WEBVTT - Transforming The Way Kids Learn Through LEGO 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.360 at Bloomberg dot com slash podcast. I love to watch 0:00:22.560 --> 0:00:25.880 some cricket occasionally. Also love to play with Legos, or 0:00:25.880 --> 0:00:27.720 at least I did an I as a kid, and 0:00:27.760 --> 0:00:30.280 I recently saw that they also have a Seinfeld set, 0:00:30.320 --> 0:00:32.880 so I might get back into it. Has been Stark joins, 0:00:32.960 --> 0:00:36.360 us president of Lego Education to talk to us about 0:00:36.360 --> 0:00:40.440 the pandemics impact on learning and what back to school 0:00:40.520 --> 0:00:45.120 means um for Lego as well. It has a mission 0:00:45.120 --> 0:00:48.560 to transform the way kids learn. I guess I didn't 0:00:48.560 --> 0:00:50.040 even realize I was learning when I was doing it, 0:00:50.040 --> 0:00:53.720 but I grew up, as did probably everybody around me 0:00:53.880 --> 0:00:56.960 as been playing with Legos. It must be one of 0:00:57.000 --> 0:01:03.640 the staple toys, at least for American children. Absolutely, I 0:01:03.680 --> 0:01:07.039 think it's a UM. I think it's a stable toy 0:01:07.720 --> 0:01:09.880 in a lot of places around the world, and isn't 0:01:09.880 --> 0:01:13.040 it wonderful that that you can learn without knowing that 0:01:13.080 --> 0:01:16.560 you're learning, and you can learn without being instructed. Has 0:01:16.600 --> 0:01:19.000 been with the world still dealing with the pandemic, but 0:01:19.040 --> 0:01:23.080 from an educational perspective, you know, the last year, last 0:01:23.080 --> 0:01:26.040 academic year was for a lot of places around the 0:01:26.080 --> 0:01:30.480 world remote learning. How do you think learning is changing 0:01:30.560 --> 0:01:33.280 evolving as as you guys look at it from your 0:01:33.280 --> 0:01:36.640 perspective going forward the pandemic? What was the impact that 0:01:36.720 --> 0:01:40.680 it will have going forward? Do you think? Well? I 0:01:40.720 --> 0:01:43.760 think immediately what we know is we're going to welcome 0:01:43.800 --> 0:01:47.559 a lot of students back into the classroom that that 0:01:47.840 --> 0:01:53.400 have faced a learning loss. Their social, emotional learning and 0:01:53.400 --> 0:01:57.120 development has been impacted as in validity they've been at home, 0:01:57.720 --> 0:02:00.560 and I think also importantly to many, we've seen reduced 0:02:00.640 --> 0:02:05.920 engagement in learning and and very unfortunately that that the 0:02:05.960 --> 0:02:09.919 most severe impact of those most severely impacted are often 0:02:09.960 --> 0:02:13.520 those already most disadvantaged. So of course we have to 0:02:13.560 --> 0:02:16.120 face how how do we pick up those students and 0:02:16.160 --> 0:02:19.520 how do we give them a healthy approach to learning 0:02:19.520 --> 0:02:22.680 while closing those gaps. What kind of learning are we 0:02:22.720 --> 0:02:27.080 talking about? I mean, I um, I think probably the 0:02:27.440 --> 0:02:30.519 skills that I picked up the most were with engineering, 0:02:30.600 --> 0:02:33.840 especially as I became a teenager and started buying the 0:02:33.919 --> 0:02:39.320 more complicated um you know, like a car sets for example, 0:02:39.840 --> 0:02:42.720 what what what are? What? Are people learning the most 0:02:42.800 --> 0:02:48.920 with your products? Our solutions are products are designed of 0:02:49.000 --> 0:02:53.880 course of all too, the delivered towards the standards and 0:02:54.000 --> 0:02:57.119 learning goals in the classrooms so that they're really highly 0:02:56.919 --> 0:03:00.000 re usable. But then of course we're also focused around 0:03:00.080 --> 0:03:04.840 really developing twenty century skillers as well, also things like creativity, 0:03:05.080 --> 0:03:10.280 critical thinking, problem solving, and important social emotional skills, also 0:03:10.400 --> 0:03:14.200 like collaboration, resilience. So when you have to solve the 0:03:14.240 --> 0:03:17.960 real world problem in the classroom with with one of 0:03:18.000 --> 0:03:21.360 your