WEBVTT - Epic S&P Rally Is Powered By Assets You Can't See or Touch 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEO, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find a Bloomberg Markets 0:00:13.600 --> 0:00:17.000 podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.439 and on Bloomberg dot Com. Allow me to digress for 0:00:21.600 --> 0:00:24.759 just this tiny second and invoked the memory of Ken Pruitt, 0:00:24.800 --> 0:00:27.320 who used to be a wonderful anchor here on Bloomberg Radio. 0:00:27.400 --> 0:00:29.880 He used to distinguish between the modern economy and the 0:00:29.920 --> 0:00:32.840 older economy by talking about things that you can pull 0:00:32.880 --> 0:00:34.919 out of the ground in terms of what companies are 0:00:34.960 --> 0:00:37.960 doing well. Sarah Ponzac, who joins me in studio now, 0:00:38.440 --> 0:00:41.479 has a version of that idea in a fantastic story 0:00:41.520 --> 0:00:44.760 today where she talks about the epic SMP five Raleigh 0:00:44.800 --> 0:00:48.640 being powered by assets you can't see or touch. Sarah, 0:00:48.640 --> 0:00:50.800 give us a little rundown of what goes on there. Well, 0:00:50.800 --> 0:00:53.320 thank you very much, Bonnie. The idea behind this is 0:00:53.360 --> 0:00:57.400 really that all year long, we constantly hear about tech 0:00:57.520 --> 0:01:02.160 outperforming tech out performance. The reality is that COVID nineteen sure, 0:01:02.200 --> 0:01:04.520 it has sped this up, but this has been a 0:01:04.560 --> 0:01:09.800 trend for a very long time, and in speaking with professors, researchers, economists, 0:01:10.160 --> 0:01:12.280 one thing that you can really trace this back to 0:01:12.600 --> 0:01:16.480 is the difference between intangible assets and tangible assets. So 0:01:16.840 --> 0:01:20.480 intangible assets being those things that you cannot see, you 0:01:20.560 --> 0:01:23.399 cannot touch, think of them as a brand name like 0:01:23.480 --> 0:01:29.399 the iPhone, for example, or data collected on people, algorithms, software, 0:01:29.959 --> 0:01:31.920 even you can think about it in the sense of 0:01:31.959 --> 0:01:34.680 a vaccine being created. All the R and D that 0:01:34.760 --> 0:01:38.000 does go into that, it's all considered intangible and it's 0:01:38.040 --> 0:01:41.400 not recorded on a company's balance sheet. So a on 0:01:41.440 --> 0:01:44.320 impotent On institute. They put out a report back in ten. 0:01:44.360 --> 0:01:47.280 It was recently cited by Bank of America by Carlyle. 0:01:47.360 --> 0:01:50.400 This has really become a topic of conversation and what 0:01:50.480 --> 0:01:52.480 they found. The way that they did this was they 0:01:52.520 --> 0:01:56.680 took total SMP five market cap and they subtracted out 0:01:56.720 --> 0:02:00.760 what's called tangible book value. Then they said every thing else, well, 0:02:01.080 --> 0:02:05.400 that's due to intangible assets, which represented eighty four percent 0:02:05.920 --> 0:02:09.240 of the SMP five dred. Now there are some discrepancies 0:02:09.240 --> 0:02:11.680 here about how you can actually go about calculating this, 0:02:11.760 --> 0:02:15.440 and it's really difficult because so touchy feely and accounting 0:02:15.440 --> 0:02:19.640 measures really aren't that great surrounding this. But yes, you 0:02:19.680 --> 0:02:22.320 have to take into account that what we see in 0:02:22.360 --> 0:02:25.160 the length of market cap and that gap is also 0:02:25.280 --> 0:02:29.200 due to projected earnings from both tangible intangible assets. But 0:02:29.280 --> 0:02:32.080 the reality is that growth in intangible assets has just 0:02:32.160 --> 0:02:35.640 been astronomical over the past two decades, over the past 0:02:35.680 --> 0:02:38.320 decade in particular, and now sped up by COVID nineteen. 