Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller.
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Speaker 1: Ukraine Russia. Boy, we did not see this coming over
Speaker 1: the weekend, or at least I didn't. We need to
Speaker 1: figure out what's happening over there, so we asked to
Speaker 1: get two of our smarter voices over in that part
Speaker 1: of the world. Maria Today, European correspondent for Bloomberg Knows,
Speaker 1: and Leonid Brashitski, calumnist with Bloomberg Opinion. Maria, thanks so
Speaker 1: much for taking the time. I know you're extremely busy today.
Speaker 1: I tell you, it feels like the world knows almost
Speaker 1: nothing about what did happen over the weekend. What is happening?
Speaker 1: What's the latest reporting about what's going on in Russia?
Speaker 3: Yes, and it's very difficult to tell because well, the Kremlin,
Speaker 3: on the one hand, has gone radio silent since Saturday morning.
Speaker 3: That's the last time we saw from Vladimir put And
Speaker 3: talk about this situation. It was interesting that at the
Speaker 3: time the language that he used he basically said Pegasian
Speaker 3: was carrying out with his treason. At one point he
Speaker 3: didn't mention him by name, but he did say it
Speaker 3: echoed nineteen seventeen, which obviously is a crucial date for
Speaker 3: Russian history.
Speaker 4: Today, we have seen the Kremlin to.
Speaker 3: Some extent, trying to take back as some of the
Speaker 3: narrative we did see Vladimir Putin, but almost and a
Speaker 3: topic completely unrelated to this, almost suggesting it's business as usual.
Speaker 3: We had also some tape video footage from the Russian
Speaker 3: Defense Minister Sergei Shoigu. I mean, a lot of the
Speaker 3: tensions with Pegashiin and Wagner had stamped because of his
Speaker 3: criticism in terms of the way that the Russian mod
Speaker 3: was carrying out were operations. So the message would be
Speaker 3: that sure was still in his job and it continues
Speaker 3: to do his job. But again the question is, how
Speaker 3: do we know if this footage was filmed today? This
Speaker 3: is all happening today, And of course I've seen that
Speaker 3: in the past Russia can be very good at just
Speaker 3: putting out a message on tape and footage and comments,
Speaker 3: pictures of things that are not happening in the moment
Speaker 3: but are already pre recorded.
Speaker 4: They just put the map because it suits a narrative
Speaker 4: to me.
Speaker 3: The real takeaway, however, is that today you see Russian's
Speaker 3: state media suggesting that this idea that there would be amnesty,
Speaker 3: that there would be no charges into Prigotten or even Wagner,
Speaker 3: that a lot of that had been part.
Speaker 4: Of a deal broker by Alexander Rokashenka.
Speaker 3: Remember he's the head of Belarus who the international community
Speaker 3: doesn't really recognize because they say he rigged the twenty
Speaker 3: twenty election, but nonetheless remains an ally, a transactional ally.
Speaker 3: I would say to Russia again, the terms of that
Speaker 3: deal that was brokeer to diffuse the situation now are
Speaker 3: being called into question. And there's a lot of questions
Speaker 3: too in terms of what is going to happen to Wagner,
Speaker 3: but also where is Pregauson.
Speaker 4: The idea is that he would be.
Speaker 3: On his way to Belarus, but we've had no indication
Speaker 3: that he's arrived here.
Speaker 5: All right, well, let's bring lean it into the conversation here.
Speaker 5: Leanid Burshitski, Thanks for getting on a call with us.
Speaker 5: Talk to me about what this tells us about Putin's
Speaker 5: control and specifically his popularity with the Russian people.
Speaker 6: Well, his control is not really in question. If there's
Speaker 6: actually a deal with pre version, such a deal could
Speaker 6: not have been engineered without Puttin's consent, Putting's permission, or
Speaker 6: putting participation somehow in the like deciding what should happen.
Speaker 6: His actual power isn't question though, because when you ask,
Speaker 6: the mutiny unfolded, nobody really made a serious move to
Speaker 6: defemp Putting and to stop the mutineers. A lot of
Speaker 6: people prefer loyalty, but nobody actually do anything to stop them.
Speaker 6: So it's a twofold situation in terms of, you know,
Speaker 6: whether whether Putting is still in control or not. He's
Speaker 6: still able to engineer deals. You know, people, the bureaucracy,
Speaker 6: the government apparatus still abasing, clearly, but nobody will go
Speaker 6: out of their way to send them against an armed threat.
Speaker 1: Maria, Is there any feeling or consensus building after the
Speaker 1: weekend about what this may mean for the actual war
Speaker 1: on the ground in Ukraine? Does this strengthen at all
Speaker 1: the Ukrainian position well.
Speaker 3: Actually, we just heard from the head of Nature of
Speaker 3: the Secretary General Staltenberg, who had what is to me
Speaker 3: a subtle maybe not even a subtle dick, but just
Speaker 3: criticism the operation in Russian just seeing the chaos that
Speaker 3: we saw play out over the past for eight hours.
Speaker 3: This is exactly what happens when you hire mercenaries, the
Speaker 3: people that will fight for money to fight you war.
Speaker 3: And again he said, this pointed to weakness in the
Speaker 3: way that Russia has conducted this operation.
Speaker 4: And this idea that the war would be easy to win.
Speaker 3: It's obviously by no means the reality now we've seen
Speaker 3: a play out for more than a year and a half.
Speaker 3: Anything that is chaos internally for Russia, the Ukrainians would
Speaker 3: perceive it as good for them. But again, one of
Speaker 3: the things that I would stress, however, is that for
Speaker 3: a lot of the European officials, especially the ones that
Speaker 3: I was on the phone with yesterday, what they say
Speaker 3: is that you have to be very clear here, precaussion
Speaker 3: is not an ally to the West. It's not again,
Speaker 3: if there had been a coup or put had been overthrown,
Speaker 3: that things of Russia would be better. If anything, you
Speaker 3: could argue there could be more hardliners that could come
Speaker 3: in and the situation could become even more destable.
Speaker 4: And this is a country that still holds nuclear weapons.