mates, there's a lot of problems solving, there's a 0:03:21.360 --> 0:03:25.040 lot of negotiations. So it's not the technique because I 0:03:25.080 --> 0:03:28.040 have so my godson in I got I got him 0:03:28.080 --> 0:03:33.240 recently the Lego Doukati Panagali V four R. And he's 0:03:33.320 --> 0:03:36.080 just a kid, he's only I think seven years old. 0:03:36.440 --> 0:03:38.360 But after he got it put together with his daddy 0:03:38.360 --> 0:03:40.600 said look, if I turned the crank, the cylinders go 0:03:40.680 --> 0:03:42.200 up and down. And I thought it was so cool 0:03:42.200 --> 0:03:45.920 that there was just that much detail on the set. Yeah, 0:03:46.120 --> 0:03:49.240 I think imagine that and imagine imagine you know, the 0:03:49.240 --> 0:03:52.040 imagining of that joy and the engagement that he has. 0:03:52.080 --> 0:03:55.680 I'm sure he spent sort of hours really deeply engaged 0:03:55.720 --> 0:04:00.120 in that. And then you layer over intentional content and 0:04:00.360 --> 0:04:04.760 to then take out learning outcomes of that. So while 0:04:04.760 --> 0:04:07.560 it's not do CARDI we bring into the classroom, it 0:04:07.800 --> 0:04:11.160 is hands on legal based solutions. They are also quoting 0:04:11.240 --> 0:04:15.800 elements in it where students then solve real world problems 0:04:16.920 --> 0:04:20.719 having subject based learning, but again also bringing on a 0:04:20.720 --> 0:04:23.560 lot of those twenty first century skills. And I could 0:04:23.600 --> 0:04:26.600 imagine that he's also practiced quite a bit of resilience 0:04:26.680 --> 0:04:29.440 as he's played built that big one and you know, 0:04:29.520 --> 0:04:33.680 finding the right elements and and ultimately succeeding. So I 0:04:33.680 --> 0:04:37.839 think take that magic, add the purposefulness of delivering towards 0:04:37.880 --> 0:04:41.360 specific outcomes, and then bring it into the classroom. That's 0:04:41.360 --> 0:04:44.960 what we look to deliver. So what is Lego Education 0:04:45.360 --> 0:04:47.960 you know doing specifically? I mean you think, I'll think 0:04:48.000 --> 0:04:49.880 about the last year we had that remote learning and 0:04:49.880 --> 0:04:53.480 I know you guys support Lego education supports learning through play. 0:04:53.560 --> 0:04:56.920 I'm guessing that took a pretty big hit last year 0:04:56.920 --> 0:05:02.159 as kids were working remotely. Um, of course, we try 0:05:02.200 --> 0:05:05.080 to do what we can to support teachers to have 0:05:05.320 --> 0:05:08.240 a learning wherever it takes place. But you're right, our 0:05:08.400 --> 0:05:12.480 solutions are optimized for using in the classroom where the 0:05:12.520 --> 0:05:17.719 students can engage in collaborative, iterative problem solving. And I 0:05:17.720 --> 0:05:20.520 think we've also seen through the pandemic actually the magic 0:05:20.600 --> 0:05:23.480 that the classroom has and what students are missing there 0:05:23.920 --> 0:05:26.280 and what's then really important for us to say, how 0:05:26.320 --> 0:05:29.480 can we make that even stronger? How can we optimize 0:05:29.760 --> 0:05:33.000 the learning potential in the classroom. And that's why we 0:05:33.080 --> 0:05:37.600 talk about the importance of rethinking learning. So again, how 0:05:37.640 --> 0:05:45.080 can we make learning engaging, personally meaningful, iterative, socially collaborative, 0:05:45.160 --> 0:05:47.760 so we can really press the students with the skills 0:05:48.279 --> 0:05:51.960 they need. It said, a very important healthy approach to them. 0:05:52.040 --> 0:05:53.920 Ashman Stark, thank you so much for joining us. Really 0:05:53.960 --> 0:05:58.080 appreciate a fascinating discussion here, ashpan Stark, President of Lego Education. 