WEBVTT - Earnings, IMF, ETFs, and Autos (Podcast) 0:00:00.760 --> 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 0:00:11.520 --> 0:00:15.560 with essential market moving news. Fund The Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.560 at Bloomberg dot com slash podcast. All right, we got 0:00:21.560 --> 0:00:24.880 earnings kicking off later this week. We want to get 0:00:24.880 --> 0:00:27.600 a sense from some professionals like, how should we think 0:00:27.640 --> 0:00:30.560 about these these earnings? What should we be looking for? 0:00:31.280 --> 0:00:32.960 What are the risks out there? So let's bring in 0:00:33.120 --> 0:00:36.760 Gina Martin Adams. She's our chief strategist at Bloomberg Intelligence 0:00:37.159 --> 0:00:39.560 and she joins us here on our Bloomberg Interactive Broker studio. 0:00:39.600 --> 0:00:42.879 So we appreciate that you get the gold star. You know, 0:00:42.920 --> 0:00:44.839 we've dealt with a lot until last time we talk 0:00:44.840 --> 0:00:46.880 to you. It seems like it's been a little bit Gina. 0:00:46.960 --> 0:00:49.440 We've had a banking crisis, we've had a FED continuing 0:00:49.440 --> 0:00:54.600 to raise rates, market pricing in rate cuts. Let's get 0:00:54.600 --> 0:00:58.160 back the fundamentals stocks earnings. What are you looking for 0:00:58.400 --> 0:01:00.600 this earnings period? Well, I think it's going to be 0:01:00.600 --> 0:01:02.640 a pretty ugly earning season. Remember, at the beginning of 0:01:02.640 --> 0:01:05.160 the year, analysts we're anticipating about a two percent drop 0:01:05.160 --> 0:01:09.560 in first quarter earnings. They're now anticipating an eight percent decline. 0:01:09.920 --> 0:01:13.240 They are also anticipating at least a three quarter earnings 0:01:13.240 --> 0:01:15.559 recession that began with a fourth quarter of twenty twenty 0:01:15.600 --> 0:01:17.760 two will extend through the first half of this year. 0:01:17.800 --> 0:01:21.120 At the very least, probably by the end of earning season, 0:01:21.120 --> 0:01:22.760 we'll find that it will be a full four quarter 0:01:22.760 --> 0:01:25.440 earnings recession extending through the third quarter, because the third 0:01:25.480 --> 0:01:27.880 quarter estimate is on the verge of decline already. Wait, 0:01:27.959 --> 0:01:30.880 these are your analysts. Is this is the consensus of 0:01:30.959 --> 0:01:34.440 Wall Street analysts? Ah, well, what do you think. Look, 0:01:34.480 --> 0:01:37.040 our model says we get a five percent earnings contraction 0:01:37.200 --> 0:01:39.400 that was as of Our model is suggesting we were 0:01:39.400 --> 0:01:41.440 headed into earnings recession as early as the middle of 0:01:41.520 --> 0:01:44.440 last year. It currently says somewhere between a five and 0:01:44.520 --> 0:01:48.080 seven percent earnings contraction overall on a trailing twelve month basis. 0:01:48.360 --> 0:01:50.320 If you look at the trailing twelve month numbers as 0:01:50.360 --> 0:01:52.920 implied by the analyst consensus, it's closer to a three 0:01:52.960 --> 0:01:56.440 and a half percent earnings recession. That's very similar to 0:01:56.440 --> 0:01:59.520 the twenty fifteen twenty sixteen earnings recession, which was a 0:01:59.560 --> 0:02:03.920 midscal recession, but certainly very light relative to your typical 0:02:03.920 --> 0:02:07.480 earnings recession was about fifteen percent. I think what everyone 0:02:07.600 --> 0:02:09.919 is struggling with right now, as everyone says the market 0:02:10.040 --> 0:02:13.960 is fully unprepared for this recession. Unfortunately, I think that 0:02:13.960 --> 0:02:18.200 the timing is a little bit messy because as of October, 0:02:18.280 --> 0:02:20.880 our models would suggest actually the market was pricing for 0:02:21.000 --> 0:02:24.200 up to a fifteen percent recession emerging in twenty twenty three, 0:02:24.560 --> 0:02:28.119 so we already priced the earnings down draft that we're 0:02:28.120 --> 0:02:30.120 going through right now. You have to get to a 0:02:30.240 --> 0:02:35.000 point where the consensus capitulates so far, so fast that 0:02:35.040 --> 0:02:37.079 they're now starting to say, look, this