Speaker 3: I think at this point, does it help the Ukrainians
Speaker 3: in terms of the symbolic nature of this for them?
Speaker 3: They say yes, because again it goes back to this
Speaker 3: idea that Latimer Putting is not invincible, that this myth
Speaker 3: that the KJB man is a myth extent, but will
Speaker 3: play out on the battlefield, and will they help them logistically?
Speaker 4: I think that is very very early to tell. And
Speaker 4: again when I.
Speaker 3: Spoke to the Ukraine and Prime Minister last week, he
Speaker 3: did say to me, look, this is not a Hollywood movie.
Speaker 3: It's not that things happen and changed from one day
Speaker 3: to another. A counter offensive counts with many different operations.
Speaker 3: Will it change something substantially on the battlefield ass of today?
Speaker 4: I think that's overly or an overly stretch. But again
Speaker 4: it goes back to this idea, at least.
Speaker 3: For NATO today, reinforcing this message that whatever happens internally
Speaker 3: in Russia, for NATO you have to help Ukraine. That's
Speaker 3: what Stottenburg said, and at this point maintain that support.
Speaker 5: Well, leonet on that I wonder to what extent you
Speaker 5: feel that Putin's authority had already been undermined based on
Speaker 5: his performance and conduct within the Ukraine invasion.
Speaker 6: Well, it's clear that his authority has been undermined by this,
Speaker 6: but by having to actually make a deal with people
Speaker 6: who are station open revolt. But whether that affects the
Speaker 6: events on the battlefield is another a different matter. The
Speaker 6: Russian generals coordinating the Russian resistance to the Ukrainian Culter
Speaker 6: offensive out of the headquarters in Rostov actually continued as
Speaker 6: if nothing had happened, even as the Wagner fighters were
Speaker 6: patrolling the perimeter. So it's not as if some sort
Speaker 6: of anti war force threatened to overthrow Putting. The Precaussian
Speaker 6: is firmly in the pro war camp, even if he
Speaker 6: questions the motives that led to the war being started,
Speaker 6: Like whatever happens to Putting personally, whether that ends the
Speaker 6: war is an open question.
Speaker 1: Lean, what do you expect I guess the next thing
Speaker 1: we will hear from mister Putin? What do you expect
Speaker 1: him to do next?
Speaker 6: What do I expect Putin to do? He hasn't really
Speaker 6: been doing much lately, he's kind of been weighing in
Speaker 6: wait on letting the letting the military do their job.
Speaker 6: He really has kept out of the action to such
Speaker 6: a degree that the sort of the ultra nationalist contingent
Speaker 6: in Russia is questioning whether he's still around or you know,
Speaker 6: the Kremlin is being run by a double So what's
Speaker 6: she gonna what's she gonna do next? Nothing?
Speaker 1: Okay? H and Maria just so quickly, mister Pregosian doing
Speaker 1: what do we know about him? His whereabouts?
Speaker 4: And yeah, sorry, at this point it's not clear. It's
Speaker 4: not clear at all.
Speaker 3: And and in fact, this morning on the show, we
Speaker 3: spoke with Spilan, who was the again. Remember she challenged
Speaker 3: uh in the twenty twenty election, again which the Internet
Speaker 3: community says was rigged, and that lukashenk A rigged in
Speaker 3: twenty twenty four himself so that he was a winner.
Speaker 4: The one thing she said is that frankly, this should
Speaker 4: not be.
Speaker 3: A problem for Belarus to deal with, that this is
Speaker 3: an independent of sovereign country and theory and they should
Speaker 3: not be dealing with which she said or quote sucks.
Speaker 3: But of course a lot of the focus will now
Speaker 3: be unaware, is he But also what kind of reception
Speaker 3: and treatment will he get from Lukashenka. One of the
Speaker 3: things that I thought was interesting from Tigeroskaya is that
Speaker 3: she said he's not.
Speaker 4: Really been a mediator.
Speaker 3: He probably just passed on a message for Vladimir Putting
Speaker 3: and he will treat and do with Privashin whatever Button
Speaker 3: tells him he needs to do next.
Speaker 1: All right, Maria, thank you so much for joining us.
Speaker 1: We know you're busy. Maria today European correspondent for Bloomberg
Speaker 1: News and lead in Brashitski. He's a calmnist for Bloomberg Opinion,
Speaker 1: spent a lot of time in Moscow. He's done a
Speaker 1: lot of work with in Ukraine as well, So really informed.
Speaker 1: A couple of voices there, and Maddie, I guess you know,
Speaker 1: we're like the rest of the world, just kind of
Speaker 1: waiting to see what kind of news or what kind
Speaker 1: of information will be disclosed about what really happened over
Speaker 1: the weekend and what it means for mister Putin going forward.
Speaker 1: So but again we had two very very good voices here,
Speaker 1: well informed to give us a little bit of perspective here,
Speaker 1: but again a lot more needs to be learned here.
Speaker 7: You're listening to the team Ken's are live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot com,
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Speaker 1: Joining us here in our Bloomberg Interactive Broker Studio, which
Speaker 1: means he's live on YouTube as well, because you know
Speaker 1: we YouTube stream this thing. Oh yeahs if you can
Speaker 1: go to you cross platform, thank you. That's a good
Speaker 1: like multimedia thing. Yeah, you just have to go to
Speaker 1: YouTube and search Bloomberg Global News you and you'll get
Speaker 1: that stream. David, thanks so much for joining us here. Again.
Speaker 1: Kind of a markets year to date that hasn't The
Speaker 1: indexes look good. The numbers kind of look good, but
Speaker 1: if you didn't own a handful of stocks, you're you're lagging.
Speaker 1: How do you think about the first half and kind
Speaker 1: of how the market performed, and what do you think
Speaker 1: about for second half of the year.
Speaker 8: Yeah, there's only.
Speaker 9: Two precedents where I've seen it where the cap weighted
Speaker 9: index was so good from such a few amount of companies,
Speaker 9: and that was in nineteen ninety nine. In that period
Speaker 9: in twenty twenty and it never ever ever ends. Well,
Speaker 9: you look at the equal weighted S and P on
Speaker 9: the year, it's a totally different story. Now people can say,
Speaker 9: I don't care, I don't ownly equal weighted S and P.
