Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: My name is Mike Reagan. I'm a senior editor at
Speaker 1: Bloomberg and I'm Aldana Higher across Asset reporter with Bloomberg.
Speaker 1: And this week on the show, Well, as we record
Speaker 1: this episode, the SMP five hundred is down from its
Speaker 1: last record, since you closer to that threshold that marks
Speaker 1: what most people considered to be a bear market. But
Speaker 1: what's interesting is that what we're once considered the most
Speaker 1: innovative companies and really the most profitable stocks to own,
Speaker 1: are faring much worse. The NASDAC one hundred, for example,
Speaker 1: is down almost So what exactly is it about our
Speaker 1: current environment with red hot inflation and a sprint higher
Speaker 1: in interest rate that is kryptonite for innovative niece and
Speaker 1: what will take to make those types of stocks market leaders? Again,
Speaker 1: we're going to get into it with the chief investment
Speaker 1: officer for public equities at a major Wall Street acid
Speaker 1: management firm. But first, Beltano, I have to say, I
Speaker 1: hope you did not go around last week telling everyone
Speaker 1: your high school nickname. Did you know? I haven't? Okay? Good?
Speaker 1: Because as you know, that is a hot commodity and
Speaker 1: podcast land. I think we've already gotten a few more
Speaker 1: reviews on Apple podcast by holding out the promise of
Speaker 1: your high school nickname. So I think if we get
Speaker 1: to three and fifty ratings, we'll reveal it. Does that
Speaker 1: sound good? So you're holding out one, You're you're letting
Speaker 1: this drag out a little bit longer. Absolutely, yeah, Okay,
Speaker 1: Well just let the record show and let the listeners
Speaker 1: show that this was your idea to hold them hostage.
Speaker 1: They know that, not mine. Yes, no, that I think
Speaker 1: it's well known that any crazy scheme, any gimmick on
Speaker 1: this show is usually my terrible idea, but it works,
Speaker 1: and I will say it works. And uh so, go
Speaker 1: on your Apple podcast app and give us a rating.
Speaker 1: I'm not saying it has to be five stars, but
Speaker 1: you know, hey, that's the highest rating. And give micro
Speaker 1: rating and write us a review, right, maybe even suggest
Speaker 1: new nicknames for us. Whatever it takes, well, we'll take it.
Speaker 1: But that's the way that we sort of spread the
Speaker 1: word about the podcast. Uh and and give listeners who
Speaker 1: are just finding it on Apple a little hint at
Speaker 1: what kind of show it is and how well received.
Speaker 1: We're not well received it is. I don't know. I
Speaker 1: don't know. We'll find out. Well, we'll see how well
Speaker 1: this idea of yours to hold listeners hostage work. In
Speaker 1: the meantime, I'm hoping we can hear from our guest
Speaker 1: this week, Katie Koch. She's the chief investment Officer of
Speaker 1: public equity at Goldman Sachs Asset Management, is joining us
Speaker 1: this week. Katie, thank you so much for coming back
Speaker 1: on the show. Oh, it's my pleasure to be here.
Speaker 1: Thanks for having us. She came back and we didn't
Speaker 1: even make her reveal any nicknames. Who's did you? Just
Speaker 1: to start, we have this stat your team had sent
Speaker 1: us over. They said that you manage something like twenty
Speaker 1: billion dollars of tech slash innovation assets and yet at
Speaker 1: the same time, we know that growth has been underforming
Speaker 1: year today. So I was hoping you could talk to
Speaker 1: us about this and tell us how you're thinking about it. Sure. Absolutely, um,
Speaker 1: I will say. When I knew I needed to do
Speaker 1: this podcast today, I wanted to start with some advice
Speaker 1: to you guys. I think the podcast is called what
Speaker 1: Goes Up, and it's it's a short less you might
Speaker 1: want to you might want to rename it for for
Speaker 1: the dear term, but at a very serious note, um
Speaker 1: it Uh. We are big believers on investing client capital
Speaker 1: into the innovation space. I did just want to impress
Speaker 1: upon something that we've been saying for the last several years,
Speaker 1: which is that we think when people step into these
Speaker 1: innovation themes and we can unpack them in more detail,
Speaker 1: they really needed to really need to be committed for
Speaker 1: the long term. I don't I don't think any of
Speaker 1: these things are tactical traits generally. I think it's really
Speaker 1: tough the time to markets, but I think it's particularly
Speaker 1: true and a lot of these high innovation areas. So
Speaker 1: I do want to say that at the outset that
Speaker 1: we think it's strategic, not tactical. Um. The second thing
Speaker 1: that I would say is that I do think that
Speaker 1: the dislocation has been very severe, particularly in public markets. UM.
Speaker 1: Just you had asked earlier why that is. I mean,
Speaker 1: the very basic explanation for that is that growth assets,
Speaker 1: the cash flows or the furthest out, so they're kind
Speaker 1: of the longest duration assets, if you will, and they're
Speaker 1: the most hurt when it looks like rates are going
Speaker 1: to rise, which is obviously the environment we're in UM
Speaker 1: and so that was that's a big leg down of
Speaker 1: most of the pain that's been experienced in in tech
Speaker 1: UM and they're everything is correlated effectively to one UM
Speaker 1: and so that's been a painful absolute return experience. But
Speaker 1: we think people who are already in these assets should
Speaker 1: have patients around it because eventually growth it will will
Speaker 1: be in a world where growth is scarce UM and
Speaker 1: and these assets should rerate on the back of that.
Speaker 1: And if you don't think you have enough exposure to
Speaker 1: this part of the market, I think the recent correction
Speaker 1: actually provides some really compelling entry points to get exposure
Speaker 1: to technology as a as a secular theme. So that's
Speaker 1: kind of how I would think about it. Tech is
Speaker 1: down at the moment, but it's not out. Don't give
Speaker 1: up on it. And I'm very happy to go into
Speaker 1: more detail in terms of why we think it's going
Speaker 1: to work from here and what we like. That would
Speaker 1: be great, Katie. I'd love to unpack that some more.
Speaker 1: But I will say one thing that is going up
Speaker 1: is interest rates, so we can talk about and that's
Speaker 1: true and inflation of course too. There are some things
Speaker 1: going up, just just not a lot in the innovation
Speaker 1: space today, but there in lies the opportunity. I guess
Speaker 1: I think I think blood pressure among portfolio management. But
Speaker 1: I wanted to sort of get your ache on what
Speaker 1: is so toxic about inflation and rising interest rates, specifically
Speaker 1: for those long duration tech companies that that you mentioned.
Speaker 1: I mean, we'll often here, sort of from the macro level,
Speaker 1: a couple of reasons why rising rates are so bad. Obviously,
Speaker 1: you know, if a company is heavy, heavily levered up
Speaker 1: and has you know, to take on new debt, you know,
Speaker 1: rolling over debt into higher interest rates, that that's an
Speaker 1: obvious one. Also, you know, just the risk free rate
Speaker 1: of the market and treasuries going higher sort of as
Speaker 1: you point out, you know, is is really kind of
Speaker 1: dangerous for those long duration assets. But yeah, I look
Speaker 1: at the SMP five hundred at least as a whole,
Speaker 1: and it seems like, you know, the leverage, the balance
Speaker 1: sheets are are healthy, healthier than past years based on
Speaker 1: most metrics. Now, your your debt to prize value or
Speaker 1: your your debt to earnings ratios at any sort of
Speaker 1: debt to fill in the blank ratio seems to be
Speaker 1: fairly healthy. So is this all about that risk free rate.
