WEBVTT - Leon Black Steps Down Early From Apollo, Cedes Chair 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 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find 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 --> 0:00:22.720 at Bloomberg dot com slash podcast. Now, let's talk a 0:00:22.720 --> 0:00:27.360 little bit about Apollo. Leon black is the famed billionaire 0:00:28.160 --> 0:00:31.159 who is one of the co founders of Apollo, but 0:00:31.720 --> 0:00:38.040 he was tangled up in the drama around disgraced financier 0:00:38.320 --> 0:00:42.120 Jeffrey Epstein and is stepping down as chief executive of 0:00:42.240 --> 0:00:45.040 his company a few months ahead of schedule. Shnelly Bassk 0:00:45.440 --> 0:00:49.000 covers Wall Street for US for Bloomberg News. Shaley, Um, 0:00:49.080 --> 0:00:52.520 does this mean that Apollo can make an earlier sort 0:00:52.520 --> 0:00:58.080 of uh restart at It's I guess pr campaign to 0:00:58.080 --> 0:01:01.120 get away from Epstein? Listen at. That's certainly the hope. 0:01:01.160 --> 0:01:03.120 If you look at Apollo shares in the year, they're 0:01:03.120 --> 0:01:06.600 pretty flat, whereas Blackstone is up more than twelve percent, 0:01:07.160 --> 0:01:11.320 so they're at a pretty big differential when you compare 0:01:11.360 --> 0:01:14.520 them to their largest competitor. They have some big things 0:01:14.520 --> 0:01:17.200 on the horizon for themselves. They agreed to an eleven 0:01:17.240 --> 0:01:20.399 billion dollar deal to merge with the insurance company that 0:01:20.440 --> 0:01:23.320 they founded. So there is a hope that they can 0:01:23.360 --> 0:01:26.440 start moving past the scandal and into a growth phase. 0:01:27.280 --> 0:01:29.960 Uh and yeah, that's that is the main hope. It 0:01:30.000 --> 0:01:33.240 is a big surprise, right because Leon Black initially said 0:01:33.520 --> 0:01:36.600 he would step back a CEO but stay chairman, and 0:01:36.680 --> 0:01:41.000 now he's stepping back as chairman and CEO and um, 0:01:41.160 --> 0:01:42.840 he will be involved in the sense that he will 0:01:42.880 --> 0:01:46.800 remain the firm's largest shareholder. Sne has anything changed, Has 0:01:46.840 --> 0:01:51.080 any news come up to maybe, uh, precipitate this move here. 0:01:51.120 --> 0:01:53.240 I know that the news is generally as it relates 0:01:53.280 --> 0:01:56.320 to his relationship with Epstein, been very very unsettling for 0:01:56.320 --> 0:01:58.680 the firm. But has anything new come out? Well, yeah, 0:01:58.720 --> 0:02:00.840 the fact that he's stepping back come completely like this 0:02:00.920 --> 0:02:04.840 begs the question if investors were concerned that he remained 0:02:05.200 --> 0:02:08.679 it's affiliated with the firm at all. So the thing 0:02:08.800 --> 0:02:11.200 is he said to the board that really this has 0:02:11.240 --> 0:02:14.360 taken a toll on him. A lot of this public 0:02:14.400 --> 0:02:18.040 spotlight in light of his own relationship with Jeffrey Epstein. Remember, 0:02:18.080 --> 0:02:20.920 Apaulo did not have a relationship, just Leon Black did, 0:02:21.320 --> 0:02:23.280 and he said that it really took a toll on 0:02:23.360 --> 0:02:25.919 his health and that's why he's stepping back. So he 0:02:26.040 --> 0:02:29.240 did paint this as a very personal decision when when 0:02:29.280 --> 0:02:33.560 he announced this just this morning. Now you cover private 0:02:33.560 --> 0:02:36.240 equity for us and talked to the biggest movers and 0:02:36.280 --> 0:02:41.320 shakers in the industry and half for years, Leon Black 0:02:41.400 --> 0:02:45.000 paid Jeffrey Epstein a hundred and fifty eight million dollars 0:02:45.080 --> 0:02:49.280 for financial advice. Does that seem to you, you know, 0:02:49.400 --> 0:02:52.919 in the realm of billionaires, like something that's at all 0:02:53.000 --> 0:02:56.000 normal to do. Listen, it's a lot of money, and 0:02:56.080 --> 0:03:00.000 it really financed such a large amount of Jeffrey EPP's 0:03:00.040 --> 0:03:03.720 dean's own wealth that it did raise a ton of eyebrows. 