WEBVTT - Power Tool Demand Booms During Pandemic 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:23.759 at Bloomberg dot com slash podcast. Now, I am excited 0:00:23.800 --> 0:00:26.560 to welcome Jim Laurie to the program, Chief executive Officer 0:00:26.800 --> 0:00:29.360 Stanley Black and deck Or. The stock has hit an 0:00:29.400 --> 0:00:33.599 all time high and the company has boosted it's uh 0:00:33.760 --> 0:00:37.520 two thousand twenty one Tools and Storage organic growth view. 0:00:37.880 --> 0:00:41.080 I am Jim. You're probably your target retail customer looking 0:00:41.080 --> 0:00:44.000 for an angle grinder right now. There's nothing I love, well, 0:00:44.040 --> 0:00:45.919 there's very There are very few things I love more 0:00:45.960 --> 0:00:48.680 than power tools. Ride motorcycles a lot, but mainly so 0:00:48.720 --> 0:00:52.239 that I can work on them. Um. I guess it's 0:00:52.240 --> 0:00:55.080 probably home improvement though. That's been driving your business this year, 0:00:55.120 --> 0:00:59.520 Is that right? Well, that's certainly a big part of it. 0:01:00.000 --> 0:01:02.200 But you know, we we do, uh, we do have 0:01:02.200 --> 0:01:06.880 some drivers and all around the globe, and it's home improvement, 0:01:07.520 --> 0:01:12.440 it's repurposing homes. It's home starts, housing starts, and uh 0:01:12.760 --> 0:01:17.559 economic activity in general, you know, all drive the business, alright, 0:01:17.560 --> 0:01:19.840 So Jim, give us a sense of how your business 0:01:20.720 --> 0:01:23.400 kind of was impacted during the pandemic. Take us to 0:01:23.480 --> 0:01:25.199 kind of just as you know, that quarter or two 0:01:25.200 --> 0:01:27.920 pre pandemic, and then what it's been like since the pandemic. 0:01:27.920 --> 0:01:32.120 How's your business changed. Yeah, we had a very interesting 0:01:32.920 --> 0:01:37.039 pre pandemic situation where it was just kind of normal, 0:01:37.120 --> 0:01:39.959 and then one day we woke up and UH sales 0:01:40.000 --> 0:01:46.640 plummeted by We're down for four continuous weeks in US retail, 0:01:47.000 --> 0:01:49.400 which is a big part of our business. So it 0:01:49.480 --> 0:01:51.320 was a little bit scary at that point in time, 0:01:51.360 --> 0:01:54.520 but we uh we kept producing. We remained continuously open, 0:01:55.280 --> 0:01:58.840 and in May, what happened was the point of sale, 0:01:59.120 --> 0:02:02.480 the cash register receipts, if you will, at the retailers 0:02:02.920 --> 0:02:06.640 started going positive and then it went to stratospheric levels 0:02:06.840 --> 0:02:08.799 in the middle of last year that we've really never 0:02:08.840 --> 0:02:13.400 seen before, you know, like up e commerce was up. 0:02:14.760 --> 0:02:17.680 It was just crazy numbers and so fortunately we had 0:02:17.840 --> 0:02:21.240 made some that says we saw this these cash registered 0:02:21.280 --> 0:02:26.360 receipts going up for tools, and we bought six hundred 0:02:26.400 --> 0:02:30.160 million dollars worth of inventory and manufactured six hundred million 0:02:30.160 --> 0:02:33.240 dollars worth the extra inventory to serve that demand, and 0:02:33.240 --> 0:02:36.240 that that demand has just continued, you know, at different 0:02:36.520 --> 0:02:39.480 varying rates. But let me give you a little insight 0:02:39.520 --> 0:02:43.120 into the first quarter. Uh, you know, the total sales 0:02:43.160 --> 0:02:49.040 and the tools business, we're up forty organically. North America 0:02:49.160 --> 0:02:53.280 was up for US, retail was up and get this, 0:02:53.440 --> 0:02:59.959 Europe was up, and the UK and even the emerging market, 0:03:00.200 --> 0:03:03.720 who you wouldn't think would be doing so well, they 0:03:03.720 --> 0:03:07.760 were up seventy in Latin America seventy seven percent. So 0:03:07.800 --> 0:03:11.200 it's it's really really broad based market strength. And when 0:03:11.200 --> 0:03:13.400 we cut fining you across the products. You know, power 0:03:13.440 --> 0:03:17.000 tools were up fifty percent, hand tools up and outdoor 0:03:17.600 --> 0:03:20.520 outdoor was up a hundred