WEBVTT - Single Best Idea with Tom Keene: Kona Haque & Matt Miskin

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Single best idea and the single best idea this weekend

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<v Speaker 2>across this nation is to be intelligent about the heat.

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<v Speaker 2>I've learned a lot about it. I'm pretty ignorant about it.

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<v Speaker 2>A shout out to the New York Times, which I

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<v Speaker 2>think is part the difference between the word dangerous in

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<v Speaker 2>the difference with excess heat or whatever. And the answer

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<v Speaker 2>is from what I can tell, you don't know you're

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<v Speaker 2>doing heat exhaustion until it's too late, is sort of

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<v Speaker 2>the what I've learned in this new heat and particularly

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<v Speaker 2>not the number of degrees and index and all that stuff,

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<v Speaker 2>but the number of days back to back seems to

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<v Speaker 2>be new. We heard that from Rob Carolyn Our, Bloomberg

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<v Speaker 2>meteorologist about the three day heat wave is becoming the

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<v Speaker 2>five day heat wave. Careful because this this heat exhaustion thing,

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<v Speaker 2>whatever your age, whatever your background, it creeps up on you.

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<v Speaker 2>One of the things that's crept up on us is

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<v Speaker 2>drought worldwide. We went to the authority. We try to

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<v Speaker 2>do that on Bloomberg Surveillance. ConA Haek is with Ed

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<v Speaker 2>n f Man. If you don't know that name, it

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<v Speaker 2>is truly one of the romantic names of the history

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<v Speaker 2>of finance. Edf and Man goes back forever, kings and queens.

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<v Speaker 2>It's been around, and ConA Haek is truly the most

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<v Speaker 2>intelligent person on softs. We know safts are agricultural economies.

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<v Speaker 2>In America, rice is no big deal. In Cambodia, rice

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<v Speaker 2>really matters. ConA Haek on rice.

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<v Speaker 3>Yeah, so rice was very tight. The markets were very

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<v Speaker 3>tight the last year and a bit. India had a

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<v Speaker 3>rice export ban and they're the world's largest exporter. Thailand

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<v Speaker 3>had a drought, as mentioned, you know, causing severe declining

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<v Speaker 3>rice yields so an Asia. For Asians, rice is the staple.

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<v Speaker 3>It's the potatoes of the UK, It's the grains of

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<v Speaker 3>the USA. You know, without rice, you know, you get

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<v Speaker 3>food inflation. And that's what happened. And unfortunately there just

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<v Speaker 3>wasn't enough. The monsoons are absolutely critical to help the

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<v Speaker 3>rice yields recover.

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<v Speaker 2>One of the great themes Conaek there, Edie and f Man.

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<v Speaker 2>One of the great themes of the week has been

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<v Speaker 2>the word solid. There's been all sorts of interviews and

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<v Speaker 2>maybe this nuance, that nuance and the rest of it,

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<v Speaker 2>but the answer is people are summarizing to their interpretation

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<v Speaker 2>of a solid economy, the financial economy, the stock market

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<v Speaker 2>economy is wrapped around a group of people that have

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<v Speaker 2>participated in what six, seven, eight, ten stocks and those

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<v Speaker 2>that have it. And there's a partitionere that we deal

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<v Speaker 2>with every day with the mail that we see, YouTube,

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<v Speaker 2>live chat and all the context people in restaurants, people

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<v Speaker 2>in the street here in New York City, and there's

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<v Speaker 2>this underlying belief. I think that everybody has that at

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<v Speaker 2>some point, like musical chairs, the music's going to stop.

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<v Speaker 2>Matt Michigan is with John Hancock in Boston with all

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<v Speaker 2>sorts of experience, a really brilliant conversation, and here Matt

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<v Speaker 2>Michigan on when the music will stop.

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<v Speaker 1>I believe in reversion the meme, I do you know?

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<v Speaker 1>And I think this concentration is historic. It is historic.

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<v Speaker 1>I mean, that's the data. This is an outlier. You're

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<v Speaker 1>never see ten stocks represent only almost forty percent of

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<v Speaker 1>the S and P five hundred. So reversion the mean

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<v Speaker 1>suggests that that's going to move down, that they're not

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<v Speaker 1>going to be that big. But it could be worse, right,

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<v Speaker 1>It could be that these companies don't make money that

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<v Speaker 1>they're not great companies. These companies have great profit margins,

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<v Speaker 1>great balance sheets, great return on equity or overweight tech.

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<v Speaker 1>We've been overweight tech for the last five years, and

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<v Speaker 1>that's the best airings engine in the world.

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<v Speaker 2>People ask me all the time how I measure this,

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<v Speaker 2>And of course we do not give investment advice here.

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<v Speaker 2>Of course we're asconced, you know, with all the different

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<v Speaker 2>trusts for the children and the triple leveraged all cash fund.

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<v Speaker 2>But what I would say is there has to be

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<v Speaker 2>a new respect away from financial media ratios to what

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<v Speaker 2>the grown ups like Matt Michigan look at, and that

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<v Speaker 2>is free cash flow. In this strange phrase, capital allocation.

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<v Speaker 2>The Bloomberg has a wonderful screen, the WACC screen, the

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<v Speaker 2>weighted average cost of capital screen that shows for each company, Apple, whatever,

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<v Speaker 2>American Chin Strap. It shows eva weighted average cost of capital,

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<v Speaker 2>return on invested capital, and the difference that spreads the

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<v Speaker 2>differences between those. I use it like religion. It's hugely

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<v Speaker 2>important in my first study of any company. So what

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<v Speaker 2>do you do? Pro tip, and particularly for those of

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<v Speaker 2>you that are students, capital allocation is a religion. Easily

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<v Speaker 2>going back twenty years, if not thirty. At the High

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<v Speaker 2>Altar is Michael Mobison m au BB Michael Mobison now

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<v Speaker 2>at Morgan Stanley. Read Michael Mobison. I don't know what

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<v Speaker 2>else to say, but that will give you a better

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<v Speaker 2>idea of what Matt Michigan was talking about, which is

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<v Speaker 2>the concentration is ridiculous. But the fact is there's still

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<v Speaker 2>minting money. So look to Michael Mobison at Morgan Stanley

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<v Speaker 2>for some leadership. There. There's some good books. Bill Priest's

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<v Speaker 2>book on free cash flow. Shareholder Yield is also another

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<v Speaker 2>thing to look at. William Priest. Shareholder Yield is a

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<v Speaker 2>great great short read on free cash flow. Our short

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<v Speaker 2>read is staggered a Monday. It's good to know that

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<v Speaker 2>Paul Sweeney will have dinner with John Tucker tonight after

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<v Speaker 2>the Sea Streak ferry over to New Jersey because the

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<v Speaker 2>trains aren't working. It'll be a stressless weekend. Red Keeper

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<v Speaker 2>of the AMX, of course, will pick up all that

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<v Speaker 2>vast expense. We're on YouTube search and subscribe to Bloomberg

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<v Speaker 2>Podcasts on Apple car Play, on Android play as well,

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<v Speaker 2>and of course on Apple Podcasts. It's single best idea