0:02:38.320 --> 0:02:40.560 And that has extreme implications for the economy and the 0:02:40.639 --> 0:02:43.280 labor market too. And of course how you value these 0:02:43.280 --> 0:02:45.720 assets is what's important, or how investors value them. I 0:02:45.720 --> 0:02:47.920 should say, some of these are just runs, some of them, 0:02:47.960 --> 0:02:50.799 as you say, or you know, intellectual property and so on. 0:02:51.120 --> 0:02:54.639 Some of them produced revenue, others absolutely don't. Right, There 0:02:54.639 --> 0:02:57.880 are many implications of this. Often spoken about is what 0:02:57.960 --> 0:03:01.600 this means for value investing. There is large question about 0:03:01.639 --> 0:03:03.960 if this is the reason why value seems to be 0:03:04.080 --> 0:03:07.160 quote unquote dead, why value hasn't been able to outperform. 0:03:07.240 --> 0:03:10.600 Is it the reality that value investors are missing this 0:03:10.720 --> 0:03:14.360 key input of intangible assets. Bank of America, for example, 0:03:14.400 --> 0:03:16.679 how a recent report on this and they created their 0:03:16.760 --> 0:03:21.760 value Intangibles basket where they incorporated intangibles into value investing 0:03:21.840 --> 0:03:24.360 and they got much better returns. There's also a value 0:03:24.360 --> 0:03:27.400 et F, for example, that holds Amazon, and the reason 0:03:27.440 --> 0:03:29.480 that it holds Amazon is because they do take into 0:03:29.480 --> 0:03:33.320 account intangible value. But when you think about the macro 0:03:33.560 --> 0:03:37.200 economic effects of this and the macro economic implications when 0:03:37.200 --> 0:03:40.480 you think about a company with a lot of intangible assets, 0:03:40.480 --> 0:03:42.800 for example, a software company, there's a lot of R 0:03:42.880 --> 0:03:44.840 and D research and development that goes into this. But 0:03:44.880 --> 0:03:47.400 once the software is created, or once a vaccine is created, 0:03:47.400 --> 0:03:50.280 for example, they have immense scale and you don't need 0:03:50.360 --> 0:03:54.880 too many people working to keep that scale growing, to 0:03:55.560 --> 0:03:59.560 keep software being issued too many different people to many 0:03:59.600 --> 0:04:02.280 different companies for example. Same with a vaccine having it 0:04:02.320 --> 0:04:06.240 administered around the world. So what people wonder and what 0:04:06.360 --> 0:04:10.080 the proof has shown is that aside from the growth 0:04:10.240 --> 0:04:13.640 of intangible assets alongside it, I should say we've also 0:04:13.680 --> 0:04:16.200 seen slower labor market recoveries because if you think in 0:04:16.240 --> 0:04:19.400 the olden days, if you think with oil wells and factories, 0:04:19.440 --> 0:04:22.480 you needed a lot of people to really power these 0:04:22.520 --> 0:04:25.760 tangible assets. Well, with intangible assets, the idea is that 0:04:25.800 --> 0:04:28.960 you don't need that much growth and employment, you don't 0:04:28.960 --> 0:04:31.360 need that many people. So people are starting to think 0:04:31.360 --> 0:04:33.359 about and really wonder about what this means for the 0:04:33.400 --> 0:04:37.520 future of the economy. One interesting area is brand names, 0:04:37.520 --> 0:04:39.599 as you said, And yesterday I was speaking with somebody 0:04:39.640 --> 0:04:41.839 who owns many Reads or who's the CEO of a 0:04:41.920 --> 0:04:45.240 red company, and he talked about how they've undone some 0:04:46.080 --> 0:04:48.880 deals they had with Marriott or I h S for example, 0:04:48.960 --> 0:04:50.720 and you have to wonder, you know, he talked about 0:04:50.720 --> 0:04:53.000 a hundred fifty hotel brands that they used to work 0:04:53.040 --> 0:04:55.280 with and now they're really consolidating that and going with 0:04:55.320 --> 0:04:58.080 their own hotel brands like Sanesta. You have to wonder, 0:04:58.360 --> 0:05:01.360 will some of these brands just go away or decrease 0:05:01.360 --> 0:05:03.960 significant dy and value. Well, you have to wonder that. 0:05:04.040 --> 0:05:06.320 And when you think about a brand, you have to 0:05:06.360 --> 0:05:11.080 think about the emotions that comes with it, also just 0:05:11.200 --> 0:05:14.800 how recognizable it is to a majority of people. When 0:05:14.839 --> 0:05:17.800 I was working on this story, one example that came up, 0:05:17.839 --> 0:05:20.440 for example, was the