could be even 0:02:37.160 --> 0:02:40.720 worse than fifteen percent before the market even need go 0:02:40.880 --> 0:02:43.280 lower than it was in October. And I think that 0:02:43.280 --> 0:02:45.840 that is what is creating a lot of confusion on 0:02:45.840 --> 0:02:48.600 the part of investors is are we ready for this? 0:02:48.680 --> 0:02:50.799 Are we not ready for this? I think the market 0:02:50.880 --> 0:02:53.000 is very well prepared for this, and that's why it's 0:02:53.000 --> 0:02:54.959 been able to look through a lot of this weakness, 0:02:55.120 --> 0:02:58.880 so stocks can perform. The market can perform in a 0:02:58.960 --> 0:03:03.040 period where earning are coming down yep, And essentially we 0:03:03.080 --> 0:03:05.520 already priced this in, We've already dealt with it, and 0:03:05.560 --> 0:03:07.840 we've already recovered on the market, even though you haven't 0:03:07.880 --> 0:03:10.200 seen it hit the street. Two conditions that need to 0:03:10.240 --> 0:03:13.560 happen that we need to see happen for that to 0:03:13.639 --> 0:03:17.800 remain the base case. The first is estimate revision momentum 0:03:17.880 --> 0:03:20.720 cannot go lower than it was in October. So intriguingly, 0:03:21.000 --> 0:03:25.000 estimate revisions reached the worst of their worst momentum in 0:03:25.040 --> 0:03:27.760 the October November time period as well, So even though 0:03:27.760 --> 0:03:30.600 analysts are marking down expectations, they're not marking them down 0:03:30.639 --> 0:03:32.600 as fast as they were in October and November, and 0:03:32.639 --> 0:03:36.560 that momentum is really critical to driving price. So yes, 0:03:36.640 --> 0:03:39.160 you can absolutely see earnings continue to remain weak, and 0:03:39.360 --> 0:03:41.520 as a matter of fact, on average, stock prices bottom 0:03:41.560 --> 0:03:45.360 two quarters before earnings ultimately find their bottom. We can 0:03:45.400 --> 0:03:48.160 continue to see earnings remain weak in stock prices move higher, 0:03:48.160 --> 0:03:50.800 but we need to see that momentum remain a little 0:03:50.800 --> 0:03:54.120 bit less bad, if not start to improve. The second 0:03:54.120 --> 0:03:57.560 thing that is absolutely critical to maintaining I think market 0:03:57.600 --> 0:04:01.240 momentum going forward is these do need to continue to 0:04:01.240 --> 0:04:04.560 cut cost to the point where we can get confident 0:04:04.640 --> 0:04:07.040 that margins will bottom in the first half of this year. 0:04:07.360 --> 0:04:09.760 This is something we've been talking about since twenty twenty one. 0:04:09.800 --> 0:04:12.320 When margin weaknesses started to emerge on the index. It 0:04:12.360 --> 0:04:15.160 was a very critical sign of weakness coming for the 0:04:15.200 --> 0:04:18.760 index itself, and we need to see margins bottom. Now. 0:04:18.760 --> 0:04:21.119 The analyst consensus says, hey, margins are going to bottom 0:04:21.160 --> 0:04:23.039 in the first quarter. We're going to see the worst 0:04:23.080 --> 0:04:24.520 of the worst in the first quarter. It's going to 0:04:24.520 --> 0:04:26.680 get slightly less bad going into the second quarter, in 0:04:26.720 --> 0:04:29.880 the third quarter because finally all these cost pressures are 0:04:29.880 --> 0:04:33.120 starting to abate, and that is really quite a critical 0:04:33.160 --> 0:04:35.800 to forming that ultimate earnings turn around to twenty twenty four. 0:04:36.000 --> 0:04:39.200 Who don't get enough cost cuts. It's a problem when 0:04:39.200 --> 0:04:41.680 you look across the university of companies that you and 0:04:41.839 --> 0:04:45.480 Bloomberg Intelligence covers, do you see that happening? I mean, 0:04:45.680 --> 0:04:48.440 you can tell right before you really get earnings if 0:04:48.480 --> 0:04:52.200 they fired enough people, if they've so it has it happened. 0:04:52.360 --> 0:04:55.159 It has happened for some sectors. It has absolutely happened 0:04:55.200 --> 0:04:58.039 within the communication services space. This is at the forefront 0:04:58.040 --> 0:05:02.320 of everything. This is the world, This is Paul's comfort zone. 0:05:02.360 --> 0:05:04.400 These are the companies that are really at the forefront 0:05:04.400 --> 0:05:08.000 of this. Yeah, even though this used to be a 0:05:08.040 --> 0:05:10.279 meta free zone. Yeah, trying to get with the kids. 0:05:10.279 --> 0:05:13.640 You can't help himself. Netflix, those Disneys of the world. 