0:03:04.000 --> 0:03:06.120 On top of that, it was a hundred and fifty 0:03:06.160 --> 0:03:10.200 eight million dollars, largely for tax advice. Leon Black is 0:03:10.240 --> 0:03:14.120 a financial genius, right, so that amount of money for 0:03:14.320 --> 0:03:17.520 tax advice seemed like a lot of money to spend 0:03:17.560 --> 0:03:22.240 for any type of consultancy, let alone tax advice. What's 0:03:22.240 --> 0:03:24.600 the impact been on the firm? Has there been any 0:03:24.639 --> 0:03:30.520 impact on the firm from um this fallout with Mr Epstein. Listen, Yes, absolutely, investors, 0:03:30.639 --> 0:03:34.520 large pension funds were threatening to not really continue to 0:03:34.560 --> 0:03:37.440 invest in some of Apollo's largest funds, right, and which 0:03:37.480 --> 0:03:39.280 is why a lot of this decision had happened in 0:03:39.320 --> 0:03:42.920 the first place. Mark Rowan was really who was becoming 0:03:42.920 --> 0:03:45.080 the CEO of this firm, was behind some of the 0:03:45.120 --> 0:03:47.480 most profitable bets at Apollo, so it was a really 0:03:47.560 --> 0:03:49.880 natural choice to take over for the firm. He was 0:03:49.920 --> 0:03:52.840 also a co founder, so a lot of consistency. But yes, 0:03:53.000 --> 0:03:56.480 the the Epstein scandal really did weigh on Apollo. It 0:03:56.520 --> 0:03:59.800 seemed to very much weigh on Leon black himself. And 0:04:00.600 --> 0:04:03.600 these people are just looking forward to moving on and 0:04:03.640 --> 0:04:06.120 moving to the next phase of this firm. Again, they 0:04:06.120 --> 0:04:07.760 have a lot of catch up to do when you 0:04:07.800 --> 0:04:11.760 compare them with Blackstone, but this is certainly a big 0:04:11.760 --> 0:04:14.320 move for a firm that has really become a giant 0:04:14.560 --> 0:04:17.760 of finance. Ye. Hey, Shinali, thanks so much for joining. 0:04:17.800 --> 0:04:20.839 It's just a fascinating story here, Shinali Bostic. She is 0:04:20.920 --> 0:04:24.159 Bloomberg's Wall Street reporter. We always enjoyed getting the latest 0:04:26.200 --> 0:04:30.600 we all know of the many, many, many industries that 0:04:30.680 --> 0:04:33.520 have been disrupted by COVID. I guess we saw first 0:04:33.520 --> 0:04:36.560 and foremost, you know a year ago right about now, 0:04:36.640 --> 0:04:40.240 leisure and lodging and just you know, how the consumer 0:04:40.560 --> 0:04:43.080 goes about his or her daily life. Well, let's take 0:04:43.279 --> 0:04:46.279 let's think about the insurance industry and what changes it 0:04:46.400 --> 0:04:49.440 has had to implement as it deals with COVID. There's 0:04:49.480 --> 0:04:52.039 nobody better to chat about that than Wayne Peacocky's the 0:04:52.080 --> 0:04:55.760 president and CEO of U s a A based in 0:04:55.839 --> 0:05:00.160 beautiful San Antonio, Texas. I spent many, many day as 0:05:00.160 --> 0:05:03.080 in San Antonio, Texas. Uh. Some great folks down there, Wayne, 0:05:03.080 --> 0:05:05.440 Thanks so much for joining us here. Again we think 0:05:05.440 --> 0:05:10.120 about the pandemic disrupting a lot of industries. UH many 0:05:10.160 --> 0:05:13.240 profoundly give us a sense of how it impacted your 0:05:13.320 --> 0:05:16.880 business over the past twelve months. Well again, thanks for 0:05:16.920 --> 0:05:19.599 having me on this morning, and great to be reaching 0:05:19.600 --> 0:05:21.760 out from San Antonio. A little more beautiful this week 0:05:21.760 --> 0:05:23.720 than a couple of weeks ago with the deep freeze, 0:05:23.720 --> 0:05:27.200 so we're we're thawing out here today. You know, for us, 0:05:27.279 --> 0:05:30.600 first and foremost was the need to get our employees 0:05:30.839 --> 0:05:33.800 out of the office and working remotely. UM. And be 0:05:33.839 --> 0:05:36.359 able to do that without interrupting service. I think we 0:05:36.400 --> 0:05:39.839 did that pretty well back in March of last year. 0:05:40.279 --> 0:05:43.040 But as we think back to last year, two big 0:05:43.200 --> 0:05:46.240 themes I think that are important to