Speaker 1: You know, we can finally get three percent in treasuries,
Speaker 1: and the assumption being that you know inflations, one day,
Speaker 1: knock on what, we'll go back to two percent and
Speaker 1: we'll get a positive reralio. Is that the main catalyst?
Speaker 1: Do you think? I think that certainly plays a part
Speaker 1: in what's happening here. Again, as rates go up, these
Speaker 1: cash flows are further out. It puts pressure downward pressure
Speaker 1: on these stocks. But it's not that in isolation. UM.
Speaker 1: I'd say a second issue is just where evaluations were.
Speaker 1: So valuations for broad equity markets UM were in their
Speaker 1: high ninety percentile most expensive relative to history. You you
Speaker 1: mentioned that the outset that equity markets have correct its
Speaker 1: seventeen percent from the highs. Roughly it moves around a
Speaker 1: little bit, but that's about true. And valuations are still
Speaker 1: in their ninety most expensive percentile. So there's only two
Speaker 1: things that can really drive equity markets, which is multiples
Speaker 1: and learnings. And the multiples were already quite I demanding
Speaker 1: mostly good news, and actually what we've gotten this mostly
Speaker 1: bad news. So I think the valuations are certainly part
Speaker 1: of it. So you have this this long duration issue
Speaker 1: of cash flows working against you. You have the multiple
Speaker 1: was too high, arguably broadly and intech specifically. And then
Speaker 1: I think, you know, related to a lot of this
Speaker 1: is the inflationary pressures and this dawning realization that the
Speaker 1: central bank put is gone. Um. In other words, the
Speaker 1: market kind of got used to the reality that when
Speaker 1: things were difficult, the central bank would come in and
Speaker 1: cut rates. But if they're actually forming another performing another
Speaker 1: important test, which is trying to control and inflation, they're
Speaker 1: less likely to do that in the absence of a
Speaker 1: major recession. And so it's a combination of all of
Speaker 1: those issues that are really weighing down on this part
Speaker 1: of the market. But if you want to step in here,
Speaker 1: because I think actually, ultimately this is a deeply secular opportunity. UM.
Speaker 1: I had mentioned this to you guys, but the CEO
Speaker 1: of Microsoft u uh Statta Dallas that on his call
Speaker 1: he was being pushed on this very issue, the macro
Speaker 1: environment stuff. How are you going to operate through this?
Speaker 1: And he kind of gave an answer that was I
Speaker 1: don't focus so much on that day to day because
Speaker 1: over the next decade, tech is a percentage of GDP.
Speaker 1: GDP spend rather is going to double. So there's an
Speaker 1: incredible opportunity. And we know that company managements all over
Speaker 1: the world are kind of continue to invest in innovation
Speaker 1: just to survive and also to take market share, and
Speaker 1: so this these things will work and they're gonna work really,
Speaker 1: really well. Um, it's just at the moment we have
Speaker 1: that has been dislocated. And as I said earlier, I
Speaker 1: would think about that as an opportunity if you have,
Speaker 1: if you have patient capital to come in and step
Speaker 1: in here, um and and buy some of these assets.
Speaker 1: I just think you have to be balanced. It's not
Speaker 1: I have very little conviction on that on a twenty
Speaker 1: four hour, one week, even a couple of months view.
Speaker 1: I think it will work out over the long term,
Speaker 1: but you have to be patient and you have to
Speaker 1: be balanced about it. We are not, in my view,
Speaker 1: going to have v shaped recovery like people might be
Speaker 1: a recent data point in people's mind given the pandemic,
Speaker 1: but that's not what we're set up for here. We're
Speaker 1: kind of set up for the hard work of hopefully
Speaker 1: stabilizing the multiple and these companies delivering earnings, and so
Speaker 1: in my view, there will be strong recoveries and return
Speaker 1: opportunities from here. UM, but it's going to take longer
Speaker 1: for for that to be realized. Can you, Katie, maybe
Speaker 1: narrow down that list for us? So what specifically are
Speaker 1: you looking at, what are you finding attractive and maybe
Speaker 1: what are you guys buying right now? So areas themes
Speaker 1: that we've focused on, just because we're talking about innovation now.
Speaker 1: I mean the way we do will do this is
Speaker 1: we think about how is the world's going to change
Speaker 1: over the next decade, what are the big themes and
Speaker 1: then obviously trying to pick the right companies within those themes.
Speaker 1: So the themes that we're focused on here is the
Speaker 1: energy transition. UM. We also so this is you know
Speaker 1: climate for example. UM. We also are interested in the
Speaker 1: future of tex so the technology companies be on the
Speaker 1: banks down the market cap around the world. UM. We
Speaker 1: like the future disruptive future of of healthcare UM and
Speaker 1: how that's going to change the world. Uh, the consumer,
Speaker 1: particularly the millennial and Gen Z consumer. And then we're
Speaker 1: invested in the real estate and infrastructure that will underpin
Speaker 1: all of that. So those are some of the major themes. UM.
Speaker 1: I wanted to come back to this point on on balance,
Speaker 1: and then we can dig into any of those in
Speaker 1: more detail. But I do think it is prudent. We
Speaker 1: always believe this to be prudent. This is the reason
Speaker 1: some of our thermatic strategies have have done better than
Speaker 1: the peer group. It's always prudent to have some balance
Speaker 1: in these strategies. So, yes, we like these themes, but
Speaker 1: we don't have to just be in companies that are
Speaker 1: growth at any price. We can own more expensive innovative companies,
Speaker 1: for example, software a snowflake which still trades at twenty
Speaker 1: times on e V two sales. These are bills despite
Speaker 1: the correction rich multiples, but they're high growth companies. We
Speaker 1: can own that in the future of tech alongside, for example,
Speaker 1: something in the semi space which trades that much more
Speaker 1: reasonable valuations discount to where it's been relative to the
Speaker 1: last ten years in certain instances, and get that balance
Speaker 1: in the portfolio between the high growth names um and
Speaker 1: and some of those more value or cyclical oriented names.