0:05:13.680 --> 0:05:16.600 Those companies were at the forefront of the massive margin 0:05:16.640 --> 0:05:19.000 problems that emerged in twenty twenty one. They are now 0:05:19.040 --> 0:05:21.600 at the forefront of finding some margin lows through their 0:05:21.640 --> 0:05:25.080 cost cunning endeavors. You're also seeing tech start to get 0:05:25.080 --> 0:05:28.960 in on this game some select consumer discretionary stocks. We're 0:05:29.000 --> 0:05:32.159 not seeing it end mass, and we may need to 0:05:32.200 --> 0:05:35.120 see it in mass before we can really create that 0:05:35.200 --> 0:05:37.560 margin low. You know, you've had very few layoffs in 0:05:37.560 --> 0:05:40.800 the financial sector, very few layoffs and industrials there are some, 0:05:41.560 --> 0:05:45.200 but perhaps not enough to create those really solid margin lows. 0:05:45.600 --> 0:05:48.080 I would anticipate we continue to hear more news about 0:05:48.160 --> 0:05:50.560 layoffs over the JIL. Corporate America has more work to 0:05:50.600 --> 0:05:52.840 do into Q two. As your mentor, yeah, I think 0:05:52.880 --> 0:05:55.359 a little bit more. They also have a lot of 0:05:55.360 --> 0:05:58.360 cost rationalization they can do, though, just in just general 0:05:58.480 --> 0:06:01.880 marketing and expenditure you know, the general expenses can come 0:06:01.920 --> 0:06:04.200 down as well, which would help that operating leverage. I 0:06:04.240 --> 0:06:07.040 think the investor relations people like across the corporate America 0:06:07.080 --> 0:06:09.960 have said to their CFOs and CEOs, cost cuts the 0:06:10.000 --> 0:06:12.719 market likes, oh yeah, yeah, the stocks go up when 0:06:12.720 --> 0:06:15.359 you talk about cutting costs. That's kind of the market 0:06:15.400 --> 0:06:17.440 right now, as opposed to the market wants to see 0:06:17.480 --> 0:06:20.160 top line both. So anyway, Gina has been talking about 0:06:20.160 --> 0:06:22.479 and her team I've been talking about watch those margins 0:06:22.520 --> 0:06:26.000 for years and been spot on there. Gina Martin Adams, 0:06:26.120 --> 0:06:29.040 chief equity strategist for Bloomberg Intelligence, joining us here in 0:06:29.080 --> 0:06:32.560 our Bloomberg Interactive Broker Studio again. Ernie's kicking off later 0:06:32.600 --> 0:06:34.839 this week and we'll have full coverage from the bi analysts, 0:06:34.839 --> 0:06:37.920 from the strategists, and from external analysts, as well as 0:06:37.960 --> 0:06:42.440 some Sweet Suite people coming in as well. You're listening 0:06:42.480 --> 0:06:46.280 to the team can'ser Line program, Bloomberg Markets weekdays at 0:06:46.320 --> 0:06:49.839 ten am Eastern, Bloomberg dot Com, the I Heard Radio app, 0:06:49.960 --> 0:06:52.839 and the Bloomberg Business app. We're listening on demand wherever 0:06:52.920 --> 0:06:58.760 you get your podcast. We got interest rates rising early 0:06:58.760 --> 0:07:01.200 over the last twelve months. A rate we've never seen before. 0:07:01.279 --> 0:07:03.240 That can't be good for real estate. So how do 0:07:03.320 --> 0:07:07.480 you in your world look at real estate today? What's 0:07:07.480 --> 0:07:11.320 your call? First of all, Paul Mcko morning, thank you 0:07:11.360 --> 0:07:15.960 again for having me. You're talking about our home Green Street. 