0:05:58.160 --> 0:06:01.080 And again, kids going back to school, that's the really 0:06:01.120 --> 0:06:04.119 good news, and getting them back into the classroom, getting 0:06:04.160 --> 0:06:07.760 back into activities after school, activities and clubs and sports, 0:06:07.760 --> 0:06:09.960 and that's the good news. And Lego is a big 0:06:10.120 --> 0:06:17.160 part of that. We had some better than expected manufacturing 0:06:17.320 --> 0:06:20.080 I s M data came out this morning. Good news 0:06:20.120 --> 0:06:23.200 there for the manufacturing front. Let's break it down with 0:06:23.279 --> 0:06:26.800 Tim Fury, chairman of the Manufacturing Business Survey for the 0:06:26.839 --> 0:06:30.000 Institute of Supply Management based in Miami. Tim, thanks so 0:06:30.080 --> 0:06:32.040 much for joining us here. Better than expected numbers give 0:06:32.080 --> 0:06:35.919 us the highlights. Yeah, really good demand again and the 0:06:35.960 --> 0:06:38.560 month of August uh, better than the month of July. 0:06:38.720 --> 0:06:41.600 And plus I mean that's a great number. The new 0:06:41.600 --> 0:06:43.960 export order number was really strong. To supporting that new 0:06:44.080 --> 0:06:48.000 order number. Backlog was again near records, second highest number 0:06:48.000 --> 0:06:50.800 ever since we've been keeping record since the nineties. And 0:06:50.800 --> 0:06:54.000 the customer inventory again was swallow months below forty which 0:06:54.040 --> 0:06:57.040 is a super too low. Empty cells everywhere. If you've 0:06:57.040 --> 0:06:58.720 been in any of the stores lately, try to buy 0:06:58.760 --> 0:07:02.080 a car, you can't. There's a went to a department store, 0:07:02.120 --> 0:07:04.680 going to a grocery store sells a rampy everywhere, and 0:07:04.760 --> 0:07:07.400 it's kind of indicative of what this reporter is signed. 0:07:09.200 --> 0:07:12.840 Our delivery side us a little bit uh, and prices 0:07:12.880 --> 0:07:14.960 are backing off there. There is some positive signs for 0:07:14.960 --> 0:07:18.440 the future go ahead well, I just um spent the 0:07:19.280 --> 0:07:24.040 my lunch hour trying to order a titanium um connecting 0:07:24.120 --> 0:07:29.040 pipe for um an a Kropovitch exhaust. And who doesn't 0:07:29.040 --> 0:07:31.680 do that in their lunch Well, it's just they're impossible 0:07:31.680 --> 0:07:35.120 to find. I called a ton of distributors and dealerships 0:07:35.160 --> 0:07:38.400 and they say, you know what, you're gonna be waiting weeks, 0:07:38.400 --> 0:07:42.160 like hope to get it at the earliest end of October. 0:07:42.720 --> 0:07:45.280 And it just feels like that's a long way away 0:07:45.360 --> 0:07:47.840 from you know, I feel like we just finished August. 0:07:48.200 --> 0:07:50.880 Um when is this going to When are we gonna 0:07:50.880 --> 0:07:54.440 see a recovery? Well, so let's let's expand on that. 0:07:54.480 --> 0:07:57.440 You know, our our number one industry sector that's expanding 0:07:57.440 --> 0:08:00.200 its furniture. And you go into a furn is to 0:08:00.200 --> 0:08:02.360 store these days and they'll tell you, well, maybe four weeks, 0:08:02.360 --> 0:08:04.720 but I don't really know. And even the day before 0:08:04.720 --> 0:08:06.360 we supposed to deliver, they'll call you up and say 0:08:06.400 --> 0:08:07.880 it's going to be another three weeks. A lot of 0:08:07.880 --> 0:08:10.600 that has to do with poor congestion. I think we're 0:08:10.600 --> 0:08:13.080 gonna be dealing with this uncertainty for quite some time. 0:08:14.080 --> 0:08:16.120 You know the fact that the Dela variant raised through 0:08:16.600 --> 0:08:19.760 UH the US to such an extent it didn't so 0:08:19.880 --> 0:08:23.520 much impact our panelists, but it's definitely impacting sentiment and 0:08:23.520 --> 0:08:25.360 you can see it in the conference board in the 0:08:25.440 --> 0:08:27.600 University of Michigan. So, and that's not a good thing. 0:08:28.040 --> 0:08:30.440 Our lead times are out so far we set record 0:08:30.600 --> 0:08:33.559 Romatory of lead times again, and what's happening is that's 0:08:33.640 --> 0:08:36.120 driving up our new order number. How much I can't 0:08:36.160 --> 0:08:39.160 really tell, but you can probably assume it's five points 0:08:39.160 --> 0:08:44.560 of it. So, and that's essentially advanced demands. That's if 0:08:44.559 --> 0:08:46.800 you have lead times that are typically six weeks, they're 0:08:46.800 --> 0:08:50.040 now twelve or fifteen. You're committing to higher prices at 0:08:50.040 --> 0:08:52.400 some point longer in the future than you normally do. 0:08:52.880 --> 0:08:55.040 And that's kind of risky. But but I think you know, 0:08:55.120 --> 0:09:00.000 overall suppliedment balances, we're in balance, but we're making progress. 0:09:00.080 --> 0:09:03.360 The input side mad some progress price disease that although 0:09:03.360 --> 0:09:05.839 they're still expanding not as fast rate as they were 0:09:05.840 --> 0:09:08.640 in July and June, the suppliers delibered better. You can 0:09:08.640 --> 0:09:12.760 see that in the rometary inventory account. We manufacturing inventory account. 0:09:12.800 --> 0:09:14.920 We got to fifty five first time in quite some time. 0:09:15.559 --> 0:09:17.520 So but I think We've got a new normal here 0:09:17.600 --> 0:09:19.480 that we're gonna be dealing with for at least a year. 0:09:19.559 --> 0:09:24.520 And that's the impacts of variants coming out and the 0:09:24.559 --> 0:09:28.880 attitude that it has on people tim manufacturing. What are 0:09:28.880 --> 0:09:31.080 they saying about their labor force? Are they getting the 0:09:31.120 --> 0:09:34.160 labor they need? Well, that's the big story for the months. 0:09:34.200 --> 0:09:38.120 We are still struggling attracting people. Hired to fire ratio 0:09:38.240 --> 0:09:41.199 is still eight or nine to one, Uh no, one is. 0:09:41.440 --> 0:09:43.760 I think I had one respond in talking about layoffs. 0:09:44.440 --> 0:09:47.520 Everybody else is talking about trying to hire. Of the people, 0:09:47.880 --> 0:09:49.920 I think eight two percent of my comments were higher 0:09:49.920 --> 0:09:53.240 related and of that, thirty five of those said that 0:09:53.240 --> 0:09:55.920 they were having difficulty, which is up five points from July. 0:09:56.080 --> 0:09:58.160 So that's that says a lot of The biggest thing 0:09:58.160 --> 0:10:00.840 on the labor side, I think in August is that 0:10:00.920 --> 0:10:06.679 what started in July turnover is now accelerating. So of 0:10:07.000 --> 0:10:12.360 those hiring clans is related to turnover, including retirements, and 0:10:12.360 --> 0:10:16.440 that's a big number. So you hire two, somebody retires, 0:10:16.480 --> 0:10:19.480 you have to hire three. It's and in most cases 0:10:19.480 --> 0:10:22.920 it's people chasing wages, and that's a direct result of 0:10:22.960 --> 0:10:26.520 people raising wages to try to fill up their staffing levels. 0:10:27.400 --> 0:10:30.600 All right, very interesting stuff. Great to get your take 0:10:30.679 --> 0:10:32.880 on this, Tim, thanks so much for joining us. The 0:10:32.960 --> 0:10:36.679 usual Tim Fiori, there's the chairman of the Manufacturing Business 0:10:36.720 --> 0:10:41.480 Survey out of the Institute for Supply Management in Miami. 0:10:41.559 --> 0:10:43.320 Of course, we've got that number. You can see it 0:10:43.360 --> 0:10:46.760 if you type eCos space US go UM, or you 0:10:46.800 --> 0:10:49.320 can type w E c O go in the blueboard terminal, 0:10:49.360 --> 0:10:51.280 click on the American flag and you will see I 0:10:51.559 --> 0:10:54.120 s M Manufacturing came in at fifty nine point function 0:10:54.160 --> 0:10:57.920 of nine from fifty eight the survey was fifty eight 0:10:57.920 --> 0:11:00.680 point five, so beating the survey and more than the 0:11:00.720 --> 0:11:07.160 prior reading of point five. We have had a ton 0:11:07.320 --> 0:11:11.920 of stories, well just daily deluge of stories about the 0:11:12.000 --> 0:11:16.160 changing regulatory environment and China, and a lot of investors 0:11:16.160 --> 0:11:20.160 have just said it's uninvestable at this point, but some 0:11:20.240 --> 0:11:23.559 are seeing opportunities, and Ashroff huck is among them. Among them. 0:11:23.600 --> 0:11:27.320 He's a senior portfolio manager at Sands Capital, and he 0:11:27.440 --> 0:11:31.520 joins us to talk about um the companies that could 0:11:31.520 --> 0:11:37.280 benefit from the regulatory revisions that we're seeing. Ashroff, thanks 0:11:37.360 --> 0:11:39.960 very much for joining us. What are you seeing as 0:11:40.160 --> 0:11:43.520 kind of the overall theme here in terms of what 0:11:43.640 --> 0:11:47.560 China is doing. Hey, Matt and Paul, thank you for 0:11:47.600 --> 0:11:50.240 having me on UM. You know, it's been a rocky 0:11:51.559 --> 0:11:54.640 and the regulation has been fast and furious, and you know, 0:11:54.679 --> 0:11:57.760 we've taken some hits, but we think the government is 0:11:57.760 --> 0:12:03.800 focused on strategic priority these improving its demographics, reducing income equality, 0:12:04.200 --> 0:12:08.040 moving to higher value manufacturing industries. And we don't think 0:12:08.080 --> 0:12:10.439 it's a case where they're trying to destroy capitalism or 0:12:10.440 --> 0:12:15.040 punish the wealthy. And so the attractive areas that they're pushing, uh, 0:12:15.080 --> 0:12:18.920 you know, they're encouraging more athletic participation, better access to 0:12:19.160 --> 0:12:23.560 affordable drugs and healthcare, and cleaning the environment. But when 0:12:23.600 --> 0:12:27.000 I take a look at big companies like Ali Baba, 0:12:27.080 --> 0:12:30.720 like ten Cent, which have been such winners not just 0:12:30.800 --> 0:12:35.440 for shareholders but also arguably for China itself on a 0:12:35.480 --> 0:12:39.760 global scale, seemed to reflect very well on China. It's 0:12:39.760 --> 0:12:43.800 surprised a lot of people that the government went after 0:12:43.840 --> 0:12:47.280 it was such a heavy hand. Those again, those companies 0:12:47.320 --> 0:12:50.960 that were really representing I thought China well on a 0:12:51.000 --> 0:12:54.440 global scale. How do you make make out or make 0:12:54.440 --> 0:12:56.439 peace with kind of how they're viewing some of their 0:12:56.600 --> 0:13:02.160 traditional stalwart companies. Yeah, I think that those tech companies 0:13:02.200 --> 0:13:05.079 have gotten so big, and a lot of the issues 0:13:05.160 --> 0:13:08.000 that the Chinese regulators are dealing with are the same 0:13:08.040 --> 0:13:10.880 issues that American and European regulators have with the big 0:13:10.920 --> 0:13:14.760 tech companies. Here the differences that China can regulate them 0:13:14.880 --> 0:13:18.800 much more efficiently and effectively. UM So, I don't think 0:13:18.840 --> 0:13:21.080 they're trying to destroy the ten cents and the baba's, 0:13:21.679 --> 0:13:24.240 but they want to ensure fair competition. They want to 0:13:24.280 --> 0:13:28.439 ensure that that the you know, the term that everyone's 0:13:28.480 --> 0:13:31.240 talking about common prosperity. They want to ensure that there's 0:13:31.280 --> 0:13:34.640 more equal participation in the growth that's being generated by 0:13:34.640 --> 0:13:40.360 those platforms. Are you concerned about the fact that, you know, 0:13:40.559 --> 0:13:43.000 things can change in a dime here? I mean it's 0:13:43.040 --> 0:13:45.920 not like, um, we get a plan that's laid out 0:13:46.040 --> 0:13:49.560 and we know in advance, they could just change their 0:13:49.600 --> 0:13:52.800 mind at any point. Yeah, I mean it is a 0:13:52.800 --> 0:13:56.200 little bit more dynamic. It's complicated, but I also think 0:13:56.280 --> 0:13:59.520 China's is too compelling to ignore. Um And as I mentioned, 0:13:59.559 --> 0:14:02.360 there are they're you know, right now the tech platforms 0:14:02.400 --> 0:14:05.160 and education, for example, are in the spotlight but there's 0:14:05.160 --> 0:14:08.480 a lot of growth in consumer businesses there that the 0:14:08.720 --> 0:14:12.480 government will regulate to make sure that it's it's fair competition, 0:14:12.559 --> 0:14:15.600 but they're not trying to control those businesses maybe as much. 0:14:15.920 --> 0:14:18.640 Uh So. For example, we own a business called Anta, 0:14:18.720 --> 0:14:21.040 which is one of our largest ways. It's a athletic 0:14:21.080 --> 0:14:24.480 footwear company. Uh and that's gonna grow as the as 0:14:24.520 --> 0:14:27.680 the government's pushing more uh kids into you know, stop 0:14:27.760 --> 0:14:31.120 playing video games and play more soccer. Um so uh 0:14:31.160 --> 0:14:34.400 And China's about to host the Winter Olympics. They're encouraging 0:14:34.400 --> 0:14:36.880 people to go skiing and things like that. So Anta, 0:14:37.200 --> 0:14:39.680 which you see Clay Thompson wearing, will be a big 0:14:39.680 --> 0:14:42.800 beneficiary of that. And um you know, it's something that 0:14:43.400 --> 0:14:46.200 we've helped for a long time with growth twenty over 0:14:46.200 --> 0:14:49.680 the next five years per year. So astra in in 0:14:49.960 --> 0:14:53.880 terms of new capital going into China, my guests would 0:14:53.880 --> 0:14:57.040 be it's gonna go in and demand a much higher 0:14:57.080 --> 0:14:59.920 risk premium. I'll pay a much lower multiple for my equities, 0:15:00.000 --> 0:15:04.400 a called demand a higher yield on my credit. Talk 0:15:04.480 --> 0:15:06.480 to us about what you're seeing in the capital markets there, 0:15:06.560 --> 0:15:10.840 the financial markets, the funding markets for China. Yeah, that's 0:15:10.840 --> 0:15:13.640 certainly in the case, and you're seeing that even reflected 0:15:13.680 --> 0:15:16.240 in the public company multiples. I mean, you look at 0:15:16.280 --> 0:15:19.520 a business like Ali Baba versus Amazon UM, you know, 0:15:19.680 --> 0:15:22.760 very similar growth rates. In fact, Baba is growing probably 0:15:22.760 --> 0:15:25.640 faster in its core business, and it trades that a 0:15:25.720 --> 0:15:28.720 much lower multiple, higher risk premiums and than Amazon. So 0:15:28.800 --> 0:15:33.320 it's certainly something we're seeing, uh, in both private and 0:15:33.480 --> 0:15:41.600 public funding markets. Interesting when you see UM everyone sort 0:15:41.640 --> 0:15:45.080 of rushing out of China heading for the exit, does 0:15:45.120 --> 0:15:49.680 that provide any kind of UM, any kind of opportunity? 0:15:49.680 --> 0:15:51.360 And I noticed there's some companies I think of ever 0:15:51.440 --> 0:15:55.920 Grand for example, that are having fire sales. Yeah, we're 0:15:55.960 --> 0:15:59.080 not really interested in UM businesses like that. You know, 0:15:59.120 --> 0:16:04.680 we run global growth portfolios or distressed or distressed assets. Now, yeah, 0:16:05.680 --> 0:16:08.320 we're really looking for great growth franchises. Some of those 0:16:08.360 --> 0:16:12.280 are on sale, but I think less than the fire sale. 0:16:12.280 --> 0:16:15.560 We're more interested in how innovation and technology are creating 0:16:15.600 --> 0:16:18.400 new opportunities, and that's certainly happening in China as well 0:16:18.400 --> 0:16:20.080 as many other parts. I mean, China is a small 0:16:20.120 --> 0:16:23.920 part portion of our of our global internationally and portfolios UM, 0:16:24.200 --> 0:16:28.120 so it is I think less you know, the fire 0:16:28.160 --> 0:16:30.520 sell more the opportunity that's been created by innovation invest 0:16:30.560 --> 0:16:33.680 what we're focused on right now. Alright, as, thank you 0:16:33.680 --> 0:16:37.960 so much. We appreciate that. Getting some thoughts there on China. 0:16:38.040 --> 0:16:41.160 And again the real question is to what extent, uh 0:16:41.280 --> 0:16:43.680 is China investable? Is it still investable? But it's such 0:16:43.720 --> 0:16:45.520 a big part of the m s c I index 0:16:45.520 --> 0:16:47.120 that you kind of have to be there as astrof, 0:16:47.200 --> 0:16:50.840 said Ashraff hawk Uh, senior portfolio manager for Sance Capital. 0:16:50.880 --> 0:16:52.760 Thanks so much. I love the joint. I love the 0:16:52.760 --> 0:16:55.920 the athletics shoe point. You know, because if kids are 0:16:55.920 --> 0:16:58.560 going to stop playing video games and yep, I think 0:16:58.600 --> 0:17:02.200 that's a very big if. Um, they are going to 0:17:02.280 --> 0:17:04.320 have to do something else, and it's probably going to 0:17:04.359 --> 0:17:09.080 involve running around, um, wearing shoes, especially if they're playing basketball, 0:17:09.280 --> 0:17:11.480 which they love to do. They're getting pushed down on 0:17:11.480 --> 0:17:14.280 the ski slopes and need new boots. Yeah, it should 0:17:14.320 --> 0:17:16.320 be interesting it but I'll be like like you said, Mattabie, 0:17:16.400 --> 0:17:18.639 I don't know how they're going to regulate Uh, the 0:17:18.920 --> 0:17:22.640 uh kids are gonna have parents can't do it. Good 0:17:22.680 --> 0:17:24.520 luck to the Chinese government. We'll have more coming up 0:17:24.680 --> 0:17:30.880 this is Bloomberg, But we have a good old fashioned 0:17:30.960 --> 0:17:33.560 price war in the m and a space this time 0:17:33.720 --> 0:17:37.520 for Kansas City Southern Railway. We've got the two Canadian railways, 0:17:37.640 --> 0:17:42.360 Canadian Pacific Railway and Canadian National, both vying for this asset. 0:17:42.640 --> 0:17:45.280 Would give them a great Canada through the US into 0:17:45.320 --> 0:17:49.440 Mexico line. There lots of opportunity. Let's dig deep into 0:17:49.440 --> 0:17:51.840 this deal. We can do it with nobody better than 0:17:51.880 --> 0:17:54.240 Tony Hatch. He has been covering these rails and truckers 0:17:54.280 --> 0:17:56.960 for decades on Wall Street, one of the top analysts there. 0:17:57.320 --> 0:18:00.040 He is knee deep in this deal. Tony again, it 0:18:00.080 --> 0:18:02.080 makes a lot of sense to buy for one of 0:18:02.080 --> 0:18:05.600 these Canadian companies to buy Kansas City Southern. What's the 0:18:05.680 --> 0:18:08.399 problem here for these two players. It seems like Canadian 0:18:08.480 --> 0:18:11.600 National had a kind of a setback, So Cannadian and 0:18:11.640 --> 0:18:14.640 I saying hey, Paul, Canadian National kind of like a 0:18:14.680 --> 0:18:18.200 combination in the ring yesterday, a straight left by the 0:18:18.440 --> 0:18:21.800 STB rejecting their voting truest and then a roundhouse by 0:18:22.119 --> 0:18:24.920 t c I trying to change the manager team out. 0:18:25.000 --> 0:18:28.240 So it was not a good day to be in Montreal. 0:18:28.840 --> 0:18:31.800 Say the deal is that c N was proposing this 0:18:31.960 --> 0:18:34.280 under new rules, the so called new rules for the 0:18:34.400 --> 0:18:38.200 STB which came about in two thousand one and require 0:18:38.480 --> 0:18:43.880 enchanced competition, not not just preventing reduced CP skated by 0:18:43.880 --> 0:18:46.359 any of the old rules and see and also had 0:18:46.400 --> 0:18:49.440 horrible timing. This STB is activist and wants to get 0:18:49.440 --> 0:18:51.440 out to get in the ring and punch it railroads, 0:18:51.440 --> 0:18:55.240 and c N has provided them with that opportunity. Is 0:18:55.280 --> 0:18:57.440 it damaging to have this kind of deal up in 0:18:57.480 --> 0:19:00.199 the air? I mean, um, what does the management do 0:19:00.440 --> 0:19:05.160 what when there's so much uncertainty. It's a very good question, 0:19:05.160 --> 0:19:06.600 you know. I think you would say that there's some 0:19:06.680 --> 0:19:10.240 lost time really maybe all three carriers involved, because certainly 0:19:10.280 --> 0:19:13.600 the top strategy lines were focused on on this and 0:19:13.640 --> 0:19:16.119 in Washington, d C rather than out in the field. 0:19:16.720 --> 0:19:19.960 I don't think it's you know, ultimately damaging. I think 0:19:19.960 --> 0:19:22.080 they all have good prospects. You know, we may see 0:19:22.160 --> 0:19:25.199 change and see ed which would in some ways be unfortunate, 0:19:25.880 --> 0:19:28.480 but I think they can get past that level of damage. 0:19:28.840 --> 0:19:31.919 These deals would whoever would win, would be transformative and 0:19:31.960 --> 0:19:34.439 may have been worth the time risk, if not the 0:19:34.520 --> 0:19:38.080 dollar risk. So Canadian Pacific. Now I guess from a 0:19:38.119 --> 0:19:41.200 regulatar perspective, seems to be in the driver's seat here. 0:19:41.320 --> 0:19:46.040 But there offers actually lower than what Canadian National did. 0:19:46.160 --> 0:19:48.320 So are they have to raise their offer or can 0:19:48.359 --> 0:19:51.480 there twenty seven billion dollar offers still win the day? 0:19:52.119 --> 0:19:54.400 I think at this point it probably wins the day. 0:19:54.480 --> 0:19:56.520 So the key thing, and you may remember, Paul, is 0:19:56.760 --> 0:20:00.080 the UH the voting trust issue if if C he 0:20:00.200 --> 0:20:03.080 has approved. If you if you were a Ryott Pennsy Southern, 0:20:03.160 --> 0:20:05.439 your board and your chry was voted to approve the 0:20:05.440 --> 0:20:08.800 CP deal, you could get paid almost instantly if you 0:20:08.840 --> 0:20:11.120 were to continue with the CN deal, which I don't 0:20:11.160 --> 0:20:13.240 think will happen, but if you work to you would 0:20:13.240 --> 0:20:17.480 have to take the entire regulatory review process, time and risk. 0:20:18.200 --> 0:20:20.320 So the question is is you know it's three hundred 0:20:20.359 --> 0:20:25.080 today or maybe in a year or more. So that's 0:20:25.080 --> 0:20:27.280 why they feel they don't need to raise that they 0:20:27.280 --> 0:20:31.359 can win with a lower face price face price offer, 0:20:33.200 --> 0:20:38.960 are there? UH this deal would have gone to Canadian 0:20:39.080 --> 0:20:43.880 National Railway and maybe it goes to Canadian Pacific now 0:20:44.359 --> 0:20:46.840 losing Kansas City Southern. It just strikes me as an 0:20:46.840 --> 0:20:50.720 American that we seem to be seating power to the north. 0:20:53.640 --> 0:20:57.359 The railroaders, you may recall, have always viewed this as 0:20:57.400 --> 0:21:01.159 a North American venture. After all, the CEO of the 0:21:01.160 --> 0:21:05.920 Canadian Pacific UH is an American. Most of the transformation 0:21:06.000 --> 0:21:11.679 of c N under Hunter Harrison and American were Americans. So, um, 0:21:11.720 --> 0:21:13.920 you know, from a rail shipper and a rail investor, 0:21:13.960 --> 0:21:16.680 you could buy Canadian Pacific and sell Union Pacific or 0:21:16.760 --> 0:21:19.880 vice versa. That we don't view it that way. In fact, 0:21:19.960 --> 0:21:21.840 it would be more likely if somebody were to go 0:21:21.920 --> 0:21:24.119 buy an American were trying to buy one of the 0:21:24.119 --> 0:21:28.680 two Canadian headquartered railroads, that would raise nationalistic fears than 0:21:28.760 --> 0:21:31.720 a fear about somebody buying the smallest American railroad, which 0:21:31.720 --> 0:21:34.040 really is a play in Mexico, the third country we 0:21:34.040 --> 0:21:37.640 haven't talked about. Yes, let's talk about this deal strategically. 0:21:37.680 --> 0:21:41.119 Let's say Canadian Pacific gets Kansas City Southern. Talk to 0:21:41.200 --> 0:21:45.000 us about the benefits of putting those two roads together. Well, 0:21:45.040 --> 0:21:46.639 you know, and I want to say this to if 0:21:46.680 --> 0:21:49.280 c N had been able to do this without competition 0:21:49.440 --> 0:21:51.520 or under the old rules, they would have gotten this 0:21:51.680 --> 0:21:56.080 the old rules, and this does not reduce competition questions 0:21:56.080 --> 0:21:58.439 as to enhance it for CP under the rules of 0:21:58.520 --> 0:22:02.200 nearly presenting that it does and hurt anything that currently exists. 0:22:03.000 --> 0:22:05.360 Would link you know, every railroad now wants to get 0:22:05.400 --> 0:22:07.439 access to more water, so it would get them to 0:22:07.520 --> 0:22:09.760 the US Gulf and get them all the way to Mexico. 0:22:09.880 --> 0:22:13.679 It would link the autoly industry from parts coming in 0:22:14.320 --> 0:22:19.280 manufacturing in Mexico. Detroit as well as in Ontario would 0:22:19.280 --> 0:22:22.120 all be linked. In addition, corn grown into the code 0:22:22.200 --> 0:22:25.800 is as the largest US import into Mexico and so 0:22:26.000 --> 0:22:28.280 they have infertile growing fields there and the end up 0:22:28.320 --> 0:22:31.399 single line service. So you know the it would create 0:22:31.520 --> 0:22:35.040 real power north South and most of the rail industry 0:22:35.040 --> 0:22:37.159 as you well call as focused east West. You know, 0:22:37.359 --> 0:22:40.760 containers from l A inbound to Chicago and that type 0:22:40.760 --> 0:22:45.600 of thing. Does it, though, um reduce the amount of 0:22:45.640 --> 0:22:49.240 competition in the industry, I mean it must it's CP 0:22:50.240 --> 0:22:52.320