historic catastrophe year 0:05:46.920 --> 0:05:50.280 UM and the need to be able to serve members 0:05:50.600 --> 0:05:53.719 in need UM without actually being able to get out 0:05:53.720 --> 0:05:57.800 in virtually and physically inspect their their homes. So the 0:05:57.839 --> 0:06:00.160 work we've been doing over the years to build digital 0:06:00.240 --> 0:06:04.159 capabilities paid huge dividends as we adjusted our model to 0:06:04.200 --> 0:06:08.960 do virtual adjusting for catastrophes. And in the auto insurance 0:06:09.000 --> 0:06:12.719 business UM, as we all went home and businesses shut down, 0:06:13.120 --> 0:06:16.960 UM folks stopped driving, So a very significant change in 0:06:17.000 --> 0:06:20.800 the frequency of miles driven UM and accidents that will 0:06:20.839 --> 0:06:23.400 come as a result of that. So two different stories 0:06:23.440 --> 0:06:27.080 for us UM in the insurance business last year. And 0:06:27.120 --> 0:06:31.799 you Wayne have followed the Marine Corps philosophy for making 0:06:31.839 --> 0:06:36.680 decisions solution. Tell us what that is. Well, I'll tell you. 0:06:36.720 --> 0:06:39.039 First of all, a global pandemic was not on my 0:06:39.120 --> 0:06:42.080 priority list, and I became the CEO on February one 0:06:42.240 --> 0:06:44.400 of last year. I had about nineteen days of grace 0:06:44.440 --> 0:06:47.280 before the world began to you know, kind of unravel 0:06:47.440 --> 0:06:49.920 and it became really clear that we needed to move 0:06:49.960 --> 0:06:53.599 with speed UM to make decisions as simple as and 0:06:53.640 --> 0:06:56.560 as complex as getting employees home UM and then just 0:06:56.880 --> 0:06:59.279 you know, a range of decisions as we adapted and 0:06:59.360 --> 0:07:02.000 changed the busines this. So we took on this philosophy 0:07:02.040 --> 0:07:03.880 of you know, we're not gonna have perfect information, we 0:07:03.920 --> 0:07:06.640 won't have everything that we need, but we do need 0:07:06.680 --> 0:07:08.800 to make a good risk managed decision, and we need 0:07:08.839 --> 0:07:12.160 to make it today. Um SE seems like a good 0:07:12.440 --> 0:07:16.160 number to start with. And then recognizing this changing environment, 0:07:16.200 --> 0:07:20.160 that conditions will change and we can rechoose tomorrow if necessary, 0:07:20.200 --> 0:07:23.160 but better to choose today UM than not choose. And 0:07:23.160 --> 0:07:26.080 I think that served us UM really well through the 0:07:26.120 --> 0:07:29.040 height of the pandemic and thankfully as continuing to serve 0:07:29.120 --> 0:07:31.800 us today as we kind of taught ourselves that UM, 0:07:31.920 --> 0:07:34.600 this big organization can move at a much faster pace 0:07:34.680 --> 0:07:38.280 than maybe we thought possible before the pandemic arrived on 0:07:38.280 --> 0:07:43.520 our doorstep. So Wayne USA A serves the needs the 0:07:43.520 --> 0:07:48.360 insurance needs of US military members and and and veterans 0:07:48.720 --> 0:07:51.680 talk to us about any special insurance needs they may 0:07:51.760 --> 0:07:55.120 need here around covid UM that you've had to deal 0:07:55.120 --> 0:07:58.720 with well, like all of us, uh, you know, the 0:07:58.760 --> 0:08:01.680 d O D shutdown as well. So we had military 0:08:01.720 --> 0:08:05.920 folks who were planning to move duty stations, UM, those 0:08:05.960 --> 0:08:08.840 were halted. In many cases, we'd started to help them 0:08:08.840 --> 0:08:11.040 with their plans for their new location while they were 0:08:11.040 --> 0:08:13.920 stuck in their old location. So just working through some 0:08:14.000 --> 0:08:17.560 of those challenges as their kind of move was suspended 0:08:17.720 --> 0:08:21.040 is an example. UM. I think from an insurance standpoint, 0:08:21.520 --> 0:08:23.760 really kind of being there when they need us most. 0:08:24.120 --> 0:08:26.840 But what we saw a lot, especially with enlisted folks 0:08:26.920 --> 0:08:29.840 is um, you know that enlisted soldier or sailor airmen 0:08:29.880 --> 0:08:32.960 is still