0:07:16.160 --> 0:07:20.440 I hear the kind of David here. I'm fine. Oh okay, 0:07:20.440 --> 0:07:23.640 there we go. Headphone problem, David, We hear you. Good 0:07:23.720 --> 0:07:30.920 man sound check successful sound check before the show. Um, 0:07:31.080 --> 0:07:34.360 you know and appreciate the Green Street mentioned my farm 0:07:34.560 --> 0:07:37.960 home and yeah, you're right. Definitely the pre eminent reet 0:07:38.080 --> 0:07:40.360 and research shop. You know, when we talk about the 0:07:40.360 --> 0:07:43.080 current environment of reets in a rising at just rate environment, 0:07:43.560 --> 0:07:46.880 my approach is to focus on the fundamentals. We are, 0:07:46.920 --> 0:07:49.720 you know, with us focused on the residential reet income 0:07:49.800 --> 0:07:53.160 et FR ticker as house h a US. We're looking 0:07:53.200 --> 0:07:56.760 at the residential reads focused on that rental income. So 0:07:56.840 --> 0:08:00.280 from a fundamental perspective and a strong employe in an 0:08:00.320 --> 0:08:04.160 environment that we're experiencing, the rent is paid. A lot 0:08:04.200 --> 0:08:07.440 of the rental players have tailwords in their favor, which 0:08:07.480 --> 0:08:11.160 should lead to a pretty decent first quarter earning season 0:08:11.800 --> 0:08:15.320 for many of these single family rental players. The multifamily 0:08:15.400 --> 0:08:18.120 reats and other players that are in the sector. Well, 0:08:18.200 --> 0:08:21.040 so everything's good now, but what happens when they have 0:08:21.200 --> 0:08:27.120 to refi at these rates, Well, that's a great question, Matt. 0:08:27.160 --> 0:08:30.360 And you know what's interesting is we published a blog 0:08:30.400 --> 0:08:33.800 recently looking at the balance sheets of our top ten constituents, 0:08:34.200 --> 0:08:36.880 and what we've noticed is that, first of all, we're 0:08:36.880 --> 0:08:39.360 operating in a ten year environment right now, looking at 0:08:39.360 --> 0:08:42.560 my Bloomberg of three forty two, much different than what 0:08:42.600 --> 0:08:45.240 we experienced during COVID, when the ten year was training 0:08:45.240 --> 0:08:47.920 around one and a half percent, Much different than just 0:08:47.960 --> 0:08:50.360 a few months ago when we were training near four percent. 0:08:50.760 --> 0:08:53.160 And so, as a result, because of what happened during COVID, 0:08:53.480 --> 0:08:55.600 many of these reats were able to take advantage of 0:08:55.600 --> 0:09:00.560 basically unprecedented lending conditions to really well capitalize their balance sheets. 0:09:00.600 --> 0:09:03.120 And then our blog that I mentioned, we talk about, 0:09:03.160 --> 0:09:05.040 you know, the top ten holdings are looking at their 0:09:05.040 --> 0:09:08.240 debt maturities pretty much across the board. We say that 0:09:08.400 --> 0:09:11.440 right now, for our guys, right now, the average debt 0:09:11.480 --> 0:09:14.000 maturity over the next three years, it's about twenty percent 0:09:14.040 --> 0:09:16.839 of the stack. No more company is rolling more than 0:09:16.920 --> 0:09:20.760 thirty percent over the next three years. We say, right now, 0:09:20.760 --> 0:09:24.040 the weighted average debt maturity is about eight years with 0:09:24.160 --> 0:09:26.679 an average weighted interest rate about three points six percent 0:09:26.760 --> 0:09:29.400 of pretty much right online. With the tenure where we're 0:09:29.400 --> 0:09:32.320 at right now. Result, you know, with many of these guys, 0:09:32.440 --> 0:09:36.000 you know, predominantly with fixed rate debt, I don't see 0:09:36.040 --> 0:09:38.080 it being into at this point, and hopefully by the 0:09:38.080 --> 0:09:40.440 time that it really comes into play, we will see 0:09:40.720 --> 0:09:42.760 you know, federal reserve interest rates being in a more 0:09:42.800 --> 0:09:45.560 manageable level. And David, I know you guys focus on 0:09:45.559 --> 0:09:50.960 a residential real estate biz. So that's regional big time Reasonal, 0:09:51.000 --> 0:09:54.520 I guess the pandemic has just exacerbated the regional differences. 