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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moving news.

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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 3: So what's the state of the mysterious world of crypto

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Speaker 3: now that you can jump in with an ETF? Sandy

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Speaker 3: call is head of Digital asset in Investor Advisory Services

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Speaker 3: at Franklin Templeton. Our next guest. You know, Gary Gensler

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Speaker 3: kind of made it clear of the regulatory approval of

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Speaker 3: bitcoin ETFs. That's no sort of implicit endorsement by the regulators,

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Speaker 3: I imagine though that hasn't dampened any of the enthusiasm,

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Speaker 3: has it?

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Speaker 4: No, definitely has not. A record launch for an ETF

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Speaker 4: over three billion and that new inflows into the products

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Speaker 4: over the last just week.

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Speaker 5: And how do you view some of those inflows? Though,

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Speaker 5: I'm looking at Bloomberg Data, black Rock and Fidelity dominating

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Speaker 5: in terms of flows, both north of a billion. I'm

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Speaker 5: looking at least according to the terminal Franklin Templeton closure

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Speaker 5: to fifty million. So how does that play out?

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Speaker 4: Yeah, I think that it depends who your audience is.

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Speaker 4: Out of the gate right now, you're seeing a lot

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Speaker 4: of the direct self directed investors coming in and accessing

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Speaker 4: this for their own personal portfolios. Moving these new products

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Speaker 4: on to the wealth advisory platforms is going to take

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Speaker 4: a few months as they do their due diligence see

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Speaker 4: how the new product works, and so there will be

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Speaker 4: a slower buildup of assets in the discretionarily managed and

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Speaker 4: in the professionally managed accounts. And I think you will

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Speaker 4: see this continue to grow throughout the coming year, so

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Speaker 4: kind of an out of the gate with the self

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Speaker 4: directed and then over time you will start to see

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Speaker 4: more of the advised assets having an allocation to Bitcoin

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Speaker 4: in many of these portfolios.

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Speaker 3: What are your fees? Is there a fee war?

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Speaker 4: Well, our fees right now are zero, So I don't

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Speaker 4: think you can beat that.

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Speaker 3: You actually could, but I won't go into that.

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Speaker 4: Well, we believe that, you know, we want these early

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Speaker 4: investors who come alongside us in our new etf offering

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Speaker 4: to really get the one hundred percent full benefit of

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Speaker 4: movements in bitcoin. We think we're coming up to an

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Speaker 4: important period fundamentally in the bitcoin market, with the upcoming

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Speaker 4: having event where the supply is going to tighten systematically.

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Speaker 4: This happens through an algorithm, and it's coming right at

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Speaker 4: a point where these new ETFs are creating demand in

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Speaker 4: the marketplace, and we think it's going to be an

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Speaker 4: exciting period for bitcoin. So we want our investors to

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Speaker 4: get the full benefit of any price movements that might result,

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Speaker 4: and we're not taking any fee. We believe in the

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Speaker 4: long term nature of this opportunity and we're willing to

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Speaker 4: be in it for the long haul, so we're going

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Speaker 4: to wait and take our fees later down the road

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Speaker 4: as the product becomes more established.

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Speaker 3: I have a host of like wacky questions. You guys

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Speaker 3: have ESG offerings. I would imagine, right, okay, so how

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Speaker 3: does this conflict with that? Because in order to generate

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Speaker 3: this stuff you have to run computers which take gazillions

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Speaker 3: of tons of electricity or gigawatts or whatever. That's sort

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Speaker 3: of indirect conflict I would imagine with the environmental goals

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Speaker 3: of the company.

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Speaker 4: You know, intuitively, it would seem to be but what's

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Speaker 4: been kind of very exciting about this is that a

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Speaker 4: lot of clean energy launches have been held off because

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Speaker 4: there has not been a clear use case for them.

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Speaker 4: And what we're seeing is a lot of these bitcoin

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Speaker 4: miners that have relocated from Russia or from China are

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Speaker 4: relocating into areas and they are using clean energy incentives

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Speaker 4: that are being offered by the government to build their

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Speaker 4: mining facilities. So actually it turns out that bitcoin mining

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Speaker 4: is starting to be a use case for introducing clean

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Speaker 4: energy technology. And of course not all bitcoin miners are

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Speaker 4: at that point, but we're seeing a very positive trend

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Speaker 4: in this movement towards cleaner, cleaner users of energy for

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Speaker 4: bitcoin mining, which we think is a great thing to see.

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Speaker 5: And Sandy you mentioned kind of taking the long term view.

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Speaker 5: Eric Balchunis are Bloomberg Intelligence analysts coined it the Cooinentucky Derby.

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Speaker 3: Which I'm a big fan of.

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Speaker 5: I enjoy betting on horses.

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Speaker 3: JT.

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Speaker 5: I don't know about you, now, A little pun for you.

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Speaker 3: Well, I'll go back to my wacky questions. But it's

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Speaker 3: just like I go to the barber shop. That's topic

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Speaker 3: dujoure of people who can't afford to lose money and

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Speaker 3: who don't know what they're talking about. I don't even

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Speaker 3: know this what a bitcoin is. I can't explain it.

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Speaker 5: Well, Ceady, I'm guessing I'm just wondering Coinentucky Derby, use

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Speaker 5: your punt, whatever pun you want. There are nine new

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Speaker 5: spot bitcoin ETFs. How does the race for money impact

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Speaker 5: kind of success and whether or not people are going

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Speaker 5: to be pulling out of it?

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Speaker 4: Yeah, so I look at it this way. There's two

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Speaker 4: sets of offerings that are coming to market through these nine.

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Speaker 4: I think it's even eleven. One set is coming from

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Speaker 4: firms that have been digital natives and have kind of

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Speaker 4: grown up in the crypto space. One set is coming

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Speaker 4: from traditional asset management firms. I think Franklin Templeton is

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Speaker 4: a little unique in that we're actually both right. We

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Speaker 4: have been active and operating in the digital crypto native

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Speaker 4: space since twenty seventeen. We operating across five different public blockchains.

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Speaker 4: We do our own node verification, We really understand and

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Speaker 4: are a part of the ecosystem, create our own research

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Speaker 4: on individual coins, including bitcoin, and put together portfolios of

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Speaker 4: multi cooin portfolios through separately managed accounts that we can

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Speaker 4: work with investors to access. So we've been in this

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Speaker 4: space for a long time and really understand it. Yet

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Speaker 4: we are also a seventy five year old asset manager

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Speaker 4: who is trusted and who has been there for clients

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Speaker 4: through many market regimes. So I think it's the coming

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Speaker 4: together of the crypt natives and the traditional financial services,

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Speaker 4: really epitomized by Franklin Templeton, that I think is creating

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Speaker 4: the excitement about what's going to happen. And I don't

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Speaker 4: know if it's going to be a derby and some

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Speaker 4: aren't going to finish the race. I just think it's

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Speaker 4: going to be a long race. Right. It's a new

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Speaker 4: asset class. Some of your questions are showing people have

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Speaker 4: yet to kind of start to understand it. But once

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Speaker 4: they do, I think it's hard not to get excited.

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Speaker 4: I saw that in my own career when I had

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Speaker 4: my AHA moment. It's like my eyes opened and I

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Speaker 4: really saw this new opportunity and potential.

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Speaker 5: Sandy, this may be a dumb question. Bitcoin trades twenty

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Speaker 5: four to seven. If the token crashes on Saturday and Sunday,

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Speaker 5: do I wake up Monday morning with a huge loss

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Speaker 5: on my TF?

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Speaker 4: Well, the good news for you is if the token

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Speaker 4: crashes on a Saturday or Sunday. We've got portfolio managers

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Speaker 4: and traders trading it on a Saturday and Sunday and

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Speaker 4: working to keep the spread between the Bitcoin index and

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Speaker 4: what's happening in the ETF in line. So we operate

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Speaker 4: twenty four to seven in these markets just like the

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Speaker 4: markets operate. So it would be like any market. You know,

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Speaker 4: if there's a move over the weekend, you'll see that

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Speaker 4: move reflected. But the fact that the ETF is closed

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Speaker 4: and the market is open isn't going to be a

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Speaker 4: problem in this case because we're running a twenty four

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Speaker 4: to seven trading desk around this.