and twenty. So the headge trimmers, 0:03:20.560 --> 0:03:23.440 the shears, the electric shears and those types of things 0:03:23.440 --> 0:03:27.320 just bonanza really across the board. Well, your long term 0:03:27.360 --> 0:03:31.320 growth has been strong as well, And I wonder if 0:03:31.320 --> 0:03:33.760 I look at your next day three to five years, 0:03:33.800 --> 0:03:35.320 do you expected to pick up from the last three 0:03:35.360 --> 0:03:39.360 to five years. Absolutely, you know, I've been at sea 0:03:39.440 --> 0:03:42.200 level exacting this company for twenty one years, and when 0:03:42.240 --> 0:03:45.520 I joined, we were two billion in revenue, and we'll 0:03:45.560 --> 0:03:48.640 finish this year, you know, somewhere in the fifteen sixteen 0:03:48.800 --> 0:03:52.120 billion dollar range. Our market cap was two billion, and 0:03:52.280 --> 0:03:55.240 it's over thirty now. So it's been a long term 0:03:55.240 --> 0:03:58.040 growth story as long as I've been here, and even 0:03:58.120 --> 0:04:01.120 dating back you know, before that, since our founding in 0:04:01.160 --> 0:04:04.360 eighteen forty three. But in any event, we're excited about 0:04:04.360 --> 0:04:07.840 the post pandemic economy, and we're excited about our portfolio 0:04:07.960 --> 0:04:11.560 because not only do we have I would say, the 0:04:11.600 --> 0:04:16.080 construction market coming back, we see very positive outlook for 0:04:16.160 --> 0:04:21.880 the US economy and beyond that global growth. And then 0:04:22.000 --> 0:04:25.080 specifically to Stanley Black and Ducker, we are going to 0:04:26.200 --> 0:04:28.920 uh execute an option that we have to buy eight 0:04:29.440 --> 0:04:31.880 of a company called mt D, which is one of 0:04:31.880 --> 0:04:36.960 the largest gasolene powered outdoor power equipment makers of one 0:04:37.040 --> 0:04:40.520 mowers and riding mowers and most types of things. And 0:04:40.560 --> 0:04:43.200 we're going to that's about a three billion dollar business, 0:04:43.200 --> 0:04:47.960 and we're going to convert that business using our technology 0:04:48.080 --> 0:04:51.159 and our know how in battery power, We're going to 0:04:51.240 --> 0:04:53.960 convert that and electrify that. So we're gonna add billions 0:04:53.960 --> 0:04:56.400 of dollars of revenue, and we're gonna do great things 0:04:56.480 --> 0:05:00.960 for the environment. A just recal Okay, thirty seconds, Jim, 0:05:00.960 --> 0:05:03.600 I'm looking at, uh the supply chain function on the 0:05:03.640 --> 0:05:06.320 Bloomberg Terminal SPLC. I see you've got about more than 0:05:06.400 --> 0:05:08.680 eighty suppliers out there. Talk to us about the supply chain. 0:05:08.800 --> 0:05:13.680 Are you getting the stuff you need? We've done really 0:05:13.720 --> 0:05:16.400 really well in that regard. However, it's not It has 0:05:16.440 --> 0:05:18.880 not been without its challenges. You can imagine, you know, 0:05:19.360 --> 0:05:23.680 officially Asian and Mexican supply chain during a pandemic. It 0:05:23.800 --> 0:05:26.719 does have challenges. And we you know, the three things 0:05:26.720 --> 0:05:30.680 that are uh mostly most scarce, I would say would 0:05:30.680 --> 0:05:36.039 be batteries, semiconductors, and UH in some cases resins. And 0:05:36.240 --> 0:05:39.200 we're in good shape to continue this kind of growth, 0:05:39.880 --> 0:05:42.400 UH and this kind of run rate sales UH with 0:05:42.560 --> 0:05:47.719 batteries and also semi conductors. UH. And then the next 0:05:47.760 --> 0:05:49.400 next year, in the year beyond, we're gonna have to 0:05:49.600 --> 0:05:51.680 We're gonna have to get some more access to semiconductors. 0:05:51.760 --> 0:05:55.120 Resins were into shape, Jim, thanks so much for joining us. 0:05:55.120 --> 0:05:58.520 Any guys reported really strong numbers last week's stock at 0:05:58.520 --> 0:06:00.320 an all time high. Good time to be in the 0:06:00.360 --> 0:06:04.080 tool business. Jim Laury, chief executive officer for Stanley, Black 0:06:04.080 --> 0:06:07.000 and Decker. We appreciate him taking some time there again 0:06:07.040 --> 0:06:10.880 benefiting from the at home consumer doing some work around 0:06:10.880 --> 0:06:15.800 the house. I guess now I want to bring in 0:06:15.839 --> 0:06:19.719 Phil Orlando is the chief equity market strategist and head 0:06:19.760 --> 0:06:22.839 of client portfolio management that Federated Hermes. They've got about 0:06:22.839 --> 0:06:26.719 eighty billion dollars in equities under management firm wide, about 0:06:26.720 --> 0:06:31.160 six billion dollars in assets under management as of a 0:06:31.200 --> 0:06:33.560 kind of the end of last year. Phil um. You know, 0:06:33.680 --> 0:06:35.280 lots changed since the end of last year, so I'm 0:06:35.279 --> 0:06:38.640 expecting that number is probably a lot higher now. But 0:06:38.760 --> 0:06:41.000 how much higher can it get? I mean, have we 0:06:41.040 --> 0:06:46.240 reached a point when you know, uh, the market expectations 0:06:46.279 --> 0:06:52.200 are um are now high enough for or the valuations 0:06:52.200 --> 0:06:56.560 are high enough to meet market expectations. Well, the market 0:06:56.640 --> 0:07:01.479 is going to reflect corporate earnings and you know the 0:07:01.600 --> 0:07:03.640 S and P five from the bottom of the market 0:07:03.640 --> 0:07:06.240 March a year ago to where we are now. You know, 0:07:06.320 --> 0:07:08.480 we hit a record high within the last couple of days, 0:07:11.840 --> 0:07:14.080 and there have been a lot of folks that have 0:07:14.120 --> 0:07:17.240 been scratching their heads saying, how can the market be 0:07:17.320 --> 0:07:21.280 doing this? Well, um, we had, you know, the deepest 0:07:21.320 --> 0:07:26.800 recession in history, and the reason is that the equity 0:07:26.840 --> 0:07:30.560 market is a forward looking discount mechanism which attempts to 0:07:30.600 --> 0:07:33.760 price in what they think is going to happen six 0:07:33.840 --> 0:07:36.080 or nine months later. So here we are now in 0:07:36.080 --> 0:07:39.800 the first quarter earning season. We're about two thirds of 0:07:39.840 --> 0:07:42.960 the way through. Earnings were expected to be up about 0:07:44.280 --> 0:07:48.680 year on year according to facts set, They're up. Yeah, well, 0:07:48.680 --> 0:07:50.560 I mean tail this is the interesting thing. I mean, 0:07:51.200 --> 0:07:55.440 I have never seen companies knocked the cover um so 0:07:55.800 --> 0:07:58.080 far off the ball as they had this earning season. 0:07:58.080 --> 0:08:02.080 In fact, um, the last looked SMP companies are beating 0:08:02.080 --> 0:08:06.880 expectations by nine percent. You know, almost all of the 0:08:06.920 --> 0:08:12.120 companies out are beating the street's estimates. And yet, um, 0:08:12.240 --> 0:08:14.480 we haven't seen stocks move a lot in the past 0:08:14.480 --> 0:08:17.040 few days. Analysts are saying, thank you very much. We 0:08:17.200 --> 0:08:19.560 are our investors are saying, thank you very much. We 0:08:19.600 --> 0:08:21.760 expected that. You know, what what can you do for me? Now? 0:08:22.240 --> 0:08:25.120 Well that that's exactly the point. There's maybe one percent. 0:08:25.240 --> 0:08:28.720 Rally has priced in some of this gain. The second quarter. 0:08:28.840 --> 0:08:31.480 The quarter that just started that we're going to report 0:08:31.480 --> 0:08:33.679 in July. We think the earnings are going to be 0:08:33.760 --> 0:08:38.640 up another sixty Now that could represent the peak of 0:08:38.679 --> 0:08:42.040 the cycle in terms of rate of growth. So we 0:08:42.160 --> 0:08:45.320 may continue to grind earnings up second half of this 0:08:45.440 --> 0:08:47.959 year all of next year, but the corner on quarter 0:08:48.120 --> 0:08:52.840 year on year pace of that increase may start to decline. UM. 0:08:53.080 --> 0:08:56.160 So so that's the the interesting inflection point that we're 0:08:56.160 --> 0:08:59.280 gonna be watching right now. We still think the market's 0:08:59.320 --> 0:09:02.040 going to forty five hundred, but we may get to 0:09:03.320 --> 0:09:07.880 by August as opposed to December, based upon the strength 0:09:07.960 --> 0:09:11.600 of the earnings recovery that corporate America right now is enjoying. 0:09:12.920 --> 0:09:17.000 Phil give us a sense of your concern about inflation, 0:09:17.080 --> 0:09:20.600 because we certainly are seeing inflation, uh coming into this market, 0:09:20.600 --> 0:09:23.200 whether you look at the soft commodities, hard commodities, oil, 0:09:23.480 --> 0:09:28.280 you know rallying here um the Fed and Chairman Pal saying, hey, 0:09:28.280 --> 0:09:30.920 it's just transitory, don't worry about it. But I think 0:09:30.920 --> 0:09:33.960 there's a growing chatter about the concerns for inflation. What 0:09:34.040 --> 0:09:36.320 that night mean for the FED going forward? What are 0:09:36.360 --> 0:09:39.800 your thoughts we think the Fed is being there whistling 0:09:39.840 --> 0:09:42.880 past the graveyard here. On inflation. We just saw the 0:09:42.920 --> 0:09:47.480 core PC on Friday go from one point four year 0:09:47.520 --> 0:09:51.560 on year core in February one eight percent in March. 0:09:51.840 --> 0:09:54.280 That number is going to keep going up based upon 0:09:54.360 --> 0:09:57.640 this procedural base effect. As we drop off the low 0:09:57.720 --> 0:10:00.960 inflation readings from a year ago, that number is going 0:10:01.000 --> 0:10:03.920 to be somewhere between let's call it two and a 0:10:03.960 --> 0:10:07.400 half and three over the next couple of months. Now, 0:10:07.480 --> 0:10:10.559 the FED at that point is saying, don't worry about it, 0:10:10.559 --> 0:10:13.800 it'll plateau, it will roll over. Given the spike in 0:10:13.880 --> 0:10:19.079 commodity prices and the significant increase in labor costs that 0:10:19.160 --> 0:10:20.959 the companies are gonna have to pay in order to 0:10:21.000 --> 0:10:24.079 get workers off the sidelines to take their jobs back, 0:10:24.400 --> 0:10:27.200 and then the price increases, they're going to pass those 0:10:27.280 --> 0:10:30.480 labor costs on us in the form of higher consumer praises. 0:10:30.880 --> 0:10:32.600 All of that, in our view, is going to start 0:10:32.600 --> 0:10:36.040 to filter into core inflation. So so and and the 0:10:36.040 --> 0:10:38.600 FED is locked in that they're not going to make 0:10:38.640 --> 0:10:41.600 a policy change until you know, the end of calendar 0:10:41.720 --> 0:10:44.280 twenty three at the earliest. So I think we're at 0:10:44.320 --> 0:10:46.800 an inflection point on the FED here as well. At 0:10:46.840 --> 0:10:50.680 what point does the Fed blink and recognize that maybe 0:10:50.720 --> 0:10:53.360 inflation is a little bit of a problem here, and 0:10:53.360 --> 0:10:56.680 that they're gonna have to change policy, either tapering or 0:10:56.800 --> 0:11:01.600 moving interest rates higher earlier than the beginning of into Phil, 0:11:01.600 --> 0:11:06.560 what asset class do you like if inflation is not transitory? 0:11:07.120 --> 0:11:09.000 Where do you put your money? Heard a fixed income 0:11:09.040 --> 0:11:11.000 strategies morning? Tell me junk bonds. But that's a little 0:11:11.000 --> 0:11:13.720 too risky for my blood. Well, and I'm not the 0:11:13.760 --> 0:11:16.520 bond guy. I'm the equity guy. And and and basically 0:11:16.559 --> 0:11:19.560 what you want or companies that have pricing power that 0:11:19.640 --> 0:11:22.600 are leveraged to this improvement of the economy. So we 0:11:22.640 --> 0:11:25.720 think that the value stocks, which we've been playing since 0:11:25.840 --> 0:11:35.959 last August, financials, energy industrials, UH, consumer discretionary, UH materials, 0:11:36.280 --> 0:11:39.359 that these are the companies that are that are producing 0:11:39.400 --> 0:11:42.840 the outsize games because the economy is growing so strongly 0:11:43.120 --> 0:11:45.960 and the valuation gap between growth and value is still 0:11:46.000 --> 0:11:49.360 significant enough. But I think that the value trade ought 0:11:49.360 --> 0:11:52.080 to continue to work. Love it, Phil, great to get 0:11:52.720 --> 0:11:55.280 your input. Really appreciate you stopping by for a bit. 0:11:55.320 --> 0:11:58.920 Phil Orlando. There is that chief equity market strategist also 0:11:59.000 --> 0:12:03.440 head of Client port folio Management over Federated Hermes and 0:12:03.440 --> 0:12:04.960 Paul as you were you were telling me this morning. 0:12:05.000 --> 0:12:08.640 Phil has been bullish and he's been right. He has 0:12:08.679 --> 0:12:11.160 been and uh, you know it's interesting. He's got that 0:12:11.160 --> 0:12:14.280 that rotation trade very much uh in play here, and 0:12:14.320 --> 0:12:17.719 he's gonna ride that out. So it's been a good trade. Um, 0:12:17.760 --> 0:12:19.640 And I think a lot of investors are feeling, you know, 0:12:19.720 --> 0:12:21.959 this has got some more room to run here. As 0:12:22.000 --> 0:12:23.640 long as the Fed stays on the sidelines and this 0:12:23.760 --> 0:12:27.120 economy continues to reopen, we can see more legs there. 0:12:29.760 --> 0:12:32.960 Time for Bloomberg Opinion today, we're joined by Tara la Chapelle. 0:12:33.000 --> 0:12:36.880 She covers entertainment, telecommunications and deals for Bloomberg Opinion. And 0:12:36.880 --> 0:12:38.720 I'll tell you, if you have an interest in media 0:12:39.200 --> 0:12:42.479 like I do, in the convergence of media and technology 0:12:42.600 --> 0:12:45.160 and cord cutting and streaming and all that cool stuff, 0:12:45.600 --> 0:12:48.280 Terra's work is an absolute must read. And she's out 0:12:48.320 --> 0:12:52.440 with another fantastic column today talking about Netflix and Terry, 0:12:52.480 --> 0:12:56.400 you're suggesting that Netflix, you know, they haven't really bought anything. 0:12:56.440 --> 0:12:58.720 They've just kind of built their company up from scratch, 0:12:58.800 --> 0:13:01.960 investing in their in their business, investing in their programming, 0:13:01.960 --> 0:13:03.760 but you're suggesting maybe they should take a look at 0:13:03.760 --> 0:13:07.679 buying an existing media company, which one and whine right, 0:13:07.760 --> 0:13:10.199 So I think that they should look at Discovery and 0:13:10.360 --> 0:13:14.520 not just Netflix the other streaming giants you know, Apple, Um, 0:13:14.640 --> 0:13:17.120 maybe not so much. Disney doesn't really fit their family 0:13:17.200 --> 0:13:20.280 friendly programming, but you know, Amazon Prime, any of them. 0:13:20.320 --> 0:13:24.000 Because I think what's missing now from the streaming universe 0:13:24.240 --> 0:13:28.800 is reality TV programming, which you know, maybe Discoveries content 0:13:28.920 --> 0:13:31.880 on you know, TLC, things like that are considered kind 0:13:31.880 --> 0:13:35.240 of like the lowest rung of television art, but at 0:13:35.240 --> 0:13:37.080 the same time, a lot of people enjoy it. And 0:13:37.120 --> 0:13:40.240 I think it also is that type of content that 0:13:40.280 --> 0:13:42.400 you can just turn on the TV and it's background 0:13:42.480 --> 0:13:45.200 noise while you're maybe scrolling your phone or making dinner. 0:13:45.559 --> 0:13:47.720 And I think that's really missing from streaming, and there's 0:13:47.920 --> 0:13:50.240 value and being able to provide that. So I think 0:13:50.480 --> 0:13:53.360 if Netflix is smart and if the other companies are smart, 0:13:53.400 --> 0:13:55.720 they start to see that there's a hole there and 0:13:55.760 --> 0:13:57.400 it would make an awful lot of sense to fill 0:13:57.480 --> 0:13:59.880 because this kind of programming is not expensive to me 0:14:00.160 --> 0:14:03.800 and it really you know, pays dividends. Yeah, I mean 0:14:03.840 --> 0:14:08.200 if if Tiger King isn't the lowest rung of creating art, 0:14:08.720 --> 0:14:10.880 I feel like they've already gone there. Um, and that 0:14:10.920 --> 0:14:15.920 program was extraordinarily successful. Right. Meanwhile, Discovery has for me, 0:14:16.000 --> 0:14:19.600 at least, they've got the top Gear America, which is 0:14:20.360 --> 0:14:24.160 reality programming that I absolutely love. What else is Discovery 0:14:24.200 --> 0:14:27.000 got on offer they have? They have really a wide 0:14:27.480 --> 0:14:31.000 um offering of of programming. Top Gear comes from Motor Trend, 0:14:31.000 --> 0:14:34.040 but Discovery owns that. Yeah, they have a ton um 0:14:34.080 --> 0:14:37.040 you know. Aside from Motor Trend. There's TLC with Nintie 0:14:37.080 --> 0:14:40.240 Day Fiance is their big show right now, and David Zaslav, 0:14:40.320 --> 0:14:42.600 the CEO of Discovery, is kind of mused before that 0:14:42.640 --> 0:14:45.280 it's like their Sunday Night Football. It airs on Sunday 0:14:45.360 --> 0:14:47.720 nights and it just gets tons of viewers. And I 0:14:47.760 --> 0:14:50.440 think what's interesting about Nintie Day Fiance and some of 0:14:50.440 --> 0:14:53.800 their other programs. They have Chopped on the Food Network, 0:14:54.120 --> 0:14:57.760 there's Naked and Afraid on the Discovery Channel. Obviously HDTV 0:14:57.880 --> 0:15:01.160 has a ton of hit programming. Um. I think what's 0:15:01.160 --> 0:15:04.200 different about them is that these are franchises. Do you 0:15:04.240 --> 0:15:06.520 look at something like Tiger King and some of the 0:15:06.560 --> 0:15:10.400 other uh paise Netflix has made into reality shows. None 0:15:10.440 --> 0:15:13.800 of them have been franchises, and Discovery just kind of 0:15:13.880 --> 0:15:16.360 keeps building on these brands. And it's funny because they 0:15:16.360 --> 0:15:19.160 don't really have stars behind them. They're just mostly regular 0:15:19.200 --> 0:15:21.880 people that they're filming in these cases and you know, 0:15:21.960 --> 0:15:24.840 ninety Day Fiance, they're just following around Americans who are 0:15:24.840 --> 0:15:27.840 trying to bring over their fiance's from abroad on K 0:15:28.000 --> 0:15:31.200 one visas. And you know, it's it's really like, you know, 0:15:31.360 --> 0:15:34.200 low budget programming, but it's wildly entertaining to a lot 0:15:34.240 --> 0:15:38.800 of people, and it appears to spin offs and extras 0:15:38.800 --> 0:15:43.000 and reunion shows basically gifts that keep on giving for Discovery. 0:15:43.520 --> 0:15:46.120 All right, So Tara, I, you know, I know Discovery 0:15:46.120 --> 0:15:48.920 Communications very well. And one of the key things about 0:15:49.000 --> 0:15:53.920 that company is that it's control shareholder is John Malone. 0:15:54.040 --> 0:15:57.720 What do we know about Dr Malone's feelings about Discovery 0:15:57.720 --> 0:16:00.400 and perhaps selling this company should should have bona Flied 0:16:00.440 --> 0:16:03.560 offer come along. You know, it's funny. I think John 0:16:03.600 --> 0:16:06.400 Malone and David Zaslov are the two executives that are 0:16:06.400 --> 0:16:09.120 always willing to kind of pitch their own companies for 0:16:09.120 --> 0:16:12.119 sale anytime they go out to the media or their conferences. 0:16:12.280 --> 0:16:14.280 They seem to always be like open to that idea, 0:16:14.280 --> 0:16:17.120 and they're almost kind of asking for offers, and I 0:16:17.160 --> 0:16:19.880 wouldn't I think that if they got one, they definitely 0:16:20.040 --> 0:16:22.720 would consider it. I think that, you know, John Malone 0:16:22.800 --> 0:16:25.280 is a dealmaker at heart, and I think that he's 0:16:25.360 --> 0:16:27.560 you know, always been kind of open to selling at 0:16:27.600 --> 0:16:29.800 the right price, and especially now given his age and 0:16:29.840 --> 0:16:32.960 trying to kind of tidy up his portfolio, I imagine 0:16:33.000 --> 0:16:35.560 that they would be willing sellers. Um. I think it's 0:16:35.600 --> 0:16:38.720 just a matter of when these other media companies feel 0:16:38.760 --> 0:16:41.680 ready to make a big bet like this and see 0:16:41.680 --> 0:16:43.320 the value in it. And I think more and more 0:16:43.360 --> 0:16:46.600 discoveries proving its value. In the case of Netflix, it 0:16:46.640 --> 0:16:49.920 really wasn't financially in the position to do major acquisitions, 0:16:49.960 --> 0:16:51.800 and it's just starting to get to the point where 0:16:52.160 --> 0:16:54.440 they're saying they're going to be cash flow positive starting 0:16:54.480 --> 0:16:57.600 next year. So maybe they now have the wherewithal to 0:16:57.640 --> 0:17:00.400 be able to think about making acquisitions, especially as they 0:17:00.400 --> 0:17:04.960 see their own subscriber growth really start to slow. When 0:17:05.000 --> 0:17:06.720 I was a kid, we used to call John Malone 0:17:06.760 --> 0:17:10.720 the Darth Vader of cable. I can't remember why. But 0:17:11.240 --> 0:17:15.080 as you point out Tara's he's getting older and maybe 0:17:15.080 --> 0:17:18.200 looking to wrap up his legacy. Here, what if Netflix 0:17:18.240 --> 0:17:21.000 doesn't take Discovery, is there another buyer out there who 0:17:21.040 --> 0:17:24.160 would want them? I think it would make sense for 0:17:24.240 --> 0:17:27.960 any of the streaming companies that are really lacking in 0:17:28.240 --> 0:17:30.800 the kind of content that we did enjoy about cable. 0:17:30.880 --> 0:17:33.160 So I think of Apple TV plus, it's very focused 0:17:33.200 --> 0:17:37.800 around you know, specific shows and movies with big actors 0:17:37.800 --> 0:17:40.320 in it, and it's kind of you know, you watch 0:17:40.359 --> 0:17:41.879 it and then that's that you forget about it. I 0:17:41.880 --> 0:17:44.480 think they need something that keeps people coming back these 0:17:44.560 --> 0:17:46.919 kinds of programs do that. Amazon Prime doesn't really have 0:17:46.960 --> 0:17:49.600 a whole lot there. Um. But also, you know a 0:17:49.600 --> 0:17:52.359 company that always comes up when you talk about Discovery 0:17:52.480 --> 0:17:55.760 is Viacom CBS. UM. I don't see the logic as 0:17:55.840 --> 0:17:57.720 much there, but I think it's it's a case where 0:17:57.760 --> 0:18:00.720 because they're kind of the also ransom this industry, people 0:18:00.720 --> 0:18:02.560 see them, you know, they should get together and they'll 0:18:02.560 --> 0:18:05.560 be stronger together. So there's there's that argument. Um. But 0:18:05.720 --> 0:18:07.840 I think you know, Netflix, if they want to stay 0:18:07.880 --> 0:18:10.359 on top, this is something that's really missing and it 0:18:10.400 --> 0:18:13.520 fits really well because Discovery is also a very international 0:18:13.600 --> 0:18:17.199 company and that's something that's important to Netflix. So I 0:18:17.240 --> 0:18:19.679 think it probably makes the most sense for them. But 0:18:19.880 --> 0:18:22.400 any of these companies should be looking at them. UM. 0:18:22.440 --> 0:18:24.399 You know, so much of the takeover speculation and the 0:18:24.440 --> 0:18:28.040 industry is focused on Hollywood movie houses. I think, you know, 0:18:28.320 --> 0:18:30.680 that doesn't really help them that much. I think something 0:18:30.760 --> 0:18:32.880 like this would would pay off a little bit better 0:18:32.880 --> 0:18:37.040 in the long run. Have you heard anything from Repastings, 0:18:37.119 --> 0:18:41.240 the CEO of Netflix, about their willingness or appetite for 0:18:41.400 --> 0:18:45.560 any type of acquisitions. Not a whole lot on that front. 0:18:45.600 --> 0:18:47.400 And again I think maybe that has to do with 0:18:47.440 --> 0:18:49.240 them just trying to get to the point where they 0:18:49.280 --> 0:18:52.800 could prove to investors and the naysayers that they are 0:18:52.880 --> 0:18:56.160 a financially viable company and now they've gotten there. Um. 0:18:56.200 --> 0:18:58.080 But also, you know, they get asked a lot about 0:18:58.240 --> 0:19:01.720 whether they would expand into other things like gaming. UM. 0:19:01.720 --> 0:19:06.160 I've brought up the idea of them getting into consumer products, licensing, UM. 0:19:06.320 --> 0:19:09.240 But they haven't really been specific about what's next, which 0:19:09.320 --> 0:19:11.480 kind of makes you wonder what they could be thinking about. 0:19:11.560 --> 0:19:15.200 But UM, acquisitions come up whenever a company's growth is 0:19:15.240 --> 0:19:17.320 starting to slow and Netflix is now kind of a 0:19:17.320 --> 0:19:20.240 mature company in that sense, and so you could imagine 0:19:20.280 --> 0:19:23.520 that they're starting to have those conversations that companies like 0:19:23.600 --> 0:19:28.359 Disney have had, you know, for years. Tara your article 0:19:28.440 --> 0:19:30.520 and Matt, this is funny. When I first read TERA's 0:19:30.600 --> 0:19:32.960 article this morning, said, oh, investment bankers are hitting the 0:19:33.000 --> 0:19:35.800 phones today because I think Terri's kind of raises a 0:19:35.800 --> 0:19:41.800 lot of questions here. Yeah. Interesting, uh interesting. Al Bloomberg 0:19:41.800 --> 0:19:45.840 opinion columns can sometimes spark deals, but I mean her 0:19:45.960 --> 0:19:49.920 her logic isn't flawed and it's probably something, hopefully something 0:19:49.960 --> 0:19:54.120 that investment bankers thought of as well. Otherwise, I think 0:19:54.119 --> 0:19:56.040 Tara could be in for a pretty big pay day 0:19:56.080 --> 0:19:59.040 if she were to switch over to the dark side. 0:19:59.080 --> 0:20:01.399 Tara la Chappelle there from Bloomberg Opinion. Check out her 0:20:01.400 --> 0:20:03.480 work by typing O, P I N go on the 0:20:03.480 --> 0:20:07.320 Bloomberg or look at Bloomberg dot com slash opinion. This 0:20:08.040 --> 0:20:15.359 is Bloomberg. We're about halfway through this earning season. Another 0:20:15.400 --> 0:20:18.280 big week. Uh. This week and another are just coming 0:20:18.280 --> 0:20:20.720 in very strong, and that's what this market needed. Let's 0:20:20.760 --> 0:20:24.080 see how some strategists are thinking about that. Scott Wren. 0:20:24.160 --> 0:20:29.280 He's a senior global market strategist for Wells Fargo Investment Institute. Scott, 0:20:29.280 --> 0:20:31.239 thanks so much for joining us here. You know, there 0:20:31.280 --> 0:20:33.640 was a strong argument to be made that this first 0:20:33.720 --> 0:20:36.919 quarter earning earning season really have to come in strong 0:20:37.119 --> 0:20:40.679 to justify the valuation in this marketplace. Do you think 0:20:40.720 --> 0:20:44.560 corporate Americas has come through so far? Well, I really do, Paul, 0:20:44.640 --> 0:20:46.520 But I tell you I think really the way I 0:20:46.520 --> 0:20:49.600 look at most earning season and even this one is, 0:20:49.800 --> 0:20:52.280 you know, this is more of a confirmation process. I mean, 0:20:52.320 --> 0:20:55.560 it's the last thing that happens in the entire earnings processes. 0:20:55.640 --> 0:20:59.320 It's it's reported to the streets. So the street expected 0:21:00.240 --> 0:21:04.320 good earning strowth. We've certainly had that. We know we're 0:21:04.359 --> 0:21:08.160 going to get some really good UH economic growth here. 0:21:08.280 --> 0:21:11.719 So this is more of a of a confirmation step 0:21:11.840 --> 0:21:14.200 in my mind. But certainly this has been a really 0:21:14.200 --> 0:21:17.640 good earning season. I always look at this from two 0:21:17.640 --> 0:21:21.280 different angles. On the one hand, it Scott, you know, 0:21:21.680 --> 0:21:25.560 companies are doing great, they're bouncing back from to be fair, 0:21:25.720 --> 0:21:28.520 you know, pretty low base effects. On the other hand, 0:21:28.720 --> 0:21:34.360 analysts got it wrong. Um they undervalued or underbid these 0:21:34.400 --> 0:21:40.440 companies earnings reports, Nearly ninety percent of SMP firms beat estimates. 0:21:40.560 --> 0:21:43.399 What are the analysts doing something wrong? Are they not 0:21:43.520 --> 0:21:47.480 updating their expectations? Are they, you know, working from home? 0:21:47.560 --> 0:21:51.239 What's the story? Well, I'll tell you, Matt, this is 0:21:51.280 --> 0:21:54.000 my bias I think is a strategist is a lot 0:21:54.040 --> 0:21:57.320 of times individual company analysts, you know there they are 0:21:57.400 --> 0:22:01.040 really glued to company guidance. And if you think back 0:22:01.080 --> 0:22:04.320 what's happened over the last year, uh and and really 0:22:04.359 --> 0:22:06.720 in a lot of earning seasons, you know, these these 0:22:06.760 --> 0:22:09.800 companies are are very cautious. They don't want to give 0:22:10.760 --> 0:22:15.080 a very aggressive outlook. You know, that's why six in 0:22:15.119 --> 0:22:19.960 any earning season season beat. But that that's the situation 0:22:20.000 --> 0:22:24.359 that guidance is very conservative. We know from economists and 0:22:24.400 --> 0:22:27.679 certainly our economists that we that we talked to with 0:22:27.720 --> 0:22:31.120