0:09:54.960 --> 0:09:58.000 So is it just as simple as go along the 0:09:58.080 --> 0:10:01.680 sun Belt? You know, I wish they were that simple, 0:10:01.679 --> 0:10:03.760 because if that was the answer, Matt, you and I'd 0:10:03.760 --> 0:10:06.200 be traveling cross country on my G five, going to 0:10:06.200 --> 0:10:11.560 see all the shows we want to see. Unfortunately, you know, 0:10:11.640 --> 0:10:14.560 first of all, location matters. You know, we have firms 0:10:14.600 --> 0:10:16.920 that are out there, we all see them every day, 0:10:17.000 --> 0:10:19.959 Coast Stars, Zilo, Real Page, redfin et cetera. That are 0:10:19.960 --> 0:10:23.400 telling where those migration trends are going. And one of 0:10:23.400 --> 0:10:25.840 the key takeaways here is that if you were called 0:10:25.920 --> 0:10:29.000 during COVID, pretty much there was this massive exodus from 0:10:29.040 --> 0:10:32.320 the coast, from New York, San Francisco, LA. And what 0:10:32.400 --> 0:10:34.960 we're seeing, especially out of companies like F six, which 0:10:34.960 --> 0:10:38.080 is a West Coast based apartner route, people are coming back. 0:10:38.440 --> 0:10:40.600 And so as a result, though the Sun Belt remains 0:10:40.760 --> 0:10:44.320 very resilient, you are seeing pockets of strength happen again 0:10:44.400 --> 0:10:47.600 back in certain parts of New York City, San Francisco, LA, 0:10:47.720 --> 0:10:50.240 some of the southern parts of California where there are 0:10:50.320 --> 0:10:53.719 tenants that are moving back into those properties. Interesting. So 0:10:53.800 --> 0:10:58.520 people are well capitalized, they got right with race during Zerpe, 0:10:59.000 --> 0:11:05.480 and the tenants are moving back into the you know, 0:11:05.720 --> 0:11:10.120 properties they abandoned on the coasts. What about costs? You know, 0:11:10.120 --> 0:11:13.040 we were just talking with Gina Martin Adams from Bloomberg 0:11:13.080 --> 0:11:17.800 Intelligence and she was saying, the market, you know, broadly 0:11:18.240 --> 0:11:22.280 priced in or accession last year, and so we just 0:11:22.400 --> 0:11:25.160 need to see that hit the street. But the only 0:11:25.200 --> 0:11:28.240 concern she has when we get earnings this quarter is 0:11:28.280 --> 0:11:31.240 that companies need to deal with costs. They should hopefully 0:11:31.240 --> 0:11:33.199 already have taken care of them, but maybe they had 0:11:33.320 --> 0:11:37.720 need to into the second quarter. What about reets. Great question, 0:11:37.800 --> 0:11:41.080 and obviously Gina always delivered the goods when she's either 0:11:41.160 --> 0:11:43.640 on TV or radio. Super you know, top guests for 0:11:43.720 --> 0:11:45.880 me to follow up on. You know, a couple of 0:11:46.160 --> 0:11:50.600 takes here from a cost perspective that is always in 0:11:50.640 --> 0:11:53.559 the wheelhouse of every single reef management team trying to 0:11:53.600 --> 0:11:57.240 focus on can we maximize our revenues through growth? And 0:11:57.320 --> 0:11:59.880 how can we minimize our expenses through a spect control 0:12:00.000 --> 0:12:04.480 of about utilizing smart technology a Podding concept, you know, 0:12:04.520 --> 0:12:07.040 a Podding concept would be, let's say you have three 0:12:07.120 --> 0:12:10.600 residential properties within a two mile radius. You could use 0:12:10.760 --> 0:12:14.840 let's say one or two maintenance guys across all three properties, 0:12:14.880 --> 0:12:18.400 opposed to planting one at each location. So I think 0:12:18.440 --> 0:12:21.560 with these guys focused on trying to minute maximize the 0:12:21.600 --> 0:12:25.200 bottom line, the NI number, you know, that's expense control 0:12:25.240 --> 0:12:28.240 plays into it. But from a very high level. You know, 0:12:28.360 --> 0:12:31.520 right now, the rental market remains strong. You're talking about 0:12:31.559 --> 0:12:34.880 thirty your mortgage rates that are above seven percent. Housing 0:12:34.920 --> 0:12:37.880 affordability is out the window, especially if you're in one 0:12:37.880 --> 0:12:41.720 of these desirable markets. So for those factors alone, that 0:12:41.840 --> 0:12:47.080 benefits the rental landlord. Remember we're focused on rental income. 