likes of band aid. For example, 0:05:20.720 --> 0:05:22.800 band aid is a brand, but when we talk about 0:05:22.880 --> 0:05:25.040 using band aids, I mean, I'll go ahead and say 0:05:25.080 --> 0:05:27.560 the name you talk about using band aids, so that 0:05:27.680 --> 0:05:31.120 is such value that is added to the company that 0:05:31.200 --> 0:05:34.679 creates band aid. For example, you think about the likes 0:05:34.839 --> 0:05:37.480 of Apple and It's iPhone. When people talk about phones, 0:05:37.520 --> 0:05:40.040 a lot of people will just off handly use iPhone 0:05:40.080 --> 0:05:43.320 because such a large proportion of the population uses it. 0:05:43.440 --> 0:05:45.799 So when you think about the value of a company, 0:05:45.880 --> 0:05:49.920 brand names are so important and the ideas the emotion 0:05:50.000 --> 0:05:51.719 that comes with it. Another one that comes to mind 0:05:51.760 --> 0:05:54.800 is Disney. Disney has such a great brand value that 0:05:54.839 --> 0:05:56.760 comes with it. Even though it's a company that does 0:05:56.839 --> 0:05:59.719 have a high amount of tangible assets, you also have 0:05:59.760 --> 0:06:03.040 to think about the brand. To Sarah, there's so much 0:06:03.040 --> 0:06:04.680 more we can talk about in this story, but we 0:06:04.680 --> 0:06:06.760 do have to leave it there for now. Sarah Ponzac 0:06:07.040 --> 0:06:09.919 is our Cross Asset reporter here at Bloomberg. Again, if 0:06:09.960 --> 0:06:12.320 you have a chance to have a read through this story, 0:06:12.360 --> 0:06:15.679 it really is just a fun story, but also extraordinary, 0:06:16.000 --> 0:06:20.840 lust lustrative, and also educational epic SMB five values powered 0:06:20.839 --> 0:06:25.000 by assets you can't see or touch. That Sarah Ponzac, 0:06:27.320 --> 0:06:30.159 time for a conversation now about monopoly, and I'm not 0:06:30.200 --> 0:06:32.720 talking the board game. I'm talking Google which our next 0:06:32.720 --> 0:06:36.600 guest says should learn from Microsoft's a tough lesson. Jon 0:06:36.680 --> 0:06:40.039 Oh Sarah joins us now Bloomberg opinion columnist. What was 0:06:40.080 --> 0:06:43.440 the tough lesson that Microsoft learned, Joe that Google is 0:06:43.480 --> 0:06:47.760 about to learn? According to you, you fight the federal 0:06:47.760 --> 0:06:53.240 government at your peril. Uh, let's let's start there. Um. 0:06:53.279 --> 0:06:57.080 You know the the when you look at the complaint 0:06:57.120 --> 0:07:01.640 that the Dust's Department filed against Google, it is uncannily 0:07:01.839 --> 0:07:06.440 similar to the complaint the Justice Department file twenty two 0:07:06.560 --> 0:07:11.120 years ago against Microsoft. Microsoft was accused of using it, 0:07:11.880 --> 0:07:17.400 you know, operating system monopoly to squash um a competitor, 0:07:17.600 --> 0:07:21.160 Netscape that had a browser that was competing with with 0:07:21.280 --> 0:07:26.440 the Microsoft browser Internet Explorer. Um Uh. Google is being 0:07:26.480 --> 0:07:33.200 accused of basically, um uh, going to going to Apple 0:07:33.320 --> 0:07:35.680 and other companies and basically saying, we want to be 0:07:35.840 --> 0:07:38.560 the pre we want to be the defalse search engine. 0:07:38.560 --> 0:07:41.040 We'll pay you to put our search engine you know, 0:07:41.360 --> 0:07:45.120 embedded in your in your devices and keep everybody else out. 0:07:45.600 --> 0:07:49.920 It's very very similar, and you know, Microsoft lost that case, 0:07:50.240 --> 0:07:54.880 and even though antitrust is um gotten a little more 0:07:54.920 --> 0:07:58.560 las fair since then. I think Google's in a heap 0:07:58.600 --> 0:08:02.080 of trouble. Well, there have been twenty two years in 0:08:02.120 --> 0:08:05.440 the meantime. Is there anything in case slow or anything 0:08:05.480 --> 0:08:07.600 in precedent that Google might be able to learn from 0:08:07.760 --> 0:08:11.840 and use to its advantage. Well, the main thing that 0:08:11.920 --> 0:08:15.520 they will argue about is how to define the market. 