WEBVTT - Ukraine and Russia, IBM, PacWest, and VCs (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:05.240 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day, we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.520 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.200 --> 0:00:23.680 Ukraine Russia. Boy, we did not see this coming over 0:00:23.680 --> 0:00:25.800 the weekend, or at least I didn't. We need to 0:00:25.800 --> 0:00:28.040 figure out what's happening over there, so we asked to 0:00:28.040 --> 0:00:30.720 get two of our smarter voices over in that part 0:00:30.720 --> 0:00:34.200 of the world. Maria Today, European correspondent for Bloomberg Knows, 0:00:34.479 --> 0:00:38.440 and Leonid Brashitski, calumnist with Bloomberg Opinion. Maria, thanks so 0:00:38.479 --> 0:00:40.880 much for taking the time. I know you're extremely busy today. 0:00:41.240 --> 0:00:44.199 I tell you, it feels like the world knows almost 0:00:44.240 --> 0:00:47.440 nothing about what did happen over the weekend. What is happening? 0:00:47.680 --> 0:00:51.120 What's the latest reporting about what's going on in Russia? 0:00:51.600 --> 0:00:54.880 Yes, and it's very difficult to tell because well, the Kremlin, 0:00:54.920 --> 0:00:59.320 on the one hand, has gone radio silent since Saturday morning. 0:00:59.400 --> 0:01:01.840 That's the last time we saw from Vladimir put And 0:01:02.160 --> 0:01:05.640 talk about this situation. It was interesting that at the 0:01:05.720 --> 0:01:09.920 time the language that he used he basically said Pegasian 0:01:10.040 --> 0:01:12.480 was carrying out with his treason. At one point he 0:01:12.480 --> 0:01:15.000 didn't mention him by name, but he did say it 0:01:15.080 --> 0:01:18.520 echoed nineteen seventeen, which obviously is a crucial date for 0:01:18.680 --> 0:01:19.520 Russian history. 0:01:19.640 --> 0:01:21.880 Today, we have seen the Kremlin to. 0:01:21.840 --> 0:01:24.000 Some extent, trying to take back as some of the 0:01:24.080 --> 0:01:27.000 narrative we did see Vladimir Putin, but almost and a 0:01:27.080 --> 0:01:32.400 topic completely unrelated to this, almost suggesting it's business as usual. 0:01:32.480 --> 0:01:36.679 We had also some tape video footage from the Russian 0:01:36.680 --> 0:01:39.120 Defense Minister Sergei Shoigu. I mean, a lot of the 0:01:39.200 --> 0:01:43.560 tensions with Pegashiin and Wagner had stamped because of his 0:01:43.680 --> 0:01:45.840 criticism in terms of the way that the Russian mod 0:01:46.240 --> 0:01:49.440 was carrying out were operations. So the message would be 0:01:49.520 --> 0:01:52.800 that sure was still in his job and it continues 0:01:52.880 --> 0:01:55.640 to do his job. But again the question is, how 0:01:55.640 --> 0:01:58.080 do we know if this footage was filmed today? This 0:01:58.000 --> 0:02:00.480 is all happening today, And of course I've seen that 0:02:00.560 --> 0:02:03.960 in the past Russia can be very good at just 0:02:04.000 --> 0:02:07.000 putting out a message on tape and footage and comments, 0:02:07.040 --> 0:02:09.600 pictures of things that are not happening in the moment 0:02:09.639 --> 0:02:10.880 but are already pre recorded. 0:02:10.880 --> 0:02:13.280 They just put the map because it suits a narrative 0:02:13.320 --> 0:02:13.519 to me. 0:02:13.639 --> 0:02:17.480 The real takeaway, however, is that today you see Russian's 0:02:18.080 --> 0:02:22.040 state media suggesting that this idea that there would be amnesty, 0:02:22.120 --> 0:02:26.040 that there would be no charges into Prigotten or even Wagner, 0:02:26.080 --> 0:02:27.760 that a lot of that had been part. 0:02:27.639 --> 0:02:29.720 Of a deal broker by Alexander Rokashenka. 