0:12:47.160 --> 0:12:50.400 That rental income that you pay to the landlord as 0:12:50.440 --> 0:12:53.720 your monthly rent payment goes into investors pockets in the 0:12:53.760 --> 0:12:56.480 form of dividend income. And that's what we're focused on, 0:12:56.600 --> 0:12:59.520 is the rent goes up, that dividend hopefully should go 0:12:59.600 --> 0:13:01.840 up at the end of the day as well. So 0:13:01.960 --> 0:13:04.760 I'm looking just at the SP five real Estate Investment 0:13:04.760 --> 0:13:07.199 Trusts index, and year to date it's kind of flat 0:13:07.280 --> 0:13:10.679 up a little bit. Where are the riets stocks relative 0:13:10.760 --> 0:13:14.600 to say navs right here's or value in rates or 0:13:15.000 --> 0:13:17.200 in a rising in real real estate or a rising 0:13:17.200 --> 0:13:20.000 interest rate environment, just maybe don't want to get near them. 0:13:21.240 --> 0:13:23.560 Let me get a little pedestal here and give you 0:13:23.640 --> 0:13:26.560 the four one one on four to eleven. There, public 0:13:26.600 --> 0:13:30.280 traded roets are trading at a massive discount to net 0:13:30.280 --> 0:13:33.600 asset value. That soundlike some of the private vehicles that 0:13:33.600 --> 0:13:36.320 are out there talking about them trading at premiums to 0:13:36.400 --> 0:13:39.400 net asset value. Historically though, and if you go back 0:13:39.480 --> 0:13:42.640 to some mayreet the National Association or real Estate Investment 0:13:42.679 --> 0:13:46.800 trust some of data over the long term and rising 0:13:46.800 --> 0:13:50.160 periods of rising interest rates. Rates are the sector that 0:13:50.240 --> 0:13:53.160 you want to be invested in, you know, Traditionally, reets 0:13:53.160 --> 0:13:56.880 have been that usual go to during flights to safety 0:13:57.400 --> 0:14:01.080 because again of that dividend income stream, and so you know, 0:14:01.480 --> 0:14:04.680 until we do see a major reset in this interest 0:14:04.760 --> 0:14:08.359 rate environment, we're focused on those strong pockets and fundamentals, 0:14:08.360 --> 0:14:11.280 you know. Taking it outside of residential, there's a reason 0:14:11.320 --> 0:14:15.839 why company sectors of industrial reefs or different rets and 0:14:16.000 --> 0:14:19.320 tower reefs continue to remain very strong because these are 0:14:19.360 --> 0:14:22.960 properties and sectors that are being used every single day. 0:14:23.120 --> 0:14:25.720 Self storage there's a there's a merger that's going on 0:14:25.840 --> 0:14:29.840 right now between extra Space Storage or tickers EXR and 0:14:29.960 --> 0:14:33.720 Light Life Space Storage tick LSI, and so there's some 0:14:33.800 --> 0:14:36.440 tail ones in that storage space. Remember we're all holding 0:14:36.440 --> 0:14:38.920 more and more stuff. You know, Matt, I can't go 0:14:38.960 --> 0:14:41.440 to a show without buying another T shirt or a magnet. 0:14:41.640 --> 0:14:44.720 So you know, that just adds up into the storage unit. 0:14:44.960 --> 0:14:46.920 And so as a result, these are sectors that are 0:14:46.920 --> 0:14:49.720 just going to continue to grow. It's those other sectors 0:14:49.720 --> 0:14:51.760 that are right now. You know, everybody tech heres about 0:14:52.040 --> 0:14:55.840 offices and malls and what's the long term future for 0:14:55.920 --> 0:14:58.520 those sectors. I wish I knew the answer to that, 0:14:58.560 --> 0:15:00.760 but I can tell you that they're definitely long road 0:15:01.120 --> 0:15:04.480 ahead for residential reefs as far as that, you know, 0:15:04.560 --> 0:15:08.200 maintained strength. Don't get me started on malls, dude, When 0:15:09.560 --> 0:15:13.200 we recently got the summer tour schedule, what are the 0:15:13.400 --> 0:15:15.960 what are the must see shows? What are the shows 0:15:15.960 --> 0:15:17.800 that you can't miss? Are you coming back to MSG? 0:15:19.120 --> 0:15:22.520 I'm hopeful to be at ALL seven MSG. I will 0:15:22.560 --> 0:15:24.680 be seeing my two hundred show next week at the 0:15:24.720 --> 0:15:27.880 Hollywood Bowl in La. Sorry, we can't be together, but 0:15:28.560 --> 0:15:30.680 if all goes well, yes you will. I will be 0:15:30.680 --> 0:15:34.640 at ALL seven at MSG again. Vernado, you know, big 0:15:34.680 --> 0:15:38.000 New York office and plaza, big major redevelopment going on 0:15:38.080 --> 0:15:41.040 in the area. Currently on pause, I believe, But you know, again, 0:15:41.120 --> 0:15:43.200 it's hard. You can't walk around New York City without 0:15:43.240 --> 0:15:45.400 being hit in the face. Buyer reets at pretty much 0:15:45.440 --> 0:15:49.520 every single intersection. All right, David, good stuff. Appreciate that. 0:15:49.600 --> 0:15:52.920 David