single digit p it has a five percent
Speaker 1: dividend yield, it has a nine percent free cash yield.
Speaker 1: That's not a bubble. That's actually a very attractive, reasonable valuation. Similarly,
Speaker 1: something like broad Com that I mentioned trading at a
Speaker 1: mid teens p. So there are bubbles out there. As
Speaker 1: an active manager, our job is to avoid those bubbles
Speaker 1: and to find the places that still have a lot
Speaker 1: of value. And But in thinking about the volatility that
Speaker 1: we're seeing, and to your point that perhaps this is
Speaker 1: just a preview of what's to come, how does the
Speaker 1: FED and their plans play into this, How much of
Speaker 1: this volatility that we are seeing in are yet to see?
Speaker 1: How much can we blame the FED here? I think
Speaker 1: we blend the FET a lot. It's going to be
Speaker 1: really really the debate right now is are we gonna
Speaker 1: have a soft landing or hard landing? Um, But we're
Speaker 1: gonna have some kind of a landing, So soft soft
Speaker 1: landing can be the you know, stocks are volato, but
Speaker 1: maybe they end the year at a similar place where
Speaker 1: they are today, maybe even up you know, mid single digits.
Speaker 1: Hard landing is we're going to get a correction at
Speaker 1: some point, you know, in this year. Overall, I think
Speaker 1: I think that that is late, that that is behind
Speaker 1: the game. They're they're raising race trying to catch up.
Speaker 1: Um or they will be soon. UM. There's still a
Speaker 1: lot of time left on the game clock this year,
Speaker 1: so we'll have to see how things play out. I
Speaker 1: think it's fascinating what you just said, Katie. I just
Speaker 1: think about the Grantham story with Eric and this whole
Speaker 1: idea that you know, there's some that have just had
Speaker 1: such a tremendous run up, but as we're just hearing
Speaker 1: right now, that's not the case for every name that's
Speaker 1: out there. So um, but let's talk a little bit
Speaker 1: more about some of the names that you like and
Speaker 1: fundamentally why you like it on that list and correct
Speaker 1: me if I'm wrong. Are some big US financials right,
Speaker 1: like a AP Morgan or Visa? Yeah? Absolutely so. So
Speaker 1: JP Morgan really fits the bill or something for you know,
Speaker 1: one of those durable companies that's not going to go away. Um.
Speaker 1: Over the last five years, JP Morgan has grown their
Speaker 1: earnings per share at a fifteen percent rate and the
Speaker 1: SMP has been thirteen percent. So here's a here's a
Speaker 1: big bank that's grown faster than the market over the
Speaker 1: last ten years. They're growing earnings that at nine percent
Speaker 1: compounded and the market is a percent. So the market
Speaker 1: includes all these big tech names, all these companies with
Speaker 1: much higher evaluations. JP Morgan is outgrowing the market for
Speaker 1: five and ten years. It trades it a p of
Speaker 1: twelve versus the market at twenty. As a divinields with
Speaker 1: two point seven percent. So you kind of put that
Speaker 1: all together and look, there's going to be volatility in
Speaker 1: JP Morgan as rates go up and rates go down
Speaker 1: as we you know, sort of price in consumer credit
Speaker 1: and other other drivers of big financials. But the big picture,
Speaker 1: you have a growth entity here with the dividend trading
Speaker 1: at a massive discount to the market. And ben to
Speaker 1: circle back on what you said about, you know, your
Speaker 1: interest in companies that are earning money right now that
Speaker 1: you know do have strong uh you know financials. Does
Speaker 1: that mean you're avoiding growth stocks? How does how does
Speaker 1: tech look in this environment to you? Speculative tech looks
Speaker 1: tough um and we've been we've been saying that for
Speaker 1: a while. So technology companies that are they are really
Speaker 1: trying to enter new markets. Companies might only have one
Speaker 1: product and they're you know, really having to spend aggressively
Speaker 1: to try and get market share. You know, the capital
Speaker 1: markets are closing to those companies they have been able
Speaker 1: to raise debt, raise equity at really attractive rates, and
Speaker 1: funding is just getting a lot more challenging. So those
Speaker 1: companies that have no earnings have gone down a lot
Speaker 1: this year. They're essentially trading like hundred year bonds, and
Speaker 1: and they should. Within tech though, there there are still
Speaker 1: a lot of places that are you know, good quality
Speaker 1: companies that have interesting free cash flow. So I mentioned Broadcom.
Speaker 1: We also like Google, so big, big dominant companies with
Speaker 1: good balanchiet structural growth. You know, they may not be
Speaker 1: the flavor of the month right now, but over time,
Speaker 1: their long term competitive position is undiminished. And that's really
Speaker 1: what we're looking for as fundamental investors. Fundamentals, right balance sheets,
Speaker 1: This stuff really matters. Ben Kirby, thank you so much,
Speaker 1: co head of Investments imagining director at Thornburg Investment Management UM,
Speaker 1: joining us on the phone from Santa Fe, New Mexico.
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