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Speaker 3: You you mentioned the next big step that includes derivatives

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Speaker 3: with respect to bitcoin.

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Speaker 4: That's a lot of people are looking already at derivatives.

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Speaker 4: I think that, you know, building the education and understanding

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Speaker 4: of the opportunity is more important as the next step

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Speaker 4: than really thinking about the next product evolution. I think

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Speaker 4: a lot of people have yet to really internalize. We've

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Speaker 4: been in a period where we're used to platforms being

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Speaker 4: the way of the economy. Network effects are built around

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Speaker 4: platforms like Amazon or Uber or airbn be and now

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Speaker 4: what we're seeing in the crypto domain is that we're

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Speaker 4: seeing protocol based networks right where anyone peer to peer

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Speaker 4: can access it. Just like when you type HTTP into

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Speaker 4: your browser, that's a protocol. Everyone in the world can

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Speaker 4: use that to access the Internet. And these networks that

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Speaker 4: are being built like Bitcoin, are protocols that anyone in

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Speaker 4: the world can use and everyone can participate in. So

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Speaker 4: it's different than a company owning the platform. This is

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Speaker 4: all of us collectively owning these new networks, and this

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Speaker 4: is a new way to access that ownership. So it's

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Speaker 4: an education process and I think that that's where the

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Speaker 4: focus should be to really help investors understand why this

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Speaker 4: can be an important opportunity for their portfolio.

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Speaker 5: Sandy, I got to ask about the Franklin Templeton x profile.

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Speaker 5: You've got laser eyes on Ben Franklin.

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Speaker 3: I would say, there's not in the marketing department. I

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Speaker 3: just make it clear.

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Speaker 5: I just want to like some of them's weird third

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Speaker 5: tweets that I've seen, even in tweet saying the lawyers

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Speaker 5: won't let us respond to comments, but we hear you

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Speaker 5: posting about the sixty to forty plus bitcoin. What what

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Speaker 5: is the marketing plant like, what's going on.

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Speaker 4: Well, this is really you know, as I said, we

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Speaker 4: really are part of the crypto made and ecosystem as

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Speaker 4: well as being a traditional asset manager, and our analysts,

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Speaker 4: interns employees that are in the digital asset unit really

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Speaker 4: understand what matters to people in that community, and the

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Speaker 4: laser eyes was an important signal to them that we

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Speaker 4: stand with them in believing in the future of bitcoin.

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Speaker 3: All right, Sandy, thanks for something. I appreciate it. Sandy

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Speaker 3: Call had a digital asset in investor advisory Services at

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Speaker 3: Franklin Temple. Did I sound too skeptical? It's too harsh.

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Speaker 5: Talking to the youth.

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Speaker 6: You're listening to the team Kens Live program Bloomberg Markets

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Speaker 6: weekdays at ten am Eastern on Bloomberg dot Com, the

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Speaker 6: iHeartRadio app and the Bloomberg Business App, or listen on

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Speaker 6: demand wherever you get your podcasts.

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Speaker 3: Well, let's make a deal. What's the outlook for M

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Speaker 3: and A in twenty twenty four, Bailey Our next guest

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Speaker 3: Mitch Berlin. He's vice chair of America's Strategy and Transactions

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Speaker 3: with Ernst and Young, and I gotta say I think

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Speaker 3: he wins the prize for the coolest looking office on

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Speaker 3: zoom today. Are you looking at question? What are all

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Speaker 3: the ribbons in the background.

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Speaker 7: They're actually dog show ribbons.

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Speaker 5: Oh don't shool, I mean you're interested, right, we've just changed.

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Speaker 3: We've just changed the topic. So you're gonna get.

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Speaker 7: More accomplished than I am. So you know what kind

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Speaker 7: of dogs?

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Speaker 3: What are the dogs?

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Speaker 7: Portuguese water dogs?

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Speaker 3: Oh beautiful, Yeah, those are the ones that are like hypoallergenic.

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Speaker 3: They don't show right at his office anyway. Okay, so

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Speaker 3: we'll get back on topic. Is this an environment right

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Speaker 3: now in twenty twenty four that's conducive to deal making

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Speaker 3: and kind of what's driving it?

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Speaker 7: It will be?

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Speaker 8: So twenty twenty three was a reset to the pre

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Speaker 8: pandemic deal volume. So if you look at major deals,

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Speaker 8: those are those deals that are above one hundred million.

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Speaker 8: There are approximately twelve hundred and fifty in twenty nineteen

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Speaker 8: and twelve hundred and fifty in twenty twenty three. So

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Speaker 8: we were trying to understand what does M and A

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Speaker 8: look like going from there now that we've reset to

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Speaker 8: pre pandemic levels. And so we looked at the last

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Speaker 8: thirty five years of M and A and we correlated

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Speaker 8: that to information such as GDP growth, inflation, corporate profits,

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Speaker 8: the bond spreads and such, and we did see a correlation.

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Speaker 8: And so if the predictions for those same metrics hold

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Speaker 8: true going forward for twenty twenty four, we should see

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Speaker 8: about a twelve to thirteen increase in M and A

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Speaker 8: over the twenty twenty three numbers.

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Speaker 5: Does the feeling I spend most of my day job

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Speaker 5: Mitch covering the IPO market, and the main sense is

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Speaker 5: that something's got to give? Is that kind of your sense?

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Speaker 5: We have a need for deals, We have cash on

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Speaker 5: the sidelines, We have companies who are kind of nearing

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Speaker 5: the end of their maturity in one sense or another.

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Speaker 7: That's exactly right.

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Speaker 8: I think that we're at a point now where people

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Speaker 8: have been sitting on the sidelines for two years. There

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Speaker 8: are a lot of private companies or portfolios or private

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Speaker 8: equity that are coming to maturity on their debt to refinance,

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Speaker 8: we put them in a very different position from an

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Speaker 8: ROI than they are today. So they have to do

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Speaker 8: the math and figure out should we monetize now or

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Speaker 8: do we take the risk of refinancing hoping that we

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Speaker 8: can get a lower rate soon enough that it doesn't

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Speaker 8: impact our ROI calculations.

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Speaker 3: Okay, so who's coming together in twenty twenty four. You

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Speaker 3: don't have to name names, but like, well that would

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Speaker 3: be nice, but industries, I.

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Speaker 7: Can name that.

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Speaker 8: The industry sectors, the sectors that we're going to see

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Speaker 8: the most activity are the ones where the deal multiples

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Speaker 8: have gone down. Because in a time where you have

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Speaker 8: a very high cost of capital and high multiples, it's

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Speaker 8: unlikely that you're going to see a significant amount of

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Speaker 8: M and A activity. But if you look at the

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Speaker 8: sectors where the deal multiples have gone down, that includes

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Speaker 8: life sciences and technology, those deal multiples have gone down

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Speaker 8: down about eight points each. And if you look at energy,

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Speaker 8: those deal multiples have gone down about four points here

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Speaker 8: over year.

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Speaker 7: Those are the areas where I thought energy it.

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Speaker 3: Was pretty much exhausted, like in twenty twenty three with

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Speaker 3: all those deals.

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Speaker 7: Well there's still and it may not be the major players,

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Speaker 7: but there's still players out there, and they're cost of

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Speaker 7: the constant capitals high, but the multiples are going down,

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Speaker 7: so they can be attractive targets.

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Speaker 5: When you're talking life sciences, we saw a number of

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Speaker 5: deals coming out of JP Morgan a few weeks ago

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Speaker 5: is that biotech. Are we seeing smaller Bolton deals? Are

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Speaker 5: we going to see potentially a return of.

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Speaker 9: Major M and A.

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Speaker 7: You're going to see both.

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Speaker 8: I think the when you look at major M and A,

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Speaker 8: there's still patent cliffs looming and they'll need to buy

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Speaker 8: an R and D pipeline to continue to turn the

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Speaker 8: profits that they want to turn. So I think you'll

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Speaker 8: see it on both on both sides and some of

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Speaker 8: the smaller biotech deals as well.