Speaker 9: So as long if it's six companies carrying the index
Speaker 9: and I own the index, I'm fine. But the problem
Speaker 9: with that, of course, is it's unsustainable. Markets are mean
Speaker 9: reverting things. This will revert to the mean. You will
Speaker 9: need more participation to see a broader market movement.
Speaker 5: So what about what you're looking at next? I'm stealing
Speaker 5: this from Abigail Do a little from earlier in the show.
Speaker 5: She was saying that markets are going to be moving
Speaker 5: more on earnings than FED moves in the next couple
Speaker 5: of months. Do you agree.
Speaker 9: I think markets always move off of earnings, other than
Speaker 9: sometimes in a couple of months or weeks days. Ultimately,
Speaker 9: this is a Ben Graham one oh one. Markets moved
Speaker 9: by earnings. And I think that you will get better
Speaker 9: cash flow growth outside of AI and big tech, and
Speaker 9: that the idea of people anticipating the FED or trying
Speaker 9: to gain what the FED will do. The fed's role
Speaker 9: in market movements is way too high, and it's only
Speaker 9: a matter of when not if that reverts to more
Speaker 9: normal wing of market movement.
Speaker 1: Looking at some of your stock pics here, I see
Speaker 1: some financial services. So let's start off just kind of
Speaker 1: how you're viewing financial services. I guess that many little
Speaker 1: crisis we had in some of the regional banks that
Speaker 1: didn't scare you away from the sector.
Speaker 9: Well, we only like a couple names, and Truest is
Speaker 9: the big regional we own. But it wasn't because we
Speaker 9: weren't afraid of what happened. It's because we didn't think
Speaker 9: what happened affected Truest.
Speaker 1: Now Truest is the old Remember.
Speaker 9: BB and T and Sunrine merge together, and that's a
Speaker 9: super regional by any definition of the word. It's only
Speaker 9: a little smaller than some of those kind of cities
Speaker 9: and Bank of Americas, and it's a lot bigger than
Speaker 9: the Silicon Valleys and First Republic. So it's kind of
Speaker 9: in this no man's land, but it was being treated
Speaker 9: as a regional. It's interesting we remember when they put
Speaker 9: the deposit together to help out First Republic. Truis was
Speaker 9: one of the banks that did that. They put a
Speaker 9: billion dollars into that. They weren't in need of deposit money,
Speaker 9: they were giving deposit money. So we think truest was
Speaker 9: misunderstood in the market. Has great cash flows to get
Speaker 9: through this tough period.
Speaker 5: So I've noticed in your stock pigs none of them
Speaker 5: are super AI related at all. What do you say
Speaker 5: to clients then, who are calling in and saying, why
Speaker 5: are we not getting in on the AI rally?
Speaker 9: So I believe that the way we're investing in AI
Speaker 9: is the only way people should be invested in it,
Speaker 9: and that's with companies that actually already have incumbent businesses
Speaker 9: that make a ton of money. Broadcom, Cisco, and IBM.
Speaker 9: We own all three. Broad comes the most AI adjacent,
Speaker 9: but it's not relying on AI. Like if something were
Speaker 9: to happen that moves with AI, the whole sentiment changed
Speaker 9: and VIDIA could drop fifty percent in one day. Broadcom
Speaker 9: is far less reliant on that and yet really does
Speaker 9: have fundamental exposures. So we like the idea of hedging
Speaker 9: with cash flow with a balance sheet with a real business,
Speaker 9: and there is an AI component in oldline businesses like
Speaker 9: IBM and Cisco. It's not the most leverage, it's obviously
Speaker 9: not the most beta, but we think it's a safer
Speaker 9: way to still be exposed to AI.
Speaker 1: So we are coming up on earnings in a couple
Speaker 1: of weeks, we get the big banks kicking us off. Here,
Speaker 1: I'm looking at the S and P five hundred, the
Speaker 1: bottoms up numbers like two hundred and twenty bucks per
Speaker 1: share EPs. I've heard people, I guess not recently, but
Speaker 1: they were talking about this thing could be two hundred
Speaker 1: bucks something like that. I mean, do you still see
Speaker 1: some meaningful earnings risk in this market?
Speaker 9: I believe that if you're going to have a severe recession,
Speaker 9: it's inevitable. In fact, it's sort of a tautology. There
Speaker 9: is no recession if earnings stay at two twenty. Like
Speaker 9: by definition, a recession means corporate profits drop, and at
Speaker 9: two hundred, that would be about a reasonable expectation. I
Speaker 9: think the market priced a lot of that expectation in
Speaker 9: last year. Remember we were at one point looking forward
Speaker 9: at what's two fifty or so, and so I don't
Speaker 9: think that it is the most likely scenario to happen.
Speaker 9: I think there's been a lot of earnings resilience, But
Speaker 9: the problem is the way the market's set up now,
Speaker 9: it's really dependent on one or two sectors and you
Speaker 9: could have earnings an aggregate that hold in there, but
Speaker 9: the impact sector by sector is very different.
Speaker 5: What needs to happen to change that, to change that
Speaker 5: dynamic of just the narrow rally that we've seen in
Speaker 5: the S and P.
Speaker 9: Yeah, it's inevitable, it happened, but it's going to be
Speaker 9: when the FED is not our number one story, when
Speaker 9: everyone isn't just sitting around waiting on the words of
Speaker 9: a press conference with Jpal, that'll ultimately be what changes it.
Speaker 9: And you know, I don't think it's good for index
Speaker 9: investors if we go into the next phase nineteen or
Speaker 9: twenty times forward earnings. You'd rather be at sixteen or
Speaker 9: seventeen forward and even that's not cheap. But to go
Speaker 9: into the next phase already above average valuation, I think
Speaker 9: it would be a difficult place to start at. We
Speaker 9: just prefer be much more selective and we run a
Speaker 9: really concentrated portfolio.
Speaker 1: Are you so concentrate portfolio? Define what that means for you?
Speaker 7: Guys?
Speaker 9: We have right now thirty three stocks. I've never had
Speaker 9: less than twenty five. I've never had more than thirty five.