0:08:16.000 --> 0:08:19.239 So if the if the market is defined purely as 0:08:19.280 --> 0:08:23.200 the search engine market, then I think Google's going to 0:08:23.320 --> 0:08:26.360 have real problems defending its position. But if they can 0:08:26.400 --> 0:08:30.600 persuade the judge to make the market um, you know, 0:08:30.760 --> 0:08:36.120 Internet platforms or something that's broader and wider than simply search, 0:08:36.679 --> 0:08:38.480 then I think they've got a pretty good shot. I 0:08:38.480 --> 0:08:41.040 think a lot. So it's a it's as technical term, 0:08:41.040 --> 0:08:44.480 but it's super important in the antitrust is how do 0:08:44.520 --> 0:08:47.800 you define the market? Uh? And if you define it 0:08:47.920 --> 0:08:50.040 one way, it can you know, then you're a monopolist. 0:08:50.120 --> 0:08:51.920 If you define it another way, then maybe you're not. 0:08:53.200 --> 0:08:57.480 They will have teams and teams of lawyers, Joe, I 0:08:57.520 --> 0:09:00.480 mean how will this play out? I mean will it 0:09:00.520 --> 0:09:02.560 be a public spectacle? Will we be able to see 0:09:02.559 --> 0:09:06.000 a lot of drama, a lot of theater? Um? Well, 0:09:06.080 --> 0:09:10.360 in the past, Google has uh wound up usually settling 0:09:11.120 --> 0:09:14.599 Uh with gup various governments or in Europe paid to 0:09:14.720 --> 0:09:17.720 paid large fines. So the real question is will it 0:09:17.800 --> 0:09:21.920 get to the trial stage. If it does get to 0:09:21.960 --> 0:09:25.040 the trial stage, I think it's quite likely that it 0:09:25.120 --> 0:09:28.920 will be, um, you know, one of those uh high 0:09:28.960 --> 0:09:32.880 profile rock and roll you know trials with lots of 0:09:32.920 --> 0:09:37.360 fireworks and you know, inflammatory emails and you know, so 0:09:37.440 --> 0:09:40.400 on and so forth. Um. I'm sure one thing that 0:09:40.480 --> 0:09:43.760 they learned from the trial is uh, not to act 0:09:43.760 --> 0:09:46.320 the way Bill Gates acted during his deposition, which was 0:09:46.360 --> 0:09:51.680 devastating for Microsoft. As you were called, he was his 0:09:51.679 --> 0:09:57.720 his answers were he he barely seemed to know you know, 0:09:57.800 --> 0:10:01.199 what the words meant, and when that was played in 0:10:01.240 --> 0:10:05.920 the courthouse, that did not help Microsoft at all. Joe, 0:10:06.480 --> 0:10:08.840 you know, Google is going to face this first, but 0:10:09.120 --> 0:10:11.360 it's clear that some of the other major tech companies 0:10:11.360 --> 0:10:13.160 are going to face this as well. Is there anything 0:10:13.240 --> 0:10:16.640 to suggest that one company might prevail over some of 0:10:16.720 --> 0:10:19.439 the others, or that that companies will take a different 0:10:19.480 --> 0:10:22.800 tech when dealing with us, Well, each company is going 0:10:22.880 --> 0:10:24.600 to have a different issue, you know, and that's what 0:10:24.679 --> 0:10:28.400 makes this so hard. So, you know, Facebook, you know, 0:10:28.559 --> 0:10:33.240 is the is the eight hundred pound gorilla UH in 0:10:33.320 --> 0:10:36.520 social media. UM, and if the government went after them, 0:10:36.559 --> 0:10:38.920 they would probably try to break them up and and 0:10:38.920 --> 0:10:42.600 and you know, UH separate them from Instagram and What's App, 0:10:42.640 --> 0:10:47.000 which which they both own. Amazon is the platform company 0:10:47.080 --> 0:10:51.640 that is being accused of using data from UH it's 0:10:51.920 --> 0:10:55.640 its own customers, companies that sell on Amazon to make 0:10:55.679 --> 0:10:59.240 their own products to compete with these other companies. And 0:10:59.520 --> 0:11:02.800 UH so that's what they'll be suit over UM an Apple. 0:11:03.040 --> 0:11:05.680 If the government goes after them, it'll be because of 0:11:06.440 --> 0:11:10.040 the way they enforce the rules and and handle their 0:11:10.080 --> 0:11:14.079 own UM the app store, the propriety of the app store. 