1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you. 2 00:00:05,360 --> 00:00:07,680 Speaker 1: Along with my co host Lisa Brahma Waits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor, find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:23,920 Speaker 1: at Bloomberg dot com. Stocks are up, giving a little 8 00:00:23,920 --> 00:00:26,600 Speaker 1: bit of a pop, although you know, really the action 9 00:00:27,120 --> 00:00:30,200 Speaker 1: is underneath the surface. There has been a rotation out 10 00:00:30,240 --> 00:00:34,080 Speaker 1: of those momentum names tech for example, and into value 11 00:00:34,240 --> 00:00:37,200 Speaker 1: led by banks. Interestingly enough, we are getting a little 12 00:00:37,200 --> 00:00:40,080 Speaker 1: bit of yield curve skeepening, but not not a whole 13 00:00:40,120 --> 00:00:42,640 Speaker 1: lot to justify the move that we have seen. We 14 00:00:42,680 --> 00:00:45,080 Speaker 1: are so lucky to have with us on Wheti Bajugana. 15 00:00:45,200 --> 00:00:47,320 Speaker 1: She is senior portfolio manager and a head of multi 16 00:00:47,360 --> 00:00:52,080 Speaker 1: asset Strategy at Columbia thread Needle Investments, which oversees almost 17 00:00:52,080 --> 00:00:54,560 Speaker 1: five hundred billion dollars on wheat. Thank you so much 18 00:00:54,600 --> 00:00:57,400 Speaker 1: for being with us. I want to just start with 19 00:00:57,600 --> 00:01:00,400 Speaker 1: what's getting you excited right now? I mean this sort 20 00:01:00,400 --> 00:01:03,960 Speaker 1: of trade out of momentum and into value. Do you 21 00:01:03,960 --> 00:01:08,199 Speaker 1: think of this is something that has legs very short 22 00:01:08,360 --> 00:01:13,000 Speaker 1: term Li Sa I have been watching this rotation as well, 23 00:01:13,240 --> 00:01:17,720 Speaker 1: and on the equity front, it's value versus growth. But 24 00:01:17,880 --> 00:01:20,480 Speaker 1: if you look at the bond market, it's really quite 25 00:01:20,480 --> 00:01:25,040 Speaker 1: correlated to what's happening to rate. And we have seen 26 00:01:25,200 --> 00:01:30,680 Speaker 1: a few days now of sustained sell off in UM bonds, 27 00:01:30,720 --> 00:01:35,600 Speaker 1: which is leading this rotation UM in the stocks also, 28 00:01:36,480 --> 00:01:40,160 Speaker 1: and really the drivers for both markets is the same. 29 00:01:40,440 --> 00:01:46,920 Speaker 1: It is some sense um in the markets of reduced risk, 30 00:01:47,480 --> 00:01:51,360 Speaker 1: the escalation of some of the issues that had dominated 31 00:01:51,480 --> 00:01:57,920 Speaker 1: UM folks mindset in August. So and we we've seen, 32 00:01:57,960 --> 00:02:01,560 Speaker 1: as you mentioned, some rotation driven by rates. What is 33 00:02:01,600 --> 00:02:05,280 Speaker 1: your kind of economic backdrop in your base case, We've 34 00:02:05,320 --> 00:02:10,120 Speaker 1: seen the consumer really kind of supporting in this economy 35 00:02:10,200 --> 00:02:12,840 Speaker 1: in the face of kind of what some weakening manufacturing data. 36 00:02:13,960 --> 00:02:18,240 Speaker 1: Right So that's why I'm a little uh skeptical of 37 00:02:18,440 --> 00:02:21,720 Speaker 1: the rotation that we are seeing right now. It's definitely 38 00:02:21,720 --> 00:02:25,240 Speaker 1: worth watching. But what would get me really excited to 39 00:02:25,280 --> 00:02:28,720 Speaker 1: answer Lisa's question, would be if we begin to see 40 00:02:28,960 --> 00:02:33,680 Speaker 1: some improvement on the economic front, and that Paul still 41 00:02:33,720 --> 00:02:36,920 Speaker 1: remains to be seen In fact, if you look at 42 00:02:36,919 --> 00:02:41,440 Speaker 1: the data that's been released in September so far, we're 43 00:02:41,480 --> 00:02:45,600 Speaker 1: beginning to see cracks on the consumer side of the economy. Also, 44 00:02:45,960 --> 00:02:48,800 Speaker 1: we saw a leg down in the consumer sentiment in 45 00:02:48,840 --> 00:02:52,640 Speaker 1: the Michigan survey for August, and if we look at 46 00:02:52,680 --> 00:02:56,840 Speaker 1: the payroll report, we're seeing slow down in hiring also. 47 00:02:57,080 --> 00:03:00,720 Speaker 1: So I would be super excited if we see improvement 48 00:03:00,840 --> 00:03:04,520 Speaker 1: in economic data. That would give me confidence that the 49 00:03:04,560 --> 00:03:07,919 Speaker 1: movie you're seeing in Rapes is sustainable, and that would 50 00:03:07,960 --> 00:03:12,880 Speaker 1: make more sense to me than one that's probably based 51 00:03:13,080 --> 00:03:18,000 Speaker 1: more on um, you know, a sense of the escalation, 52 00:03:18,440 --> 00:03:21,160 Speaker 1: even though none of the underlying issues in my mind 53 00:03:21,200 --> 00:03:23,200 Speaker 1: have been resolved. Okay, So, given the fact that you 54 00:03:23,240 --> 00:03:26,840 Speaker 1: don't necessarily see a sea change underpinning the move that 55 00:03:26,880 --> 00:03:30,120 Speaker 1: we have seen, are you selling, for example, bank stocks 56 00:03:30,160 --> 00:03:33,919 Speaker 1: into the rally and are you buying bonds? We are 57 00:03:34,000 --> 00:03:38,760 Speaker 1: maintaining very much the mindset we had in August, which 58 00:03:38,840 --> 00:03:42,400 Speaker 1: is that we are slightly underweight equities and for us 59 00:03:42,480 --> 00:03:46,560 Speaker 1: Lisa at an aggregate level, that would be selling equities 60 00:03:46,560 --> 00:03:49,200 Speaker 1: on rallies and buying bonds. So that's what that's that's 61 00:03:49,440 --> 00:03:52,840 Speaker 1: what you've been doing. For example, yes, that's right. So 62 00:03:52,880 --> 00:03:55,520 Speaker 1: and we just you know, we talked about, you know, 63 00:03:55,600 --> 00:03:57,800 Speaker 1: what are the key drivers for this market, and you know, 64 00:03:57,880 --> 00:04:02,240 Speaker 1: we can't escape the fact that global trade tensions discussions 65 00:04:02,280 --> 00:04:05,360 Speaker 1: between the US and China more likely than not, are 66 00:04:05,480 --> 00:04:07,520 Speaker 1: you know, kind of influencing day to day moves in 67 00:04:07,560 --> 00:04:10,040 Speaker 1: the market. How are you discounting kind of in Europe 68 00:04:10,040 --> 00:04:12,920 Speaker 1: base case outlook kind of what is a very uncertain 69 00:04:13,160 --> 00:04:17,240 Speaker 1: trade environment between US and China. UM, it happened very 70 00:04:17,240 --> 00:04:20,560 Speaker 1: difficult to get that call, right, Paul Um. So we 71 00:04:20,640 --> 00:04:25,480 Speaker 1: are staying out of it. We don't see any improvement 72 00:04:25,600 --> 00:04:28,600 Speaker 1: other than really just the mood music on on the 73 00:04:28,640 --> 00:04:33,640 Speaker 1: trade front. That it's no real substantial movement on the 74 00:04:33,680 --> 00:04:36,720 Speaker 1: trade front. There's a lot of back and forth. We 75 00:04:36,760 --> 00:04:40,719 Speaker 1: don't believe we would see a substantial deal anytime soon, 76 00:04:41,440 --> 00:04:45,000 Speaker 1: and so we are staying on the way risk affettes 77 00:04:45,120 --> 00:04:49,680 Speaker 1: in our portfolios. It would be helpful if um we 78 00:04:49,920 --> 00:04:53,599 Speaker 1: see the breaksit issues get resolved. But you know, even there, 79 00:04:54,440 --> 00:04:57,640 Speaker 1: the only positive that I've seen is that there is 80 00:04:57,800 --> 00:05:02,680 Speaker 1: some lowering of the risk of UM no deal hard brexit. 