0:02:29.840 --> 0:02:33.239 Remember he's the head of Belarus who the international community 0:02:33.320 --> 0:02:36.360 doesn't really recognize because they say he rigged the twenty 0:02:36.400 --> 0:02:40.720 twenty election, but nonetheless remains an ally, a transactional ally. 0:02:40.760 --> 0:02:43.280 I would say to Russia again, the terms of that 0:02:43.400 --> 0:02:46.480 deal that was brokeer to diffuse the situation now are 0:02:46.480 --> 0:02:48.520 being called into question. And there's a lot of questions 0:02:48.560 --> 0:02:51.240 too in terms of what is going to happen to Wagner, 0:02:51.280 --> 0:02:52.960 but also where is Pregauson. 0:02:53.200 --> 0:02:54.680 The idea is that he would be. 0:02:54.639 --> 0:02:57.280 On his way to Belarus, but we've had no indication 0:02:57.400 --> 0:02:58.600 that he's arrived here. 0:02:59.120 --> 0:03:01.960 All right, well, let's bring lean it into the conversation here. 0:03:02.120 --> 0:03:04.639 Leanid Burshitski, Thanks for getting on a call with us. 0:03:04.960 --> 0:03:08.160 Talk to me about what this tells us about Putin's 0:03:08.639 --> 0:03:12.840 control and specifically his popularity with the Russian people. 0:03:14.760 --> 0:03:21.840 Well, his control is not really in question. If there's 0:03:21.919 --> 0:03:27.000 actually a deal with pre version, such a deal could 0:03:27.080 --> 0:03:31.960 not have been engineered without Puttin's consent, Putting's permission, or 0:03:32.160 --> 0:03:37.200 putting participation somehow in the like deciding what should happen. 0:03:39.440 --> 0:03:46.760 His actual power isn't question though, because when you ask, 0:03:46.840 --> 0:03:52.240 the mutiny unfolded, nobody really made a serious move to 0:03:52.320 --> 0:03:59.400 defemp Putting and to stop the mutineers. A lot of 0:03:59.400 --> 0:04:03.400 people prefer loyalty, but nobody actually do anything to stop them. 0:04:03.800 --> 0:04:08.440 So it's a twofold situation in terms of, you know, 0:04:08.480 --> 0:04:12.680 whether whether Putting is still in control or not. He's 0:04:12.720 --> 0:04:17.680 still able to engineer deals. You know, people, the bureaucracy, 0:04:17.800 --> 0:04:22.800 the government apparatus still abasing, clearly, but nobody will go 0:04:22.920 --> 0:04:26.159 out of their way to send them against an armed threat. 0:04:26.880 --> 0:04:29.360 Maria, Is there any feeling or consensus building after the 0:04:29.640 --> 0:04:32.880 weekend about what this may mean for the actual war 0:04:32.960 --> 0:04:36.560 on the ground in Ukraine? Does this strengthen at all 0:04:36.600 --> 0:04:39.520 the Ukrainian position well. 0:04:39.320 --> 0:04:41.800 Actually, we just heard from the head of Nature of 0:04:41.800 --> 0:04:44.919 the Secretary General Staltenberg, who had what is to me 0:04:45.279 --> 0:04:47.400 a subtle maybe not even a subtle dick, but just 0:04:47.440 --> 0:04:51.760 criticism the operation in Russian just seeing the chaos that 0:04:51.760 --> 0:04:53.760 we saw play out over the past for eight hours. 0:04:53.760 --> 0:04:57.240 This is exactly what happens when you hire mercenaries, the 0:04:57.279 --> 0:05:00.320 people that will fight for money to fight you war. 0:05:00.400 --> 0:05:03.039 And again he said, this pointed to weakness in the 0:05:03.040 --> 0:05:05.760 way that Russia has conducted this operation. 0:05:05.400 --> 0:05:08.280 And this idea that the war would be easy to win. 0:05:08.360 --> 0:05:11.039 It's obviously by no means the reality now we've seen 0:05:11.040 --> 0:05:12.600 a play out for more than a year and a half. 0:05:13.120 --> 0:05:16.880 Anything that is chaos internally for Russia, the Ukrainians would 0:05:16.880 --> 0:05:19.400 perceive it as good for them. But again, one of 0:05:19.400 --> 0:05:22.360 the things that I would stress, however, is that for 0:05:22.520 --> 0:05:24.640 a lot of the European officials, especially the ones that 0:05:24.880 --> 0:05:27.839 I was on the phone with yesterday, what they say 0:05:27.880 --> 0:05:30.039 is that you have to be very clear here, precaussion 0:05:30.200 --> 0:05:32.560 is not an ally to the West. It's not again, 0:05:32.600 --> 0:05:35.680 if there had been a coup or put had been overthrown, 0:05:36.000 --> 0:05:38.200 that things of Russia would be better. If anything, you 0:05:38.200 --> 0:05:41.159 could argue there could be more hardliners that could come 0:05:41.160 --> 0:05:43.320 in and the situation could become even more destable. 