0:11:14.360 --> 0:11:16.679 So each case is going to be different. They're all 0:11:16.720 --> 0:11:20.480 antitrust cases, but but the the emphasis in each case 0:11:20.600 --> 0:11:23.000 is going to be quite different. And it's really hard 0:11:23.040 --> 0:11:26.520 to know at this point which of the cases are 0:11:26.520 --> 0:11:28.880 the stronger for the Justice Department and which are ones 0:11:28.920 --> 0:11:31.320 are the weaker. I think the other thing that's gonna 0:11:31.320 --> 0:11:35.440 happen though, don't forget, there's also Congress, and so if 0:11:35.559 --> 0:11:39.480 the Democrats take the Senate and UM the White House, 0:11:40.520 --> 0:11:44.200 you're almost surely going to see laws being written and 0:11:44.320 --> 0:11:49.360 passed that UM that outlaws some of the practices these 0:11:49.360 --> 0:11:52.360 tech companies have been doing. UH, so that there's no 0:11:52.559 --> 0:11:55.960 there's no ambiguity about about whether they violate the law 0:11:56.040 --> 0:11:57.920 or not. They're just gonna say this is against the law. 0:11:58.000 --> 0:12:00.720 You cannot do this Amazon, or you cannot do this Facebook. 0:12:01.520 --> 0:12:04.880 It's so fascinating. I'm also curious as to whether a 0:12:04.960 --> 0:12:07.920 change in administration should we get one, and that's absolutely 0:12:07.960 --> 0:12:10.800 not not determined yet. But if we get one, doesn't 0:12:10.920 --> 0:12:13.160 make a difference in this what's going to be a 0:12:13.240 --> 0:12:17.480 year's one case. I don't think it does. UM. This 0:12:17.480 --> 0:12:21.400 this case was clearly put together by the UM career 0:12:21.400 --> 0:12:25.400 professionals at the Justice Department. They're not going to go anywhere. UM. 0:12:25.440 --> 0:12:28.720 The Democrats, as I wrote in another column recently, are 0:12:28.800 --> 0:12:33.440 really UM geared up to go after these big tech 0:12:33.480 --> 0:12:38.920 companies on antitrust grounds. And UM the idea that Biden 0:12:38.960 --> 0:12:43.559 administration would back away from this lawsuit is almost inconceivable. 0:12:43.840 --> 0:12:48.679 If anything, they will add additional charges that are not 0:12:48.920 --> 0:12:51.600 currently contained in in the in the in the in 0:12:51.640 --> 0:12:55.520 the complaint right now. Yeah, I mean, it's really interesting. 0:12:56.160 --> 0:12:58.400 There's also the question of how the do o J 0:12:58.760 --> 0:13:00.640 is going to be staffed up and so on, Joe. 0:13:00.640 --> 0:13:02.720 But you think these things just carry on sort of 0:13:03.080 --> 0:13:08.840 seamlessly transition or no, well, seamlessly it is probably overstatement. 0:13:09.320 --> 0:13:11.800 I mean, don't forget don't forget a T and T 0:13:12.080 --> 0:13:15.000 T and T deal with time. Warner was just about 0:13:15.080 --> 0:13:18.560 locked up when making del Rayhan became the antitrust chief 0:13:18.559 --> 0:13:23.720 of the Juice Department under under under President Trump, and 0:13:23.760 --> 0:13:26.800 he immediately reversed course on it with much of the 0:13:26.880 --> 0:13:30.160 dismay of the career professionals. But in this particular case, 0:13:30.280 --> 0:13:33.920 I think the career professionals and whoever hit their superiors 0:13:33.920 --> 0:13:35.679 turn out to be are going to be going to 0:13:35.760 --> 0:13:39.679 be aligned on this case. Joe. It's always so fascinating 0:13:39.720 --> 0:13:41.800 to speak to you just on a stufford note, before 0:13:41.800 --> 0:13:44.800 we let you can ask you what you think it's 0:13:44.800 --> 0:13:49.280 going to happen tomorrow night, debate night. You can ask me. 0:13:49.320 --> 0:13:53.640 But I don't know that's a fair enough answer. It's uh, 0:13:53.800 --> 0:13:55.720 it's not fair to put an opinion columnist on the 0:13:55.720 --> 0:13:58.280 spot like that, Joe. Thank you. Jonah Sarah is a 0:13:58.320 --> 0:14:01.920 Boombrig opinion columnists covering business. We should say, and of 0:14:01.920 --> 0:14:03.959 course I do check out if you haven't heard it. 0:14:04.520 --> 0:14:08.000 His project the Bloomberg Wandere Project, the Shrink next Door 0:14:08.400 --> 0:14:11.640 for all sorts of prizes, and really just a fascinating 0:14:11.760 --> 0:14:14.640 liston as well. So Joe, thanks for joining today's column. 