Speaker 9: But that's not by design. If we had fifty companies
Speaker 9: that met our criteria, we may own fifty, but it's
Speaker 9: always right around third.
Speaker 1: How much cash do you have right now?
Speaker 9: We have about three percent. We don't usually like to
Speaker 9: run more, clients pay us to get them risk premia,
Speaker 9: but we have cash right now just from a sale
Speaker 9: position that we haven't replaced.
Speaker 5: And how many tech names would you say are in
Speaker 5: there right now?
Speaker 9: See, I don't think that the cool kids would consider
Speaker 9: these tech names, but Cisco, Broadcom, I do.
Speaker 1: Those are tech names.
Speaker 9: But if it's not a dividend growing, cash flow generative name,
Speaker 9: which takes out Fang, it takes out Nvidia, AI, the
Speaker 9: Big six seven, even Microsoft, they just quit growing the
Speaker 9: divid in relative to the valuation they had, so we
Speaker 9: sold that years ago. So whether it's new tech or
Speaker 9: even some of those old tech names, Apple and Microsoft
Speaker 9: both should be two of the biggest divid and growing
Speaker 9: names in history.
Speaker 1: That's what I've been saying. I mean, like Apple, and
Speaker 1: I say this to all the tech investors and they
Speaker 1: push back on me, But I mean they have a
Speaker 1: yield less than one percent in dividend. You'll you know,
Speaker 1: they got a gajillion dollars with a cash said ninety
Speaker 1: two hundred million dollars of free cash. So yes, I
Speaker 1: know they buy back stock, but a lot of that's
Speaker 1: just just to cover the options that that that you're issuing.
Speaker 1: Why do you think they don't have a three three
Speaker 1: and a half percent dividend yield?
Speaker 7: Oh?
Speaker 9: I think it is purely an ego issue in silicon
Speaker 9: value where they believe, like the reason people push back
Speaker 9: with you is tech investors believe that they can invest
Speaker 9: the money better than we can, and they can do
Speaker 9: a point, but there's a diminishing return. That's why diving
Speaker 9: and growth is so important for shareholders. At some point,
Speaker 9: the c suite starts doing dumb things. Now, Apple makes
Speaker 9: so much money they got away with it. My example
Speaker 9: years ago is they bought doctor Dre's headphone company for
Speaker 9: three billion dollars. It wasn't worth eight hundred million, soaking wet.
Speaker 9: Now for a normal company to throw two two and
Speaker 9: a half billion in the trash can, that'd be a problem.
Speaker 9: For Apple, it didn't matter. But that's the kind of
Speaker 9: bad deals companies do when they're not returning cash.
Speaker 1: So give me a name in your portfolio that is
Speaker 1: a good dividing growth story that you guys own.
Speaker 9: For all thirty three days at our portfolio, good dividend
Speaker 9: growing names. But you look at the consumer staples, You're
Speaker 9: Johnson Johnson's, Procter Gambles, Pepsi's Coreox. They could bore people
Speaker 9: to death. They've had the best pricing power of any
Speaker 9: sector through this period of time. Their top line sales
Speaker 9: have either come down or stayed flat, and yet profits
Speaker 9: are up anywhere from seven to fifteen percent. You have
Speaker 9: a lot of dividend growth embedded in that sector. And
Speaker 9: then energy, the midstream pipelines are growing dividends double digits
Speaker 9: and they're less levered now than they were when they started.
Speaker 9: So we really like that midstream energy for divid and growth.
Speaker 5: Any discretionary names in our final couple of seconds together.
Speaker 9: See this is a funny thing is I've only owned
Speaker 9: what I consider one consumer discretionary name my whole career,
Speaker 9: and it's McDonald's.
Speaker 5: But I'm not sure.
Speaker 9: I'm not sure it's really a consumer dissive. I think
Speaker 9: it's a staatepoint. I think you have to own those
Speaker 9: you have to buy those French fries, and it's really
Speaker 9: a real estate company.
Speaker 10: At the end of the day.
Speaker 1: Oh yeah, exactly. And I learned that from watching the movie.
Speaker 1: Oh yeah, yeah, that's I learned. I didn't know that.
Speaker 1: It made it a ton of sense. You're not in
Speaker 1: the hamburger business, You're in the real estate. So go
Speaker 1: all right, David, thanks so much for joining us. David Boston,
Speaker 1: he's the CIO of the Boson Group. I like the
Speaker 1: strategy of you know, consolidated portfolio and looking at dividends.
Speaker 1: I mean, that's something you can get your head around.
Speaker 1: Where do that takes you? I don't know, but it
Speaker 1: takes you to some of those big staples as well.
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Speaker 1: Madison Olds, and Paul Smitty here in our Bloomberg Interactive
Speaker 1: Broker's studio. You can check out the live stream on YouTube.
Speaker 1: Just go to YouTube and search Bloomberg Global News. A
Speaker 1: little Bit of a Merger Monday. Here, Maddie. I mean,
Speaker 1: not a big deal, but it's in tech, so it
Speaker 1: kind of got my attention. It's IBM there buying app
Speaker 1: to you for four point six billion dollars in an
Speaker 1: Audi nation. Push here, but just give you some perspective.
Speaker 1: IBM's got a market cap about one hundred and twenty
Speaker 1: billion dollars, so not a huge deal. But let's get
Speaker 1: see what it means for our good friends in Armack,
Speaker 1: New York, if that's even where they still are located.
Speaker 1: Ana rog Rana, I know where he is. He's in
Speaker 1: Bloomberg Chicago office, Happy camper in Chicago. He's a tech
Speaker 1: on als for Bloomberg Intelligence. He's been covering IBM and
Speaker 1: this space for a long time. Anurak, thanks for joining
Speaker 1: us here. What is IBM buying here?
Speaker 10: Yeah, this is a very small company. I think from
Speaker 10: a logical point of view, IBM make a very big
Speaker 10: push on hybrid cloud with the acquisition of red Hat
Speaker 10: many years ago. This product kind of goes along with it.