0:05:43.320 --> 0:05:46.160 And this is a country that still holds nuclear weapons. 0:05:46.200 --> 0:05:49.080 I think at this point, does it help the Ukrainians 0:05:49.440 --> 0:05:51.720 in terms of the symbolic nature of this for them? 0:05:51.760 --> 0:05:54.159 They say yes, because again it goes back to this 0:05:54.240 --> 0:05:57.280 idea that Latimer Putting is not invincible, that this myth 0:05:57.360 --> 0:06:00.880 that the KJB man is a myth extent, but will 0:06:00.880 --> 0:06:04.040 play out on the battlefield, and will they help them logistically? 0:06:04.080 --> 0:06:06.120 I think that is very very early to tell. And 0:06:06.160 --> 0:06:06.680 again when I. 0:06:06.680 --> 0:06:09.200 Spoke to the Ukraine and Prime Minister last week, he 0:06:09.240 --> 0:06:11.880 did say to me, look, this is not a Hollywood movie. 0:06:11.880 --> 0:06:13.960 It's not that things happen and changed from one day 0:06:14.000 --> 0:06:18.800 to another. A counter offensive counts with many different operations. 0:06:18.839 --> 0:06:22.200 Will it change something substantially on the battlefield ass of today? 0:06:22.240 --> 0:06:25.680 I think that's overly or an overly stretch. But again 0:06:25.720 --> 0:06:27.920 it goes back to this idea, at least. 0:06:27.920 --> 0:06:32.080 For NATO today, reinforcing this message that whatever happens internally 0:06:32.400 --> 0:06:35.920 in Russia, for NATO you have to help Ukraine. That's 0:06:35.960 --> 0:06:39.279 what Stottenburg said, and at this point maintain that support. 0:06:39.720 --> 0:06:42.400 Well, leonet on that I wonder to what extent you 0:06:42.440 --> 0:06:46.800 feel that Putin's authority had already been undermined based on 0:06:47.279 --> 0:06:51.880 his performance and conduct within the Ukraine invasion. 0:06:53.800 --> 0:06:57.039 Well, it's clear that his authority has been undermined by this, 0:06:57.880 --> 0:07:02.320 but by having to actually make a deal with people 0:07:02.400 --> 0:07:08.960 who are station open revolt. But whether that affects the 0:07:09.000 --> 0:07:13.880 events on the battlefield is another a different matter. The 0:07:14.000 --> 0:07:20.720 Russian generals coordinating the Russian resistance to the Ukrainian Culter 0:07:20.840 --> 0:07:25.440 offensive out of the headquarters in Rostov actually continued as 0:07:25.520 --> 0:07:30.440 if nothing had happened, even as the Wagner fighters were 0:07:30.480 --> 0:07:34.960 patrolling the perimeter. So it's not as if some sort 0:07:34.960 --> 0:07:40.200 of anti war force threatened to overthrow Putting. The Precaussian 0:07:40.280 --> 0:07:43.080 is firmly in the pro war camp, even if he 0:07:43.200 --> 0:07:46.400 questions the motives that led to the war being started, 0:07:47.120 --> 0:07:51.440 Like whatever happens to Putting personally, whether that ends the 0:07:51.480 --> 0:07:53.520 war is an open question. 0:07:54.240 --> 0:07:58.200 Lean, what do you expect I guess the next thing 0:07:58.200 --> 0:08:00.640 we will hear from mister Putin? What do you expect 0:08:00.800 --> 0:08:01.840 him to do next? 0:08:04.120 --> 0:08:06.360 What do I expect Putin to do? He hasn't really 0:08:06.360 --> 0:08:13.080 been doing much lately, he's kind of been weighing in 0:08:13.120 --> 0:08:18.679 wait on letting the letting the military do their job. 0:08:19.200 --> 0:08:23.440 He really has kept out of the action to such 0:08:23.480 --> 0:08:27.000 a degree that the sort of the ultra nationalist contingent 0:08:27.040 --> 0:08:31.040 in Russia is questioning whether he's still around or you know, 0:08:31.120 --> 0:08:34.400 the Kremlin is being run by a double So what's 0:08:34.440 --> 0:08:36.360 she gonna what's she gonna do next? Nothing? 