0:14:14.840 --> 0:14:18.400 Is that Google should learn from Microsoft's tough lesson and 0:14:18.440 --> 0:14:23.200 well worth a read for anybody out there. Let's get 0:14:23.200 --> 0:14:26.000 back to the markets now. A very interesting conversation coming 0:14:26.080 --> 0:14:30.040 up with Anderson Capital Management. Peter Anderson, who is located 0:14:30.080 --> 0:14:33.480 in Boston and manage is something called the weather marka 0:14:33.560 --> 0:14:37.680 fun It's a credit driven, concentrated, low turnover stock portfolio 0:14:38.040 --> 0:14:43.280 that apparently incorporates a truly different esoteric stock selection process. 0:14:43.800 --> 0:14:46.240 So Peter, welcome and give us just a little hint 0:14:46.240 --> 0:14:50.080 of what this esoteric stock selection process might be. Well, 0:14:50.120 --> 0:14:52.920 good morning, Bonnie. Yes, so I come from a fixed 0:14:52.960 --> 0:14:56.800 income background and inequity background, and not many people have 0:14:56.920 --> 0:15:00.240 that combination. Usually you stay in one swim lane for 0:15:00.320 --> 0:15:03.040 your profession. But I switched over to equities and I 0:15:03.040 --> 0:15:07.200 found it very convenient and helpful, frankly, to borrow from 0:15:07.240 --> 0:15:10.880 the fixed income marketplace the different tools they use and 0:15:10.920 --> 0:15:13.720 apply that to equity analysis. So what I have is 0:15:13.760 --> 0:15:17.000 a current portfolio or fifteen stocks, but they are derived 0:15:17.080 --> 0:15:20.920 mainly by looking at dislocations between how the bond market 0:15:21.000 --> 0:15:23.360 might have an opinion on a company versus how an 0:15:23.400 --> 0:15:26.360 equity market would have an opinion on the same company. 0:15:27.720 --> 0:15:30.280 So what does it led you to put into your 0:15:30.320 --> 0:15:34.800 portfolio in the last six months? And have you changed much? Uh? 0:15:34.840 --> 0:15:38.400 You know, my turnover is very low relatively speaking. You know, 0:15:38.440 --> 0:15:40.720 there are a lot of competitors out there. Mutual funds 0:15:40.800 --> 0:15:43.280 would have over ad percent turnover, but mine is only 0:15:43.320 --> 0:15:47.400 about twenty five. So that's an indirect way of saying 0:15:47.440 --> 0:15:51.200 that my turn my new stock selection is pretty slow. 0:15:51.320 --> 0:15:53.880 At most. Ill pick maybe one or two stocks a year, 0:15:54.440 --> 0:15:57.960 and uh, I hoping that's a sign of my conviction 0:15:58.200 --> 0:16:01.560 on the holdings that I currently have, of uh in 0:16:01.680 --> 0:16:07.040 terms of my outlook for their market appreciation. Okay, how 0:16:07.280 --> 0:16:09.720 specific can you get when you talk to us about 0:16:09.760 --> 0:16:12.200 what's actually in your portfolio? Because last year, for example, 0:16:13.080 --> 0:16:17.280 return on an eighteen stock portfolio. Yes, yes, and I've 0:16:17.600 --> 0:16:19.360 delighted to talk to you about that, and I wanted 0:16:19.400 --> 0:16:22.120 to also tie that in to you know, what my 0:16:22.240 --> 0:16:25.080 current assessment is of where we are. I think it's 0:16:25.160 --> 0:16:28.920 extremely difficult right now. You know, COVID has just kind 0:16:28.960 --> 0:16:32.440 of dropped a bomb on all the standard metrics that 0:16:32.600 --> 0:16:35.880 either economists use or equity analysts used. I think they're 0:16:35.880 --> 0:16:39.280 having a very very hard time formulating, oh, what is 0:16:39.280 --> 0:16:41.480 going to happen, say with the next three months. So 0:16:41.560 --> 0:16:44.360 I don't take an approach like that. This approach takes 0:16:44.400 --> 0:16:48.200 a longer view, and I tried to simplify UH supply 0:16:48.320 --> 0:16:50.880 demand and try to get a clearer sense of what 0:16:51.040 --> 0:16:55.760 stocks out there will endure and indeed appreciate regardless of 0:16:55.840 --> 0:16:59.400 what happens in the White House, how long the virus lasts, 0:16:59.480 --> 0:17:02.360 or whether an we have our hopes for the vaccine 0:17:02.560 --> 0:17:06.159 or dash. So with that in mind, some enduring themes 0:17:06.200 --> 0:17:08.480 are believe it or not, pet care. That's the most 0:17:08.520 --> 0:17:11.840 recent editions I've had in the portfolio, and I have 0:17:11.920 --> 0:17:14.600 a theme of pet care sub theme if you will 0:17:14.640 --> 0:17:17.440 have three stocks in there, and I can explicitly tell 0:17:17.440 --> 0:17:20.880 you what they are, the Trupanion Fresh pet in Zoetics. 