81 00:05:03,400 --> 00:05:07,280 Speaker 1: But by and large, the thing that's giving us most 82 00:05:07,320 --> 00:05:10,200 Speaker 1: confidence really is the fact that the FED is thing 83 00:05:10,240 --> 00:05:14,480 Speaker 1: accommodative threads, not of its not complete pivot on their 84 00:05:14,560 --> 00:05:18,600 Speaker 1: strategy since the beginning of the year, and is um 85 00:05:18,640 --> 00:05:22,960 Speaker 1: maintaining a policy stance which is supportive of risk that 86 00:05:23,480 --> 00:05:29,679 Speaker 1: prevents us from getting up two nervous about the market 87 00:05:30,360 --> 00:05:33,880 Speaker 1: because there is a backstop. So, given the fact that 88 00:05:33,920 --> 00:05:37,080 Speaker 1: the FED is likely to remain accommodative and perhaps provide 89 00:05:37,080 --> 00:05:39,920 Speaker 1: even more accommodation in the very near near term, I'm 90 00:05:39,920 --> 00:05:42,240 Speaker 1: wondering how you feel about credit right now. You talked 91 00:05:42,279 --> 00:05:45,640 Speaker 1: about buying bonds. Does that extend to risk your bonds 92 00:05:45,680 --> 00:05:48,680 Speaker 1: at a time when companies such as for example today 93 00:05:48,760 --> 00:05:51,080 Speaker 1: Kraft Heins is looking to push out their maturities so 94 00:05:51,240 --> 00:05:55,240 Speaker 1: longer dated debt and lock in these lower borrowing costs. Yes, 95 00:05:55,279 --> 00:05:59,159 Speaker 1: I think completely so doing a really good UM, you 96 00:05:59,200 --> 00:06:03,000 Speaker 1: know the job taking advantage of the yield environment. I 97 00:06:03,040 --> 00:06:06,239 Speaker 1: think we still don't really like the risk are segments 98 00:06:06,279 --> 00:06:09,599 Speaker 1: of the credit market such as high yield was staying 99 00:06:09,640 --> 00:06:13,719 Speaker 1: in the investment grade and securitized space and reyn old 100 00:06:13,880 --> 00:06:20,080 Speaker 1: treasury bonds, mainly because we can see more accommodation this 101 00:06:20,200 --> 00:06:23,760 Speaker 1: year and even more next year. But that would really 102 00:06:23,800 --> 00:06:27,599 Speaker 1: just mean that the economic conditions continue to deteriorate and 103 00:06:28,160 --> 00:06:32,719 Speaker 1: the trade issues continue to escalate, So that is not 104 00:06:32,920 --> 00:06:37,000 Speaker 1: really a very encouraging environment for longer term health of 105 00:06:37,080 --> 00:06:41,400 Speaker 1: the economy. UM in that scenario, you know, spread easing 106 00:06:41,440 --> 00:06:45,880 Speaker 1: even more aggressively or getting even more accommodative. That is 107 00:06:46,000 --> 00:06:49,440 Speaker 1: likely because the other two issues have not been resolved, 108 00:06:49,760 --> 00:06:52,040 Speaker 1: and that's not a great environment for the risk are 109 00:06:52,080 --> 00:06:54,520 Speaker 1: segments of the board market. So I was that's kind 110 00:06:54,520 --> 00:06:57,400 Speaker 1: of where I was going to go. Unwitty emerging markets. 111 00:06:57,440 --> 00:07:00,080 Speaker 1: There's been some debate whether you know, the the that 112 00:07:00,120 --> 00:07:03,280 Speaker 1: the lower rate environment we had been experiencing was conducive 113 00:07:03,360 --> 00:07:06,240 Speaker 1: to emerging markets, but the performance just hasn't been there. 114 00:07:06,360 --> 00:07:10,560 Speaker 1: What is your view on emerging markets? Very similar views 115 00:07:10,640 --> 00:07:14,119 Speaker 1: as in high yield pole. I would also be uh 116 00:07:14,520 --> 00:07:17,920 Speaker 1: cautious on emerging markets. You know, they are actually bearing 117 00:07:17,960 --> 00:07:22,600 Speaker 1: the brunt of this trade trade escalation. Uh there is 118 00:07:22,640 --> 00:07:27,200 Speaker 1: this location in their export and what's happening UM with 119 00:07:27,280 --> 00:07:30,400 Speaker 1: the global trade flowdown, So there is no reason to 120 00:07:31,440 --> 00:07:34,160 Speaker 1: uh take a lot of risk in that space. Also 121 00:07:34,320 --> 00:07:38,080 Speaker 1: at this point in the cycle, we're speaking with Anuti Bahuganas, 122 00:07:38,120 --> 00:07:41,080 Speaker 1: senior portfolio manager and head of multi asset strategy at 123 00:07:41,080 --> 00:07:44,440 Speaker 1: Columbia thread Needle Investments, which overseas four hundred and sixty 124 00:07:44,480 --> 00:07:48,960 Speaker 1: eight billion dollars based in Boston, Massachusetts. Uh and today 125 00:07:49,160 --> 00:07:52,760 Speaker 1: is quite a day on Wall Street. We're remembering nine 126 00:07:52,760 --> 00:07:55,680 Speaker 1: eleven and the interspersed throughout the day, we are having 127 00:07:55,720 --> 00:07:59,640 Speaker 1: moments of silence that are incredibly appointed for everybody who 128 00:07:59,640 --> 00:08:03,120 Speaker 1: experien arians what happened eighteen years ago. Hard to believe 129 00:08:03,160 --> 00:08:05,640 Speaker 1: it was eighteen years ago and we did. I want 130 00:08:05,680 --> 00:08:08,160 Speaker 1: to shift gears a little bit away from just sort 131 00:08:08,160 --> 00:08:11,000 Speaker 1: of allocations to the ECB because everyone is on high 132 00:08:11,000 --> 00:08:13,760 Speaker 1: alert for what the what the e c B is 133 00:08:13,800 --> 00:08:17,200 Speaker 1: willing to do in terms of accelerating their stimulus, whether 134 00:08:17,200 --> 00:08:19,840 Speaker 1: they're going to cut the deposit rate further, whether they're 135 00:08:19,880 --> 00:08:23,280 Speaker 1: going to add some to their quantity of easy or 136 00:08:23,320 --> 00:08:25,680 Speaker 1: purchase even stocks. What are you expecting out of the 137 00:08:25,680 --> 00:08:30,720 Speaker 1: e c B. Um, not as much as I think 138 00:08:30,800 --> 00:08:34,560 Speaker 1: the market is expecting. I think, you know, they will 139 00:08:35,040 --> 00:08:38,080 Speaker 1: do some rate cards and maybe a little bit more queue. 140 00:08:38,280 --> 00:08:40,960 Speaker 1: And I've seen lea a very different estimates of the 141 00:08:41,120 --> 00:08:44,720 Speaker 1: range of QUEUEE deposit cuts of twenty basis points is 142 00:08:45,240 --> 00:08:49,439 Speaker 1: quite likely. I think if they do a little more 143 00:08:49,520 --> 00:08:55,160 Speaker 1: quee uh, that would be supportive of risk assets in Europe. 