0:08:37.400 --> 0:08:41.120 Okay? H and Maria just so quickly, mister Pregosian doing 0:08:41.160 --> 0:08:44.400 what do we know about him? His whereabouts? 0:08:44.600 --> 0:08:47.760 And yeah, sorry, at this point it's not clear. It's 0:08:47.800 --> 0:08:48.800 not clear at all. 0:08:48.840 --> 0:08:50.920 And and in fact, this morning on the show, we 0:08:51.000 --> 0:08:55.480 spoke with Spilan, who was the again. Remember she challenged 0:08:55.920 --> 0:09:00.000 uh in the twenty twenty election, again which the Internet 0:09:00.320 --> 0:09:03.920 community says was rigged, and that lukashenk A rigged in 0:09:03.960 --> 0:09:06.200 twenty twenty four himself so that he was a winner. 0:09:06.320 --> 0:09:09.240 The one thing she said is that frankly, this should 0:09:09.280 --> 0:09:09.559 not be. 0:09:09.520 --> 0:09:11.760 A problem for Belarus to deal with, that this is 0:09:11.800 --> 0:09:14.319 an independent of sovereign country and theory and they should 0:09:14.360 --> 0:09:17.000 not be dealing with which she said or quote sucks. 0:09:17.040 --> 0:09:19.439 But of course a lot of the focus will now 0:09:19.480 --> 0:09:21.600 be unaware, is he But also what kind of reception 0:09:21.679 --> 0:09:24.440 and treatment will he get from Lukashenka. One of the 0:09:24.440 --> 0:09:27.360 things that I thought was interesting from Tigeroskaya is that 0:09:27.440 --> 0:09:28.920 she said he's not. 0:09:29.000 --> 0:09:30.000 Really been a mediator. 0:09:30.000 --> 0:09:32.240 He probably just passed on a message for Vladimir Putting 0:09:32.240 --> 0:09:35.160 and he will treat and do with Privashin whatever Button 0:09:35.200 --> 0:09:36.920 tells him he needs to do next. 0:09:37.000 --> 0:09:39.160 All right, Maria, thank you so much for joining us. 0:09:39.200 --> 0:09:43.000 We know you're busy. Maria today European correspondent for Bloomberg 0:09:43.040 --> 0:09:46.440 News and lead in Brashitski. He's a calmnist for Bloomberg Opinion, 0:09:46.480 --> 0:09:48.559 spent a lot of time in Moscow. He's done a 0:09:48.600 --> 0:09:52.199 lot of work with in Ukraine as well, So really informed. 0:09:52.320 --> 0:09:54.760 A couple of voices there, and Maddie, I guess you know, 0:09:55.000 --> 0:09:56.520 we're like the rest of the world, just kind of 0:09:56.840 --> 0:09:58.560 waiting to see what kind of news or what kind 0:09:58.559 --> 0:10:02.160 of information will be disclosed about what really happened over 0:10:02.400 --> 0:10:06.280 the weekend and what it means for mister Putin going forward. 0:10:06.360 --> 0:10:09.079 So but again we had two very very good voices here, 0:10:09.080 --> 0:10:11.120 well informed to give us a little bit of perspective here, 0:10:11.160 --> 0:10:13.640 but again a lot more needs to be learned here. 0:10:15.320 --> 0:10:18.720 You're listening to the team Ken's are live program Bloomberg 0:10:18.800 --> 0:10:22.120 Markets weekdays at ten am Eastern on Bloomberg dot com, 0:10:22.240 --> 0:10:25.360 the iHeartRadio app and the Bloomberg Business App, or listen 0:10:25.440 --> 0:10:27.559 on demand wherever you get your podcasts. 0:10:29.880 --> 0:10:32.680 Joining us here in our Bloomberg Interactive Broker Studio, which 0:10:32.720 --> 0:10:35.840 means he's live on YouTube as well, because you know 0:10:35.880 --> 0:10:39.679 we YouTube stream this thing. Oh yeahs if you can 0:10:39.679 --> 0:10:41.760 go to you cross platform, thank you. That's a good 0:10:41.800 --> 0:10:44.080 like multimedia thing. Yeah, you just have to go to 0:10:44.120 --> 0:10:46.880 YouTube and search Bloomberg Global News you and you'll get 0:10:46.880 --> 0:10:50.319 that stream. David, thanks so much for joining us here. Again. 