0:17:20.920 --> 0:17:25.400 Each one has a very specific place in the pet 0:17:25.440 --> 0:17:28.240 care of this nation. At least we own over a 0:17:28.320 --> 0:17:31.440 hundred million cats and dogs out there, and I've write 0:17:31.520 --> 0:17:34.679 reason to that no matter what happens, we treat our 0:17:34.720 --> 0:17:40.360 pets equal to and to a family members in a family. 0:17:40.880 --> 0:17:45.240 So Trupanion is the only publicly traded stock that provides 0:17:45.320 --> 0:17:48.840 healthcare insurance for pets, and their market penetrations is only 0:17:48.920 --> 0:17:53.120 one percent of the entire hundred million animals out there. 0:17:53.200 --> 0:17:56.080 So just think of that. If it doubles its market share, 0:17:56.119 --> 0:17:59.320 it's only up two percent in market share, but it 0:17:59.440 --> 0:18:03.800 certainly double its revenues in fresh pet is gourmet food 0:18:04.000 --> 0:18:09.600 for pets and zoetts. Provides the medication, the prescription medication 0:18:09.680 --> 0:18:14.159 that once you bring your pet to UH doctor veterinarian, 0:18:14.280 --> 0:18:19.280 you will usually get UH prescription for medication and most 0:18:19.320 --> 0:18:21.199 likely the way if this is a manufacturer of that. 0:18:21.359 --> 0:18:25.440 So this is a long term perspective. Uh, from now 0:18:25.600 --> 0:18:28.000 through the end of the year. I think that there 0:18:28.000 --> 0:18:31.720 will be incredible volatility, but who can predict who's going 0:18:31.760 --> 0:18:35.080 to win, when the virus will end, when the vaccines 0:18:35.119 --> 0:18:37.080 will come out. But I think these socks have an 0:18:37.160 --> 0:18:41.440 enduring quality. Are any of your holdings at all dependent 0:18:41.520 --> 0:18:45.080 on more stimulus coming? You know, I try to stay 0:18:45.080 --> 0:18:47.479 away from me because when you think about it, pets 0:18:47.640 --> 0:18:50.840 are definitely, you know, something that costs some money. You know, 0:18:50.880 --> 0:18:53.600 you just said it yourself, right, So you're essentially trying 0:18:53.640 --> 0:18:56.600 to gather the extra pennies that people have, and in 0:18:56.640 --> 0:18:59.480 this case it's through their pets. But a lot of 0:18:59.480 --> 0:19:02.639 people who have pets that you know, don't get extra stimulus, 0:19:02.640 --> 0:19:04.600 will not be able to get their pet that extra 0:19:04.640 --> 0:19:08.639 operation or that medicine. Yes, that's a possibility, but I 0:19:08.640 --> 0:19:11.720 would also say that if that's the case, it's almost 0:19:11.800 --> 0:19:14.760 like saying you wouldn't be able to provide for your 0:19:14.800 --> 0:19:17.680 own family member. So I think there is a strong 0:19:18.240 --> 0:19:22.520 commitments and I would say almost an inelastic demand for 0:19:22.720 --> 0:19:26.720 pet care in this country, at least the way um 0:19:26.800 --> 0:19:31.240 the demographics read and all the latest polling of pet 0:19:31.480 --> 0:19:35.159 um owners say that this is top on their list 0:19:35.640 --> 0:19:37.760 next to a family member to spend. So I think 0:19:37.800 --> 0:19:40.600 you'd really have to erode. There's a lot of inelastic 0:19:40.640 --> 0:19:43.760 demand elements out there that I try to avoid, uh. 0:19:43.800 --> 0:19:46.280 And I do think that these stocks, for instance, will 0:19:46.320 --> 0:19:50.960 be unaffected by a stimulus as some other sectors, such 0:19:51.000 --> 0:19:53.720 as data security and data storage. Those are other to 0:19:53.720 --> 0:19:56.119 two other themes that I play in the portfolio, but 0:19:56.240 --> 0:20:00.280 I think also have enduring qualities. Interesting. Alright, Peter's thank 0:20:00.359 --> 0:20:03.520 you some wonderful things to think about. Their Peter Anderson, 0:20:03.520 --> 0:20:07.119 as founder of Anderson and Capital Management, talking to us 0:20:07.119 --> 0:20:10.520 there about some pet care stocks and then also data storage, 0:20:10.720 --> 0:20:13.080 and of course we know storage of all kinds has 0:20:13.119 --> 0:20:16.600 been pretty popular in this pandemic, a lot of people transferring. 