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Speaker 5: What's up with the FTC and some of this antitrust though?

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Speaker 5: Is that something that's it feels like every deal has

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Speaker 5: some kind of a tie up. I don't.

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Speaker 7: Yeah, stuper with that, Yeah, I know.

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Speaker 8: It's a good quest. So the new guidelines came out.

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Speaker 8: It's been thirteen years or so since they've come up

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Speaker 8: with since they've revised the guidelines. The clients that we're

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Speaker 8: speaking to understand that it's going to make things a

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Speaker 8: little bit more difficult and take longer, but they're not

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Speaker 8: shying away from deal making because of many choices. They

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Speaker 8: really in many cases, they really don't have a choice,

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Speaker 8: and so more will come under the radar because the

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Speaker 8: threshold of what they consider to be a movement in

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Speaker 8: the consolidation index has tightened, so more will come under

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Speaker 8: the radar. They're going to require more information, so the

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Speaker 8: timeline to get a deal done is going to take longer,

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Speaker 8: so more is going to come under their scrutiny. But

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Speaker 8: we are working with clients every day to come up

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Speaker 8: with multiple scenarios that they can look at around reshifting

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Speaker 8: the portfolio of the combined entity into something that would

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Speaker 8: be more appealing to the FTC and DJ Okay.

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Speaker 3: You want to weigh in on spirit, I mean, what

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Speaker 3: happened there, it's maybe you take not specifically, maybe a

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Speaker 3: broader view.

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Speaker 8: Well, my guess is that the way that they shift

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Speaker 8: to the portfolio of the routes may have not been

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Speaker 8: exactly what the FTC is looking for. But it sounds

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Speaker 8: like they're going back to the drawing board from the

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Speaker 8: From what we're reading in the paper, it sounds like

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Speaker 8: they're they're going to go back for another try at it.

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Speaker 8: So I imagine they're going to have to reshift their portfolio

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Speaker 8: into something that's more appealing.

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Speaker 5: Well, looking at I robot that's coming from Europe, are

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Speaker 5: they more stringent typically, like what's to read from one

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Speaker 5: of the biggest technology companies not being able to buy

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Speaker 5: the maker of a robotic vacuum.

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Speaker 8: Yeah, so I can't speak on behalf of the FDC.

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Speaker 8: By are the European regulators on that one? I think

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Speaker 8: the concern was around having a market dominance and being

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Speaker 8: able to shut other players out because you know, the

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Speaker 8: buyer of that has such a significant marketplace that they

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Speaker 8: can control who's competing with their own products.

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Speaker 7: And I think that there's some sensitivity around that.

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Speaker 3: Okay, So twenty twenty four overall, you think is going

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Speaker 3: to be a pretty hot year for M and A,

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Speaker 3: Can we say that?

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Speaker 7: We do?

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Speaker 8: We think again, you know, twelve to thirty percent increase,

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Speaker 8: which would be nice because the last over the last

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Speaker 8: two years, M and A has gone down thirty to

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Speaker 8: forty percent depending on what sector you're looking at.

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Speaker 3: And M and A is not just for the big guys.

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Speaker 3: You can have much smaller, even businesses you've never heard of,

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Speaker 3: right right, and we would And I mean, how does

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Speaker 3: that work? How is that different in terms of funding

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Speaker 3: or whatever than the big deals.

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Speaker 8: Well, the smaller deals are easy to get fund and

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Speaker 8: sometimes you can fund them off balance sheet, but you

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Speaker 8: probably will see a pickup in some of those smaller

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Speaker 8: deals because quite frankly, they're also coming up with maturities

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Speaker 8: on their debt that they're trying to figure out how

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Speaker 8: to refinance. And often again it's the constant capital is

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Speaker 8: too expensive for them. Now they struck these deals five

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Speaker 8: years ago, when you know the cost of capital is

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Speaker 8: almost free, and now they're paying five six percent.

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Speaker 7: That's a very different economic scenario for them.

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Speaker 3: Is that is that one of the bigger drivers behind

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Speaker 3: these some of these deals that you know, we got

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Speaker 3: a big debt coming up, but whatever, and this is

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Speaker 3: the way we can fund that.

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Speaker 7: It will be for sure.

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Speaker 8: They need to exit, they need to get they need

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Speaker 8: to refinance that debt, and to to increase that interest

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Speaker 8: rate by four or five percent is significant.

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Speaker 5: What's going on with private equity?

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Speaker 7: Equity?

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Speaker 3: Do we call it private equity anymore?

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Speaker 6: Though?

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Speaker 7: Pe?

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Speaker 3: Do we still call it that because it's morphed into

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Speaker 3: something else.

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Speaker 8: If we change the name, we'd have to change a

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Speaker 8: lot of thought leadership. So we'll continue to call it

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Speaker 8: private equity. But they're they're in a in a difficult

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Speaker 8: position right now because again, their deals are leveraged. There

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Speaker 8: were you know, those that were struck five years ago.

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Speaker 8: They were probably hoping to monetize by now. But they're

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Speaker 8: coming up with the same maturity cliffs, and so they

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Speaker 8: have to do the math to say, shouldn't you know,

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Speaker 8: should we lower our valuations and try to sell these

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Speaker 8: port codes now? Should we refinanced hope that we can

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Speaker 8: get refinanced for a lower cost of capital and a

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Speaker 8: year or two and keep the valuations high. You have

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Speaker 8: to go, you know, you have to go port code

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Speaker 8: by port cone, really do the math to see what

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Speaker 8: makes sense whether you move now or hold on it.

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Speaker 3: Okay, the question everybody's been waiting for, how many dogs

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Speaker 3: and what are their names? Games?

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Speaker 7: No, so I have five dogs.

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Speaker 3: Oh my gosh they are.

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Speaker 7: So we got Loot, Tiki, Greta, Berta, and Irma.

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Speaker 8: Yes, all right, so if you want a dog, I

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Speaker 8: can ship one over to you right away because I

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Speaker 8: have too many.

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Speaker 5: I will take any and all that I googled. I

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Speaker 5: didn't know we have a snowshovel yet, dogging dogside.

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Speaker 3: All right, I will leave it there. Mitch Berle and

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Speaker 3: Vice chair of America's Strategy and Transactions with Rinstin Young.

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Speaker 3: I don't think he's ever going to come back with

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Speaker 3: us for that.

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Speaker 5: The real question is would you rather have a dog

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Speaker 5: or a shovel I'd rather have talk.

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Speaker 3: How about you get a dog that you trained to

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Speaker 3: shovel you out or something like that.

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Speaker 6: You're listening to the tape catch are live program Bloomberg

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Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business app.

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00:18:54,280 --> 00:18:57,120
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Speaker 6: flagship New York station, Just say Alexa Bloomberg eleven.

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Speaker 3: Let's take a deeper dive into these risk assets, Skyler

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Speaker 3: winand is CIO at Reagan Capital. Let's stretch you off

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Speaker 3: with the bubble question. Does this feel like a bubble

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Speaker 3: to you?

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Speaker 9: It sure does.

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Speaker 10: With stocks back to all time highs, short end rates

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Speaker 10: up five hundred basis points in the last two years,

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Speaker 10: long end rates up two hundred and fifty basis points.

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Speaker 10: You do the math on where stocks should be given

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Speaker 10: that rise in rates, stocks theoretically should be down all

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Speaker 10: boards of forty percent over the last two years.

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Speaker 3: Wow, so you just took Bailey's breath.

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Speaker 5: Yeah, No, so what breaks than Skyler?

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Speaker 9: I'm just looking.

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Speaker 5: You know, we've got the for the swaps pricing in

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Speaker 5: just under six rate cuts next year or this year.

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Speaker 5: We've got a lot of analysts and strategies talking up

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Speaker 5: twenty twenty four earnings and looking into twenty twenty five.

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Speaker 9: What happens.

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Speaker 10: You have to look at leverage first, and the most

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Speaker 10: levered players out there are going to break first. We've

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Speaker 10: already seen that in banks. Then it goes to private

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Speaker 10: equity and very leveraged companies.