144 00:08:55,160 --> 00:08:57,960 Speaker 1: But if you look at risk assets in Europe, and 145 00:08:58,000 --> 00:09:02,240 Speaker 1: I mean away from bomb looking at European equities, they've 146 00:09:02,280 --> 00:09:05,199 Speaker 1: been performing quite well, in fact, their neck to neck 147 00:09:05,280 --> 00:09:09,680 Speaker 1: with the U S stock markets. So I think risk 148 00:09:09,720 --> 00:09:14,520 Speaker 1: efforts are pricing in more accommodation from ECB, and that 149 00:09:14,559 --> 00:09:18,360 Speaker 1: would be sort of druggs foreign gifts to UM monetary 150 00:09:18,440 --> 00:09:21,679 Speaker 1: policy in that space. But what happens actually this raise 151 00:09:21,760 --> 00:09:24,800 Speaker 1: is a good question, what happens if the ECB disappoints. 152 00:09:25,000 --> 00:09:26,360 Speaker 1: I mean, how big of a sell off could we 153 00:09:26,400 --> 00:09:32,560 Speaker 1: be looking at? Well, it's I wouldn't be able to 154 00:09:32,600 --> 00:09:35,880 Speaker 1: give a sense of the sell off, but I really 155 00:09:35,920 --> 00:09:40,200 Speaker 1: really doubt that they would disappoint enormously. I think they 156 00:09:40,200 --> 00:09:43,680 Speaker 1: would still go through about thirty billion or so per 157 00:09:43,760 --> 00:09:47,400 Speaker 1: month in QUEI, and I think that we would see 158 00:09:47,400 --> 00:09:51,840 Speaker 1: deposit cut rate cuts, which is, you know, perhaps given 159 00:09:52,040 --> 00:09:57,199 Speaker 1: the noise of some opposition by some of the shadow 160 00:09:57,240 --> 00:10:01,520 Speaker 1: policymakers UM and a fair amount of debate within e 161 00:10:01,600 --> 00:10:03,600 Speaker 1: CD on whether they should be doing this or not 162 00:10:03,880 --> 00:10:07,080 Speaker 1: is not fully priced in. So and we you know, 163 00:10:07,520 --> 00:10:10,480 Speaker 1: we seem to be having a global race to lower 164 00:10:10,600 --> 00:10:14,120 Speaker 1: rate to the bottom. How effective do you think continued 165 00:10:14,240 --> 00:10:17,360 Speaker 1: rate cuts are to address what could be slowing economies? 166 00:10:18,320 --> 00:10:22,280 Speaker 1: So so there are they are small bandids, small and 167 00:10:22,320 --> 00:10:28,920 Speaker 1: they can help if broader economic health remains um you know, 168 00:10:29,040 --> 00:10:34,319 Speaker 1: well maintained. In other words, we are seeing this the 169 00:10:34,360 --> 00:10:37,000 Speaker 1: deceleration of growth even in the US from where we 170 00:10:37,000 --> 00:10:39,240 Speaker 1: were at three percent to now to do too in 171 00:10:39,240 --> 00:10:42,400 Speaker 1: a quarter or so and you know, back to sort 172 00:10:42,400 --> 00:10:46,920 Speaker 1: of trend growth around the best performing economies of the 173 00:10:46,960 --> 00:10:50,600 Speaker 1: world are seeing below trend growth or trend trend growth, 174 00:10:50,679 --> 00:10:53,440 Speaker 1: but we are not in recession and that sort of 175 00:10:53,480 --> 00:10:57,400 Speaker 1: the support all this accommodation is providing. While at the 176 00:10:57,520 --> 00:11:00,760 Speaker 1: same time we are seeing change, see change in how 177 00:11:00,840 --> 00:11:05,120 Speaker 1: global trade is conducted. So there is to your point, 178 00:11:05,360 --> 00:11:09,599 Speaker 1: limits to how much help they can give, they can support. 179 00:11:09,840 --> 00:11:13,199 Speaker 1: They can be there with lower rates. Lower rates are 180 00:11:13,240 --> 00:11:17,040 Speaker 1: not really holding back businesses. It's the uncertainty around the 181 00:11:17,160 --> 00:11:20,880 Speaker 1: bigger question of trade that's holding back businesses. And who 182 00:11:20,960 --> 00:11:22,839 Speaker 1: gonna thank you so much for joining us on what 183 00:11:23,000 --> 00:11:25,920 Speaker 1: he is Senior portfolio manager and head of multi asset 184 00:11:25,960 --> 00:11:45,760 Speaker 1: strategy for Columbia Threadneedle Investments, based in Boston, Massachusetts right now. 185 00:11:45,800 --> 00:11:48,720 Speaker 1: It's interesting to just to remember that over the trailing 186 00:11:48,760 --> 00:11:53,040 Speaker 1: twelve months, Uh, the SMP five hasn't really moved that much. 187 00:11:53,040 --> 00:11:55,360 Speaker 1: We've had a tremendous amount of oility at that time, 188 00:11:55,400 --> 00:11:58,959 Speaker 1: but essentially unchanged of the trailing twelve months. What But yeah, 189 00:11:59,000 --> 00:12:01,280 Speaker 1: we are better a one and a half percent from 190 00:12:01,280 --> 00:12:03,160 Speaker 1: the all time high. So the question is kind of 191 00:12:03,400 --> 00:12:05,480 Speaker 1: where do we go from here and can we expect 192 00:12:05,559 --> 00:12:08,760 Speaker 1: more volatility going forward? There's no one better to discuss 193 00:12:08,800 --> 00:12:11,200 Speaker 1: some of those market issues. And Ken Fisher Ken as 194 00:12:11,240 --> 00:12:14,040 Speaker 1: a founder, executive chairman and co c IO of Fisher 195 00:12:14,080 --> 00:12:19,040 Speaker 1: Investments with one and seven billion dollars under management based 196 00:12:19,040 --> 00:12:21,120 Speaker 1: on Whatside, California, but joining us here in our Bloomberg 197 00:12:21,120 --> 00:12:24,440 Speaker 1: Interactive Broker studio. Thanks so much for being here. So 198 00:12:24,840 --> 00:12:27,040 Speaker 1: there's a lot of folks, I think, trying to figure 199 00:12:27,040 --> 00:12:30,880 Speaker 1: out what the next step is for the equity markets. 200 00:12:30,880 --> 00:12:34,400 Speaker 1: For example, we've had trade issues, we've got an easing FED, 201 00:12:34,480 --> 00:12:37,400 Speaker 1: we were ten plus years into an economic cycle. What 202 00:12:37,440 --> 00:12:39,880 Speaker 1: are you advising your clients? Well, I certainly don't think 203 00:12:39,960 --> 00:12:41,880 Speaker 1: we have an easy FED. I don't believe that for 204 00:12:41,920 --> 00:12:47,600 Speaker 1: a heartbeat. I mean, the FED is um idiotic at best, 205 00:12:48,120 --> 00:12:50,160 Speaker 1: uh and and always has been. I learned that for 206 00:12:50,240 --> 00:12:52,400 Speaker 1: Milton Friedman when I was very young. He always said 207 00:12:52,400 --> 00:12:56,320 Speaker 1: they always would be, and I'm gonna stick with that. 208 00:12:56,760 --> 00:13:00,000 Speaker 1: But the fact is that right now it's fairly obvious 209 00:13:00,040 --> 00:13:02,720 Speaker 1: if you think about it on a Bloomberg terminal, that 210 00:13:03,760 --> 00:13:06,080 Speaker 1: the non US world for the first time is leading 211 00:13:06,080 --> 00:13:08,760 Speaker 1: the American market. And if we think of what's going 212 00:13:08,800 --> 00:13:12,480 Speaker 1: on overseas, what you were saying, which is true when 213 00:13:12,480 --> 00:13:18,440 Speaker 1: we think of the American market, becomes more visibly directional 214 00:13:18,760 --> 00:13:25,000 Speaker 1: if we think overseas, so whether it's Sweden, whether it's um, Germany, 215 00:13:25,080 --> 00:13:28,360 Speaker 1: whether it's Britain, I mean Britain with all our bricks stuff, 216 00:13:28,400 --> 00:13:31,320 Speaker 1: the UK markets doing better than the US market is right. 