getting their paycheck, but their spouse most likely 0:08:33.040 --> 0:08:36.680 has been disaffected much more so than the average person 0:08:37.120 --> 0:08:39.839 in the pandemic. So a lot of under employment or 0:08:40.000 --> 0:08:43.000 no employment in that kind of second income for a 0:08:43.000 --> 0:08:45.400 group of folks who are really kind of working paycheck 0:08:45.440 --> 0:08:48.480 to paycheck every single month. So we had about a 0:08:48.559 --> 0:08:52.880 million of our members that we helped either by you know, uh, 0:08:53.120 --> 0:08:55.720 stringing out their payments to on a longer pace or 0:08:55.880 --> 0:08:58.800 foregoing some of the payments that they owed us, both 0:08:58.800 --> 0:09:02.479 in terms of banking UM and in our insurance portfolio. 0:09:02.559 --> 0:09:05.199 And it's just really helpful to that group to ease 0:09:05.280 --> 0:09:07.719 the pain m as they work through some of the 0:09:07.800 --> 0:09:10.240 challenges like the rest of us did last year. And 0:09:10.280 --> 0:09:12.880 you you provided more than forty seven million dollars to 0:09:12.960 --> 0:09:18.040 support COVID nineteen relief for families of the military, also 0:09:18.120 --> 0:09:20.640 fifty million over three years. You have a program to 0:09:20.640 --> 0:09:24.080 support racial equity initiatives, and your return more than a 0:09:24.120 --> 0:09:28.520 billion dollars in dividends to members during the pandemic. What 0:09:28.720 --> 0:09:32.320 how does that compare in terms of returning dividends. Well, 0:09:32.480 --> 0:09:35.600 it's something we really have. We we returned dividends every year. 0:09:35.640 --> 0:09:38.599 It's part of the great part of the Usays Association. 0:09:38.840 --> 0:09:41.520 When we have funds left over at the end, we 0:09:41.679 --> 0:09:44.640 return them back to members. But these are special dividends 0:09:44.640 --> 0:09:47.319 that we did throughout the year in recognition of our 0:09:47.400 --> 0:09:50.720 auto insurance policy holders, you know, who are not driving 0:09:51.120 --> 0:09:53.120 as much. We did a series of three of those 0:09:53.200 --> 0:09:56.160 during the year, totally, as you said, about a billion dollars. 0:09:56.240 --> 0:09:58.480 And then what we realized, you know, we can help 0:09:58.679 --> 0:10:01.199 you know, members who are in need, but we really 0:10:01.320 --> 0:10:04.400 needed to take an additional step, so we put almost 0:10:04.440 --> 0:10:07.040 fifty million dollars into COVID relief, whether it was food 0:10:07.080 --> 0:10:10.080 and security issues and markets where you know we work 0:10:10.120 --> 0:10:13.719 and live, or very specifically about thirty million dollars UM 0:10:13.760 --> 0:10:17.559 that we invested with military aid societies so that they 0:10:17.600 --> 0:10:21.920 could give low interest loans or grants UM two soldier sailors, 0:10:21.920 --> 0:10:24.600 airmen and National guardsman who you know may be having 0:10:24.600 --> 0:10:28.120 a difficult time through that period. And then with the 0:10:28.160 --> 0:10:31.160 social unrest um that we all experienced last year, we 0:10:31.559 --> 0:10:33.960 recognize we need to do more on our part as well, 0:10:34.400 --> 0:10:37.160 and so we've committed you know, fifty million dollars the 0:10:37.200 --> 0:10:39.640 first in our history UM to try to attack and 0:10:39.640 --> 0:10:42.480 address some of the challenges with systemic racism and the 0:10:42.559 --> 0:10:45.360 inequalities that are kind of built into the fabric of 0:10:45.559 --> 0:10:49.000 our society. So really interested in making a difference on 0:10:49.040 --> 0:10:52.000 that front as well. All right, Wayne Peacock diving into 0:10:52.040 --> 0:10:55.360 the d pen taking over as President CEO of us 0:10:55.440 --> 0:10:59.680 A a mere really days before the pandemic hit the 0:10:59.720 --> 0:11:01.640 show orders the United States of America. Thanks so much 0:11:01.840 --> 0:11:07.120 for joining us, Wayne. Let's get over to somebody who 0:11:07.240 --> 0:11:10.480 is clearly an expert in