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Speaker 9: The last folks to lose will be the least.

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Speaker 10: Leveraged companies, companies that are using a half a turn

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Speaker 10: or maybe over only eternal leverage. So I think the

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Speaker 10: market's going to be really bifurcated. You hear a lot

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Speaker 10: of folks talk about let's stick to high quality. I

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Speaker 10: like that, but look to leverage to break before anything else.

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Speaker 5: All right, two questions then, off as Skyler, going back

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Speaker 5: to your initial point, are you shorting the market? And

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Speaker 5: then are you shorting some of these levered stocks?

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Speaker 7: How are you playing that?

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Speaker 10: I think you know we're not stock guys, but but

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Speaker 10: in my stock investments, I think you know it's it's

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Speaker 10: one of two things. A sometimes the only way to

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Speaker 10: win is not to play and to wait it out

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Speaker 10: and maybe stick in mid to high single digit inc plays,

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Speaker 10: but b own the entire market as well, where I

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Speaker 10: don't know when the next in Nvidia or Tesla or

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Speaker 10: Monster beverage is it going to come along?

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Speaker 9: So I want to own them all.

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Speaker 3: Who's who's most overleveraged? Is that the right phraseology?

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Speaker 7: Definitely?

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Speaker 9: Banks?

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Speaker 10: You know, banks are are are government sponsored hedge funds

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Speaker 10: so to speak, allowed up to twelve x leverage. Now,

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Speaker 10: what's happened over the last.

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Speaker 3: Time you're talking the majors or regionals or what or

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Speaker 3: just the entire.

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Speaker 10: Allowed the same leverage. But regionals and community banks got

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Speaker 10: a ton of cash in post COVID, post PPP, Right,

444
00:21:47,320 --> 00:21:50,639
Speaker 10: So folks got all this cash, they parked it at

445
00:21:50,640 --> 00:21:51,200
Speaker 10: the banks.

446
00:21:51,600 --> 00:21:53,800
Speaker 9: Banks sat there for eight months. What are we going

447
00:21:53,880 --> 00:21:54,160
Speaker 9: to do?

448
00:21:54,520 --> 00:21:57,800
Speaker 10: Okay, let's go out and start buying treasuries and mortgage bonds.

449
00:21:58,119 --> 00:22:01,159
Speaker 10: What's happened is a lot of those down upwards of

450
00:22:01,200 --> 00:22:03,960
Speaker 10: twenty points, right, And so if you were levering that

451
00:22:04,119 --> 00:22:09,040
Speaker 10: up ten times twelve times, your effective equity now went

452
00:22:09,080 --> 00:22:12,280
Speaker 10: from ten percent down to about four percent, So you're

453
00:22:12,359 --> 00:22:15,639
Speaker 10: upwards of twenty five x leveraged. So what you have

454
00:22:15,680 --> 00:22:17,480
Speaker 10: to look at is you have to look at tangible

455
00:22:17,840 --> 00:22:23,000
Speaker 10: book value, tangible equity, right, and if that percentage is

456
00:22:23,000 --> 00:22:26,199
Speaker 10: at only four or five percent, divide four into one

457
00:22:26,280 --> 00:22:29,560
Speaker 10: hundred that's twenty five x, so you're twenty five x levered.

458
00:22:30,119 --> 00:22:32,960
Speaker 10: So moves like we've seen since the start of the year,

459
00:22:33,080 --> 00:22:35,080
Speaker 10: the bond markets down a point point in a quarter.

460
00:22:35,840 --> 00:22:39,480
Speaker 10: Multiply that times twenty for a regional bank or a

461
00:22:39,520 --> 00:22:42,520
Speaker 10: community bank that owns treasuries and mortgage bonds.

462
00:22:43,240 --> 00:22:48,440
Speaker 3: So who's who's least leverage? Then, on the opposite end

463
00:22:48,440 --> 00:22:48,680
Speaker 3: of the.

464
00:22:48,600 --> 00:22:52,440
Speaker 10: Spectrum, JP Moore, the big guys, the big guys who

465
00:22:52,720 --> 00:22:55,280
Speaker 10: had a lot of money, they took it in. They

466
00:22:55,320 --> 00:23:01,120
Speaker 10: focused on on fee paying product product like credit cards.

467
00:23:01,800 --> 00:23:06,399
Speaker 10: They weren't immediately incentivized to go out and buy really

468
00:23:06,440 --> 00:23:11,080
Speaker 10: really long duration paper and so on the flip side

469
00:23:11,119 --> 00:23:14,360
Speaker 10: of the large guys, Via of Alcy has huge amounts

470
00:23:14,400 --> 00:23:17,399
Speaker 10: of unrealized loss of sitting on their balance sheet. JP

471
00:23:17,480 --> 00:23:20,199
Speaker 10: Morgan looks like a genius because they didn't really go

472
00:23:20,240 --> 00:23:23,200
Speaker 10: and invest in all that all of that money into

473
00:23:23,600 --> 00:23:27,639
Speaker 10: you know, Fanny to Fanny two point five qpon paying mortgages,

474
00:23:27,920 --> 00:23:30,959
Speaker 10: which two years ago the market thought everybody was going

475
00:23:31,000 --> 00:23:34,000
Speaker 10: to refinance, and something like seventy percent.

476
00:23:33,720 --> 00:23:35,960
Speaker 9: Of all of all mortgages.

477
00:23:35,720 --> 00:23:39,119
Speaker 10: Have been issued in the last two years, So now

478
00:23:39,320 --> 00:23:42,440
Speaker 10: the market thinks nobody's ever going to refinance again, nobody's

479
00:23:42,480 --> 00:23:44,800
Speaker 10: ever gonna move. Everybody's stuck in these two and a

480
00:23:44,840 --> 00:23:46,359
Speaker 10: half percent qpon mortgages.

481
00:23:46,760 --> 00:23:49,879
Speaker 9: So it's who owns that stuff and who doesn't?

482
00:23:49,920 --> 00:23:54,640
Speaker 10: And JP Morgan stuck really short duration, and now they

483
00:23:54,840 --> 00:23:57,840
Speaker 10: you know, they're they're coming out ahead of everybody. You know,

484
00:23:57,960 --> 00:24:01,800
Speaker 10: the time to own money markets and T bills, honestly

485
00:24:02,480 --> 00:24:05,639
Speaker 10: was when rates were zero, not when rates are at

486
00:24:05,200 --> 00:24:06,920
Speaker 10: five and a quarter five and a half.

487
00:24:07,840 --> 00:24:09,960
Speaker 5: Well, sky that we've talked a lot about what you

488
00:24:10,280 --> 00:24:12,239
Speaker 5: don't like, what do you like?

489
00:24:13,800 --> 00:24:18,800
Speaker 10: So now there's two sides of the coin, in terms

490
00:24:18,840 --> 00:24:21,199
Speaker 10: of equities and in terms of real estate. Most things,

491
00:24:21,520 --> 00:24:24,480
Speaker 10: it's do you want to be the equity holder or

492
00:24:24,480 --> 00:24:29,639
Speaker 10: the lender? Now is a great time to be a lender, okay,

493
00:24:29,880 --> 00:24:31,920
Speaker 10: And you can be a lender on real estate.

494
00:24:32,320 --> 00:24:33,480
Speaker 9: You can be a lender to.

495
00:24:33,560 --> 00:24:37,040
Speaker 10: Equities i e. Bonds that can you can be a

496
00:24:37,160 --> 00:24:40,280
Speaker 10: lender to municipalities. So now is as good of a

497
00:24:40,359 --> 00:24:45,120
Speaker 10: time as ever to lend. The market's been hoping. Savers

498
00:24:45,119 --> 00:24:49,160
Speaker 10: have been waiting for five plus percent yields on high

499
00:24:49,280 --> 00:24:52,760
Speaker 10: quality fixed income for what sixteen years now, and it's

500
00:24:52,760 --> 00:24:56,280
Speaker 10: here we should be jumping into this like Scrooge mcd up.