Speaker 10: If you are a company, let's say you Pepsi and
Speaker 10: Coca Cola, you have a very old IT architecture, which
Speaker 10: is all your products or workloads are on premise and
Speaker 10: you want to move some of them to the cloud.
Speaker 10: This product helps you figure out, you know, whether some
Speaker 10: products are better off you keep it in house, and
Speaker 10: whether some workloads are better if you So it's like
Speaker 10: a cost stoppization product. And in this market where every
Speaker 10: every company wants to save more costs on technology, this
Speaker 10: is this is you know, that fits right in with that.
Speaker 5: And Ana, we've talked a lot about the challenges of
Speaker 5: getting any deals done right now. Why is IBM one
Speaker 5: of the few tech companies that's been able to get
Speaker 5: a deal done in this environment?
Speaker 10: Yeah, I mean we have been writing about this for
Speaker 10: some time that we think they are only a handful
Speaker 10: of public companies who can make some deals. And you know,
Speaker 10: IBM being such a small compare to like the likes
Speaker 10: of Microsoft or Google or Apple or Facebook. I mean,
Speaker 10: this is this is a you know, this is the
Speaker 10: only one that can make a deal right now other
Speaker 10: than private equity firms. I mean, they're really having a
Speaker 10: ball out there with you know, chief funding as well
Speaker 10: as valuations in the software world going down. So IBM
Speaker 10: is one of the few ones I can do it.
Speaker 10: And then and as Paul mentioned, you know four point
Speaker 10: six billion dollars is not a whole lot of money.
Speaker 10: The company didn't divulge there financials, but we think the
Speaker 10: revenue run rate would be somewhere between four hundred to
Speaker 10: five hundred million, given that apt Yeo was public three
Speaker 10: years ago, so if you extrapolate that, so from that point,
Speaker 10: it's you know, it's going to be less than one
Speaker 10: percent of IBM's sales from a contribution point of view,
Speaker 10: so it's a very small deal, frankly.
Speaker 1: So I'm looking at the stock of IBM here on
Speaker 1: Rock I see the stocks down about seven and a
Speaker 1: half percent year today, So it's clearly not getting the
Speaker 1: AI love a lot that a lot of other tech
Speaker 1: names have. Why is that because they're not an AI
Speaker 1: play or how does a company kind of try to
Speaker 1: position itself there.
Speaker 10: Yeah, I'm a bit surprised that they haven't been you know,
Speaker 10: they haven't gotten any love where a lot of company
Speaker 10: like C three AI have seen their stock go up
Speaker 10: I don't know, two hundred three hundred percent or so.
Speaker 10: IBM actually is one of the first ones to come
Speaker 10: up with AI products with the Watson suite over the
Speaker 10: last ten years, and you know, it really was difficult
Speaker 10: to commercialize some of those products because of the difficulty
Speaker 10: in you know, implementing those in the enterprise or the
Speaker 10: corporate world. And then I'm sorry price that they haven't
Speaker 10: gotten any left. Those products are still there. People are
Speaker 10: going to use them as they come up with their
Speaker 10: AI strategy. It also has a good consulting arm, which
Speaker 10: is very required. I think they really need to market
Speaker 10: themselves a little bit better over the next twelve months
Speaker 10: with some of the products that they have and perhaps
Speaker 10: you know, people will look at as them as another
Speaker 10: player in the market.
Speaker 5: Do you think within that marketing they need to have
Speaker 5: a certain number of AI word counts.
Speaker 10: Basically, I think they already you know, kind of used
Speaker 10: all of that in the last ten years with Watson,
Speaker 10: and since nothing came out of it, people are not
Speaker 10: People don't believe that they can do anything in that area.
Speaker 10: And I don't really believe that because they have very
Speaker 10: good They work with almost every major company out there,
Speaker 10: so if you want to try something new, I mean,
Speaker 10: you're going to give it a try. With their products
Speaker 10: as well, I think I think there is a lot
Speaker 10: of consumer use that's easy to figure out, and IBM
Speaker 10: is not a consumer play, frankly, and that's partially the
Speaker 10: reason why you get more visibility from the likes of
Speaker 10: Microsoft and what it's doing with bing or Excel and
Speaker 10: you know, Google and others, rather than you know, the
Speaker 10: likes of IBM.
Speaker 1: So anag you and men Deep Singh lead our global
Speaker 1: technology coverage for Bloomberg Intelligence. And of course one of
Speaker 1: the biggest issues out there for investors is a I
Speaker 1: how are you and the technology team at BI suggesting
Speaker 1: investors really play this at this stage.
Speaker 10: See I think over the next twelve months it's going
Speaker 10: to be a lot of weight and watch things. I
Speaker 10: think the first applications, as I said, would be more
Speaker 10: on the search side. We're going to really see what
Speaker 10: Microsoft does with you know, getting some search market share
Speaker 10: over the next twelve months. That's really that I think
Speaker 10: the first area that we have to see. Then you
Speaker 10: have cloud investments going in. Companies are going to do
Speaker 10: test environments in you know, one of the larger cloud providers,
Speaker 10: whether that's Microsoft, Amazon or Google, to come up with
Speaker 10: new applications. So it's going to be a steady progress.
Speaker 10: But this is this is one place I think over
Speaker 10: then and then you know, moniep and I have done
Speaker 10: some work on it. We have published a big report
Speaker 10: on this topic. We think this is really going to
Speaker 10: support very strong tech spending over the next decade.
Speaker 5: What is that tech spending looking like?
Speaker 10: I think, you know, if you go back historically, technology
Speaker 10: spending has you know, been somewhere around five to seven percent,
Speaker 10: with software being the bigger portion of it with ten
Speaker 10: to twelve percent. But we think, you know, this thing
Speaker 10: supports that level of growth with more spending going towards
Speaker 10: software and less on the you could say services side
Speaker 10: of it or some of the other areas.
Speaker 1: So on our give us a sense here just kind
Speaker 1: of overall tech spend out there. I feel like it's
Speaker 1: you know, it's been a obviously such a great secular
Speaker 1: growth story for decades. Now where are we in that now?
Speaker 1: I mean, I know people are talking about a recession
Speaker 1: and concerns about that. Where are we in just overall
Speaker 1: tech spend so the near.