how these markets work. Pete 0:11:10.480 --> 0:11:14.320 Anderson joins us UH. He is the founder of Anderson 0:11:14.360 --> 0:11:18.000 Capital management, and he's located in Boston and he beat 0:11:18.040 --> 0:11:23.400 the SMP last year by forty point seven percent. Peter, 0:11:23.840 --> 0:11:26.480 how well, first of all, tell us how you did that, 0:11:26.679 --> 0:11:29.600 and tell us if your strategy has changed in one 0:11:30.880 --> 0:11:33.440 I think we're doing a great job this year of 0:11:33.520 --> 0:11:37.800 distracting ourselves more really matters. More about that later, but listen, 0:11:37.840 --> 0:11:41.640 I did this by focusing on fifteen stocks. Fifteen stocks only, 0:11:42.200 --> 0:11:46.280 long holding period, just common sense about what I think 0:11:46.440 --> 0:11:49.480 is going to go up and value regardless of whether 0:11:49.559 --> 0:11:52.360 or not we had a lockdown or we're swinging from 0:11:52.360 --> 0:11:56.520 the vines with an economic recovery. I picked stocks based 0:11:56.559 --> 0:12:00.920 on fundamental outlooks and the demand that I or the 0:12:01.040 --> 0:12:04.960 coming uh for those industries. All right, Peter, you're a 0:12:04.960 --> 0:12:09.559 long time value investor and that's certainly had its time 0:12:09.559 --> 0:12:14.120 and sun here really since September. I would suggest give 0:12:14.200 --> 0:12:17.160 us your sense for kind of the legs you think 0:12:17.400 --> 0:12:21.720 this trade has going forward. Well, you know, um, I 0:12:21.800 --> 0:12:24.760 am both a value and a growth investor. I wanted 0:12:24.800 --> 0:12:27.960 to just clarify that, and um I actually kind of 0:12:28.000 --> 0:12:30.920 shunned those labels because, as I said, I just tried 0:12:30.920 --> 0:12:32.959 to pick stocks that go up and as you know, 0:12:33.600 --> 0:12:36.880 you know, all kinds of stocks go up. So what's 0:12:36.880 --> 0:12:40.520 happening now though, is I think we've made the world 0:12:40.559 --> 0:12:43.880 too complex for our own understanding. You know, this relationship 0:12:43.920 --> 0:12:46.240 we're seeing it this morning right when the market opened, 0:12:46.679 --> 0:12:50.719 this inverse relationship with the treasuries. When the yield goes up, 0:12:51.160 --> 0:12:54.760 the market goes down. Whoever thought of that? And why 0:12:54.880 --> 0:12:57.040 is that now the new narrative? I mean, I'm just 0:12:57.120 --> 0:13:00.319 ignoring those, uh that dynamic and you know it's ainful 0:13:00.440 --> 0:13:02.840 sometimes because let me put you to this way, if 0:13:02.840 --> 0:13:05.440 I sell the stock every time rates went up, I 0:13:05.440 --> 0:13:08.280 wouldn't end up owning anything. So you've got to have 0:13:08.320 --> 0:13:11.520 a longer term perspective. And I also think that rates 0:13:11.520 --> 0:13:14.120 are too low. I'm probably the only person out there 0:13:14.160 --> 0:13:17.400 that's going to say this publicly, but we're on the 0:13:18.320 --> 0:13:21.199 We're going to embark on one of the greatest economic 0:13:21.240 --> 0:13:23.480 recoveries of all time, right, I think we all can 0:13:23.520 --> 0:13:26.840 agree upon that. And with a ten year you know, 0:13:27.400 --> 0:13:31.920 hitting perhaps a two yield, I think that's absolutely fine 0:13:31.960 --> 0:13:34.400 with me. In fact, you know, it hasn't been long 0:13:34.520 --> 0:13:37.240 where we've seen a three percent yield. People need to 0:13:37.920 --> 0:13:42.520 think about in perspective a great growth scenario, and you 0:13:42.559 --> 0:13:44.920 do have to have yields going up. It's just part 0:13:44.920 --> 0:13:48.560 of the calculus of the economics. I mean. The concern, 0:13:48.600 --> 0:13:52.079 of course, is that we get with that great growth scenario, 0:13:52.400 --> 0:13:56.920 great inflation um and that forces the Fed's hand. Are 0:13:56.960 --> 0:14:02.400 you not worried as as Sharon Powell um uh calmed 0:14:02.440 --> 0:14:06.360 you in terms of worrying about rate rises. Well, you know, 0:14:06.480 --> 0:14:08.240 you asked how I got out to the forty plus 0:14:08.280 --> 0:14:11.240 percent last year, and a lot of this stuff, um 0:14:11.240 --> 0:14:15.199 it was all due respect to the chairman and other analysts. 