501
00:24:56,920 --> 00:24:59,480
Speaker 3: Okay, I've always been told you don't fight the fad,

502
00:24:59,520 --> 00:25:01,960
Speaker 3: but certainly the bond market has been fighting the FED,

503
00:25:02,080 --> 00:25:04,320
Speaker 3: or so it would seem your impression. Get a been

504
00:25:04,359 --> 00:25:04,960
Speaker 3: a minute left.

505
00:25:06,080 --> 00:25:10,399
Speaker 10: Yeah, the market, the FED has been saying for the

506
00:25:10,480 --> 00:25:13,040
Speaker 10: last two years now, but we have been There's going

507
00:25:13,080 --> 00:25:17,520
Speaker 10: to be a lot of pain, right, and we've seen pain.

508
00:25:17,880 --> 00:25:21,120
Speaker 10: Bonb market was down thirteen percent last year, came back

509
00:25:21,160 --> 00:25:23,600
Speaker 10: the last two months of or I'm sorry twenty twenty two,

510
00:25:23,760 --> 00:25:25,560
Speaker 10: came back the last two months of twenty twenty three

511
00:25:25,640 --> 00:25:28,720
Speaker 10: to make it a positive year. And the Fed is

512
00:25:28,760 --> 00:25:31,879
Speaker 10: still saying rates are only going to drop two to

513
00:25:31,960 --> 00:25:35,040
Speaker 10: three times this year. Yet the market has priced in

514
00:25:35,440 --> 00:25:38,560
Speaker 10: six drops this year, in eight drops over the next

515
00:25:38,560 --> 00:25:39,480
Speaker 10: eighteen months.

516
00:25:39,800 --> 00:25:43,360
Speaker 9: So it's a really good time to sit.

517
00:25:43,240 --> 00:25:49,240
Speaker 10: In floating rate paper that'll hugely benefit from the FED.

518
00:25:50,480 --> 00:25:53,520
Speaker 10: What's the FED saying happening versus what the market is saying.

519
00:25:54,000 --> 00:25:56,320
Speaker 10: If you're in fixed rate paper right now, what you're

520
00:25:56,320 --> 00:26:02,200
Speaker 10: along is rates drop being seven, eight, nine times over

521
00:26:02,240 --> 00:26:03,320
Speaker 10: the next eighteen months.

522
00:26:03,880 --> 00:26:07,040
Speaker 3: We'll a letle bit there. Skyler, weinmand the CIO at

523
00:26:07,240 --> 00:26:08,320
Speaker 3: Reagan Capital.

524
00:26:09,240 --> 00:26:12,359
Speaker 6: You're listening to the tape. Catch are live program Bloomberg

525
00:26:12,400 --> 00:26:16,000
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the

526
00:26:16,080 --> 00:26:19,320
Speaker 6: tune it app, Bloomberg dot Com, and the Bloomberg Business app.

527
00:26:19,320 --> 00:26:22,160
Speaker 6: You can also listen live on Amazon Alexa from our

528
00:26:22,160 --> 00:26:26,600
Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

529
00:26:27,080 --> 00:26:30,119
Speaker 3: They always told me don't fight the Fed, but it

530
00:26:30,160 --> 00:26:32,320
Speaker 3: looks like somebody's fighting the Fed. At least the bond

531
00:26:32,400 --> 00:26:35,120
Speaker 3: market is with the markets, and the FED interact with

532
00:26:35,440 --> 00:26:38,920
Speaker 3: how they're going to interact. In twenty twenty four, Hans

533
00:26:38,920 --> 00:26:42,639
Speaker 3: Olsen is CIO at Fiduciary Trust Company, joining us now

534
00:26:42,680 --> 00:26:47,040
Speaker 3: I think from Boston to discuss so the market, as

535
00:26:47,040 --> 00:26:49,720
Speaker 3: I said, the bond market at least is fighting the FED.

536
00:26:49,800 --> 00:26:51,960
Speaker 3: This has set us up for some kind of disaster.

537
00:26:52,119 --> 00:26:55,199
Speaker 11: Now, you know, I do think that this market is

538
00:26:55,560 --> 00:26:58,919
Speaker 11: certainly overbought and overconfident, and I think you see it

539
00:27:00,119 --> 00:27:03,680
Speaker 11: bought a view when you look at sort of the

540
00:27:03,880 --> 00:27:06,800
Speaker 11: the S and p's RSI right, the relative strength. It

541
00:27:06,840 --> 00:27:10,480
Speaker 11: has had one heck of a run and it's corrected

542
00:27:10,480 --> 00:27:12,160
Speaker 11: a bit from that, but now it looks like it's

543
00:27:12,200 --> 00:27:15,560
Speaker 11: making another run to a real overbought position, and the

544
00:27:15,600 --> 00:27:19,240
Speaker 11: overconfident bit is really clean, clearly seeing when you look

545
00:27:19,240 --> 00:27:21,280
Speaker 11: at the difference between what the market expects for rate

546
00:27:21,320 --> 00:27:24,360
Speaker 11: cuts and what the FED is telegraphing, and so far

547
00:27:24,560 --> 00:27:27,080
Speaker 11: the economy is suggesting that perhaps the Fed is more

548
00:27:27,200 --> 00:27:28,919
Speaker 11: right than than is the market.

549
00:27:29,480 --> 00:27:31,000
Speaker 5: We were talking about it this morning. What do you

550
00:27:31,080 --> 00:27:33,840
Speaker 5: make of the University of Michigan sentiment data and how

551
00:27:33,840 --> 00:27:36,800
Speaker 5: does that kind of impact your view on the path

552
00:27:36,840 --> 00:27:38,320
Speaker 5: forward for markets and also the Fed.

553
00:27:38,920 --> 00:27:41,800
Speaker 11: Yeah, that's that's a good question. I tend to focus

554
00:27:41,840 --> 00:27:46,000
Speaker 11: on what people do versus what they say, and especially

555
00:27:46,040 --> 00:27:50,399
Speaker 11: in markets, right, you follow the money and without a doubt,

556
00:27:50,440 --> 00:27:52,760
Speaker 11: I mean it was it was a good read. I

557
00:27:52,840 --> 00:27:55,800
Speaker 11: look back at what happened in with retail sales in

558
00:27:55,800 --> 00:27:57,439
Speaker 11: December and that was pretty good. If you look at

559
00:27:57,440 --> 00:28:02,680
Speaker 11: what's happening at with excuse me, with employment, that's also

560
00:28:02,840 --> 00:28:06,520
Speaker 11: quite good. So people I think are in pretty good

561
00:28:07,119 --> 00:28:11,440
Speaker 11: rude economic health. At the moment, housing looks like it

562
00:28:11,480 --> 00:28:14,320
Speaker 11: is going to be just fine exception of today's numbers.

563
00:28:14,800 --> 00:28:17,240
Speaker 11: But I think if you look forward permits in the like,

564
00:28:17,280 --> 00:28:19,200
Speaker 11: that all suggests that the economy is and rude health.

565
00:28:19,280 --> 00:28:22,119
Speaker 11: So if that is the case, then one has to

566
00:28:22,160 --> 00:28:25,000
Speaker 11: rethink sort of the timing and the extent of the

567
00:28:25,040 --> 00:28:28,760
Speaker 11: interest rate cuts. And as you know, that's sixteen percent

568
00:28:28,920 --> 00:28:31,639
Speaker 11: run toward in the end of twenty twenty three was

569
00:28:32,400 --> 00:28:36,960
Speaker 11: powered in large part by expectations around rates. It wasn't

570
00:28:36,960 --> 00:28:38,200
Speaker 11: powered by earnings.

571
00:28:39,200 --> 00:28:43,680
Speaker 3: So we are headed for soft landing, no landing, hard landing,

572
00:28:44,240 --> 00:28:47,840
Speaker 3: And which one of those scenarios do you think it's

573
00:28:47,880 --> 00:28:49,120
Speaker 3: going to be and what is that going to mean

574
00:28:49,200 --> 00:28:50,480
Speaker 3: for risk assets?