217 00:13:31,640 --> 00:13:35,440 Speaker 1: Hold on, let's let's translate this basically. Basically, it's leading 218 00:13:35,559 --> 00:13:38,520 Speaker 1: US in terms of the ECB, the Bank of England, 219 00:13:38,760 --> 00:13:43,560 Speaker 1: the Swedish all The direction is easy. The direction of 220 00:13:43,600 --> 00:13:48,679 Speaker 1: the market is positive and upward overseas more so than here. 221 00:13:48,800 --> 00:13:51,840 Speaker 1: Here it looks like you're in that trading channel there 222 00:13:51,920 --> 00:13:53,960 Speaker 1: it looks like it's broken out, because it's not that 223 00:13:54,000 --> 00:13:56,240 Speaker 1: the economy is so much better there. Oh, I think 224 00:13:56,280 --> 00:14:01,200 Speaker 1: it's because just simply there's this fairly st andrew economy 225 00:14:01,240 --> 00:14:03,960 Speaker 1: being better. G Who in the heck needs a better economy? 226 00:14:04,040 --> 00:14:06,040 Speaker 1: We have a near Goldilocks economy as it is. If 227 00:14:06,080 --> 00:14:08,480 Speaker 1: you could grow the global economy at two percent with 228 00:14:08,559 --> 00:14:10,439 Speaker 1: no inflation, that's kind of what in the nineties we 229 00:14:10,480 --> 00:14:13,280 Speaker 1: thought Goldilocks should look like. The fact of the matter 230 00:14:13,400 --> 00:14:17,040 Speaker 1: is they've been having enough problems over there that at 231 00:14:17,080 --> 00:14:22,360 Speaker 1: every place you've got the almost equivalent of having recognized 232 00:14:22,360 --> 00:14:28,000 Speaker 1: a recession. It's not a recession, but it's that quasi 233 00:14:28,840 --> 00:14:33,160 Speaker 1: growth recession, which is almost as positive for stocks after 234 00:14:33,240 --> 00:14:37,400 Speaker 1: that as an actual recession. The history of big slowdowns 235 00:14:37,600 --> 00:14:42,240 Speaker 1: grinding through what what are what are recessions and bearer 236 00:14:42,280 --> 00:14:45,800 Speaker 1: markets supposed to do. They're supposed to overcome and fix 237 00:14:45,880 --> 00:14:49,040 Speaker 1: the excesses of the prior boom. That's what's supposed to happen. 238 00:14:49,680 --> 00:14:52,440 Speaker 1: Right now, We've got a comparable period where we're doing 239 00:14:52,440 --> 00:14:54,920 Speaker 1: the same thing over there. How about here in the U. 240 00:14:55,000 --> 00:14:57,080 Speaker 1: S are you in the camp that it feels like 241 00:14:57,080 --> 00:15:02,440 Speaker 1: a recession is av for the US? I would be 242 00:15:02,560 --> 00:15:06,680 Speaker 1: stunned if we have a social care uh in that timeframe. Okay, 243 00:15:06,800 --> 00:15:11,120 Speaker 1: The fact of the matter is that there's really other 244 00:15:11,160 --> 00:15:14,240 Speaker 1: than the fact that things are going along pretty darn well. 245 00:15:14,840 --> 00:15:18,920 Speaker 1: For example, folks point to uh manufacturing p m s, 246 00:15:19,920 --> 00:15:22,480 Speaker 1: but if you think about its services are three times larger, 247 00:15:22,960 --> 00:15:25,120 Speaker 1: and service p m I is are just fine, thank you. 248 00:15:25,960 --> 00:15:29,240 Speaker 1: When if we're up to me and I would have fed, 249 00:15:30,600 --> 00:15:32,640 Speaker 1: I would dump all those stupid bonds that they bought 250 00:15:32,680 --> 00:15:34,720 Speaker 1: that they never should have bought in the first place. Well, okay, 251 00:15:34,720 --> 00:15:36,800 Speaker 1: well let's let's let's talk about what you're actually doing 252 00:15:36,880 --> 00:15:38,680 Speaker 1: or what you're actually advising your clients to do. And 253 00:15:38,720 --> 00:15:40,720 Speaker 1: it sounds like you're bullish on Europe right now, given 254 00:15:40,760 --> 00:15:42,880 Speaker 1: the fact that they're they're cheaper than the U S. No, 255 00:15:42,960 --> 00:15:45,200 Speaker 1: I didn't say cheaper, that they that they're basically they 256 00:15:45,240 --> 00:15:48,800 Speaker 1: have more bearishness sort of built into them. Uh so, 257 00:15:48,840 --> 00:15:53,160 Speaker 1: therefore there's more potential upside the US maybe less so 258 00:15:53,680 --> 00:15:55,600 Speaker 1: in terms of where we are in that cycle is 259 00:15:56,400 --> 00:15:58,160 Speaker 1: right here, right now, And we're also with a stage 260 00:15:58,200 --> 00:16:01,400 Speaker 1: in the American political cycle were normally the market slows 261 00:16:01,440 --> 00:16:03,640 Speaker 1: down for a little bit in America. Okay, so then 262 00:16:03,680 --> 00:16:06,920 Speaker 1: how much are you advising clients to overweight Europe over 263 00:16:07,040 --> 00:16:10,880 Speaker 1: the US. You know, I'm not that extreme. So you know, 264 00:16:10,920 --> 00:16:14,560 Speaker 1: I kind of have a overweight view. I don't want 265 00:16:14,600 --> 00:16:17,080 Speaker 1: to be extreme. I don't have a you know, hit bigger, 266 00:16:17,120 --> 00:16:19,600 Speaker 1: go home better in me, because too often you go 267 00:16:19,640 --> 00:16:21,840 Speaker 1: home and you're wrong too often. I mean, I live 268 00:16:21,880 --> 00:16:24,920 Speaker 1: in a world where it's a world of probabilities, not certainties, 269 00:16:24,960 --> 00:16:27,080 Speaker 1: and I got to be able to live through mistakes, 270 00:16:27,240 --> 00:16:28,480 Speaker 1: which I know I'm going to make a lot of. 271 00:16:28,680 --> 00:16:30,920 Speaker 1: If I could, if I could be right seventy percent 272 00:16:31,040 --> 00:16:34,840 Speaker 1: of history, which I can't, i'd be become a living legend. 273 00:16:35,200 --> 00:16:37,000 Speaker 1: And so I got to be prepared to be wrong 274 00:16:37,040 --> 00:16:41,040 Speaker 1: at least thirty percent of the time and lived through it. Okay, 275 00:16:41,040 --> 00:16:44,160 Speaker 1: so close to a living legend, one could argue, certainly, 276 00:16:44,600 --> 00:16:47,760 Speaker 1: giving your performance and the assets under management. But so 277 00:16:48,000 --> 00:16:50,040 Speaker 1: the question, one of the questions is simply, we've had 278 00:16:50,040 --> 00:16:52,880 Speaker 1: it just this week. It seems, at least on Bloomberg 279 00:16:52,960 --> 00:16:55,840 Speaker 1: Radio a discussion and on Bloomberg News about maybe a 280 00:16:55,880 --> 00:16:58,560 Speaker 1: little bit of rotation going on underneath the surface kind 281 00:16:58,600 --> 00:17:01,240 Speaker 1: of what is your sent is that? Just to me, 282 00:17:01,360 --> 00:17:04,160 Speaker 1: it seems like boy people are making a big deal 283 00:17:04,200 --> 00:17:06,480 Speaker 1: about what might just be some anomalous trading over a 284 00:17:06,520 --> 00:17:09,320 Speaker 1: couple of days. But that's something more and that might 285 00:17:09,359 --> 00:17:12,639 Speaker 1: be true. But pretty often after you've had a trading 