auerback, managing director at Armada ETF Advisors. So you 0:15:52.960 --> 0:15:57.440 were talking fish fish. I want to an amazing fish 0:15:57.520 --> 0:16:02.160 show with David and I guess I hope I'll be 0:16:02.240 --> 0:16:05.560 doing it again. And they just tour all the time, 0:16:05.640 --> 0:16:08.040 just like the Dead did they tour? Yeah? Pretty much. 0:16:08.040 --> 0:16:10.520 I mean they've had hiatuses. I don't know the plural 0:16:10.520 --> 0:16:14.120 of netword, but they're on tour again and I'm ssighted 0:16:14.120 --> 0:16:15.920 to see them this summer. This is the last summer 0:16:16.000 --> 0:16:17.880 for the Deadenco. By the way, is that right? If 0:16:17.880 --> 0:16:21.880 you want to see Bobby and Mickey play with John Mayer? 0:16:22.040 --> 0:16:23.720 This is it? All right? I'll make a note. All right, 0:16:23.920 --> 0:16:26.000 very good this mister Weir. By the way, do we 0:16:26.040 --> 0:16:30.880 not believe he's seventy seven? Maybe you're listening to the 0:16:30.920 --> 0:16:34.480 tap Can's are Live program Bloomberg Markets weekdays at ten 0:16:34.560 --> 0:16:38.560 am Eastern on Bloomberg Radio, tune in app, Bloomberg dot Com, 0:16:38.600 --> 0:16:41.360 and the Bloomberg Business App. You can also listen live 0:16:41.440 --> 0:16:44.520 on Amazon Alexa from our flagship New York station. Just 0:16:44.680 --> 0:16:49.840 say Alexa play Bloomberg eleven thirty. All right, we got 0:16:49.880 --> 0:16:53.280 some m and A out there, folks. Gold Giant numont 0:16:53.400 --> 0:16:57.080 raises new Newcrest bid to nineteen point five billion dollars. 0:16:57.080 --> 0:17:01.040 Some movement there in the gold space. Grant's spa, Spora? 0:17:01.200 --> 0:17:02.760 How do I do that? Grant? Grant? How do I 0:17:02.800 --> 0:17:07.399 pronounce your last name? Spora? It's Spora. Yes, he's a 0:17:07.440 --> 0:17:10.840 metals of Mining Senior an also Bloomberg Intelligence. So Grant 0:17:10.840 --> 0:17:14.240 talk to us about this, uh, you know Newmont deal 0:17:14.359 --> 0:17:17.919 for Newcrest, what's going on there? M yeah, thank you 0:17:17.960 --> 0:17:20.919 for having me on. Firstly, in the gold space, I 0:17:20.920 --> 0:17:23.080 mean they're two drivers for M and A. One is, 0:17:24.040 --> 0:17:27.240 every year these gold companies eat up their reserves and resources, 0:17:27.560 --> 0:17:31.240 and if you're of a certain scale, you really struggle 0:17:31.320 --> 0:17:34.040 to replace those reserves and resources. So the one way 0:17:34.080 --> 0:17:38.199 to do that quickly and you know arguably well it 0:17:38.200 --> 0:17:41.520 depends on your valuation, but hopefully not too expensively is 0:17:41.600 --> 0:17:44.240 through M and A. So that's the one reason. And 0:17:45.520 --> 0:17:49.119 in this case Newcrest does have a particularly good or 0:17:49.280 --> 0:17:53.960 large reserve base. Um, so that's what Newmont are after. 0:17:54.560 --> 0:17:59.000 And the second reason, or the second rational is there 0:17:59.080 --> 0:18:01.840 is a school of thought it's the bigger you get 0:18:01.880 --> 0:18:07.560 in gold, the more you likely to attract the generalist shareholder, 0:18:07.960 --> 0:18:10.800 as opposed to staying in an inner sector, which is 0:18:10.920 --> 0:18:15.240 often perceived by mainstream investors as a bit niche. So 0:18:15.359 --> 0:18:17.760 you know, if you become the let's say, the the 0:18:17.960 --> 0:18:21.760 Xon of the gold sector, that'll that'll get you a 0:18:21.800 --> 0:18:26.440 premium because people will naturally gravitate towards you, so that 0:18:26.760 --> 0:18:29.480 both of these are at play here. For for new 0:18:29.480 --> 0:18:34.720 month's bid for New Crest, so nonetheless the shares are 0:18:34.800 --> 0:18:40.400 down today they were down yesterday. Um, is this price 0:18:40.840 --> 0:18:46.040 too much? So if it depends on which way you 0:18:46.040 --> 0:18:47.560 look at it, So if you look at it on 0:18:47.600 --> 0:18:53.720 an earning is multiple, the answer is possibly. Um, the 0:18:53.840 --> 0:18:57.879 implied sort of valuation bid in terms of EVT but 0:18:58.040 --> 0:19:01.879 dies around nine point six times for New Crest, which is, 0:19:02.359 --> 0:19:06.360 you know, way more expensive than its next most expensive pier, 0:19:06.400 --> 0:19:09.280 which is a Nico Eagle at around eight point eight times. 