575
00:28:50,840 --> 00:28:54,920
Speaker 11: Man, John, That's an interesting question because if I had

576
00:28:54,960 --> 00:28:59,800
Speaker 11: told you last year at this time that we would

577
00:28:59,880 --> 00:29:03,560
Speaker 11: have interest rates where they were without some sort of

578
00:29:03,560 --> 00:29:06,840
Speaker 11: resetting of economic activity or certainly in the marketing thought

579
00:29:06,880 --> 00:29:10,240
Speaker 11: it'd be back barking mad. But that's exactly what happened.

580
00:29:10,280 --> 00:29:12,280
Speaker 11: So last year in many respects, was a year of

581
00:29:12,280 --> 00:29:15,760
Speaker 11: no landing because we didn't hit the FEDCE target and

582
00:29:16,440 --> 00:29:19,920
Speaker 11: market was fine and the economy was fine. I think

583
00:29:19,960 --> 00:29:23,200
Speaker 11: in many respects there's a good chance that this year

584
00:29:23,440 --> 00:29:27,800
Speaker 11: is going to be a year of either a softish

585
00:29:27,960 --> 00:29:32,560
Speaker 11: landing or indeed possibly no landing, maybe a go round

586
00:29:32,600 --> 00:29:36,000
Speaker 11: right where we don't hit that FED target. The economy

587
00:29:36,080 --> 00:29:40,600
Speaker 11: is actually stronger than people are giving it credit for

588
00:29:40,800 --> 00:29:44,880
Speaker 11: right now, and the markets can do pretty well with that.

589
00:29:45,000 --> 00:29:47,280
Speaker 11: I think, though, the way that you make money in

590
00:29:47,320 --> 00:29:49,200
Speaker 11: that environment is different than the way that you made

591
00:29:49,240 --> 00:29:51,600
Speaker 11: it last year. Returns last year, we're all driven by

592
00:29:51,720 --> 00:29:54,640
Speaker 11: a multiple expansion, and it really happened in Q four

593
00:29:55,560 --> 00:29:57,920
Speaker 11: on the belief of rape cut. So really that powered,

594
00:29:58,120 --> 00:30:01,280
Speaker 11: but it was not powered, was not assisted at all

595
00:30:01,520 --> 00:30:04,560
Speaker 11: by earnings. This year, I think it has to be

596
00:30:04,680 --> 00:30:08,160
Speaker 11: assisted by earnings, so and it's I'm not sure that

597
00:30:08,200 --> 00:30:11,960
Speaker 11: we can expect much on the multiple expansion front. So

598
00:30:12,400 --> 00:30:14,880
Speaker 11: this is the year where I think stock picking really

599
00:30:14,920 --> 00:30:19,440
Speaker 11: starts to matter. A focus on profits is probably the.

600
00:30:19,440 --> 00:30:22,440
Speaker 12: Way to go here, so you get away from necessarily

601
00:30:22,520 --> 00:30:27,520
Speaker 12: incredibly high valuations but more high quality profitable companies being

602
00:30:27,560 --> 00:30:32,640
Speaker 12: the prominent feature that people should be emphasizing in their

603
00:30:32,680 --> 00:30:34,000
Speaker 12: equity portfolioers this year.

604
00:30:34,200 --> 00:30:36,200
Speaker 5: Yeah, Hans, let's stick on that note in terms of

605
00:30:36,240 --> 00:30:41,440
Speaker 5: what areas you do, Like you mentioned profitability, maybe lower multiples.

606
00:30:41,480 --> 00:30:45,840
Speaker 5: What areas, industries or sectors are you liking for twenty

607
00:30:45,880 --> 00:30:47,440
Speaker 5: twenty four when it comes to the equity market.

608
00:30:47,920 --> 00:30:50,200
Speaker 11: Yeah, I think it's important because it'd be easy to

609
00:30:50,200 --> 00:30:54,000
Speaker 11: talk sectors, but even within each sector, there are companies

610
00:30:55,400 --> 00:30:57,800
Speaker 11: that have these features of what you would want this year.

611
00:30:57,880 --> 00:31:03,640
Speaker 11: So even some of the the higher valued sectors, you

612
00:31:03,720 --> 00:31:08,200
Speaker 11: would find companies that are incredibly profitable, really good allocation

613
00:31:08,280 --> 00:31:11,360
Speaker 11: of capital uh and which will drive some nice returns.

614
00:31:11,800 --> 00:31:18,240
Speaker 11: I think from a sector standpoint at this juncture, you know, software, banks,

615
00:31:18,240 --> 00:31:23,200
Speaker 11: oil and gas computers, those would be areas that we

616
00:31:23,240 --> 00:31:26,160
Speaker 11: can see companies living in that have the features that

617
00:31:26,200 --> 00:31:28,960
Speaker 11: we want. And you can see that if you drill

618
00:31:29,080 --> 00:31:32,479
Speaker 11: down into companies like an Exxon Mobile of Berkshire, UH

619
00:31:32,520 --> 00:31:35,000
Speaker 11: and Nvidia and the like. These are these are companies

620
00:31:35,000 --> 00:31:37,400
Speaker 11: that you know they should have the wind at their

621
00:31:37,440 --> 00:31:40,800
Speaker 11: back because the earnings are there and they're likely to grow.

622
00:31:42,360 --> 00:31:45,760
Speaker 11: So so I think that's how I would come at it, rather.

623
00:31:45,600 --> 00:31:47,720
Speaker 12: Than just sort of do a you know, the the

624
00:31:48,880 --> 00:31:50,960
Speaker 12: passive s and P five hundred exposure.

625
00:31:51,360 --> 00:31:55,280
Speaker 3: If we agree we're in a disinflationary environment, what does

626
00:31:55,320 --> 00:31:56,840
Speaker 3: that do to earnings and sales.

627
00:31:58,360 --> 00:32:01,680
Speaker 11: Yeah, that's that's an interesting question because it's disinflationary to

628
00:32:02,040 --> 00:32:05,760
Speaker 11: what right, So if we went from nine to three,

629
00:32:06,920 --> 00:32:09,960
Speaker 11: I think we've seen that largely play out. If it

630
00:32:10,000 --> 00:32:14,400
Speaker 11: goes from you know, three down to where it had

631
00:32:14,480 --> 00:32:18,240
Speaker 11: been for the last five or six years, I'd be

632
00:32:18,320 --> 00:32:19,920
Speaker 11: in another case. But I don't think that that's going

633
00:32:20,000 --> 00:32:22,840
Speaker 11: to happen. I think it's really going to be now

634
00:32:23,040 --> 00:32:27,520
Speaker 11: about margins and earnings growth. And to the extent that

635
00:32:27,520 --> 00:32:30,880
Speaker 11: your cost of goods sold has some mixture of fixed

636
00:32:31,000 --> 00:32:35,160
Speaker 11: in it versus floating, right, so you're not as susceptible

637
00:32:35,200 --> 00:32:38,680
Speaker 11: to your input costs rising as much. If you've hedged

638
00:32:39,120 --> 00:32:41,840
Speaker 11: some of your inputs and the like, you can actually

639
00:32:41,920 --> 00:32:47,000
Speaker 11: interestingly see your earnings rise in an environment where there's

640
00:32:47,040 --> 00:32:49,960
Speaker 11: a bit higher inflation. So the details will matter in

641
00:32:50,040 --> 00:32:51,040
Speaker 11: an environment like this.

642
00:32:51,880 --> 00:32:55,320
Speaker 3: Thanks a lot. I appreciate it. I was gonna say,

643
00:32:55,360 --> 00:32:58,160
Speaker 3: snowy Boston, but not yet. It's not its way Hans

644
00:32:58,480 --> 00:33:03,160
Speaker 3: I bet he has a shovel cio fiduciary trust company

645
00:33:03,360 --> 00:33:11,720
Speaker 3: joining us from Boston. Right now, you're listening to the tape.