286 00:17:12,760 --> 00:17:17,520 Speaker 1: range like this, where the prior leadership has stalled, you 287 00:17:17,560 --> 00:17:20,639 Speaker 1: get a bounce back effect that's not extraordinary. And that 288 00:17:20,720 --> 00:17:24,640 Speaker 1: bounce back effect in this case would be value over growth, 289 00:17:24,800 --> 00:17:28,520 Speaker 1: smaller over big. That's been what's been going on in 290 00:17:28,520 --> 00:17:32,480 Speaker 1: that rotation. My guess is, however, usually if we assume 291 00:17:32,560 --> 00:17:36,240 Speaker 1: the bull market continues, usually the girl that brought you 292 00:17:36,280 --> 00:17:40,320 Speaker 1: to the dance stays with you, and that probably is 293 00:17:40,800 --> 00:17:44,000 Speaker 1: what happens, which is the leadership then eventually reverts back. 294 00:17:44,440 --> 00:17:46,119 Speaker 1: I mean, normally, as you move towards the end of 295 00:17:46,119 --> 00:17:48,600 Speaker 1: a bull market, you get what is referred to as 296 00:17:48,680 --> 00:17:51,800 Speaker 1: narrowing breadth. Fewer and fewer big stocks lead the market 297 00:17:51,920 --> 00:17:55,400 Speaker 1: higher and higher, typically of the same categories that led earlier. 298 00:17:55,640 --> 00:17:57,840 Speaker 1: So I'd expect over the course of the rest of 299 00:17:57,840 --> 00:18:01,719 Speaker 1: the year for that process to eventually revert. One thing 300 00:18:01,720 --> 00:18:04,880 Speaker 1: I've been in wondering how often do you trade? How 301 00:18:04,920 --> 00:18:07,360 Speaker 1: often do you trade? How often as little as I can? 302 00:18:07,480 --> 00:18:09,280 Speaker 1: So when when I was young, there was a great 303 00:18:09,320 --> 00:18:12,919 Speaker 1: columnist for Forbes magazine named Lucian Hooper. He was the 304 00:18:12,960 --> 00:18:16,240 Speaker 1: third longest running columnists in Forbes History. Uh, and he 305 00:18:16,320 --> 00:18:17,840 Speaker 1: had a lot of great he was in New England 306 00:18:17,920 --> 00:18:19,200 Speaker 1: or he had a lot of great lines. And one 307 00:18:19,200 --> 00:18:21,400 Speaker 1: of them is, you know, you make more money sitting 308 00:18:21,440 --> 00:18:23,200 Speaker 1: on your hands and you do dancing on your feet. 309 00:18:23,600 --> 00:18:25,840 Speaker 1: And there's a lot of truth to that. You you 310 00:18:26,040 --> 00:18:28,320 Speaker 1: make your bets and unless you come to the realization 311 00:18:28,359 --> 00:18:30,040 Speaker 1: that you were wrong in the first place, which should 312 00:18:30,040 --> 00:18:33,040 Speaker 1: have some fundamental arguments to it, you let the volatility 313 00:18:33,200 --> 00:18:35,119 Speaker 1: dance through you. So when was the last time that 314 00:18:35,160 --> 00:18:37,639 Speaker 1: you traded? Oh? Well, we trade little bits all the 315 00:18:37,640 --> 00:18:40,760 Speaker 1: time because we got a lot of money. But but yeah, 316 00:18:41,200 --> 00:18:43,640 Speaker 1: big trades. You know, we haven't done anything other than 317 00:18:43,680 --> 00:18:48,880 Speaker 1: trimming little things for months. Is it less than usual? Yeah, 318 00:18:48,880 --> 00:18:50,679 Speaker 1: because the market is not that volatile. People think the 319 00:18:50,680 --> 00:18:53,680 Speaker 1: markets volatile, but the markets volatility this year is actually subnormal. 320 00:18:54,240 --> 00:18:56,600 Speaker 1: If you actually look at the markets, volatility this year 321 00:18:56,680 --> 00:18:58,199 Speaker 1: is not high. How about I P S. Do you 322 00:18:58,200 --> 00:19:02,639 Speaker 1: guys look at No. When I wrote a book thirty 323 00:19:02,640 --> 00:19:05,399 Speaker 1: two years ago where I had a chapter that I 324 00:19:05,520 --> 00:19:08,119 Speaker 1: P O S. I mean, it's probably overpriced, and I 325 00:19:08,160 --> 00:19:09,960 Speaker 1: still believe that's true. The fact of the matter is 326 00:19:10,000 --> 00:19:11,560 Speaker 1: I P O S or priced for the issuer. They're 327 00:19:11,560 --> 00:19:16,880 Speaker 1: not priced for the consumer. And the fact is if 328 00:19:17,080 --> 00:19:18,800 Speaker 1: if they want the history of I p o s 329 00:19:18,880 --> 00:19:21,000 Speaker 1: is a short term pop. And you know, if you're 330 00:19:21,040 --> 00:19:23,000 Speaker 1: gonna try to create a short term pop, usually that's 331 00:19:23,000 --> 00:19:24,920 Speaker 1: going to go against you. Look at what happened with Uber, 332 00:19:24,960 --> 00:19:28,520 Speaker 1: Look what happen would lift. Uh. The good part about 333 00:19:28,520 --> 00:19:30,199 Speaker 1: I p o s right now is that we have 334 00:19:30,400 --> 00:19:35,800 Speaker 1: not gotten to that part where we're floating garbage on 335 00:19:35,920 --> 00:19:39,600 Speaker 1: top of the water like it's gold. Uh, the garbage 336 00:19:39,600 --> 00:19:41,960 Speaker 1: in there. You know, we're not having manufactured i p 337 00:19:42,119 --> 00:19:44,160 Speaker 1: o s for the purpose of going public in volume 338 00:19:44,240 --> 00:19:46,800 Speaker 1: like you know we do when we have exuberance. The 339 00:19:46,920 --> 00:19:49,360 Speaker 1: lack of that as a sign of a lack of exuberance, 340 00:19:49,400 --> 00:19:52,600 Speaker 1: which is healthy. Ken Fisher, thank you so much for 341 00:19:52,640 --> 00:19:55,320 Speaker 1: being with us. Thanks for having me. Ken Fisher is founder, 342 00:19:55,359 --> 00:19:58,400 Speaker 1: our executive chairman, and co chief investment officer of Fisher Investments, 343 00:19:58,400 --> 00:20:01,640 Speaker 1: which overseas a hundred and seven million dollars from Woodside, California. 344 00:20:01,680 --> 00:20:23,520 Speaker 1: But he joins us here in our Bloomberg Interactive broker's studios. Well, 345 00:20:23,560 --> 00:20:27,160 Speaker 1: we woke up to a surprise deal in financial services 346 00:20:27,200 --> 00:20:30,280 Speaker 1: this morning. Hong Kong Exchange has made an unexpected thirty 347 00:20:30,359 --> 00:20:34,360 Speaker 1: six point six billion dollar bid for the London Stock Exchange, 348 00:20:34,800 --> 00:20:37,760 Speaker 1: a move there that would upend the UK Borses combination 349 00:20:38,080 --> 00:20:41,159 Speaker 1: just announced recently with definitive. So to get the latest 350 00:20:41,200 --> 00:20:43,679 Speaker 1: on what this means in the world of global exchanges, 351 00:20:43,720 --> 00:20:47,359 Speaker 1: we welcome Sarah Siad. Sarah's a Bloomberg News reporter, UM 352 00:20:47,480 --> 00:20:50,359 Speaker 1: to get her sense. Sarah, thanks so much for joining us. 353 00:20:50,760 --> 00:20:52,879 Speaker 1: Just give us kind of the background and what happened here. 354 00:20:52,880 --> 00:20:56,239 Speaker 1: This was really an unexpected announcement, wasn't. Yeah. I mean 355 00:20:56,280 --> 00:20:58,840 Speaker 1: we're saying, UM, the words that are being used is 356 00:20:58,920 --> 00:21:02,600 Speaker 1: the unexpected, the shark, the surprise. I mean definitely had 357 00:21:02,640 --> 00:21:07,280 Speaker 1: London scrambling around. UM this morning. Certainly the deal's team 358 00:21:07,320 --> 00:21:09,680 Speaker 1: woke up to to some big news this morning. I mean, 359 00:21:10,240 --> 00:21:12,480 Speaker 1: as you mentioned, it is a bit of a shock. 