0:19:09.359 --> 0:19:12.880 So on near terms earnings basis, you know, one would 0:19:12.920 --> 0:19:17.639 say Newmont is paying up. If you look at it 0:19:17.680 --> 0:19:19.880 from another perspective, if you look at it in terms 0:19:19.920 --> 0:19:23.720 of reserve value, then it actually isn't you know? Then 0:19:24.200 --> 0:19:27.040 then for instance, Agnico Eagle is you know, is around 0:19:27.080 --> 0:19:32.280 five hundred and thirty dollars per ounce of reserve, whereas 0:19:32.600 --> 0:19:35.560 the New Crest but is only around two hundred dollars 0:19:35.600 --> 0:19:39.880 an ounce. So on that basis, you know, Um, future 0:19:40.359 --> 0:19:45.080 future reserves or future growth is not that expensive today's 0:19:45.119 --> 0:19:50.439 earnings are, so I guess investors today you're saying, well, 0:19:50.680 --> 0:19:53.240 in the near term that looks a bit expensive, given 0:19:53.280 --> 0:19:56.680 that that Newmont's shares about the only gold sector gold 0:19:56.720 --> 0:20:00.000 stock that is down today. So grant in the space 0:20:00.119 --> 0:20:03.479 is here. I mean, is the scale matter? I mean, 0:20:03.480 --> 0:20:04.960 when I'm digging the stuff out of the ground, the 0:20:05.000 --> 0:20:09.919 scale matter? Why do this gale anything? Well again, it's 0:20:10.000 --> 0:20:14.160 it's it's in fairness. You know. My initial reaction would 0:20:14.160 --> 0:20:16.800 be would be to say, look, it's all about quality, right, 0:20:16.840 --> 0:20:20.200 It's how much value are you adding? What's your your 0:20:20.240 --> 0:20:22.280 cash flow to share things like all the good good 0:20:22.320 --> 0:20:26.120 metrics if we look at UM. But so far Newmont, 0:20:26.160 --> 0:20:29.080 which has built some scale, UM it does trade, also 0:20:29.200 --> 0:20:32.720 traded a premium versus many of its peers, including Barrick 0:20:32.760 --> 0:20:36.440 which is his nearest, its next biggest competitor. So let's 0:20:36.480 --> 0:20:39.399 pulled the valuation gap on its on its nearest competitor. 0:20:39.480 --> 0:20:41.680 And you know, in terms of quality, I wouldn't say 0:20:41.720 --> 0:20:45.639 Newmont is necessarily a better quality company than Barrick UM. 0:20:46.119 --> 0:20:49.720 But the market seems to um, you know, be wanting scale, 0:20:49.760 --> 0:20:54.720 So that the market seems to has seems to be 0:20:54.760 --> 0:20:59.440 indicating that, yes, scale does matter. Um, you know, my, my, my, 0:20:59.560 --> 0:21:01.920 I would the opposite side of it, and say, you know, 0:21:01.920 --> 0:21:04.520 I'd rather see the value add in terms of you know, 0:21:04.760 --> 0:21:07.000 are you able to take those reserves and resources and 0:21:07.040 --> 0:21:09.840 actually develop them and deliver the cash flow out of 0:21:09.840 --> 0:21:13.720 those ouncers. And this deal will will take some time 0:21:13.760 --> 0:21:16.320 before that comes to light. You know, you could be 0:21:16.320 --> 0:21:18.680 two to three years before we actually see the benefit 0:21:18.720 --> 0:21:22.879 of the deal coming out. So how have grant these 0:21:23.080 --> 0:21:27.360 gold miners then in general traded next to gold? I mean, 0:21:27.359 --> 0:21:31.119 we've seen the underlying commodity breeds two thousand dollars and 0:21:31.119 --> 0:21:34.520 get pretty close to an all time high. So in 0:21:34.600 --> 0:21:37.000 terms of if you look at year to day performance, 0:21:37.640 --> 0:21:40.320 most of the certainly the more leverage names have done 0:21:40.440 --> 0:21:43.920 very very well. So some of your your South African stocks, 0:21:44.640 --> 0:21:47.960 you know, up fifty percent here to date, really really 0:21:47.960 --> 0:21:53.160 done very well, massively outperformed gold. Some of the larger 0:21:53.240 --> 0:21:56.640 cap plays of have marginally outperformed gold. Because of course 0:21:56.920 --> 0:22:00.439 you still have lingering cost inflation, so that you know 0:22:00.520 --> 0:22:02.280