646
00:33:11,840 --> 00:33:15,200
Speaker 6: Can's our live program Bloomberg Markets weekdays at ten am

647
00:33:15,240 --> 00:33:19,040
Speaker 6: Eastern on Bloomberg Radio, the tune It app, Bloomberg dot Com,

648
00:33:19,080 --> 00:33:21,800
Speaker 6: and the Bloomberg Business App. You can also listen live

649
00:33:21,880 --> 00:33:25,080
Speaker 6: on Amazon Alexa from our flagship New York station. Just

650
00:33:25,120 --> 00:33:27,760
Speaker 6: say Alexa play Bloomberg eleven thirty.

651
00:33:28,440 --> 00:33:30,560
Speaker 3: Bubble or no bubble. That's kind of the question that

652
00:33:30,640 --> 00:33:34,760
Speaker 3: raises for me. Brian veddig Is, the president at MJP, advises.

653
00:33:35,080 --> 00:33:39,240
Speaker 3: He joins us, Now, from where are you Connecticut, Westborth, Connecticut. Job, what'spury?

654
00:33:39,280 --> 00:33:42,280
Speaker 3: Oh lovely to discuss the outlook for the market. So

655
00:33:42,840 --> 00:33:45,840
Speaker 3: what's say you when I say, oh, my gosh, maybe

656
00:33:45,880 --> 00:33:47,160
Speaker 3: a bubble, Well.

657
00:33:47,120 --> 00:33:50,000
Speaker 13: I don't think that's necessarily true, John, when considering all

658
00:33:50,080 --> 00:33:52,120
Speaker 13: parts of the market. I mean, we look back at

659
00:33:52,200 --> 00:33:54,680
Speaker 13: last year. We know that the majority of the games

660
00:33:54,720 --> 00:33:58,080
Speaker 13: came from megacap tech, and we did see a broadening

661
00:33:58,120 --> 00:34:01,640
Speaker 13: out in the market in the fourth quarter. But really,

662
00:34:01,760 --> 00:34:06,080
Speaker 13: when you look at areas like small cap stocks, some

663
00:34:06,560 --> 00:34:10,440
Speaker 13: value oriented sectors like healthcare and industrials, I really think

664
00:34:10,440 --> 00:34:12,600
Speaker 13: there's some other parts of the market that again, you know,

665
00:34:12,640 --> 00:34:15,480
Speaker 13: to the points that you and barely mentioned about, you know,

666
00:34:15,520 --> 00:34:18,960
Speaker 13: earnings growth, you know, in twenty four I think the

667
00:34:18,960 --> 00:34:21,080
Speaker 13: market's going to come back to fundamentals, and we're looking

668
00:34:21,160 --> 00:34:23,359
Speaker 13: at some earnings numbers over the balance of the year

669
00:34:23,440 --> 00:34:25,880
Speaker 13: that can help those areas quit a little bit of

670
00:34:25,920 --> 00:34:28,160
Speaker 13: catch up. While at the same point in time, I

671
00:34:28,200 --> 00:34:31,360
Speaker 13: still think there's that longer term trend with AI innovation

672
00:34:31,520 --> 00:34:33,680
Speaker 13: that that is going to play out in aspects of

673
00:34:33,680 --> 00:34:34,760
Speaker 13: the technology sector.

674
00:34:35,440 --> 00:34:38,520
Speaker 5: Yeah, I wanted to ask talking about the ketchup trade

675
00:34:38,560 --> 00:34:40,279
Speaker 5: has been something I feel like has been top of

676
00:34:40,320 --> 00:34:44,200
Speaker 5: mind since really the October bottom second best performer in

677
00:34:44,239 --> 00:34:46,840
Speaker 5: the SP five hundred is in Vidia, up seventeen percent.

678
00:34:46,840 --> 00:34:49,360
Speaker 5: Obviously that coming after the TSM number. So when you

679
00:34:49,400 --> 00:34:52,239
Speaker 5: look at that broadening, what areas are going to are

680
00:34:52,239 --> 00:34:54,120
Speaker 5: we going to see strength broadening out to and what

681
00:34:54,160 --> 00:34:56,799
Speaker 5: does that mean for the likes of an Invidia, which

682
00:34:56,840 --> 00:34:58,520
Speaker 5: still seems to be red hot.

683
00:35:00,080 --> 00:35:02,080
Speaker 13: That's a great point, Bailey, I think on the video

684
00:35:02,160 --> 00:35:04,799
Speaker 13: side of the house, I'll just address that first. I mean,

685
00:35:05,080 --> 00:35:08,160
Speaker 13: it's that expectation of growth moving forward. So when you

686
00:35:08,160 --> 00:35:10,880
Speaker 13: look at the forward pe for Navidia, as much as

687
00:35:10,880 --> 00:35:13,600
Speaker 13: the share price has had a nice run, the forward

688
00:35:13,920 --> 00:35:17,520
Speaker 13: price to earnings ratio is actually quite reasonable, you know,

689
00:35:17,560 --> 00:35:20,080
Speaker 13: with a twenty handle or so. But when we talk

690
00:35:20,160 --> 00:35:22,400
Speaker 13: about the other areas of the market, let's just be

691
00:35:22,520 --> 00:35:25,240
Speaker 13: fair when we take a look at that disparity of return,

692
00:35:25,760 --> 00:35:28,440
Speaker 13: going back to the S and P versus let's say

693
00:35:28,440 --> 00:35:31,080
Speaker 13: the even weight SMP for example, we know that a

694
00:35:31,160 --> 00:35:34,080
Speaker 13: market cap S and P forty percent is in those

695
00:35:34,320 --> 00:35:37,680
Speaker 13: those magnificent seven names or so, and when we look

696
00:35:37,719 --> 00:35:40,160
Speaker 13: at an even weight and we really strip that out,

697
00:35:40,200 --> 00:35:44,200
Speaker 13: we see that the forward price to earnings ratio of

698
00:35:44,280 --> 00:35:48,120
Speaker 13: the market is actually quite reasonable in some sectors under

699
00:35:48,160 --> 00:35:53,000
Speaker 13: their historical average, so healthcare, small caps, mid cap stocks,

700
00:35:53,800 --> 00:35:57,200
Speaker 13: looking at some areas in the industrial complex. I mean,

701
00:35:57,280 --> 00:36:00,520
Speaker 13: these are things that we know that there's some some

702
00:36:00,560 --> 00:36:03,360
Speaker 13: breath and some trends there and the outlooks for growth

703
00:36:03,600 --> 00:36:05,240
Speaker 13: are actually looking quite promising.

704
00:36:05,600 --> 00:36:08,160
Speaker 3: Okay, since you guys brought up AI got to ask

705
00:36:08,360 --> 00:36:11,759
Speaker 3: when does it start to jail in terms of the sales. Well,

706
00:36:11,800 --> 00:36:15,000
Speaker 3: we've already seen that you mentioned in video. But along

707
00:36:15,040 --> 00:36:19,520
Speaker 3: with the productivity gains that are promised by this new technology,

708
00:36:20,200 --> 00:36:21,440
Speaker 3: when does it all come together?

709
00:36:22,360 --> 00:36:25,120
Speaker 13: Yeah, no, I think it's all that's a great question.

710
00:36:25,120 --> 00:36:27,000
Speaker 13: It's almost like when does it come together where we

711
00:36:27,160 --> 00:36:31,160
Speaker 13: start to see, you know, market expectations on rate cuts

712
00:36:31,200 --> 00:36:33,759
Speaker 13: line up with reality from the FED, right, So there's

713
00:36:34,040 --> 00:36:36,239
Speaker 13: so I think that the AI trend is a five

714
00:36:36,280 --> 00:36:39,319
Speaker 13: to seven year trend. I mean there's a there's a

715
00:36:39,560 --> 00:36:41,839
Speaker 13: high multiple of sales that's being put on a lot

716
00:36:41,880 --> 00:36:43,799
Speaker 13: of these companies right now, which we are a little

717
00:36:43,880 --> 00:36:46,399
Speaker 13: wary of, and you have to be selective. I think

718
00:36:46,440 --> 00:36:49,480
Speaker 13: it's looking at it from that productivity point, which is

719
00:36:49,520 --> 00:36:53,920
Speaker 13: why we like areas in technology that are focusing on

720
00:36:54,040 --> 00:36:59,520
Speaker 13: workflow management, data management, thinking about how AI might create

721
00:37:00,680 --> 00:37:05,440
Speaker 13: more productive outcomes when you think about cybersecurity, you.