Speaker 10: Time we have a problem, I mean, we are not
Speaker 10: seeing that level of spending. We saw some fairly neutral
Speaker 10: to i would say bearish results from Accentia last week,
Speaker 10: and they are the biggest I T services companies in
Speaker 10: the world. They're saying their consulting bookings were down, which
Speaker 10: is a third consecutive quarter. So I would say as
Speaker 10: it comes to the second half or even the results
Speaker 10: we're going to see in July, we are not very
Speaker 10: optimistic that we're going to see some massive positive bump
Speaker 10: coming out because of all the AI rush that we
Speaker 10: are seeing now. Having said that, I think they will
Speaker 10: indicate a lot of new product launches and new things happening.
Speaker 10: And with that in mind, I think, you know, things
Speaker 10: could change in the latter half of the year with
Speaker 10: bookings improving, and then you know, twenty twenty four year
Speaker 10: could be where we see some rebound.
Speaker 1: All right, Honrod, thanks so much for joining us. Really
Speaker 1: appreciate it. Honor rog Rana, he's the senior technology analyst
Speaker 1: for Bloomberg Intelligence based out in our Chicago office. Just
Speaker 1: giving us some color here in another little m and
Speaker 1: a trade here in the tech space, IBM buying app
Speaker 1: deal for four point six billion dollars.
Speaker 7: You're listening to the Team Ken's are Live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot com,
Speaker 7: the iHeartRadio app, and the Bloomberg Business app, or listen
Speaker 7: on demand wherever you get your podcasts.
Speaker 1: What a treat it is to welcome our next guest,
Speaker 1: Jack Divine. He's a president and founding partner of Arcan Group.
Speaker 1: But we love talking to Jack because he is a
Speaker 1: thirty two year veteran of the Central Intelligence Agency. Folks
Speaker 1: that know call it CIA, not the CIA, It's just
Speaker 1: CIA and folks. His resume is way too long to
Speaker 1: go over. But he was in Europe, he was in
Speaker 1: Latin America. He was pretty much everywhere and probably places
Speaker 1: we don't know about and we're not supposed to know about.
Speaker 1: But he's going to give some good perspective here on
Speaker 1: what's happening in the world. Jack, it was a crazy
Speaker 1: weekend this weekend. Can you give us your thoughts here
Speaker 1: as we try to process what happened in Russia?
Speaker 8: Well, that's a big question, Paul. I was splanning on
Speaker 8: doing a lot of things this weekend, but right away
Speaker 8: and pull myself away. You know, back in March of
Speaker 8: twenty twenty two, I put an outbed in the Wall
Speaker 8: Street Journal saying that Putin's invasion of Ukraine ensured his demise.
Speaker 8: I didn't say next week, right, this isn't quite what
Speaker 8: I had in mind. But you could see this building
Speaker 8: that something had to give between the Wagner group, the
Speaker 8: military and Putin. It just couldn't go on the way
Speaker 8: it was. Was I expecting that they were going to
Speaker 8: march up the highway the Moscow and that they'd have
Speaker 8: a get as far as they could. A bit of
Speaker 8: a surprise. I think this is not this is really important.
Speaker 8: It has damaged Putin significantly. It's changed the world's perception
Speaker 8: of him and internally, but this isn't what I had
Speaker 8: in mind, and that he won't endure. I think it's
Speaker 8: a bit longer coming. I think that precusion moving back
Speaker 8: was part of their strategy to just get him to
Speaker 8: stop and head back, and I think it was good move. However,
Speaker 8: they sold it, and so I think prokosion days are gone.
Speaker 8: Now Putin has the job of trying to patch it up,
Speaker 8: and this is where I think the troubles begin. I
Speaker 8: was actually expecting to begin after the second offensive, but
Speaker 8: right now I think he's got his hands full regaining
Speaker 8: the control he needs.
Speaker 5: What do you think is going on in Ukraine right now?
Speaker 5: And do you think that Ukrainian officials are feeling like
Speaker 5: this is going to be a moment for them to
Speaker 5: finally come out on top.
Speaker 8: Well, I think they broke out the champagne. Yeah, maybe
Speaker 8: they shouldn't use it. All saved for later. But I
Speaker 8: think it's a very positive development because I think it
Speaker 8: weakens Putin's arguments, both internally and externally about why he's there.
Speaker 8: I think the battlefield will continue looking the way it
Speaker 8: has recently. Everyone was expecting the big counter offensive. I'm saying,
Speaker 8: it's David Goliath. If he's just holding goliathal of this
Speaker 8: is really good. So I think expecting too much from
Speaker 8: the second from the counter offensive was not realistic. I
Speaker 8: think they will make progress, they will continue. This helps
Speaker 8: them because I think the forces on the ground are
Speaker 8: going to be demoralized in trying to sort out where
Speaker 8: they are and why they're shooting why are they being
Speaker 8: shot at. But it's a tough, tough, tough haul. So
Speaker 8: I think the bigger picture is the long game, and
Speaker 8: the Ukrainians should be upbeat about that part of it.
Speaker 1: So Jack, if there is going to be some challenge
Speaker 1: to Putin and his authority within Russia, and maybe the
Speaker 1: events over the weekend will serve as a catalyst to
Speaker 1: maybe accelerate that. Where do you think it will actually
Speaker 1: come from. Will it come from the military, will it
Speaker 1: come from other political factions? What are your sources kind
Speaker 1: of telling you.
Speaker 8: Well, first of all, I didn't think you would see
Speaker 8: a coupe, in other words, the Army, Navy, Air Force
Speaker 8: yankeing them out. I didn't think he'd lose an election.
Speaker 8: I didn't think the mass demonstrations in the streets would
Speaker 8: push him out. I think when he becomes a liability
Speaker 8: to the elites and the establishment. Now we can spend
Speaker 8: a lot of time defining that, and it's an amorphous group.