0:20:16.640 --> 0:20:21.920 There's the literal physical buildings into physical storage in inner 0:20:21.920 --> 0:20:23.920 cities as well. So that's another theme that we can 0:20:24.240 --> 0:20:29.200 look at another day. Let's get now to our next 0:20:29.240 --> 0:20:31.640 guest who keeps an eye on emerging markets, but also 0:20:31.680 --> 0:20:34.600 so much more than that. Damian Sasaur is just an 0:20:34.640 --> 0:20:37.240 absolute genius when it comes to watching the markets. He's 0:20:37.280 --> 0:20:41.080 chief Emerging markets credit strategist for Bloomberg Intelligence. But I 0:20:41.119 --> 0:20:42.639 know that in his spare time he does a lot 0:20:42.680 --> 0:20:45.960 more than that, such as looking at frontier markets. And Damian, 0:20:46.000 --> 0:20:48.560 if you don't mind me jumping you with the question, 0:20:49.359 --> 0:20:52.239 we haven't really spent any time on Nigeria or on 0:20:52.280 --> 0:20:54.920 any of the problems that have been having that we've 0:20:54.960 --> 0:20:58.040 been seeing on the periphery. Have you looked at any 0:20:58.040 --> 0:21:00.280 of the frontier markets that are that are suffering right 0:21:00.320 --> 0:21:05.160 now and where is experiencing the most trouble. So it's 0:21:05.160 --> 0:21:07.040 interesting actually that you bring that up, Bonnie. And by 0:21:07.040 --> 0:21:09.479 the way, I'm blushing, thank you for the introduction. So 0:21:09.600 --> 0:21:11.360 you know, the reality is in Nigeria. You know, you've 0:21:11.400 --> 0:21:13.720 had some protests. Nigeria is kind of a closed market. 0:21:13.720 --> 0:21:16.520 There's a big dislocation between the niro, which is its 0:21:16.520 --> 0:21:19.600 local currency, and and the black market rates. So you know, 0:21:19.720 --> 0:21:22.280 I mean, you know, it's not really an investors market 0:21:22.440 --> 0:21:26.040 from a US dollar investor perspective, but you can get 0:21:26.080 --> 0:21:28.600 some really high carrying a lot of frontier markets for 0:21:28.600 --> 0:21:31.440 for example, Egypt and Uruguay and Ghana. You know, you've 0:21:31.440 --> 0:21:33.760 got double digit yields and all of those economies, um, 0:21:33.800 --> 0:21:35.960 and you know, you know you can get that, albeit 0:21:36.280 --> 0:21:38.400 with increased currency risk. So I think that's the real 0:21:38.480 --> 0:21:40.879 risk here. But my goodness, the moving the dollar is 0:21:40.880 --> 0:21:43.760 definitely catching people's attentions. And you know, I can see 0:21:43.760 --> 0:21:45.199 a lot of people putting more money to work in 0:21:45.200 --> 0:21:47.760 the front along the frontier and emerging markets. Right, So 0:21:47.960 --> 0:21:50.600 net net is it better for these markets when that 0:21:50.640 --> 0:21:53.120 happens or is it is it a disaster? Do they 0:21:53.119 --> 0:21:55.320 need to run to the I M F and runder 0:21:55.320 --> 0:21:58.400 any program that that will host them. Well, it certainly depends, 0:21:58.480 --> 0:22:00.200 right I mean, certainly the I m F is there 0:22:00.320 --> 0:22:03.000 for you know, real troubled economies. I mean, we saw 0:22:03.080 --> 0:22:05.960 what they're doing with with in places like Argentina, Ukraine, 0:22:06.040 --> 0:22:08.280 you know, even Ecuador. But you know, when you're looking 0:22:08.280 --> 0:22:10.119 at the front here, you know, and and some of 0:22:10.119 --> 0:22:12.560 the markets I just mentioned, I wouldn't say stable is 0:22:12.600 --> 0:22:15.800 the right word to to characterize them, but certainly more 0:22:15.840 --> 0:22:18.359 stable than than than the former. So you know, Egypt 0:22:18.440 --> 0:22:20.480 is one place where you can carry really really well 0:22:20.520 --> 0:22:22.800