722
00:37:05,440 --> 00:37:06,520
Speaker 7: Know, things of that nature.

723
00:37:06,600 --> 00:37:09,080
Speaker 13: Then just saying hey, we're going to invest in you know,

724
00:37:09,120 --> 00:37:12,480
Speaker 13: a certain aspect of hardware that's probably going to be

725
00:37:12,600 --> 00:37:15,080
Speaker 13: used because you know AI is going to be coming,

726
00:37:15,120 --> 00:37:17,319
Speaker 13: I think. I think it's a longer term trend. So

727
00:37:17,400 --> 00:37:20,360
Speaker 13: will there be volatility in the space, Will there be

728
00:37:20,480 --> 00:37:23,680
Speaker 13: the natural winners and losers kind of play out over

729
00:37:23,680 --> 00:37:25,640
Speaker 13: the next five to seven years. Yeah, we think so.

730
00:37:26,239 --> 00:37:28,640
Speaker 13: But don't forget that again, This is the point I'm

731
00:37:28,640 --> 00:37:30,960
Speaker 13: trying to make, going back to Bailey's questions, don't forget

732
00:37:30,960 --> 00:37:34,280
Speaker 13: about some of those other areas that have stable balance,

733
00:37:34,320 --> 00:37:38,120
Speaker 13: these predictable cash flow margins, that look strong and they're

734
00:37:38,120 --> 00:37:40,399
Speaker 13: still innovation. And that's why I want to remind people

735
00:37:40,440 --> 00:37:44,040
Speaker 13: about healthcare, because healthcare did not perform well last year,

736
00:37:44,360 --> 00:37:46,400
Speaker 13: But it's one of those those areas of the market

737
00:37:46,400 --> 00:37:51,440
Speaker 13: where you're concerned about economic expansion. This year can be defensive,

738
00:37:51,680 --> 00:37:53,760
Speaker 13: but we know there's a lot of innovation coming from

739
00:37:53,960 --> 00:37:57,160
Speaker 13: healthcare companies as well that could be supportive for growth

740
00:37:57,200 --> 00:37:57,840
Speaker 13: moving forward.

741
00:37:58,000 --> 00:38:00,200
Speaker 5: But where in healthcare do you particularly like Are we

742
00:38:00,200 --> 00:38:03,239
Speaker 5: talking biotech, medtech that seems to be where innovation would

743
00:38:03,280 --> 00:38:05,440
Speaker 5: be versus something like managed care.

744
00:38:07,239 --> 00:38:09,640
Speaker 13: A great point I think to be selective in healthcare,

745
00:38:09,680 --> 00:38:12,600
Speaker 13: we are looking at areas of some of the biotech,

746
00:38:12,840 --> 00:38:15,719
Speaker 13: some of the big pharma space areas because the big

747
00:38:15,719 --> 00:38:19,520
Speaker 13: pharma companies they're building out, they're going out and acquiring

748
00:38:19,840 --> 00:38:23,160
Speaker 13: other companies right now and building out their pipeline for

749
00:38:23,280 --> 00:38:27,040
Speaker 13: new therapies and drugs. And I think as rates change,

750
00:38:27,160 --> 00:38:28,920
Speaker 13: we might see a little bit more in that m

751
00:38:29,000 --> 00:38:31,480
Speaker 13: and A space from healthcare. And I also think at

752
00:38:31,480 --> 00:38:34,160
Speaker 13: the same point in time, we have a demographic shift

753
00:38:34,160 --> 00:38:36,200
Speaker 13: that we know that is going to continue to play

754
00:38:36,200 --> 00:38:39,239
Speaker 13: out in the United States. The baby boomers, they're not

755
00:38:39,280 --> 00:38:44,520
Speaker 13: getting any younger they're still demand for services and care

756
00:38:44,680 --> 00:38:47,400
Speaker 13: that's out there. So even looking at some of the

757
00:38:47,520 --> 00:38:51,879
Speaker 13: larger healthcare networks, healthcare providers, insurance providers, I know they've

758
00:38:51,920 --> 00:38:55,799
Speaker 13: had a rough week this week when considering concerns around

759
00:38:55,840 --> 00:38:59,040
Speaker 13: Medicare costs. But those that can execute and move through that,

760
00:38:59,160 --> 00:39:01,560
Speaker 13: I think also are areas of healthcare that makes a

761
00:39:01,600 --> 00:39:03,080
Speaker 13: lot of sense A bailable.

762
00:39:02,880 --> 00:39:04,759
Speaker 3: Yeah, and I got to I'm not a brown nose,

763
00:39:04,800 --> 00:39:06,479
Speaker 3: but I got to point out the bosses. The big

764
00:39:06,480 --> 00:39:10,960
Speaker 3: boss is editorial today. The healthcare system, he writes, is

765
00:39:11,120 --> 00:39:14,919
Speaker 3: more short staff than ever, even as it faces its

766
00:39:15,000 --> 00:39:20,279
Speaker 3: next big shock and aging population. So tackle that one

767
00:39:20,320 --> 00:39:24,440
Speaker 3: from an investment perspective, since you brought up the healthcare industry.

768
00:39:25,160 --> 00:39:25,800
Speaker 7: Yeah, definitely.

769
00:39:25,880 --> 00:39:30,520
Speaker 13: I mean, I think there is a concern around let's

770
00:39:30,560 --> 00:39:34,719
Speaker 13: say investing and let's say hospitals that are trying to

771
00:39:34,840 --> 00:39:37,200
Speaker 13: run their staffs at certain margin. But we have a

772
00:39:37,320 --> 00:39:41,040
Speaker 13: labor shortage, and we also have issues in quality of

773
00:39:41,160 --> 00:39:46,720
Speaker 13: care which might suffer, which that then causes demand shifts

774
00:39:46,760 --> 00:39:49,759
Speaker 13: around that space. I'm focusing more on the ways to

775
00:39:49,880 --> 00:39:54,960
Speaker 13: deliver the care and helping them to support productivity, whether

776
00:39:55,040 --> 00:39:58,960
Speaker 13: that might be software and technology in the healthcare space again,

777
00:39:59,320 --> 00:40:04,240
Speaker 13: the insurance providers, you know, helping to provide a wider

778
00:40:04,320 --> 00:40:08,319
Speaker 13: network or better products or policies that people can take

779
00:40:08,360 --> 00:40:12,000
Speaker 13: advantage of. So I'm not focused so much on the

780
00:40:12,120 --> 00:40:15,400
Speaker 13: labor side. I'm looking more at the solution side to

781
00:40:15,480 --> 00:40:17,640
Speaker 13: try to get through some of these problems.

782
00:40:17,680 --> 00:40:19,960
Speaker 3: John, all right, Brian, thanks a lot. We'll leave it there.

783
00:40:20,000 --> 00:40:24,440
Speaker 3: President at MJP Advisors from Lovely Westport, Can I think

784
00:40:24,480 --> 00:40:27,200
Speaker 3: that's isn't that where Martha Stewart lives? Head on Sport.

785
00:40:28,040 --> 00:40:30,440
Speaker 3: You're not that demographic. I'm not going to you're from California.

786
00:40:30,480 --> 00:40:31,239
Speaker 3: I'm in California.

787
00:40:31,320 --> 00:40:31,680
Speaker 7: Kids.

788
00:40:32,160 --> 00:40:35,239
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can

789
00:40:35,280 --> 00:40:39,040
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

790
00:40:39,160 --> 00:40:42,880
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

791
00:40:43,080 --> 00:40:46,320
Speaker 2: at Matt Miller nineteen seventy three and on Faull Sweeney.

792
00:40:46,320 --> 00:40:47,880
Speaker 7: I'm on Twitter at pt Sweeney.

793
00:40:47,920 --> 00:40:48,840
Speaker 9: Before the podcast.

794
00:40:48,880 --> 00:40:52,359
Speaker 1: You can always catch us worldwide at Bloomberg Radio