Speaker 8: It's elements within the intelligence services, within the security apparatus,
Speaker 8: within the military, but then the money people. So I
Speaker 8: think he's more of a liability today, but he's not
Speaker 8: enough of a liability for them to act. This is
Speaker 8: bad news what they're looking at. If you're in the
Speaker 8: military and you're looking at your armed forces, you're having
Speaker 8: a bad day and you want this to end. I
Speaker 8: think there's more sentiment about trying to figure out how
Speaker 8: to get out of Ukraine. It doesn't mean a deal.
Speaker 8: I don't see a deal in the cards. So I
Speaker 8: think if anything happens, and I thought this in March
Speaker 8: of twenty twenty two. It'll be when he fails in
Speaker 8: the offensive and the Ukrainians sort of stabilize where they
Speaker 8: are and it becomes a liability, and at that point
Speaker 8: a conspiracy develops and it's not as I said, It
Speaker 8: might be something like a palace coup, and we will
Speaker 8: be surprised some morning we wake up that suddenly he's
Speaker 8: walked to the door or carried to the door. That's
Speaker 8: what I anticipated, but it's not an eminent in my view,
Speaker 8: not eminent, Okay, I guess.
Speaker 5: I wonder then it feels like in some ways he's
Speaker 5: already hit that definition of a liability. What changes that dynamic?
Speaker 3: Then?
Speaker 5: What is the thing that he has to mess up?
Speaker 5: The single biggest thing?
Speaker 8: So I think Progrosion is now out of the game.
Speaker 8: That doesn't mean he can't cause a major problem tomorrow morning,
Speaker 8: but his ability to remove Putin, and I don't think
Speaker 8: that was his original objective or maybe never, but I
Speaker 8: think the real challenge now is Putin has given a
Speaker 8: bit of a breather and a chance to crack down
Speaker 8: solidify his position. So I believe the old KGB and
Speaker 8: their running around doing everything can to figure out test everybody.
Speaker 8: But this is a delicate thing. He doesn't have an
Speaker 8: iron hand anymore. He may be holding a clay hand,
Speaker 8: and that's what we're going to find out. How a
Speaker 8: depth is he doing this, because if you start doing it,
Speaker 8: you may then trigger elements within that elite that I
Speaker 8: talked about to decide to take action. So I think
Speaker 8: he's got a very tricky hand to play. I used
Speaker 8: to say it was very good tactically, but not very
Speaker 8: good strategically. I'm not sure he's good at either anymore,
Speaker 8: just like we're not so sure if the Russian military
Speaker 8: is how good it is. So I'm not optimistic that
Speaker 8: he's going to be able to handle it over the
Speaker 8: long run. But I wouldn't count him out of the
Speaker 8: game now. Despite what I'm saying, I think he's insured
Speaker 8: his demise, but it isn't I don't see that as
Speaker 8: being an eminent issue.
Speaker 1: President Jiji, King of China, I guess tacitly has been
Speaker 1: supporting Russia. Mister She's probably gonna be saying, who did
Speaker 1: I get into bed with? I mean, who's this guy?
Speaker 1: And he can't even take care of his own country?
Speaker 1: Where do you think? How do you think China is
Speaker 1: viewing all this.
Speaker 8: I think they see Putin has a liability, but not
Speaker 8: enough of a liability. No, there is, it can be
Speaker 8: a liability. It's a question of where is that pressure point,
Speaker 8: and that burns burns slower. But the embrace. It's very
Speaker 8: important that China and Russia, from China's point of view,
Speaker 8: remain together because together they represent a counter block to
Speaker 8: the Democratic nations. Right, So even though Russia is a
Speaker 8: weaker partner, it's an important alliance. So they wanted to stay,
Speaker 8: but they haven't embraced that. It's not a bear hug.
Speaker 8: I mean there's some deep issues between Russians and Chinese historically,
Speaker 8: but I won't go back into my days and the
Speaker 8: the effort in Afghanistan.
Speaker 1: Yes, exactly, Jack, I mean one of the things I'm
Speaker 1: also thinking about is Mattie and I were talking about it.
Speaker 1: I mean, Putin, he's totally irrelevant to the world's leaders, right,
Speaker 1: he has no standing with a Biden, She the European Union,
Speaker 1: he doesn't. He doesn't get invited to the G sevens
Speaker 1: or G twenties or any of those types of things,
Speaker 1: does he.
Speaker 8: He can't come back, can't come back there's no roadback.
Speaker 8: That's what I was saying before. There's no way in Russia.
Speaker 1: I can't have that, can I?
Speaker 8: And that's at the point where at what point does
Speaker 8: that become intolerable for what mix of people and do
Speaker 8: they have and how hard can he? How hard can
Speaker 8: he be? So I think we just have to wait
Speaker 8: and see how that plays out. It's interesting that Erdowan
Speaker 8: called him among the first. Now, remember they tried to ask, right,
Speaker 8: So if I were guessing this is Jack's guess that
Speaker 8: he gave him a couple of tips that when they
Speaker 8: try and push you out, these are a couple of
Speaker 8: things from and one of them is get any deal going,
Speaker 8: so they back off and then you get a breathe
Speaker 8: and then make sure your count knows this interesting?
Speaker 1: All right, Jack, thanks so much for joining us. Really
Speaker 1: appreciate you coming here. Jack Divine, he's a president and
Speaker 1: founding partner of the ARC and Group, joining us live
Speaker 1: in the Bloomberg Interactive Brokers to do no phoning it
Speaker 1: in for Jack Divine.
Speaker 7: You're listening to the tape Cat's are Live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio. The
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Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Speaker 1: Let's talk venture capital investing. I wonder how how that
Speaker 1: market is reacting to a market where you've got rising
Speaker 1: interest rates. We've got potentially a recession on the horizon.
Speaker 1: What's that mean for the folks in the VC buz
Speaker 1: Zoe Peden joins us. She's a VC partner at Ananda
Speaker 1: Impact Ventures. Zoey, thanks so much for joining us here
Speaker 1: via zoom. Talk to us about what you guys do
Speaker 1: at Anando. How's your what is your angle on venture
Speaker 1: capital investing?