0:14:15.280 --> 0:14:18.600 A lot of it is somewhat noise, and I think 0:14:18.640 --> 0:14:21.640 you have to factor it into a more complex picture, 0:14:22.120 --> 0:14:24.600 you know. I do say some things are simple, but 0:14:24.760 --> 0:14:27.960 some things are complex, and in this case, you know, 0:14:28.000 --> 0:14:32.600 the FT is trying its best to calm h. What 0:14:32.680 --> 0:14:34.840 I would say is a very emotional market, you know, 0:14:34.960 --> 0:14:38.360 since the beginning of one I think everything changed. If 0:14:38.360 --> 0:14:41.400 we look back to January and think of the narratives, 0:14:41.400 --> 0:14:46.200 you know, space travel, uh, spacts, all these kinds of 0:14:46.360 --> 0:14:51.160 really newly focused areas. I think we have to put 0:14:51.200 --> 0:14:54.320 that in perspective, as you do with the FED and 0:14:54.440 --> 0:14:57.680 their narrative on rates. I do think the FED is 0:14:57.720 --> 0:15:01.880 probably saying that they don't want you have this recovery 0:15:02.080 --> 0:15:05.320 dampened at all. So it's very, very sensitive. But when 0:15:05.320 --> 0:15:08.120 you just strip all this way, what is driving this. 0:15:08.440 --> 0:15:11.240 It's this pent up, huge recovery that we're going to have. 0:15:11.360 --> 0:15:13.120 We're right on the brink of this, and I think 0:15:13.160 --> 0:15:16.200 would be shameful for people to think that if rates 0:15:16.200 --> 0:15:18.520 are going up, um, it's a bad time to invest 0:15:18.560 --> 0:15:21.880 in growth stocks. All right, So what are some of 0:15:21.920 --> 0:15:24.800 the sectors that you think or or that you know 0:15:24.880 --> 0:15:27.920 you're putting some money to work in right now? Well, 0:15:27.960 --> 0:15:31.160 you know, I've always liked and I continue to like, 0:15:31.360 --> 0:15:35.720 you know, growth stocks. So in UM cyber security, that 0:15:35.880 --> 0:15:38.200 is never going to go away, right So, I think 0:15:38.280 --> 0:15:41.120 last time we mentioned Palo Alto and cyber Arc, and 0:15:41.160 --> 0:15:43.480 those are two companies that are dear to my heart, 0:15:43.960 --> 0:15:47.480 and I think regardless of what will happen rising rates, 0:15:48.000 --> 0:15:52.280 decreasing rates, you know, slowing development, whatever people want to 0:15:52.280 --> 0:15:54.880 throw in terms of the narrative of the day, these 0:15:54.920 --> 0:15:57.960 stocks are going to be survivors. The most recent stock 0:15:58.000 --> 0:16:00.640 I added though, and I mentioned I did match and SPACs. 0:16:00.680 --> 0:16:05.040 You know, I'm negative on most SPACs that are startups 0:16:05.160 --> 0:16:07.320 bacts in the sense that they buy companies that don't 0:16:07.320 --> 0:16:09.600 have any operating history. But there are plenty of companies 0:16:09.640 --> 0:16:13.240 out there that's back will buy that does have operating history. 0:16:13.240 --> 0:16:15.400 And a company that I'm very excited about is called 0:16:15.840 --> 0:16:22.000 Danimer Scientific. They make biodegradable plastic. And I'm not um 0:16:22.040 --> 0:16:24.720 an E s G investor, but when I do see 0:16:24.760 --> 0:16:30.080 a company that has a uh tremendously attractive product such 0:16:30.160 --> 0:16:33.680 as plastic the will biodegrade in your backyard, I do 0:16:33.760 --> 0:16:36.840 get excited about that because the addressable market is so large. 0:16:36.840 --> 0:16:39.240 So that is the most recent stock that I've added. 0:16:39.600 --> 0:16:42.880 And other than that, I still own in video, uh, 0:16:42.920 --> 0:16:46.800 cybersecurity I mentioned, and data storage basic you know, the 0:16:46.840 --> 0:16:50.320 basic building blocks of a starring economy. Hey, Peter, thanks 0:16:50.360 --> 0:16:52.720 so much for joining us and sharing your thoughts here. 0:16:52.720 --> 0:16:57.480 Peter Anderson, founder of Anderson Capital Management based in a Boston. 