360 00:21:12,920 --> 00:21:17,119 Speaker 1: UM announcement. It wasn't one that any of us or 361 00:21:17,160 --> 00:21:19,679 Speaker 1: our competitors broke. It was. It was an announcement that 362 00:21:19,720 --> 00:21:23,800 Speaker 1: came directly from from the Hong Kong Exchange UM itself. 363 00:21:23,840 --> 00:21:29,399 Speaker 1: I think, UM, the timing is quite interesting. It comes 364 00:21:29,440 --> 00:21:32,679 Speaker 1: on the off the back of the the announcement about 365 00:21:32,800 --> 00:21:37,720 Speaker 1: of the LSE refinitive deal. I think what's indicative of 366 00:21:38,480 --> 00:21:43,119 Speaker 1: the timing of the announcement is UM. Had the refinitive 367 00:21:43,400 --> 00:21:46,480 Speaker 1: LSE deal gone through, it would have made the LSE 368 00:21:47,200 --> 00:21:54,240 Speaker 1: pretty much unaffordable for many other interested parties UM. But 369 00:21:54,359 --> 00:21:59,399 Speaker 1: whilst the deal is still UM not completely through, buying 370 00:21:59,400 --> 00:22:02,440 Speaker 1: else by itself makes it a more affordable play than 371 00:22:02,760 --> 00:22:06,400 Speaker 1: with together with refinitive. What's the what's the larger here 372 00:22:06,480 --> 00:22:09,040 Speaker 1: for the Hong Kong exchanges? Well, I think you know 373 00:22:09,119 --> 00:22:13,600 Speaker 1: Hong Kong. These are two of the world's most significant 374 00:22:15,000 --> 00:22:19,040 Speaker 1: UM exchanges, and it really depends on what I mean. 375 00:22:19,080 --> 00:22:21,120 Speaker 1: It's clear what Hong Kong wants to do. They want 376 00:22:21,160 --> 00:22:27,000 Speaker 1: to create an exchange powerhouse. The question is what does 377 00:22:27,040 --> 00:22:30,720 Speaker 1: Elsie want to do. I mean the deal with refinitive 378 00:22:31,480 --> 00:22:36,439 Speaker 1: meant would have meant that UM the London Exchange was 379 00:22:37,000 --> 00:22:42,800 Speaker 1: not only reliant on on the exchange but diversifying into 380 00:22:42,920 --> 00:22:47,480 Speaker 1: more data driven a more data driven business. They need 381 00:22:47,560 --> 00:22:51,399 Speaker 1: to now ask themselves, do we want to continue on 382 00:22:51,480 --> 00:22:54,280 Speaker 1: that path and and this strategy that we had in 383 00:22:54,359 --> 00:22:57,880 Speaker 1: play to diversify into more data or do we want 384 00:22:57,920 --> 00:23:06,120 Speaker 1: to grow and become a exchange powerhouse by by by 385 00:23:06,280 --> 00:23:10,320 Speaker 1: being acquired by the Hong Kong Exchange. We should note 386 00:23:10,359 --> 00:23:13,920 Speaker 1: that refinitive is the old Thompson Reuter's business, the icon 387 00:23:14,040 --> 00:23:20,720 Speaker 1: terminal neck competed directly with Bloomberg LP. Uh, sir, give 388 00:23:20,800 --> 00:23:24,040 Speaker 1: us the sense of what the political overtones maybe here, 389 00:23:24,080 --> 00:23:26,720 Speaker 1: because this is, you know, the London Stock Exchanges a 390 00:23:26,800 --> 00:23:29,880 Speaker 1: in a national treasure if you will, for the UK 391 00:23:30,040 --> 00:23:33,200 Speaker 1: and Hong Kong coming in and maybe even by extension, 392 00:23:33,320 --> 00:23:37,360 Speaker 1: China coming in and buying such an iconic UK asset. 393 00:23:37,560 --> 00:23:39,320 Speaker 1: How do you think that's going to play up? It's 394 00:23:39,320 --> 00:23:42,160 Speaker 1: definitely and it would be an understatement to say that 395 00:23:42,240 --> 00:23:48,399 Speaker 1: it is a politically sensitive um UM scenario. For sure. 396 00:23:49,160 --> 00:23:54,439 Speaker 1: Hong Kong Exchange is interestingly UM pitting itself as a 397 00:23:54,520 --> 00:23:58,840 Speaker 1: global exchange, trying to move away from being a pure 398 00:23:58,880 --> 00:24:03,360 Speaker 1: Hong Kong or Chinese UM entity. And I think that 399 00:24:03,560 --> 00:24:07,800 Speaker 1: is to UM an extem placate London and the government 400 00:24:08,440 --> 00:24:12,399 Speaker 1: UH here for any concerns there may be about UM 401 00:24:12,760 --> 00:24:16,520 Speaker 1: there being a Chinese bidder for UM. I guess this 402 00:24:16,640 --> 00:24:21,280 Speaker 1: gem of in London. You know, the UK Government's Andrea 403 00:24:21,359 --> 00:24:24,760 Speaker 1: Ledson said this morning um On on bloom Vegta TV, 404 00:24:24,920 --> 00:24:27,719 Speaker 1: just as the announcement was breaking that it's something that 405 00:24:27,760 --> 00:24:31,520 Speaker 1: they would look into and most likely scrutinized. So it's 406 00:24:31,520 --> 00:24:36,960 Speaker 1: certainly not without any political issues or involvement. I think 407 00:24:37,000 --> 00:24:39,280 Speaker 1: that there could also be a US angle with with 408 00:24:39,280 --> 00:24:43,240 Speaker 1: with Cyphius um Um coming into place. So yeah, from 409 00:24:43,240 --> 00:24:45,879 Speaker 1: a political perspective, there's certainly it would not It's not 410 00:24:45,960 --> 00:24:48,880 Speaker 1: a straightforward deal. It would not be a straightforward deal. 411 00:24:49,359 --> 00:24:51,000 Speaker 1: It just is a rabid up. But with the three 412 00:24:51,040 --> 00:24:54,040 Speaker 1: six point five billion dollar offer, how does it sort 413 00:24:54,080 --> 00:24:56,399 Speaker 1: of sit with analysts? They think it's expensive? Do they 414 00:24:56,400 --> 00:24:58,960 Speaker 1: think it's cheap? Um? I mean a lot of the 415 00:24:59,040 --> 00:25:03,639 Speaker 1: analysts report that we have read today have suggested that 416 00:25:03,800 --> 00:25:06,160 Speaker 1: it's a deal that they don't think we'll go through 417 00:25:06,200 --> 00:25:10,440 Speaker 1: for a number of reasons, politically, um being one of them. 418 00:25:10,480 --> 00:25:13,520 Speaker 1: But you know they have also said, um, you know 419 00:25:13,560 --> 00:25:17,520 Speaker 1: that the UK is an attractive market for some foreign 420 00:25:17,520 --> 00:25:22,760 Speaker 1: investors at the moment, particularly with the drop in in Sterling. 421 00:25:23,160 --> 00:25:27,920 Speaker 1: But the Hong Kong exchanges um. Charles leaves that made 422 00:25:28,240 --> 00:25:32,280 Speaker 1: an interesting metaphor earlier today, describing the potential tie up 423 00:25:32,280 --> 00:25:35,439 Speaker 1: between Hong Kong and London as a corporate Romeo and 424 00:25:35,560 --> 00:25:40,040 Speaker 1: Juliet But I think we all know how that story ended. Yeah, 425 00:25:40,040 --> 00:25:42,720 Speaker 1: not not exactly auspicious. No, it's a bizarre it was 426 00:25:42,720 --> 00:25:46,680 Speaker 1: a bizarre connection to make. So yeah, let's see narrator. 