0:10:50.480 --> 0:10:54.240 Kind of a markets year to date that hasn't The 0:10:54.280 --> 0:10:57.040 indexes look good. The numbers kind of look good, but 0:10:57.120 --> 0:10:59.920 if you didn't own a handful of stocks, you're you're lagging. 0:11:00.200 --> 0:11:02.679 How do you think about the first half and kind 0:11:02.679 --> 0:11:04.600 of how the market performed, and what do you think 0:11:04.600 --> 0:11:05.800 about for second half of the year. 0:11:06.120 --> 0:11:07.000 Yeah, there's only. 0:11:06.880 --> 0:11:10.240 Two precedents where I've seen it where the cap weighted 0:11:10.280 --> 0:11:13.720 index was so good from such a few amount of companies, 0:11:13.760 --> 0:11:15.920 and that was in nineteen ninety nine. In that period 0:11:15.920 --> 0:11:19.280 in twenty twenty and it never ever ever ends. Well, 0:11:20.240 --> 0:11:22.920 you look at the equal weighted S and P on 0:11:22.960 --> 0:11:25.719 the year, it's a totally different story. Now people can say, 0:11:25.760 --> 0:11:27.679 I don't care, I don't ownly equal weighted S and P. 0:11:27.880 --> 0:11:30.360 So as long if it's six companies carrying the index 0:11:30.360 --> 0:11:32.560 and I own the index, I'm fine. But the problem 0:11:32.600 --> 0:11:35.920 with that, of course, is it's unsustainable. Markets are mean 0:11:36.240 --> 0:11:39.320 reverting things. This will revert to the mean. You will 0:11:39.320 --> 0:11:41.920 need more participation to see a broader market movement. 0:11:42.320 --> 0:11:45.840 So what about what you're looking at next? I'm stealing 0:11:45.880 --> 0:11:48.160 this from Abigail Do a little from earlier in the show. 0:11:48.240 --> 0:11:50.040 She was saying that markets are going to be moving 0:11:50.080 --> 0:11:53.400 more on earnings than FED moves in the next couple 0:11:53.440 --> 0:11:54.560 of months. Do you agree. 0:11:54.760 --> 0:11:57.920 I think markets always move off of earnings, other than 0:11:57.960 --> 0:12:01.600 sometimes in a couple of months or weeks days. Ultimately, 0:12:01.640 --> 0:12:04.240 this is a Ben Graham one oh one. Markets moved 0:12:04.280 --> 0:12:06.560 by earnings. And I think that you will get better 0:12:06.600 --> 0:12:11.120 cash flow growth outside of AI and big tech, and 0:12:11.160 --> 0:12:14.520 that the idea of people anticipating the FED or trying 0:12:14.559 --> 0:12:17.120 to gain what the FED will do. The fed's role 0:12:17.200 --> 0:12:20.080 in market movements is way too high, and it's only 0:12:20.080 --> 0:12:22.839 a matter of when not if that reverts to more 0:12:22.880 --> 0:12:24.560 normal wing of market movement. 0:12:24.960 --> 0:12:26.600 Looking at some of your stock pics here, I see 0:12:26.600 --> 0:12:29.360 some financial services. So let's start off just kind of 0:12:29.360 --> 0:12:32.960 how you're viewing financial services. I guess that many little 0:12:33.160 --> 0:12:35.120 crisis we had in some of the regional banks that 0:12:35.160 --> 0:12:36.600 didn't scare you away from the sector. 0:12:37.040 --> 0:12:40.600 Well, we only like a couple names, and Truest is 0:12:40.640 --> 0:12:43.000 the big regional we own. But it wasn't because we 0:12:43.000 --> 0:12:44.760 weren't afraid of what happened. It's because we didn't think 0:12:44.800 --> 0:12:46.640 what happened affected Truest. 0:12:46.800 --> 0:12:48.520 Now Truest is the old Remember. 0:12:48.400 --> 0:12:52.280 BB and T and Sunrine merge together, and that's a 0:12:52.440 --> 0:12:55.080 super regional by any definition of the word. It's only 0:12:55.120 --> 0:12:57.880 a little smaller than some of those kind of cities 0:12:57.920 --> 0:13:00.480 and Bank of Americas, and it's a lot bigger than 0:13:00.520 --> 0:13:02.800 the Silicon Valleys and First Republic. So it's kind of 0:13:02.800 --> 0:13:05.200 in this no man's land, but it was being treated 0:13:05.280 --> 0:13:07.719 as a regional. It's interesting we remember when they put 0:13:07.720 --> 0:13:11.839 the deposit together to help out First Republic. Truis was 0:13:11.880 --> 0:13:13.760 one of the banks that did that. They put a 0:13:13.800 --> 0:13:16.680 billion dollars into that. They weren't in need of deposit money, 0:13:16.679 --> 0:13:19.400 they were giving deposit money. So we think truest was 0:13:19.440 --> 0:13:22.000 misunderstood in the market. Has great cash flows to get 0:13:22.000 --> 0:13:23.320 through this tough period. 0:13:23.440 --> 0:13:26.040 So I've noticed in your stock pigs none of them 0:13:26.200 --> 0:13:30.640 are super AI related at all. What do you say 0:13:30.679 --> 0:13:33.280 to clients then, who are calling in and saying, why 0:13:33.280 --> 0:13:35.080 are we not getting in on the AI rally? 0:13:35.360 --> 0:13:37.400 So I believe that the way we're investing in AI 0:13:37.480 --> 0:13:39.440 is the only way people should be invested in it, 0:13:39.440 --> 0:13:42.880 and that's with companies that actually already have incumbent businesses 0:13:42.920 --> 0:13:46.520 that make a ton of money. Broadcom, Cisco, and IBM. 0:13:46.600 --> 0:13:49.359 We own all three. Broad comes the most AI adjacent, 0:13:49.600 --> 0:13:52.520 but it's not relying on AI. Like if something were 0:13:52.559 --> 0:13:55.400 to happen that moves with AI, the whole sentiment changed 0:13:55.440 --> 0:13:59.400 and VIDIA could drop fifty percent in one day. Broadcom 0:13:59.480 --> 0:14:02.400 is far less reliant on that and yet really does 0:14:02.520 --> 0:14:06.360 have fundamental exposures. So we like the idea of hedging 0:14:06.679 --> 0:14:09.240 with cash flow with a balance sheet with a real business, 0:14:09.640 --> 0:14:14.080 and there is an AI component in oldline businesses like 0:14:14.120 --> 0:14:17.080 IBM and Cisco. It's not the most leverage, it's obviously 0:14:17.080 --> 0:14:19.280 not the most beta, but we think it's a safer 0:14:19.280 --> 0:14:20.760 way to still be exposed to AI. 0:14:21.480 --> 0:14:23.720 So we are coming up on earnings in a couple 0:14:23.720 --> 0:14:25.640 of weeks, we get the big banks kicking us off. Here, 0:14:25.720 --> 0:14:27.280 I'm looking at the S and P five hundred, the 0:14:27.280 --> 0:14:29.440 bottoms up numbers like two hundred and twenty bucks per 0:14:29.480 --> 0:14:33.360 share EPs. I've heard people, I guess not recently, but 0:14:33.360 --> 0:14:35.120 they were talking about this thing could be two hundred 0:14:35.120 --> 0:14:37.440 bucks something like that. I mean, do you still see 0:14:37.480 --> 0:14:39.280 some meaningful earnings risk in this market? 0:14:39.880 --> 0:14:42.280 I believe that if you're going to have a severe recession, 0:14:42.320 --> 0:14:45.040 it's inevitable. In fact, it's sort of a tautology. There 0:14:45.120 --> 0:14:47.720 is no recession if earnings stay at two twenty. Like 0:14:47.760 --> 0:14:51.880 by definition, a recession means corporate profits drop, and at 0:14:51.920 --> 0:14:55.280 two hundred, that would be about a reasonable expectation. I 0:14:55.280 --> 0:14:57.680 think the market priced a lot of that expectation in 0:14:57.760 --> 0:15:00.760 last year. Remember we were at one point looking forward 0:15:00.840 --> 0:15:03.760 at what's two fifty or so, and so I don't 0:15:03.800 --> 0:15:06.520 think that it is the most likely scenario to happen. 0:15:06.520 --> 0:15:09.160 I think there's been a lot of earnings resilience, But 0:15:09.720 --> 0:15:11.760 the problem is the way the market's set up now, 0:15:11.760 --> 0:15:14.840 it's really dependent on one or two sectors and you 0:15:14.920 --> 0:15:18.320 could have earnings an aggregate that hold in there, but 0:15:18.480 --> 0:15:21.080 the impact sector by sector is very different. 0:15:21.520 --> 0:15:24.800 What needs to happen to change that, to change that 0:15:24.960 --> 0:15:28.080 dynamic of just the narrow rally that we've seen in 0:15:28.120 --> 0:15:28.520 the S and P. 0:15:28.960 --> 0:15:31.480 Yeah, it's inevitable, it happened, but it's going to be 0:15:31.480 --> 0:15:33.520 when the FED is not our number one story, when 0:15:33.520 --> 0:15:36.160 everyone isn't just sitting around waiting on the words of 0:15:36.200 --> 0:15:40.160 a press conference with Jpal, that'll ultimately be what changes it. 0:15:40.200 --> 0:15:42.640 And you know, I don't think it's good for index 0:15:42.680 --> 0:15:45.800 investors if we go into the next phase nineteen or 0:15:45.800 --> 0:15:48.920 twenty times forward earnings. You'd rather be at sixteen or 0:15:48.960 --> 0:15:52.240 seventeen forward and even that's not cheap. But to go 0:15:52.440 --> 0:15:56.760 into the next phase already above average valuation, I think 0:15:56.760 --> 0:15:59.440 it would be a difficult place to start at. We 0:15:59.560 --> 0:16:01.680 just prefer be much more selective and we run a 0:16:01.720 --> 0:16:03.200 really concentrated portfolio. 0:16:03.800 --> 0:16:07.000 Are you so concentrate portfolio? Define what that means for you? 0:16:07.040 --> 0:16:07.320 Guys? 0:16:07.400 --> 0:16:09.400 We have right now thirty three stocks. I've never had 0:16:09.480 --> 0:16:11.640 less than twenty five. I've never had more than thirty five. 0:16:11.760 --> 0:16:14.560 But that's not by design. If we had fifty companies 0:16:14.640 --> 0:16:16.800 that met our criteria, we may own fifty, but it's 0:16:16.800 --> 0:16:17.720 always right around third. 0:16:17.760 --> 0:16:19.360 How much cash do you have right now? 0:16:19.360 --> 0:16:21.320 We have about three percent. We don't usually like to 0:16:21.400 --> 0:16:24.080 run more, clients pay us to get them risk premia, 0:16:24.200 --> 0:16:26.080 but we have cash right now just from a sale 0:16:26.120 --> 0:16:27.880 position that we haven't replaced. 0:16:28.440 --> 0:16:31.280 And how many tech names would you say are in 0:16:31.320 --> 0:16:31.840 there right now? 0:16:31.880 --> 0:16:33.880 See, I don't think that the cool kids would consider 0:16:33.920 --> 0:16:36.800 these tech names, but Cisco, Broadcom, I do. 0:16:37.640 --> 0:16:38.640 Those are tech names. 0:16:38.680 --> 0:16:41.920 But if it's not a dividend growing, cash flow generative name, 0:16:41.960 --> 0:16:45.080 which takes out Fang, it takes out Nvidia, AI, the 0:16:45.400 --> 0:16:48.240 Big six seven, even Microsoft, they just quit growing the 0:16:48.280 --> 0:16:50.880 divid in relative to the valuation they had, so we 0:16:50.960 --> 0:16:54.160 sold that years ago. So whether it's new tech or 0:16:54.160 --> 0:16:57.240 even some of those old tech names, Apple and Microsoft 0:16:57.280 --> 0:16:59.120 both should be two of the biggest divid and growing 0:16:59.200 --> 0:16:59.880 names in history. 0:17:00.040 --> 0:17:02.200 That's what I've been saying. I mean, like Apple, and 0:17:02.240 --> 0:17:03.960 I say this to all the tech investors and they 0:17:03.960 --> 0:17:06.199 push back on me, But I mean they have a 0:17:06.240 --> 0:17:08.520 yield less than one percent in dividend. You'll you know, 0:17:08.560 --> 0:17:10.600 they got a gajillion dollars with a cash said ninety 0:17:10.600 --> 0:17:13.159 two hundred million dollars of free cash. So yes, I 0:17:13.240 --> 0:17:15.400 know they buy back stock, but a lot of that's 0:17:15.440 --> 0:17:17.560 just just to cover the options that that that you're issuing. 0:17:17.800 --> 0:17:19.359 Why do you think they don't have a three three 0:17:19.400 --> 0:17:20.560 and a half percent dividend yield? 