0:16:58.080 --> 0:17:02.440 UH optimistic outlook on the market there, Um Matt and 0:17:02.480 --> 0:17:05.399 he's he kind of has a concentrated portfolio of names 0:17:05.440 --> 0:17:09.080 that again he thinks they're just good, solid names. Uh. 0:17:09.080 --> 0:17:11.000 And he's got some growth and some value in there. 0:17:11.240 --> 0:17:12.800 I hope we can get him back for a little 0:17:12.800 --> 0:17:16.320 bit longer. I mean, Peter Anderson went to Harvard and 0:17:16.480 --> 0:17:20.880 Yale and he's an overseer of the Boston Symphony Orchestra, 0:17:21.000 --> 0:17:23.080 and I do hope we can get back to Boston 0:17:23.160 --> 0:17:26.560 for the Pops. Hopefully this fourth of July we can 0:17:26.560 --> 0:17:32.760 see them play live again in the Shell. Well. A big, 0:17:32.800 --> 0:17:37.120 big trade in the railroad business. Canadian Pacific Railway agreed 0:17:37.200 --> 0:17:40.360 to buy Kansas City Southern for twenty five billion dollars, 0:17:40.400 --> 0:17:44.080 creating the only network that cuts through the US, Mexico 0:17:44.320 --> 0:17:47.280 and Canada in the first year of those nations new 0:17:47.320 --> 0:17:51.480 trade alliance. Canadian Pacific Railway CEO Keith Creole spoke with 0:17:51.560 --> 0:17:54.680 Bloomberg's Ed Hammond earlier today and had this to say 0:17:54.680 --> 0:17:58.360 about the deal. With the common vision of common operating philosophy, 0:17:58.520 --> 0:18:01.840 creating a network that can become the true backbone connecting 0:18:01.880 --> 0:18:04.560 three countries on the hills of the U S M 0:18:04.640 --> 0:18:07.600 C agreement that enables commerce between the three companies, that 0:18:07.640 --> 0:18:10.520 at a time that the trade has never been more important, 0:18:10.840 --> 0:18:15.280 is compelling. The benefits are compelling. That was Canadian Pacific 0:18:15.359 --> 0:18:18.080 Railways CEO Keith A. Creole talking about the merits of 0:18:18.080 --> 0:18:21.160 that deal. Let's break it down with Lee Classical. Lee 0:18:21.320 --> 0:18:25.280 is the senior transportation analysts for Bloomberg Intelligence. He's been 0:18:25.280 --> 0:18:28.440 covering these railroad companies for decades. So Lee, thanks so 0:18:28.520 --> 0:18:30.440 much for joining us here. This deal, when you think 0:18:30.440 --> 0:18:33.680 about it from a geographic perspective, boy, it really makes 0:18:33.680 --> 0:18:36.560 a lot of sense, doesn't Yeah, Hey, Paul, thanks for 0:18:36.600 --> 0:18:38.240 having me on. Yeah, I mean yeah, we've been a 0:18:38.280 --> 0:18:42.280 pro both East proponent of this deal for quite some time. Uh, 0:18:42.280 --> 0:18:45.640 it just makes complete sense. You know, the two railroads 0:18:45.640 --> 0:18:48.600 and only interchange in one spot. There's not a lot 0:18:48.640 --> 0:18:52.280 of overlap of their network, and so you know, we 0:18:52.320 --> 0:18:54.960 don't see it as a huge issue for you know, 0:18:55.040 --> 0:18:58.560 hurting competition amongst the railroads and maybe other modes. I 0:18:58.600 --> 0:19:01.960 think it's the net net in for the railroads because 0:19:02.000 --> 0:19:05.040 it's really expanding their reach and if you can keep 0:19:05.080 --> 0:19:08.520 people on your network longer, that's not only good for 0:19:08.600 --> 0:19:11.640 your your bottom line, but it's also good for service 0:19:11.640 --> 0:19:15.440 for customers because there's less interchanges happening, uh, and less 0:19:15.560 --> 0:19:18.040 opportunity for things to go wrong, because that's usually what 0:19:18.119 --> 0:19:20.919 it does. First of all, I want to say how 0:19:20.960 --> 0:19:23.560 cool it is that we're talking about railroads Yeah. I 0:19:23.560 --> 0:19:27.679 saw this pop up on my daybreak app on on 0:19:27.720 --> 0:19:29.520 the weekend and I thought, wow, that is so old 0:19:29.520 --> 0:19:33.440 economy and so cool. Such a big number too. Um, 0:19:33.520 --> 0:19:36.640 are we gonna see more deals like this? Lee? I mean, 0:19:36.800 --> 0:19:41.639 we've seen a number of railroad stocks