Speaker 11: Thanks Paul. Yes, so, Ananda's impact focused bench capital fund
Speaker 11: based in Europe. We invest in sustainable solutions to the
Speaker 11: world's most pressing ecological and social challenges across biodiversity, climate, health,
Speaker 11: education and employment. So two hundred million euros across four
Speaker 11: impact funds and we've got an active portfolio of thirty
Speaker 11: three investments.
Speaker 5: So talk to us about how your portfolio and your
Speaker 5: work day to day has changed given the higher interest
Speaker 5: rates that we're experiencing. That Paul mentioned earlier, how is
Speaker 5: a higher interest rate environment impacting you?
Speaker 11: So it's out of a higher interest rate environment the companies, Well,
Speaker 11: the advice that you see in media and reading in
Speaker 11: the papers is quite conflicting. Sometimes. Many of the companies
Speaker 11: before the interest rates were really growing really fast, and
Speaker 11: I think a lot of the advice that we're giving
Speaker 11: them now is to look at the areas where they're
Speaker 11: growing fast. If they're working in different industries, to focus
Speaker 11: on those ones rather than new ones that might be
Speaker 11: a few years away yet, and then cutting back. If
Speaker 11: there's anything that they can trim, they will trim. And
Speaker 11: if they can put up those prices too, if that
Speaker 11: market is elastic enough to be able to do that,
Speaker 11: then now's the time to put those prices up. But
Speaker 11: they're strong, they're faced, they're faced at the things before
Speaker 11: they We're all used to working in difficult environments. So yes,
Speaker 11: it's an interesting time for sure.
Speaker 1: Hey, so we give us an example of maybe a
Speaker 1: recent investment you guys made. You know, what attracted you
Speaker 1: to that investment, What are some analysis you did and
Speaker 1: why did you actually end up investing?
Speaker 11: Okay, yes, so this is quite related to the challenges
Speaker 11: of hand, which you ask a company to cut back.
Speaker 11: Because one of the recent investments we did is a
Speaker 11: company called Nature Metrics, and this is the world's leading
Speaker 11: environmental DNA company. And what I mean by that is
Speaker 11: they're using the measuring biodiversity to be able to help enterprises,
Speaker 11: very large enterprises, become nature positive. So we're talking about
Speaker 11: all the regulated industries such as extracted marine water utilities,
Speaker 11: as well as non regulated industries looking at nature and
Speaker 11: a lot of climate finances starting to look at nature
Speaker 11: and start to build bonds and loans around these metrics
Speaker 11: to be able to offer large industries banks special loans
Speaker 11: based on these metrics. So for us to start saying
Speaker 11: to this company, I think it's time that you need
Speaker 11: to be watching your finances. This is such a cutting
Speaker 11: edge area that's in such high demand. So for us,
Speaker 11: the analysis around it, it's you know, this is nature
Speaker 11: is the new carbon. So you've got carbon credits. I
Speaker 11: believe biodiversity credits are the next thing coming up.
Speaker 5: So talk to me about how you measure the impact
Speaker 5: of these companies over time. We talk a lot about,
Speaker 5: you know, the obsession and interest in ESG investing and
Speaker 5: impact driven investing, but how how do you specifically measure
Speaker 5: the success of those initiatives.
Speaker 11: Well, I's something to really be conscious of here. It's
Speaker 11: around terminology. There's a lot of confusion in the market
Speaker 11: around impact and ESG, and I think a great resource
Speaker 11: that your listeners might be intoed by Tideline at tideline
Speaker 11: dot com, New York Agency outlines real simple difference between
Speaker 11: ESG and impact. So first of all, it's important to
Speaker 11: get the terminology correct. And impact is around intention is
Speaker 11: outcomes focus, whereas ESG is more around inputs and is
Speaker 11: more risk management focused. So the way we go about
Speaker 11: it is we will look at a company and start
Speaker 11: to ask the founders intent what their intentions are for
Speaker 11: their end goal. So look at their theory of change.
Speaker 11: This is very outcomes focused, what do they want to
Speaker 11: change in the world. And then looking over this could
Speaker 11: be ten year horizon, but looking at what is going
Speaker 11: to happen over the next two to three years, what
Speaker 11: are those outputs? So maybe two to three KPIs that
Speaker 11: we can measure. So with nature metrics, it might be
Speaker 11: around the kilometer the hector spread of the area that
Speaker 11: they're able to measure on the planet. With environmental DNA
Speaker 11: when they're collecting that, and we also might be around
Speaker 11: the number of red listed IUCN endangered species that are
Speaker 11: able to collect too, so we're able to demonstrate the
Speaker 11: growth and their efficacy. So their business drivers as well
Speaker 11: as impact drivers, and we have two to three of those.
Speaker 11: It's of the earlier stage ones and a few more
Speaker 11: when they get later stage. And is it possible for
Speaker 11: me to mention about our impact carry in the in
Speaker 11: the turn sheet that we have. I think that's quite
Speaker 11: exciting actually. So something that really demonstrates, you know, what
Speaker 11: an impact investor is from maybe someone who calls themselves
Speaker 11: ESG or a mainstream impact investor, is the fact that
Speaker 11: we have this impact turnsheet and we have a carry model.
Speaker 11: So as you know, vcs always talk about, you know,
Speaker 11: they have their basic salaries, but there's the carry that
Speaker 11: we get so often it's beyond a certain hurd also
Speaker 11: two or three or sometimes five times and then they
Speaker 11: get twenty percent of the extra above that is their carry. Now, Fernanda,
Speaker 11: we wrote alongside the European Investment funds the carry model
Speaker 11: where it's integrated, so we do not see our carrie
Speaker 11: as investors unless we've met certain impact hurdles as well
Speaker 11: as the financial hurdles. So that's kind of that you
Speaker 11: get all values aligned with the impact then, and it's
Speaker 11: not just about the finances.
Speaker 1: Hey, Zoey, thanks so much for taking the time to
Speaker 1: speak with us here. Talk to us a little bit
Speaker 1: about impact investing and maybe some of the differences with
Speaker 1: ESG and how investors can invest in the impact space.
Speaker 1: Zoe Pedan, VC partner for Ananda Impact Ventures.
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 2: at Matt Miller nineteen seventy three.
Speaker 1: And I'm Fall Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio.