WEBVTT - Fixing NYC's Subways Requires Study That Isn't Happening: Ravitch 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.599 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. There 0:00:33.640 --> 0:00:36.680 has been a lot of discussion that has led up 0:00:36.760 --> 0:00:39.760 to a story yesterday that was published by the New 0:00:39.800 --> 0:00:42.200 York Times magazine that has garnered a lot of attention 0:00:42.680 --> 0:00:47.360 about the disrepair of the New York City subway system 0:00:47.440 --> 0:00:52.239 and potential catastrophe that could ensue if these problems are 0:00:52.280 --> 0:00:55.280 not fixed. Here to speak with us about that is 0:00:55.280 --> 0:00:58.200 somebody who has intimate knowledge with the m t A 0:00:58.400 --> 0:01:01.560 and the New York City subway system, Richard Ravitch, who 0:01:01.640 --> 0:01:04.360 is the chairman and partner of Ravage, Rice and Co. 0:01:04.600 --> 0:01:08.360 Also though former Lieutenant Governor of New York State and 0:01:08.520 --> 0:01:12.959 head of the Metropolitan Transportation Authority. Thank you so much 0:01:13.120 --> 0:01:16.600 for coming in on this incredibly snowy day. I want 0:01:16.600 --> 0:01:19.680 to start with this story in the New York Times 0:01:19.720 --> 0:01:22.760 magazine that put the bill at a hundred and eleven 0:01:22.800 --> 0:01:25.880 billion dollars conservatively that would be needed to fix the 0:01:25.920 --> 0:01:28.920 New York City subway system. Did you think that the 0:01:28.920 --> 0:01:31.480 tone of it was accurate, that we're kind of at 0:01:31.480 --> 0:01:35.640 a do or die point for the entire subway system. Well, 0:01:35.880 --> 0:01:41.679 there is no instant solution. What has been lacking because 0:01:41.840 --> 0:01:49.600 of the board's failure to fulfill their responsibilities properly, Uh, 0:01:50.360 --> 0:01:53.560 has been There is no analysis of what it would 0:01:53.560 --> 0:01:56.560 take to restore the system. It was stating good repair. 0:01:56.880 --> 0:01:59.720 The number that the author of that article came up 0:01:59.760 --> 0:02:04.640 with was a composite of what other people said. But 0:02:04.880 --> 0:02:09.680 what you need is an analysis of what the replacement 0:02:09.760 --> 0:02:14.240 cost and useful life of every component part of the 0:02:14.280 --> 0:02:19.760 subway system is. Then you decide from that how much 0:02:19.840 --> 0:02:24.239 is necessary. Then you prioritize, and then you look at 0:02:24.680 --> 0:02:30.760 new stations, new new challenges, and you make policy choices. 0:02:31.160 --> 0:02:36.000 But you can't start when you don't have the fundamental knowledge. 0:02:36.240 --> 0:02:41.200 And the board has failed to fulfillix responsibility in a 0:02:41.320 --> 0:02:47.080 very serious manner. They have acted negligently and irresponsibly. So, uh, 0:02:47.960 --> 0:02:52.000 how can this be fixed? The legislature of the State 0:02:52.040 --> 0:02:56.399 of New York it has a responsibility to look into this. 0:02:57.320 --> 0:03:00.520 They are the authors of laws. They pass for Law 0:03:01.360 --> 0:03:05.919 UH in two thousand and nine, making it abundantly clear 0:03:06.000 --> 0:03:10.800 that the fiduciary responsibility of the boards of authorities like 0:03:10.880 --> 0:03:14.320 the m t A is to the purposes of the authority, 0:03:14.520 --> 0:03:18.919 and the legislature has the power to investigate, to hold hearings, 0:03:19.280 --> 0:03:24.720 to bring public's attention UH, to demand that the people 0:03:24.720 --> 0:03:28.639 who will hold these appointments fulfill their responsibility is as 0:03:28.680 --> 0:03:32.560 the law intended that they be fulfilled. Mr Ravitch, I 0:03:32.639 --> 0:03:36.200 understand that back in nineteen seventy nine, cast your mind back. 0:03:36.280 --> 0:03:38.160 You came up with such a plan. You took a 0:03:38.240 --> 0:03:41.880 detailed look at the entire system, and you put together 0:03:42.280 --> 0:03:45.360 a playlist for what needed to happen, even how to 0:03:45.360 --> 0:03:49.760 wear a bulletproof vest. I think at one point it 0:03:49.760 --> 0:03:52.000 didn't work out the way you thought it was. You 0:03:52.040 --> 0:03:55.040 had a call of gentleman named David Rockefeller. I'm wondering 0:03:55.000 --> 0:03:58.360 if you could just didn't you have to call him 0:03:58.360 --> 0:04:01.440 and take him from them at five am in the morning. 0:04:01.520 --> 0:04:06.760 I did because there were upstate Republicans who are reluctant 0:04:06.840 --> 0:04:11.400 to approve all the revenue measures that I had recommended 0:04:11.440 --> 0:04:15.520 to the legislature to provide a stream of revenue that 0:04:15.640 --> 0:04:18.880 we would use to support the borrowing, the capital borrowing 0:04:18.880 --> 0:04:22.160 that we needed to fix the subway system. So I 0:04:22.680 --> 0:04:26.000 needed the support of the business community in New York 0:04:26.040 --> 0:04:28.800 to get the Republican support. But we had the support 0:04:28.839 --> 0:04:31.880 of the governor, the active support of the governor, the 0:04:31.920 --> 0:04:35.600 active support of the New York State Assembly, the active 0:04:35.640 --> 0:04:38.919 support of of the Mayor of the City of New York, 0:04:39.560 --> 0:04:45.440 um and and the unions and the business community, and 0:04:45.440 --> 0:04:49.240 and they got behind this, and they authorized or enacted 0:04:49.720 --> 0:04:53.600 legislation that provided hundreds of millions of dollars of revenue 0:04:53.600 --> 0:04:57.240 which we used to support the indebtedness that enabled me 0:04:57.279 --> 0:05:00.680 to buy three billion dollars of subway cars. Well, but 0:05:01.000 --> 0:05:03.479 I want to sort of broaden out here, because you're 0:05:03.600 --> 0:05:07.600 underscoring fundamental flaws in the management of the subway system 0:05:07.640 --> 0:05:11.360 at a time when more broadly, we're talking about infrastructure 0:05:11.400 --> 0:05:15.480 spending and how much we can invest. Just real quick, 0:05:16.200 --> 0:05:20.680 can we even make these infrastructure investments without a wholesale 0:05:20.800 --> 0:05:28.880 change in the management? Uh. I obviously am no longer 0:05:28.960 --> 0:05:33.680 familiar with the technicians who operate at the m t A. 0:05:34.120 --> 0:05:37.360 But I have to tell you. The professional engineers who 0:05:37.440 --> 0:05:40.960 I've known over the years have very eminently qualified. The 0:05:41.720 --> 0:05:46.719 problem isn't the professional technical management people know how to 0:05:46.800 --> 0:05:49.880 fix this. People know how to buy subway cars. People 0:05:49.960 --> 0:05:55.680 know how to change the signal system to uh triple 0:05:55.880 --> 0:05:58.960 the throughput of so we don't have as many people 0:05:59.040 --> 0:06:02.880 waiting in stations for two or three trains because of 0:06:02.880 --> 0:06:06.800 all we're crowding. Everybody knows how to do it. That's 0:06:06.839 --> 0:06:11.360 not what's missing. What's missing his money, and money requires 0:06:11.440 --> 0:06:14.920 paying for the person was going to pay it. And 0:06:14.920 --> 0:06:18.200 and therefore the question is, in the best sense of 0:06:18.200 --> 0:06:20.920 the word in a democracy, a political question. How do 0:06:20.960 --> 0:06:24.239 you allocate the burden? We are speaking with Richard Ravitch. 0:06:24.320 --> 0:06:28.520 He is the former chairman of the Metropolitan Transportation Authority, 0:06:28.560 --> 0:06:31.520 former Lieutenant Governor of the State of New York, the 0:06:31.600 --> 0:06:33.680 author of the book So Much to Do, A Full 0:06:33.720 --> 0:06:39.040 Life of business, politics and confronting fiscal crises. One crisis 0:06:39.080 --> 0:06:41.960 that we've been following is Puerto Rico, and Mr Ravitch 0:06:42.080 --> 0:06:46.480 has been looking at the situation in the devastated Commonwealth. 0:06:46.560 --> 0:06:48.800 And Mr Ravitch, and maybe you could offer us some 0:06:48.839 --> 0:06:52.960 thoughts about the current conditions and what if you were 0:06:53.000 --> 0:06:56.520 given a clean slate. If you were given a white board, 0:06:57.160 --> 0:07:01.200 what would you suggest be one of the first steps 0:07:01.200 --> 0:07:03.440 that has taken in order to right the ship at 0:07:03.520 --> 0:07:06.720 the first of all the three And they have million 0:07:06.800 --> 0:07:11.840 people and it's unfortunately it's probably closer to three today. UH. 0:07:11.880 --> 0:07:15.840 Our United States citizens and they have not been treated 0:07:15.920 --> 0:07:19.320 the same way that the United States citizens in Houston, 0:07:19.400 --> 0:07:25.160 Texas or New Orleans were treated after devastating hurricanes. Are 0:07:25.240 --> 0:07:29.960 distinguished President through paper towels at them, but has failed 0:07:30.520 --> 0:07:34.440 to make any serious effort to get an amount of 0:07:34.480 --> 0:07:38.760 money to restore the power, to restore the physical infrastructure. 0:07:39.320 --> 0:07:42.720 And as a consequence, people are leaving the island. There 0:07:42.800 --> 0:07:46.240 is no incentive for people to invest. UM. The health 0:07:46.280 --> 0:07:50.280 care system is in jeopardy. Uh. There is still a 0:07:50.320 --> 0:07:53.280 substantial percentage of the population that has to boil the 0:07:53.360 --> 0:07:58.800 water uh to um before they drink it. UM. And 0:07:58.880 --> 0:08:00.640 I talked to a friend of I know was the 0:08:00.720 --> 0:08:03.800 chairman of one of the largest banks in Puerto Rico 0:08:03.840 --> 0:08:05.640 who told me he still doesn't have power in his 0:08:05.720 --> 0:08:08.480 home and it's not because he's not rich and can't 0:08:08.480 --> 0:08:12.080 afford it. You advise the government, correct, I advise the 0:08:12.120 --> 0:08:15.600 government and the U. S. Treasury Department, So you're advising 0:08:16.600 --> 0:08:20.280 no longer h One major issue that was facing the 0:08:20.320 --> 0:08:23.600 government is the pension obligations, and this has been one 0:08:23.640 --> 0:08:26.280 of the most onerous issues apart from the seventy billion 0:08:26.320 --> 0:08:31.480 dollars of debt UM. I'm wondering what lessons we can 0:08:31.560 --> 0:08:33.880 draw from that, you know, what, what sort of the 0:08:34.000 --> 0:08:36.160 rout out is and sort of extract lay out to 0:08:36.160 --> 0:08:39.760 the pension issues that we're seeing across the US right now. 0:08:41.280 --> 0:08:44.480 How how bleak of a situation is this with obligations 0:08:44.520 --> 0:08:49.720 that way outstripped potential income and current current reserves. These 0:08:49.800 --> 0:08:54.559 were not obligations in curtain bad faith. They were incurred 0:08:55.000 --> 0:08:59.959 without a realistic expectation and understanding of how they would 0:09:00.040 --> 0:09:03.600 be ultimately met. So that the underfunding of the pension 0:09:03.679 --> 0:09:08.560 system in Puerto Rico, where it's particularly egregious, they've essentially 0:09:08.640 --> 0:09:11.880 run out of the principal amount of the pension funds, 0:09:12.320 --> 0:09:15.800 and how gonna have to pay whatever benefits they wish 0:09:15.880 --> 0:09:20.040 to pay out of current revenue, which is of course 0:09:20.080 --> 0:09:26.600 diminishing UM. Elsewhere in the United States, uh from Chicago 0:09:26.840 --> 0:09:31.680 to New Jersey to Kentucky to California, I could give 0:09:31.720 --> 0:09:35.839 you a list, Colorado, there's no capacity to meet their 0:09:35.880 --> 0:09:39.360 pension obligations. There are a lot of very serious efforts 0:09:39.480 --> 0:09:45.040 that intellectually. There are four or five major foundations that 0:09:45.080 --> 0:09:50.680 are funding studies on this subject um. And you have 0:09:50.760 --> 0:09:55.480 a very serious moral and political question. If you say 0:09:55.600 --> 0:09:59.320 you want to reduce the pension benefits for somebody who 0:09:59.360 --> 0:10:02.600 worked for govern and for twenty years, why is that 0:10:03.200 --> 0:10:08.520 morally acceptable? But you don't want to cut the interest 0:10:08.640 --> 0:10:11.360 that you're paying this somebody who lent you money they 0:10:11.360 --> 0:10:13.640 shouldn't have lent you because you were solving when you 0:10:13.720 --> 0:10:19.040 borrowed it. And why why people in New York City 0:10:19.160 --> 0:10:21.600 billions of dollars, which is what led to the New 0:10:21.679 --> 0:10:25.360 York City fiscal crisis in all these hedge funds that 0:10:25.480 --> 0:10:29.840 lent Puerto Rico had brought hundreds of or billions and 0:10:29.920 --> 0:10:32.760 billions of dollars of the debt when they were broke, 0:10:32.800 --> 0:10:35.360 when they didn't even have a worded in financial statements, 0:10:35.559 --> 0:10:41.120 they gambled. Why is their entitlement to interest morally superior 0:10:41.480 --> 0:10:49.119 to the payment of the pension to a former public servant. Unfortunately, 0:10:49.120 --> 0:10:50.959 we're gonna have to to leave it there. Richard Ravitch, 0:10:51.240 --> 0:10:54.120 who is the author of So Much to Do as 0:10:54.120 --> 0:10:56.440 well as former Lieutenant Governor of New York and head 0:10:56.520 --> 0:11:13.280 of the m t A. All right, we want to 0:11:13.360 --> 0:11:15.800 learn about Tesla, and we have Liam Denning are a 0:11:15.800 --> 0:11:20.840 Bloomberg Gadfly columnists, to tell us about the Model three. Liam, 0:11:20.920 --> 0:11:23.920 is Tesla really going to be able to meet their 0:11:24.000 --> 0:11:28.600 targets when it comes to that five thousand unit mark? 0:11:28.760 --> 0:11:30.520 And how much is it going to cost for them 0:11:30.520 --> 0:11:36.280 to produce those cars? Well, the question is, well, you know, 0:11:36.360 --> 0:11:38.680 you need to take a step. I can say what 0:11:38.800 --> 0:11:43.679 actually is a target here? Because that five thousand number 0:11:43.800 --> 0:11:46.080 or and other numbers have been thrown around, like the 0:11:46.080 --> 0:11:49.640 old tens thousand a week rate that was spoken of. Um. 0:11:50.800 --> 0:11:56.600 If a target moves over time enough, does it? Is 0:11:56.640 --> 0:12:00.439 it really still a target? I mean, it's it's it's 0:12:00.440 --> 0:12:04.440 fairly certain that Tesla will get to producing five thousand 0:12:04.480 --> 0:12:09.439 Model three a week at some point. UM. But I'm 0:12:09.480 --> 0:12:11.040 not sure we can even call it a target at 0:12:11.040 --> 0:12:13.320 this point because it has been moved around so much. 0:12:13.440 --> 0:12:16.920 We just have to call it an expectation. UM. And 0:12:16.920 --> 0:12:19.240 that was kind of the point of the column that 0:12:19.280 --> 0:12:23.520 I published today. UM. Because the thing is, if you're 0:12:23.520 --> 0:12:29.160 really relying on these targets, um, then it's kind of 0:12:29.160 --> 0:12:31.320 hard to say that you're actually investing on the strength 0:12:31.480 --> 0:12:33.880 of those. What you're really investing on is just a 0:12:34.000 --> 0:12:41.000 general belief that Tesla will get to profitability and volume 0:12:41.080 --> 0:12:44.559 production at some point. But you're not really you're sort 0:12:44.600 --> 0:12:46.920 of trusting them, but you're not really following up with 0:12:46.960 --> 0:12:49.480 the with the verifying bit. In other words, this is 0:12:49.559 --> 0:12:52.000 pure faith and nothing based in particular numbers. I mean, 0:12:52.000 --> 0:12:55.040 I guess that uh, sort of edifying that point is 0:12:55.120 --> 0:12:57.640 Tesla shares today they're down a little bit less than 0:12:57.720 --> 0:13:01.000 one percent. You would expect a much bigger decline with 0:13:01.080 --> 0:13:05.520 yet another disappointment from their actual production when this has 0:13:05.559 --> 0:13:08.720 been one of the key concerns. Also, there's still they're 0:13:08.720 --> 0:13:11.600 still burned through a billion dollars of cash every quarter 0:13:11.840 --> 0:13:13.760 and are probably going to have to raise more money 0:13:13.760 --> 0:13:17.280 now you would expect. So, I mean, if you if 0:13:17.280 --> 0:13:19.840 you think back to when they reported third quarter results, 0:13:19.840 --> 0:13:25.160 which was early November, now those results were, um, you know, 0:13:25.200 --> 0:13:28.120 they missed targets across the board. There a miss forecast 0:13:28.160 --> 0:13:31.320 across the board. Um, they cut the the outlook for 0:13:31.440 --> 0:13:33.640 production of the Model three, which is kind of at 0:13:33.720 --> 0:13:36.760 all that anyone really cares about at this point. Um, 0:13:36.800 --> 0:13:39.440 and the stork did actually fall quite sharply after that, 0:13:39.559 --> 0:13:43.559 went back below three hundred bucks a share, But since 0:13:43.640 --> 0:13:46.600 came back, I mean partly because um, you know, we 0:13:46.640 --> 0:13:49.000 had the launch of the well we call it launch, 0:13:49.080 --> 0:13:52.640 but we had the the sort of demo of of 0:13:52.760 --> 0:13:57.040 the Tesla Electric semitrucks since then, and the stock went 0:13:57.120 --> 0:13:58.880 up a bit on that and it's actually higher now 0:13:59.280 --> 0:14:04.480 than it was in the immediate aftermas of those results. Um. 0:14:04.520 --> 0:14:06.560 But if you look forward to this year, I mean 0:14:06.559 --> 0:14:09.240 what you have a combination of here is Tesla has 0:14:09.320 --> 0:14:13.480 invested already a lot of money into building this production line, 0:14:13.480 --> 0:14:18.200 which isn't working as planned. They haven't reached um, you know, 0:14:18.400 --> 0:14:21.280 smooth mass production of the car yet and they've had 0:14:21.320 --> 0:14:26.040 to scale back um at the pace of growth in 0:14:26.080 --> 0:14:27.880 that And if you think about that, what that means 0:14:28.000 --> 0:14:32.080 is you've invested all the money in this production line, 0:14:32.360 --> 0:14:35.120 but you're still waiting to really produce the cars that 0:14:35.160 --> 0:14:39.080 are going to generate the revenue to pay back on 0:14:39.200 --> 0:14:41.960 that investment. And as we look forward to the rest 0:14:42.000 --> 0:14:44.880 of the year, you know, it does seem likely that 0:14:45.160 --> 0:14:49.600 unless something drastic changes in the pace at which Tesla 0:14:49.640 --> 0:14:53.720 can produce these cars, um, they are probably going to 0:14:53.800 --> 0:14:57.800 have to tap the markets for more financing this year. 0:14:58.080 --> 0:14:59.920 Whether now, whether that comes in the form of equit 0:15:00.400 --> 0:15:03.520 or another bond or a convertible or something else, um, 0:15:03.560 --> 0:15:08.200 that is looking ever more likely. Of course, the flip 0:15:08.240 --> 0:15:12.600 side of that is, as long as the stock doesn't 0:15:12.640 --> 0:15:17.040 react badly to this, you know, consistent missing of targets, 0:15:17.880 --> 0:15:21.440 then Tesla does appear to have a ready way of 0:15:21.560 --> 0:15:23.760 raising that money. Liam Denning, thank you so much for 0:15:23.840 --> 0:15:27.840 joining us. Liam Denning, Energy Mining and Commodities calumnist for 0:15:28.040 --> 0:15:47.960 Bloomberg Gadfly Research. No, forget about it. Meeting chief executive 0:15:48.000 --> 0:15:51.920 officers a waste of time for this fund manager, and 0:15:51.960 --> 0:15:54.560 they've actually done pretty well here to help us understand 0:15:54.600 --> 0:15:57.200 their strategy. As Kurt Kara, he is the chief investment 0:15:57.240 --> 0:16:01.760 strategist for my invest They're based in Copenhagen, Denmark, and 0:16:01.800 --> 0:16:03.960 he joins us on the phone. Kurt, thank you very 0:16:04.000 --> 0:16:07.080 much for being with us. Just described for people your 0:16:07.200 --> 0:16:10.960 strategy and how you came to put this all together 0:16:12.320 --> 0:16:14.960 all right, Well, thank you for letting me call in 0:16:16.160 --> 0:16:21.320 very Briefly, we are very focused on being rational when 0:16:21.360 --> 0:16:24.520 we invest, So we try to be as stringent and 0:16:24.560 --> 0:16:27.200 the rational out of a sort of a moral imperative 0:16:27.200 --> 0:16:29.840 wing invest. So one of the things that we find 0:16:29.880 --> 0:16:32.400 it is very important is to be driven by data 0:16:32.560 --> 0:16:36.480 and rationality and economic understanding of the businesses we invest in. 0:16:36.960 --> 0:16:39.360 So what we do is basically we look for if 0:16:39.400 --> 0:16:41.680 you want to catch some sort of if you want 0:16:41.680 --> 0:16:43.560 to if you want to hunt a dinosaur, you look 0:16:43.600 --> 0:16:46.160 for din dinosaur footprints and then you ask yourself if 0:16:46.200 --> 0:16:48.280 this is a dinosaur, and then you then you go 0:16:48.360 --> 0:16:51.200 for the hunting itself. So so that's basically what we do. 0:16:52.360 --> 0:16:55.040 How many stocks do you invest in at any given time? 0:16:55.080 --> 0:16:57.560 In other words, do you have to kind of concentrate 0:16:57.640 --> 0:17:00.920 your bets with this type of strategies since it requires 0:17:01.440 --> 0:17:05.879 uh profound understanding of the businesses. Yeah, well, it's a 0:17:05.880 --> 0:17:10.000 good question because I think one of the conventional um 0:17:10.240 --> 0:17:13.480 cardinal points of investment is that you should diversify a lot. 0:17:13.760 --> 0:17:17.640 I think that there's a big difference between diversification and diversification. 0:17:18.119 --> 0:17:22.520 If we diversify too much, we actually diversify. We believe 0:17:22.560 --> 0:17:26.240 that twenty five to thirty five names is adequate. Anything 0:17:26.240 --> 0:17:28.720 about thirty five names and we will start to become 0:17:29.160 --> 0:17:31.480 index Haugust, And that's really not what we want to be. 0:17:31.520 --> 0:17:35.800 We want to be active managers, picking the best businesses 0:17:35.840 --> 0:17:39.800 we can find that at attractive prices. And I honestly 0:17:39.840 --> 0:17:41.800 believe that if you look at, for instance, the financial 0:17:41.840 --> 0:17:46.159 crisis in in oh eight, very diversified portfolios didn't do 0:17:46.240 --> 0:17:49.840 much better than less diversified portfolios. So so in theory 0:17:50.000 --> 0:17:51.800 it may work, but in reality, I don't think the 0:17:51.920 --> 0:17:57.560 versification works. Once you're above thirty five forty names, Kurt, 0:17:57.920 --> 0:18:02.159 where do you get the confidence to maintain this level 0:18:02.320 --> 0:18:07.600 of discipline? Oh? Well, yeah, Well, first of all, I 0:18:07.640 --> 0:18:10.359 have some good colleagues and they'll kick me if I 0:18:10.680 --> 0:18:14.720 don't if I'm not discipline. But my confidence in my 0:18:15.000 --> 0:18:19.120 and the discipline comes from I would say, first of all, 0:18:19.240 --> 0:18:22.399 having this system. We have that that sort of looks 0:18:22.440 --> 0:18:25.520 at the marketplace, looks at all the stocks in the marketplace, 0:18:25.560 --> 0:18:29.600 and gives us ideas and scores every single stock out there. 0:18:30.119 --> 0:18:33.280 And that is a very good neutral, objective view on 0:18:33.680 --> 0:18:36.240 the marketplace. And then we have our subjective views and 0:18:36.240 --> 0:18:40.479 our subjective understanding of the businesses we invest in. The discipline, however, 0:18:40.600 --> 0:18:43.720 is obviously something which has to be learned over the years, 0:18:43.720 --> 0:18:47.800 and I believe we have done so. Uh. There is 0:18:47.840 --> 0:18:50.400 a big difference between basically eating the menu and eating 0:18:50.400 --> 0:18:53.600 the menu card, and a lot of investors perhaps eat 0:18:53.640 --> 0:18:56.359 the card more than the menu. So it's easy to 0:18:56.400 --> 0:18:59.360 say your value invest It's easy to say we're active 0:18:59.400 --> 0:19:03.600 investors and we manage risk, but actually doing it requires discipline, 0:19:03.640 --> 0:19:05.480 and this is something we've been working on over the 0:19:05.560 --> 0:19:07.840 years and we still work on it. Maybe just use 0:19:08.000 --> 0:19:12.359 one UH investment idea General Motors as an example, because 0:19:12.359 --> 0:19:14.320 you know when you when you hear about your strategy, 0:19:14.359 --> 0:19:17.119 you think, oh, there's some like super secret company that 0:19:17.160 --> 0:19:19.360 they're going to invest in it, and it turns out 0:19:19.440 --> 0:19:22.480 it may just be that you find a company that 0:19:22.520 --> 0:19:26.200 everybody knows about, but the way you perceive the company 0:19:26.280 --> 0:19:30.720 and the confidence you have in the decision is different. Yeah. Well, 0:19:30.760 --> 0:19:33.520 I guess GM is a great example. I mean, we 0:19:33.600 --> 0:19:37.040 bought GM in September last year. Uh. I believe the 0:19:37.040 --> 0:19:40.120 market value was roughly around fifty billion dollars and they 0:19:40.040 --> 0:19:42.720 the enterprise value is forty billion dollars and GM generates 0:19:42.720 --> 0:19:44.880 ten billion dollars in earnings and and ten billion dollars 0:19:44.880 --> 0:19:47.840 in free cash flow. Uh. It has a female CEO, 0:19:48.000 --> 0:19:50.480 which is quite rare, so she's obviously doing a great 0:19:50.560 --> 0:19:53.960 job in a in a sector which is dominated by males. 0:19:54.480 --> 0:19:57.680 Uh So, Uh, all the things when you look at 0:19:57.720 --> 0:20:01.399 it looked okay because you know, they have autonomus driving. 0:20:01.840 --> 0:20:04.320 They have the Chevallet bowl, the Chevallet bowl, They have 0:20:04.400 --> 0:20:07.439 the Cadillac, which is the only limo priced as a 0:20:07.440 --> 0:20:11.520 as a Mercedes basically. Uh, they have the Camaro and 0:20:11.560 --> 0:20:13.360 you know, you name it they have. They have nine 0:20:13.359 --> 0:20:16.200 percent of lift as far as I understand. So they 0:20:16.240 --> 0:20:19.080 have all these areas. And when you look at GM, 0:20:19.320 --> 0:20:23.160 it's not the old dust covered company that some people 0:20:23.200 --> 0:20:26.800 may believe it is. It is actually a company which 0:20:26.840 --> 0:20:29.880 is up to date technologically speaking. And the price tag 0:20:30.000 --> 0:20:32.040 was very, very attractive, so you could say, you know, 0:20:33.160 --> 0:20:35.679 we don't necessarily buy gold just because it's goal. We 0:20:35.720 --> 0:20:38.520 want to buy gold when it's priced as silver. GM 0:20:38.600 --> 0:20:41.720 is perhaps silver. Priceless bronze are actually more like junk metal, 0:20:42.080 --> 0:20:44.720 whereas some of the more golden stocks in the stock 0:20:44.720 --> 0:20:47.480 market right now, they're priceless diamonds and they're not diamonds. 0:20:47.560 --> 0:20:51.560 So for us, it's all about buying the on the 0:20:51.640 --> 0:20:54.360 valued stuff. And just wanted the breaking because I want 0:20:54.560 --> 0:20:56.919 to come into but just quickly give you ten seconds, 0:20:57.000 --> 0:21:00.720 Mary Barra, as the chairman, chief executive, it's important to 0:21:00.720 --> 0:21:06.719 you explain well, very briefly. I mean it's important because 0:21:06.840 --> 0:21:10.679 if you can make it as a CEO with your 0:21:11.040 --> 0:21:14.800 biometric measures against you and your your biological measures against you, 0:21:14.840 --> 0:21:17.119 in the sense that we know that there is an 0:21:17.160 --> 0:21:21.440 overrepresentation in boardrooms and amongst the CEOs when we look 0:21:21.440 --> 0:21:26.280 at for instance, Caucasian males uh. Tall, slim Caucasian males 0:21:26.280 --> 0:21:28.840 are overrepresented. So if you have a CEO which is 0:21:29.160 --> 0:21:32.560 which doesn't have these features, it must be because they're 0:21:32.600 --> 0:21:35.520 doing some sort of you know, good stuff. As a CEO, 0:21:35.600 --> 0:21:39.160 they have to be outperforming significantly since they can, they 0:21:39.160 --> 0:21:41.320 can get to that position. And I think she's doing 0:21:41.320 --> 0:21:44.000 a great job and I don't have to meet her. 0:21:44.040 --> 0:21:45.840 I mean, we don't have to meet the CEO. We 0:21:45.840 --> 0:21:49.520 we look at the results they generate, uh, and that's 0:21:49.520 --> 0:21:51.880 more important for us. Kurt Kara, thank you so much 0:21:52.000 --> 0:21:56.119 for joining us. Kurt Carra, chief investment strategist at my invest, 0:21:56.720 --> 0:22:00.800 which runs the my Invest Value Act here and which 0:22:00.920 --> 0:22:04.800 has returned on average each year in the past five years, 0:22:04.840 --> 0:22:13.439 better than percent of its peers. Thanks for listening to 0:22:13.440 --> 0:22:16.320 the Bloomberg P and L podcast. You can subscribe and 0:22:16.400 --> 0:22:20.360 listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast 0:22:20.400 --> 0:22:23.880 platform you prefer. I'm pim Fox. I'm on Twitter at 0:22:24.040 --> 0:22:27.440 pim Fox. I'm on Twitter at Lisa Abramo. It's one 0:22:27.640 --> 0:22:30.359 before the podcast. You can always catch us worldwide on 0:22:30.400 --> 0:22:31.240 Bloomberg Radio.