jump in reaction. Yeah. 0:19:41.720 --> 0:19:44.840 The reality is probably not for a very long time. 0:19:44.920 --> 0:19:48.560 The industry is extremely consolidated. This will bring it to 0:19:48.720 --> 0:19:51.560 six class one rails. Those are the biggest railroads in 0:19:51.840 --> 0:19:55.600 North America. Um. You know, maybe a longer term and 0:19:55.680 --> 0:19:58.440 when I say longer term, ten plus years, you could 0:19:58.440 --> 0:20:02.440 see an East marry a West, or maybe Canadian Nationals 0:20:02.440 --> 0:20:05.320 try to get deeper into the East. But you know, 0:20:05.400 --> 0:20:10.879 those kind of transactions will face extreme regulatory hurdles. Um. 0:20:10.960 --> 0:20:13.120 And it will not be easy to get done. I mean, 0:20:13.160 --> 0:20:14.960 you know this deal is not is not a slam 0:20:15.080 --> 0:20:18.160 dunk because it still needs you know, approval from the regulators. 0:20:18.320 --> 0:20:19.919 You know, we do think of the things I was 0:20:19.960 --> 0:20:22.719 mentioned about earlier, about the fact that there's not a 0:20:22.720 --> 0:20:24.640 lot of overlap with the networks, and we don't think 0:20:24.640 --> 0:20:27.520 it's going to impact a competition in a negative way. 0:20:27.800 --> 0:20:29.760 You know, we think that the deal does get done 0:20:30.000 --> 0:20:32.280 and also Kansas City was exempt for some of the 0:20:32.359 --> 0:20:36.200 high hurdle rates that the STB has has has kind 0:20:36.200 --> 0:20:40.080 of implemented about the teen plus years ago. There is 0:20:40.240 --> 0:20:43.520 some you know, risk that maybe the STB might revive 0:20:43.720 --> 0:20:47.040 revised those rules, but we still think, you know, the 0:20:47.080 --> 0:20:50.800 probabilities that the deal does get done. Lee, talk to 0:20:50.880 --> 0:20:53.040 us about some of the business you expect to go 0:20:53.080 --> 0:20:57.159 over this railroad, you know, once they get combined. Here 0:20:57.160 --> 0:21:01.640 as we think about Canada, the US and Mexico. Yeah, 0:21:01.840 --> 0:21:04.400 so you know, the reality is is that they are 0:21:04.520 --> 0:21:08.919 creating the kind of transportation network for the future. I 0:21:08.960 --> 0:21:11.200 know that's sounds silly when we're talking about old world 0:21:11.280 --> 0:21:15.760 economy railroads, but you know, we're we're one of our 0:21:15.840 --> 0:21:18.560 major long term thesis is that you know, we're going 0:21:18.640 --> 0:21:21.760 to see a lot more on shoring into Mexico, UH, 0:21:22.040 --> 0:21:26.040 given UH shippers wanting to be closer to their customers 0:21:26.240 --> 0:21:28.640 and the fact that they want to diversify away from 0:21:28.680 --> 0:21:32.600 from Asia and China, you know, given that trade issues 0:21:32.640 --> 0:21:36.640 are going to probably continue between the U S and China. UM. 0:21:36.680 --> 0:21:39.639 And so you know, you have Canada with all the 0:21:39.680 --> 0:21:43.399 great natural resources. You have the US that consume a 0:21:43.440 --> 0:21:46.800 lot of stuff and then you have Mexico increasing their 0:21:46.880 --> 0:21:50.840 manufacturing footprint, so it just seems like it's just a 0:21:50.840 --> 0:21:55.040 great deal for future growth. Um. You know, there's one 0:21:55.040 --> 0:21:57.520 of one of the great things about the KSU network 0:21:57.640 --> 0:22:00.159 again to the Southern network is their cross board or 0:22:00.200 --> 0:22:03.520 business that's been a high growth area for the railroad 0:22:03.800 --> 0:22:06.119 and you know, we can we expect back to continue 0:22:06.440 --> 0:22:10.480 as more and more stuff are manufactured you south to 0:22:10.560 --> 0:22:13.920 the border of the US. Lee. Is there any cutting 0:22:14.040 --> 0:22:17.480 edge aspect to the research, I mean, to the to 0:22:17.520 --> 0:22:19.560 the industry that you research. I mean, is there any 0:22:19.640 --> 0:22:23.960 kind of hyperloop or you know, um, super green people 0:22:24.040 --> 0:22:27.240 carrier uh stuff going on? Or is it all still 0:22:27.359 --> 0:22:30.919