427 00:25:47,119 --> 00:25:49,439 Speaker 1: They both died. Sarah's said, thank you so much for 428 00:25:49,480 --> 00:25:51,960 Speaker 1: being with us, Sarah said. Bloomberk News reporter are joining 429 00:25:52,040 --> 00:25:55,240 Speaker 1: us to talk about the Hong Kong Exchanges surprise, a 430 00:25:55,320 --> 00:25:59,880 Speaker 1: proposal to combine with the London Stark Exchange. Generalist saying 431 00:26:00,040 --> 00:26:02,840 Speaker 1: it's unlikely, uh to see it come to fruition, but 432 00:26:02,880 --> 00:26:06,840 Speaker 1: nonetheless definitely shocking markets this morning and sort of making 433 00:26:06,840 --> 00:26:09,760 Speaker 1: them imagine the possibility. Is interesting to know what the 434 00:26:09,920 --> 00:26:11,879 Speaker 1: business cases for a lot of these exchanges. It has 435 00:26:11,920 --> 00:26:15,560 Speaker 1: increasingly become a data one, UH in terms of feeds 436 00:26:15,680 --> 00:26:33,679 Speaker 1: and UH and and an other market intelligence. We've been 437 00:26:33,720 --> 00:26:36,600 Speaker 1: focusing on financial technology this week. We were earlier in 438 00:26:36,760 --> 00:26:41,000 Speaker 1: Boston at the Boston's Fintech Week, which was really interesting 439 00:26:41,040 --> 00:26:43,880 Speaker 1: as people sort of try to reimagine, uh, the way 440 00:26:43,880 --> 00:26:46,480 Speaker 1: that the financial industry will look in the years to come. 441 00:26:46,560 --> 00:26:49,840 Speaker 1: Joining us now in that theme as Michael Tannenbaum. He 442 00:26:49,920 --> 00:26:53,600 Speaker 1: is chief financial Officer of Brex based in San Francisco. 443 00:26:53,840 --> 00:26:55,479 Speaker 1: Michael thank you so much for being with us. Why 444 00:26:55,520 --> 00:26:59,120 Speaker 1: don't you just start by telling us what Brex is. Sure, 445 00:26:59,240 --> 00:27:03,959 Speaker 1: Brex is a credit card for early stage businesses like 446 00:27:04,119 --> 00:27:09,080 Speaker 1: tech startups, life sciences companies, and e commerce businesses. So, Michael, 447 00:27:09,119 --> 00:27:11,560 Speaker 1: what are kind of what is your product your card 448 00:27:11,640 --> 00:27:13,960 Speaker 1: designed to do? Is there is there a problem or 449 00:27:14,160 --> 00:27:16,840 Speaker 1: a need in the marketplace for some of these startup 450 00:27:16,840 --> 00:27:20,520 Speaker 1: companies that your card in your service tries to address. Yeah, 451 00:27:20,560 --> 00:27:23,879 Speaker 1: I think it's really around both products, underwriting, and text, 452 00:27:23,960 --> 00:27:26,720 Speaker 1: so all three of those. On the product side, I 453 00:27:26,760 --> 00:27:32,440 Speaker 1: think we're offering innovative rewards and technology and expense management 454 00:27:32,560 --> 00:27:35,760 Speaker 1: that is targeted to these businesses. On the underwriting side, 455 00:27:36,119 --> 00:27:39,160 Speaker 1: unlike most credit cards, we underrate based on bank account 456 00:27:39,560 --> 00:27:44,320 Speaker 1: rather than personal FICO or credit scores um and the 457 00:27:44,400 --> 00:27:47,800 Speaker 1: combination of that delivers a really high quality product experience 458 00:27:48,040 --> 00:27:51,399 Speaker 1: for these customers, often who are fast growing but have 459 00:27:52,040 --> 00:27:56,040 Speaker 1: limited credit or operation history. So talk a little bit 460 00:27:56,040 --> 00:27:57,879 Speaker 1: about the creation of BRAX. I know that you have 461 00:27:57,960 --> 00:28:02,880 Speaker 1: the support of some pretty significant play ayres in Silicon Valley. Yeah. So, 462 00:28:02,960 --> 00:28:06,439 Speaker 1: the it's backed by Peter Thiel and Mac Lection, the 463 00:28:06,480 --> 00:28:09,760 Speaker 1: two co founders of PayPal. We also had a bunch 464 00:28:09,800 --> 00:28:15,480 Speaker 1: of investments from Silicon Valley and tech investors including y Combinator, 465 00:28:15,880 --> 00:28:19,000 Speaker 1: d st Um, Kliner, Perkins, so a lot of big 466 00:28:19,080 --> 00:28:24,280 Speaker 1: names that really saw the opportunity for credit cards to 467 00:28:24,359 --> 00:28:28,720 Speaker 1: deliver more um to these these fast growing segments of 468 00:28:28,720 --> 00:28:32,040 Speaker 1: the economy. So, Michael, I'm just looking at the brex 469 00:28:32,200 --> 00:28:35,359 Speaker 1: website here, and it talks about higher limits um, you know, 470 00:28:35,480 --> 00:28:39,200 Speaker 1: ten to twenty times higher than any competing card for 471 00:28:39,240 --> 00:28:41,960 Speaker 1: a corporate card. So how do you get there? How 472 00:28:42,000 --> 00:28:44,920 Speaker 1: do you get comfortable? What's your process your underwriting process 473 00:28:44,960 --> 00:28:48,160 Speaker 1: to get there. Yeah, it's interesting because when you think 474 00:28:48,160 --> 00:28:52,360 Speaker 1: about counterparty risk as a lender, which ultimately we are 475 00:28:52,480 --> 00:28:55,920 Speaker 1: in that respect, you want to look at the business 476 00:28:56,120 --> 00:28:58,360 Speaker 1: rather than the person. So if you think about traditional 477 00:28:58,400 --> 00:29:01,960 Speaker 1: credit card businesses in the small small business space, they're 478 00:29:02,080 --> 00:29:05,920 Speaker 1: underwriting the founder or some executive as a person and 479 00:29:06,000 --> 00:29:09,760 Speaker 1: using that personal credit score to make that decision breakfast 480 00:29:09,840 --> 00:29:11,920 Speaker 1: saying no, We're going to look at the business and 481 00:29:12,000 --> 00:29:15,000 Speaker 1: underwrite the cash that is in the business bank account. 482 00:29:15,240 --> 00:29:18,280 Speaker 1: And because we're doing that, we can actually offer much 483 00:29:18,360 --> 00:29:21,960 Speaker 1: higher limits than competitive cards which are just underwriting people. 484 00:29:22,280 --> 00:29:24,640 Speaker 1: So the business is our counterparty and that's why we 485 00:29:24,680 --> 00:29:27,560 Speaker 1: can offer higher limits. This is such an interesting conversation 486 00:29:27,600 --> 00:29:29,800 Speaker 1: to be having at a time when a lot of 487 00:29:29,840 --> 00:29:34,080 Speaker 1: cash burning unicorns are trying to I, P O and 488 00:29:34,080 --> 00:29:36,800 Speaker 1: and and come to market to raise more money. And 489 00:29:37,160 --> 00:29:39,600 Speaker 1: I have to wonder, if you're looking at the actual 490 00:29:39,880 --> 00:29:44,280 Speaker 1: cash of a company, how do you factor in potential growth? 491 00:29:44,320 --> 00:29:46,400 Speaker 1: I mean, how do you sort of extrapolate out to 492 00:29:46,440 --> 00:29:48,680 Speaker 1: see what this company may look like if you do 493 00:29:48,800 --> 00:29:51,280 Speaker 1: extend them alone and they're able to do something legitimate 494 00:29:51,320 --> 00:29:54,720 Speaker 1: with it totally? I think, Well, one of the nice 495 00:29:54,720 --> 00:29:58,160 Speaker 1: things about what we do is we have thirty day 496 00:29:58,200 --> 00:30:02,640 Speaker 1: statement periods, So from our perspective, if you think about 497 00:30:02,720 --> 00:30:05,480 Speaker 1: the way you know financial markets work, it's a very 498 00:30:05,520 --> 00:30:09,160 Speaker 1: short term product. We're repricing it to some extent each 499 00:30:09,240 --> 00:30:12,800 Speaker 1: thirty days because each thirty days opens a new statement 500 00:30:12,840 --> 00:30:16,880 Speaker 1: cycle and I think broader when you think about the industry. 501 00:30:17,280 --> 00:30:19,400 Speaker 1: What we do is we look at it two ways. 502 00:30:19,520 --> 00:30:22,560 Speaker 1: One is on a cash basis, do you have money 503 00:30:22,560 --> 00:30:24,840 Speaker 1: in your bank account? We have real time access to 504 00:30:24,880 --> 00:30:26,840 Speaker 1: that bank account, so we always know if the company 505 00:30:26,840 --> 00:30:29,320 Speaker 1: can make their payment within thirty days. And then we 506 00:30:29,400 --> 00:30:32,200 Speaker 1: also look at for those companies that are further along 507 00:30:32,480 --> 00:30:35,360 Speaker 1: and do have revenue. We look at forecasts and sales, 508 00:30:35,600 --> 00:30:37,800 Speaker 1: particularly in the e commerce space, as a way to 509 00:30:37,920 --> 00:30:41,240 Speaker 1: determine ability to pay. So, Michael, it give us a 510 00:30:41,320 --> 00:30:44,040 Speaker 1: sense of kind of how you're doing in the marketplace, 511 00:30:44,040 --> 00:30:46,040 Speaker 1: why don't you kind of enter this marketplace, and how's 512 00:30:46,160 --> 00:30:49,520 Speaker 1: Brex doing relative to competitors in terms of market share? 513 00:30:50,520 --> 00:30:54,280 Speaker 1: Got it? So? We have started. We started in early 514 00:30:54,320 --> 00:30:59,240 Speaker 1: two thousand seventeen. We launched publicly in mid two th eighteen. 515 00:30:59,320 --> 00:31:01,920 Speaker 1: We've had really tremendous growth. We've been one of the 516 00:31:02,000 --> 00:31:07,440 Speaker 1: fastest growing companies in Silicon Valley. If you look at 517 00:31:07,480 --> 00:31:10,120 Speaker 1: the market today, as you've already indicated, there's a bit 518 00:31:10,120 --> 00:31:14,600 Speaker 1: of a bifurcation between consumer and consumer facing businesses and 519 00:31:14,680 --> 00:31:17,520 Speaker 1: those in the B two B space. We're serving businesses, 520 00:31:17,600 --> 00:31:20,280 Speaker 1: and I think that the soft the financial software and 521 00:31:20,400 --> 00:31:24,000 Speaker 1: underwriting that we've built in that space has been really, 522 00:31:24,040 --> 00:31:27,960 Speaker 1: really attractive, especially as we've added newer markets outside of 523 00:31:28,000 --> 00:31:31,000 Speaker 1: our core startup market to include the life sciences and 524 00:31:31,000 --> 00:31:33,760 Speaker 1: the e commerce sector. Who do you partner with for 525 00:31:33,800 --> 00:31:38,120 Speaker 1: the capital? Got it? So? Our card is a MasterCard product, 526 00:31:38,240 --> 00:31:41,880 Speaker 1: So anywhere master cards accepted um you can use Brex 527 00:31:42,120 --> 00:31:45,520 Speaker 1: on the capital side. We actually have a warehouse line 528 00:31:45,880 --> 00:31:49,880 Speaker 1: UM with far Plays where UM we use funds there 529 00:31:50,400 --> 00:31:54,200 Speaker 1: um to help expand our balance sheet and in terms 530 00:31:54,320 --> 00:31:56,040 Speaker 1: and so I think that's one of the ways that 531 00:31:56,080 --> 00:31:58,760 Speaker 1: we can continue to grow but also do so in 532 00:31:58,760 --> 00:32:01,400 Speaker 1: a low cost way that does that require as much equity. 533 00:32:01,720 --> 00:32:03,720 Speaker 1: So what are some of the unique needs from a 534 00:32:03,840 --> 00:32:07,560 Speaker 1: corporate credit perspective for some of these startup companies that 535 00:32:07,640 --> 00:32:11,280 Speaker 1: you're targeting. Sure, I think it's one being able to 536 00:32:11,320 --> 00:32:15,720 Speaker 1: get a card instantly and online. It's actually still a 537 00:32:15,760 --> 00:32:19,880 Speaker 1: paper based process. When you think about UH applying for 538 00:32:19,880 --> 00:32:22,760 Speaker 1: a credit cards, you're usually even if you're applying online, 539 00:32:22,920 --> 00:32:25,360 Speaker 1: you're typically receiving something in the mail that lets you 540 00:32:25,400 --> 00:32:28,959 Speaker 1: know whether you're approved. That's one. Two is the ability 541 00:32:29,000 --> 00:32:32,640 Speaker 1: to scale with your businesses with your business Brex because 542 00:32:32,680 --> 00:32:35,080 Speaker 1: we underwrite based on a bank account with which we 543 00:32:35,120 --> 00:32:38,440 Speaker 1: have real time access our credit limits dynamically as just 544 00:32:38,800 --> 00:32:41,400 Speaker 1: as the business grows. And I think the last is 545 00:32:41,400 --> 00:32:45,960 Speaker 1: on rewards, which is always a popular topic among UH 546 00:32:46,040 --> 00:32:48,760 Speaker 1: you know credit cards, and the reality is Brex has 547 00:32:48,800 --> 00:32:53,080 Speaker 1: built a rewards program that has not only rewards UM 548 00:32:53,120 --> 00:32:57,200 Speaker 1: and accelerators on categories that the people in this industry 549 00:32:57,240 --> 00:33:00,480 Speaker 1: spend on but it also has a lot of high 550 00:33:00,600 --> 00:33:04,600 Speaker 1: quality sign up offers on UM the goods and services 551 00:33:04,640 --> 00:33:08,800 Speaker 1: that these businesses use, one example being Amazon Web Services. 552 00:33:08,840 --> 00:33:11,680 Speaker 1: Brex offers five thousand dollars of credits on a WUS 553 00:33:11,920 --> 00:33:14,800 Speaker 1: for all of its cardholders. Michael Tannebaum, thank you so 554 00:33:14,920 --> 00:33:17,200 Speaker 1: much for joining us. Michael's the chief financial officer of 555 00:33:17,280 --> 00:33:21,080 Speaker 1: Brex Incorporated, based in San Francisco, with kind of a 556 00:33:21,160 --> 00:33:24,960 Speaker 1: new take on the corporate credit card, targeting UM, the 557 00:33:25,080 --> 00:33:27,680 Speaker 1: start up community and some of the unique needs that 558 00:33:27,880 --> 00:33:31,320 Speaker 1: some of these early stage companies have from a credit perspective. 559 00:33:31,680 --> 00:33:33,920 Speaker 1: Thanks for listening to the Bloomberg P and L podcast. 560 00:33:34,080 --> 00:33:36,680 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts 561 00:33:36,800 --> 00:33:39,880 Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on 562 00:33:39,920 --> 00:33:42,560 Speaker 1: Twitter at pt Sweeney. I'm Lisa bramoy It's I'm on 563 00:33:42,560 --> 00:33:45,400 Speaker 1: Twitter at Lisa A. Bram woyds one. Before the podcast, 564 00:33:45,400 --> 00:33:48,000 Speaker 1: you can always catch us worldwide on Bloomberg Radio.