Speaker 1: And we do that really across every theme. In healthcare,
Speaker 1: we own some of the medical device companies which are
Speaker 1: more valuation grounded, and then we own stuff in the
Speaker 1: genomic space, which is obviously very high growth oriented. So
Speaker 1: we focus on the themes picked the companies and try
Speaker 1: and have a balance within those themes of those high
Speaker 1: growth companies along with some of the more cyclically exposed
Speaker 1: value oriented names as well. You Know what I find
Speaker 1: interesting when we talk about innovation, uh and what stocks
Speaker 1: will benefit from that is we've almost had sort of
Speaker 1: the opposite problem with those you know, you mentioned the
Speaker 1: big fang companies you know. To me, you know, and
Speaker 1: these companies just got so huge, you know, Apple at
Speaker 1: what two and two and a half trillion whatever it
Speaker 1: is at the moment. To me, Apple is kind of
Speaker 1: uh struggling with innovation these days. You know, you've got
Speaker 1: you've got the iPhone, you wait for that sort of
Speaker 1: iPhone replacement cycle. You've got the mac uh, You've got
Speaker 1: the services revenue is strong, um, but the promise of
Speaker 1: sort of more innovation from from saying Apple, you know,
Speaker 1: there was talk of them getting in the TVs or
Speaker 1: automo electric vehicles. Um. And not just to pick on Apple,
Speaker 1: but I feel like Amazon might be struggling with the
Speaker 1: same thing. You know. Here, Amazon started by disrupting the
Speaker 1: book industry, went on to disrupt every sort of retail
Speaker 1: industry there is then I found a lot of growth
Speaker 1: in the cloud business, but I feel like for you know,
Speaker 1: a lot of these big companies, Facebook included, um, they've
Speaker 1: sort of reached saturation. So you know, the question is,
Speaker 1: when you're looking for innovation, does it really necessarily require
Speaker 1: going down the ladder as far as market size and
Speaker 1: finding you know, undiscovered sort of small cap stocks were
Speaker 1: you know, is there a case to be made of
Speaker 1: any of these companies sort of being leaders in innovation? Again,
Speaker 1: I guess the one, you know, the one alluring thing
Speaker 1: everyone likes to talk about is the metaverse, you know, withcebook.
Speaker 1: I'm not sure anyone's buying that though you know the
Speaker 1: the growth potential there, But how do you think about that?
Speaker 1: I know this is a very long winned winted question,
Speaker 1: which is my specialty, but how do you how do
Speaker 1: you think about that notion of you know, the size
Speaker 1: factor of a stock as it relates to their potential
Speaker 1: to innovate and disrupt? Well, I mean, it's a it's
Speaker 1: a hugely It may have been a long question, but
Speaker 1: it's an important one too because these companies dominate a
Speaker 1: lot of a lot of the market, right so we
Speaker 1: have one percent of the number of companies taking up
Speaker 1: still despite all of the movement out there, more than
Speaker 1: the market cap, I will say, in a sign of
Speaker 1: the times, UM, Apple is actually no longer the world's
Speaker 1: most viable company. That changed if we exactly UM. But
Speaker 1: big picture here's I want to make a couple of
Speaker 1: big picture comments briefly about those top dominant companies and
Speaker 1: kind of where we see them going from here, and
Speaker 1: then I'm going to end with an argument that like, yeah,
Speaker 1: I do think you need to own stuff well beyond
Speaker 1: them and around the world, but in those in those
Speaker 1: companies themselves, they you made up. You made the comment
Speaker 1: around UM saturation. I mean, it's one way of looking
Speaker 1: at They're also facing some regulatory challenges to UM. But
Speaker 1: just looking at the long arc of history, if we
Speaker 1: look at the ten largest companies twenty years ago UM
Speaker 1: and then compare them to the ten today, there's actually
Speaker 1: only two companies that are still on that list, Microsoft
Speaker 1: one of them. UM. The other eight went on to
Speaker 1: destroy close to four hundred billion dollars of market cap
Speaker 1: during a great bull market for equities. So I kind
Speaker 1: of look at it and think a lot about and
Speaker 1: our team does the creative destruction. How difficult it is
Speaker 1: for those companies to stay persistently amongst the largest companies
Speaker 1: in the world for some of the reasons that you
Speaker 1: just outlined in terms of the challenges that they are facing.
Speaker 1: So that is a reason we think people need to
Speaker 1: diversify away from those companies to find the future winners
Speaker 1: that will be able, that that are going to show
Speaker 1: up on that list, because obviously that's one of the
Speaker 1: great ways to create wealth. I would just balance those comments. Um,
Speaker 1: we do own some of those large incumbents, not all
Speaker 1: of them, but we take positions in some of them
Speaker 1: because you can't forget, particularly an environment like this, how
Speaker 1: incredibly strong the balance sheets of these companies are. And
Speaker 1: when you're sitting in thirty fifty hundred in some cases
Speaker 1: more billion dollars of cash on the balance sheet, that
Speaker 1: gives you clearly the ability to navigate an uncertain environment,
Speaker 1: but also the ability to buy or invest in the
Speaker 1: next big thing you talked about metaverse wolves. Facebook can
Speaker 1: do that because they're highly free cash flow generative, and
Speaker 1: they have thirty billion dollars of cash on the balance sheet,
Speaker 1: and they were able to get into the next property
Speaker 1: which was UM you know, for example, Instagram, because they
Speaker 1: were able to buy that. So I just think you've
Speaker 1: got to take into account that they have a lot
Speaker 1: of firepower UM to navigate a difficult environment and also
Speaker 1: to get on the right side of innovation and disruption.
Speaker 1: The question is whether or not they have the management
Speaker 1: team UM and the execution capability to continue to do that.
Speaker 1: And it's true vent true over time that not all
Speaker 1: of them do it. So you've got to be selective
Speaker 1: about that. Pick your spots and those big companies, but
Speaker 1: definitely diversify U into the future leaders UM. And then
Speaker 1: in addition to that, looking around the world because UM,
Speaker 1: because of the ubiquity of cloud and five G, a
Speaker 1: lot of these companies are going to be actually found
Speaker 1: outside of Silicon Valley and outside the US. It's the
Speaker 1: markets not showing us that right now because some of
Speaker 1: those companies are are facing a lot of pressure on
Speaker 1: a day to day basis, but they are going to
Speaker 1: be disruptive and they may be the future winners. And
Speaker 1: that growth, by the way, is actually very much on sale.
Speaker 1: The growth rates are higher clearly outside of the big incumbents.
Speaker 1: And right now, if you took the highest quintile growth
Speaker 1: and the lowest quintile growth. It has the tightest valuation
Speaker 1: compression that we've had in a very very long time.
Speaker 1: In other words, you don't right now have to pay
Speaker 1: a big premium to get into the growthier parts of tech.
Speaker 1: And I'll end by saying there's lots of stuff we
Speaker 1: like and are excited about outside of the things, including stemmies,
Speaker 1: which we talked about briefly, software, and then also cyber
Speaker 1: which we haven't mentioned, but we think is an incredible
Speaker 1: space with actually a big tail one because of the
Speaker 1: current geopolitical tension. Katie, I remember when COVID first broke
Speaker 1: out a couple of years ago, you and I ended
Speaker 1: up talking and you told me all about the names
Speaker 1: that you were looking at. You know, you mentioned, you know,
Speaker 1: the future of things, and you were talking about this
Speaker 1: post COVID world, and back then you said you had
Speaker 1: been looking at companies that were heavily discounted, and you
Speaker 1: were looking also at back to workplace leading childcare names
Speaker 1: focused on services, spending and stuff that's fun. I think
Speaker 1: you had said, so what do you what do you
Speaker 1: make of of those types of companies at this point? Yeah,
Speaker 1: So people like to have fun. That's a pretty pretty
Speaker 1: persistent theme through different economic cycles, and that we like
Speaker 1: things in the real economy. Um, And having fun is
Speaker 1: related to the consumer the right now. Data on the
Speaker 1: consumer is very strong. We ingest credit card data all
Speaker 1: day every day like many of our peers. In addition
Speaker 1: to running a fundamental business, if we're talking about a
Speaker 1: lot here, I have the privilege of also running a
Speaker 1: quant business where we ingest a lot of that data
Speaker 1: and I can tell you across all metrics, the consumer,
Speaker 1: particularly the US consumer, looks very strong. Um. We are
Speaker 1: preparing portfolios for a world in which that consumer may
Speaker 1: weaken because of some of the macro stresses that we've
Speaker 1: already talked about here, inflation being at the top of
Speaker 1: the top of that list. Um. And so what does
Speaker 1: that mean as it relates to some of the ideas
Speaker 1: that you just brought up, and also this concept of
Speaker 1: having fun. If you're in the right part of having fun,
Speaker 1: it can actually be recession resistant. So there's parts of
Speaker 1: the consumer basket the come under pressure during a recession,
Speaker 1: and and and travel for example, might be one of those.
Speaker 1: But we like affordable experiences because we do think that
Speaker 1: this millennial preference for experience over things is incredibly persistent UM,
Speaker 1: and so we lean into those experiences, but more affordable
Speaker 1: experiences in the event that the macro environment deteriorates. And so,
Speaker 1: for example, we have exposure to concert companies both here
Speaker 1: in the US as well as in Europe. UM. So
Speaker 1: in the US we own Live Nation, for example, because
Speaker 1: Beyonce is the ultimately recession resistant UM and and maybe
Speaker 1: that's so many things, but that too. But then in
Speaker 1: addition to that would be a category like beauty UM,
Speaker 1: which can do well when times are good and also
Speaker 1: shows a lot of resilience UM even if you get
Speaker 1: into an economic correction. So we do own parts of
Speaker 1: the real economy for sure. That comes back to having
Speaker 1: balance in the portfolio. On the consumer rights say, we
Speaker 1: do have exposure, but we're trying to make sure that
Speaker 1: we are eyes wide open about some of the downward
Speaker 1: pressure they may face down the road. Beyonce is recession resistant.
Speaker 1: I think we found our headline there for the specific
Speaker 1: on that is that like just to to give data,
Speaker 1: So it sounds like a flipping comment, but this company
Speaker 1: Live Nation, if you looked at ticket sales back and
Speaker 1: oh eight UM they actually never went went negative. Uh
Speaker 1: So the consumer will will spend in a recession, you
Speaker 1: just have to be they'll be quite selective in terms
Speaker 1: of what they spend on. And then the other thing
Speaker 1: I would the other thing I would say, just from
Speaker 1: being an importance of being global, is that another place
Speaker 1: where you can find some interesting consumer names or or
Speaker 1: even consumer names around the world with exposure to this
Speaker 1: um would be China, which is obviously in a very
Speaker 1: tough situation at the moment, which has been reflected into
Speaker 1: equity prices, with effectively a third of the productive capacity.
Speaker 1: How there's different ways of looking at it. But of
Speaker 1: China being closed that is putting pressure on supply chains,
Speaker 1: which is obviously coming through in the CPI print. But
Speaker 1: it also the consumer has then quite weak clearly since
Speaker 1: many of them are under zero COVID policy lockdowns. I
Speaker 1: don't I'm not a macro person, and I don't think
Speaker 1: we have a big edge on calling near term macro um.
Speaker 1: I am highly convicted that China will once again reopen.
Speaker 1: That's one thing I can say with great degree of certainty,
Speaker 1: because it's not possible to run an economy that way
Speaker 1: long term, and it would create instability, and we're hoping
Speaker 1: to see more movement towards that as we reach the
Speaker 1: twentieth Party Congress in the fall. And I think you
Speaker 1: can buy assets here in the US as well as
Speaker 1: assets in China that are overly discounted for something that
Speaker 1: we know is eventually going to work out, which is
Speaker 1: that the economy will reopen. So, for example, luxury Goods
Speaker 1: sector and LVM Major or a Montclair are names that
Speaker 1: we own that we think are being overly discounted UM
Speaker 1: and that because we know that the Chinese consumer will
Speaker 1: come back, we actually had the pattern recognition on that
Speaker 1: established because we've seen the consumer globally come back and
Speaker 1: buy in the luxury space UM after previous lockdowns. And
Speaker 1: actually luxury is also somewhat counterintuitively has some protection and
Speaker 1: recessions too, because that segment of the consumer um gets
Speaker 1: gets gets let's hit. So all the sort of delisting
Speaker 1: concerns and the sort of trade tensions, the lingering trade tis,
Speaker 1: they don't they don't scare you away from China at all.
Speaker 1: I think those are real concerns. There's there's the lockdown,
Speaker 1: there's the potential for d listings, there's the regulation, the
Speaker 1: tech regulation, and then there's the broader US sign no
Speaker 1: tensions UM, but was kind of talked about the lockdown.
Speaker 1: I'm hoping that we don't go to de listings, but
Speaker 1: if we do, we have the ability to buy these
Speaker 1: companies on the Hong Kong Exchange, as do most investors.
Speaker 1: So I think there'll be a tough transition period, but
Speaker 1: it will work itself out. UM. I think the tech regulation,
Speaker 1: we we actually have a lot of clarity on what
Speaker 1: that's gonna look like. And the U s Sino or
Speaker 1: Western Sino tensions, they're going to be there for a while,
Speaker 1: but the question is whether or not that that's imputed
Speaker 1: in valuations. And at the moment this is in some
Speaker 1: areas a fifty discount to the US, so there's a
Speaker 1: lot of margin of safety there. And then I just
Speaker 1: say one more thing UM about investing in in China, UM,
Speaker 1: which is that the government is actually quite clear about
Speaker 1: what their priorities are UM and the reality is that
Speaker 1: once they announced those it gets discounted into markets immediately
Speaker 1: because they have the ability, unlike in the US, to
Speaker 1: actually implement those policies immediately. So if you pay attention
Speaker 1: to what they're saying you can actually get on the
Speaker 1: right side of this regulation. So I'll just end with
Speaker 1: you know, another example of something in China, and we own.
Speaker 1: We've told you why we like software already. Uh, we
Speaker 1: do like it as a space very famous Robert Smith
Speaker 1: quote software is better than first lean debt because they're
Speaker 1: so essential to the running of companies. That's true in
Speaker 1: the US, it's true in China. We own a company
Speaker 1: called king D Software are an essential software for many
Speaker 1: small medium enterprises in in China. We know the government
Speaker 1: is going to support small medium enterprises, particularly coming out
Speaker 1: of this lockdown. Uh. And we know that the government
Speaker 1: is very supportive of digitalization again, particularly of small businesses.
Speaker 1: So this is a tech company that's not going to
Speaker 1: get most likely not going to get caught in the
Speaker 1: crossfairs um of regulation, compounding at a very high rate
Speaker 1: and looking extremely attractive to its own history and the
Speaker 1: software sector broadly. So again challenges a lot of it
Speaker 1: discounted in selectively, one can can find opportunities. Yeah. I
Speaker 1: also have some interesting news this week where China basically
Speaker 1: came out and said that all state enterprises need to
Speaker 1: start buying domestic computers and software that that's certainly uh,
Speaker 1: certainly gonnapen up some opportunities I would imagine, yeah, that
Speaker 1: I would pick up on that and saying that's a
Speaker 1: very important point. This is obviously a sign of deglobalization UM.
Speaker 1: And we are believers that the tech ecosystem is going
Speaker 1: to build out. We already have the Splinternet, but other
Speaker 1: parts of the tech ecosystem, including the semi supply chain
Speaker 1: and hardware, are going to build out separately and shine
Speaker 1: than they are in the US. And so the US
Speaker 1: is also going to invest more in supply chain security
Speaker 1: of chips. It's a it's a national security issue. We
Speaker 1: at the moment cannot manufacture at the leading edge UM
Speaker 1: for chips in the US. That is that's unacceptable really
Speaker 1: from a from a national security perspective. And so this
Speaker 1: country is going to invest a lot in in building
Speaker 1: out that supply chain. That's by the way, ultimately inflationary UM,
Speaker 1: but it does create some opportunities. And so one thing
Speaker 1: that we are invested in across many of our portfolios
Speaker 1: is that local is a rebuilding now to the semi
Speaker 1: supply chain, and we own for example, the semi equipment manufacturers.
Speaker 1: It's a way to benefit from that um and I'd
Speaker 1: end up by saying you can, you can be, you
Speaker 1: can do two things. You can say, wow, this is
Speaker 1: really scary China is building out this totally separate ecosystem.
Speaker 1: Or you can say, well, it's the world's second largest economy.
Speaker 1: It's a very big equity market, and I want to
Speaker 1: own a piece of that for my clients too, because
Speaker 1: there's going to be a lot of investment happening there.
Speaker 1: We obviously choose to believe the ladder, but try and
Speaker 1: be very selective about what to own and what prices
Speaker 1: to buy it At Katie, just to bring things back
Speaker 1: to the US, there was something that really struck me
Speaker 1: in one of the notes you had sent us over
Speaker 1: before the podcast, and I actually ended up writing wow
Speaker 1: in my notes on your note, and it said, while
Speaker 1: we have a very difficult set up, returns will be
Speaker 1: lower the next ten years. And you said, I'm not
Speaker 1: entering the nineteen seventies, but we need to be aggressive
Speaker 1: in finding opportunities. So can you talk about that and
Speaker 1: this idea that things will not be so great in
Speaker 1: the next decade. Yeah, I guess that is kind of
Speaker 1: a wow comment. What do you what do you say
Speaker 1: it that way, but but it is. It is what
Speaker 1: I believe to be true and something I really want
Speaker 1: people to reflect on as they manage their own personal wealth.
Speaker 1: When you look at we I kind of think about
Speaker 1: through the lens of the sixty forty portfolio to sixty
Speaker 1: stocks UM forty bonds. And I say that because that's
Speaker 1: generally how most people around the world are are kind
Speaker 1: of allocated. And that's been a phenomenal asset to own
Speaker 1: through the last cycle that has returned eight percent real return.
Speaker 1: So after inflation returns, you compound that eight percent annually.
Speaker 1: I mean, you guys know, that's incredibly powerful and and
Speaker 1: and great news, particularly for people on a fixed income.
Speaker 1: That return was more like five percent over the last
Speaker 1: hundred years and about negative nine percent year to date UM.
Speaker 1: And so my point is that a lot of returns
Speaker 1: were pulled forward into the previous ten years, which suggests
Speaker 1: the next ten years returns are going to be harder
Speaker 1: to come by. And I think people need to be
Speaker 1: prepared for that environment as they plan for their retirement,
Speaker 1: as they think about what they're going to spend UM
Speaker 1: and I think they need to prepare for it by
Speaker 1: being more active in their portfolio and seeking out those
Speaker 1: returns UM. And that leads us back to you know,
Speaker 1: so what do you do you should be In our view,
Speaker 1: if we are going to have inflation, we would recommend
Speaker 1: people be overweight equities relative to fixed income and then
Speaker 1: the equities bucket. Um. Again, I want to acknowledge my
Speaker 1: biases here as an active manager, but clearly these like
Speaker 1: tremendous dislocation and market creates really interesting entry points and
Speaker 1: opportunities for active managers to hopefully do a lot better
Speaker 1: than that passive portfolio UM. And I don't think that
Speaker 1: we're set up for the lost decade of the nineteen seventies.
Speaker 1: There's a lot of reasons it is actually different this time,
Speaker 1: including I won't go through the whole list, but for example,
Speaker 1: employments and in a much stronger place U where inflations
Speaker 1: nowhere near um as high as it was then, and
Speaker 1: we have more of the tools to tackle it, more
Speaker 1: central and more independent central banks globally, etcetera. But it
Speaker 1: is going to be a return It is going to
Speaker 1: be rather a decade of lower returns, and you're not
Speaker 1: just gonna be able to sit and own passive assets
Speaker 1: and hope it all works out, you're going to have
Speaker 1: to take more control of of of your destiny, and
Speaker 1: we're working with a lot of people to do that,
Speaker 1: particularly in their equity portfolios. Okaty. I know at Goldman
Speaker 1: Sachs Asset Management, you spend a lot of time sort
Speaker 1: of listening to what c c e O s and
Speaker 1: CFOs have to say. Uh, you know what their plans are. Um.
Speaker 1: You know, unlike myself, they probably return your calls when
Speaker 1: when you when you call them. Quite a quite a
Speaker 1: luxury you have there. But I'm curious, is there sort
Speaker 1: of UM quantify CEO CFO sentiment right now? Are they scared?
Speaker 1: Are they looking for opportunities? What's kind of the vibe
Speaker 1: out there from the C suite? As far as you
Speaker 1: can sell UM, I would say it's cautious. So they
Speaker 1: do return our calls. That's one of the benefits of
Speaker 1: of of being at Goldman SAX and having to pay
Speaker 1: I think my phone might be broken. I'm not sure
Speaker 1: because so I appreciate you asking that. And we are
Speaker 1: really delighted that we get great access to management teams
Speaker 1: on behalf of our clients, and I think we do
Speaker 1: get good data points and I go back to what
Speaker 1: I was just saying that I think they're cautious. And
Speaker 1: you see that because again the market as we started
Speaker 1: down seventeen percent since the highest, did we have a
Speaker 1: bad earning season? No, it was actually very good earnings.
Speaker 1: So again the right now data is suggesting the fundamentals
Speaker 1: are quite strong and healthy. But you asked a very
Speaker 1: important question, which is what is sentiment look like? And
Speaker 1: and sentiment is is is more challenge than that, And
Speaker 1: that's also reflected in guidance being lower because these cycle
Speaker 1: tested management teams, which are obviously the ones who try
Speaker 1: and commit capital to you know, they've seen this movie
Speaker 1: before and they know that we're entering a more difficult
Speaker 1: operating environment. And I think the best if people want
Speaker 1: to really get insight into what a great management team
Speaker 1: is kind of thinking and saying, and how they're trying
Speaker 1: to prepare themselves um for this operating environment, they should
Speaker 1: read Dara, the CEO of um Uber's letter to his
Speaker 1: employees about what this environment will look like, how they're
Speaker 1: going to have to operate differently, that they can't just
Speaker 1: go out and talk about how big the market opportunity
Speaker 1: if there's not profitable excuse me if they're not profitable
Speaker 1: because investors don't care, and you just like imputing some
Speaker 1: of that realism into the way that you're running a business. Um,
Speaker 1: that's what we see a lot of management teams doing.
Speaker 1: And the ones who want to commit capital to that
Speaker 1: have been through this before, that know how to work
Speaker 1: through this grind, that have that have raised capital when
Speaker 1: it was available, not when they needed to. Um, that
Speaker 1: know how to motivate, people, that know how to leave,
Speaker 1: people that know how to run the company in a
Speaker 1: way that will be received well by investors, which will
Speaker 1: obviously help stock prices. That that's that's that's what we're
Speaker 1: hearing and what we want to see from from great
Speaker 1: management teams. And I just want to end by saying, UM,
Speaker 1: we never you know it's that when returns are absolute negative. UM,
Speaker 1: for sure, we that is not what we're trying to
Speaker 1: do here. We're trying to help our clients retire with
Speaker 1: dignity and security. And as I said earlier, it moves
Speaker 1: in cycles and feels very confident will come back. But
Speaker 1: moments like this where stock prices are dislocated on top
Speaker 1: of the operating environment being very challenging, this is very
Speaker 1: very rich for differentiation. There are some companies that are
Speaker 1: publicly listed that may not survive what's happening right now,
Speaker 1: and obviously we want to avoid those uh and and
Speaker 1: we will uh And then you want to find um
Speaker 1: allocate to to the ones that will differentiate, you know,
Speaker 1: try and store through the pretenders versus the contenders, if
Speaker 1: you will. And that's what we're spending a lot of
Speaker 1: time doing on behalf of our clients. I actually had
Speaker 1: wanted to ask you what you make of this idea
Speaker 1: that the market is sniffing out. These sort of worrisome
Speaker 1: developments are worrisome signals in the micro data. So we
Speaker 1: talked about you know, FED and inflation, some of the
Speaker 1: bigger concerns. But I know I wrote about this interview
Speaker 1: a non stick coding CEO had given Humblemark TV where
Speaker 1: he was saying, the way his orders are coming in,
Speaker 1: it just looks like recessionary behavior. So what do you
Speaker 1: make of these sort of micro signals that are flashing
Speaker 1: morning signs for micro signals very very important, and that
Speaker 1: is what we spent a lot of time with management
Speaker 1: teams doing. And I think they can be quite predictive
Speaker 1: about where the economic cycles going, and there are ways
Speaker 1: to consume that, uh now through big data, and we
Speaker 1: do get access to a lot of that so near
Speaker 1: term orders, etcetera. Um, but some of it you do
Speaker 1: get just from speaking to management teams and you generally
Speaker 1: will start to see, um, the pain show up there first.
Speaker 1: I would just say it's a little bit conflated right
Speaker 1: now because of all the supply chain issues we've had,
Speaker 1: so you can't you have to be very careful about
Speaker 1: looking at the data because it's quite lumpy. But I
Speaker 1: do think the micro signals are important. Um, absolutely, Katie.
Speaker 1: I know you also like private markets, and I want
Speaker 1: to ask you what's attractive to you in the private
Speaker 1: Sure we we are believers at Goldman's access that management
Speaker 1: that clients should have if they are able to get
Speaker 1: invested to both public as well as private markets. That
Speaker 1: that that is absolutely true. UM. I would say at
Speaker 1: the moment, great news for people that are interested in
Speaker 1: public markets. The challenges have have been imputed into stock prices,
Speaker 1: so market down, seventeen, tech down, MidCap software down. It
Speaker 1: has a lot of the worries have been reflected in
Speaker 1: stock prices. In contrast, a lot of these private assets
Speaker 1: only took down a mark in the first quarter of
Speaker 1: down ten percent, And if you look at what you
Speaker 1: can buy in public markets right now, it's effectively a
Speaker 1: fifty discount to what UH private companies were raising last year.
Speaker 1: So I just make the point that the valuations are
Speaker 1: arguably more attractive now and like versus private markets. Um.
Speaker 1: The second point I would make is that I think
Speaker 1: there's really interesting assets that are really only available in
Speaker 1: public markets. Things that are capital and intensive, for example,
Speaker 1: and that would include semis, which we've already talked about.
Speaker 1: But if you want to own best in class semis,
Speaker 1: you do need to look in public markets for those,
Speaker 1: and that semis are, of course the based infrastructure for
Speaker 1: all of the innovation we talked about today, are going
Speaker 1: to grow up multiples of GDP and are mostly available
Speaker 1: in public markets. I would say there's companies that are
Speaker 1: highly regulated in the utility space that look interesting. Those
Speaker 1: are interesting assets to own if we do have a
Speaker 1: more inflationary environment, and they're also if you pick the
Speaker 1: right ones. Then the leaders in climate transition, which we've
Speaker 1: identified as a very important theme over the next decade,
Speaker 1: mostly available in public markets. And then finally, UM, you know,
Speaker 1: you can avoid binary outcomes in public markets by owning
Speaker 1: um different parts of the supply chain and owning more
Speaker 1: diversified baskets UH and putting those together on the supply
Speaker 1: chain point, I just say, we really let we talked
Speaker 1: about the future of healthcare being interesting, and then specifically
Speaker 1: we love the development's happening in genomics and UM huge
Speaker 1: amount of opportunity in the biologic space. We do own
Speaker 1: those drug companies, I'm happy to come back to that.
Speaker 1: But we also own a company called West Pharmaceuticals that
Speaker 1: makes the rubber stoppers for biologic drugs UH in the
Speaker 1: small and MidCap space. So there's just such a in
Speaker 1: the public markets. You just get such a strong array
Speaker 1: of companies all across the supply chain that enables you
Speaker 1: to have more latitude in the way you can implement
Speaker 1: UM implement some of these themes. So own both but
Speaker 1: public markets on sale now and also a lot of
Speaker 1: reasons to to make sure that you have capital invested.
Speaker 1: There are things that exist in public markets that that
Speaker 1: don't necessarily exist in private markets. The rubber stoppers for
Speaker 1: test tube, so that's got to be recession proof too.
Speaker 1: I like I like that one. UH, I'm gonna look
Speaker 1: into them. Yeah, they have a seventy percent market share
Speaker 1: globally in that space. And as you can imagine, there's
Speaker 1: they have the barriers to entry because it's there's regulatory
Speaker 1: issues because they interact with the drug. Um, they have
Speaker 1: to be the packaging actually has to be f d
Speaker 1: A approved, and yes it should be resistant somewhat in
Speaker 1: a recession, I would agree with you. And also a
Speaker 1: beneficiary of our continued booster right right, That's that's pretty fascinated.
Speaker 1: I know, I think we're gonna be getting boosters every
Speaker 1: six months. It seems like, Katie, it's been refreshing to
Speaker 1: talk to you. I think we've gone almost a half
Speaker 1: an hour here and no one has even said the
Speaker 1: word crypto, which is is very refreshing. But you know,
Speaker 1: obviously is the other big story going on is just
Speaker 1: this you know, blood bath and crypto markets Bitcoin down,
Speaker 1: and obviously crypto has become pretty influential to the stock market,
Speaker 1: whether it be you know, Tesla and micro Strategy adding
Speaker 1: it to their balance sheets and their treasuries. Were you know,
Speaker 1: years ago, a company could add blockchain to its name
Speaker 1: and see it's stockpop um. You know, the chip makers,
Speaker 1: which I know you followed pretty closely. Uh, you know
Speaker 1: certain chipmakers got a big boost from all the minding
Speaker 1: going on. How are you thinking about or are you
Speaker 1: thinking about it at all? Now? Given this you know,
Speaker 1: big retransmant in crypto prices. Is it sort of the
Speaker 1: type of sector you just avoid and let the dust
Speaker 1: fall where may? Or is it you know, is there
Speaker 1: opportunities there? How do you how are you sort of
Speaker 1: thinking the way crypto complain into equity markets? Uh? If
Speaker 1: at all? Well, as you guys know, there's actually not
Speaker 1: a lot of pure play publicly listed ways to get
Speaker 1: exposure to crypto, so it's actually not a space we
Speaker 1: spent a lot of time on um, particularly with regards
Speaker 1: to the coins themselves, because they're just they're not part
Speaker 1: of our investable universe. UM. I will say, um, and
Speaker 1: I know you've heard people say this before, so it's
Speaker 1: not going to sound particularly brave, but I do believe
Speaker 1: it to be quite true, UM that the blockchain technology
Speaker 1: and opinion that is highly disruptive, and it's something that
Speaker 1: we spend a lot of time thinking about, and we
Speaker 1: expressed it through our positioning in the payment space. So
Speaker 1: if you look at financials broadly as a category. UM.
Speaker 1: The way we're positioned there is that we still like
Speaker 1: the big banks UM. It turns out it's a good
Speaker 1: business model to loan money UM and and hopefully uh
Speaker 1: get the loans paid back UM and have high net
Speaker 1: interest margins when rates are going up. These are actually
Speaker 1: good assets to own, and again they offer some diversity
Speaker 1: to portfolios and an environment where growth not performing. So
Speaker 1: we continue to like the best in class banks UM.
Speaker 1: And then on the other side and the more growth
Speaker 1: oriented space. We're actually avoiding a lot of the lot
Speaker 1: of the fintech space UM because writ large, because it's
Speaker 1: obviously clearly highly competitive is and also these companies and
Speaker 1: management teams many of them haven't worked through a credit
Speaker 1: cycle before, which gives us pause. UM. But we do like, however,
Speaker 1: some of the payment companies UM and so and some
Speaker 1: of them actually are you going to be leaders in
Speaker 1: blockchain disruption? And so that's really where we expressed that
Speaker 1: thesis in our portfolios. Katie, you talk about having fun, UM.
Speaker 1: I don't know if you realize this. Valdonna's idea of
Speaker 1: fun is watching grammar videos, videos about Grammar and her
Speaker 1: other her other fun thing to do is to read
Speaker 1: a story I've already edited and look for typos. That's
Speaker 1: kind of her, So you can figure out a way
Speaker 1: to monitor is those two things of all ears. But
Speaker 1: for the podcast, the way we have fun is uh
Speaker 1: talking at the craziest things we've seen in markets this week.
Speaker 1: Uh proud tradition. So I think it's time to pivot,
Speaker 1: pivot to the crazy. There's been no shortage of crazy things, uh, Katie,
Speaker 1: So hope hopefully you you found something to uh the
Speaker 1: dazzle with us. I think your clients this is this.
Speaker 1: The pressure is on Katie. Your clients really want to
Speaker 1: know the craziest thing you saw. But we'll start with
Speaker 1: Uldonna Vildana. What's the craziest thing you saw this week?
Speaker 1: I think I'm gonna go with the obvious. And I
Speaker 1: actually had a couple of listeners reach out and and
Speaker 1: flag it to me as well. And I know you
Speaker 1: had been looking at it, Mike and I had been
Speaker 1: looking at it, and you and I ended up writing
Speaker 1: about it together. But I want to give a shout
Speaker 1: out to Brian reich Half and at Dr Einstein, who
Speaker 1: both sent over that the Horde whole. Tara Luna the
Speaker 1: buckle to me, Brian Ha's, I mean a super interesting
Speaker 1: threat about how it actually how that stable coin became
Speaker 1: unpegged and everything that had happened there, and then also
Speaker 1: Dr Einstein and apologies. But I don't know his actual name,
Speaker 1: so we're just going with with his Twitter handle. But
Speaker 1: he he was mentioning how it felt, you know, I
Speaker 1: think it was worth something like he said, thirty billion
Speaker 1: dollars and then it felt to just a tremendous, tremendous
Speaker 1: amount over just a couple of days. So that's that,
Speaker 1: by far, is the craziest thing. Yeah, it really is, Luna.
Speaker 1: I think the Queen was worth a hundred and sixteen
Speaker 1: in early April. It's now worth a hundred and sixteen
Speaker 1: dollars now it's worth I don't know, eighty five cents
Speaker 1: the last time I checked. And loyal listeners may remember
Speaker 1: we actually did an interview with do Quan, who was
Speaker 1: the guy behind all of this, about I think about
Speaker 1: a year and a half ago. So if you scroll
Speaker 1: through your podcasts you might be able to find that
Speaker 1: one um and he talks about stable coins and synthetic
Speaker 1: equities and everything else they're working on. Absolutely yeah, absolutely. Uh,
Speaker 1: fascinating story and really kind of kind of scary when
Speaker 1: you think of um how big that project had gotten.
Speaker 1: I think Tera after Ethereum was like the second biggest
Speaker 1: blockchain for a while there. So um, a lot to
Speaker 1: play out in that story. Uh, Katie, how about you,
Speaker 1: did you see anything crazy in markets this week? I mean, yeah,
Speaker 1: that that that question. I have a lot of answers
Speaker 1: to a lot of a lot of crazy things. I
Speaker 1: mean I think the thing that we one interesting thing
Speaker 1: and that we're that I want to highlight is that, um,
Speaker 1: I would be weary of people at say look at
Speaker 1: things and say to you, oh, this is a great
Speaker 1: opportunity to buy this because it's as cheap as it's
Speaker 1: been in five years, or it's as cheap as it's
Speaker 1: been in ten years. Because if we've entered an environment
Speaker 1: where capital is not free again, and that there's inflation
Speaker 1: shin and the central thanks going to be fighting it,
Speaker 1: it may actually not matter to compare evaluations now versus
Speaker 1: five years ago, but there are putting that context out there.
Speaker 1: There are still things that look really interesting from evaluation
Speaker 1: perspective through different types of metrics, and so one that
Speaker 1: stands out to me is what's happening right now in
Speaker 1: the biotech space. UM. So something that interests me is
Speaker 1: that if you look at XBI as an example, UM,
Speaker 1: this is the small and mid cap biotech e t
Speaker 1: f UM. It's market cap is now the whole et
Speaker 1: f UM a little bit less than five billion dollars.
Speaker 1: If you take that, compare it to cash on the
Speaker 1: balance sheet of large pharma companies. So just take the
Speaker 1: top twelve largest pharma companies globally. They have six hundred
Speaker 1: billion dollars of cash on their balance sheet. So cash
Speaker 1: on balance sheet of big pharma companies is actually larger
Speaker 1: than the market cap of small MidCap biotech UM. And
Speaker 1: the last time we got anywhere near those types of
Speaker 1: extremes was actually in two thousands fifteen, which was the
Speaker 1: last bottom for biotech. So again, not very skills at
Speaker 1: calling things over days or weeks or even months, but
Speaker 1: it would suggest to me, if the part of the
Speaker 1: market that you're looking to get involved in, those valuations
Speaker 1: are very meaningful and I think quite supportive. Does that
Speaker 1: suggest at all that some of those big, bigger biotech
Speaker 1: firms might go on a little bit of a shopping spree.
Speaker 1: You know and and snatch up some of those smaller firms.
Speaker 1: Being acquisitive has been quite helpful to some large form
Speaker 1: of companies because they need to stay on the leading
Speaker 1: edge of innovation, and obviously some of that innovation is
Speaker 1: happening in this small space. So it is possible, um,
Speaker 1: that you will actually see some takeouts, and in fact
Speaker 1: we we seen a couple um or and also intentions
Speaker 1: to do that in the last few weeks. So the
Speaker 1: answers yes, and I think that that level of firepower
Speaker 1: suggests that there's some floor to these companies. Now, the
Speaker 1: reality is some of these biotech companies, when you know,
Speaker 1: I can keep going on and on and saying how
Speaker 1: some of them are trading for less than cash and
Speaker 1: the balance sheet are less than cash. Let's their enterprise value, um, etcetera.
Speaker 1: They are burning cash. I mean, that's what they do.
Speaker 1: They spend a lot of cash trying to get these
Speaker 1: drugs to the market. But they're not all they're not
Speaker 1: all going under, They're not all worth less than the
Speaker 1: cash on their balance sheet. So I think, um, there
Speaker 1: there is opportunity there, and it does suggest a floor. Anyway,
Speaker 1: I will pivot now to my craziest thing. As Vildona
Speaker 1: will tell you, Katie, I'm a I'm a big fan
Speaker 1: of the art market, especially the crazy art market, if
Speaker 1: you will. And uh, I like art when it has
Speaker 1: a message. So this brings us to a story from
Speaker 1: the Irish time. There are times there's a young Irish
Speaker 1: artist named Shane Berkery, thirty years old. He decided to
Speaker 1: paint a picture of a nude Vladimir Putin. Um and why,
Speaker 1: you may ask, would he paint a nude Vladimir Putin?
Speaker 1: And he said, Uh, wanted it to be a reminder
Speaker 1: that this person is also just a man. And I
Speaker 1: guess it's just to highlight how absurd it is that
Speaker 1: so many people are dying and lives are being destroyed
Speaker 1: because of decisions he makes. So his solution was to
Speaker 1: paint Putin in the buff and then they auctioned it
Speaker 1: off in an auction to benefit the Red Crosses efforts
Speaker 1: in Ukraine. So that obviously gives us Fildonna an opportunity
Speaker 1: here to play the prices, right, what do you suppose
Speaker 1: the winning bid for a nude painting of Vladimir Putin
Speaker 1: went for and in auction in Ireland. Listeners can see me,
Speaker 1: but I'm totally rolling my eyes as as you do,
Speaker 1: as I should be. I'll go with it's got to
Speaker 1: be low, right unless you can never count the oligarch bit.
Speaker 1: But I'm not. I'm keeping a poker face not saying either.
Speaker 1: I'm gonna go with dollars and that's that's like, I
Speaker 1: think that's okay, Well it's it's in British pounds, so
Speaker 1: i'd have to I'd have to look up the exchange rate.
Speaker 1: But thousand, thirty five thousands of British pounds, Katie, this
Speaker 1: is the time to impress your clients here with your skills.
Speaker 1: I think a half hour you guys talking about markets
Speaker 1: and someone will be impressed by manswer to this. I'm
Speaker 1: in the wrong business, but you get you get the
Speaker 1: luxury of price's right rules. So I felt that is
Speaker 1: saying thirty five thousand. You know it's if she goes over,
Speaker 1: she she's wrong. So you could you know, okay, you
Speaker 1: could be gonna say, oh, I can do that, I
Speaker 1: can do the one dollar. You could Okay, you never
Speaker 1: know what some oligarch might might did. I don't know.
Speaker 1: I'm not I'm not I'm not sure. I'm gonna. I'm
Speaker 1: not gonna editorialize at all, but all of my thoughts
Speaker 1: are captured in one dollar. That is why jealous of that.
Speaker 1: I went with that. I wish I went with that.
Speaker 1: That is why she's the c I O. Your clients
Speaker 1: will be impressed, katounds which still seems high, but uh,
Speaker 1: nothing like the spender of vill Donna was ready to
Speaker 1: bid on on that. I was thinking of the oligon.
Speaker 1: Yeah it's true, but they their money is all tied up.
Speaker 1: They can't they can't access and spend it. So um,
Speaker 1: that was a weird one as it was. Yes, yeah,
Speaker 1: that wasn't I take I take that as a compliment, right, No,
Speaker 1: not super weird. Alright, Katie, I promise you that's the
Speaker 1: most awkward segment of the podcast. So no, but I
Speaker 1: also feel like you kind of cheated because you were
Speaker 1: supposed to like give your fun fact, but you made
Speaker 1: it a test for us. I don't know that. I
Speaker 1: always cheat, always cheat. Okay, that's how long super long
Speaker 1: questions that take like twenty minutes to ask and cheating
Speaker 1: on crazy? Well, I you know, I think I was
Speaker 1: born to be a game show host. So I'm just
Speaker 1: as me, just kind of you know, throw that out there,
Speaker 1: trying prices right ever needs Bob Barker retires, he must
Speaker 1: have retired already, but anyway, just throw that out there.
Speaker 1: I'm um, no, but is there? Most importantly, what's like
Speaker 1: if you said this is the price is right? You
Speaker 1: took your fact, you made it into a contest. I
Speaker 1: want it sounds like, so, what's the prize like? Right right?
Speaker 1: The respected admiration of all of the what shows up
Speaker 1: listeners and an invitation an invitation employee please join us
Speaker 1: again because it's always, uh, such a treat to get
Speaker 1: your insights Katie and hear what you guys are up
Speaker 1: to at Goldman Sachs Asset Management, a small Wall Street
Speaker 1: firm that maybe maybe one or two listeners have heard of.
Speaker 1: I don't know. I want to. I really appreciate you
Speaker 1: guys having me here, and I just want to leave
Speaker 1: people with the message that I know this is a
Speaker 1: very difficult market environment. We're working very hard for our clients.
Speaker 1: Don't panic, it doesn't pay. It's very difficult to time markets,
Speaker 1: you know, stay invested, and um, we'll get to the
Speaker 1: other side of this, just like every other correction that
Speaker 1: we've had and been able to manage through, so appreciate
Speaker 1: the chance to be on here and share that message
Speaker 1: with people. Thank you so much for your time, Katie,
Speaker 1: really appreciate it. Thank you, Katie. Bye, guys, What Goes Up.
Speaker 1: We'll be back next week and so then you can
Speaker 1: find us on the Bloomberg Terminal, website and app or
Speaker 1: wherever you get your podcast. We love it if you
Speaker 1: took the time to rate and review the show on
Speaker 1: Apple Podcasts, so more listeners can find us. And you
Speaker 1: can find us on Twitter, follow me at reag Anonymous,
Speaker 1: Bildanna hierarch is at Bildonna Hirich. You can also follow
Speaker 1: Bloomberg Podcasts at Podcasts. What Goes Up is produced by
Speaker 1: Stacy Wang. The head of Bloomberg podcast is Francesco Levie.
Speaker 1: Thanks for listening. To see you next time.