0:17:20.680 --> 0:17:20.840 Oh? 0:17:20.880 --> 0:17:23.360 I think it is purely an ego issue in silicon 0:17:23.440 --> 0:17:25.960 value where they believe, like the reason people push back 0:17:25.960 --> 0:17:28.639 with you is tech investors believe that they can invest 0:17:28.640 --> 0:17:30.439 the money better than we can, and they can do 0:17:30.520 --> 0:17:33.320 a point, but there's a diminishing return. That's why diving 0:17:33.359 --> 0:17:35.600 and growth is so important for shareholders. At some point, 0:17:35.640 --> 0:17:38.760 the c suite starts doing dumb things. Now, Apple makes 0:17:38.760 --> 0:17:41.040 so much money they got away with it. My example 0:17:41.119 --> 0:17:43.800 years ago is they bought doctor Dre's headphone company for 0:17:43.840 --> 0:17:47.480 three billion dollars. It wasn't worth eight hundred million, soaking wet. 0:17:47.720 --> 0:17:49.639 Now for a normal company to throw two two and 0:17:49.680 --> 0:17:51.879 a half billion in the trash can, that'd be a problem. 0:17:52.000 --> 0:17:54.280 For Apple, it didn't matter. But that's the kind of 0:17:54.400 --> 0:17:57.240 bad deals companies do when they're not returning cash. 0:17:57.320 --> 0:17:59.000 So give me a name in your portfolio that is 0:17:59.040 --> 0:18:01.680 a good dividing growth story that you guys own. 0:18:01.520 --> 0:18:04.320 For all thirty three days at our portfolio, good dividend 0:18:04.320 --> 0:18:07.120 growing names. But you look at the consumer staples, You're 0:18:07.200 --> 0:18:11.160 Johnson Johnson's, Procter Gambles, Pepsi's Coreox. They could bore people 0:18:11.160 --> 0:18:13.560 to death. They've had the best pricing power of any 0:18:13.560 --> 0:18:17.840 sector through this period of time. Their top line sales 0:18:17.840 --> 0:18:20.000 have either come down or stayed flat, and yet profits 0:18:20.000 --> 0:18:22.919 are up anywhere from seven to fifteen percent. You have 0:18:23.080 --> 0:18:25.520 a lot of dividend growth embedded in that sector. And 0:18:25.520 --> 0:18:29.840 then energy, the midstream pipelines are growing dividends double digits 0:18:29.920 --> 0:18:32.520 and they're less levered now than they were when they started. 0:18:32.920 --> 0:18:35.800 So we really like that midstream energy for divid and growth. 0:18:36.160 --> 0:18:39.600 Any discretionary names in our final couple of seconds together. 0:18:39.440 --> 0:18:41.400 See this is a funny thing is I've only owned 0:18:41.440 --> 0:18:44.200 what I consider one consumer discretionary name my whole career, 0:18:44.240 --> 0:18:45.159 and it's McDonald's. 0:18:45.160 --> 0:18:45.800 But I'm not sure. 0:18:46.000 --> 0:18:48.280 I'm not sure it's really a consumer dissive. I think 0:18:48.320 --> 0:18:50.240 it's a staatepoint. I think you have to own those 0:18:50.440 --> 0:18:52.720 you have to buy those French fries, and it's really 0:18:52.760 --> 0:18:53.719 a real estate company. 0:18:53.720 --> 0:18:54.760 At the end of the day. 0:18:54.400 --> 0:18:57.320 Oh yeah, exactly. And I learned that from watching the movie. 0:18:57.560 --> 0:18:59.560 Oh yeah, yeah, that's I learned. I didn't know that. 0:18:59.600 --> 0:19:01.119 It made it a ton of sense. You're not in 0:19:01.119 --> 0:19:03.760 the hamburger business, You're in the real estate. So go 0:19:03.800 --> 0:19:05.959 all right, David, thanks so much for joining us. David Boston, 0:19:06.000 --> 0:19:09.119 he's the CIO of the Boson Group. I like the 0:19:09.119 --> 0:19:13.480 strategy of you know, consolidated portfolio and looking at dividends. 0:19:13.520 --> 0:19:15.439 I mean, that's something you can get your head around. 0:19:16.240 --> 0:19:17.720 Where do that takes you? I don't know, but it 0:19:17.760 --> 0:19:19.760 takes you to some of those big staples as well. 0:19:20.240 --> 0:19:23.359 You're listening to the tape. Cat's are live program Bloomberg 0:19:23.400 --> 0:19:27.000 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:19:27.080 --> 0:19:30.280 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:19:30.320 --> 0:19:33.160 You can also listen live on Amazon Alexa from our 0:19:33.160 --> 0:19:39.240 flagship New York station, Just say Alexa, play Bloomberg eleven thirty. 0:19:39.320 --> 0:19:41.800 Madison Olds, and Paul Smitty here in our Bloomberg Interactive 0:19:41.840 --> 0:19:45.440 Broker's studio. You can check out the live stream on YouTube. 0:19:45.480 --> 0:19:49.200